<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996
REGISTRATION NO. 333-6311
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
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
<TABLE>
<CAPTION>
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.......... $115,920,000 $39,656
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) 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 OCTOBER 11, 1996
7,200,000 SHARES
METRO NETWORKS, INC.
[LOGO]
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
--------------
Of the 7,200,000 shares of Common Stock offered hereby, 3,600,000 shares are
being sold by the Company and 3,600,000 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 $13.00 and $15.00. 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.
--------------
<TABLE>
<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 $700,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 1,080,000 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
, 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, according
to a March, 1994 market analysis prepared by the United States Department of
Transportation, and believes that it 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," "Business" and "Glossary."
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 $10.0 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 a purchase agreement to acquire all of the assets of
Airborne Traffic Network, Inc. ("ATN") and a letter of intent to acquire
the assets of 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
4
<PAGE>
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 (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
5
<PAGE>
(age 12 and over) in the Company's MSA markets. The Company's advertisers have
the ability to target 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. In September 1996, the Company
signed an agreement 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. Such
acquisition is expected to close in January 1997.
-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 9,350,607 shares of Metro Networks, Inc.'s Common Stock and
2,549,750 shares of Metro Networks, Inc.'s Series A Convertible Preferred 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
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,600,000 shares
Common Stock offered by the Selling
Stockholder................................. 3,600,000 shares
Common Stock outstanding after the
offering.................................... 15,500,357 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 1,000,000 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 (the "1996 Plan"). See "Management --
Executive Compensation." Does not include 2,549,750 shares of Series A
Convertible Preferred Stock. See "Business -- Reorganization", "Description
of Capital Stock" and "Certain Transactions."
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 8,869 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 74,012 32,386 41,560
Income (loss) from operations........ 2,865 9,213 5,469 4,090 (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 2,375 (2,091) 7,649
Income tax provision............... 1,066 2,179 1,036 808 229 573
Income (loss) from continuing
operations.......................... 1,416 6,905 3,310 1,567 (2,320) 7,076
--------- --------- ---------- ----------- ----------- ---------------
Discontinued operations............ (561) -- -- -- -- --
--------- --------- ---------- ----------- ----------- ---------------
Net income (loss).................... $ 855 $ 6,905 $ 3,310 $ 1,567 $ (2,320) $ 7,076
--------- --------- ---------- ----------- ----------- ---------------
--------- --------- ---------- ----------- ----------- ---------------
Pro forma net income................. $ 2,803 $ 4,933
---------- ---------------
---------- ---------------
Pro forma net income per share(2).... $ .23 $ .41
---------- ---------------
---------- ---------------
Pro forma weighted average shares
outstanding(2)...................... 12,251,997 11,962,153
---------- ---------------
---------- ---------------
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 AS ADJUSTED(3)
--------- --------- ---------- ---------------
ACTUAL
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................... $ 1,862 $ 7,414 $ 7,900 $ 6,843 $ 29,049
Total assets......................... 16,492 27,502 42,437 56,750 73,621
Total debt........................... 2,183 6,650 22,624 31,147 1,847
Common stockholder's equity/partners'
capital............................. $ 4,153 $ 9,401 $ 4,478 $ 5,343 $ 51,515
<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 (4)........................... $ 4,679 $ 10,515 $ 9,450 $ 10,010 $ (69) $ 11,453
Predecessor shareholder costs (5).... 2,022 1,734 1,392 2,138 625 726
--------- --------- ---------- ----------- ----------- ---------------
Adjusted EBITDA (6).................. 6,701 12,249 10,842 12,148 556 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
9
<PAGE>
January 1, 1995. In addition, such data give effect to the anticipated
Reorganization. The unaudited pro forma financial data 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) Pro forma weighted average shares outstanding and pro forma net income per
common share are calculated assuming the shares issued in conjunction with
the Reorganization were outstanding for all periods presented, adjusted for
excess distributions and assuming the Predecessor Companies were taxed at
rates expected to apply subsequent to the Reorganization. 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) Assumes an initial public offering price of $14.00 per share (the midpoint
of the range of the initial public offering prices set forth on the cover
page of this Prospectus) and estimated net proceeds to the Company from the
offering of $46.2 million. See "Use of Proceeds."
(4) 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.
(5) 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."
(6) 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"), Metro
Traffic Control, Inc. and Metro Networks, Ltd., dated October 21, 1994, as
amended (the "Credit Agreement") prohibits the Company and its subsidiaries
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 material adverse effect on the Company's
operations in the future. The Company has obtained a commitment letter to enter
into a credit agreement (the "New Line of Credit") with NationsBank upon
completion of this offering; such New Line of Credit will replace the Credit
12
<PAGE>
Agreement. The Company anticipates that the New Line of Credit will be secured
by the granting of a lien by the Company and its subsidiary on all of their
respective assets and the pledge of the Company's equity interest in its
subsidiary 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 53.5% of the Company's outstanding Common Stock (50.1% if the underwriters'
overallotment option is exercised in full). In addition, the Saperstein Family
will own all of the outstanding Series A Convertible Preferred Stock; such
preferred stock will be pledged to the Company pursuant to the Stock Loan and
Pledge Agreement. As a result of the ownership by the Saperstein Family of such
shares, the Saperstein Family will be able to vote 60.1% (56.7% if the
Underwriters' overallotment option is exercised in full) of the issued and
outstanding voting stock of the Company and 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 "Business -- Reorganization," "Certain Transactions" and "Principal
and Selling Stockholders."
POTENTIAL CONFLICTS OF INTERESTS
All of the shares of Common Stock being offerred for sale by David I.
Saperstein were borrowed from the Trusts (as hereinafter defined) and the
Company. Mr. Saperstein will pledge an equivalent number of shares of Series A
Convertible Preferred Stock as security for the loan from the Company and an
equivalent number of shares of Common Stock as security for the loans from the
Trusts. Mr. Saperstein will retain the ability to vote each of the shares
pledged to secure such loans. Such arrangement will allow Mr. Saperstein to
maintain a majority voting interest in the Company while benefiting
substantially from his participation in the offering as a selling stockholder.
In addition, prior to the closing of the offering, the Company has entered into
several arrangements with or on behalf of Mr. Saperstein or his affiliates which
were not on an arms-length basis. Upon the closing of the offering, these
arrangements will terminate, except as indicated herein, and the Company will
enter into transactions with related parties only on an arms-length basis. See
"Business -- Reorganization" and "Certain Transactions."
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
Assuming an initial public offering price of $14.00 per share (the midpoint
of the range of the initial public offering prices set forth on the cover page
of this Prospectus), purchasers of Common Stock in this offering will experience
immediate dilution of $11.97 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
13
<PAGE>
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 15,500,357 outstanding
shares of Common Stock. Of these shares, the 7,200,000 shares sold in this
offering, (8,280,000 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
8,300,357 shares outstanding upon completion of this offering 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 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 $46.2 million ($60.2 million if the Underwriters' over-allotment
option is exercised in full), based on an assumed offering price of $14.00 per
share (the midpoint of the range of the initial public offering prices set forth
on the cover page of this Prospectus) 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 a letter of intent to acquire the assets of WIS and an agreement to
purchase the assets of ATN, 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 New 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 New
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 hereby (assuming an initial public offering price of $14.00 per share
(the midpoint of the range of the initial public offering prices set forth on
the cover page of this Prospectus)) 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" and the
Reorganization. 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" and "Certain Transactions."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents............................................................... $ 3,466 $ 20,337
--------- ------------
--------- ------------
SHORT-TERM DEBT:
Current portion of long-term debt..................................................... $ 6,475 $ 1,140
Notes payable......................................................................... 707 707
--------- ------------
Total short-term debt............................................................... 7,182 1,847
--------- ------------
--------- ------------
LONG-TERM DEBT:
Bank debt............................................................................. 23,966 --
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.001 per share, 10,000,000 shares authorized; 2,549,750
shares of Series A Convertible Preferred Stock issued and outstanding as adjusted.... -- 3
Common Stock, par value $.001 per share, 25,000,000 shares authorized; 15,500,357
shares issued and outstanding as adjusted............................................ 3 16
Additional paid-in capital............................................................ 4,024 50,755
Partners' capital..................................................................... 575 --
Retained earnings..................................................................... 741 741
--------- ------------
Total stockholder's equity/partners' equity........................................... 5,343 51,515
--------- ------------
Total capitalization................................................................ $ 29,309 $ 51,515
--------- ------------
--------- ------------
</TABLE>
16
<PAGE>
DILUTION
The net tangible book value of the Company available to common stockholders
at June 30, 1996 was $(14.7) million, or $(1.57) per share of Common Stock. Net
tangible book value per share available to common stockholders is equal to the
Company's total tangible assets less total liabilities and the amount of the
preferred stockholder's liquidation preference, divided by the total number of
outstanding shares of Common Stock after giving effect to the Reorganization.
After giving effect to the sale of 3,600,000 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
available to common stockholders at June 30, 1996 would have been $31.5 million,
or $2.03 per share. This represents an immediate increase in net tangible book
value of $3.60 per share to existing stockholders and an immediate dilution of
$11.97 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............................ $ 14.00
Net tangible book value per share before this offering........... $ (1.57)
Increase in net tangible book value per share attributable to new
investors....................................................... $ 3.60
Pro forma net tangible book value per share after this
offering........................................................ $ 2.03
Dilution in net tangible book value per share to new investors... $ 11.97
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock (and shares of Series A Convertible
Preferred Stock which is convertible into 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 $14.00 per share (the
midpoint of the range of the initial public offering prices set forth on the
cover page of this Prospectus):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------------- ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).......................... 11,900,357 77.0% $ 5,343,374 10.0% $ .45
New investors..................................... 3,600,000 23.0 50,400,000 90.0 $ 14.00
------------- ----- -------------- ---------
Total......................................... 15,500,357 100.0% $ 55,743,374 100.0%
------------- ----- -------------- ---------
------------- ----- -------------- ---------
</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 8,300,357 shares,
or 53.5% 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 7,200,000 shares, or 46.5% of the total
number of shares of Common Stock outstanding after this offering.
The foregoing table and calculations should be read in conjunction with
"Business -- Reorganization" and "Certain Transactions".
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 approximately 500,000 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,
Pending Acquisitions and the Reorganization 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>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------------------- 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 15,980 6,821 10,101
General and administrative
expense.................... 3,845 4,522 6,994 5,939 7,193 8,869 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 74,012 32,386 41,560
Income (loss) from
operations................. 4,733 441 2,865 9,213 5,469 4,090 (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 2,375 (2,091) 7,649
Income tax provision...... 1,241 2,649 1,066 2,179 1,036 808 229 573
--------- --------- --------- --------- ---------- ----------- --------- ----------
Income (loss) from
continuing operations...... 3,386 (2,245) 1,416 6,905 3,310 1,567 (2,320) 7,076
--------- --------- --------- --------- ---------- ----------- --------- ----------
Discontinued operations... -- (563) (561) -- -- -- -- --
--------- --------- --------- --------- ---------- ----------- --------- ----------
Net income (loss)........... $ 3,386 $ (2,808) $ 855 $ 6,905 $ 3,310 $ 1,567 $ (2,320) $ 7,076
--------- --------- --------- --------- ---------- ----------- --------- ----------
--------- --------- --------- --------- ---------- ----------- --------- ----------
Pro forma net income........ $ 2,803 $ 4,933
---------- ----------
---------- ----------
Pro forma income per common
share (2).................. $ .23 $ .41
---------- ----------
---------- ----------
Pro forma weighted average
shares outstanding (2)..... 12,251,997 11,962,153
---------- ----------
---------- ----------
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>
18
<PAGE>
<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............................. $ 1,468 $ (254) $ 1,862 $ 7,414 $ 7,900 $ (1,137) $ 6,843
Total assets................................ 21,458 22,426 16,492 27,502 42,437 35,796 56,750
Total debt.................................. 274 597 2,183 6,650 22,624 18,746 31,147
Common stockholder's equity/partners'
capital.................................... $ 6,798 $ 5,168 $ 4,153 $ 9,401 $ 4,478 $ (346) $ 5,343
</TABLE>
<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 $ 10,010 $ (69) $ 11,453
Predecessor shareholder
costs (4)..................... 597 1,091 2,022 1,734 1,392 2,138 625 726
--------- --------- --------- --------- --------- ----------- --------- ---------
Adjusted EBITDA (5)............ 6,894 3,373 6,701 12,249 10,842 12,148 556 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) Pro forma weighted average shares outstanding and pro forma net income per
common share are calculated assuming the shares issued in conjunction with
the Reorganization were outstanding for all periods presented, adjusted for
excess distributions and assuming the Predecessor Companies were taxed at
rates expected to apply subsequent to the Reorganization. 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 8,869 11.4 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 74,012 94.8 32,386 105.8
Income (loss) from
operations......... 2,865 6.0 9,213 15.3 5,469 7.6 4,090 5.2 (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 2,375 3.0 (2,091) (6.8)
Income tax
provision........ 1,066 2.2 2,179 3.6 1,036 1.4 808 1.0 229 0.7
Discontinued
operations....... (561) (1.2) -- * -- * -- * -- *
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)... $ 855 1.8% $ 6,905 11.5% $ 3,310 4.6% $ 1,567 2.0% $ (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 48.7%, 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 created opportunities for the Company to increase
prices on its sales of commercial airtime inventory,
22
<PAGE>
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 8.0% 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 48.3% for the June 1996 Period from
64.7% 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 7.3%, 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 $0.9 million from $1.1
million in the June 1995 Period to $0.2 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.
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.
23
<PAGE>
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
69-76% 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 8.8%. 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 4.2%, 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 $0.3 million to $0.9 million in 1995, from $1.2
million in 1994.
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
24
<PAGE>
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 9.5%, 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 $12.1 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.
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.
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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, 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.
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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 is $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 the New Line of
Credit, which will replace the Line of Credit, with its lender upon the closing
of this offering. The New Line of Credit is expected to provide for maximum
aggregate permitted borrowings of $30.0 million. The New Line of Credit is
expected to expire September 30, 2003, and to begin amortizing in December 1998.
The New 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 New
Line of Credit is expected to have a commitment fee based on the daily average
unborrowed balance of the New Line of Credit. Upon the closing, the Company
anticipates that the New Line of Credit will be secured by the granting of a
lien by the Company and its subsidiary on all of their respective assets and a
pledge of the Company's equity interest in its subsidiary in favor of the
lender. The New 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.
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
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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, according
to a March, 1994 market analysis prepared by the United States Department of
Transportation, and believes that it 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 stations 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.
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 $10.0 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 47 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/
33
<PAGE>
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]
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.
34
<PAGE>
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 2,843,500 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 57.3
Danbury, CT 164,300 83.6
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 (2,253,200) and Monmouth
(490,700) 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 an agreement to acquire the assets of
ATN, a provider of traffic services to 16 radio station affiliates in Kansas
City, Missouri and Omaha, Nebraska; such transaction is expected to close in
January 1997. 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, arrangements, or
understandings
39
<PAGE>
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 $27.9 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
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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 97,654 square feet in the aggregate, pursuant to the terms of
various lease agreements. In addition, the Company leases approximately 25,031
square feet of space in Houston, Texas, which formerly was used as the Company's
headquarters and Houston operations center; the Company is attempting to
sublease this space. 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
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the issued and outstanding equity interests in the Predecessor Companies, by
exchanging such interests for 9,350,607 shares of Metro Networks Inc.'s Common
Stock and 2,549,750 shares of Metro Networks Inc.'s Series A Convertible
Preferred Stock.
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 is intended to qualify as a tax-free reorganization under
Section 368(a)(2) of the Internal Revenue Code of 1986, as amended.
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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 served as President of the Company from 1978 through June 1996. 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
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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 $100,000 in such periods (the "Named Executive Officers").
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
NAME AND OTHER ANNUAL STOCK
PRINCIPAL POSITION YEAR SALARY($) 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 1,000,000, of which approximately 500,000 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 1,500,000 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"). An
employee's right to purchase shares under the Purchase Plan will be granted at
the beginning of each six month period based on payroll deductions made in the
prior six month period. All purchases will be made automatically at the end of
each six month period. Employee Purchases cannot exceed $25,000 in any plan
year. The price at which the Common Stock is purchased under the Purchase Plan
as set by the Board of Directors is the lesser of 95% of the fair market value
of the Common Stock at the time an employee's right to purchase the stock is
granted, or the fair market value of the Common Stock on the date of purchase.
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<PAGE>
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 $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.
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<PAGE>
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, 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.
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<PAGE>
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-
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
49
<PAGE>
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 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 2,549,750 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 0.1% 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
$2,550 to the Company and will be obligated to repay to the Company any
dividends that are paid by the Company on the Loaned Stock. The Series A
Convertible Preferred Stock will not pay any dividends.
50
<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
19, 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.................... 8,300,357(1) 88.8% 3,600,000 8,300,357 (2) 53.5%
Charles I. Bortnick.................... -- -- -- --(3) *
Shane E. Coppola....................... 210,050(4) 2.2% -- 210,050 (5) 1.4%
Curtis H. Coleman...................... -- -- -- --(6) *
Gary L. Worobow........................ -- -- -- --(7) *
All executive officers and directors as
a group (5 persons)................... 8,510,407 91.0% 3,600,000 8,510,407 54.9%
</TABLE>
- ------------------------------
* Less than 1%.
(1) Does not include shares held by the Trusts (as defined below), beneficial
ownership of which Mr. Saperstein disclaims. In addition, the number of
shares beneficially owned does not include 2,549,750 shares of Series A
Convertible Preferred Stock owned by Mr. Saperstein and pledged to the
Company in connection with the stock loan under the Stock Loan and Pledge
Agreement. See "Certain Transactions." Such shares have not been included
because they can only be converted into Common Stock upon repayment of such
stock loan; repayment may be achieved either through the acquisition of
shares of Common Stock in the open market and delivery of such shares to
the Company or the delivery of shares of Series A Convertible Preferred
Stock. Mr. Saperstein will retain the voting rights to all pledged shares
of Series A Convertible Preferred Stock. See "Description of Capital Stock"
and "Certain Transactions."
(2) Does not include stock options to purchase 100,000 shares of Common Stock
granted under the 1996 Plan upon the effective date of this offering.
(3) Does not include stock options to purchase 75,000 shares of Common Stock
granted under the 1996 Plan upon the effective date of this offering.
(4) Includes 210,050 shares beneficially owned through the Michelle Joy Coppola
Trust. Mrs. Coppola, the beneficiary of the trust, is Mr. Coppola's wife.
These shares have been loaned to the Selling Stockholder in connection with
this offering. See below.
(5) Does not include stock options to purchase 75,000 shares of Common Stock
granted under the 1996 Plan upon the effective date of this offering.
(6) Does not include stock options to purchase 55,000 shares of Common Stock
granted under the 1996 Plan upon the effective date of this offering.
(7) Does not include stock options to purchase 45,000 shares of Common Stock
granted 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 (the "Common Stock"), 10,000,000 shares of preferred
stock, par value $0.001 per share. At September 19, 1996, assuming the
Reorganization had occurred as of such date there would have been 9,350,607
shares of Common Stock and 2,549,750 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 19, 1996, assuming the Reorganization had occurred as of
such date there were 9,350,607 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 (the "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
52
<PAGE>
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 Common Stock and any other then outstanding Preferred Stock of
other classes with respect to the assets of the Company in an amount per share
of Series A Covertible Preferred Stock equal to 10% of the fair market value of
a share 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 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, but may not be
converted while the stock loan is outstanding.
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 the Delaware General Corporation Law ("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 the 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
REMOVAL OF DIRECTORS; STAGGERED BOARD OF DIRECTORS
Pursuant to Article 10 of the Company's Amended and Restated Certificate of
Incorporation, a director may be removed only for cause and only by the holders
of a majority of the outstanding shares of all classes of capital stock of the
Company entitled to vote in the election of directors. In addition, pursuant to
Article 3 of the Company's Bylaws the Company's Board of Directors is divided
into three classes, each elected for staggered terms of three years, which,
effectively, prevents a change in a majority of the directors of the Company
from being effected at a single annual meeting of stockholders. While the
principal purpose of such articles 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.
53
<PAGE>
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 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 Delaware General Corporation 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
54
<PAGE>
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 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 practical 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 15,500,357 shares of
Common Stock outstanding. Of these shares, the 7,200,000 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 8,300,357 shares will be "Restricted
Securities" as defined in Rule 144 under the Securities Act ("Rule 144"). All of
such shares, without consideration of the contractual restrictions described
below, would be available for resale in the public market pursuant to Rule 144
(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 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 and (iii)
8,300,357 shares will be eligible for sale, subject to volume and manner of sale
restrictions, upon expiration of lock-up agreements 180 days after the date of
this Prospectus.
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
55
<PAGE>
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 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
Systems, 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-3
Combined Balance Sheets............................................................................. F-4
Combined Statements of Operations................................................................... F-6
Combined Statements of Stockholder's Equity/Partners' Capital....................................... F-7
Combined Statements of Cash Flows................................................................... F-8
Notes to Combined Financial Statements.............................................................. F-10
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-22
Combined Statement of Operations.................................................................... F-23
Combined Statement of Cash Flows.................................................................... F-24
Notes to Combined Financial Statements.............................................................. F-25
Pro Forma Condensed Financial Data:................................................................... F-27
Pro Forma Condensed Balance Sheet as of June 30, 1996............................................... F-28
Pro Forma Condensed Statement of Operations for the six months ended June 30, 1996.................. F-29
Pro Forma Condensed Statement of Operations for the year ended December 31, 1995.................... F-30
Notes to Condensed Pro Forma Financial Statements................................................... F-31
</TABLE>
F-1
<PAGE>
(This page has been left blank intentionally.)
F-2
<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-3
<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-4
<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
-------------- -------------- --------------
<CAPTION>
STOCKHOLDER'S EQUITY/PARTNERS' CAPITAL
<S> <C> <C> <C>
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-5
<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.................... 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 data (unaudited):
Income 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
-------------- --------------
-------------- --------------
Pro forma net income per share...... $ .23 $ .41
-------------- --------------
-------------- --------------
Weighted average shares
outstanding........................ 11,900,357 11,900,357
Plus shares attributable to excess
distributions...................... 351,640 61,796
-------------- --------------
Pro forma weighted average shares
outstanding........................ 12,251,997 11,962,153
-------------- --------------
-------------- --------------
</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 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-7
<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-8
<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-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
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-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)
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.
PRO FORMA EARNINGS PER SHARE
Weighted average shares outstanding, net income per share and pro forma net
income per share are calculated assuming the shares issued in conjunction with
the Reorganization were outstanding for
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 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the periods presented. In addition, an adjustment has been made to reflect the
distributions which exceeded capital contributions and net income in accordance
with the rules of the Securities and Exchange Commission.
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
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)
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. ("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,
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)
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 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.
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 2 -- ACQUISITIONS (CONTINUED)
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>
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................................................... $ 66,804 $ 73,377
Net Income............................................................. 7,505 2,854
</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>
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 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>
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, $408,362 and $1,067,338, respectively.
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 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 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 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.
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 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.
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 to be taxed under the
S corporation provisions of the Internal Revenue Code by approximately
$1,035,000.
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 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-19
<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-20
<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 $52,822, 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-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Boards of Directors
Skyview Broadcasting Networks, Inc.
Airborne Broadcast Consultants
Airborne Broadcasting Systems, Inc.:
We have audited the accompanying combined statements 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. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 statements 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-22
<PAGE>
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS
AIRBORNE BROADCASTING SYSTEMS, 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....................................................................................... 48,374
-------------
Total operating costs.............................................................................. 4,811,150
Income from operations............................................................................. 341,617
Interest expense................................................................................... 21,867
-------------
Income before income tax........................................................................... 319,750
Income tax expense................................................................................. 108,707
-------------
Net income......................................................................................... $ 211,043
-------------
-------------
</TABLE>
See accompanying notes to combined financial statements.
F-23
<PAGE>
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS
AIRBORNE BROADCASTING SYSTEMS, INC.
COMBINED STATEMENT OF CASH FLOWS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income.......................................................................................... $ 211,019
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation.................................................................................... 48,374
Decrease (increase) in:
Accounts receivable........................................................................... (253,864)
Due from stockholders......................................................................... 46,000
Other assets.................................................................................. (18,806)
Increase (decrease) in:
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 of year...................................................... 60,924
------------
Cash and cash equivalents at end of year............................................................ $ 65,019
------------
------------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest.......................................................... $ 35,267
------------
------------
Cash paid during the year for taxes............................................................. $ 2,145
------------
------------
</TABLE>
See accompanying notes to combined financial statements.
F-24
<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 financial statements include the operations of Skyview
Broadcasting Networks, Inc., Airborne Broadcast Consultants, and Airborne
Broadcasting Systems, Inc. (collectively, the "Company"). The Company has
operations in Tuscon, Phoenix, Las Vegas, Memphis, Nashville and Louisville.
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.
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. 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
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 asset and 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-25
<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 receivable of
approximately $1.1 million.
F-26
<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. These acquisitions are reflected
in the balance sheet and statement of operations of the Predecessor Companies'
(as defined below) combined historical financial statements as of and for the
six months ended June 30, 1996. 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"). Provided
herein are the audited combined financial statements of Skyview Broadcasting
Networks, Inc., Airborne Broadcast Consultants and Airborne Broadcasting
Systems, Inc. for the year ended December 31, 1994. The audited financial
statements of TrafficScan, Incorporated, Aeromedia, Inc., Traffic Net Inn,
Traffic Net of Connecticut, Inc. and The Weather Bureau, Inc. have not been
included herein because the acquisitions are not significant.
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. As the equity interests in the
entities 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.
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 on January 1, 1995.
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-27
<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
------------- ------------ ------------- ----------- ----------- --------------
Total assets.......... 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
Preferred Stock......... -- -- -- -- 2,549(D) 2,549
Common stock 3,015 12,000 (12,000 (A) 3,015 6,335(D) 9,350
Additional paid-in
capital................ 4,023,811 82,500 (82,500 (A) 4,023,811 566,510(D) 4,590,321
Partners' capital....... 575,394 -- -- 575,394 (575,394)(D) --
Retained earnings
(deficit) 741,154 210,704 (210,704 (A) 741,154 (3,851,659)(D),(E),(J) (3,110,505)
------------- ------------ ------------- ----------- ----------- --------------
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-28
<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(K) 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(L) 1,041,718 -- 1,041,718
------------- ------------ ------------- ----------- ---------------- --------------
867,561 3,747 104,076 975,384 -- 975,384
Income (loss) before
income tax............. 7,648,624 139,941 (296,108) 7,492,457 -- 7,492,457
Income tax expense
(benefit).............. 572,855 -- (53,097 (M) 519,758 2,027,677(N) 2,547,435
------------- ------------ ------------- ----------- ---------------- --------------
Income (loss)........... $ 7,075,769 $ 139,941 $ (243,011) $ 6,972,699 $ (2,027,677) $ 4,945,002
------------- ------------ ------------- ----------- ---------------- --------------
------------- ------------ ------------- ----------- ---------------- --------------
Pro forma net income per
share.................. $ .41
--------------
--------------
Pro forma weighted
average shares
outstanding............ 11,962,153
--------------
--------------
</TABLE>
F-29
<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) before income tax.... 4,345,729 (75,235) 46,675 43,749
Income tax expense (benefit)....... 1,036,352 -- -- --
------------- ------------------- -------------------- -------------------
Income (loss)...................... $ 3,309,377 $ (75,235) $ 46,675 $ 43,749
------------- ------------------- -------------------- -------------------
------------- ------------------- -------------------- -------------------
Pro forma income per share.........
Pro forma weighted average shares
outstanding.......................
<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 -- 8,869,013 -- 8,869,013
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 1,891,403 74,011,330 -- 74,011,330
Income (loss) from operations...... 72,923 413,028 (1,891,403) 4,091,027 -- 4,091,027
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) before income tax.... 72,923 404,487 (2,462,598) 2,375,730 -- 2,375,730
Income tax expense (benefit)....... -- -- (416,160)(H) 620,192 187,566(I) 807,75
8
------------------- ------------ -------------- ----------- --------------- --------------
Income (loss)...................... $ 72,923 $ 404,487 $ (2,046,438) $ 1,755,538 $ (187,566) $ 1,567,972
------------------- ------------ -------------- ----------- --------------- --------------
------------------- ------------ -------------- ----------- --------------- --------------
Pro forma income per share......... $ .13
--------------
--------------
Pro forma weighted average shares
outstanding....................... 12,251,997
--------------
--------------
</TABLE>
F-30
<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 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. In September 1996, the Company entered into
an agreement to acquire the assets of ATN; such transaction is expected to close
in January 1997. 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-31
<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 purchase broadcast contracts and other
intangibles 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 issuance of 9,350,607 of
Common Stock, 2,549,750 of Preferred Stock and 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. This adjustment has not been reflected in the pro forma statement
of operations, however, at conversion the amount will be charged to operations.
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.
F-32
<PAGE>
METRO NETWORKS, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(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.
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:
(K)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 purchase broadcast contracts and other
intangibles are amortized on a straight-line method over a five-year term.
(L)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.
(M)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, 1995.
(N)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-33
<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............................................................ 7,200,000
---------------
---------------
</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 1,080,000
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 7,200,000 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........................... 49
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 NOVEMBER , 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.
7,200,000 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.............................................. 150,000
Legal fees and expenses...................................................... 300,000
Accounting fees and expenses................................................. 125,000
Blue Sky fees and expenses................................................... 15,000
Transfer Agent and Registrar fee............................................. 15,000
Miscellaneous expenses....................................................... 43,344
-----------
Total........................................................................ $ 700,000
</TABLE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation 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 the
Delaware General Corporation Law.
The general effect of the provisions in the Company's Amended and Restated
Certificate of Incorporation and the Delaware General Corporation 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.
RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Reorganization, the Company issued 8,300,357 shares
of Common Stock to Mr. David Saperstein, 210,050 shares of Common Stock to the
Michelle Joy Saperstein Coppola 1994 Trust, 210,050 shares of Common Stock to
the Jennifer Beth Saperstein 1994 Trust, 210,050 shares of
II-1
<PAGE>
Common Stock to the Jonathan Alexander Saperstein 1994 Trust, 210,050 shares of
Common Stock to the Alexis Daniella Saperstein 1994 Trust and 210,050 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 Amendment No. 3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on October 11, 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 Amendment
No. 3 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 October 11, 1996
David I. Saperstein and Chief Executive Officer
/s/ CHARLES I. BORTNICK*
------------------------------------------- President and Director October 11, 1996
Charles I. Bortnick
/s/ SHANE E. COPPOLA*
------------------------------------------- Executive Vice President and October 11, 1996
Shane E. Coppola Director
Senior Vice President, Chief
/s/ CURTIS H. COLEMAN* Financial Officer and Director
------------------------------------------- (Chief Financial and Accounting October 11, 1996
Curtis H. Coleman Officer)
/s/ GARY L. WOROBOW*
------------------------------------------- Senior Vice President, General October 11, 1996
Gary L. Worobow Counsel, Secretary and Director
</TABLE>
* by David I. Saperstein as attorney-in-fact
II-5
<PAGE>
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C> <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
3.4** Form of Amended and Restated Bylaws of 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, 1990 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 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.
10.23** Fourth Amendment to Credit Agreement dated September 25, 1996 among
Metro Traffic Control, Inc., Metro Networks, Ltd. and NationsBank of
Texas, N.A.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
10.24** Form of Credit Agreement among Metro Networks, Inc., certain lenders,
and NationsBank of Texas, N.A., as Administrative Lender, dated as of
, 1996.
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).
23.3** Consent of KPMG Peat Marwick LLP
24.* Powers of Attorney, included on pages II-3.
27.1* Financial Data Schedule
99.1* Consent of James A. Arcara
</TABLE>
- ------------------------
* Previously filed
** Filed herewith.
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Exhibit Numbered Pages
- ---------- ---------------------------------------------------------------------------------------- ---------------
<S> <C> <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
3.4** Form of Amendment and Restated Bylaws of 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, 1990 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.
10.23** Fourth Amendment to Credit Agreement dated September 25, 1996 among Metro Traffic
Control, Inc., Metro Networks, Ltd. and NationsBank of Texas, N.A.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.24** Form of Credit Agreement among Metro Networks, Inc., certain lenders, and NationsBank of
Texas, N.A., as Administrative Lender, dated as of
, 1996.
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).
23.3** Consent of KPMG Peat Marwick LLP
24.* Powers of Attorney, included on pages II-3.
27.1* Financial Data Schedule
99.1* Consent of James A. Arcara
</TABLE>
- ------------------------
* Previously filed
** Filed herewith.
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
METRO NETWORKS, INC.
* * * * *
METRO NETWORKS, INC., a Corporation organized and existing under the
laws of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That Metro Networks, Inc. (the "Corporation") was originally
incorporated under the same name, and the original Certificate of Incorporation
of the Corporation was filed with the Secretary of State of the State of
Delaware on May 31, 1996.
SECOND: That this Amended and Restated Certificate of Incorporation
restates and amends the provisions of the Certificate of Incorporation of the
Corporation and has been duly adopted in accordance with the provisions of
Section 245 of the General Corporation Law of the State of Delaware.
THIRD: That the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
1. NAME.
The name of the corporation is Metro Networks, Inc.
2. REGISTERED OFFICE AND REGISTERED AGENT.
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
<PAGE>
3. PURPOSE.
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. EXISTENCE.
The Corporation is to have perpetual existence.
5. CAPITALIZATION.
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Thirty-five Million (35,000,000)
shares consisting of Ten Million (10,000,000) shares of Preferred Stock, par
value $.001 per share (hereinafter, the "Preferred Stock"), and Twenty-five
Million (25,000,000) shares of Common Stock, par value $.001 per share
(hereinafter, the "Common Stock"). The rights, preferences and privileges of
holders of shares of Common Stock are subject to the rights of the holders of
shares of the Series A Convertible Preferred Stock (as hereinafter defined) or
any series of Preferred Stock which the corporation may designate and issue
in the future. The Common Stock and the Series A Convertible Preferred Stock
shall be nonassessable.
B. Other than the shares of the Series A Convertible Preferred
Stock, the designations, powers, preferences and rights of which, and the
qualifications, limitations and restrictions of which, are set forth below, the
shares of Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of the Corporation is hereby authorized, by adopting
appropriate resolutions and causing one or more certificates of designation to
be executed, acknowledged, filed, recorded and to become effective in accordance
with the General Corporation Law of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights, dividend rights, dividend rates, conversion
rights, exchange rights, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices, and the
liquidation preferences of any wholly unissued series of shares of Preferred
Stock, or any of
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<PAGE>
them; and to increase or decrease the number of shares of any series subsequent
to the issue of the shares of that series, but not above the total number of
authorized shares of Preferred Stock and not below the number of shares of such
series then outstanding. In case the number of any shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
that they had prior to the adoption of the resolution originally fixing the
number of shares of such series. Except as may otherwise be required by law or
this Amended and Restated Certificate of Incorporation, the terms of any series
of Preferred Stock may be amended without the consent of the holders of any
other series of Preferred Stock or of Common Stock.
C. Section 1. DESIGNATION AND AMOUNT. Seven million five hundred
thousand (7,500,000) shares of Preferred Stock shall be designated as the
"Series A Convertible Preferred Stock", par value $.001 per share. Without the
prior approval of the holders of a majority of the then outstanding shares of
the Series A Convertible Preferred Stock, no additional shares of or change of
any characteristic or provision of the Series A Convertible Preferred Stock
shall be authorized by the Board of Directors or issued by the Corporation.
Section 2. GENERAL DEFINITIONS. For purposes of this Article
5.C., the following definitions shall apply:
(a) "JUNIOR SECURITIES" means any equity security of any kind
which the Corporation or any Subsidiary at any time issues or is authorized to
issue, other than the shares of Series A Convertible Preferred Stock or as
holders of a majority of the shares of then outstanding Series A Convertible
Preferred Stock otherwise expressly designate.
(b) "SUBSIDIARY" means any corporation of which at least a
majority of the shares of stock possessing voting power in electing the board of
directors is, at the time as of which any determination is being made, owned by
the Corporation, either directly or indirectly.
-3-
<PAGE>
Section 3. VOTING RIGHTS. Holders of Series A Convertible
Preferred Stock shall be entitled to one vote, voting with the holders of Common
Stock as a class, for each share held on all matters submitted to a vote of
stockholders and shall have no cumulative voting rights.
Section 4. CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK.
Each share of the Series A Convertible Preferred Stock, at the option of the
holder, shall be convertible into one (1) share of Common Stock (subject to
adjustment for stock splits, stock dividends, reverse stock splits,
recapitalizations and similar events) upon the return of the Loaned Securities
(as defined in that certain Stock Loan and Pledge Agreement between the
Corporation and David I. Saperstein, dated October ___, 1996 (the "Stock Loan
and Pledge Agreement")) pursuant to the Stock Loan and Pledge Agreement. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date a holder of Series A Convertible Preferred Stock requests
such conversion be made, and the person or persons entitled to receive the
shares of Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date. Upon the conversion of the Series A Convertible Preferred Stock pursuant
to this Section 4, (i) the shares of Preferred Stock designated as Series A
Convertible Preferred Stock shall cease to be so designated, (ii) such shares
shall remain authorized shares of Preferred Stock and (iii) such shares of
Preferred Stock may be redesignated and included in another series of Preferred
Stock pursuant to Article 5.B.
Section 5. LIQUIDATION RIGHTS.
(a) For purposes hereof, the term "LIQUIDATING EVENT" shall mean
(i) any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, (ii) any consolidation or merger of the Corporation
into another corporation or corporations (except in the case of a merger or
consolidation in which the Corporation is the continuing corporation), or (iii)
the sale or transfer by the Corporation of all or substantially all of its
assets. Upon the occurrence of any Liquidating Event, the holders of shares of
Series A Convertible Preferred Stock shall be entitled to receive ratably,
before any distribution or payment is made upon any Common Stock or any other
Junior Security, to be paid out of the assets of
-4-
<PAGE>
the Corporation available for distribution to its stockholders an amount per
share of Series A Convertible Preferred Stock in cash equal to ten percent (10%)
of the offering price of the Common Stock in the Corporation's initial offer and
sale of Common Stock for the account of the Corporation to the public. If upon
any such Liquidating Event, the assets of the Corporation to be distributed
among the holders of shares of Series A Convertible Preferred Stock shall be
insufficient to permit payment to such holders of the aggregate amount which
such holders are then entitled to be paid, then the entire assets of the
Corporation to be distributed shall be distributed ratably among such holders so
that an equal amount is received with respect to each share of Series A
Convertible Preferred Stock. After the payment or the setting apart for payment
to the holders of Series A Convertible Preferred Stock of the preferential
amounts so payable to them upon a Liquidating Event, the holders of Common Stock
and any other Junior Security shall be entitled to receive, ratably share for
share without distinction as to class, the remaining assets of the Corporation,
if any, based upon the number of shares of fully vested Common Stock or other
Junior Security held by each such holder.
(b) The Corporation will mail written notice of any Liquidating
Event, not less than 30 days prior to the date of such Liquidating Event, to
each holder of shares of Series A Convertible Preferred Stock.
Section 6. DIVIDENDS. Holders of shares of Series A Convertible
Preferred Stock shall not be entitled to dividends.
D. Section 1. VOTING RIGHTS. Holders of Common Stock shall be
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and shall have no cumulative voting rights.
Section 2. LIQUIDATION RIGHTS. Upon the occurrence of any
Liquidating Event, the holders of shares of Common Stock shall be entitled to
receive ratably the net assets of the Corporation 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.
-5-
<PAGE>
Section 3. DIVIDENDS. Holders of Common Stock shall be 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 time.
Section 4. OTHER RIGHTS. Holders of Common Stock shall have no
preemptive, subscription, redemption or conversion rights.
6. LIMITATION OF LIABILITY OF DIRECTOR.
No Director shall have any personal liability to the Corporation or
its stockholders for any monetary damages for breach of fiduciary duty as a
Director, except that this Article shall not eliminate or limit the liability of
each Director: (i) for any breach of such Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which such Director derived an improper personal benefit.
7. MEETINGS OF STOCKHOLDERS.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
8. INDEMNIFICATION OF DIRECTORS.
The Corporation shall, to the full extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as amended from time to
time, indemnify all persons whom it may indemnify pursuant thereto.
9. VACANCIES.
Vacancies and newly created directorships resulting from any increase
in the authorized number of Directors may be filled by a majority vote of the
remaining Directors then
-6-
<PAGE>
in office, although less than a quorum, or by the sole remaining Director, and
each Director so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of the class to which he or she has
been elected expires and until such Director's successor shall have been duly
elected and qualified. No decrease in the authorized number of Directors shall
shorten the term of any incumbent Director.
10. REMOVAL.
A Director may be removed only for cause. A Director may be removed
only by the holders of a majority of the outstanding shares of all classes of
capital stock of the Corporation entitled to vote in the election of Directors,
considered for this purpose as one class.
11. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS.
Pursuant to Section 203(b)(3) thereof, Section 203 of the General
Corporation Law of the State of Delaware shall not apply to this Corporation.
This paragraph shall not be effective until 12 months after the date hereof.
12. AMENDMENTS TO BYLAWS.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the Bylaws of the Corporation.
13. AMENDMENTS TO CERTIFICATE OF INCORPORATION.
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in the Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by the statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation on behalf of the Corporation and hereby
affirm that the statements made herein are true under the penalties of perjury,
this ______ day of October, 1996.
METRO NETWORKS, INC.
By:_________________________
David I. Saperstein,
President
ATTEST:
By:__________________________
Gary L. Worobow,
Secretary
-8-
<PAGE>
Exhibit 3.4
AMENDED AND RESTATED
BYLAWS
of
METRO NETWORKS, INC.
a Delaware Corporation
ARTICLE I
OFFICES
Section 1.01 REGISTERED OFFICE. The registered office of Metro
Networks, Inc. (hereinafter called the "Corporation") shall be at such place in
the State of Delaware as shall be designated by the Board of Directors
(hereinafter called the "Board").
Section 1.02 PRINCIPAL OFFICE. The principal office for the
transaction of the business of the Corporation shall be at such location, within
or without the State of Delaware, as shall be designated by the Board.
Section 1.03 OTHER OFFICES. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
Section 2.02 SPECIAL MEETINGS. Special meetings of the stockholders
of the Corporation for any purpose or purposes may be called at any time by the
Board, or by a committee of the Board which has been duly designated by the
Board and whose powers and authority, as provided in a resolution of the Board
or in the Bylaws, include the power to call such meetings, but such special
meetings may not be
<PAGE>
called by any other person or persons; provided, however, that if and to the
extent that any special meeting of stockholders may be called by any other
person or persons specified in any provisions of the Certificate of
Incorporation or any amendment thereto or any certificate filed under Section
151(g) of the General Corporation Law of Delaware (or its successor statute as
in effect from time to time hereafter), then such special meeting may also be
called by the person or persons, in the manner, at the time and for the purposes
so specified.
Section 2.03 PLACE OF MEETINGS. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meetings and specified in the respective notices or waivers of notice thereof.
Section 2.04 NOTICE OF MEETINGS. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at his address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his address last known to the
Secretary, or by transmitting a notice thereof to him at such address by
telegraph, cable or wireless. Except as otherwise expressly required by law, no
publication of any notice of a meeting of the stockholders shall be required.
Every notice of a meeting of the stockholders shall state the place, date and
hour of the meeting, and, in the case of a special meeting shall also state the
purpose or purposes for which the meeting is called. Except as otherwise
expressly required by law, notice of any adjourned meeting of the stockholders
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken.
Section 2.05 QUORUM. The holders of record of a majority in voting
interest of the shares of stock of the Corporation entitled to be voted, present
in person or by proxy, shall constitute a quorum for the transaction of business
at any meeting of the stockholders of the Corporation or any adjournment
thereof. The stockholders
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<PAGE>
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum. In the absence of a quorum at
any meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at or to act as secretary of such meeting may adjourn such meeting from time to
time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
Section 2.06 VOTING.
(a) At each meeting of the stockholders, each stockholder shall
be entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation which has voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these
Bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then
(A) at the close of business on the day next preceding the day on which notice
of the meeting shall be given or (B) if notice of the meeting shall be waived,
at the close of business on the day next preceding the day on which the meeting
shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common,
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tenants by the entirety or otherwise, or with respect to which two or more
persons have the same fiduciary relationship, shall be voted in accordance with
the provisions of the General Corporation Law of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders
all matters, except as otherwise provided in the Certificate of Incorporation,
in these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon. The stockholders present at a duly called or held meeting
at which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. The vote at any meeting of the stockholders on any question need not be
by ballot, unless so directed by the chairman of the meeting. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy
if there be such proxy, and it shall state the number of shares voted.
Section 2.07 LIST OF STOCKHOLDERS. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the entire duration thereof, and may be inspected by any stockholder who
is present.
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Section 2.08 INSPECTOR OF ELECTION. If at any meeting of the
stockholders a vote by written ballot shall be taken on any question, the
chairman of such meeting may appoint an inspector or inspectors of election to
act with respect to such vote. Each inspector so appointed shall first
subscribe an oath faithfully to execute the duties of an inspector at such
meeting with strict impartiality and according to the best of his ability. Such
inspectors shall decide upon the qualification of the voters and shall report
the number of shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the voting is completed,
shall ascertain and report the number of shares voted respectively for and
against the question. Reports of the inspectors shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation.
Inspectors need not be stockholders of the Corporation, and any officer of the
Corporation may be an inspector on any question other than a vote for or against
a proposal in which he shall have a material interest.
Section 2.09 STOCKHOLDER ACTION WITHOUT MEETINGS. Any action
required by the General Corporation Law of Delaware to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing setting forth
the action so taken shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 2.10 NOTICE OF BUSINESS. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
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to the Secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of the
Corporation, not less than 90 days prior to the date on which, in the
immediately preceding calendar year, the annual meeting of stockholders 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, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th day
following the date on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting, (b) the name and address, as they appear on
the Corporation's books, of the stockholder proposing such business, (c) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at the meeting and intends to appear at the meeting
to bring such business before the meeting; (d) any material interest of the
stockholder in such business; and (e) such other information regarding the
matter of business to be proposed as would be required in a proxy statement
soliciting proxies for the approval of such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section 2.10.
The Chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Section 2.10, and if he shall so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01 GENERAL POWERS. The property, business and affairs of
the Corporation shall be managed by or under the direction of the Board, which
may exercise all of the powers of the Corporation, except such as are by the
Certificate of Incorporation, by these Bylaws or by law conferred upon or
reserved to the stockholders.
Section 3.02 NUMBER AND CLASS OF DIRECTORS. The number of Directors
of this Corporation shall be a minimum
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of three (3) and a maximum of nine (9) persons except that when all of the
capital stock are owned by less than three (3) stockholders, the number of
Directors may be less than three (3) but not less than the number of
stockholders. The Board of Directors shall have sole authority to determine the
number of Directors and may increase or decrease the exact number of Directors
from time to time by resolution duly adopted by such Board. No decrease in the
number of Directors shall have the effect of shortening the term of any
incumbent Director. The exact number of Directors shall be seven (7) until so
increased or decreased.
The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of Directors constituting the whole
Board permits, with the term of office of one class expiring each year. At each
annual meeting of stockholders, the successors to the class of Directors whose
term shall then expire shall be elected to hold office for a term expiring at
the third succeeding annual meeting and each Director so elected shall hold
office until his successor is elected and qualified, or until his earlier
resignation or removal.
If the number of Directors is changed, any increase or decrease in the
number of Directors shall be apportioned among the three classes so as to make
all classes as nearly equal in number as possible, and the Board of Directors
shall decide which class shall contain an unequal number of Directors.
Section 3.03 NOMINATION OF DIRECTORS. Only persons who are nominated
in accordance with the procedures set forth in this Section 3.03 shall be
eligible for election as Directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of stockholders
by or at the direction of the Board of Directors or by any stockholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 3.03. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 90 days prior to the date on which, in the immediately preceding
calendar year, the annual meeting of stockholders for such year was held
(provided that if the date of the annual meeting is changed by more than 30 days
from such
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anniversary date, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a Director, (i)
the name and address of such person, and (ii) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such persons' written consent to being named in the proxy
statement as a nominee as to serving as a Director if elected); (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Corporation's books, of such stockholder, (ii) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
at the meeting and intends to appear at the meeting to bring such nominations
before the meeting and (c) a description of all arrangements or understandings
between the stockholder and each nominee. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3.03. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the Bylaws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
Section 3.04 ELECTION OF DIRECTORS. The directors shall be elected
by the stockholders of the Corporation, and at each election the persons
receiving the greatest number of votes, up to the number of directors then to be
elected, shall be the persons then elected.
Section 3.05 RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, it shall take effect immediately upon
its receipt; and, unless otherwise
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specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3.06 VACANCIES. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum, or by a sole remaining director. Each
director so chosen to fill a vacancy shall hold office until his successor shall
have been elected and shall qualify or until he shall resign or shall have been
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Upon the resignation of one or more directors from the Board,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have the power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided hereinabove in the filling of other vacancies.
Section 3.07 PLACE OF MEETING; TELEPHONE CONFERENCE MEETING. The
Board may hold any of its meetings at such place or places within or without the
State of Delaware as the Board may from time to time by resolution designate or
as shall be designated by the person or persons calling the meeting or in the
notice or waiver of notice of any such meeting. Directors may participate in
any regular or special meeting of the Board by means of conference telephone or
similar communications equipment pursuant to which all persons participating in
the meeting of the Board can hear each other, and such participation shall
constitute presence in person at such meeting.
Section 3.08 FIRST MEETING. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
Section 3.09 REGULAR MEETINGS. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day
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which is not a legal holiday. Except as provided by law, notice of regular
meetings need not be given.
Section 3.10 SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board or the Chief Executive Officer
or by any two (2) directors, to be held at the principal office of the
Corporation, or at such other place or places, within or without the State of
Delaware, as the person or persons calling the meeting may designate.
Notice of the time and place of special meetings shall be given to
each director either (i) by mailing or otherwise sending to him a written notice
of such meeting, charges prepaid, addressed to him at his address as it is shown
upon the records of the Corporation, or if it is not so shown on such records or
is not readily ascertainable, at the place in which the meetings of the
directors are regularly held, at least seventy-two (72) hours prior to the time
of the holding of such meeting; or (ii) by orally communicating the time and
place of the special meeting to him at least forty-eight (48) hours prior to the
time of the holding of such meeting. Either of the notices as above provided
shall be due, legal and personal notice to such director.
Whenever notice is required to be given, either to a stockholder or a
director, under any provision of the General Corporation Law of Delaware, the
Certificate of Incorporation or these Bylaws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting, whether in person or by proxy, shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at nor the purpose of any regular or special meeting
of directors or committee of directors need be specified in any written waiver
of notice.
All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 3.11 QUORUM AND ACTION. Except as otherwise provided in
these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
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business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
Section 3.12 ACTION BY CONSENT. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or such committee. Such
action by written consent shall have the same force and effect as the unanimous
vote of such directors.
Section 3.13 COMPENSATION. No stated salary need be paid to
directors, as such, for their services but, as fixed from time to time by
resolution of the Board, the directors may receive directors' fees, compensation
and reimbursement for expenses for attendance at directors' meetings, for
serving on committees and for discharging their duties; provided that nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.14 COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have any power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation; and unless the resolution of the
Board
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expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Any such committee
shall keep written minutes of its meetings and report the same to the Board when
required.
In the absence of any member of any such committee, the members
thereof present at any meeting and not disqualified from voting, whether or not
they constitute a quorum, may appoint another member of the Board to act at the
meeting in the place of such absent member.
A majority of the members, or replacements thereof, of any such
committee shall constitute a quorum for the transaction of business. Every act
or decision done or made by a majority of the members, or replacements thereof,
of any such committee shall be regarded as the act or decision of the entire
committee.
Section 3.15 OFFICERS OF THE BOARD. The Board shall have a Chairman
of the Board and may, at the discretion of the Board, have one or more Vice
Chairmen. The Chairman of the Board and the Vice Chairmen shall be appointed
from time to time by the Board and shall have such powers and duties as shall be
designated by the Board.
ARTICLE IV
OFFICERS
Section 4.01 OFFICERS. The officers of the Corporation shall be a
Chairman of the Board, a Chief Executive Officer, a President, a Secretary and a
Chief Financial Officer. The Corporation may also have, at the discretion of
the Board, one or more Vice Presidents, one or more Assistant Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers and such
other officers as may be appointed in accordance with the provisions of Section
4.03 of these Bylaws. One person may hold two or more offices, except that the
Secretary may not also hold the office of President. The salaries of all
officers of the Corporation shall be fixed by the Board.
Section 4.02 ELECTION. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 4.03
or Section 4.05 of these Bylaws, shall be chosen annually by the Board, and each
shall hold his office until he shall resign or
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shall be removed or otherwise disqualified to serve, or until his successor
shall be elected and qualified.
Section 4.03 SUBORDINATE OFFICERS. The Board may appoint, or may
authorize the Chief Executive Officer to appoint, such other officers as the
business of the Corporation may require, each of whom shall have such authority
and perform such duties as are provided in these Bylaws or as the Board or the
President from time to time may specify, and shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve.
Section 4.04 REMOVAL AND RESIGNATION. Any officer may be removed,
with or without cause, by a majority of the directors at the time in office, at
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board, by the Chief Executive Officer upon whom such power of
removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.05 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for the regular appointments to such office.
Section 4.06 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of
the Corporation shall, subject to the control of the Board, have general
supervision, direction and control of the business and affairs of the
Corporation. He shall preside at all meetings of stockholders and the Board.
He shall have the general powers and duties of management usually vested in the
chief executive officer of a corporation, and shall have such other powers and
duties with respect to the administration of the business and affairs of the
Corporation as may from time to time be assigned to him by the Board or as
prescribed by the Bylaws. In the absence or disability of the President, the
Chief Executive Officer, in addition to his assigned duties and powers, shall
perform all the duties of the President and when so acting shall have all the
powers and be subject to all restrictions upon the President.
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Section 4.07 PRESIDENT. The President shall exercise and perform
such powers and duties with respect to the administration of the business and
affairs of the Corporation as may from time to time be assigned to him by the
Chief Executive Officer (unless the President is also the Chief Executive
Officer) or by the Board or as is prescribed by the Bylaws. In the absence or
disability of the Chief Executive Officer, the President shall perform all of
the duties of the Chief Executive Officer and when so acting shall have all the
powers and be subject to all the restrictions upon the Chief Executive Officer.
Section 4.08 VICE PRESIDENT. The Vice President(s), if any, shall
exercise and perform such powers and duties with respect to the administration
of the business and affairs of the Corporation as from time to time may be
assigned to each of them by the President, by the Chief Executive Officer, by
the Board or as is prescribed by the Bylaws. In the absence or disability of
the President, the Vice Presidents, in order of their rank as fixed by the
Board, or if not ranked, the Vice President designated by the Board, shall
perform all of the duties of the President and when so acting shall have all of
the powers of and be subject to all the restrictions upon the President.
Section 4.09 SECRETARY. The Secretary shall keep, or cause to be
kept, a book of minutes at the principal office for the transaction of the
business of the Corporation, or such other place as the Board may order, of all
meetings of directors and stockholders, with the time and place of holding,
whether regular or special, and if special, how authorized and the notice
thereof given, the names of those present at directors' meetings, the number of
shares present or represented at stockholders' meetings and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the principal office
for the transaction of the business of the Corporation or at the office of the
Corporation's transfer agent, a share register, or a duplicate share register,
showing the names of the stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the stockholders and of the Board required by these Bylaws or by law
to be given, and he
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shall keep the seal of the Corporation in safe custody, and shall have such
other powers and perform such other duties as may be prescribed by the Board or
these Bylaws. If for any reason the Secretary shall fail to give notice of any
special meeting of the Board called by one or more of the persons identified in
Section 3.09 of these Bylaws, or if he shall fail to give notice of any special
meeting of the stockholders called by one or more of the persons identified in
Section 2.02 of these Bylaws, then any such person or persons may give notice of
any such special meeting.
Section 4.10 CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions of the Corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares. Any surplus, including earned surplus,
paid-in surplus and surplus arising from a reduction of capital, shall be
classified according to source and shown in a separate account. The books of
account at all reasonable times shall be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. He shall disburse the funds of
the Corporation as may be ordered by the Board, shall render to the President,
to the Chief Executive Officer and to the directors, whenever they request it,
an account of all of his transactions as Treasurer and of the financial
condition of the Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board or these Bylaws.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 5.01 EXECUTION OF CONTRACTS. The Board, except as otherwise
provided in these Bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name and on
behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
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Section 5.02 CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such person shall give such bond, if any, as
the Board may require.
Section 5.03 DEPOSIT. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, attorney or attorneys, of the Corporation to whom such power shall have
been delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the President, the Chief
Executive Officer, any Vice President or the Treasurer (or any other officer or
officers, assistant or assistants, agent or agents, or attorney or attorneys of
the Corporation who shall be determined by the Board from time to time) may
endorse, assign and deliver checks, drafts and other orders for the payment of
money which are payable to the order of the Corporation.
Section 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board from time
to time may authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by an officer or officers, assistant or assistants,
agent or agents, or attorney or attorneys of the Corporation to whom such power
shall have been delegated by the Board. The Board may make such special rules
and regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, in such
form as the Board shall prescribe, certifying the number and class of shares of
the stock of the Corporation owned by him. The certificates representing shares
of such stock shall be numbered in the
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order in which they shall be issued and shall be signed in the name of the
Corporation by the Chairman of the Board, the President or a Vice President and
by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any or all of the signatures on the certificates may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon any such certificate shall thereafter
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as though the person who signed such
certificate, or whose facsimile signature shall have been placed thereupon, were
such officer, transfer agent or registrar at the date of issue. A record shall
be kept of the respective names of the persons, firms or corporations owning the
stock represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the respective dates
thereof, and in case of cancellation, the respective dates of cancellation.
Every certificate surrendered to the Corporation for exchange or transfer shall
be cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled, except in cases provided for in Section 6.04 of these Bylaws.
Section 6.02 TRANSFER OF STOCK. Transfer of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03 of these Bylaws, and upon
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security, and not absolutely, such fact shall be stated
expressly in the entry of transfer if, when the certificate or certificates
shall be presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
Section 6.03 REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue,
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transfer and registration of certificates for shares of the stock of the
Corporation. The Board may appoint, or authorize any officer or officers to
appoint, one or more transfer clerks or one or more transfer agents and one or
more registrars, and may require all certificates for stock to bear the
signature or signatures of any of them.
Section 6.04 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sums as the Board may direct; provided, however, that a
new certificate may be issued without requiring any bond when, in the judgment
of the Board, it is proper to do so.
Section 6.05 RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any other change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. If, in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders, the Board shall not fix such a record date, the record date for
determining stockholders for such purpose shall be the close of business on the
day on which the Board shall adopt the resolution relating thereto. A
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
Section 6.06 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any Vice President and the Secretary or any Assistant Secretary of
this Corporation are authorized to vote, represent and exercise on behalf of
this Corporation all rights incident to all shares of any other corporation or
corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in
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<PAGE>
person or by any person authorized so to do by proxy or power of attorney duly
executed by said officers.
ARTICLE VII
INDEMNIFICATION
Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body, against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or as a member of any committee or similar
body, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
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<PAGE>
suit if he acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Section 7.01 or 7.02 of these Bylaws (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 7.01 and 7.02 of these Bylaws. Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders.
Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article VII, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02 of these Bylaws, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 7.05 ADVANCE OF EXPENSES. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of the director or officer, to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VII. Such
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<PAGE>
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board deems appropriate.
Section 7.06 OTHER RIGHTS AND REMEDIES. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other Sections
of this Article VII shall not be deemed exclusive and are declared expressly to
be nonexclusive of any other rights to which those seeking indemnification or
advancements of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 7.07 INSURANCE. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VII.
Section 7.08 CONSTITUENT CORPORATIONS. For the purposes of this
Article VII, references to "the Corporation" include in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise or as a member of any committee or similar body shall
stand in the same position under the provisions of this Article VII with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
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<PAGE>
Section 7.09 EMPLOYEE BENEFIT PLANS. For the purposes of this
Article VII, references to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to any employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article VII.
Section 7.10 BROADEST LAWFUL INDEMNIFICATION. In addition to the
foregoing, the Corporation shall, to the broadest and maximum extent permitted
by Delaware law, as the same exists from time to time (but, in case of any
amendment to or change in Delaware law, only to the extent that such amendment
or change permits the Corporation to provide broader rights of indemnification
than is permitted to the Corporation prior to such amendment or change),
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that he
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding. In addition, the Corporation shall, to the broadest
and maximum extent permitted by Delaware law, as the same may exist from time to
time (but, in case of any amendment to or change in Delaware law, only to the
extent that such amendment or change permits the Corporation to provide broader
rights of payment of expenses incurred in advance of the final disposition of an
action, suit or proceeding than is permitted to the Corporation prior to such
amendment or change), pay to such person any and all expenses (including
attorneys' fees) incurred in defending or settling any such action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the
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<PAGE>
director or officer, to repay such amount if it shall ultimately be determined
by a final judgment or other final adjudication that he is not entitled to be
indemnified by the Corporation as authorized in this Section 7.10. The first
sentence of this Section 7.10 to the contrary notwithstanding, the Corporation
shall not indemnify any such person with respect to any of the following
matters: (i) remuneration paid to such person if it shall be determined by a
final judgment or other final adjudication that such remuneration was in
violation of law; or (ii) any accounting of profits made from the purchase or
sale by such person of the Corporation's securities within the meaning of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law; or (iii)
actions brought about or contributed to by the dishonesty of such person, if a
final judgment or other final adjudication adverse to such person establishes
that acts of active and deliberate dishonesty were committed or attempted by
such person with actual dishonest purpose and intent and were material to the
adjudication; or (iv) actions based on or attributable to such person having
gained any personal profit or advantage to which he was not entitled, in the
event that a final judgment or other final adjudication adverse to such person
establishes that such person in fact gained such personal profit or other
advantage to which he was not entitled; or (v) any matter in respect of which a
final decision by a court with competent jurisdiction shall determine that
indemnification is unlawful; provided, however, that the Corporation shall
perform its obligations under the second sentence of this Section 7.10 on behalf
of such person until such time as it shall be ultimately determined by a final
judgment or other final adjudication that he is not entitled to be indemnified
by the Corporation as authorized by the first sentence of this Section 7.10 by
virtue of any of the preceding clauses (i), (ii), (iii), (iv) or (v).
Section 7.11 TERM. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VII shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 7.12 SEVERABILITY. If any part of this Article VII shall be
found, in any action, suit or proceeding or appeal therefrom or in any other
circumstances or as to any particular officer, director, employee or agent
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<PAGE>
to be unenforceable, ineffective or invalid for any reason, the enforceability,
effect and validity of the remaining parts or of such parts in other
circumstances shall not be affected, except as otherwise required by applicable
law.
Section 7.13 AMENDMENTS. The foregoing provisions of this Article
VII shall be deemed to constitute an agreement between the Corporation and each
of the persons entitled to indemnification hereunder, for as long as such
provisions remain in effect. Any amendment to the foregoing provisions of this
Article VII which limits or otherwise adversely affects the scope of
indemnification or rights of any such persons hereunder shall, as to such
persons, apply only to claims arising, or causes of action based on actions or
events occurring, after such amendment and delivery of notice of such amendment
is given to the person or persons so affected. Until notice of such amendment
is given to the person or persons whose rights hereunder are adversely affected,
such amendment shall have no effect on such rights of such persons hereunder.
Any person entitled to indemnification under the foregoing provisions of this
Article VII shall, as to any act or omission occurring prior to the date of
receipt of such notice, be entitled to indemnification to the same extent as had
such provisions continued as Bylaws of the Corporation without such amendment.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 SEAL. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and showing the year of incorporation.
Section 8.02 WAIVER OF NOTICES. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
Section 8.03 LOANS AND GUARANTIES. The Corporation may lend money
to, or guarantee any obligation of, and otherwise assist any officer or other
employee of the Corporation or of its subsidiaries, including any officer who is
a director, whenever, in the judgment of the
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<PAGE>
Board, such loan, guaranty or assistance may reasonably be expected to benefit
the Corporation. The loan, guaranty, or other assistance may be with or without
interest, and may be unsecured or secured in such manner as the Board shall
approve, including, without limitation, a pledge of shares of stock of the
Corporation.
Section 8.04 GENDER. All personal pronouns used in these Bylaws
shall include the other genders, whether used in the masculine, feminine or
neuter gender, and the singular shall include the plural, and vice versa,
whenever and as often as may be appropriate.
Section 8.05 AMENDMENTS. These Bylaws, or any of them, may be
rescinded, altered, amended or repealed, and new Bylaws may be made (i) by the
Board, by vote of a majority of the number of directors then in office as
directors, acting at any meeting of the Board or (ii) by the stockholders, by
the vote of a majority of the outstanding shares of voting stock of the
Corporation, at an annual meeting of stockholders, without previous notice, or
at any special meeting of stockholders, provided that notice of such proposed
amendment, modification, repeal or adoption is given in the notice of special
meeting; provided, however, that Section 2.02 of these Bylaws can only be
amended if that Section as amended would not conflict with the Corporation's
Certificate of Incorporation. Any Bylaw made or altered by the stockholders may
be altered or repealed by the Board or may be altered or repealed by the
stockholders.
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<PAGE>
EXHIBIT 4.1
[GRAPHIC]
[LOGO]
METRO NETWORKS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 591918 10 7
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
METRO NETWORKS, INC.
transferable only on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate and the shares represented hereby are
issued under and subject to the laws of the State of Delaware and to the
Certificate of Incorporation and Bylaws of the Corporation, all as in effect
from time to time. This certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
[SIG]
SECRETARY
[SEAL]
[SIG]
CHIEF EXECUTIVE OFFICER
<PAGE>
METRO NETWORKS, INC.
THE ISSUER IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES OF STOCK. A
COPY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF,
AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS, WILL BE FURNISHED BY THE ISSUER WITHOUT CHARGE UPON THE
REQUEST OF ANY STOCKHOLDER.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT Custodian
TEN ENT -- as tenants by the entireties -------------- -------------
JT TEN -- as joint tenants with rights (Cust) (Minor)
of survivorship and not as Under Uniform Gifts to Minors
tenants in common
Act
--------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list:
For value received, hereby sell, assign and transfer unto
------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
----------------------------------------------
----------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
By
- ----------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit 4.2
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SHARES
0
METRO NETWORKS, INC.
TOTAL AUTHORIZED ISSUE SEE REVERSE FOR
7,500,000 SHARES PAR VALUE $0.001 EACH CERTAIN DEFINITIONS
SERIES A CONVERTIBLE PREFERRED STOCK
SPECIMEN
THIS IS TO CERTIFY THAT: _______________________________________ IS THE OWNER OF
__________________________________________________________________________ fully
paid and non-assessable shares of the above Corporation transferable only on the
books of the Corporation by the holder hereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the Corporation and the signatures of its duly authorized
officers.
DATED
____________________________ ____________________________
Secretary President
<PAGE>
THE FOLLOWING ABBREVIATIONS, WHEN USED IN THE INSCRIPTION ON THE FACE
OF THIS CERTIFICATE, SHALL BE CONSTRUED AS THOUGH THEY WERE WRITTEN OUT IN
FULL ACCORDING TO APPLICABLE LAWS OR REGULATIONS:
TEN COM - AS TENANTS IN COMMON UNIF GIFT MIN ACT - CUSTODIAN
------ -------
(CUST) (MINOR)
UNDER UNIFORM GIFTS TO MINORS
TEN ENT - AS TENANTS BY THE ACT
ENTIRETIES --------------------------
(STATE)
JT TEN - AS JOINT TENANTS WITH
RIGHT OF SURVIVORSHIP
AND NOT AS TENANTS IN
COMMON
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST.
FOR VALUE RECEIVED__________________________HEREBY SELL, ASSIGN AND TRANSFER
UNTO
PLEASE REPORT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint __________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated _________________, 19 ___
In presence of
_________________________________
_______________________________
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR
SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE>
EXHIBIT 10.18
METRO NETWORKS, INC.
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Employee Stock Purchase
Plan of Metro Networks, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that Section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "COMMITTEE" shall have the meaning set forth therefor in
Section 13(a) of the Plan.
(d) "COMMON STOCK" shall mean the Common Stock, par value $.001
per share, of the Company.
(e) "COMPANY" shall mean Metro Networks, Inc., a Delaware
corporation.
(f) "COMPENSATION" shall mean gross earnings exclusive of bonus
compensation.
(g) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which
have been designated by the Board or the Committee from time to time in its sole
discretion as eligible to participate in the Plan.
(h) "EMPLOYEE" shall mean any individual who is an employee of
the Company or a Designated Subsidiary for purposes of tax withholding under the
Code whose customary employment with the Company or any Designated Subsidiary is
at least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the
<PAGE>
employment relationship shall be treated as continuing intact while the
individual is on sick leave or other leave of absence approved by the Company.
Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(j) "ENROLLMENT DATE" shall mean the first day of each Offering
Period.
(k) "EXERCISE DATE" shall mean the last day of each Offering
Period.
(l) "FAIR MARKET VALUE" shall mean the value of one (1) share of
Common Stock, determined as follows:
(1) If the shares are traded on a nationally recognized
exchange or the National Market System (the "NMS") of the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the closing
price as reported for composite transactions on the date of valuation or, if no
sales occurred on that date, then the average of the highest bid and lowest ask
prices on such exchange or the NMS at the end of the day on such date;
(2) If the shares are not traded on an exchange or the NMS
but are otherwise traded over-the-counter, the average of the highest bid and
lowest asked prices quoted in the NASDAQ system as of the close of business on
the date of valuation, or, if on such day such security is not quoted in the
NASDAQ system, the average of the representative bid and asked prices on such
date in the domestic over-the-counter market as reported by the National
Quotation Bureau, Inc., or any similar successor organization; and
(3) If neither (1) nor (2) applies, the fair market value
as determined by the Board in good faith. Such determination shall be
conclusive and binding on all persons.
(m) "OFFERING PERIOD" shall mean a period of approximately six
(6) months, commencing on the first Trading Day on or after January 1 and
terminating on the last Trading Day in the period ending the following June 30,
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<PAGE>
or commencing on the first Trading Day on or after July 1 and terminating on the
last Trading Day in the period ending the following December 31, during which an
option granted pursuant to the Plan may be exercised. The duration of Offering
Periods may be changed pursuant to Section 4 of this Plan.
(n) "PLAN" shall mean this Metro Networks, Inc. Employee Stock
Purchase Plan.
(o) "PURCHASE PRICE" shall mean an amount equal to 95% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(p) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(q) "RULE 16B-3" shall have the meaning set forth therefor in
Section 13(b) of the Plan.
(r) "SUBSIDIARY" shall mean a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(s) "TRADING DAY" shall mean a day on which national stock
exchanges and the National Association of Securities Dealers Automated Quotation
(NASDAQ) System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company or a
Designated Subsidiary for at least one year on a given Enrollment Date shall be
eligible to participate in the Plan; PROVIDED, HOWEVER, that all employees on
the effective date of the Company's initial public stock offering shall be
eligible to participate in the Plan on the first Enrollment Date.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent,
immediately after the grant, such Employee (or any other person whose stock
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<PAGE>
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent such option permits his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after January 1 and July 1 each year, or on such other date as the Board
or the Committee shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The Board or the Committee shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each payday
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each payday during the Offering Period,
and the aggregate of such payroll deductions during the Offering Period shall
not exceed ten
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<PAGE>
percent (10%) of the participant's Compensation during said Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board or the Committee may, in its discretion,
limit the number of participation rate changes during any Offering Period. The
change in rate shall be effective with the first full payroll period following
five (5) business days after the Company's receipt of the new subscription
agreement unless the Company elects to process a given change in participation
more quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during the current calendar year (the
"Current Offering Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Offering Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Offering Period equal $25,000. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Offering Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
Federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
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<PAGE>
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to the sale or early disposition of
Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than a
number of Shares determined by dividing $25,000 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof, and
the option shall expire at the end of the day on the last day of the Offering
Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of shares
will be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
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<PAGE>
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account during such Offering Period will be
paid to such participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
such Offering Period. If a participant withdraws during any Offering Period,
payroll deductions will not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.
(b) Upon a participant's ceasing to be an Employee (as defined
in Section 2(h) hereof), for any reason, including by virtue of him or her
having failed to remain an Employee of the Company for at least twenty (20)
hours per week during an Offering Period in which the Employee is a participant,
he or she will be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to such participant's account during the then
current Offering Period but not yet used to exercise the option will be returned
to such participant or, in the case of his or her death, to the person or
persons entitled thereto under Section 14 hereof, and such participant's option
will be automatically terminated.
(c) A participant's withdrawal from an Offering Period will not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. INTEREST. No interest shall accrue on the payroll deductions of
a participant in the Plan.
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<PAGE>
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be 1,500,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 18 hereof. If on a given Exercise Date the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right in
shares covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will
be registered in the name of the participant or in the name of the participant
and his or her spouse.
13. ADMINISTRATION.
(a) ADMINISTRATIVE BODY. The Plan shall be administered by the
Board or a committee of at least two members of the Board appointed by the Board
(the "Committee"). The Board or the Committee shall have full and exclusive
discretionary authority to construe, interpret and apply the terms of the Plan,
to determine eligibility and to adjudicate all disputed claims filed under the
Plan. Every finding, decision and determination made by the Board or the
Committee shall, to the full extent permitted by law, be final and binding upon
all parties.
(b) RULE 16B-3 LIMITATIONS. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Exchange Act, or any successor provision ("Rule 16b-3"), provides
specific requirements for the administrators of plans of this type, the Plan
shall be only administered by such a body and in such a manner as shall comply
with the applicable requirements of Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares
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<PAGE>
and cash, if any, from the participant's account under the Plan in the event of
such participant's death subsequent to an Exercise Date on which the option is
exercised but prior to delivery to such participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to exercise of the option. If a participant
is married and the designated beneficiary is not the spouse, spousal consent
shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
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<PAGE>
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the stockholders of the Company, the Reserves as well as the price per share
of Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of outstanding shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board or the Committee, whose determination in
that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board or the Committee.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation in which the Company is not the
surviving entity, each option under the Plan shall be assumed or an equivalent
option shall be substituted by the successor corporation or a parent or
subsidiary of the successor corporation, in each case with the assumed or new
option containing such terms and provisions as shall be required substantially
to preserve the rights and benefits of all options held by participating
Employees during the then current Offering Period, unless the Board or the
Committee determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date") or to cancel each
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<PAGE>
outstanding right to purchase and refund all sums collected from participants
during the Offering Period then in progress. If the Board or the Committee
shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board or the
Committee shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date for his or her
option has been changed to the New Exercise Date and that his or her option will
be exercised automatically on the New Exercise Date, unless prior to such date
he or she has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this Section, an option granted or assumed by a
successor corporation shall be deemed to substantially preserve the rights and
benefits of options held by participants if, following the sale of assets or
merger, the option confers the right to purchase, for each share of option stock
subject to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board or the Committee may, with the consent
of the successor corporation and the participant, provide for the consideration
to be received upon exercise of the option to be solely common stock of the
successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
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<PAGE>
19. AMENDMENT OR TERMINATION.
(a) The Board may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 18 hereof, no such termination
may affect options previously granted, provided that an Offering Period may be
terminated by the Board of Directors on any Exercise Date if the Board
determines that the termination of the Plan is in the best interests of the
Company and its stockholders. Except as provided in Section 18 hereof, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to comply with
Rule 16b-3 or under Section 423 of the Code (or any successor rule or provision
or any other applicable law or regulation), the Company shall obtain stockholder
approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether
any participant's rights may be considered to have been "adversely affected,"
the Board (or the Committee) shall be entitled to change the Offering Periods
(subject to the provisions of the second sentence of Section 4), limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or the Committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of
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<PAGE>
such shares pursuant thereto shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. TERM OF PLAN. The Plan shall become effective upon its adoption
by the Board of Directors, subject to its approval by the stockholders of the
Company within twelve months. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19 hereof. The Plan was
adopted by the Board effective October 16, 1996.
23. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions
of options granted hereunder to, and the purchase of shares by, persons subject
to Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 from
time to time to qualify for the maximum exemption from Section 16 the Exchange
Act with respect to Plan transactions.
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EXHIBIT A
METRO NETWORKS, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
____ Original Application Enrollment Date:______
____ Change in Payroll Deduction Rate
____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in the
Metro Networks, Inc. Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
_____% of my Compensation on each payday (not to exceed 10%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete "Employee Stock Purchase Plan." I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that the grant
of the option by the Company under this Subscription Agreement may be
subject to obtaining stockholder approval of the Employee Stock Purchase
Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of
Exhibit A - Page 1
<PAGE>
(Employee or Employee and Spouse Only):
____________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be treated
for Federal income tax purposes as having received ordinary income at the
time of such disposition in an amount equal to the excess of the fair
market value of the shares at the time such shares were purchased by me
over the price which I paid for the shares. I HEREBY AGREE TO NOTIFY THE
COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF
SHARES AND I WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX
WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION OF THE
COMMON STOCK. The Company may, but will not be obligated to, withhold from
my compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year holding period, I understand that I will
be treated for Federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of (1)
the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15%
of the fair market value of the shares on the first day of the Offering
Period. The remainder of the gain, if any, recognized on such disposition
will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
Exhibit A - Page 2
<PAGE>
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _______________________________________
(First) (Middle) (Last)
_____________________ ___________________________________
Relationship
___________________________________
(Address)
NAME: (Please print) _______________________________________
(First) (Middle) (Last)
_____________________ ___________________________________
Relationship
___________________________________
(Address)
Employee's Social
Security Number: ___________________________________
Employee's Address: ___________________________________
___________________________________
___________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ________________ __________________________________
Signature of Employee
__________________________________
Spouse's Signature
(If beneficiary other than spouse)
Exhibit A - Page 3
<PAGE>
EXHIBIT B
METRO NETWORKS, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Metro
Networks, Inc. Employee Stock Purchase Plan which began on ___________, 19__
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the participation in the Employee Stock Purchase Plan for the
Offering Period. He or she hereby directs the Company to pay to the undersigned
as promptly as practicable all the payroll deductions credited to his or her
account with respect to such Offering Period. The undersigned understands and
agrees that his or her option for such Offering Period will be automatically
terminated. The undersigned understands further that no further payroll
deductions will be made for the purchase of shares in the current
Offering-Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
_______________________________
_______________________________
_______________________________
Signature:
_______________________________
Date: _________________________
<PAGE>
EXHIBIT 10.20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM OF
STOCK LOAN AND PLEDGE AGREEMENT
DATED AS OF OCTOBER __, 1996
BETWEEN
METRO NETWORKS, INC.
AND
DAVID I. SAPERSTEIN
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- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
STOCK LOAN AND PLEDGE AGREEMENT
PAGE
----
1. Loan of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Delivery of Collateral Securities. . . . . . . . . . . . . . . . . 1
2.2 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . 1
3. Obligations of Lender; Distributions. . . . . . . . . . . . . . . . . . 2
3.1 Obligations of the Lender with Respect to the Collateral . . . . . 2
3.2 Right of Borrower in Respect of Loaned Securities. . . . . . . . . 2
3.3 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Term of Loan; Return of Loaned Securities . . . . . . . . . . . . . . . 3
4.1 Term of Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Return of Loaned Securities. . . . . . . . . . . . . . . . . . . . 3
5. Loan Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Remedies of Lender. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Rights of Secured Creditor . . . . . . . . . . . . . . . . . . . . 5
7.2 Calculation of Unpaid Remedy Amount. . . . . . . . . . . . . . . . 5
7.3 Setoffs of Collateral. . . . . . . . . . . . . . . . . . . . . . . 6
7.4 No Counterclaim, Waiver, etc.. . . . . . . . . . . . . . . . . . . 6
7.5 No Rights Against Transferees. . . . . . . . . . . . . . . . . . . 7
8. Transfer Taxes and Other Costs of Transfer. . . . . . . . . . . . . . . 7
9. Representations, etc. of Lender and Borrower. . . . . . . . . . . . . . 7
9.1 Representations of Lender. . . . . . . . . . . . . . . . . . . . . 7
9.2 Representations, Warranties and Covenants of the Borrower. . . . . 7
10. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11. Payments, Deliveries, Notices . . . . . . . . . . . . . . . . . . . . . 8
12. Deliveries to Custodian; Lender's Right to Appoint Agents . . . . . . . 9
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13. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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<PAGE>
STOCK LOAN AND PLEDGE AGREEMENT
STOCK LOAN AND PLEDGE AGREEMENT, dated as of October __, 1996 (the
"AGREEMENT"), between Metro Networks, Inc. (the "LENDER") and David I.
Saperstein (the "BORROWER"). Capitalized terms used herein and not otherwise
defined are used as defined in Section 13.
The Lender and the Borrower agree as follows:
1. LOAN OF SHARES. Subject to the terms and conditions hereof, the
Lender agrees to lend (the "LOAN") to the Borrower and the Borrower agrees to
borrow from the Lender on the date hereof (the "LOAN DATE") ______ shares of
Common Stock (the "LOANED SHARES") of Metro Networks, Inc., a Delaware
corporation (the "COMPANY"), represented by the stock certificates identified on
Schedule A attached hereto, together with all securities which are distributed
by the Company with respect to the Loaned Shares, or are received in exchange
for the Loaned Shares in connection with a merger, recapitalization or
reorganization involving the Company (collectively, the "LOANED SECURITIES").
The transfer of the Loaned Shares from the Lender to the Borrower shall be
reflected on the share register of the Company.
2. COLLATERAL.
2.1 DELIVERY OF COLLATERAL SECURITIES. The Borrower is concurrently
delivering to the Custodian a number of shares of Series A Convertible Preferred
Stock of the Company equal to the number of Loaned Shares (the "PLEDGED
SHARES"), represented by the stock certificates identified on Schedule B
attached hereto, and shall deliver the upfront fee set forth in Section 5
hereof. The Pledged Shares shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Lender and the Custodian.
2.2 GRANT OF SECURITY INTEREST. To secure the due and punctual
performance of the obligations of the Borrower under this Agreement, the
Borrower hereby grants to the Lender a first lien on and security interest in
the Pledged Shares and all securities which are distributed by the Company with
respect thereto, or are received in exchange for any of the foregoing in
connection with a merger, recapitalization or reorganization involving the
Company (collectively the "COLLATERAL SECURITIES"), PROVIDED that Collateral
Securities shall not include any securities returned to the Borrower pursuant to
Section 3.1 or 4.2. The Borrower recognizes that the Collateral Securities will
be held by, or on the books and records of, the Custodian or
<PAGE>
other agents of the Lender or one or more financial intermediaries to perfect
the Lender's security interest therein. Except for the security interests
granted hereby, the Borrower shall not create or suffer to exist any security
interest, lien or encumbrance in respect of any Collateral Securities.
3. OBLIGATIONS OF LENDER; DISTRIBUTIONS.
3.1 OBLIGATIONS OF THE LENDER WITH RESPECT TO THE COLLATERAL. The
Lender shall cause the Custodian to record on its books all Collateral
Securities delivered to it, and to keep the Collateral Securities identifiable.
The Lender shall cause the Custodian not to commingle the Collateral Securities
with the Custodian's or the Lender's other assets or assets of the Custodian's
other custodial clients or any collateral delivered by other borrowers. The
Lender shall not, and shall cause the Custodian not to, use, invest, transfer,
lend or pledge the Collateral Securities, except as permitted by Section 7.1 or
7.3. The Lender shall cause the Custodian to vote the Collateral Securities in
accordance with the instructions of the Borrower, so long as no Event of Default
has occurred and is continuing.
Except as otherwise expressly provided herein, the sole obligations of
the Lender in respect of the Collateral Securities are to return to the Borrower
all Collateral Securities at the termination of the Loan, in accordance with and
subject to the provisions of Section 4.2 (against return of the Loaned
Securities), and, so long as no Event of Default has occurred and is continuing,
to pay over or deliver to the Borrower, in accordance with its instructions to
the Lender, all Distributions received by the Custodian with respect to
Collateral Securities.
3.2 RIGHT OF BORROWER IN RESPECT OF LOANED SECURITIES. Except as set
forth in Section 3.3, until the Loaned Securities are required to be redelivered
to the Lender upon termination of the Loan, the Borrower shall have all the
incidents of ownership of the Loaned Securities, including the right to transfer
the Loaned Securities to others and to have the Loaned Securities transferred to
any person on the share register of the Company, including, without limitation,
in connection with an initial public offering of the Common Stock, but in the
event the Borrower shall so transfer the Loaned Securities to any other person,
the Borrower shall not be relieved of its obligations under Section 4.2 to
return the Loaned Securities (or an equivalent quantity of securities of the
same class and issuer). The Lender hereby waives the right to vote or to
provide any consent or to take any similar action with respect to the Loaned
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<PAGE>
Securities in the event that the record date or deadline for such vote, consent
or other action falls during the term of the Loan.
3.3 DISTRIBUTIONS. If any Distribution on any Loaned Securities
shall be made, and the record or other date for determining the security holders
entitled to receive such Distribution shall be on or after the delivery of such
Loaned Securities to the Borrower and any necessary registration of transfer in
connection therewith, but before the return of such Loaned Securities to the
Lender and any necessary registration of transfer in connection therewith, the
Borrower shall on the date for such distribution, and whether or not the same is
actually received by the Borrower, pay to the Custodian for the benefit of the
Lender such cash, and shall deliver to the Custodian for the benefit of the
Lender such property (other than securities), as shall have been included in
such Distribution. Any securities included in a distribution shall be added to
the Loaned Securities on the date for such distribution and shall thereupon for
all purposes constitute Loaned Securities delivered under the Loan.
4. TERM OF LOAN; RETURN OF LOANED SECURITIES.
4.1 TERM OF LOAN. The Loan shall terminate on the first to occur of
(a) three business Days after written or telephone notice of demand,
given to the Borrower by the Lender or the Custodian, for the return of any
Loaned Securities;
(b) any termination of the Loan pursuant to Section 6; and
(c) the tenth anniversary of the date hereof.
4.2 RETURN OF LOANED SECURITIES. Upon termination of the Loan, the
Borrower shall deliver the Loaned Securities (or an equivalent quantity of
securities of the same class and issuer) to the Custodian, together with all
Distributions thereon (i) which shall not have previously been paid over to the
Custodian pursuant to Section 3.3 and (ii) with respect to which the record or
other date for determining the security holders entitled to receive payment or
distribution thereof shall have occurred prior to the return of the Loaned
Securities (or such equivalent securities) to the Custodian and any necessary
registration of transfer in connection therewith, except that if any such
Distributions shall not have been made prior to such time, the Borrower shall
deliver such distributions to the Custodian immediately upon the making thereof,
whether or not the
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<PAGE>
same is actually received by the Borrower. Delivery of Loaned Securities (or
such equivalent securities) by the Borrower in accordance with the first
sentence of this Section 4.2 shall be made against return of Collateral
Securities to the Borrower, PROVIDED, HOWEVER, that if an Event of Default shall
have occurred and be continuing, such Collateral Securities shall not be
returned to the Borrower, despite the return of such Loaned Securities (or such
equivalent securities), and all Collateral Securities shall be subject to all of
the terms and conditions hereof until such Event of Default shall have been
cured or waived.
5. LOAN FEE. In consideration of the Loan, the Borrower shall pay
to the Lender during the term of the Loan annually on each anniversary date of
this Agreement and on any termination of the Loan pursuant to Section 4.1, an
annual loan fee (the "LOAN FEE") equal to 0.10% of the average Value of the
Loaned Securities during the five day trading period (E.G., any day on which
trading takes place in the NASDAQ national market) following the Loan Date.
One-half of this fee will be paid on an annual basis and one-half will be paid
upon the termination of the Loan but the deferred portion shall only be payable
if such termination occurs pursuant to Section 4.1(b) or (c) hereof. In the
event of a termination pursuant to Section 4.1(b), the Loan Fee shall be
prorated on the basis of the number of months (including any portion of a month)
that have elapsed since the Loan Date or the date of the immediately preceding
payment of a portion of the Loan Fee. In addition, the Borrower will pay the
Lender an upfront fee of $____________ payable on the date hereof.
6. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur,
(a) the Borrower shall fail in any material respect to perform or
observe any term hereof; or
(b) any representation or warranty made by the Borrower herein shall
have been untrue when made in any material respect and the Lender notifies
the Borrower that such untruth is to constitute an Event of Default; or
(c) the Borrower shall (i) file, or consent by answer or otherwise to
the filing against it of, a petition for relief, reorganization,
rehabilitation, arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency or
rehabilitation law of any jurisdiction,
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<PAGE>
(ii) make an assignment for the benefit of creditors, (iii) consent to the
appointment of a custodian, receiver, trustee, rehabilitator or other
officer with similar powers of either or both of itself or of any
substantial part of its property, (iv) be adjudicated insolvent or be
liquidated or (v) take action for the purpose of any of the foregoing; or
(d) a court or governmental authority of competent jurisdiction shall
enter an order appointing, without the consent of the Borrower, a
custodian, receiver, trustee, rehabilitator or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or if any order for relief shall be entered in any case or
proceeding for liquidation or reorganization or otherwise to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Borrower, or if any petition
for any such relief shall be filed against the Borrower.
then, unless otherwise specified by the Lender to the Borrower in writing, the
loan shall terminate immediately without any further notice by the Lender.
7. REMEDIES OF LENDER.
7.1 RIGHTS OF SECURED CREDITOR. If any Event of Default shall have
occurred and be continuing, the Lender shall have all the rights and remedies,
with respect to all Collateral Securities, of a secured party under Articles 8
and 9 of the Uniform Commercial Code of the State of New York in effect at that
time and as otherwise provided by law, and, in addition, may, at its sole
option, exercise, or cause the Custodian to exercise on its behalf, any one or
more of the remedies described in Sections 7.3 and 7.4.
7.2 CALCULATION OF UNPAID REMEDY AMOUNT. If any Event of Default
shall have occurred and be continuing, the Borrower will pay in cash to the
Custodian the "Unpaid Remedy Amount", which shall be equal to the sum of the
following amounts:
(a) the Value as of such time of the Loaned Securities other than any
Loaned Securities (or their equivalent) previously returned to the Lender;
(b) all taxes, fines, penalties or interest incurred by the Lender,
the Custodian or any other agent
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<PAGE>
of the Lender as a result of the Borrower's failure to perform its
obligations hereunder, including (without limitation) the Borrower's
obligation to return Loaned Securities (or equivalent securities) as
provided by Section 4.2;
(c) any unpaid Loan Fee or other unpaid amounts (in the form of cash
or otherwise) owing to the Lender under this Agreement;
(d) any amounts not included in clauses (a) through (c) of this
Section 7.2 which are owing pursuant to Section 3, 4, 5, 8 or 10; and
(e) interest on each of the foregoing amounts until payment thereof
in full has been made, to accrue daily at an annual rate equal to 2% above
the amount announced by Citibank, N.A. as its "prime" rate (its "PRIME
RATE"), as in effect from time to time (such rate to be adjusted
simultaneously with each change in such prime rate);
minus the aggregate Value of Collateral Securities absolute ownership of which
has been assumed by the Lender under Section 7.3 (which ownership is not subject
to any judicial or statutory stay against enforcement).
7.3 SETOFFS OF COLLATERAL. If any Event of Default shall have
occurred and be continuing, including, but not limited to, the Borrower's
failure to return the Loaned Securities (or their equivalents) in accordance
with Section 4.2, the Lender or the Custodian may, at any time and in the
Lender's sole discretion, set off all or any portion of the Collateral
Securities against any Unpaid Remedy Amount (or a portion thereof) as of such
time, by assuming absolute ownership of all or a portion of the Collateral
Securities, and, at the discretion of the Lender, selling any or all of such
Collateral Securities and assuming absolute ownership of the proceeds, PROVIDED
that the Value of the Collateral Securities absolute ownership of which is so
assumed does not exceed the Unpaid Remedy Amount as of the time of such
assumption of ownership.
7.4 NO COUNTERCLAIM, WAIVER, ETC. The Lender's rights against the
Collateral Securities shall be absolute and subject to no counterclaim, offset,
recoupment, deduction or defense in favor of the Borrower, whether such
counterclaim, offset, recoupment, deduction or defense relates to the Lender or
the Custodian. No failure on the part of the Lender or the Custodian to
exercise, and no delay on its part in exercising, any right, power or remedy
hereunder shall operate as a waiver
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<PAGE>
thereof, nor shall any single or partial exercise by the Lender or the Custodian
of any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
provided herein are cumulative and are not exclusive of any remedies provided by
law.
7.5 NO RIGHTS AGAINST TRANSFEREES. In no event shall the Lender have
any rights against any transferee of the Loaned Securities (or any further
transferees thereof) or against any Loaned Securities so transferred. The
Borrower agrees that this Section 7.5 is for the benefit of transferees and may
be enforced thereby as if such transferees were parties to this Agreement.
8. TRANSFER TAXES AND OTHER COSTS OF TRANSFER. The Borrower shall
be responsible for, and shall pay or reimburse the Lender for, all transfer
taxes and other costs involved in all transfers of Loaned Securities or
Collateral Securities between the Lender or the Custodian, on the one hand, and
the Borrower, on the other hand. In connection with deliveries hereunder, the
Borrower shall execute all appropriate transfer tax exemption certificates.
9. REPRESENTATIONS, ETC. OF LENDER AND BORROWER.
9.1 REPRESENTATIONS OF LENDER. The Lender represents that (a) the
Lender has the legal right and authority to execute, deliver and perform this
Agreement, and no disability or contractual obligation exists which would
prohibit the Lender from so doing; (b) the Lender has obtained all necessary
approvals or authorizations by all regulatory bodies and other third parties
required to be obtained by the Lender to consummate the transactions
contemplated hereby; (c) the execution and delivery of this Agreement by the
Lender complies, and all transactions by the Lender contemplated hereby will
comply, with all applicable laws and regulations applicable to the Lender,
including, without limitation, all rules and regulations of the Securities and
Exchange Commission, and will not be in violation of any of the foregoing; (d)
when transferred to the Borrower pursuant hereto, the Loaned Securities shall be
transferred free and clear of any security interests, liens or encumbrances, and
(e) the Loaned Securities are validly issued, fully paid and nonassessable.
9.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER. The
Borrower represents, warrants and covenants to the Lender that (a) the Borrower
has the legal right and authority to execute, deliver and perform this Agreement
and no disability or contractual obligation exists which would prohibit
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<PAGE>
the Borrower from so doing; (b) the Borrower has obtained all necessary
approvals or authorizations by all regulatory bodies and other third parties to
consummate the transactions contemplated hereby; (c) the execution and delivery
of this Agreement complies, and all transactions contemplated hereby will
comply, with all applicable laws and regulations, including, without limitation,
all rules and regulations of the Securities and Exchange Commission, and will
not be in violation of any of the foregoing; (d) the Collateral Securities are
owned by the Borrower free and clear of any security interests, liens or
encumbrances other than the liens contemplated hereby; and (e) the pledge of the
Collateral Securities pursuant to this Agreement creates a valid security
interest in the Collateral Securities in favor of the Lender and securing the
payment of the Loan.
10. INDEMNIFICATION. Except for taxes (other than transfer taxes),
the Borrower agrees to indemnify, defend and hold and save harmless the Lender
and the Custodian from any claims, actions, demands or lawsuits of any kind
whatsoever arising (a) in any way out of the use that the Borrower may make of
the Loaned Securities, or (b) out of transactions by the Lender involving the
purchase or sale of securities, but only to the extent that the liability
arising out of such transactions is due, in whole or in part, to the Borrower's
failure to perform its obligations in accordance with the terms of this
Agreement, including the Borrower's obligation to return the Loaned Securities
(or equivalent securities) within the time specified in Section 4.2, PROVIDED
that the Borrower shall not be required to indemnify the Lender or Custodian for
any claims, actions, demands or lawsuits as may be caused by the gross
negligence or willful acts of the Lender or the Custodian. The Borrower agrees
that the Custodian shall have the right to enforce its third party rights of
indemnification under this Section 10 directly against the Borrower.
11. PAYMENTS, DELIVERIES, NOTICES. All payments under this Agreement
between the parties hereto shall be made by (a) certified or official bank
check, or (b) wire transfer in immediately available funds to the account of the
payee or its designated agent.
Except as otherwise expressly provided herein, all notices, requests,
consents, and other communications hereunder between the Lender or the Custodian
and the Borrower shall be in writing and shall be deemed to have been given (a)
when delivered, if sent by hand or first class mail, postage prepaid, or (b)
when sent, if transmitted by facsimile. Each such notice or other communication
shall be addressed as follows:
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<PAGE>
(i) if to the Borrower, at the address set forth after its signature
at the end of this Agreement, and
(ii) if to the Lender, at:
_____________________
_____________________
_____________________
Fax:
(iii) if to the Custodian, at:
_____________________
_____________________
_____________________
Fax:
or to such other addresses as either party may furnish the other party by
written notice under this Section 11.
12. DELIVERIES TO CUSTODIAN; LENDER'S RIGHT TO APPOINT AGENTS. The
Borrower agrees that at the time of giving any notice or making any deliveries
to the Custodian, the Borrower shall identify such notice or delivery as
relating to the Loan or a specific provision under this Agreement. The Borrower
acknowledges that the Custodian will be acting hereunder as the Lender's agent,
and not in its individual capacity.
The Borrower further acknowledges that the Lender may at any time
appoint such agent or agents as the Lender in its sole discretion may select to
perform any other functions on its behalf in connection with any provision of
this Agreement.
13. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the following respective meanings:
BUSINESS DAY: any weekday other than one which is not recognized as a
settlement day by the NASDAQ National Market, or on which banking institutions
are authorized or required to be closed in the State of New York.
COMMON STOCK: common stock, par value $0.001 per share, issued by the
Company.
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<PAGE>
CUSTODIAN: Paul, Hastings, Janofsky & Walker LLP until such time as
the Lender shall give the Borrower notice of the Lender's appointment, as agent
for the Lender, of a different custodian for purposes of this Agreement.
DISTRIBUTION: with reference to any Loaned Securities or Collateral
Securities, any interest, dividend or other payment or distribution of cash,
securities, or other property with respect to such Loaned Securities, or any
option, warrant, right, privilege or other security of any kind distributed with
respect thereto or in exchange therefor.
SERIES A CONVERTIBLE PREFERRED STOCK: the Series A Preferred Stock,
par value $.001 per share, issued by the Company and convertible into Common
Stock.
VALUE: the Value at any time of any Loaned Securities or Collateral
Securities shall be determined as follows:
(a) if such Loaned Securities or Collateral Securities are
traded on one or more national securities exchanges, the Value thereof
shall be determined on the basis of the closing price on the preceding
Business Day on the consolidated tape as reported by the Wall Street
Journal, or such other pricing service as may be selected by the
Custodian and approved by the Lender; or
(b) if such Loaned Securities or Collateral Securities are not
traded on a national securities exchange, the Value thereof shall be
determined on the basis of the low asked price last quoted on the
preceding Business Day by any principal market maker for such Loaned
Securities or Collateral Securities chosen by the Custodian, PROVIDED
that if no such quotations shall be available for such day, such
market value shall be determined on the basis of the last low asked
price quoted on the next preceding day for which such quotations are
available.
To the market value of any Loaned Securities or Collateral Securities as
determined under the foregoing clauses (a) and (b), shall be added all interest
accrued, and all amortized discount, on such Loaned Securities or Collateral
Securities as of the close of the preceding Business Day, to the extent that
such accrued interest or amortized discount is neither reflected in the amounts
computed under clauses (a) or (b) nor has previously been paid to the Custodian.
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<PAGE>
14. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties and supersedes any other oral or written
agreement between the parties concerning securities loans. The headings in this
Agreement are for convenience of reference only and shall not expand, limit or
otherwise affect the meaning hereof. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
together shall constitute one and the same instrument. This Agreement shall not
be assignable by either party without the prior written consent of the other
party, shall be binding upon and inure to the benefit of the parties and their
respective legal representatives, distributees and successors and permitted
assigns, may not be amended, changed, modified or terminated except by an
instrument in writing signed by each of the parties hereto, and shall be
governed by and construed in accordance with New York law (without giving effect
to principles of conflicts of laws).
LENDER BORROWER
By: _________________________ By ________________________
Name: Name:
Title: Title:
Address of Borrower
______________________
______________________
______________________
Fax:
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SCHEDULE A
# of Shares of Common
Common Stock Certificate # Stock Represented
-------------------------- ---------------------
<PAGE>
SCHEDULE B
Series A Convertible
Preferred Stock # of Shares of Convertible
Certificate # Preferred Stock Represented
-------------------- ---------------------------
<PAGE>
EXHIBIT 10.21
This INDEMNIFICATION AGREEMENT is made and entered into as of
October __, 1996 between Metro Networks, Inc., a Delaware corporation ("Metro
Networks") and David I. Saperstein ("Saperstein").
WHEREAS, as of the date hereof, Metro Networks has acquired all of the
business operations of Metro Traffic Control, Inc. ("Traffic"), Metro
Reciprocal, Inc. ("Reciprocal") and Metro Video News, Inc. ("Video");
WHEREAS, Traffic, Reciprocal and Video had elected under Section 1362
of the Internal Revenue Code of 1986, as amended (the "Code") to be treated and
operated as Subchapter S corporations;
WHEREAS, Saperstein was at all times the sole shareholder of Traffic,
Reciprocal and Video;
NOW, THEREFORE, in consideration of the premises and mutual provisions
hereinafter set forth, the parties hereto hereby agree as follows:
Article 1. METRO NETWORKS INDEMNITY. Metro Networks will
indemnify Saperstein, on an after tax basis, for any United States Federal,
state or local income tax liability, to the extent such liability is
attributable to a claim by any taxing authority that Saperstein's income with
respect to his ownership of stock in Traffic, Reciprocal or Video for any
taxable year exceeds the income reported to Saperstein by Traffic, Reciprocal or
Video on its Internal Revenue Service Form K-1 or corresponding state or local
reporting form for such taxable year. Metro Networks shall have the right to
control any tax audit or contest which may give rise to an indemnification
obligation. Such indemnity will be payable upon a final determination of the
tax liability giving rise to the indemnity obligation.
Article 2. SAPERSTEIN INDEMNITY. Saperstein will indemnify Metro
Networks for Metro Networks' United States Federal, state or local income tax
liability resulting from a claim by any taxing authority that Traffic,
Reciprocal or Video was not properly treated as a Subchapter S corporation for
any period in which Traffic, Reciprocal or Video filed a tax return on which it
claimed that it was properly treated as a Subchapter S corporation (or similar
pass through vehicle for state or local tax purposes); PROVIDED, HOWEVER, that
Saperstein's obligation to indemnify Metro Networks shall be limited to the
amount that Saperstein is entitled to receive as a refund of United States
Federal, state or local income taxes previously paid with respect to his share
of income generated by Traffic, Video or Reciprocal. Such indemnity will be
payable upon a
<PAGE>
final determination of the tax liability giving rise to the indemnity
obligation.
Article 3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principals of conflicts of laws.
Article 4. NOTICES. All notices or other communications provided
for under this Agreement shall be given in writing and shall be delivered
personally or sent by post telex or facsimile transmission to the other party.
If to Metro Networks:
Metro Networks, Inc.
2800 Post Oak Boulevard
Suite 4000
Houston, Texas 77056
If to Saperstein:
David I. Saperstein
c/o Metro Networks, Inc.
2800 Post Oak Boulevard
Suite 4000
Houston, Texas 77056
Article 5. ASSIGNMENT. Except as otherwise specifically provided
herein, this Agreement and any rights and obligations hereunder may not be
assigned by either party without the prior written approval of the other party,
and any attempted assignment not in compliance with this Article shall be void
and of no effect.
Article 6. COSTS. In any proceeding to enforce any rights under
this Agreement by legal proceedings or otherwise, the prevailing party shall be
reimbursed by the defaulting party for all of the costs and expenses of the
prevailing party in pursuing such proceedings, including, without limitation,
reasonable attorneys' or solicitors' fees.
Article 7. PARTIES NOT PARTNERS. Nothing contained in this
Agreement shall constitute a partnership or other agency agreement between the
parties hereto or their respective subsidiaries or any of them, nor shall
anything contained in this Agreement give any of the parties hereto or any of
the respective subsidiaries the right to
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bind, or pledge the credit of, any of the other parties hereto or any of their
respective subsidiaries.
Article 8. ANNUAL REVIEW. This Agreement may be amended by mutual
consultation among the parties, evidenced in a writing signed by both parties,
and the parties agree to engage in mutual consultation in good faith during each
annual period from the date hereof at the request of any party to maintain in
this Agreement the principles of fairness and equity, and to amend this
Agreement accordingly.
Article 9. SEVERABILITY. If any provision in this Agreement is
found by any court or administrative body of competent jurisdiction to be
invalid or unenforceable, the invalidity or unenforceability of such provision
shall not affect the other provisions of this Agreement and all provisions not
affected by such invalidity or unenforceability shall remain in full force and
effect unless the severance of the invalid or unenforceable provision would
unreasonably frustrate the commercial purposes of this Agreement. The parties
hereby agree to attempt to substitute for any invalid or unenforceable provision
a valid or enforceable provision which achieves to the greatest extent possible
the economic objectives of the invalid or unenforceable provision.
Article 10. WAIVER. The waiver by either party of a breach or
default of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any succeeding breach of the same or other
provisions nor shall any delay or omission on the part of either party to
exercise or avail itself of any right power or privilege that it has or may have
hereunder operate as a waiver of any breach or default by the other party.
Article 11. ENTIRE AGREEMENT. This Agreement constitutes the
entire and only Agreement between the parties hereto relating to the subject
matter hereof and overrides and supersedes any prior arrangements or oral
discussions and shall not be modified except in writing by agreement between the
parties.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
METRO NETWORKS, INC.
By: _________________________
Name:
Title:
_________________________
David I. Saperstein
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Exhibit 10.23
FOURTH AMENDMENT TO CREDIT AGREEMENT
THE FOURTH AMENDMENT TO CREDIT AGREEMENT (the "Fourth Amendment"),
dated as of September 25, 1996, is entered into among Metro Traffic Control,
Inc., a Maryland corporation, Metro Networks, Ltd., a Texas limited partnership
(collectively, the "Borrowers"), the banks listed on the signature pages hereto
(collectively, the "Lenders"), and NationsBank of Texas, N.A., as Administrative
Lender (in said capacity, the "Administrative Lender").
BACKGROUND
Borrowers, Lenders and Administrative Lender heretofore entered into
that certain Credit Agreement, dated as of October 21, 1994, as modified by that
certain Letter Agreement dated as of February 6, 1995, and as amended by that
certain First Amendment to Credit Agreement dated as of May 22, 1995, by that
certain Second Amendment to Credit Agreement dated as of November 22, 1995, and
by that certain Third Amendment to Credit Agreement dated as of June 14, 1996
(as amended, modified or restated from time to time, the "Credit Agreement"; the
terms defined in the Credit Agreement and not otherwise defined herein shall be
used herein as defined in the Credit Agreement).
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Borrowers,
Lenders and Administrative Lender covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT. Upon the satisfaction of the
conditions of effectiveness set forth in Section 4 of this Fourth Amendment, the
following provisions of the Credit Agreement shall be amended as set forth
below:
(a) The definition of Commitment Reduction Date set forth in
Section 1.1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"COMMITMENT REDUCTION DATE" shall mean the last Business Day of
December, 1996.
<PAGE>
(b) Section 2.6(c) of the Credit Agreement is hereby amended to
read in its entirety as follows:
(c) SCHEDULED REDUCTION. On each Quarterly Date,
commencing on the Commitment Reduction Date, through the Maturity
Date, the Commitment outstanding on the Commitment Reduction
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
- -------------- ------------
December 31, 1996 6.40%
March 31, 1997 6.42%
June 30, 1997 6.42%
September 30, 1997 6.42%
December 31, 1997 6.42%
March 31, 1998 6.42%
June 30, 1998 5.50%
September 30, 1998 5.50%
December 31, 1998 5.50%
March 31, 1999 6.25%
June 30, 1999 6.25%
September 30, 1999 6.25%
December 31, 1999 6.25%
March 31, 2000 10.00%
June 30, 2000 10.00% and any remaining balance
such that the Commitment shall be
zero
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, each
-2-
<PAGE>
Borrower represents and warrants that, as of the date hereof and after giving
effect to the amendments contemplated by the foregoing Section 1:
(a) the representations and warranties contained in the Credit
Agreement are true and correct on and as of the date hereof as made on and as of
such date;
(b) no event has occurred and is continuing which constitutes a
Default or an Event of Default;
(c) such Borrower has full power and authority to execute and
deliver this Fourth Amendment, and this Fourth Amendment and the Credit
Agreement, as amended hereby, constitute the legal, valid and binding
obligations of such Borrower, enforceable in accordance with their respective
terms; and
(d) no authorization, approval consent, or other action by,
notice to, or filing with, any governmental authority or other Person, is
required for the execution, delivery or performance by such Borrower of this
Fourth Amendment or the acknowledgement of the Fourth Amendment by any Guarantor
or limited partners of Metro Networks, Ltd. (the "Partnership").
3. CONDITIONS OF EFFECTIVENESS. This Fourth Amendment shall be
effective as of September 25, 1996, subject to the following:
(a) Administrative Lender shall have received counterparts of
this Fourth Amendment executed by each Lender;
(b) Administrative Lender shall have received counterparts of
this Fourth Amendment executed by each Borrower and acknowledged by each
Guarantor and limited partner of the Partnership; and
(c) Administrative Lender shall have received, in form and
substance satisfactory to Administrative Lender and its counsel, such other
documents, certificates, instruments and opinion letters as Administrative
Lender shall require.
4. GUARANTOR'S ACKNOWLEDGEMENT. By signing below, each of the
Guarantors acknowledges this Fourth Amendment and agrees that its obligations in
respect of its Subsidiary Guaranty are not released, modified, impaired or
-3-
<PAGE>
affected in any manner by this Fourth Amendment or any of the provisions
contemplated herein.
5. LIMITED PARTNERS' CONSENT. By signing below, each of the limited
partners of the Partnership acknowledges this Fourth Amendment and further
acknowledges and agrees that (a) the general partner of the Partnership has the
authority to execute and deliver this Fourth Amendment on behalf of the
Partnership and (b) its obligations in respect of its Pledge Agreement are not
released, modified, impaired or affected in any manner by this Fourth Amendment
or any of the provisions contemplated herein.
6. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Fourth amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder", or words of
like import shall mean and be a reference to the Credit Agreement, as affected
and amended by the Fourth Amendment.
(b) The Credit Agreement, as amended by this Fourth Amendment,
and all other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
7. COSTS, EXPENSES AND TAXES. Each Borrower agrees, jointly and
severally, to pay on demand all costs and expenses of Administrative Lender in
connection with the preparation, reproduction, execution and delivery of this
Fourth Amendment and the other instruments and documents to be delivered
hereunder (including the reasonable fees and out-of-pocket expenses of counsel
for Administrative Lender with respect thereto and with respect to advising
Administrative Lender as to its rights and responsibilities under the Credit
Agreement, as amended by this Fourth Amendment).
8. EXECUTION IN COUNTERPARTS. This Fourth Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same
instrument.
9. GOVERNING LAW; BINDING EFFECT. This Fourth Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding
-4-
<PAGE>
upon each borrower and each Lender and their respective successors and assigns.
10. HEADINGS. Section headings in this Fourth Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Fourth Amendment for any other purpose.
11. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS
FOURTH AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
as of the date first above written.
METRO TRAFFIC CONTROL, INC.
By: /s/ Curtis H. Coleman
---------------------------
Curtis H. Coleman
Chief Financial Officer
METRO NETWORKS, LTD.
By: METRO TRAFFIC CONTROL, INC., its general partner
By: /s/ Curtis H. Coleman
---------------------------
Curtis H. Coleman
Chief Financial Officer
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender, as Lender and as Issuing Bank
By: /s/ Whitney L. Busse
---------------------------
Whitney L. Busse,
Vice President
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<PAGE>
ACKNOWLEDGED AND AGREED BY THE GUARANTORS AND LIMITED PARTNERS THIS 25TH DAY OF
SEPTEMBER 1996
METRO RECIPROCAL, INC.
METRO VIDEO NEWS, INC.
TRAFFICSCAN, INCORPORATED
MTC GP, INC.
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS, INC.
TRAFFIC NET INC.
THE WEATHER BUREAU, INC.
TRAFFIC NET OF CONNECTICUT, INC.
By: /s/ Curtis H. Coleman
-----------------------------
Curtis H. Coleman
Chief Financial Officer
/s/ David I. Saperstein
- ----------------------------------
David I. Saperstein
MICHELLE JOY COPPOLA 1994 TRUST
By: /s/ Michelle Joy Coppola
-----------------------------
Michelle Joy Coppola, Sole
Trustee of the Michelle Joy
Coppola 1994 Trust
JENNIFER BETH SAPERSTEIN 1994 TRUST
By: /s/ Jennifer Beth Saperstein
-----------------------------
Jennifer Beth Saperstein, Sole
Trustee of the Jennifer Beth
Saperstein 1994 Trust
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<PAGE>
JONATHAN ALEXANDER SAPERSTEIN 1994 TRUST
By: /s/ Suzanne Saperstein
-----------------------------
Suzanne Saperstein, Sole Trustee
of the Jonathan Alexander
Saperstein 1994 Trust
ALEXIS DANIELLA SAPERSTEIN 1994 TRUST
By: /s/ Suzanne Saperstein
-----------------------------
Suzanne Saperstein, Sole Trustee
of the Alexis Daniella
Saperstein 1994 Trust
STEFANIE NICOLE SAPERSTEIN 1994 TRUST
By: /s/ Suzanne Saperstein
-----------------------------
Suzanne Saperstein, Sole Trustee
of the Stephanie Nicole
Saperstein 1994 Trust
-8-
<PAGE>
Draft of 07 October 1996
Revised From Draft of 27 September 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
METRO NETWORKS, INC.,
CERTAIN LENDERS
AND
NATIONSBANK OF TEXAS, N.A.,
AS ADMINISTRATIVE LENDER
______________, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINED TERMS.......................................... 1
Section 1.2 AMENDMENTS AND RENEWALS................................ 16
Section 1.3 CONSTRUCTION........................................... 16
ARTICLE 2
ADVANCES
Section 2.1 THE ADVANCES........................................... 16
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT................... 17
Section 2.3 INTEREST............................................... 19
Section 2.4 FEES................................................... 20
Section 2.5 PREPAYMENT............................................. 21
Section 2.6 REDUCTION OF COMMITMENT................................ 21
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE LENDER...... 23
Section 2.8 PAYMENT OF PRINCIPAL OF ADVANCES....................... 23
Section 2.9 REIMBURSEMENT.......................................... 23
Section 2.10 MANNER OF PAYMENT...................................... 24
Section 2.11 LIBOR LENDING OFFICES.................................. 24
Section 2.12 SHARING OF PAYMENTS.................................... 25
Section 2.13 CALCULATION OF LIBOR RATE.............................. 25
Section 2.14 BOOKING LOANS.......................................... 25
Section 2.15 TAXES.................................................. 25
Section 2.16 LETTERS OF CREDIT...................................... 28
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE TO, AND
LETTERS OF CREDIT ON BEHALF OF, THE BORROWER............. 34
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES..................... 36
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES......................... 37
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC........ 44
ARTICLE 5
GENERAL COVENANTS
Section 5.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS.......... 44
Section 5.2 BUSINESS; COMPLIANCE WITH APPLICABLE LAW............... 44
Section 5.3 MAINTENANCE OF PROPERTIES.............................. 44
Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS............... 45
Section 5.5 INSURANCE.............................................. 45
Section 5.6 PAYMENT OF TAXES AND CLAIMS............................ 45
Section 5.7 VISITS AND INSPECTIONS................................. 45
Section 5.8 PAYMENT OF INDEBTEDNESS................................ 45
Section 5.9 USE OF PROCEEDS........................................ 45
Section 5.10 INDEMNITY.............................................. 46
Section 5.11 ENVIRONMENTAL LAW COMPLIANCE........................... 47
Section 5.12 INTEREST RATE HEDGING.................................. 48
Section 5.13 SUBSIDIARIES........................................... 48
Section 5.14 PRIOR CREDIT AGREEMENT................................. 48
ARTICLE 6
INFORMATION COVENANTS
Section 6.1 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION......... 48
Section 6.2 ANNUAL FINANCIAL STATEMENTS AND INFORMATION;
CERTIFICATE OF NO DEFAULT.............................. 49
Section 6.3 COMPLIANCE CERTIFICATES................................ 50
Section 6.4 COPIES OF OTHER REPORTS AND NOTICES.................... 50
Section 6.5 NOTICE OF LITIGATION, DEFAULT AND OTHER MATTERS........ 51
Section 6.6 ERISA REPORTING REQUIREMENTS........................... 52
ARTICLE 7
NEGATIVE COVENANTS
Section 7.1 INDEBTEDNESS........................................... 53
Section 7.2 LIENS.................................................. 54
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<PAGE>
Section 7.3 INVESTMENTS............................................ 54
Section 7.4 AMENDMENT AND WAIVER................................... 55
Section 7.5 LIQUIDATION, DISPOSITION OR ACQUISITION OF ASSETS,
MERGER, NEW SUBSIDIARIES............................... 55
Section 7.6 ACQUISITIONS........................................... 55
Section 7.7 DIVIDENDS.............................................. 56
Section 7.8 AFFILIATE TRANSACTIONS................................. 56
Section 7.9 COMPLIANCE WITH ERISA.................................. 56
Section 7.10 LEVERAGE RATIO......................................... 57
Section 7.11 FIXED CHARGES COVERAGE RATIO........................... 57
Section 7.12 DEBT SERVICE COVERAGE RATIO............................ 57
Section 7.13 CAPITAL STOCK OF THE BORROWER.......................... 58
Section 7.14 SALE AND LEASEBACK..................................... 58
Section 7.15 SALE OR DISCOUNT OF RECEIVABLES........................ 58
Section 7.16 CONDUCT OF BUSINESS.................................... 58
Section 7.17 SUBORDINATED DEBT...................................... 58
Section 7.18 AFFILIATE CONTRACTS.................................... 58
ARTICLE 8
DEFAULT
Section 8.1 EVENTS OF DEFAULT...................................... 59
Section 8.2 REMEDIES............................................... 62
ARTICLE 9
CHANGES IN CIRCUMSTANCES
Section 9.1 LIBOR BASIS DETERMINATION INADEQUATE................... 63
Section 9.2 ILLEGALITY............................................. 63
Section 9.3 INCREASED COSTS........................................ 63
Section 9.4 EFFECT ON PRIME RATE ADVANCES.......................... 65
Section 9.5 CAPITAL ADEQUACY....................................... 65
ARTICLE 10
AGREEMENT AMONG LENDERS
Section 10.1 AGREEMENT AMONG LENDERS................................ 65
Section 10.2 LENDER CREDIT DECISION................................. 67
Section 10.3 BENEFITS OF ARTICLE.................................... 67
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<PAGE>
ARTICLE 11
MISCELLANEOUS
Section 11.1 NOTICES................................................ 68
Section 11.2 EXPENSES............................................... 69
Section 11.3 WAIVERS................................................ 69
Section 11.4 DETERMINATION BY THE LENDERS CONCLUSIVE AND BINDING.... 70
Section 11.5 SET-OFF................................................ 70
Section 11.6 ASSIGNMENT............................................. 70
Section 11.7 COUNTERPARTS........................................... 72
Section 11.8 SEVERABILITY........................................... 72
Section 11.9 INTEREST AND CHARGES................................... 73
Section 11.10 HEADINGS............................................... 73
Section 11.11 AMENDMENT AND WAIVER................................... 73
Section 11.12 EXCEPTION TO COVENANTS................................. 74
Section 11.13 NO LIABILITY OF ISSUING BANK........................... 74
Section 11.14 CREDIT AGREEMENT GOVERNS............................... 74
SECTION 11.15 GOVERNING LAW...................................... 74
SECTION 11.16 WAIVER OF JURY TRIAL............................... 75
SECTION 11.17 ENTIRE AGREEMENT................................... 75
Section 11.18 WAIVER OF SUBROGATION.................................. 75
-iv-
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Liens
Schedule 3: Existing Litigation
Schedule 4: Licenses, Permits and Other Authorizations
Schedule 5: Rights Relating to Pledged Stock
Schedule 6: Subsidiaries
Schedule 7: Existing Investments
Schedule 8: Existing Indebtedness
Exhibit A: Promissory Note
Exhibit B: Borrower Pledge Agreement
Exhibit C: Subsidiary Pledge Agreement
Exhibit D: Subsidiary Guaranty
Exhibit E: Borrower Security Agreement
Exhibit F: Subsidiary Security Agreement
Exhibit G: Compliance Certificate
Exhibit H: Assignment and Acceptance Agreement
-v-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of ______________, 1996, among METRO
NETWORKS, INC., a Delaware corporation ("Borrower"), 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 Borrower has requested that the Lenders make a credit facility
available to the Borrower up to the maximum amount of $30,000,000. 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 the 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 the 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 the 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 the 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 the Borrower or any Subsidiary for an Acquisition,
including, but not limited to, the fair market
<PAGE>
value of any cash, property, stock or services given, the amount of any
Indebtedness assumed or incurred.
"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 the 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, the Borrower.
"AFFILIATE CONTRACTS" shall mean any agreements between the Borrower or
any Subsidiary and any television or radio station pursuant to which such
television or radio station agrees to broadcast the Borrower's or such
Subsidiary's traffic, news, sports, weather or similar informational reports.
"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, 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
- 2 -
<PAGE>
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 1.5 to 1 0.500 1.500
(ii) If the Leverage Ratio is less than 1.5 to 1 but
is not less than 1.0 to 1 0.250 1.250
(iii) If the Leverage Ratio is less than 1.0 to 1 but
is not less than 0.5 to 1 0.000 1.000
(iv) If the Leverage Ratio is less than 0.5 to 1 0.000 0.750
The Applicable Margin payable by the Borrower 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 Borrower 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 6.1(b) or 6.2(b) hereof, as applicable. If financial
statements of the Borrower 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 1.5 to 1 until such time as such financial
statements are received. For the final quarter of any fiscal year of the
Borrower, the Borrower may provide its unaudited financial statements, subject
only to year-end adjustments, for the purpose of adjusting the Applicable
Margin. The Applicable Margin from and including the Closing Date to the date
of the initial adjustment to be made therein as provided above shall be 0.000%
for the Prime Rate Basis and 0.750% for the LIBOR Basis.
"ART. 1.04" shall have the meaning ascribed thereto in the definition of
"APPLICABLE LAW."
"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.
- 3 -
<PAGE>
"AUTHORIZED SIGNATORY" shall mean such senior personnel of the Borrower
as may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances and Letters of Credit hereunder.
"BORROWER" shall have the meaning given such term in the introductory
paragraph of this Agreement.
"BORROWER PLEDGE AGREEMENT" shall mean one or more pledge agreements,
executed by the Borrower, granting a first priority Lien on (i) the Pledged
Stock owned directly by the Borrower and (ii) each Intercompany Note evidencing
intercompany advances made by the 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 the Borrower, granting a first priority Lien on (i) the
Accounts and related items of the Borrower and (ii) the tangible personal
property of the 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.
"BORROWER'S 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 the 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.
"CHANGE OF CONTROL" shall mean the occurrence of either of the following
events after the Agreement Date: (a)(i) any Person or any Persons acting
together which would constitute a "group" (a "Group") for purposes of Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or any successor provision thereto, other than the Group whose nominees
constituted a majority of the board of directors of the Borrower as of the
Agreement Date, together with any Affiliates or Related Persons thereof, shall
beneficially own (as defined in Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act or any successor provision thereto) at least
25% of the aggregate voting power of all classes of capital stock of the
Borrower entitled to vote generally in the election of directors of the Borrower
and
- 4 -
<PAGE>
(ii) David Saperstein shall (X) fail to own at least 25% of the aggregate voting
power of all classes of capital stock of the Borrower entitled to vote generally
in the election of directors of the Borrower or (Y) fail to be a director of the
Borrower; or (b) any Person or Group, other than any Person or Group whose
nominees constituted a majority of the board of directors of the Borrower as of
the Agreement Date, together with any Affiliates or Related Persons thereof,
shall succeed in having sufficient of its or their nominees elected to the Board
of Directors of the Borrower such that such nominees, when added to any existing
director remaining on the Board of Directors of the Borrower after such election
who is an Affiliate or Related Person of such Group, shall constitute a majority
of the Board of Directors of the Borrower.
"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 $30,000,000, as reduced from time to time
pursuant to SECTION 2.6 hereof.
"COMMITMENT REDUCTION DATE" shall mean the last Business Day of
[DECEMBER, 1998].
"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
the Borrower shall be deemed to be members of the Borrower's Controlled Group,
and the Borrower and any other entities (whether incorporated or not
incorporated) which are under common control with the Borrower and which,
together with the Borrower, are treated as a single employer under Section
414(b), (c), (m) or (o) of the Code, shall be deemed to be members of the
Borrower's Controlled Group on and after the 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.
- 5 -
<PAGE>
"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%.
"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 the Borrower and its
Subsidiaries, (a) a Reportable Event (other than a Reportable Event not subject
to the provision for 30-day notice to the PBGC under regulations issued under
Section 4043 of ERISA), (b) the withdrawal of any such Person or any member of
its Controlled Group from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing
of a notice of intent to terminate under Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Plan by the PBGC, (e) the failure to
make required contributions which could result in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA, or (f) any other event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or the imposition of any liability under Title IV of ERISA
other than PBGC premiums due but not delinquent under Section 4007 of ERISA.
"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 Borrower
and its 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 for the payment of taxes during said year, plus (iv)
principal, interest, fees, and other amounts scheduled to be paid for said year
with respect to Indebtedness.
"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
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Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Administrative Lender on such day on
such transactions as determined by Administrative Lender.
"FIXED CHARGES" shall mean, for the Borrower 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 for the payment of taxes. For
purpose of calculation of Fixed Charges with respect to any Subsidiary not owned
at all times during the four fiscal quarters preceding the date of determination
of Fixed Charges there shall be (i) included in Fixed Charges the Fixed Charges
of any Subsidiary acquired during any of such four fiscal quarters for the
twelve month period preceding the date of determination and (ii) excluded from
Fixed Charges the Fixed Charges of any Subsidiary disposed of during any of such
four fiscal quarters for the twelve month period preceding the date of
determination.
"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 the 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 Agreement Date, the Highest
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Lawful Rate shall be automatically increased or decreased, as the case may be,
from time to time as of the effective time of each change in the Highest Lawful
Rate without notice to the Borrower. For purposes of determining the Highest
Lawful Rate under 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.
"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 the 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 the
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 the Borrower in the original principal
amount not to exceed $30,000,000 evidencing loans and advances made or to be
made by the 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.
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<PAGE>
"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, six months or, to the extent
available, twelve months thereafter (as the Borrower 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 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 Borrower requests to be
made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance
with the provisions of SECTION 2.2 hereof.
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"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 Borrower and the Administrative Lender.
"LIBOR RATE" means, for any LIBOR Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR Rate" shall mean, for any LIBOR Advance
for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; PROVIDED,
HOWEVER, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"LIEN" 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 Guaranties, 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 the 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 Borrower 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 2003].
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"MAXIMUM AMOUNT" shall mean the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"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
the Borrower or Subsidiary to maintain and operate its business and properties.
"NET CASH PROCEEDS" shall mean the net proceeds received by the Borrower
in connection with or as a result of any initial public offering of its capital
stock, minus the sum of reasonable out-of-pocket costs and expenses (including
underwriting fees) in connection with such initial public offering.
"NOTE" shall mean each promissory note of the Borrower evidencing
Advances hereunder, substantially in the form of EXHIBIT A hereto, together
with any extension, renewal or amendment thereof, or substitution therefor.
"OBLIGATIONS" shall mean (a) all obligations of any nature (whether
matured or unmatured, fixed or contingent, including the Reimbursement
Obligations) of the Borrower 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 Borrower 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 the
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 Borrower 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
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Cash Flow of any assets disposed of during any of such four fiscal quarters for
the twelve month period preceding the date of determination.
"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.
"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 7.1(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
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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 Borrower or the
Subsidiaries.
"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 the Borrower, its Subsidiaries or any
member of their Controlled Group.
"PLEDGE AGREEMENTS" shall mean the Borrower Pledge Agreements and the
Subsidiary Pledge Agreements.
"PLEDGED STOCK" shall mean the equity interests in each Subsidiary of
the Borrower, 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.
"PRIOR CREDIT AGREEMENT" shall mean that certain Credit Agreement dated
as of October 21, 1994, among Metro Traffic Control, Inc., Metro Networks, Ltd.,
the lenders party
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thereto, and NationsBank of Texas, N.A., as Administrative Lender, as amended or
modified from time to time.
"PRO-FORMA DEBT SERVICE" shall mean, as of any date of determination,
determined in accordance with GAAP for the Borrower 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, 1996.
"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.
"RELATED PERSON" shall mean (a) any Affiliate of the Borrower, (b) any
individual or entity who directly or indirectly holds 10% or more of any class
of capital stock of the Borrower, (c) any relative of such individual by blood,
marriage or adoption not more remote than first cousin and (d) any officer or
director of the Borrower.
"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 the 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
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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.
"SUBORDINATED DEBT" shall mean any Indebtedness of the Borrower or
Subsidiary 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 the Borrower, directly or through one or
more intermediaries, and (b) any other entity which is Controlled or then
capable of being Controlled by the Borrower, directly or through one or more
intermediaries.
"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.
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"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.
"TERMINATION EVENT" shall mean, with respect to the Borrower, any
Subsidiary, or any Plan, (a) a Reportable Event, (b) the withdrawal from a Plan
during a Plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (d) the institution of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Plan or appoint a trustee to administer a Plan, (e)
the failure to comply with the minimum funding requirements of ERISA with
respect to any Plan, or (f) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.
"TOTAL DEBT" shall mean, as of any date of determination, determined for
the Borrower 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.
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 Borrower and the Subsidiaries, unless otherwise expressly stated herein.
For the purpose of calculating Excess Cash Flow and the financial ratios set
forth in SECTIONS 7.10, 7.11 and 7.12 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
Borrower from time to time in an
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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 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 Borrower 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 Borrower, 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 Borrower's failure to
confirm any telephonic notice in writing shall not invalidate any notice so
given), of the Borrower's 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 Borrower, 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 Borrower's failure to confirm any telephonic notice
in writing shall not invalidate any notice so given), of the Borrower's
intention to borrow or reborrow a LIBOR Advance hereunder and (ii) the initial
LIBOR Advance, the Borrower, 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 Borrower's failure to confirm any telephonic notice in writing
shall not invalidate any notice so given), of the Borrower's 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
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LIBOR Advances, provided that no such Interest Period shall extend past the
Maturity Date or prohibit or impair the Borrower's ability to comply with
SECTION 2.8 hereof.
(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 Borrower, 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 Borrower'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
Borrower wishes to reborrow a LIBOR Advance), the Borrower, through an
Authorized Signatory, or irrevocable telephonic notice followed immediately by
written notice (provided, however, that the Borrower's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), the
Borrower 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 Borrower pursuant to this Section. Failure of the
Borrower 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 to 2:00 p.m., Dallas, Texas time, on the date of
any Advance hereunder, the Administrative Lender shall, subject to
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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 Borrower's instructions, or (ii)
in the absence of such instructions, crediting such amounts to the joint account
of the Borrower 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 Borrower 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 Borrower shall pay interest on the unpaid principal amount
of each LIBOR Advance, from the date such Advance is made until it is due
(whether at maturity, by reason of acceleration, by scheduled reduction,
or otherwise) or repaid, at a rate per annum equal to the LIBOR Basis for
such Advance. The Administrative 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 Borrower 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 Borrower fails to give the Administrative Lender timely notice
of the Borrower's 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 Borrower, the Prime Rate Basis shall apply to the
applicable Advance. If the Borrower fails to give the Administrative Lender
timely notice of the Borrower's 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 8.1(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 Borrower of the decision to charge interest at the
Default Rate. The Lenders will undertake to notify the Borrower, after the
effective date, of the decision to charge interest at the Default Rate.
Section 2.4 FEES.
(a) COMMITMENT FEE. Subject to SECTION 11.9 hereof, the Borrower
agrees to pay to the Administrative Lender, for the ratable account of the
Lenders, a commitment fee from the Agreement Date through the end of the fiscal
quarter immediately preceding any fiscal quarter during which outstanding
Advances exceed $10,000,000 in aggregate amount at any one time, equal to the
sum of (i) 0.25% per annum times the remainder of (x) $10,000,000 minus (y) the
daily average Advances outstanding during such fiscal quarter plus (ii) 0.1875%
per annum times $20,000,000. If at any time outstanding Advances exceed
$10,000,000 in aggregate amount, the Borrower agrees to pay to the
Administrative Lender, for the ratable account of the Lenders, a commitment fee
for the fiscal quarter in which outstanding Advances exceed $10,000,000 and
thereafter equal to 0.25% per annum of the daily 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, any Reimbursement Obligations
outstanding from time to time will reduce the unused portion of the Commitment.
(b) OTHER FEES. Subject to SECTION 11.9 hereof, the Borrower agrees
to pay directly to Administrative Lender the fees provided for in a fee letter
between the Borrower and Administrative Lender. Such fees shall be payable on
the Agreement Date, fully earned when due and, subject to SECTION 11.9 hereof,
nonrefundable when paid.
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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 Borrower, through an
Authorized Signatory, to the Administrative Lender. LIBOR Advances may be
voluntarily prepaid only so long as the Borrower concurrently reimburses the
Lenders in accordance with SECTION 2.9 hereof. Any notice of prepayment shall
be irrevocable.
(b) MANDATORY PREPAYMENT. On or before the date of any reduction of
the Commitment, the Borrower 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 Borrower 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
Borrower shall reimburse each Lender in accordance with SECTION 2.9 hereof.
(c) PREPAYMENTS FROM EXCESS CASH FLOW. For any fiscal year in which
the Borrower elects to pay Dividends on its capital stock pursuant to SECTION
7.7 hereof, the Borrower shall prepay (prior to declaring or paying such
Dividend) Advances in an aggregate amount equal to 50% of the Excess Cash Flow,
if any, for the fiscal year ending on December 31 immediately preceding such
fiscal year in which such Dividend is declared and any such prepayment shall be
made no later than March 31 of the fiscal year immediately following the fiscal
year in which such Dividend is declared.
(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.
Section 2.6 REDUCTION OF COMMITMENT.
(a) VOLUNTARY REDUCTION. The Borrower 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 Borrower, 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
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$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 Borrower 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 SECTIONS 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 Borrower 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 2003],
the Commitment outstanding on the Commitment Reduction Date shall automatically
reduce by an amount equal to the product of (i) $30,000,000 times (ii) 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
[DECEMBER 1998 5.00%]
March 1999 5.00%
June 1999 5.00%
September 1999 5.00%
December 1999 5.00%
March 2000 5.00%
June 2000 5.00%
September 2000 5.00%
December 2000 5.00%
March 2001 5.00%
June 2001 5.00%
September 2001 5.00%
December 2001 5.00%
March 2002 5.00%
June 2002 5.00%
September 2002 5.00%
December 2002 5.00%
March 2003 5.00%
June 2003 5.00%
[SEPTEMBER 2003] [5.00%] and any remaining
balance such that the Commitment
shall be zero
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(d) GENERAL REQUIREMENTS. Upon any reduction of the Commitment
pursuant to SECTION 2.6(b) or 2.6(c), the Borrower shall immediately make a
repayment of applicable Advances in accordance with SECTION 2.5(b) hereof.
The Borrower shall reimburse each Lender for any loss or out-of-pocket expense
incurred by each Lender in connection with any such payment, as set forth in
SECTION 2.9 hereof. The Borrower shall not have any right to rescind any
termination or reduction. Once reduced, 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 Borrower 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 Borrower) together with interest thereon in
respect of each day during the period commencing on the date such amount was
available to the Borrower and ending on (but excluding) the date the
Administrative 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 Borrower agrees 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.
(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 Borrower to borrow any LIBOR Advance after having given notice of their
intention to borrow in accordance with
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SECTION 2.2 hereof (whether by reason of the Borrower's election not to
proceed or the non-fulfillment of any of the conditions set forth in ARTICLE 3
hereof), or (b) any prepayment for any reason of any LIBOR Advance in whole or
in part (including a prepayment pursuant to SECTION 9.3(b) hereof), the
Borrower agrees to pay to any such Lender, upon its demand, an amount sufficient
to compensate such Lender for all such losses and out-of-pocket expenses. Such
Lender's good faith determination of the amount of such losses or out-of-pocket
expenses, calculated in its usual fashion, absent manifest error, shall be
binding and conclusive. Such losses shall include, without limiting the
generality of the foregoing, lost profits and reasonable expenses incurred by
such Lender in connection with the re-employment of funds prepaid, repaid,
converted or not borrowed, converted or paid, as the case may be. Upon request
of the Borrower, such Lender shall provide a certificate setting forth the
amount to be paid to it by the Borrower hereunder and calculations therefor.
Section 2.10 MANNER OF PAYMENT.
(a) Each payment (including prepayments) by the Borrower of the
principal of or interest on the Advances, fees, and any other amount owed under
this Agreement or any other Loan 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 Borrower agrees 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 Borrower 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 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 1 attached hereto. Each
Lender shall have the right at
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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 Borrower for increased
costs or expenses resulting solely from such designation or transfer (except any
such transfer which is made by a Lender pursuant to SECTION 9.2 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 Borrower 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 Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section, to the fullest
extent permitted by law, may exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such participation.
Section 2.13 CALCULATION OF LIBOR RATE. 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 Borrower 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 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 Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender or the Administrative Lender, (x) the sum
payable shall be
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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 Borrower shall make such deductions and (z) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrower 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 Borrower 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 Borrower, in a time sufficient to afford the Borrower, 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 Borrower a certificate setting forth in reasonable
detail the basis of the Borrower's 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 Borrower
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 Borrower will furnish to the Administrative Lender a
certificate from each appropriate taxing 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 Borrower 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.
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(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 Borrower 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 Borrower 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;
(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Borrower through the Administrative Lender with a
copy to the Administrative Lender, two (2) accurate and
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complete original signed copies of Form 4224 or Form 1001 in replacement
for the forms previously delivered by such Lender; and
(iv) it shall, promptly upon the request of the Borrower to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule
or regulation in order to establish such Lender's tax status for
withholding purposes.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 2.15 shall survive the payment in full of principal and interest
hereunder.
(g) Any Lender claiming any additional amounts payable pursuant to this
SECTION 2.15 shall use its reasonable best efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its lending office, if the making of such a change would avoid
the need for, or reduce the amount of, any such additional amounts which may
thereafter accrue and would not, in the sole judgment of such Lender, be
otherwise disadvantageous to such Lender.
(h) Each Lender (and the Administrative 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 Borrower to
minimize amounts payable by the Borrower 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 Borrower, through an
Authorized Signatory, 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 the
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 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 Borrower shall be 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
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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
Borrower 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 Borrower,
through an Authorized Signatory, 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
Borrower, 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 Borrower and the
Issuing Bank in form and substance reasonably satisfactory to the Borrower 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 Borrower at its office referred to in
SECTION 11.1 or as otherwise agreed with the Borrower in connection with such
issuance.
(c) DRAWING AND REIMBURSEMENT. The payment by the Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the 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 Borrower 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
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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 Borrower, the Borrower 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
Borrower 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
Borrower 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 Borrower under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or instrument relating to any Letter of Credit or any
Advance pursuant to SECTION 2.16(c) shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement, such
Letter of Credit Agreement and such other agreement or instrument under all
circumstances, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C RELATED DOCUMENTS");
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(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in
respect of the Letters of Credit or any Advance pursuant to SECTION
2.16(c) or any other amendment or waiver of or any consent to departure
from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), 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 Borrower 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 Borrower or a guarantor, other than the Issuing's Bank
gross negligence or wilful misconduct.
(f) COMPENSATION FOR LETTERS OF CREDIT.
(i) CREDIT FEES. Subject to SECTION 11.9 hereof, the Borrower
shall pay to the Administrative Lender for the account of each Lender a
credit fee (which shall be payable quarterly in arrears on each Quarterly
Date and on the Maturity Date) on the average daily amount available for
drawing under all outstanding Letters of Credit (computed, subject to
SECTION 11.9 hereof, on the basis of a 360-day year for the actual
number of days elapsed) at the following per annum percentages, applicable
in the following situations:
Applicability Percentage
------------- ----------
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(A) If the Leverage Ratio is not less than 1.5 to 1 1.500%
(B) If the Leverage Ratio is less than 1.5 to 1 but
is not less than 1.0 to 1 1.250%
(C) If the Leverage Ratio is less than 1.0 to 1 but
is not less than 0.5 to 1 1.000%
(D) If the Leverage Ratio is less than 0.5 to 1 0.750%
(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 Borrower 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 6.1(b) or 6.2(b) hereof.
If financial statements of the Borrower 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 1.5 to 1 until such time as such financial
statements are received. For the last fiscal quarter of any fiscal year
of the Borrower, the Borrower may provide its unaudited financial
statements, subject only to year-end adjustments, for the purpose of
adjusting the Letter of Credit fee. From and including the Closing Date
to the date of the initial adjustment of the Credit Fee to be made as
provided above, the percentage shall be 0.750%.
(iii) ISSUANCE FEE. Subject to SECTION 11.9 hereof, the
Borrower 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 Borrower 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 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 Borrower hereby grants, conveys,
assigns, pledges, sets over and transfers 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
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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 Borrower 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
Borrower, the Borrower promptly shall execute and deliver any and all such
further instruments and documents, including UCC financing statements, as
may be necessary, appropriate or desirable in the Administrative 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 Borrower
shall not create or suffer to exist any Lien on any amounts or investments
held in the L/C Cash Collateral Account other than the Lien granted under
this paragraph (ii) and Liens arising by operation of 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 Borrower shall
fail directly to pay such Reimbursement Obligations, (B) after the
Maturity Date, apply any proceeds remaining in the L/C Cash Collateral
Account FIRST to pay any unpaid Obligations then outstanding hereunder
and THEN to refund any remaining amount to the Borrower, and (C)
provided no Default or Event of Default shall be in existence, return any
funds in the L/C Cash Collateral Account to the Borrower.
(iv) The Borrower, no more than once in any calendar month, may,
through an Authorized Signatory, 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 Borrower,
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 Borrower through an Authorized Signatory, the
Administrative 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 Borrower, with the consent of the Determining Lenders
and through an Authorized Signatory, 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
Borrower recognizes that any losses or taxes with respect to such
investments shall be borne solely by the
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Borrower, and the Borrower agrees 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 Borrower hereby agrees to
reimburse the Administrative Lender) as a result of such application.
(v) The Borrower 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 THE INITIAL ADVANCE TO, AND LETTERS
OF CREDIT ON BEHALF OF, THE BORROWER. The obligation of each Lender to make
the initial Advance to the Borrower, and the obligation of the Issuing Bank to
issue the initial Letter of Credit on behalf of, the Borrower 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 the Borrower certifying as to the incumbency
of each Authorized Signatory, and including (i) a copy of the Articles of
Incorporation of the Borrower, certified to be true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of the By-Laws of
the Borrower, as in effect on the Agreement Date, (iii) a copy of the
resolutions of the Borrower 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) 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;
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(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) a Borrower Pledge Agreement, duly executed and completed by the
Borrower, dated as of the Agreement Date, granting the Lenders a first priority
Lien and security interest in (i) the Pledged Stock owned directly by the
Borrower (together with related, blank, undated stock powers) and (ii)
Intercompany Notes evidencing intercompany advances made, or to be made, by the
Borrower to Subsidiaries, together with related UCC-1 financing statements;
(e) 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 (together
with related, blank, undated stock powers), and (ii) Intercompany Notes
evidencing intercompany advances made, or to be made, each Subsidiary to other
Subsidiaries, together with related UCC-1 financing statements;
(f) 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 the Borrower and (ii) the tangible personal
property of the Borrower, together with related UCC-1 financing statements;
(g) 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, together with related UCC-1 financing
statements;
(h) the Pledged Stock, together with stock powers duly executed in
blank;
(i) the Intercompany Notes, duly endorsed;
(j) a duly executed and completed Subsidiary Guaranty, dated as of the
Agreement Date executed by each Subsidiary;
(k) the Borrower shall have received Net Cash Proceeds of at least
[$46,000,000] from an initial public offering of its capital stock;
(l) copies of insurance binders or certificates covering the assets of
the Borrower 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 Agreement Date;
(n) evidence that all corporate proceedings of the Borrower 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
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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 financial statements for the
Borrower and its Subsidiaries, as of and for the period ended June 30, 1996:
(i) combined balance sheets as of the end of such period, and (ii) combined
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 fees as required pursuant to SECTION 2.4(b) hereof;
(q) 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;
(r) UCC-11 searches in appropriate jurisdictions where Collateral is
located;
(s) a Compliance Certificate setting forth the calculation of the
Leverage Ratio as of the Agreement Date;
(t) simultaneously with the making of the initial Advance or the
issuance of the initial Letter of Credit, the Borrower shall cause (i) all
outstanding Indebtedness, interest, fees and expenses under the Prior Credit
Agreement to be paid in full and (ii) the commitment of the lenders thereunder
to make advances, and the issuing bank thereunder to issue letters of credit, to
terminate; and
(u) 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 Borrower or any Subsidiary, and the enforceability of and
security for the Obligation.
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT.
The obligation of each Lender to make each Advance (including the initial
Advance) 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 (including the initial Advance) (other than
Refinancing Advances) and each issuance of a Letter of Credit (including the
initial Letter of Credit), all of the representations and warranties of the
Borrower under this Agreement, which, pursuant to SECTION 4.2 hereof, are made
at and as of the time of such Advance or issuance, shall be true
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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 certificate of incumbency delivered in the certificate
pursuant to SECTION 3.1(a) 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 Borrower made to such effect if no written notice to the contrary, dated
on or before the date of such Advance or issuance, is received by the
Administrative Lender 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 Commitment; 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 Borrower 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 Borrower as of the date of the
making of such Advance or the issuance of such Letter of Credit that all the
conditions contained in this SECTION 3.2 have been satisfied.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to each Lender as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. As of the Agreement Date, the
respective jurisdictions of incorporation and percentage ownership by the
Borrower and each Subsidiary listed on SCHEDULE 6 are true and correct. The
Borrower and each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its state of organization. The Borrower
and each 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. The Borrower and each Subsidiary is duly qualified, in good standing
and authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization.
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(b) AUTHORIZATION. The 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. The Borrower and
each 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 the Borrower or
Subsidiary is party is a legal, valid and binding respective obligation of the
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 the Borrower or Subsidiary).
(c) COMPLIANCE WITH OTHER LOAN DOCUMENTS AND CONTEMPLATED
TRANSACTIONS. The execution, delivery and performance by the Borrower and each
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 the Borrower or Subsidiary, or under any Necessary Authorization,
indenture, agreement or other instrument, to which the 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 the Borrower or Subsidiary,
except Permitted Liens.
(d) BUSINESS. The Borrower and each Subsidiary is engaged solely in
the Borrower's Business.
(e) LICENSES, ETC. All Necessary Authorizations have been duly
authorized and obtained, and are in full force and effect. The Borrower and
each 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 the Borrower's knowledge, threatened challenge
or revocation.
(f) COMPLIANCE WITH LAW. The Borrower and each Subsidiary is in
compliance with all Applicable Laws, the violation of which could reasonably be
expected to have a Material Adverse Effect. The Borrower and each 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 regulations of any Governmental Authority relating to their business.
The Borrower and each Subsidiary has obtained all appropriate approvals and
consents of, and has made all filings with, the Governmental Authorities in
connection with the acquisition and
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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. The Borrower and each 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 the
Borrower or Subsidiary as debtor or covers (or purports to cover) any assets of
the Borrower or Subsidiary. The Borrower and each 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 the Borrower's
knowledge, threatened against the Borrower or any Subsidiary, or in any other
manner relating directly and materially adversely to the 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 the 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 the Borrower and each
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
the Borrower, each Subsidiary or any of their properties, income, profits and
assets, which are due and payable, have been paid, unless the same are being
diligently contested in good faith by appropriate proceedings, with adequate
reserves established therefor, and no Lien (other than a Permitted Lien) has
attached and no foreclosure, distraint, sale or similar proceedings have been
commenced. The charges, accruals and reserves on the books of the Borrower and
each Subsidiary in respect of their taxes are, in the judgment of the Borrower,
adequate.
(j) FINANCIAL STATEMENTS; MATERIAL LIABILITIES. The Borrower has
furnished or caused to be furnished to the Lenders copies of its audited
December 31, 1995, and its unaudited June 30, 1996, financial statements, which
are prepared in good faith and complete in all material respects and present
fairly in accordance with GAAP the financial position of the Borrower and its
Subsidiaries as at such dates and the results of operations for the periods then
ended, subject to normal year-end adjustments. The 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 December 31, 1995, no event or
circumstance has occurred or arisen that could have a Material Adverse Effect.
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(l) ERISA. The Borrower nor 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 the Borrower and
each member of its Controlled Group (other than a Multiemployer Plan), all
reports required under ERISA or any other Applicable Law to be filed with any
governmental authority, the failure of which to file could reasonably result in
liability of the Borrower or any member of its Controlled Group in excess of
$100,000, have been duly filed. All such reports are true and correct in all
material respects as of the date given. No such Plan of the Borrower or any
member of its Controlled Group has been terminated nor has any accumulated
funding deficiency (as defined in Section 412(a) of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor has
any funding waiver from the Internal Revenue Service been received or requested.
The Borrower nor 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 the 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 the Borrower and
each member of its Controlled Group equaled or exceeded the present value of the
benefit liabilities, as defined in Title IV of ERISA, of each such Plan as of
the most recent valuation date using Plan actuarial assumptions at such date.
There are no pending or, to the best of the Borrower's knowledge, threatened
claims, lawsuits or actions (other than routine claims for benefits in the
ordinary course) asserted or instituted against, and the Borrower nor any member
of its Controlled Group has knowledge of any threatened litigation or claims
against, (i) the assets of any Plan or trust or against any fiduciary of a Plan
with respect to the operation of such Plan, or (ii) the assets of any employee
welfare benefit plan within the meaning of Section 3(1) or ERISA, or against any
fiduciary thereof with respect to the operation of any such plan. The Borrower
nor 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. The Borrower nor 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. The Borrower, nor any member of its Controlled Group, or any
organization to which the Borrower or any member of its Controlled Group is a
successor or parent corporation within the meaning of ERISA Section 4069(b), has
engaged in a transaction within the meaning of ERISA Section 4069. The Borrower
nor 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
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such participant's termination of employment except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations thereunder, and at the expense of the participant or the
beneficiary of the participant, or retiree medical liabilities. The Borrower
and its Controlled Group which maintains a welfare benefit plan within the
meaning of Section 3(1) of ERISA has complied in all material respects with any
applicable notice and continuation requirements of COBRA and the regulations
thereunder.
(m) COMPLIANCE WITH REGULATIONS G, T, U AND X. The Borrower is not
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations 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 the Borrower or any Subsidiary are margin stock, and none
of the Pledged Stock is margin stock. The Borrower nor 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. The Borrower and each 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. The Borrower and each 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 the Borrower or
Subsidiary under any material indenture, agreement or other instrument, or any
judgment, decree or order to which the Borrower or Subsidiary is a party or by
which they or any of their material properties is bound.
(p) INVESTMENT COMPANY ACT. The Borrower is not required to register
under the provisions of the Investment Company Act of 1940, as amended. Neither
the entering into or performance by the Borrower of this Agreement nor the
issuance of the Notes violates any provision of such act or requires any
consent, approval, or authorization of, or registration with, the Securities and
Exchange Commission or any other governmental or public body of authority
pursuant to any provisions of such act.
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(q) ENVIRONMENTAL MATTERS. The Borrower nor any Subsidiary has any
actual knowledge or reason to believe that any substance deemed hazardous by any
Applicable Environmental Law, has been installed on any real property now owned
by the Borrower or any of its Subsidiaries. The Borrower and each Subsidiary
are not in violation of or subject to any existing, pending or, to the best of
the Borrower's knowledge, threatened investigation or inquiry by any
governmental authority or to any material remedial obligations under any
Applicable Environmental Laws, and this representation and warranty would
continue to be true and correct following disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances, if
any, pertaining to any real property of the Borrower and its Subsidiaries. The
Borrower and each 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 the Borrower or any Subsidiary by reason of any Applicable
Environmental Laws. The Borrower and each 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. The Borrower and each Subsidiary has taken all reasonable steps to
determine, and the Borrower nor any 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
the 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 the Borrower, the Subsidiaries of the
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 the 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. The 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
the Borrower and each 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. The Borrower and each 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 the Borrower or any Subsidiary to the
effect that (i) any process, method, part or other material presently
contemplated to be employed by the 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 the 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 the 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 the Borrower and not known to
the public generally that could reasonably be expected to materially adversely
affect the assets or business of the Borrower or Subsidiary, or in the future
could reasonably be expected (so far as the Borrower can now foresee) to have a
Material Adverse Effect, which has not been set forth in this Agreement or in
the documents, certificates and statements furnished to the Lenders by or on
behalf of the Borrower prior to the Agreement Date in connection with the
transaction contemplated hereby.
(w) SOLVENCY. The Borrower is, and the Borrower and the Subsidiaries
on a combined basis are, Solvent.
(x) CONSOLIDATED BUSINESS ENTITY. The Borrower and each Subsidiary is
engaged in the business set forth in SECTION 4.1(d) hereof. These operations
require financing on a basis such that the credit supplied can be made available
from time to time to the Borrower and various of the Subsidiaries, as required
for the continued successful operation of the Borrower and the Subsidiaries as a
whole. The Borrower has requested Lenders to make credit available hereunder
primarily for the purposes of financing the operations and acquisitions of the
Borrower and the Subsidiaries. The Borrower and the Subsidiaries expect to
derive benefit (and the boards of directors of the Borrower 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 Borrower and the
Subsidiaries is dependent on the continued successful performance of the
functions of the group as a whole.
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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 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
From the Agreement Date and 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. The 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. The Borrower and
each Subsidiary shall (a) engage substantially in the Borrower's 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. The 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.
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Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. The 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 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. The Borrower and each Subsidiary shall maintain a fiscal
year ending on December 31.
Section 5.5 INSURANCE. The 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. The 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. The 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. The 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 the
Borrower and Subsidiary as often as the Administrative Lender or any Lender
shall deem advisable, (b) inspect and make extracts from and copies of the
Borrower's and Subsidiary's books and records, and (c) discuss with the
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,
the 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. The 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
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SECTION 7.3 hereof, to refinance the Indebtedness under the Prior Credit
Agreement, for working capital and for other general corporate purposes.
Section 5.10 INDEMNITY.
(a) The Borrower agrees to defend, protect, indemnify and hold harmless
the Administrative 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 the Borrower or its
predecessors in interest, or the past, present or future environmental condition
of property of the 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 Borrower), 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 Borrower.
(b) In addition, the Borrower 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
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harmless with respect to Indemnified Matters, then the Borrower shall contribute
to the amount paid or payable by such Indemnitee as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the Borrower and the Borrower's
stockholders, shareholders or partners, as applicable, on the one hand and such
Indemnitee on the other hand but also the relative fault of the Borrower and
such Indemnitee, as well as any other relevant equitable considerations. The
reimbursement, indemnity and contribution obligations under this Section shall
be in addition to any liability which the Borrower may otherwise have, shall
extend upon the same terms and conditions to each Indemnitee, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Borrower, the Administrative 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 the 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 the Borrower, any Subsidiary or any of their
properties establishes a meaning for "hazardous substance," "release," "solid
waste," or "disposal" which is broader than that specified in either CERCLA or
RCRA, such broader meaning shall apply. The Borrower agrees to indemnify and
hold the Administrative 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 the 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, the Borrower
shall not 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
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Person, as finally judicially determined by a court of competent jurisdiction.
The provisions of this paragraph shall survive the Release Date and shall
continue thereafter in full force and effect.
Section 5.12 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 Borrower and the
Lenders.
Section 5.13 SUBSIDIARIES. The Borrower shall, with respect to any
Subsidiary acquired or formed after the Agreement Date, execute a Borrower
Pledge Agreement covering the Pledged Stock of such Subsidiary, and shall cause
such Subsidiary to become party to a Subsidiary Guaranty, Subsidiary Security
Agreement and a Subsidiary Pledge Agreement.
Section 5.14 PRIOR CREDIT AGREEMENT. Simultaneously with the making of
the initial Advance or the issuance of the initial Letter of Credit, the
Borrower shall cause (i) all outstanding Indebtedness, interest, fees and
expenses under the Prior Credit Agreement to be paid in full and (ii) the
commitment of the lenders thereunder to make advances, and the issuing bank
thereunder to issue letters of credit, to terminate.
ARTICLE 6
INFORMATION COVENANTS
From the Agreement Date and 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 Borrower shall
furnish or cause to be furnished to the Administrative Lender:
Section 6.1 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION.
(a) Within 50 days after the end of each fiscal quarter, combined cash
balance sheets of the Borrower and the Subsidiaries detailing tangible cash
exchanges as at the end of such quarter and the related combined cash statements
of income and combined statements of changes in cash of the Borrower and the
Subsidiaries 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 Borrower,
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
Borrower 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
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normal year-end adjustments and (ii) set forth in comparative form figures for
the corresponding fiscal quarter of the prior fiscal year.
(b) Within 45 days after the end of each fiscal quarter, combined
balance sheets of the Borrower and the Subsidiaries as at the end of such
quarter and the related combined 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 Borrower,
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 Borrower 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, (ii) detail separately
tangible cash exchange items and intangible and barter exchange items, and (iii)
set forth in comparative form figures for the corresponding fiscal quarter of
the prior fiscal year.
Section 6.2 ANNUAL FINANCIAL STATEMENTS AND INFORMATION; CERTIFICATE OF
NO DEFAULT.
(a) Within 95 days after the end of each fiscal year, a copy of (i) the
combined cash balance sheet of the Borrower and the Subsidiaries, as of the end
of the current and prior fiscal years and (ii) combined cash statements of
earnings, statements of changes in shareholders' equity, and statements of
changes in cash of the Borrower and the Subsidiaries as of and through the end
of such fiscal year, all of which (A) 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 and (B) set forth in comparative form figures for the corresponding
periods in the previous fiscal year.
(b) Within 90 days after the end of each fiscal year, a copy of (i) the
combined balance sheet of the Borrower and the Subsidiaries, as of the end of
the current and prior fiscal years and (ii) combined 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, (B) shall
detail separately tangible cash exchange items and intangible and barter
exchange items and (C) set forth in comparative form figures for the
corresponding periods in the previous fiscal year.
(c) Simultaneously with the delivery of the statements required by this
SECTION 6.2, a letter from the Borrower's public accountants certifying that
no Default was detected during the examination of the Borrower and the
Subsidiaries, and authorizing the Borrower to deliver such financial statements
and opinion thereon to the Administrative Lender and Lenders pursuant to this
Agreement.
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(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
Borrower 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:
(a) setting forth at the end of such period, a calculation of the
Leverage Ratio, as well as certifications and arithmetical calculations required
to establish whether the Borrower and the Subsidiaries were in compliance with
the requirements of SECTIONS 7.1(e) and (f), 7.3(h), 7.6, 7.10,
7.11, 7.12 and 7.18 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.
(a) Promptly upon their becoming available, a copy of (i) all material
reports or letters submitted to the Borrower or any Subsidiary by accountants in
connection with any annual, interim or special audit, including without
limitation any report prepared in connection with the annual audit referred to
in SECTION 6.2 hereof, and any other comment letter submitted to management in
connection with any such audit, (ii) each financial statement, report, notice or
proxy statement sent by the Borrower or any Subsidiary to stockholders
generally, (iii) each regular or periodic report and any registration statement
(other than statements on Form S-8) or prospectus (or material written
communication in respect of any thereof) filed by the Borrower or any Subsidiary
with any securities exchange, with the Securities and Exchange Commission or any
successor agency, and (iv) all press releases concerning material financial
aspects of the Borrower or any Subsidiary;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s)
or other evidence of indebtedness or other security of the Borrower or any
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 the Borrower or any 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 the Borrower or any
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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 to the Borrower or any 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
the Borrower or any 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 the
Borrower or any Subsidiary, there is no reasonable possibility of an adverse
determination with respect to such notice;
(d) Promptly upon receipt from any governmental agency, or any
government, political subdivision or other entity, any material notice,
correspondence, hearing, proceeding or order regarding or affecting the
Borrower, any Subsidiary, or any of their properties or businesses; 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 the Borrower 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 the 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 the aggregate (after
deducting the amount for which the Borrower or Subsidiary is insured), against
or in any other way relating directly to the 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 the 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
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(c) Any material adverse change with respect to the business, assets,
liabilities, financial position, results of operations or prospective business
of the Borrower or any Subsidiary, other than changes in the ordinary course of
business which have not had and are not likely to have a Material Adverse
Effect.
Section 6.6 ERISA REPORTING REQUIREMENTS.
(a) Promptly and in any event (i) within 30 days after the Borrower or
any member of its Controlled Group knows or has reason to know that any ERISA
Event described in clause (a) of the definition of ERISA Event or any event
described in Section 4063(a) of ERISA with respect to any Plan of the Borrower
or any member of its Controlled Group has occurred, and (ii) within 10 days
after the Borrower or any member of its Controlled Group knows or has reason to
know that any other ERISA Event with respect to any Plan of the Borrower or any
member of its Controlled Group has occurred or a request for a minimum funding
waiver under Section 412 of the Code with respect to any Plan of the Borrower or
any member of its Controlled Group, a written notice describing such event and
describing what action is being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event that is given to the PBGC;
(b) Promptly and in any event within two Business Days after receipt
thereof by the Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by the Borrower or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof by
the Borrower or any member of its Controlled Group with the United States
Department of Labor, the Internal Revenue Service or the PBGC, copies of each
annual and other report (including SCHEDULE B thereto) with respect to each
Plan;
(d) Promptly and in any event within 30 days after receipt thereof, a
copy of any notice, determination letter, ruling or opinion the Borrower or any
member of its Controlled Group receives from the PBGC, the United States
Department of Labor or the Internal Revenue Service with respect to any Plan;
(e) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief
financial officer of the Borrower or such member of its Controlled Group setting
forth details as to the events giving rise to such potential withdrawal
liability and the action which the Borrower or such member of its Controlled
Group is taking or proposes to take with respect thereto;
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(f) Notification within 30 days of any material increases in the
benefits of any existing Plan which is not a Multiemployer Plan, or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which the Borrower or any member of its Controlled Group was not previously
contributing;
(g) Notification within three Business Days after the Borrower or any
member of its Controlled Group knows or has reason to know that the Borrower or
any such member of its Controlled Group has or intends to file a notice of
intent to terminate any Plan under a distress termination within the meaning of
Section 4041(c) of ERISA and a copy of such notice; and
(h) Promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any member of its Controlled Group with
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
ARTICLE 7
NEGATIVE COVENANTS
From the Agreement Date and 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 Borrower 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 Borrower and the Subsidiaries under the Loan
Documents;
(b) Accounts payable of the Borrower and the Subsidiaries incurred in
the ordinary course of business;
(c) Indebtedness of the Borrower and the Subsidiaries evidenced by the
Intercompany Notes;
(d) Indebtedness of the Borrower and the Subsidiaries set forth on
SCHEDULE 8 hereto, and all renewals and extensions (but not increases)
thereof;
(e) Subordinated Debt of the Borrower and the Subsidiaries not to exceed
$5,000,000 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
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fiscal quarters immediately preceding the date of determination, the covenant
calculations described in SECTION 6.3(a) hereof; and
(f) Other Indebtedness of the Borrower and the Subsidiaries not to
exceed $2,000,000 in aggregate amount;
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 Borrower 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 Borrower 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 Borrower shall not, and shall not permit
any Subsidiary to, make, own or maintain any Investment, except that the
Borrower 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-1/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;
(g) Investments in Subsidiaries permitted pursuant to SECTION 7.8
hereof; and
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(h) Other Investments primarily related to the Borrower's Business not
to exceed $500,000 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 Borrower
shall not, and shall not permit any Subsidiary to, enter into any amendment of
any material term or provision of its articles of incorporation, by-laws, or
partnership agreement, as applicable. In addition, the Borrower 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 Borrower 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 except that (i) any of the
Subsidiaries may merge with the Borrower (provided that the Borrower shall be
the continuing or surviving corporation), (ii) any of the Subsidiaries may merge
with one or more of the other Subsidiaries, and (iii) any of the Subsidiaries
may merge or consolidate with any other corporation, provided that, immediately
after giving effect to such merger or consolidation (x) the continuing or
surviving corporation shall constitute a Subsidiary and (y) no Default or Event
of Default shall exist hereunder and, PROVIDED, FURTHER that the
Administrative Lender shall have received at least 10 Business Days' notice
prior to the date of any merger or consolidation permitted under this Section
7.5(b); or
(c) create or acquire any Subsidiary, except as permitted by SECTION
7.6.
Section 7.6 ACQUISITIONS. The Borrower shall not, and shall not permit
any Subsidiary to make (a) any single Acquisition during the period commencing
on the Agreement Date and ending on December 31, 1996, or during any fiscal year
ending after December 31, 1996, the Acquisition Consideration for which exceeds
$2,500,000; (b) any single Acquisition during the period commencing on the
Agreement Date and ending on December 31, 1996, or during any fiscal year ending
after December 31, 1996, if, during any such period, aggregate Acquisition
Consideration given by the Borrower and the Subsidiaries for Acquisitions prior
to such Acquisition shall have equalled or exceeded $5,000,000; (c) any
Acquisition, 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
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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
Borrower's 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, (vii) the Subsidiary being acquired becomes
party to a Subsidiary Guaranty, and (d) any Acquisition the aggregate
Acquisition Consideration for which equals or exceeds $2,500,000 unless (in
addition to the foregoing requirements and limitations) each Lender receives (i)
a copy of a duly and properly completed pro-forma Compliance Certificate after
giving effect to such acquisition demonstrating compliance with the terms of
this Agreement and the Loan Papers for one full year after the date of such
acquisition, and (ii) financial projections in form and substance acceptable to
the Lenders and demonstrating compliance with (a) the covenants described in
Section 6.3(a) hereof and (b) the required repayments as a result of the
reductions in the Commitment set forth in Section 2.6(c) hereof, each after
giving effect to such acquisition and for the period beginning on such date of
acquisition and ending on the Maturity Date.
Section 7.7 DIVIDENDS. The Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly declare or pay any Dividend; provided,
however, (a) any Subsidiary may declare and pay Dividends to the Borrower or to
any other Subsidiary, and (b) the Borrower shall be permitted to pay Dividends
on its capital stock provided that (i) SECTION 2.5(c) hereof is complied with
prior to the declaration and paying of such Dividend and (ii) such Dividend
shall not exceed 10% of Excess Cash Flow, if any, for the fiscal year ending on
December 31 immediately preceding such fiscal year in which such Dividend is to
be paid.
Section 7.8 AFFILIATE TRANSACTIONS. The Borrower 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
Borrower 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 Borrower 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 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 Borrower
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 Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly, or permit any member of
its Controlled Group to directly or indirectly, (a) terminate any Plan so as to
result in any material (in the opinion of the
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Determining Lenders) liability to the Borrower or any member of its Controlled
Group, (b) permit to exist any ERISA Event, or any other event or condition
which presents the risk of a material (in the opinion of the Determining
Lenders) liability of the Borrower or any member of its Controlled Group, (c)
make a complete or partial withdrawal (within the meaning of Section 4201 of
ERISA) from any Multiemployer Plan so as to result in any material (in the
opinion of the Determining Lenders) liability to the Borrower or any member of
its Controlled Group, (d) enter into any new Plan or modify any existing Plan so
as to increase its obligations thereunder except in the ordinary course of
business consistent with past practice which could result in any material (in
the opinion of the Determining Lenders) liability to the Borrower or any member
of its Controlled Group, or (e) permit the present value of all benefit
liabilities, as defined in Title IV of ERISA, under each Plan of the Borrower or
any member of its Controlled Group (using the actuarial assumptions utilized by
the PBGC upon termination of a plan) to materially (in the opinion of the
Determining Lenders) exceed the fair market value of Plan assets allocable to
such benefits all determined as of the most recent valuation date for each such
Plan.
Section 7.10 LEVERAGE RATIO. At the end of each fiscal quarter occurring
during the periods indicated below, the Borrower, on a combined basis, shall not
permit the Leverage Ratio to be greater than:
Period Ratio
------ -----
From Agreement Date through March 31, 1998 [2.00 TO 1]
April 1, 1998 through March 31, 1999 [1.50 TO 1]
April 1, 1999 and thereafter [1.00 TO 1]
Section 7.11 FIXED CHARGES COVERAGE RATIO. At the end of each fiscal
quarter occurring during the periods indicated below, the Borrower, 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 less than:
Period Ratio
------ -----
From Agreement Date through June 30, 1997 [1.25 TO 1]
From July 1, 1997 and thereafter [1.35 TO 1]
Section 7.12 DEBT SERVICE COVERAGE RATIO. The Borrower, 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.
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Section 7.13 CAPITAL STOCK OF THE BORROWER. The Borrower shall not, and
shall not 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 Borrower 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. The Borrower shall not,
and shall not 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 Borrower shall not, and shall not
permit any Subsidiary to, engage in any type of business except the Borrower's
Business.
Section 7.17 SUBORDINATED DEBT. The Borrower 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 the
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.
Section 7.18 AFFILIATE CONTRACTS. The aggregate number of Affiliate
Contracts of the Borrower and the Subsidiaries, collectively, existing as of the
last day of any fiscal quarter of the Borrower shall not be less than the
aggregate number of Affiliate Contracts of the Borrower and the Subsidiaries,
collectively, existing as of the last day of the immediately preceding fiscal
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quarter; provided, however, that no Event of Default shall occur as a result of
a violation of this SECTION 7.18 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) The 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 Borrower 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 Borrower to, and forthwith upon such demand, the Borrower
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 Borrower or any Subsidiary shall default in the performance or
observance of any agreement or covenant contained in SECTIONS 5.1, 5.9,
5.14 or ARTICLE 7 hereof;
(e) The Borrower or any 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);
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(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 the
Borrower or any 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 the Borrower
or any Subsidiary, or of any substantial part of their respective properties, or
ordering the winding-up or liquidation of the affairs of the Borrower or any
Subsidiary, and any such decree or order shall continue unstayed and in effect
for a period of 60 consecutive days;
(h) The Borrower or any Subsidiary shall file a petition, answer or
consent seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal or state
bankruptcy law or other similar law, or the Borrower or any Subsidiary shall
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment or taking of possession of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Borrower or any Subsidiary or of any substantial part of their respective
properties, or the Borrower or any Subsidiary shall fail generally to pay its
debts as they become due, or the Borrower or any Subsidiary shall take any
action in furtherance of any such action;
(i) A final judgment or judgments shall be entered by any court against
the Borrower or any 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 the Borrower or any Subsidiary
which, together with all other such property of the Borrower 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 Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other
party-in-interest or disqualified person shall engage in transactions which in
the aggregate would reasonably result in a direct or indirect liability to the
Borrower or any member of its Controlled Group in excess of $250,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrower, or
any member of its Controlled Group shall incur any accumulated funding
deficiency, as defined in Section 412 of the Code, in the aggregate in excess of
$250,000, or request a funding waiver from the Internal Revenue Service for
contributions in the aggregate in excess of $250,000; (iii) the Borrower or any
member of its 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 Borrower or any
member of its Controlled Group shall fail to make a required contribution by the
due date under Section 412 of the Code or Section 302 of ERISA which would
result in the imposition of a lien under Section 412 of the Code or Section 302
of ERISA; (v) the Borrower, any member of its Controlled Group or any Plan
sponsor shall notify the PBGC of an intent to terminate, or the PBGC shall
institute
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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 Borrower in writing
that the Determining Lenders have made a determination that, on the basis of
such Reportable Event, there are reasonable grounds for the termination of such
Plan by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan and as a result thereof an
Event of Default shall have occurred hereunder; (vii) a trustee shall be
appointed by a court of competent jurisdiction to administer any Plan or the
assets thereof; (viii) the benefits of any Plan shall be increased, or the
Borrower or any member of its Controlled Group shall begin to maintain, or begin
to contribute to, any Plan, without the prior written consent of the Determining
Lenders; or (ix) any ERISA Event with respect to a Plan shall have occurred, and
30 days thereafter (A) such ERISA Event, other than such event described in
clause (vi) of the definition of ERISA Event herein, (if correctable) shall not
have been corrected and (B) the then present value of such Plan's benefit
liabilities, as defined in Title IV of ERISA, shall exceed the then current
value of assets accumulated in such Plan; provided, however, that the events
listed in subsections (v) through (ix) shall constitute Events of Default only
if, as of the date thereof or any subsequent date, the maximum amount of
liability that the Borrower or any member of its Controlled Group could incur in
the aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any other
provision of law with respect to all such Plans, computed by the actuary of the
Plan taking into account any applicable rules and regulations of the PBGC at
such time, and based on the actuarial assumptions used by the Plan, resulting
from or otherwise associated with such event exceeds $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 the Borrower or any 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;
(l) The Borrower or any Subsidiary shall default in the payment of any
Indebtedness in an aggregate amount of $500,000 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) Any material Necessary Authorization shall be revoked; or there
shall occur a material default under any material Necessary Authorization by the
Borrower or any Subsidiary
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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 hearing;
(n) 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; or
(o) There shall occur any Change of Control.
Section 8.2 REMEDIES. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in SECTION
8.1(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
8.1(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 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 Borrower to, and forthwith upon such demand, the Borrower
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.
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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 Borrower,
whereupon until such Lender notifies the Borrower that the circumstances giving
rise to such situation no longer exist, the obligation of such Lender to make
LIBOR Advances shall be suspended.
Section 9.2 ILLEGALITY. If any applicable law, rule or regulation, or
any change therein or adoption thereof, or interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its 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 Borrower. 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
Borrower, notwithstanding anything contained in ARTICLE 2 hereof, the Borrower
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 Borrower 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:
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(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 Borrower, the
Borrower agrees to pay to such Lender such additional amount as will compensate
such Lender for such increased costs or reduced amounts. The affected Lender
will as soon as practicable notify the Borrower of any event of which it has
knowledge, occurring after the Agreement Date, 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
Borrower may at any time, upon at least five Business Days' prior notice to the
Lender, after reimbursement to the Lender by the Borrower in accordance with
this Section of all costs incurred, prepay in full the then outstanding LIBOR
Advances 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 Borrower 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.
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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 Borrower that
the circumstances giving rise to such repayment no longer apply, all Advances
which would otherwise be made by such Lender as LIBOR Advances shall be made
instead as 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 Borrower, subject to SECTION 11.9, the Borrower shall
immediately pay to such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender with respect to such
circumstances, 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
Borrower by a Lender hereunder, shall, in the absence of demonstrable error, be
conclusive and binding for all purposes.
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 Borrower; to distribute promptly to each
Lender information, requests and documents received from the Borrower, and each
payment (in like funds received) with respect to any of such Lender's Advances,
fee or other amount; and to deliver to the Borrower requests, demands, approvals
and consents received from the Lenders. Administrative Lender agrees to
promptly distribute to each Lender, at such Lender's address set forth below
information, requests, documents and payments received from the Borrower.
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(b) REPLACEMENT OF ADMINISTRATIVE LENDER. Should the Administrative
Lender or any successor Administrative Lender ever cease 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 Borrower 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 Borrower 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 Borrower or any other
Person on the Borrower's behalf to the Administrative Lender.
(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
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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 Borrower. To the extent not
reimbursed by the Borrower, 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.
(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, the Borrower and any of its Affiliates, and any Person who may do business
with or own securities of the Borrower or any of its Affiliates, all as if the
Administrative 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 Borrower, as
applicable; consequently, no
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Person other than Lenders or the Borrower shall be entitled to rely upon, or to
raise as a defense, in any manner whatsoever, the failure of the Administrative
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:
(i) If to the Borrower, at:
Metro Networks, Inc.
2800 Post Oak Boulevard, Suite 4000
Houston, Texas 77056-6199
Attn: Curtis H. Coleman, Senior Vice President and Chief Financial
Officer
with a copy to:
Metro Networks, Inc.
681 Fifth Avenue, 10th Floor
New York, New York 10022
Attn: Gary Worobow
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Whitney L. Busse, Vice President
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with a copy to:
Donohoe, Jameson & Carroll, P.C.
3400 Renaissance Tower
Dallas, Texas 75270-2120
Attn: A. Lamar Youngblood
(iii) If to a Lender, at its address shown below its name on the signature
pages hereof, or if applicable, set forth in its Assignment
Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 11.2 EXPENSES. The Borrower shall promptly pay:
(a) all reasonable out-of-pocket expenses of the Administrative 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 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 Borrower is not in strict compliance with the terms
of this Agreement, such decision by such Lender shall not be deemed to
constitute an
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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 Borrower.
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 rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Indebtedness evidenced
by certificates of deposit) 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 Borrower, against and on account of the Obligations which are
then due and payable and other liabilities of the Borrower 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.
Section 11.6 ASSIGNMENT.
(a) Except in connection with any merger or consolidation permitted
pursuant to SECTION 7.5(b) hereof, the Borrower may not assign or transfer any
of its 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)
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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 Borrower agrees 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 Borrower to such Participants. To the fullest
extent it may effectively do so under Applicable Law, the Borrower agrees that
any Participant may exercise any and all rights of banker's lien, set-off and
counterclaim with respect to this Participation as fully as if such Participant
were the holder of the Advances in the amount of its Participation.
(d) Each Lender may assign to one or more 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 Borrower, which approval
shall not be unreasonably withheld (provided that without the consent of the
Borrower 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) 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 rights 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 rights and obligations hereunder
have been assigned by it
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pursuant to such Assignment, relinquish such rights and be released from such
obligations under this Agreement. The Borrower shall not be liable for any fees
or expenses of the Administrative 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 Borrower's receipt of an Assignment Agreement executed by a
Lender and an Assignee, and any Note or Notes subject to such assignment, the
Borrower shall, within three Business Days after the Borrower'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 Borrower, 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 Borrower furnished to such Lender by or on behalf of the
Borrower. The Borrower may not prohibit any Participation by withholding its
consent pursuant to this SECTION 11.6(g).
(h) Except as specifically set forth in this SECTION 11.6, nothing in
this Agreement or any other Loan 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
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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 if principal
is paid in full, any remaining excess shall be paid to the Borrower. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrower and the Lenders shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effect thereof, and (c) amortize, prorate,
allocate and spread in equal parts, the total amount of interest throughout the
entire 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
Borrower the amount of such excess or credit the amount of such excess against
the total principal amount of the Obligations owing, and, in such event, the
Lenders shall not be subject to any penalties provided by any laws for
contracting for, charging or receiving interest in excess of the Maximum Amount.
This Section shall control every other provision of all agreements pertaining to
the transactions contemplated by or contained in the Loan 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
Borrower and the 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) or (c) 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,
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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 Borrower.
Section 11.12 EXCEPTION TO COVENANTS. The Borrower 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 Borrower assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. 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 Borrower shall have a claim against the Issuing
Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that the
Borrower proves were caused by (i) 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.
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 BORROWER
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AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL
HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
SECTION 11.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, 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 WAIVER OF SUBROGATION. The Borrower shall not 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 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 obligor on all or any part
of the Obligations or any collateral or any security, and the 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
Borrower and each other Obligor by virtue of any payment, court order, or law.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
BORROWER: METRO NETWORKS, INC.
By:
----------------------------------
Curtis H. Coleman
Senior Vice President and Chief
Financial Officer
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By:
----------------------------------
Whitney L. Busse
Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A.,
as a Lender
Specified Percentage:
100%
By:
----------------------------------
Whitney L. Busse
Vice President
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Whitney L. Busse
Vice President
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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 report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
October 10, 1996
<PAGE>
EXHIBIT 23.3
Boards of Directors
Skyview Broadcasting Networks, Inc.
Airborne Broadcast Consultants
Airborne Broadcasting Systems, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
October 10, 1996