<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 1997
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period from to
Commission File Number: 0-21575
----------------
METRO NETWORKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 76-0505148
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2800 POST OAK BLVD., SUITE 4000 77056-6199
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES) (713) 407-6000
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[_]
The aggregate market value of the shares of Registrant's Common Stock held
by non-affiliates of Registrant as of March 20, 1998 was $319,017,330 based
upon the last reported bid price of $37.00 per share of Common Stock on March
20, 1998, as reported in the NASDAQ National Market.
The number of shares outstanding of Registrant's Common Stock as of March
20, 1998 was 16,587,058.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for its annual
meeting of shareholders (which will be filed with the Commission within 120
days of the Registrant's last fiscal year end) are incorporated by reference
in Part III of this Form 10-K.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS.
OVERVIEW
Metro Networks, Inc. (the "Company") is the largest outsource provider of
traffic reporting services and is a leading supplier of local news, sports,
weather, video news and other information programming 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 1,576 radio station affiliates and 135 television
station affiliates. The Company provides local broadcast information reports
in 47 of the 50 largest Metro Survey Area ("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 20 affiliates per market), the Company believes that its
broadcasts of local 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 in 77 MSA markets and
are heard by more than 100 million people (age 12 and over) daily. Such
reports and the Company's commercial messages are listened to by an average of
approximately 76% 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 two different networks on which to broadcast
their advertisements: (i) the network of radio station affiliates (the "Radio
Information Services Network") which includes the affiliate stations to which
the Company provides its core information reports (the "Radio Traffic
Services" and, separately, the "Radio Traffic Services Network") and the
affiliate stations to which the Company provides its news, sports, weather and
other information reports (the "Expanded Radio Services" and, separately, the
"Expanded Radio Services Network"), and (ii) the network of broadcast
television station affiliates and cable news channel affiliates (the "MetroTV
Network") to which the Company provides its traffic information reports (the
"Television Traffic Services") and video news (other than traffic) information
products (the "Video News Services," and collectively with the Television
Traffic Services, the "MetroTV Services").
PROGRAMMING
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.) are 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.
<PAGE>
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 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 450 affiliates in 62 markets as of December 31, 1997. The
Company's total radio station affiliates increased by 15% from 1,374 in 1996
to 1,576 in 1997.
The Company gathers traffic and other data utilizing the Company's
information-gathering infrastructure, which includes aircraft (helicopters and
airplanes), broadcast quality remote camera systems positioned at
strategically located fixed-positions and on aircraft, mobile units and
cellular systems, and by accessing various government-based traffic tracking
systems. The Company also gathers information through relationships with
various third party news and information services. 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.
As a result of its extensive network of operations and broadcasters, the
Company regularly reports breaking and 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 Andrew Cunanan murder/suicide news event, the Company provided live
customized reports from Miami 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 in excess of 77 markets and that is able to
provide such customized reports to these markets.
The Company introduced its newest product within its Expanded Radio Services
division, Metro Source, in September 1997. Metro Source is a total information
system and digital audio workstation that allows Metro news affiliates to
receive via satellite, view, write, edit and report the latest news and
features. With this product, the Company provides continuously updated and
breaking news, weather, sports, business and entertainment information to its
affiliate stations. Information and content for Metro Source is primarily
generated from the Company's staff of News Bureau Chiefs, state correspondents
and professional news writers and reporters.
Local, regional and national news and information stories are fed to the
Company's national news operations center in Phoenix, Arizona where the
information is verified, edited, produced and disseminated via satellite to
the Company's internal Metro Source workstations located in each of its
operations centers and to workstations located at affiliate radio stations
nationwide. Metro Source includes proprietary software that allows for
customizing reports and editing in both audio and text formats. The benefit to
stations is that Metro Source allows them to substantially reduce time and
cost from the news gathering and editing process at the station level, while
providing greater volume and quality news and information coverage from a
single source. Metro Source information is written by broadcasters for
broadcasters. As of December 31, 1997, the Company had affiliated
approximately 80 radio stations for the Metro Source product.
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 135
television station affiliates, increasing over 18% from 114 television station
affiliates in 1996. Originally, the Company provided television affiliates
with audio reports of traffic information and basic graphics. As the Company
developed its Television Traffic Services, it provided more sophisticated
graphics displays and its professional broadcasters to the MetroTV Network. In
1995, the Company began to expand and enhance the information services that it
provides to television affiliates. As of December 31, 1997, the Company
provided its Video News Services to approximately 33 television station
affiliates in 17 markets, up from 19 television station affiliates in 12
markets at the end of 1996. Similar to its radio programming services, with
its MetroTV Services the Company supplies customized information reports which
are generally 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.
2
<PAGE>
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 fixed-position based
camera systems. 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 fixed-position camera systems.
In July 1997, the Company acquired an 80% interest in Washington News
Network, Inc. ("WNN"), which provides customized video news feeds via
satellite, primarily of news events from Capitol Hill and the White House, to
approximately 85 television station affiliates, bureaus and networks across
the country. WNN currently covers national news for local and regional
consumption and provides video crew hire services in the Washington, D.C. area
for affiliate stations nationwide. The Company offers WNN's services and
products as a part of its comprehensive MetroTV Services.
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 several 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 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) 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, and (ii)
TransCal, similar to TravInfo, is a field operational test being conducted in
Sacramento to collect and disseminate traveler information for the I-80 and US
50 Corridors between the San Francisco Bay area and the Reno/Tahoe area.
Additionally, the Company has participated in Model Deployment projects funded
by the Federal Highway Administration in Phoenix (the AZTech project) and
Seattle (the Smart Trek project) to develop Traveler Information Systems that
will deliver information through a multitude of wireless and wireline delivery
systems to an assortment of end-users devices and services.
INFRASTRUCTURE
In each of its larger markets, the Company typically employs a General
Manager who has overall operations and sales management responsibility for
that market. In smaller to medium markets, the Company usually employs one
General Manager to oversee two to four markets. In addition, the Company
employs seven Regional Vice Presidents/General Managers who oversee its
General Managers and who generally have responsibility for six to ten markets
each.
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
operations 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 nine Regional
Directors of Operations who supervise the Directors of Operations and who
report to the Company's Regional Vice Presidents/General
3
<PAGE>
Managers. In each of the markets where the Company provides its Expanded Radio
Services, the Company usually employs a News Bureau Chief who generally
reports to the Director of Operations for that market. Each News Bureau Chief
is responsible for collecting, writing and reporting local, regional and
national news and information stories generated in, or related to, their
respective market. Each News Bureau Chief, additionally, is responsible for
feeding these stories and information reports to the Company's national news
operations center, located in Arizona.
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 100
helicopters and fixed-wing aircraft, 31 mobile units, 18 airborne camera
systems, 54 fixed-position camera systems, 64 broadcast studios and 1,744
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 station affiliates. In addition, the
Company's operations 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 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.
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 broad demographic reach. 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 packages its television commercial airtime inventory
on a regional and national network basis. In 1997, the Company began providing
a national unwired network morning news product on the MetroTV Network. The
Company has developed a separate sales force to sell its television commercial
airtime inventory and to optimize the efforts of the Company's national
internal structure of sales representatives.
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 sponsorship advertising packages 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 160 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 ten
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, 1997, no single advertiser represented more than 5% of the
Company's total revenues and the Company's top ten advertisers, as a group,
represented less than 20% of the Company's total revenues.
The Radio Information Services Network
The Company's typical radio advertisement on the Radio Information Services
Network consists of an opening announcement and a ten-second commercial
message presented immediately prior to, in the middle of,
4
<PAGE>
or immediately following a regularly scheduled information report. Because the
Company has numerous radio station affiliates in each of its markets
(averaging 20 affiliates per market), the Company believes that its traffic
and information 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
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 Radio Information 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 Information 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 over 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's business has developed, it has sold increasing amounts of
its advertising to regional/national advertisers. For the year ended December
31, 1997, approximately 70% of the Company's radio advertising revenue was
attributable to regional/national advertisers, with the balance attributable
to local advertisers.
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 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 Network
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 valuable commercial airtime inventory. The
Company, in turn, packages this commercial airtime inventory and sells it to
advertisers on a 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.
Historically, revenues from sales of television commercial airtime inventory
have been an insignificant part of the Company's total revenues. In order to
increase the Company's revenues from sales of television commercial airtime
inventory, in 1997 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 large national advertisers. 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.
5
<PAGE>
ACQUISITIONS
Subsequent to year-end 1997, the Company acquired Traffic Patrol
Broadcasting, Inc. ("TPB") of Dallas, Texas. As of the closing, the Company
(through TPB and the Company's existing Dallas operations) provided traffic
services to 39 radio and three television station affiliates in Dallas/Ft.
Worth, Texas, the seventh largest MSA market.
During 1997, the Company expanded into, or enhanced, operations in 17
markets through five strategic acquisitions.
Harrisburg, York, Lancaster, Allentown/Bethlehem, Wilkes-Barre/Scranton,
Albany, Salisbury/Ocean City Acquisition. On September 19, 1997, the Company
acquired substantially all of the tangible and intangible assets of Freecom,
Inc. dba Traffax Traffic Network ("Traffax") and Freecom Newsnet ("Freecom").
As of the closing, Traffax provided traffic services to 20 radio and three
television station affiliates in Harrisburg, Pennsylvania; seven radio station
affiliates in York, Pennsylvania; seven radio station affiliates in Lancaster,
Pennsylvania; 18 radio and one television station affiliate in
Allentown/Bethlehem, Pennsylvania; 20 radio station affiliates in Wilkes-
Barre/Scranton, Pennsylvania; 24 radio and four television station affiliates
in Albany, New York and 25 radio station affiliates in Salisbury/Ocean City,
Maryland and Delaware. The MSA market rank of these MSA markets is 73, 103,
110, 65, 62, 57 and 154, respectively. As of the closing, Freecom provided
news services to 17 radio station affiliates in Harrisburg, Pennsylvania.
Fresno Acquisition. On August 1, 1997, the Company acquired substantially
all of the tangible and intangible assets of Valley Watch Broadcasting
("VWB"). As of the closing, VWB provided traffic services to eight radio and
two television station affiliates in Fresno, California, the 64th largest MSA
market.
Washington News Network, Inc. On June 27, 1997, the Company acquired an 80%
interest in Washington News Network, Inc. ("WNN"). As of the closing, WNN
provided customized video news feeds via satellite, primarily of news events
from Capitol Hill and the White House, to approximately 85 television station
affiliates, bureaus and networks across the country, covered national news for
local and regional consumption and provided video crew hire services in the
Washington, D.C. area for affiliate stations nationwide.
Cincinnati, Columbus, Dayton, Memphis, Miami and Nashville Acquisition. On
January 3, 1997, the Company acquired substantially all of the tangible and
intangible assets of TWI Networks, Inc. ("TWI"). As of the closing, TWI
provided local traffic and news services to 16 radio and one television
station affiliate in Cincinnati, Ohio; six radio station affiliates in
Columbus, Ohio; 18 radio station affiliates in Dayton, Ohio; 19 radio station
affiliates in Memphis, Tennessee; two radio station affiliates in Miami,
Florida and 12 radio and two television station affiliates in Nashville,
Tennessee. The MSA market rank of these MSA markets is 25, 32, 52, 43, 11 and
44, respectively.
Kansas City and Omaha Acquisition. On January 2, 1997, the Company purchased
substantially all of the tangible and intangible assets of Airborne Traffic
Network, Inc. ("ATN"). As of the closing, ATN provided traffic services to 16
radio station affiliates in Kansas City, Missouri, the 26th largest MSA
market; and Omaha, Nebraska, the 72nd largest MSA market.
The Company is currently in discussions with several other entities that, if
acquired, would result in new or expanded geographic coverage or additional or
complementary services by the Company. The Company, however, does not have any
commitments, arrangements, or understandings with respect to any such
acquisitions. Further, there can be no assurance that the Company will be able
to effect any such transaction, or that any such transactions, if consummated,
will prove to be beneficial to the Company.
The Company generally consolidates the operations of acquired companies or
assets into its existing operations so that duplicative costs can be
eliminated, resulting in margin improvements for the consolidated operations.
In addition, as a result of the Company's significant sales force and existing
advertising relationships, the Company is generally able to increase revenues
by selling advertising in the acquired market to the
6
<PAGE>
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.
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. The Company is currently analyzing and evaluating various
international strategic opportunities.
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
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 16 MSA markets in the United States, as compared to
the Company's operations in 77 MSA markets. Westwood One, Inc., which is
approximately 25% owned by CBS Corporation, owns and operates the Shadow
Traffic operations in four of the 16 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 1,475 full-time and 720 part-time persons
as of December 31, 1997, none of whom was covered by a collective bargaining
agreement. Approximately 40 of the Company's 2,195 employees are represented
by a union. Such employees are located in the San Francisco bay area. Of the
Company's total employees, approximately 1,744 were engaged in broadcasting
and operations; 160 in sales and marketing; and 123 in general and
administrative activities. Approximately 10% 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.
TRADEMARKS
The Company has registered "Metro Traffic Control", "Metro Networks" and
certain other trademarks which are relevant to its business. The Company does
not believe that its operations are materially dependent on these trademarks.
REORGANIZATION
From 1978 through October 1996, the business of the Company was operated
through Metro Traffic Control, Inc. ("MTC"), Metro Networks, Ltd. ("MNW"),
Metro Video News, Inc. ("MVN"), Metro Reciprocal, Inc. ("MRI") and their
subsidiaries (collectively, the "Predecessor Companies"). Until October 1996,
all of the equity interests in the Predecessor Companies were owned by David
I. Saperstein and certain trusts created for the benefit of his children (the
"Saperstein Family"). In October 1996, the Saperstein Family established the
Company as a holding company and consolidated the issued and outstanding
equity interests in the Predecessor Companies, by exchanging such interests
for 9,350,607 shares of Metro Networks, Inc.'s
7
<PAGE>
Common Stock and 2,549,750 shares of Metro Networks, Inc.'s Series A
Convertible Preferred Stock (the "Reorganization"). In November 1997, Metro
Traffic Control, Inc. changed its name to Metro Networks Communications, Inc.
ITEM 2. 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 190,720 square feet in the aggregate, pursuant to the terms of
various lease agreements. The Company believes that its existing facilities
are adequate to meet current requirements and that suitable additional space
in close proximity to its existing headquarters will be available as needed to
accommodate growth of its operations and additional sales and support offices
through the foreseeable future.
For the year ended December 31, 1997, the Company incurred $4.4 million in
total facilities expenses.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved from time to time in routine legal matters
incidental to its 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS.
No matters were submitted to a vote of the Company's stockholders during the
quarter ended December 31, 1997.
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company is authorized to issue 25,000,000 shares of common stock, par
value $0.001 per share (the "Common Stock") and 10,000,000 shares of preferred
stock, par value $0.001 per share (the "Preferred Stock"). At March 20, 1998,
16,587,058 shares of Common Stock and 2,549,750 shares of Series A Convertible
Preferred Stock were outstanding.
The Common Stock is listed for trading on the NASDAQ National Market
("Nasdaq") under the symbol "MTNT." The high and low sales prices as reported
by Nasdaq for the Common Stock from October 17, 1996, the date upon which the
Common Stock commenced trading on the Nasdaq, through December 31, 1997,
respectively for each calendar quarter were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------------- ------------- -------------- ------------- -------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997.... 26 3/4 21 7/8 25 1/2 21 7/8 33 7/8 25 5/16 35 1/2 29 1/2 35 1/2 21 7/8
1996.... 25 3/4 19 1/8 25 3/4 19 1/8
</TABLE>
The closing price of the shares of the Common Stock was $37.00 on March 20,
1998.
As of March 20, 1998, there were 116 record owners and in excess of 1,600
beneficial owners of the Common Stock.
The Company has never paid cash dividends on the Common Stock and does not
intend to pay any such cash dividends in the foreseeable future.
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial and operating data should be read in
conjunction with the consolidated financial statements of the Company and 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 selected
financial data set forth below with respect to the years ended December 31,
1997, 1996, 1995, 1994 and 1993 are derived from the audited financial
statements for that year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Advertising revenues............ $139,125 $109,237 $72,433 $60,048 $47,905
-------- -------- ------- ------- -------
Broadcasting costs.............. 67,224 50,686 41,286 32,239 27,384
Marketing expense............... 26,526 21,378 14,504 11,355 8,848
General and administrative ex-
pense.......................... 11,425 10,158 7,194 5,939 6,994
Depreciation and amortization
expense........................ 8,878 6,213 3,980 1,302 1,814
-------- -------- ------- ------- -------
Total operating costs........... 114,053 88,435 66,964 50,835 45,040
-------- -------- ------- ------- -------
Income from operations.......... 25,072 20,802 5,469 9,213 2,865
Other expenses (income)....... (1,865) (408) (137) (164) 238
Interest expense.............. 230 1,779 1,260 293 145
-------- -------- ------- ------- -------
Income before tax provision..... 26,707 19,431 4,346 9,084 2,482
Income tax provision............ 11,164 3,462 1,036 2,179 1,066
-------- -------- ------- ------- -------
Income from continuing opera-
tions.......................... 15,543 15,969 3,310 6,905 1,416
Discontinued operations......... -- -- -- -- (561)
-------- -------- ------- ------- -------
Net income...................... $ 15,543 $ 15,969 $ 3,310 $ 6,905 $ 855
======== ======== ======= ======= =======
Pro forma net income(1)......... $ -- $ 12,047 $ 2,803 $ -- $ --
Diluted income per common
share(1)(2).................... $ 0.93 $ 0.94 $ 0.23 -- --
Diluted weighted average shares
outstanding(1)(2).............. 16,714 12,884 12,252 -- --
<CAPTION>
AT DECEMBER 31,
---------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................. $ 48,106 $ 49,294 $ 7,900 $ 7,414 $ 1,862
Total assets.................... 115,073 103,757 48,030 27,502 16,492
Total debt...................... 1,478 1,310 22,624 6,650 2,183
Total stockholders'
equity/partners' capital....... 88,293 71,930 4,478 9,401 4,153
</TABLE>
- --------
(1) The unaudited pro forma financial data for the year ended December 31,
1996 and 1995 give effect to the Reorganization. See "Business--
Reorganization."
(2) For the years ending December 31, 1996 and 1995, weighted average shares
outstanding and net income per common share are calculated on a pro forma
basis 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
applicable to the Company 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."
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company, which was founded in 1978, is the largest outsource provider of
traffic reporting services and a leading supplier of local news, sports,
weather, video news and other information programming services to the
television and radio broadcast industries. 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 Information 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 include
corporate overhead. Most of the Company's expenses are associated with its
Radio Traffic Services. However, during 1995, 1996 and 1997, the Company
incurred additional expenses attributable to the development of its MetroTV
Services and development and operation of its Expanded Radio Services
(including operating expenses incurred prior to the generation of significant
revenue from both of these operations).
From 1978 through October 1996, the business of the Company was operated
through the Predecessor Companies and all of the equity interests in the
Predecessor Companies were owned by the Saperstein Family. See "Business--
Reorganization."
Immediately prior to the closing of the initial public offering, the
controlling shareholder established the Company as a holding company and
consolidated the issued and outstanding equity interests in the Predecessor
Companies into Metro Traffic Control, Inc. by exchanging such interests for
9,350,607 shares of the Company's Common Stock and 2,549,750 shares of the
Company's Series A Convertible Preferred Stock. In November 1997, Metro
Traffic Control, Inc. changed its name to Metro Networks Communications, Inc.
As the equity interests were held under common control and were contributed
by the resulting shareholder of the Company, the underlying assets are
recorded at their historical costs, similar to pooling of interest accounting.
References to Metro Networks, Inc. in the consolidated financial statements of
the Company include the Predecessor Companies prior to the Reorganization.
In the analysis set forth below, the Company discusses EBITDA, which
consists of earnings before interest 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. The Company believes
that EBITDA is a measure of financial performance widely used in the media and
broadcast industries and is useful to investors.
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 transactions are common in the broadcasting industry. In 1995,
revenues from reciprocal arrangements accounted for 11.6% of total revenues
and declined to 8.0% in 1996 and 4.0% in 1997.
The Company's advertising revenues vary 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 marketing expenses,
are generally spread evenly over the year, resulting in seasonality in the
Company's EBITDA.
INCOME TAXES
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, and, prior to the Reorganization, the
combined financial statements of the Predecessor Companies.
11
<PAGE>
Prior to the Reorganization, MNW owned corporations which were 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 recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases using enacted tax rates
in effect for the year in which the differences are expected to reverse.
Subsequent to the Reorganization, all of the operations have been included in
the consolidated tax return of the Company. Accordingly, at the time of the
Reorganization, the Company recorded an increase in the deferred tax liability
of $66,000, which represented the tax basis differential between financial and
tax assets and liabilities associated with the S corporations and partnerships
included in the Reorganization.
Prior to the Reorganization, MRI, MVN and MTC elected to be taxed under S
corporation provisions of the Internal Revenue Code of 1986, as amended. Under
these provisions, MRI, MVN and MTC are not liable for federal income taxes.
Instead, the stockholders of such entities are liable individually for federal
income taxes on their taxable income. Also, prior to the Reorganization, MNW
was a partnership for federal income tax purposes and accordingly, the
partners were liable individually for federal income taxes on their respective
partnership income. Accordingly, losses for these entities are not available
to the Company to offset income.
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 CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
-------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Advertising revenues............ $139,125 100.0% $109,237 100.0% $72,433 100.0%
-------- ----- -------- ----- ------- -----
Broadcasting costs.............. 67,224 48.3 50,686 46.4 41,286 57.0
Marketing expense............... 26,526 19.1 21,378 19.6 14,504 20.0
General and administrative ex-
pense.......................... 11,425 8.2 10,158 9.3 7,194 10.0
Depreciation and amortization
expense........................ 8,878 6.4 6,213 5.7 3,980 5.5
-------- ----- -------- ----- ------- -----
Total operating costs......... 114,053 82.0 88,435 81.0 66,964 92.5
-------- ----- -------- ----- ------- -----
Income from operations.......... 25,072 18.0 20,802 19.0 5,469 7.5
Other income ................. 1,865 1.3 408 0.4 137 0.2
Interest expense.............. 230 0.1 1,779 1.6 1,260 1.7
-------- ----- -------- ----- ------- -----
Income before income tax provi-
sion........................... 26,707 19.2 19,431 17.8 4,346 6.0
Income tax provision............ 11,164 8.0 3,462 3.2 1,036 1.4
-------- ----- -------- ----- ------- -----
Net income...................... $ 15,543 11.2% $ 15,969 14.6% $ 3,310 4.6%
======== ===== ======== ===== ======= =====
Pro forma state and federal in-
come taxes..................... $ 7,384 6.8% $ 1,543 2.1%
Pro forma net income (1)........ $ 12,047 11.0% $ 2,803 3.9%
======== ===== ======= =====
EBITDA (2)...................... $ 34,571 24.8% $ 27,027 24.7% $ 9,450 13.0%
======== ===== ======== ===== ======= =====
</TABLE>
- --------
(1) The unaudited pro forma financial data for the year ended December 31,
1996 and 1995 give effect to the Reorganization. See "Business--
Reorganization."
(2) EBITDA is earnings before interest 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.
12
<PAGE>
Year ended December 31, 1997 compared to year ended December 31, 1996
Revenues. Revenues increased by $29.9 million, or approximately 27.4%, to
$139.1 million in 1997 from $109.2 million in 1996. This increase was
primarily due to revenues generated by increased sales of commercial airtime
inventory. Acquisitions accounted for $5.7 million of this increase. Excluding
these revenues, same market revenues increased $24.2 million in 1997, or
22.2%. Revenues from reciprocal arrangements as a percentage of total revenues
declined to 4.0% in 1997 from 8.0% in 1996.
Broadcasting Costs. Broadcasting costs increased by $16.5 million, or
approximately 32.6%, to $67.2 million in 1997 from $50.7 million in 1996. The
Company's continued development of its Expanded Radio Services and MetroTV
Services accounted for approximately $11.0 million of the increase.
Additionally, operating costs associated with acquisitions accounted for
approximately $3.6 million of the increase. Excluding the increases discussed
above, the Company's broadcasting costs would have increased by approximately
$1.9 million, or 3.7%, to $52.6 million in 1997 from $50.7 million in 1996.
Broadcasting costs as a percentage of revenues increased from 46.4% in 1996 to
48.3% in 1997. Broadcasting costs associated with reciprocal arrangements
decreased by $1.1 million from $3.0 million in 1996 to $1.9 million in 1997.
Marketing Expense. Marketing expense increased by $5.1 million, or
approximately 24.1%, from $21.4 million in 1996 to $26.5 million in 1997. This
increase resulted primarily from increased sales commissions associated with
the increased revenues generated in 1997. Acquisitions accounted for $1.2
million of the increase. As a percentage of revenues, marketing expense was
19.6% in 1996 and 19.1% in 1997. Marketing expense associated with reciprocal
arrangements decreased by $0.7 million to $0.9 million in 1997, from $1.6
million in 1996.
General and Administrative Expense. General and administrative expenses
increased by $1.3 million, or approximately 12.5%, to $11.4 million in 1997
from $10.2 million in 1996. This increase was primarily attributable to
increased salaries and related overhead associated with the Company's
continued growth. As a percentage of revenues, general and administrative
expense decreased to 8.2% in 1997 from 9.3% in 1996. General and
administrative expense associated with reciprocal arrangements increased by
$0.1 million to $0.8 million in 1997, from $0.7 million in 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased to $8.9 million in 1997 from $6.2 million in 1996. This increase
resulted primarily from the increases in the Company's asset base resulting
from 1997 Acquisitions and the Company's increased purchases of equipment
pursuant to the development of its MetroTV Network and Expanded Radio Services
Network during 1997.
Effective October 1, 1997, the Company changed its depreciable asset lives
for certain assets based upon industry practice and actual experience. This
change reduced depreciation and amortization expense for the year ended
December 31, 1997 and will result in lower ongoing depreciation and
amortization expense. See Note 1 to the Consolidated Financial Statements.
Other Income. Other income increased to $1.9 million in 1997 from $0.4
million in 1996. This increase resulted primarily from increased interest
income on the net proceeds from the Company's initial public offering during
the fourth quarter of 1996.
Interest Expense. Interest expense decreased to $0.2 million in 1997 from
$1.8 million in 1996. This decrease resulted primarily from paying off the
balance on the Company's line of credit in October 1996.
Net Income. As a result of the factors discussed above, net income increased
by $3.5 million to $15.5 million in 1997, from $12.0 million in 1996 (adjusted
on a pro forma basis to reflect C corporation tax status).
EBITDA. EBITDA increased by $7.5 million, or approximately 27.9%, to $34.6
million in 1997 from approximately $27.0 million in 1996. EBITDA as a
percentage of revenues increased to 24.8% in 1997 from 24.7% in 1996.
13
<PAGE>
Year ended December 31, 1996 compared to year ended December 31, 1995
Revenues. Revenues increased by $36.8 million, or approximately 50.8%, to
$109.2 million in 1996 from $72.4 million in 1995. This increase was primarily
due to revenues generated by increased sales of commercial airtime inventory
on the Radio Traffic Services Network. Acquisitions accounted for $9.5 million
of this increase. Excluding these revenues, same market revenues increased
$27.3 million in 1996, or 41.8%. Revenues from reciprocal arrangements as a
percentage of total revenues declined to 8.0% in 1996 from 11.6% in 1995.
Broadcasting Costs. Broadcasting costs increased by $9.4 million, or
approximately 22.8%, to $50.7 million in 1996 from $41.3 million in 1995. This
increase was partially attributable to operating costs associated with
acquisitions, which accounted for approximately $2.4 million of the increase.
Additionally, the Company's continued development of its Expanded Radio
Services and MetroTV Services, and commencement of start-up operations in five
markets accounted for approximately $2.8 million of the increase. The Company
also incurred approximately $1.0 million of additional broadcasting costs
associated with the development of its Metro Information Services division.
Excluding the increases discussed above, the Company's broadcasting costs
would have increased by approximately $3.2 million, or 7.7%, to $44.5 million
in 1996 from $41.3 million in 1995. Broadcasting costs as a percentage of
revenues decreased from 57.0% in 1995 to 46.4% in 1996. Broadcasting costs
associated with reciprocal arrangements decreased by $2.0 million from $5.0
million in 1995, to $3.0 million in 1996.
Marketing Expense. Marketing expense increased by $6.9 million, or
approximately 47.4%, from $14.5 million in 1995 to $21.4 million in 1996. This
increase resulted primarily from increased sales commissions associated with
the increased revenues generated in 1996. Acquisitions accounted for $1.3
million of the increase. As a percentage of revenues, marketing expense was
20.0% in 1995 and 19.6% in 1996. Marketing expense associated with reciprocal
arrangements decreased by $1.0 million to $1.6 million in 1996, from $2.6
million in 1995.
General and Administrative Expense. General and administrative expenses
increased by $3.0 million, or approximately 41.2%, to $10.2 million in 1996
from $7.2 million in 1995. This increase was primarily attributable to
increased salaries and related overhead associated with the Company's
continued growth. General and administrative expense associated with
reciprocal arrangements decreased by $0.2 million to $0.7 million in 1996,
from $0.9 million in 1995.
Depreciation and Amortization. Depreciation and amortization expense
increased to $6.2 million in 1996 from $4.0 million in 1995. This increase
resulted primarily from the increases in the Company's asset base resulting
from the 1996 Acquisitions and the Company's increased purchases of video and
broadcast equipment pursuant to the development of its MetroTV Network during
1996.
Other Income. Other income increased to $0.4 million in 1996 from $0.1
million in 1995. This increase resulted primarily from increased interest
income on the net proceeds from the Company's initial public offering during
the fourth quarter of 1996.
Interest Expense. Interest expense increased to $1.8 million in 1996 from
$1.3 million in 1995. This increase resulted primarily from increases in
indebtedness incurred in connection with the 1996 Acquisitions.
Net Income. As a result of the factors discussed above, net income increased
by $12.7 million to $16.0 million in 1996, from $3.3 million in 1995.
EBITDA. EBITDA increased by $17.6 million, or approximately 186.9%, to $27.0
million in 1996 from approximately $9.4 million in 1995. EBITDA as a
percentage of revenues increased to 24.7% in 1996 from 13.0% in 1995.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations with cash generated by
operations and funds provided pursuant to the Credit Agreement (as defined
herein). The Company has used cash provided by operating activities to fund
capital expenditures, operations and distributions to its stockholders.
On October 22, 1996, the Company closed the initial public offering of its
common stock and received approximately $68 million in cash, net of
underwriting discounts and commission, and other expenses. The Company used
approximately $30 million of the proceeds to repay existing indebtedness under
the Credit Agreement among NationsBank of Texas, N.A., Metro Traffic Control,
Inc. and Metro Networks, Ltd., dated October 21, 1994, as amended, and the
balance of the proceeds, including those from the underwriters' exercise of
the over allotment option, has been used for working capital and general
corporate purposes.
Net cash provided by operating activities decreased by approximately $3.2
million, to $10.7 million in 1997 from $13.9 million in 1996, primarily as a
result of changes in operating assets and liabilities, which was partially
offset by an increase in depreciation and amortization. In addition, the
Company's net earnings for 1997 reflect an increase in income taxes from 1996
of approximately $7.7 million due to the change in taxpayer status from S
corporation to C corporation. Net cash used in investing activities increased
by $10.4 million to $23.6 million in 1997, from $13.2 million in 1996 due to
an increase in capital expenditures. Cash used and provided by financing
activities decreased by $42.8 million to $(3.3) million in 1997, from $39.5
million in 1996, as a result of the Company's initial public offering in 1996
which was partially offset by a reduction in long-term debt in 1996.
Net cash provided by operating activities increased by approximately $11.8
million, to $13.9 million in 1996 from $2.1 million in 1995, primarily as a
result of increases in net earnings and depreciation and amortization offset
by changes in operating assets and liabilities. Net cash used in investing
activities increased by $1.3 million to $13.2 million in 1996, from $11.9
million in 1995, due to an increase in capital expenditures which was
partially offset by a decrease in acquisition costs. Net cash provided by
financing activities increased by $30.6 million to $39.5 million in 1996, from
$8.9 million in 1995, as a result of proceeds from the Company's initial
public offering which was partially offset by a reduction in long-term debt.
The Credit Agreement and Notes Payable
In October 1996, the Company entered into a new line of credit with
NationsBank of Texas, N.A. ("NationsBank"). The maximum aggregate permitted
borrowings (the "New Line of Credit") under the Credit Agreement among
NationsBank, certain lenders and the Company, dated October 22, 1996 (the
"Credit Agreement") is $30.0 million. The New 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 0 to 50 basis points
over the prime rate or 75 to 150 basis points over LIBOR. The New Line of
Credit has a commitment fee of up to 0.25% per annum on the daily average
unborrowed balance of the New Line of Credit. The New Line of Credit expires
December 31, 2003, and will begin amortizing in March 1999. 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 or altering its existing capital structure
and paying certain dividends. As of December 31, 1997, the Company had no debt
outstanding under the New Line of Credit.
The Company issued non-interest-bearing notes in connection with the
acquisitions in 1997 of the assets of TWI Networks, Inc. and Washington News
Network, Inc. and the 1994 acquisition of Charlotte Traffic Patrol, Inc. which
had principal amounts of $0.2 million, $0.2 million and $0.4 million,
respectively, outstanding as of December 31, 1997. The Company has guaranteed
a $0.4 million letter of credit related to the Charlotte acquisition as of
December 31, 1997. See "Business--Acquisitions".
15
<PAGE>
Capital Expenditures
Capital expenditures were $16.6 million in 1997 and $6.8 million in 1996.
Historically, the Company's capital expenditures have related principally to
increasing the Company's information-gathering capabilities, broadcasting
capacity and technology base. The increase in capital expenditures is
primarily due to the Company's continued development of its MetroTV Network
and Expanded Radio Services Network during 1997.
The Company believes its existing sources of liquidity, cash on hand, cash
provided by operations and the Credit Agreement will satisfy the Company's
anticipated working capital and capital expenditure requirements for the
foreseeable future.
YEAR 2000
Many computer software systems, as well as certain hardware and equipment
containing date sensitive data, were structured to utilize a two-digit date
field meaning that they may not be able to properly recognize dates in the
Year 2000. This could result in significant system and equipment failures.
While the Year 2000 considerations are not expected to materially impact the
Company's internal operations, they may have an effect on some of our
customers and suppliers, and thus indirectly affect the Company. It is not
possible to quantify the aggregate cost to the Company with respect to
customers and suppliers with Year 2000 problems. The Company is currently in
the planning stages of developing new data processing systems throughout the
organization for management, operational and financial information. These
systems will be free of any Year 2000 limitations.
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.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 129, DISCLOSURE OF
INFORMATION ABOUT CAPITAL STRUCTURE ("SFAS 129"). SFAS 129 establishes
standards for disclosing information about a company's outstanding debt and
equity securities and eliminates exemptions from such reporting requirements
for nonpublic companies. SFAS 129 is effective for periods ending after
December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income in a company's
financial statements. Comprehensive income includes all changes in a company's
equity accounts (including net income or loss) except investments by, or
distributions to, the company's owners. Items which are components of
comprehensive income (other than net income or loss) include foreign currency
translation adjustments, minimum pension liability adjustments and unrealized
gains and losses on certain investments in debt and equity securities. The
components of comprehensive income must be reported in a financial statement
that is displayed with the same prominence as other financial statements. SFAS
130 is effective for fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
("SFAS 131"). SFAS 131 establishes standards for the way that public companies
report, in their annual financial statements, certain information about their
operating segments, their products and services, the geographic areas in which
they operate and their major customers. SFAS 131 also requires that certain
information about operating segments be reported in interim financial
statements. SFAS 131 is effective for periods beginning after December 15,
1997.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................... 18
Consolidated Balance Sheets................................................ 19
Consolidated Statements of Operations...................................... 20
Consolidated Statements of Stockholders' Equity/Partners' Capital.......... 21
Consolidated Statements of Cash Flows...................................... 22
Notes to Consolidated Financial Statements................................. 24
</TABLE>
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Metro Networks, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Metro
Networks, Inc. and Subsidiaries, and its Predecessors as of December 31, 1997
and 1996, and the related consolidated statements of operations, stockholders'
equity/partners' capital and cash flows for each of the years in the three-
year period ended December 31, 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Metro Networks, Inc. and Subsidiaries and its Predecessors as of
December 31, 1997 and 1996, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1997,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 9, 1998
18
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
ASSETS 1997 1996
------ -------- --------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................... $ 25,087 $ 41,386
Short-term marketable investments....................... 777 --
Accounts receivable, net................................ 34,113 23,318
Reciprocal
Receivables, net...................................... 11,113 11,398
Prepaid expenses...................................... -- 440
Merchandise and scrip inventory......................... 686 567
Other................................................... 703 842
-------- --------
Total current assets................................ 72,479 77,951
-------- --------
PROPERTY AND EQUIPMENT:
Operating equipment..................................... 30,638 14,857
Transportation equipment................................ 842 707
Leasehold improvements.................................. 2,747 1,170
-------- --------
34,227 16,734
Less: accumulated depreciation and amortization......... 9,838 5,993
-------- --------
24,389 10,741
-------- --------
PURCHASED BROADCAST CONTRACTS AND OTHER INTANGIBLES,
net.................................................... 17,545 14,074
OTHER ASSETS:
Deferred tax assets..................................... 146 170
Other................................................... 514 821
-------- --------
660 991
-------- --------
$115,073 $103,757
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable........................................ $ 3,030 $ 3,076
Notes payable........................................... 568 3,618
Reciprocal payables and accrued liabilities............. 10,281 12,069
Accrued liabilities..................................... 10,074 9,575
Current portion of long-term debt....................... 420 319
-------- --------
Total current liabilities........................... 24,373 28,657
LONG-TERM DEBT.......................................... 490 474
DEFERRED INCOME TAXES................................... 670 --
OTHER................................................... 1,247 2,696
-------- --------
Total liabilities................................... 26,780 31,827
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value (authorized 10,000,000
shares)................................................ 3 3
Common stock, $.001 par value (authorized 25,000,000
shares)................................................ 16 16
Additional paid-in capital.............................. 73,708 72,888
Retained earnings (deficit)............................. 14,566 (977)
-------- --------
88,293 71,930
-------- --------
$115,073 $103,757
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
ADVERTISING REVENUES.............................. $139,125 $109,237 $72,433
OPERATING COSTS AND EXPENSES
Broadcasting...................................... 67,224 50,686 41,286
Marketing......................................... 26,526 21,378 14,504
General and administrative........................ 11,425 10,158 7,194
Depreciation and amortization..................... 8,878 6,213 3,980
-------- -------- -------
114,053 88,435 66,964
-------- -------- -------
TOTAL OPERATING EARNINGS.......................... 25,072 20,802 5,469
-------- -------- -------
OTHER (INCOME) EXPENSE
Interest income................................... (1,245) (397) (165)
Interest expense.................................. 230 1,779 1,260
Other............................................. (620) (11) 28
-------- -------- -------
(1,635) 1,371 1,123
-------- -------- -------
EARNINGS BEFORE STATE AND FEDERAL INCOME TAXES.... 26,707 19,431 4,346
STATE AND FEDERAL INCOME TAXES ................... 11,164 3,462 1,036
-------- -------- -------
NET EARNINGS ..................................... $ 15,543 $ 15,969 $ 3,310
======== ======== =======
BASIC EARNINGS PER SHARE ......................... $ 0.94 $ -- $ --
======== ======== =======
DILUTED EARNINGS PER SHARE ....................... $ 0.93 $ -- $ --
======== ======== =======
BASIC AVERAGE COMMON SHARES OUTSTANDING .......... 16,555 -- --
======== ======== =======
DILUTED AVERAGE COMMON SHARES OUTSTANDING......... 16,714 -- --
======== ======== =======
PRO FORMA DATA (UNAUDITED):
Earnings before state and federal income taxes as
reported......................................... $ 19,431 $ 4,346
Pro forma state and federal income taxes.......... (7,384) (1,543)
-------- -------
Pro forma net earnings............................ $ 12,047 $ 2,803
======== =======
Pro forma basic earnings per share................ $ 0.94 $ 0.24
-------- -------
Pro forma diluted earnings per share.............. $ 0.94 $ 0.23
======== =======
Weighted average shares outstanding............... 12,884 11,900
Plus shares attributable to excess distributions.. -- 352
-------- -------
Pro forma weighted average shares outstanding..... 12,884 12,252
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
OUTSTANDING
-----------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED
---------------- ------------------ PAID-IN PARTNERS' EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL CAPITAL (DEFICIT) TOTAL
--------- ------ ---------- ------ ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994................... -- $ -- 3,198 $ 3 $ 1,024 $1,235 $ 7,139 $ 9,401
Distribution............ -- -- -- -- -- -- (11,232) (11,232)
Capital contributed..... -- -- -- -- 3,000 -- -- 3,000
Net income (loss)....... -- -- -- -- -- (584) 3,894 3,310
--------- ---- ---------- --- ------- ------ -------- --------
BALANCE AT DECEMBER 31,
1995................... -- -- 3,198 3 4,024 651 (199) 4,479
Distribution............ -- -- (3,198) -- -- -- (16,983) (16,983)
Capital contributed..... -- -- -- -- 700 -- -- 700
Stock issuance, net of
offering costs......... -- -- 4,650,000 5 67,758 -- -- 67,763
Issuance of stock loan.. -- -- 2,550,000 2 -- -- -- 2
Reorganization.......... 2,549,750 3 6,335,000 6 406 (415) -- --
Net income.............. -- -- -- -- -- (236) 16,205 15,969
--------- ---- ---------- --- ------- ------ -------- --------
BALANCE AT DECEMBER 31,
1996................... 2,549,750 3 16,550,000 16 72,888 -- (977) 71,930
Issuance of stock under
stock option plan...... -- -- 26,097 -- 570 -- -- 570
Issuance of stock under
stock purchase plan.... -- -- 10,961 -- 250 -- -- 250
Net income.............. -- -- -- -- -- -- 15,543 15,543
--------- ---- ---------- --- ------- ------ -------- --------
BALANCE AT DECEMBER 31,
1997................... 2,549,750 $ 3 16,587,058 $16 $73,708 $ -- $ 14,566 $ 88,293
========= ==== ========== === ======= ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings.................................... $ 15,543 $ 15,969 $ 3,310
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization................. 8,878 6,213 3,980
Deferred federal income taxes................. 633 (109) --
Loss (gain) on dispositions of assets......... 73 (11) 28
Amortization of discount on notes payable..... -- 76 28
Decrease (increase) in, net of acquisition of
business
Accounts receivable, net...................... (9,356) (10,045) (3,053)
Prepaid expenses and other current assets..... 138 (484) (124)
Other assets.................................. 157 (196) (286)
(Decrease) increase in, net of acquisition of
businesses
Accounts payable.............................. (494) 1,160 (522)
Accrued liabilities........................... 559 5,780 247
Other liabilities............................. (1,605) 425 (77)
Net reciprocal arrangements..................... (3,874) (4,916) (1,425)
-------- -------- --------
Cash provided by operating activities......... 10,652 13,862 2,106
-------- -------- --------
INVESTING ACTIVITIES:
Capital additions............................... (16,642) (6,840) (2,043)
Related party
Advances to................................... -- (1,749) (786)
Payments from................................. -- 316 --
Proceeds from sale of marketable securities..... 414 -- --
Purchase of marketable securities............... (1,062) -- --
Proceeds from sale of property and equipment.... 83 17 225
Acquisitions of companies....................... (6,410) (4,944) (9,219)
Advances on receivables from stockholders....... -- -- (84)
-------- -------- --------
Cash used for investing activities............ (23,617) (13,200) (11,907)
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Proceeds from issuance of debt..................... 1,244 9,411 16,890
Debt repayments
Long-term debt................................... (2,453) (30,801) (2,058)
Related party debt............................... (2,945) -- --
Issuance of common stock........................... 820 67,765 --
Cash distributions................................. -- (7,601) (8,631)
Capital contributions.............................. -- 700 3,000
Financing costs.................................... -- -- (315)
------- -------- -------
Cash (used for) provided by financing activities. (3,334) 39,474 8,886
------- -------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... (16,299) 40,136 (915)
CASH AND CASH EQUIVALENTS
Beginning of period................................ 41,386 1,250 2,165
------- -------- -------
End of period...................................... $25,087 $ 41,386 $ 1,250
======= ======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest........... $ 228 $ 1,833 $ 1,246
Cash paid during the period for State and Federal
income taxes...................................... 11,419 2,856 923
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIV-
ITIES:
Property and equipment acquired through reciprocal
activities........................................ $ 1,585 $ 490 $ 703
Reciprocal activities related to business acquisi-
tions............................................. 41 -- 1,500
Decrease in shareholder note payable............... 155 -- --
Stockholder distributions by:
Reduction in stockholder note receivable....... -- 4,819 1,791
Increase in shareholder note payable........... -- 3,100 --
Transfer of property........................... -- 1,462 967
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
From 1978 until the closing of the Company's initial public offering (the
"Public Offering") in October 1996, the business of Metro Networks, Inc. and
subsidiaries ("the Company") was operated through Metro Traffic Control, Inc.
("MTC"), a Maryland corporation; Metro Reciprocal, Inc. ("MRI"), a Texas
corporation; Metro Networks, Ltd. ("MNW"), a Texas limited partnership; Metro
Video News, Inc. ("MVN"), a Texas corporation; and their subsidiaries
(collectively, the "Predecessor Companies"). Until the closing of the Public
Offering, all of the equity interests in the Predecessor Companies were owned
by the Chairman and Chief Executive Officer of the Company, and certain trusts
(the "Trusts") created for the benefit of this individual's children.
Immediately prior to the closing of the Public Offering, the controlling
shareholder established Metro Networks, Inc. as a holding company and
consolidated the issued and outstanding equity interests in the Predecessor
Companies into MTC 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"). In November 1997,
MTC changed its name to Metro Networks Communications, Inc. Subsequent to the
Reorganization, Metro Networks Communications, Inc. is a wholly-owned
subsidiary of the Company.
As the equity interests were held under common control and were contributed
by the resulting shareholder of the Company, the underlying assets are
recorded at their historical costs, similar to pooling of interest accounting.
References to Metro Networks, Inc. in the accompanying financial statements
include the predecessor entities prior to the Reorganization.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly and majority owned subsidiaries and, prior to the
Reorganization, the combined financial statements of the Predecessor
Companies. All intercompany accounts and transactions have been eliminated in
consolidation/combination.
Business
The Company provides traffic reporting services, local news, sports,
weather, video news 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 Company's
information reports are broadcast by radio and television broadcast affiliates
throughout the United States.
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 and the
related accounts receivable is recognized at the time commercials are
broadcast. 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.
24
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
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, 1997, 1996 and 1995
was $3,968,000, $1,770,000 and $1,250,000, respectively.
Effective October 1, 1997, the Company revised its estimate of the useful
lives of certain intangible assets (purchased contracts) and camera equipment.
Previously, such assets were depreciated over five and three years,
respectively. Those lives are now extended to seven and five years,
respectively. These changes were made to better reflect the estimated periods
during which such assets will remain in service based on actual experience and
industry practice. The change, which was accounted for prospectively from
October 1, 1997, had the effect of reducing depreciation and amortization
expense and increasing net income by approximately $342,700 ($.02 per diluted
share) for the year ended December 31, 1997.
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 seven years.
Federal and State Income Tax
The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rate and laws that will be
in effect when the differences are expected to reverse.
Prior to the Reorganization, MNW owned corporations which were 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. Subsequent to the Reorganization, all of
the operations are included in the consolidated tax return of the Company.
25
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Prior to the Reorganization, MRI, MVN and MTC elected to be taxed under S
corporation provisions of the Internal Revenue Code. Under these provisions,
MRI, MVN and MTC were not liable for federal income taxes. Instead, the
stockholders were liable for individual federal income taxes on their taxable
income. Also, prior to the Reorganization, MNW was a partnership for federal
income tax purposes and accordingly, the partners were liable for federal
income taxes on their respective income.
Stock-Based Compensation
On January 1, 1996, the Company adopted Financial Accounting Standards
(SFAS) No. 123 ("Accounting for Stock-Based Compensation"), which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of Accounting Principles Board
(APB) Opinion No. 25 and provide pro forma net income and pro forma earnings
per share disclosures for employee stock option grants made in 1995 and future
years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS
No. 123.
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 and are
included in reciprocal payables and accrued liabilities in the accompanying
consolidated balance sheets. Reciprocal and airtime obligations approximated
$2,620,000 and $2,711,000 at December 31, 1997 and 1996, respectively.
Earnings Per Share
The Company has adopted the provisions of SFAS No. 128 ("Earnings Per
Share"), which replaces the presentation of primary earnings per share and
fully diluted earnings per share with a presentation of basic earnings per
share ("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS
excludes dilution and is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could
occur if securities and other contracts to issue common stock were exercised
or converted into common stock.
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 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.
For purposes of computing earnings per share, the common shares outstanding
as a result of the Stock Loan and Pledge Agreement (see Note 14) are
considered outstanding, however the shares related to the convertible
preferred stock are not considered to be Common Stock equivalents. This is due
to the fact that under the terms and provisions of the Stock Loan and Pledge
Agreement, the preferred shares outstanding cannot be converted into Common
Stock while the stock loan is outstanding.
Pro Forma Financial Data (unaudited)
Pro forma income taxes are set forth herein because certain of the
Predecessor Companies operated as subchapter S corporations or partnerships
for federal income tax purposes. Pro forma income taxes reflect federal income
taxes that would have been incurred had all the Predecessor Companies been
subject to such taxes. Such amounts have been deducted from net earnings for
pro forma purposes in the accompanying statements of operations pursuant to
the rules and regulations of the Securities and Exchange Commission.
26
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
The preparation of the 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.
Fair Value of Financial Instruments
Fair value estimates are made at discrete points in time based on relevant
market information. These estimates may be subjective in nature and involve
uncertainties and matters of significant judgement and therefore, cannot be
determined with precision.
The Company believes that the carrying amounts of its current assets and
current liabilities approximate the fair value of such items due to their
short-term nature. The carrying amount of long-term debt approximates its fair
values because the interest rates approximate market.
Accounting Pronouncements
The Company adopted SFAS No. 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 this standard did not materially affect
the Company's consolidated results of operations or financial position.
Reclassifications
Certain reclassifications have been made to prior year amounts in order to
conform to the 1997 presentation.
NOTE 2--INITIAL PUBLIC OFFERING
In October 1996, the Company completed the Public Offering. Of the 7,200,000
shares of common stock offered, 3,600,000 shares were sold by the selling
shareholder. In addition, the Company's underwriters exercised the
underwriters' over-allotment option which resulted in the Company selling an
additional 1,050,000 shares. The Company received approximately $68 million in
cash, net of underwriting discounts and commissions, and other expenses.
NOTE 3--ACQUISITIONS
During 1997, 1996 and 1995, the Company made the following acquisitions,
each of which has been accounted for using the purchase method of accounting.
On September 19, 1997, the Company acquired substantially all of the
tangible and intangible assets and assumed certain liabilities of Freecom,
Inc. ("FRE"), a Pennsylvania corporation. FRE provides traffic reporting
services to a network of broadcast affiliates serving the Harrisburg, Wilkes-
Barre/Scranton, and Allentown, Pennsylvania areas, Albany, New York and
Salisbury/Ocean City, Maryland and Delaware areas. The purchase price of
approximately $2,250,000 was allocated to the net assets acquired based upon
their estimated fair market value. The excess purchase price of $1,940,000 was
allocated to purchased broadcast contracts and non-compete agreements and is
being amortized over a seven-year period.
27
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On August 1, 1997, the Company acquired substantially all of the tangible
and intangible assets and assumed certain liabilities of Valley Watch
Broadcasting ("VWB"). VWB provides traffic reporting services to a network of
broadcast affiliates serving the Fresno, California area. The purchase price
consists of $10,000 cash and two additional contingent payments based upon
future operating cash flow.
On June 27, 1997, the Company acquired 80% of the common stock of Washington
News Network, Inc. ("WNN"), a Washington, D.C. corporation. WNN provides video
news feeds via satellite to approximately 85 broadcast affiliates across the
country. The purchase price of $400,000 consisted of cash consideration of
$100,000 and installment notes payable of $300,000. Beginning on March 31,
1998, the Company has the option to purchase the remaining 20% of the Company.
The option may be exercised at any time from March 31, 1998 through March 31,
2000.
On January 3, 1997, the Company acquired substantially all of the tangible
and intangible assets and assumed certain liabilities of TWI Networks, Inc.
("TWI"), an Ohio corporation. TWI provides traffic and news reporting services
to a network of broadcast affiliates serving the Cincinnati, Columbus and
Dayton, Ohio areas, the Memphis and Nashville, Tennessee areas and the Miami,
Florida area. The purchase price of approximately $3,700,000 consisted of cash
consideration of $2,700,000 and installment notes payable of $1,000,000. The
purchase price was allocated to the net assets acquired based upon their
estimated fair market values. The excess purchase price of approximately
$3,250,000 was allocated to purchased broadcast contracts, non-compete
agreements and goodwill and is being amortized over a seven-year period.
On January 2, 1997, the Company acquired substantially all of the tangible
and intangible assets of Airborne Traffic Network, Inc. ("Airborne"), a Kansas
corporation. Airborne provides traffic reporting services to a network of
broadcast affiliates serving the Kansas City, Kansas and Omaha, Nebraska
areas. As consideration for the asset purchase, the Company paid $1,350,000 at
closing and agreed to pay an additional contingent consideration in a final
payment based upon net revenue or operating cash flow of Airborne for the
twelve month period following the closing date. The final payment, based upon
net revenue or operating cash flow as defined in the Asset Purchase Agreement,
was determined to be $150,000. The excess purchase price of approximately
$1,470,000 was allocated to the value of purchased broadcast contracts, non-
compete agreements and goodwill and is being amortized over a seven-year
period.
On October 31, 1996, the Company acquired substantially all of the tangible
and intangible assets of Wisconsin Information Systems, Inc. ("Wisconsin"), an
Ohio corporation. Wisconsin provides traffic reporting services to a network
of broadcast affiliates serving the Milwaukee, Wisconsin, Oklahoma City,
Oklahoma, Albuquerque, New Mexico and Omaha, Nebraska areas. The cash purchase
price of approximately $650,000 was allocated to the net assets acquired based
upon their estimated fair market values. The excess purchase price of
approximately $600,000 was allocated to the value of purchased broadcast
contracts, non-compete agreements and goodwill and is being amortized over a
seven-year period.
On January 4, 1996, the Company acquired 100% of 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"). The Traffic
Net Group provides traffic and weather reporting services to a network of
broadcast affiliates serving the Hartford, Connecticut area, the Providence,
Rhode Island area, the Boston, Massachusetts area and areas throughout New
England. The Company paid cash consideration of approximately $2,900,000, 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, all of which has been subsequently collected. The
excess purchase price of approximately $3,197,000 was allocated to the value
of purchased broadcast contracts, non-compete agreements and goodwill and is
being amortized over a seven-year period.
28
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On January 3, 1996, the Company acquired substantially all of the tangible
and intangible business assets and assumed certain liabilities of Aeromedia,
Inc. ("Aeromedia"), a Utah corporation. Aeromedia provides traffic reporting
services to a network of broadcast affiliates serving the Salt Lake City, Utah
area. As consideration for the asset purchase, the Company paid $200,000 at
closing, plus additional contingent consideration of $250,000 based upon net
sales as defined in the Asset Purchase Agreement. The excess purchase price of
approximately $405,000 was allocated to the value of purchased broadcast
contracts, non-compete agreements and goodwill and is being amortized over a
seven-year period.
On March 24, 1995, the Company acquired 100% of the stock of TrafficScan,
Incorporated ("TSI"), a Georgia corporation. TSI provides traffic reporting
services to a network of broadcast affiliates serving the Atlanta, Georgia
area. The consideration for the stock of TSI included cash of approximately
$4,000,000 and trade credits of approximately $1,500,000. Approximately
$5,100,000 of the purchase price was allocated to the value of purchased
broadcast contracts, non-compete agreements and goodwill and is being
amortized over a seven-year period.
On March 9, 1995, the Company acquired all of the outstanding shares of
Skyview Broadcasting Networks, Inc. ("SBN"), an Arizona corporation. SBN
provides traffic reporting services to a network of broadcast affiliates
serving the Phoenix and Tucson, Arizona areas. The consideration for the stock
of SBN included cash of $2,280,000 and non-interest bearing notes payable of
approximately $463,000. The purchase price was allocated to the net assets
acquired 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 $2,500,000 and was allocated to the value of purchased broadcast
contracts, non-compete agreements and goodwill and is being amortized over a
seven-year period.
On March 9, 1995, the Company acquired 100% of the shares of Airborne
Broadcast Consultants ("Airborne"), a Nevada corporation. Airborne provides
traffic reporting services to a network of broadcast affiliates serving the
Las Vegas, Nevada area. The Company acquired the stock for cash consideration
of $1,140,000 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 $1,300,000 was allocated to the value of purchased broadcast
contracts, non-compete agreements and goodwill and is being amortized over a
seven-year period.
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 provides
traffic reporting services to a network of broadcast affiliates serving the
Nashville and Memphis, Tennessee areas and the Louisville, Kentucky area. The
purchase price of approximately $2,100,000 consisted of cash consideration of
$1,780,000 and noninterest bearing notes payable of approximately $358,000.
The purchase price was allocated to the net assets acquired based upon their
estimated fair market values. The excess purchase price of approximately
$2,100,000 was allocated to the value of purchased broadcast contracts, non-
compete agreements and goodwill and is being amortized over a seven-year
period.
Subsequent to December 31, 1997, the Company made the following acquisition,
which will be accounted for using the purchase method of accounting.
On March 2, 1998, the Company acquired all the outstanding common stock of
Traffic Patrol Broadcasting, Inc. ("TPB"), a Texas corporation. TPB provides
traffic reporting services to a network of broadcast affiliates serving the
Dallas/Ft. Worth, Texas area. The consideration for the stock included cash of
approximately $1,000,000 and a contingent payment based on future operating
cash flow.
29
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of the 1997, 1996 and 1995 acquisitions:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Assets acquired:
Accounts receivable............................... $ 454 $ 554 $ 995
Fixed assets...................................... 740 123 514
Other assets...................................... 21 74 17
Purchased broadcast contracts and other
intangibles...................................... 7,180 5,427 13,187
------ ------ ------
8,395 6,178 14,713
Liabilities assumed:
Notes payable..................................... 77 -- 730
Other liabilities................................. 178 1,804 3,753
------ ------ ------
255 1,804 4,483
Less: Notes payable issued.......................... 1,730 -- 1,053
------ ------ ------
Cash paid........................................... $6,410 $4,374 $9,177
====== ====== ======
</TABLE>
The following unaudited pro forma information represents the combined
results of operations of the Company as if the 1997 acquisitions had been
combined with the Company as of January 1, 1996 and the 1996 acquisitions had
been combined with the Company as of January 1, 1995 (in thousands, except
earnings per share).
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996 1995
-------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
Advertising revenues (thousands)............... $140,690 $115,977 $74,846
Net earnings (thousands)....................... 15,653 12,413 2,854
Diluted earnings per share..................... $ 0.94 $ 0.96 $ 0.23
</TABLE>
The pro forma information is not necessarily indicative of operating results
that would have occurred if each acquisition had been consummated as of the
respective dates, nor is it necessarily indicative of future operating
results. The actual results of operations of an acquired company are included
in the Company's consolidated financial statements only from the date of
acquisition.
NOTE 4--ALLOWANCE FOR DOUBTFUL ACCOUNTS
The activity in the allowance for doubtful accounts is as follows (in
thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO WRITE-OFFS BALANCE
BEGINNING COSTS NET OF AT END
OF PERIOD AND EXPENSES RECOVERIES OF PERIOD
---------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31,
1995...................... $494 $ 443 $ (627) $310
Year ended December 31,
1996...................... 310 802 (449) 663
Year ended December 31,
1997...................... 663 1,021 (1,149) 535
</TABLE>
30
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--ACCRUED LIABILITIES
The following are the components of accrued liabilities (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------- ------
<S> <C> <C>
Accrued payroll and related costs......................... $ 2,626 $2,273
Bonus accrual............................................. 1,779 1,349
Commission................................................ 2,416 1,815
Current income taxes payable.............................. 598 899
Other..................................................... 2,655 3,239
------- ------
$10,074 $9,575
======= ======
</TABLE>
NOTE 6--RECIPROCAL REVENUES AND EXPENSES
The following is a summary of reciprocal revenues and expenses (in
thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
DECEMBER 31,
--------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Reciprocal revenues.................................. $5,611 $8,731 $8,375
====== ====== ======
Reciprocal expenses.................................. 4,246 6,314 9,465
====== ====== ======
</TABLE>
NOTE 7--PURCHASED BROADCAST CONTRACTS AND OTHER INTANGIBLES
Purchased broadcast contracts and other intangibles is comprised of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
<S> <C> <C>
Non-compete agreements................................... $ 3,021 $ 2,924
Purchased broadcast contracts............................ 22,070 14,233
Goodwill, trademarks and licenses........................ 2,679 3,700
Investments in subsidiaries.............................. 50 --
Other.................................................... 1,079 --
------- -------
28,899 20,857
Less: accumulated amortization........................... 11,354 6,783
------- -------
$17,545 $14,074
======= =======
</TABLE>
31
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--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 the following in thousands:
<TABLE>
<CAPTION>
DECEMBER
31,
---------
1997 1996
---- ----
<S> <C> <C>
Various acquisition notes payable, discounted at 8%, due 1998
through 2000.................................................. $841 $687
Unsecured note payable to bank at prime (8. 50% at December 31,
1997), due 1998 through 2000.................................. 69 106
---- ----
910 793
Less: Current portion.......................................... 420 319
---- ----
$490 $474
==== ====
</TABLE>
The following is a schedule of future maturities of long-term debt as of
December 31, 1997:
<TABLE>
<S> <C>
1998................................................................. $420
1999................................................................. 412
2000................................................................. 78
2001................................................................. --
2002................................................................. --
----
$910
====
</TABLE>
On October 22, 1996, the Company paid off the notes payable related to the
$30,000,000 revolving agreement and replaced this facility with a reducing
revolving credit facility which provides for maximum aggregate permitted
borrowings of $30,000,000. The new line of credit expires December 31, 2003,
and will begin reducing in March 1999. The new line of credit bears interest
at a variable rate indexed to the lender's prime rate or LIBOR. The new line
of credit has a commitment fee based on the daily average unborrowed balance
and is 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 provides for
various restrictions on the Company which would restrict the Company, without
first obtaining the lender's consent, from taking certain actions, including
but not limited to incurring additional indebtedness, making certain
acquisitions or consolidating with any other entity, altering its existing
capital structure and paying certain dividends. No balances under the new line
of credit were outstanding at December 31, 1997 and 1996.
NOTE 9--INCOME TAXES
Income tax expense from continuing operations is comprised of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Current, federal................................... $ 8,437 $2,393 $ 722
Current, state..................................... 2,094 1,178 314
Deferred, federal.................................. 633 (109) --
------- ------ ------
$11,164 $3,462 $1,036
======= ====== ======
</TABLE>
32
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
DECEMBER 31,
------------------------
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Provision for income tax expense at U.S. statutory
rates............................................... $ 9,347 $ 6,801 $1,478
Increase (decrease) in tax provision resulting from:
Nontaxable S corporation and partnership (earnings)
losses............................................ -- (5,449) (667)
State income taxes, net of federal tax benefit..... 1,360 1,024 204
Amortization of goodwill........................... 929 1,100 --
Tax exempt income.................................. (352) -- --
Other.............................................. (120) (14) 21
------- ------- ------
$11,164 $ 3,462 $1,036
======= ======= ======
</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.
The components of the net deferred income tax assets and liabilities at
December 31, 1997 and 1996 consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -----
<S> <C> <C>
Deferred income tax assets:
Allowance for uncollectable accounts...................... $ 187 $ 232
Accrued liabilities....................................... 55 148
Fixed asset basis difference.............................. 62 197
Book over tax amortization on intangible assets........... 907 464
------- -----
Total deferred income tax assets.......................... 1,211 1,041
Deferred income tax liabilities:
Tax over book depreciation on property and equipment...... (1,214) (491)
Book over tax barter valuation............................ (96) (441)
Investment in stock....................................... (19) --
Research and development costs............................ (406) --
------- -----
Total deferred income tax liabilities..................... (1,735) (932)
Net deferred income tax asset (liability)................. (524) 109
Current deferred income tax asset (liability)............. 146 (61)
------- -----
Net long-term deferred income tax asset (liability)....... $ (670) $ 170
======= =====
</TABLE>
33
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--COMMITMENTS AND CONTINGENCIES
The Company leases certain of its office facilities and equipment over
periods ranging from one to ten years. Total facility expense for the years
ended December 31, 1997, 1996 and 1995 was $4,415,000, $3,384,000 and
$2,701,000, respectively. Future rentals for operating leases at December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998.............................................................. $ 3,171
1999.............................................................. 2,596
2000.............................................................. 2,440
2001.............................................................. 2,150
2002.............................................................. 1,819
Thereafter........................................................ 5,044
-------
$17,220
=======
</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, 1997
based on the fair market value of the leases are as follows (in thousands):
<TABLE>
<S> <C>
1998............................................................... $ 729
1999............................................................... 518
2000............................................................... 362
2001............................................................... 254
2002............................................................... 225
Thereafter......................................................... 83
------
$2,171
======
</TABLE>
The Company is subject to 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 11--DEFINED CONTRIBUTION PLAN AND EMPLOYEE STOCK PURCHASE 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 $314,000, $274,000 and $195,000 in 1997, 1996 and 1995,
respectively.
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"). As of December 31, 1997, a total of 10,961 shares have been
issued under the Purchase Plan. 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.
34
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--STOCK OPTIONS
The Company's Board of Directors adopted the 1996 Incentive Stock Option
Plan (the "1996 Plan") for the Company's officers and employees. The total
number of shares reserved for issuance under the 1996 Plan is 1,000,000, of
which approximately 932,903 were issued as of December 31, 1997. In October
1997, the Company's Board of Directors adopted the 1997 Stock Option Plan (the
"1997 Plan") for the Company's officers, employees and non-employee Directors.
The total number of shares reserved for issuance under the 1997 Plan is
1,500,000, of which approximately 100,000 were issued as of December 31, 1997.
The 1997 Plan is subject to shareholder approval at the 1998 Annual Meeting.
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 exercise price of incentive
options granted under the 1996 Plan or 1997 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 either
plan are not transferable by the optionholders except by will or by the laws
of descent and distribution. Options granted under the 1996 Plan and 1997 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.
In addition, options to purchase an aggregate of 80,000 shares were issued
to non-employee members of the Board of Directors.
At December 31, 1997, there were 1,400,000 and 67,097 additional shares
available for grant under the 1997 Plan and 1996 Plan, respectively. The per
share weighted-average value of stock options granted during 1997 and 1996 was
$14.89 and $8.12, respectively, on the date of grant using the Black Scholes
model with the following assumptions for both 1997 and 1996: weighted-average
risk-free interest rate of 6.11%, expected life of 5 years, volatility of
49.4%, and an expected dividend yield of 0%.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under
SFAS No. 123, the Company's net income would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net income:
As reported (pro forma in 1996)................ $15,543,000 $12,047,000
Pro forma--effects of SFAS No. 123............. 13,288,000 11,755,000
Earnings per share:
As reported (pro forma in 1996)................ $ 0.93 $ 0.94
Pro forma--effects of SFAS No. 123............. 0.80 0.91
</TABLE>
35
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1997, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $16.00 to $33.34 and 8.3
years, respectively. Stock option activity during the periods indicated is as
follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1995.................. 0 $ --
Granted..................................... 570,000 16.05
---------
Balance at December 31, 1996.................. 570,000 16.05
Granted..................................... 577,000 30.08
Exercised................................... (26,097) 16.00
Forfeited................................... (10,001) 16.00
---------
Balance at December 31, 1997.................. 1,110,902
=========
</TABLE>
At December 31, 1997, the number of options exercisable was 161,212 and the
weighted-average exercise price of these options was $16.33 per share.
NOTE 13--EARNINGS PER COMMON SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted computations for the years ended December 31, 1997, 1996 and
1995 (in thousands, except per share data).
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
WEIGHTED AVERAGE PER SHARE
INCOME SHARES OUTSTANDING AMOUNT
------- ------------------ ---------
<S> <C> <C> <C>
1997
BASIC EPS
Income available to common stockholders... $15,543 16,555 $0.94
EFFECT OF DILUTIVE SECURITIES
Options................................... -- 159 (0.01)
------- ------ -----
DILUTED EPS
Income available to common stockholders
plus assumed conversion.................. $15,543 16,714 $0.93
======= ====== =====
1996 PRO FORMA
BASIC EPS
Income available to common stockholders... $12,047 12,851 $0.94
EFFECT OF DILUTIVE SECURITIES
Options................................... -- 33 --
------- ------ -----
DILUTED EPS
Income available to common stockholders
plus assumed conversion.................. $12,047 12,884 $0.94
======= ====== =====
1995 PRO FORMA
BASIC EPS
Income available to common stockholders... $ 2,803 11,900 $0.24
EFFECT OF DILUTIVE SECURITIES
Shares attributable to excess distribu-
tions.................................... -- 352 (0.01)
------- ------ -----
DILUTED EPS
Income available to common stockholders
plus assumed conversion.................. $ 2,803 12,252 $0.23
======= ====== =====
</TABLE>
36
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Options to purchase 516,000 shares of Common Stock at exercise prices
ranging from $30.25 to $33.34 were outstanding during portions of 1997, but
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
The options, which have a weighted-average remaining contractual life of 8.3
years, were still outstanding at the end of 1997.
NOTE 14--COMMON STOCK, PREFERRED STOCK AND PARTNERS' CAPITAL
Immediately prior to the closing of the Public Offering, the Company entered
into a Stock Loan and Pledge Agreement with the controlling shareholder
pursuant to which the Company loaned the controlling shareholder 2,549,750
shares of common stock (the "Loaned Stock"). The loan is for a term of ten
years, although the Company has the right to require the return of the Loaned
Stock from the controlling shareholder prior to that time upon three days
notice. As security for the loan, the controlling shareholder pledged
2,549,750 shares of Series A Convertible Preferred Stock of the Company which,
when converted into Common Stock, will equal the number of shares of Loaned
Stock. The controlling shareholder is obligated to pay 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 is payable annually, and
the remaining one-half is 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. The Company
will forfeit this portion of the fee if it calls the loan prior to the end of
the ten year term. The controlling shareholder paid an initial transaction fee
of $2,550 to the Company and is obligated to repay to the Company any
dividends that are paid by the Company on the Loaned Stock. The Series A
Convertible Preferred Stock does not pay any dividends.
NOTE 15--RELATED PARTY TRANSACTIONS
Prior to the Public Offering, the Company entered into certain reciprocal
arrangements with unrelated third parties as a result of which the Company
received 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.
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 on a basis similar to the basis on which estimates are made
by others in the broadcast industry. As of December 31, 1997, the Company is
obligated to provide approximately $0.8 million of commercial airtime, goods
and services under these reciprocal arrangements. Immediately prior to the
Public Offering, the Company entered into an agreement with the controlling
shareholder pursuant to which the controlling shareholder was distributed the
goods and services the Company held for his benefit. The Company also
distributed to the controlling shareholder all of its rights to the goods and
services that are subject of existing reciprocal arrangements but which had
not yet been delivered to the Company. The value of such goods and services
was approximately $4.1 million.
During 1996, the Company 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 the controlling shareholder 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 values of
the leased properties but without preference to outside sources of valuation.
Because the Company did not make full-time use of these properties, such
leases were terminated as of October 1996, and the Company has no intention to
enter into similar leases. The Company paid $250,000 and $300,000 in rent
expense to Five S for the years ended December 31, 1996 and 1995,
respectively. Prior to October 1996, the Company incurred certain operating
and interest expenses on behalf of Five S. In October 1996, the Company
distributed a note receivable
37
<PAGE>
METRO NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
from Five S to the controlling shareholder in the amount of $832,495,
representing the amounts incurred on behalf of Five S net of the lease
payments.
As of October 1996, the Company and the controlling shareholder entered into
an agreement pursuant to which the controlling shareholder 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 MVN, MRI or MTC as a subchapter S corporation is not
respected, the Company may seek reimbursement from the controlling
shareholder, but only to the extent that the controlling shareholder receives
a tax refund attributable to amounts he previously included in income in his
capacity as a shareholder of such corporations. In October 1996, the Company
distributed to the controlling shareholder a note for $3,100,000. This note
relates to estimated tax amounts owed by the controlling shareholder as a
result of his ownership interest in S corporations and partnerships for the
period January 1, 1996 to the date of the Reorganization. The balance of this
note was paid in October 1997.
38
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information is incorporated by reference to the Company's definitive
proxy statement for its annual meeting of shareholders to be filed pursuant to
Regulation 14A ("Regulation 14A") of the Securities Exchange Act of 1934, as
amended, not later than 120 days after the end of the Company's fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Company's definitive
proxy statement for its annual meeting of shareholders to be filed pursuant to
Regulation 14A not later than 120 days after the end of the Company's fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the Company's definitive
proxy statement for its annual meeting of shareholders to be filed pursuant to
Regulation 14A not later than 120 days after the end of the Company's fiscal
year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Company's definitive
proxy statement for its annual meeting of shareholders to be filed pursuant to
Regulation 14A not later than 120 days after the end of the Company's fiscal
year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) List of documents filed as part of this report.
(1) Financial Statements
The Independent Auditors' Report and the following consolidated
financial statements are filed as part of this report:
Consolidated Statements of Operations for the years ended December
31, 1997, 1996 and 1995
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statement of Stockholder's Equity/Partners' Capital
for the years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All information required to be included in a financial statement
schedule is disclosed in the consolidated financial statements referred
to above.
39
<PAGE>
(3) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1* Form of Amended and Restated Certificate of Incorporation of the
Registrant
3.2* 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
10.1* Lease Agreement, dated April 15, 1988 between Tower, Limited and Metro
Traffic Control, Inc.
10.2* First Amendment to Lease Agreement, dated September 1, 1988 between
Tower, Limited and Metro Traffic Control, Inc.
10.3* Lease Amendment Number Two, dated April 23, 1991 between Tower,
Limited and the Registrant
10.4* Lease Amendment Number Three, dated January 28, 1992 between Tower,
Limited and the Registrant
10.5* Sublease Agreement dated January 5, 1996 between Transcontinental Gas
Pipe Line Corporation and Metro Traffic Control, Inc.
10.6* Lease Agreement dated April 18, 1990 between Transco Tower Limited and
Metro Traffic Control, Inc.
10.7* Lease Amendment Number One dated October 19, 1988 between Transco
Tower, Limited and Metro Traffic Control, Inc.
10.8* Lease Amendment Number Two dated January 29, 1992 between Transco
Tower, Limited and Metro Traffic Control, Inc.
10.9* Lease Amendment Number Three dated May 28, 1992 between Transco Tower,
Limited and Metro Traffic Control, Inc.
10.10* Employment Agreement between the Registrant and Mr. David I.
Saperstein
10.11* Employment Agreement between the Registrant and Mr. Charles I.
Bortnick
10.12* Employment Agreement between the Registrant and Mr. Shane E. Coppola
10.13 Employment Agreement between the Registrant and Mr. Timothy McMillin
10.14* Employment Agreement between the Registrant and Mr. Gary L. Worobow
10.15* Metro Networks, Inc. Employee Stock Purchase Plan
10.16* 1996 Incentive Stock Option Plan
10.17* Stock Loan and Pledge Agreement between the Registrant and Mr. David
I. Saperstein
10.18* Indemnification Agreement between the Registrant and Mr. David I.
Saperstein
10.19** Credit Agreement among Metro Networks, Inc., certain lenders, and
NationsBank of Texas, N.A., as Administrative Lender, dated as of
October 22, 1996
10.20 Employment Agreement between the Registrant and Mr. Ivan N. Shulman
10.21 Employment Agreement between the Registrant and Mr. D. Patrick
LaPlatney
10.22 Employment Agreement between the Registrant and Mr. John R. Tomlinson
10.23 Amendment to Employment Agreement between the Registrant and Mr. Gary
L. Worobow
10.24 Amendment dated September 30, 1997 to Credit Agreement among Metro
Networks, Inc., certain lenders, and NationsBank of Texas, N.A. as
Administrative Lender
10.25 Lease Amendment Number One, dated March 1, 1998, between
Transcontinental Gas Pipe Line Corporation and Metro Traffic Control,
Inc.
10.26 1997 Stock Option Plan
21.1 Subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule
</TABLE>
- --------
(*) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, Registration No. 333-6311, originally filed with the Securities
and Exchange Commission on June 19, 1996, as subsequently amended, and
declared effective on October 16, 1996.
(**) Incorporated by reference to the Registrants Form 10-K originally filed
with the Securities and Exchange Commission on March 31, 1997.
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
31, 1998.
Metro Networks, Inc.
/s/ David I. Saperstein
By:___________________________________
David I. Saperstein
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/David I. Saperstein Chairman of the March 31, 1998
- ---------------------------------- Board of Directors
David I. Saperstein and Chief
Executive Officer
(Principal
Executive Officer)
/s/Charles I. Bortnick President and March 31, 1998
- ---------------------------------- Director
Charles I. Bortnick
/s/ Shane E. Coppola Executive Vice March 31, 1998
- ---------------------------------- President and
Shane E. Coppola Director
/s/Timothy D. McMillin Senior Vice March 31, 1998
- ---------------------------------- President, Chief
Timothy D. McMillin Financial Officer
(Principal
Financial and
Accounting Officer)
/s/ Gary L. Worobow Senior Vice March 31, 1998
- ---------------------------------- President, General
Gary L. Worobow Counsel, Secretary
and Director
/s/ James A. Arcara Director March 31, 1998
- ----------------------------------
James A. Arcara
/s/ Dennis F. Holt Director March 31, 1998
- ----------------------------------
Dennis F. Holt
/s/ Kenin M. Spivak Director March 31, 1998
- ----------------------------------
Kenin M. Spivak
Director March 31, 1998
- ----------------------------------
Robert M. Miggins
41
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
3.1* Form of Amended and Restated Certificate of
Incorporation of the Registrant
3.2* 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
10.1* Lease Agreement, dated April 15, 1988 between Tower,
Limited and Metro Traffic Control, Inc.
10.2* First Amendment to Lease Agreement, dated September 1,
1988 between Tower, Limited and Metro Traffic Control,
Inc.
10.3* Lease Amendment Number Two, dated April 23, 1991
between Tower, Limited and the Registrant
10.4* Lease Amendment Number Three, dated January 28, 1992
between Tower, Limited and the Registrant
10.5* Sublease Agreement dated January 5, 1996 between
Transcontinental Gas Pipe Line Corporation and Metro
Traffic Control, Inc.
10.6* Lease Agreement dated April 18, 1990 between Transco
Tower Limited and Metro Traffic Control, Inc.
10.7* Lease Amendment Number One dated October 19, 1988
between Transco Tower, Limited and Metro Traffic
Control, Inc.
10.8* Lease Amendment Number Two dated January 29, 1992
between Transco Tower, Limited and Metro Traffic
Control, Inc.
10.9* Lease Amendment Number Three dated May 28, 1992 between
Transco Tower, Limited and Metro Traffic Control, Inc.
10.10* Employment Agreement between the Registrant and Mr.
David I. Saperstein
10.11* Employment Agreement between the Registrant and Mr.
Charles I. Bortnick
10.12* Employment Agreement between the Registrant and Mr.
Shane E. Coppola
10.13 Employment Agreement between the Registrant and Mr.
Timothy D. McMillin
10.14* Employment Agreement between the Registrant and Mr.
Gary L. Worobow
10.15* Metro Networks, Inc. Employee Stock Purchase Plan
10.16* 1996 Incentive Stock Option Plan
10.17* Stock Loan and Pledge Agreement between the Registrant
and Mr. David I. Saperstein
10.18* Indemnification Agreement between the Registrant and
Mr. David I. Saperstein
10.19** Credit Agreement among Metro Networks, Inc., certain
lenders, and NationsBank of Texas, N.A., as
Administrative Lender, dated as of October 22, 1996
10.20 Employment Agreement between the Registrant and Mr.
Ivan N. Shulman
10.21 Employment Agreement between the Registrant and Mr. D.
Patrick LaPlatney
10.22 Employment Agreement between the Registrant and Mr.
John R. Tomlinson
10.23 Amendment to Employment Agreement between the
Registrant and Mr. Gary L. Worobow
10.24 Amendment dated September 30, 1997 to Credit Agreement
among Metro Networks, Inc., certain lenders, and
NationsBank of Texas, N.A. as Administrative Lender
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
10.25 Lease Amendment Number One, dated March 1, 1998,
between Transcontinental Gas Pipe Line Corporation and
Metro Traffic Control, Inc.
10.26 1997 Stock Option Plan
21.1 Subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule
</TABLE>
- --------
(*) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, Registration No. 333-6311, originally filed with the Securities
and Exchange Commission on June 19, 1996, as subsequently amended, and
declared effective on October 16, 1996.
(**) Incorporated by reference to the Registrants Form 10-K originally filed
with the Securities and Exchange Commission on March 31, 1997.
43
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is entered into by and between Timothy
McMillin ("Employee") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "Company").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales force,
selling broadcast and other advertising, and developing, producing and
broadcasting traffic, news, sports, weather and other information reports
throughout the United States; and
WHEREAS, Employee has extensive management, financial, accounting
and operations experience; and
WHEREAS, the Company desires to engage the services of Employee to
serve as a Senior Vice President and Chief Financial Officer of the Company
on the terms and conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee
accepts such employment, and agrees to devote Employee's full time and efforts
to the interests of the Company upon the terms and conditions hereinafter set
forth.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on August 25, 1997 the effective date (the "Effective Date") and shall
continue in effect until December 31, 1999; (the "Term"); provided, however,
the Company shall have the right to terminate this Agreement on each anniversary
of Effective Date by giving the Employee written notice of such termination at
least sixty (60) days prior to such anniversary. Unless otherwise terminated
pursuant hereto, if Employee continues to be employed by the Company after the
Term, then Employee's employment shall be deemed to continue on a month-to-month
basis until such time as either party shall deliver written notice to the other
party and this Agreement shall terminate thirty (30) days after the giving of
such notice. Except as otherwise set forth herein, if either party hereto
desires to terminate this Agreement at the end of the Term or thereafter, the
same thirty (30) days prior written notice shall apply. The period from the
Effective
<PAGE>
Date through the date thirty (30) days from the date any notice of termination
referred to above is delivered is hereinafter referred to as the "Employment
Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as a Senior
Vice President and Chief Financial Officer of the Company or in such other
position as is determined from time to time by an executive officer of the
Company or the Board of Directors of the Company or the Company's parent
company's Board of Directors (the "Board of Directors"). Subject to the
direction of the Chief Executive Officer or President of the Company, the Board
of Directors or their designee, Employee shall perform such duties as from time
to time may be delegated to Employee by the Chief Executive Officer, the
President, the Board of Directors, or their designee. Employee shall devote all
of Employee's professional time, energy and ability to the proper and efficient
conduct of the Company's business. Employee shall observe and comply with all
reasonable lawful directions and instructions by and on the part of the Chief
Executive Officer, the President, the Board of Directors or their designee and
endeavor to promote the interests of the Company and not at any time do anything
which may cause or tend to be likely to cause any loss or damage to the Company
in business, reputation or otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's business, as reasonably specified from time
to time by the Chief Executive Officer, the President, the Board of Directors or
their designee. Subject to the foregoing, Employee's specific responsibilities
shall include financial, administrative, and accounting matters. The Company
may, in its sole discretion, restrict, expand, change or otherwise alter the
Employee's duties, title, or responsibilities.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty. Employee further acknowledges that
any contracts or agreements, other than the Company's standard forms without any
alterations, modifications or deletions, must be reviewed by the Company's Chief
Executive Officer, President, Executive Vice President or General Counsel, prior
to submitting such contract or
Page 2 of 13
<PAGE>
agreement to an employee, affiliate, sponsor or any other party for execution,
discussion or any other reason.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(A) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "Base Salary") of Twelve
Thousand Five Hundred Dollars and No Cents ($12,500.00). Employee's Base Salary
shall be payable semi-monthly in arrears on the tenth day and on the twenty-
fifth day of each calendar month or such other date in conformity with the
Company's payroll policies in effect from time to time. If the Company's net
revenues exceed Two Hundred and Nine Million Dollars ($209,000,000) in any
calendar year during the Employment Period, the Company shall increase
Employee's monthly Base Salary to Fourteen Thousand Five Hundred and Eighty-
Three Dollars and Thirty Four Cents ($14,583.34).
(B) BONUS. Employee shall be eligible for a cash bonus of up to
Seventy-Five Thousand ($75,000.00) Dollars of Employee's Base Salary in the sole
and absolute discretion of the Board of Directors or its Compensation Committee
or their designee.
(C) STOCK OPTIONS. Subject to the approval and terms of the
Company's parent company's Compensation Committee, which approval and terms
shall be in its sole discretion, Employee will on the Effective Date be granted
options under the Company's parent company's 1996 Incentive Stock Option Plan
(the "1996 Plan") to purchase Fifty Thousand (50,000) shares of the Company's
parent company's common stock. Such options shall vest over a three (3) year
period and may, subject to compensation committee approval, be in a form as set
forth as Exhibit A hereto.
(D) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade
Page 3 of 13
<PAGE>
relationships for restaurants, hotels, automobile rentals, courier services,
promotional items, etc. which may be used from time to time to cover ordinary
and necessary expenses of Employee and for reimbursement. Except as expressly
set forth in this Section 5, any out-of-pocket cash expenses incurred by
Employee shall be at Employee's own expense and without reimbursement by the
Company. Employee agrees that no travel expense will be reimbursed unless booked
through the Company's travel department. The Company shall provide temporary
housing for Employee through October 1997 in Houston, Texas. Such temporary
housing shall be determined by the Company. The Company shall also reimburse
Employee up to $10,000.00 in reasonable moving expenses subject to the Company's
policies regarding expense reimbursement.
6. BENEFITS.
(A) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(B) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right, if
exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof), (B) willfully breached any statutory or common law duty;
or (C) breached Section 3(c) or 3(d) of this Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business conduct
which would injure the reputation of the Company or otherwise adversely
affect its interest if Employee were retained as an employee of the
Company;
Page 4 of 13
<PAGE>
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in applicable disability insurance policies)
to carry out or to perform the duties required of Employee hereunder for a
continuous period of ninety (90) days; provided, however, that Employee's
compensation during any period in which Employee is unable to perform the
duties required of Employee hereunder shall be reduced in accordance with
the Company's policies and by any disability payments (excluding any
reimbursements for medical expenses and the like) which Employee is
entitled to receive under group or other disability insurance policies of
the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or obligations of any other
noncompetition and/or confidentiality agreements entered into between
Employee and the Company, or the Company's Related Entities (as defined in
Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee.
Page 5 of 13
<PAGE>
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered limited liability partnership or limited liability company,
corporation or other entity, in any business in competition with that carried
on by the Company or its Related Entities. Employee shall not, without the
Company's prior written consent, engage in any activity during Employee's
employment that would conflict with, interfere with, impede or hamper the
performance of Employee's duties for the Company or would otherwise be
prejudicial to the Company's business interests. Employee shall refrain from
any offensive or distasteful remarks or conduct in performance of Employee's
duties and shall faithfully comply to the best of Employee's ability with all of
the Company's decisions relating to on-the-air material and the manner of
delivering or using same. Employee shall not commit any act or become involved
in any situation or occurrence that, in the Company's reasonable judgment, could
tend to bring Employee or the Company into public disrepute, contempt, scandal
or ridicule, could provoke, insult or offend the community or any group or class
thereof, or could reflect unfavorably upon the Company or any of its Sponsors or
Corporate Affiliates. Employee shall comply with all applicable laws and
regulations governing the Company and its business, including without
limitation, regulations promulgated by the Federal Communications Commission or
any other regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"Noncompetition Period"), regardless of cause, Employee will not engage in or
carry on, directly or indirectly, either for Employee or as a member of an
association, trust, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (other than as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation, whose gross assets exceed $100,000,000), or as an
investor, officer or director of a corporation, or as an employee, agent,
trustee, associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the CMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any
Page 6 of 13
<PAGE>
Related Entity) was or had been engaged prior to the date of termination, which
business is the same as or substantially similar to any business engaged in by
the Company (or any Related Entity) on the date of termination of employment as
provided herein. The activities of Employee sought to be restricted by the
provisions of this Section 8(c) shall include, without limitation, (i) the
management or operation of a traffic, news, weather, sports or other information
report gathering and broadcast service, (ii) soliciting Sponsors and dealing
with accounts with respect thereto, (iii) soliciting Corporate Affiliates to
enter into any contract or arrangement with any person or organization to
provide traffic, news, weather, sports or other information report gathering or
broadcast services, (iv) broadcasting traffic, news, weather or sports reports
on television or radio, (v) the sale or packaging of Competitive Broadcast
Advertising Vehicles, as that term is defined in Section 20 and (vi) forming or
providing operational assistance to any business or a division of any business
primarily engaged in the foregoing activities.
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on
Employee's activities specified herein, are reasonable and necessary for the
protection of the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that
Page 7 of 13
<PAGE>
the Company shall be entitled to injunctive relief (without bond or other
undertaking).
(i) Employee and Company agree that to the extent a court of competent
jurisdiction finds any of the foregoing covenants to be overly broad based on
applicable law, then the parties agree that the court shall reform the covenants
to the extent necessary to cause such covenants to be reasonable and enforce
such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities and its trade secrets), and further, that Employee will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. For purposes of this Agreement, "Confidential
Information" means information obtained by Employee during Employee's employment
relationship with the Company which concerns the affairs of the Company or its
Related Entities and which the Company has requested be held in confidence and
could reasonably expect to be held in confidence, or the disclosure of which
would likely be embarrassing, detrimental or disadvantageous to the Company or
its Related Entities. Confidential Information, however, shall not include
information which Employee can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through
no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
Page 8 of 13
<PAGE>
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
11. WORK FOR HIRE. Employee agrees that any ideas, concepts,
techniques, or computer programs relating to the business or operations of the
Company and its Related Entities which are developed by Employee during
Employee's employment hereunder, including each program and announcement
prepared for broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that
neither Employee nor, to the best of Employee's knowledge, information and
belief, any other person, has accepted or agreed to accept, or has paid or
provided or agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee further
represents and warrants that, during Employee's employment, Employee shall
comply with all legal requirements.
Page 9 of 13
<PAGE>
13. MERGER OR REORGANIZATION. In the event of any merger,
consolidation, dissolution or reorganization of the Company (including but not
limited to any reorganization where the Company is not the surviving or
resulting entity), or any transfer of all or substantially all of the assets of
the Company, the provisions of this Agreement shall inure to the benefit of and
shall be binding upon the surviving or resulting partnership or the corporation
(or other entity) or person(s) to which such assets shall be transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy. Without limiting the generality of
the foregoing, Employee agrees that, in addition to all other rights and
remedies available at law or in equity, the Company shall be entitled to
enforcement of this Agreement in accordance with the principles of equity, the
remedy at law being hereby agreed and acknowledged by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
(b) If to the Company, addressed to:
Page 10 of 13
<PAGE>
Metro Traffic Control, Inc.
2800 Post Oak Blvd., Suite #4000
Houston, Texas 77056
Attention: President
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as to such jurisdiction be
deemed ineffective and deleted herefrom without affecting any other provision of
this Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable, the parties hereby agree and consent
that such provision shall be reformed to make it a valid and enforceable
provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all exhibits referred to
herein are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(A) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(B) SPONSOR(S). Any and all advertisers (including their subsidiaries
and affiliates) whose commercial material is to be or is incorporated in any one
or more programs or announcements, live or recorded, broadcast over the
facilities of the Company or by the Company.
(C) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities) that
directly or indirectly controls, is controlled by, or is under common control
with the Company (or its successor or assign). The term "entity" as used in
this Section 20(c) means an individual, corporation, partnership, joint venture,
limited liability partnership or limited liability company, trust,
unincorporated organization, association or other entity whose principal
business is gathering, disseminating or reporting traffic, news, sports, weather
or other information or the sale or packaging of Competitive Broadcast
Advertising Vehicles. As used in this Section 20(c), the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
Page 11 of 13
<PAGE>
direction of the management and policies of a person or entity, whether through
the ownership of voting securities, by contract or otherwise.
(D) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than two radio stations in any one CMSA.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and
does hereby irrevocably waive the right to file any complaints against the
Company with any federal, state or local agencies, including but not limited to,
the Equal Employment Opportunity Commission, and the Texas or other state
Commission on Human Rights or to file any claim, institute litigation or other
legal action based on the employment relationship or any activity covered by the
terms of this agreement. The Employee agrees and acknowledges that in exchange
for the relinquishment of those rights that any dispute, controversy or claim
arising out of this Agreement, except for the injunctive relief provided for in
paragraphs 8 and 9 above, or the employment relationship between Employee and
the Company shall be finally settled by arbitration in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement and judgment upon the award
may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto , their respective heirs, executors,
successors and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the subject matter covered hereby and may be amended, waived or
terminated only by an instrument in writing executed by both parties hereto.
Page 12 of 13
<PAGE>
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall
be interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the ____ day of
___________ 1997 to be EFFECTIVE FOR ALL PURPOSES as of the Effective Date.
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /s/ Shane E. Coppola
-----------------------------
Printed Name: Shane E. Coppola
-------------------
Title: Executive Vice President
--------------------------
"EMPLOYEE"
/s/ Timothy McMillin
---------------------------------
Timothy McMillin
6 Holly Ridge
Pine Bay
Address: Rehoboth Beach, DE 19971
-------------------------
Page 13 of 13
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is entered into by and between Ivan
Shulman ("Employee") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "Company").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales force,
selling broadcast and other advertising, and developing, producing and
broadcasting traffic, news, sports, weather and other information reports
throughout the United States; and
WHEREAS, Employee has extensive management, marketing and operations
experience; and
WHEREAS, the Company and Employee entered into an agreement
effective July 1, 1995 (the "Prior Agreement"); and
WHEREAS, the Company desires to continue to engage the services of
Employee to serve as Vice President-Marketing of the Company on the terms
and conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee
accepts such employment, and agrees to devote Employee's full time and efforts
to the interests of the Company upon the terms and conditions hereinafter set
forth. Upon the Effective Date (as hereinafter defined), the Prior Agreement
shall be terminated and null and void. The parties agree that upon the payment
of the lesser of (i) one hundred thousand ($100,000.00) dollars and (ii) all
bonus amounts accrued Employee pursuant to the Prior Agreement prorated to June
30, 1996, minus twelve thousand ($12,000.00), dollars all amounts due and owing
pursuant to the Prior Agreement shall have been paid in full. The parties agree
that such payment shall be made the later of (i) on or about September 30, 1996
and (ii) within thirty (30) days following the Effective Date (as hereinafter
defined).
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on the effective date of an initial public offering (the "Public
Offering") of the Company's proposed parent company (the "Effective Date") and
shall continue in effect
<PAGE>
until three (3) years following the closing of the Public Offering (the "Term");
provided, however, the Company shall have the right to terminate this Agreement
on the second anniversary of the closing of the Public Offering by giving the
Employee written notice of such termination at least ninety (90) days prior to
such second anniversary. Unless otherwise terminated pursuant hereto, if
Employee continues to be employed by the Company after the Term, then Employee's
employment shall be deemed to continue on a month-to-month basis until such time
as either party shall deliver written notice to the other party and this
Agreement shall terminate ninety (90) days after the giving of such notice.
Except as otherwise set forth herein, if either party hereto desires to
terminate this Agreement at the end of the Term or thereafter, the same ninety
(90) days prior written notice shall apply. Further, if the Public Offering does
not close on or before December 31, 1996, this Agreement shall be null and void
and the Prior Agreement shall remain in full force and effect. The period from
the Effective Date through the date ninety (90) days from the date any notice of
termination referred to above is delivered is hereinafter referred to as the
"Employment Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as Vice
President- Marketing of the Company or in such other position as is determined
from time to time by the Board of Directors of the Company or if the Company has
a parent company, such parent company's Board of Directors (the "Board of
Directors"). Subject to the direction of the Chief Executive Officer of the
Company, the Board of Directors or its designee, Employee shall perform such
duties as from time to time may be delegated to Employee by the Chief Executive
Officer, the Board of Directors, or their designee. Employee shall devote all
of his professional time, energy and ability to the proper and efficient conduct
of the Company's business. Employee shall observe and comply with all
reasonable lawful directions and instructions by and on the part of the Chief
Executive Officer, the Board of Directors or their designee and endeavor to
promote the interests of the Company and not at any time do anything which may
cause or tend to be likely to cause any loss or damage to the Company in
business, reputation or otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's business, as reasonably specified from time
to time by the Chief Executive Officer, the Board of Directors or their
designee.
Page 2 of 13
<PAGE>
Subject to the foregoing, Employee's specific responsibilities shall include
hiring, training, managing and motivating the Company's employees. The Company
may, in its sole discretion, restrict, expand, change or otherwise alter the
Employee's duties, title and responsibilities. Any change shall be binding on
Employee for all purposes of this Agreement.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(A) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "Base Salary") of SIXTEEN
THOUSAND SIX HUNDRED and SIXTY-SEVEN Dollars and SIXTY-SEVEN Cents ($16,666.67).
Employee's Base Salary shall be payable semi-monthly in arrears on the tenth day
and on the twenty-fifth day of each calendar month or such other date in
conformity with the Company's payroll policies in effect from time to time. The
Base Salary shall increase five (5%) percent for each year per annum during the
Term on the anniversary of the closing of the Public Offering.
(B) BONUS. Employee shall be eligible for a bonus of up to SEVENTY-
FIVE THOUSAND ($75,000.00) Dollars per annum (the "Discretionary Bonus"), in the
sole discretion of the Board of Directors (or if the Company has a parent
company, the Board of Directors of such parent company) or its Compensation
Committee. The Discretionary Bonus potential shall increase by five (5%) percent
per annum for each year during the Term on the anniversary of the closing of the
Public Offering.
(C) STOCK OPTIONS. Upon the effective date of the Public Offering,
Employee will be granted options under the Company's proposed parent company's
1996 Incentive Stock Option Plan (the "1996 Plan") to purchase THIRTY-FIVE
THOUSAND (35,000) shares of the Company's proposed parent company's common stock
pursuant a stock option agreement substantially in the form attached hereto as
Exhibit A. Additional options may be granted in the sole discretion of the
Board of Directors of the Company (or if the Company has a parent company, the
Board of Directors of such parent company) or its Compensation Committee. Such
stock options shall be immediately null and void if the Public Offering does not
close.
Page 3 of 13
<PAGE>
(D) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at his own expense and without reimbursement by
the Company. Employee agrees that no travel expense will be reimbursed unless
booked through the Company's travel department.
6. BENEFITS.
(A) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(B) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right, if
exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof) after notice from the Chief Executive Officer, the Board
of Directors or their designee of such failure or neglect and the
expiration of thirty (30) days following the delivery of such notice which
failure or neglect has remained unremedied, (B) willfully
Page 4 of 13
<PAGE>
breached any statutory or common law duty; or (C) breached Section 3(c) or
3(d) of this Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business conduct
which would injure the reputation of the Company or otherwise adversely
affect its interest if Employee were retained as an employee of the
Company;
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in applicable disability insurance policies)
to carry out or to perform the duties required of Employee hereunder for a
continuous period of ninety (90) days; provided, however, that Employee's
compensation during any period in which Employee is unable to perform the
duties required of Employee hereunder shall be reduced by any disability
payments (excluding any reimbursements for medical expenses and the like)
which Employee is entitled to receive under group or other disability
insurance policies of the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or obligations of any other
noncompetition and/or confidentiality agreements entered into between
Employee and the Company, or the Company's Related Entities (as defined in
Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
Page 5 of 13
<PAGE>
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered limited liability partnership or limited liability company,
corporation or other entity, in any business in competition with that carried
on by the Company or its Related Entities. Employee shall not, without the
Company's prior written consent, engage in any activity during Employee's
employment that would conflict with, interfere with, impede or hamper the
performance of Employee's duties for the Company or would otherwise be
prejudicial to the Company's business interests. Employee shall refrain from
any offensive or distasteful remarks or conduct in performance of Employee's
duties and shall faithfully comply to the best of Employee's ability with all of
the Company's decisions relating to on-the-air material and the manner of
delivering or using same. Employee shall not commit any act or become involved
in any situation or occurrence that, in the Company's reasonable judgment, could
tend to bring Employee or the Company into public disrepute, contempt, scandal
or ridicule, could provoke, insult or offend the community or any group or class
thereof, or could reflect unfavorably upon the Company or any of its Sponsors or
Corporate Affiliates. Employee shall comply with all applicable laws and
regulations governing the Company and its business, including without
limitation, regulations promulgated by the Federal Communications Commission or
any other regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"Noncompetition Period"), because of disability or termination by the Company
(with or without cause), Employee will not engage in or carry on, directly or
indirectly, either for Employee or as a member of an association, trust,
partnership, joint venture, limited liability partnership or limited liability
company or other entity, or as a stockholder (other than as a stockholder of
less than one percent (1%) of the issued and outstanding stock of a publicly-
held corporation, whose gross assets exceed $100,000,000), or as an investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership,
Page 6 of 13
<PAGE>
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the SMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business engaged in by the Company (or any
Related Entity) on the date of termination of employment as provided herein.
The activities of Employee sought to be restricted by the provisions of this
Section 8(c) shall include, without limitation, (i) the management or operation
of a traffic, news, weather, sports or other information report gathering and
broadcast service, (ii) soliciting Sponsors and dealing with accounts with
respect thereto, (iii) soliciting Corporate Affiliates to enter into any
contract or arrangement with any person or organization to provide traffic,
news, weather, sports or other information report gathering or broadcast
services, (iv) broadcasting traffic, news, weather or sports reports on
television or radio, (v) the sale or packaging of Competitive Broadcast
Advertising Vehicles, as that term is defined in Section 20 and (vi) forming or
providing operational assistance to any business primarily engaged in the
foregoing activities; provided, that such restricted activities shall exclude
general news gathering or general broadcast responsibilities which involve
traffic, news, weather, sports or other information reports only occasionally or
incidentally, if rendered as a regular employee of a television or radio station
or a network (in a role unrelated to a competitive activity and which network
does not derive the majority of its revenues from traffic, news, sports, weather
or other information reports on a network basis).
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
Page 7 of 13
<PAGE>
(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on his
activities specified herein, are reasonable and necessary for the protection of
the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that the Company shall be entitled to
injunctive relief (without bond or other undertaking).
(i) Employee and Company agree that to the extent a court of competent
jurisdiction finds any of the foregoing covenants to be overly broad based on
applicable law, then the parties agree that the court shall reform the covenants
to the extent necessary to cause such covenants to be reasonable and enforce
such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities and its trade secrets), and further, that Employee will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. For purposes of this Agreement, "Confidential
Information" means information obtained by Employee during Employee's employment
relationship with the Company which concerns the affairs of the Company or its
Related Entities and which the Company has requested be held in confidence and
could reasonably expect to be held in confidence, or the disclosure of which
would likely be embarrassing, detrimental or disadvantageous to the Company or
its Related Entities. Confidential Information, however, shall not include
information which Employee can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the
Page 8 of 13
<PAGE>
industry or subsequently enters the public domain or becomes generally
known in the industry through no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
11. WORK FOR HIRE. Employee agrees that any ideas, concepts,
techniques, or computer programs relating to the business or operations of the
Company and its Related Entities which are developed by Employee during
Employee's employment hereunder, including each program and announcement
prepared for broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that,
to the best of Employee's knowledge, information and belief, neither Employee
nor any other person has accepted or
Page 9 of 13
<PAGE>
agreed to accept, or has paid or provided or agreed to pay or provide, any
money, service or any other valuable consideration, as defined in Section 507 of
the Communications Act of 1934, as amended, for the broadcast of any matter
contained in programs. Employee further represents and warrants that, during
Employee's employment, Employee shall comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger,
consolidation, dissolution or reorganization of the Company (including but not
limited to any reorganization where the Company is not the surviving or
resulting entity), or any transfer of all or substantially all of the assets of
the Company, the provisions of this Agreement shall inure to the benefit of and
shall be binding upon the surviving or resulting partnership or the corporation
(or other entity) or person(s) to which such assets shall be transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy. Without limiting the generality of
the foregoing, Employee agrees that, in addition to all other rights and
remedies available at law or in equity, the Company shall be entitled to
enforcement of this Agreement in accordance with the principles of equity, the
remedy at law being hereby agreed and acknowledged by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
Page 10 of 13
<PAGE>
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
(b) If to the Company, addressed to:
Metro Traffic Control, Inc.
2700 Post Oak Blvd., Suite #1400
Houston, Texas 77056
Attention: Chief Executive Officer
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as to such jurisdiction be
deemed ineffective and deleted herefrom without affecting any other provision of
this Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable, the parties hereby agree and consent
that such provision shall be reformed to make it a valid and enforceable
provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all exhibits referred to
herein are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(A) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(B) SPONSOR(S). Any and all advertisers (including their subsidiaries
and affiliates) whose commercial material is to be or is incorporated in any one
or more programs or announcements, live or recorded, broadcast over the
facilities of the Company or by the Company.
(C) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities) that
directly or indirectly controls, is controlled by, or is under common control
with, the Company or David Saperstein or members of his immediate family or
trust for their benefit. The term "entity" as used in this Section 20(c) means
an individual, corporation, partnership, joint venture, limited liability
partnership or limited liability company, trust, unincorporated organization,
association or other entity whose principal business is gathering, disseminating
or reporting
Page 11 of 13
<PAGE>
traffic, news, sports, weather or other information or the sale or packaging of
Competitive Broadcast Advertising Vehicles. As used in this Section 20(c), the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
(D) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than three radio stations in any one ADI area of dominant influence as
defined by Arbitron, Inc.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and
does hereby irrevocably waive the right to file any complaints against the
Company with any federal, state or local agencies, including but not limited to,
the Equal Employment Opportunity Commission, and the Texas or other state
Commission on Human Rights or to file any claim, institute litigation or other
legal action based on the employment relationship or any activity covered by the
terms of this agreement. The Employee agrees and acknowledges that in exchange
for the relinquishment of those rights that any dispute, controversy or claim
arising out of this Agreement, except for the injunctive relief provided for in
paragraphs 8 and 9 above, or the employment relationship between Employee and
the Company shall be finally settled by arbitration in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement and judgment upon the award
may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto , their respective heirs, executors,
successors and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the subject matter covered hereby and may be amended, waived or
Page 12 of 13
<PAGE>
terminated only by an instrument in writing executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall
be interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the 30th day of
July 1996 to be EFFECTIVE FOR ALL PURPOSES as of the Effective Date.
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /s/ Curtis H. Coleman
-----------------------------
Printed Name: Curtis H. Coleman
-------------------
Title: Senior Vice President
--------------------------
"EMPLOYEE"
/s/ Ivan Shulman
--------------------------------
IVAN SHULMAN
Address: 5142 Braesheather Dr.
Houston, TX 77091
Page 13 of 13
<PAGE>
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is entered into by and between D. Patrick
LaPlatney ("Employee") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "Company").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales
force, selling broadcast and other advertising, and developing, producing
and broadcasting traffic, news, sports, weather and other information
reports throughout the United States; and
WHEREAS, Employee has extensive management, marketing and
operations experience; and
WHEREAS, the Company desires to engage the services of Employee
to serve as Senior Vice President-Television of the Company on the terms
and conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements herein contained, the parties hereto agree as
follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee
accepts such employment, and agrees to devote Employee's full time and efforts
to the interests of the Company upon the terms and conditions hereinafter set
forth.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on March 31, 1997 the effective date (the "Effective Date") and shall
continue in effect until December 31, 1999(the "Term"); provided, however, the
Company shall have the right to terminate this Agreement on the second
anniversary of the Effective Date by giving the Employee written notice of such
termination at least ninety (90) days prior to such second anniversary. Unless
otherwise terminated pursuant hereto, if Employee continues to be employed by
the Company after the Term, then Employee's employment shall be deemed to
continue on a month-to-month basis until such time as either party shall deliver
written notice to the other party and this Agreement shall terminate thirty (30)
days after the giving of such notice. Except as otherwise set forth herein, if
either party hereto desires to
<PAGE>
terminate this Agreement at the end of the Term or thereafter, the same thirty
(30) days prior written notice shall apply. The period from the Effective Date
through the date thirty (30) days from the date any notice of termination
referred to above is delivered is hereinafter referred to as the "Employment
Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as a Senior
Vice President Television of the Company or in such other position as is
determined from time to time by the Chief Executive Officer of the Company
("Chief Executive Officer") or the Board of Directors of the Company or the
Company's parent company's Board of Directors (the "Board of Directors").
Subject to the direction of the Chief Executive Officer or President of the
Company, the Board of Directors or their designee, Employee shall perform such
duties as from time to time may be delegated to Employee by the Chief Executive
Officer, the President, the Board of Directors, or their designee. Employee
shall devote all of Employee's professional time, energy and ability to the
proper and efficient conduct of the Company's business. Employee shall observe
and comply with all reasonable lawful directions and instructions by and on the
part of the Chief Executive Officer, the President, the Board of Directors or
their designee and endeavor to promote the interests of the Company and not at
any time do anything which may cause or tend to be likely to cause any loss or
damage to the Company in business, reputation or otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's business, as reasonably specified from time
to time by the Chief Executive Officer, the President, the Board of Directors or
their designee. Subject to the foregoing, Employee's specific responsibilities
shall include hiring, training, managing and motivating the Company's employees.
The Company may, in its sole discretion, restrict, expand, change or otherwise
alter the Employee's duties, title or responsibilities; provided, however, such
position shall remain managerial in nature.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty. Employee further acknowledges that
any contracts or agreements, other than the Company's standard forms without any
Page 2 of 14
<PAGE>
alterations, modifications or deletions, must be reviewed by the Company's Chief
Executive Officer, President, or General Counsel, prior to submitting such
contract or agreement to an employee, affiliate, sponsor or any other party for
execution, discussion or any other reason.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(A) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "Base Salary") of Sixteen
Thousand Six Hundred and Sixty-Six Dollars and Sixty-Seven Cents ($16,666.67).
Employee's Base Salary shall be payable semi-monthly in arrears on the tenth day
and on the twenty-fifth day of each calendar month or such other date in
conformity with the Company's payroll policies in effect from time to time. The
Base Salary shall increase five (5%) percent per annum during the Term on the
anniversary of the Effective Date.
(B) SIGNING BONUS. Employee shall receive as a signing bonus a cash
payment of (i) Twenty-Five Thousand ($25,000) Dollars within thirty (30) days of
the Effective Date and (ii) Twenty-Five Thousand ($25,000) Dollars by January
31, 1998, provided this agreement has not been terminated ("the Signing Bonus").
In addition, if Employee qualifies for both the full Discretionary Bonus and
Television Bonus (see below) during the first year, Employee shall receive an
additional contingent signing bonus which shall be paid as follows: (i) $25,000
by no later than June 30, 1998 and (ii) $25,000 by no later than December 31,
1998, provided, Employee is still an employee of the Company at the time
payments are to be made. If Employee breaches this Agreement or is terminated
pursuant to Sections 7(a)(i),(ii),(iv), or (v) hereof, in addition to any other
remedies the Company may have, any signing bonus paid to Employee pursuant to
this Agreement shall be immediately repaid to the Company by Employee. Employee
acknowledges that the Base Salary set forth above constitutes full and fair
compensation for the services to be rendered and that this Signing Bonus is paid
to induce Employee's entry into and compliance with the other terms of this
Agreement, so that reimbursement of the Signing Bonus upon a breach as set out
above, does not constitute a penalty.
(C) DISCRETIONARY BONUS. Employee shall be eligible for a bonus of up
to FIFTY THOUSAND ($50,000.00) Dollars per annum (the "Discretionary Bonus"), in
the sole discretion of the Board of Directors (or if the Company has a parent
company, the Board of
Page 3 of 14
<PAGE>
Directors of such parent company) or its Compensation Committee. Partial
calendar years shall be prorated. The Discretionary Bonus potential shall
increase by five (5%) percent per annum for each year during the Term on the
anniversary date of the Effective Date.
(D) TELEVISION BONUS. Employee shall be eligible for annual
bonuses of up to Fifty Thousand ($50,000) Dollars in aggregate (such potential
shall be prorated if Employee was not employed by the Company for the full year)
for obtaining certain operating and\or financial performance criteria which
shall be set by the Company in its sole discretion (the "Television Bonus"). The
Television Bonus shall be based upon the calculation of such numbers on December
31 of each year during the Term and shall be contingent upon Employee being an
employee of the Company on December 31 of a given year. The acquisition of other
entities or their assets shall not be used in any such calculation; provided,
however, the Company may modify such goals based upon any such event in its sole
discretion. The final calculation of such numbers (including accounting method)
and the determination of whether a bonus is due and payable shall be made by the
Company in its sole discretion. Any bonus payable pursuant to this section
shall be paid within ninety (90) days of the end of each calender year.
(E) STOCK OPTIONS. Subject to the approval and terms of the
Company's parent company's Compensation Committee, which approval and terms
shall be in its sole discretion, Employee will be granted options under the
Company's parent company's 1996 Incentive Stock Option Plan (the "1996 Plan") to
purchase Thirty Thousand (30,000) shares of the Company's parent company's
common stock. Such options shall vest over a three (3) year period and may,
subject to compensation committee approval, be in a form as set forth as Exhibit
A hereto.
(F) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at
Page 4 of 14
<PAGE>
Employee's own expense and without reimbursement by the Company. Employee agrees
that no travel expense will be reimbursed unless booked through the Company's
travel department.
6. BENEFITS.
(A) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(B) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right, if
exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof), (B) willfully breached any statutory or common law
duty; or (C) breached Section 3(c) or 3(d) of this Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business
conduct which would injure the reputation of the Company or otherwise
adversely affect its interest if Employee were retained as an employee of
the Company;
(iii) if Employee becomes unable by reason of physical disability or
other incapacity (as may be defined in applicable disability insurance
policies) to carry out or to perform the duties required of Employee
hereunder for a continuous period of ninety (90) days; provided, however,
that Employee's compensation during any period in which Employee is
unable to perform the duties required of Employee hereunder shall be
reduced in accordance with the Company's policies and by any disability
payments
Page 5 of 14
<PAGE>
(excluding any reimbursements for medical expenses and the like) which
Employee is entitled to receive under group or other disability insurance
policies of the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or obligations of any other
noncompetition and/or confidentiality agreements entered into between
Employee and the Company, or the Company's Related Entities (as defined
in Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered
Page 6 of 14
<PAGE>
limited liability partnership or limited liability company, corporation or other
entity, in any business in competition with that carried on by the Company or
its Related Entities. Employee shall not, without the Company's prior written
consent, engage in any activity during Employee's employment that would conflict
with, interfere with, impede or hamper the performance of Employee's duties for
the Company or would otherwise be prejudicial to the Company's business
interests. Employee shall refrain from any offensive or distasteful remarks or
conduct in performance of Employee's duties and shall faithfully comply to the
best of Employee's ability with all of the Company's decisions relating to on-
the-air material and the manner of delivering or using same. Employee shall not
commit any act or become involved in any situation or occurrence that, in the
Company's reasonable judgment, could tend to bring Employee or the Company into
public disrepute, contempt, scandal or ridicule, could provoke, insult or offend
the community or any group or class thereof, or could reflect unfavorably upon
the Company or any of its Sponsors or Corporate Affiliates. Employee shall
comply with all applicable laws and regulations governing the Company and its
business, including without limitation, regulations promulgated by the Federal
Communications Commission or any other regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"Noncompetition Period"), regardless of cause, Employee will not engage in or
carry on, directly or indirectly, either for Employee or as a member of an
association, trust, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (other than as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation, whose gross assets exceed $100,000,000), or as an
investor, officer or director of a corporation, or as an employee, agent,
trustee, associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the CMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business engaged in by the Company (or any
Related Entity) on the date of termination of employment as provided herein.
The activities of Employee sought to be restricted by the provisions of this
Section 8(c) shall include, without limitation, (i) the management or operation
of a traffic, news, video news, weather, sports or other information report
gathering and broadcast service, (ii) soliciting Sponsors and dealing with
accounts with respect thereto, (iii) soliciting Corporate Affiliates to enter
into any
Page 7 of 14
<PAGE>
contract or arrangement with any person or organization to provide traffic,
news, video news, weather, sports or other information report gathering or
broadcast services, (iv) syndicating and\or broadcasting traffic, news, video
news, weather or sports reports on television or radio, (v) the sale or
packaging of Competitive Broadcast Advertising Vehicles, as that term is defined
in Section 20 and (vi) forming or providing operational assistance to any
business or a division of any business primarily engaged in the foregoing
activities. Notwithstanding the foregoing, Employee shall be permitted to be
employed by a television station, network, syndicator or representative firm;
provided, however, employee is not involved in any business in direct
competition with the Company and such business is not a competitor of the
Company.
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on
Employee's activities specified herein, are reasonable and necessary for the
protection of the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that the Company shall be entitled to
injunctive relief (without bond or other undertaking).
(i) Employee and Company agree that to the extent a court of competent
jurisdiction finds any of the foregoing covenants to be overly broad based on
applicable law, then the
Page 8 of 14
<PAGE>
parties agree that the court shall reform the covenants to the extent necessary
to cause such covenants to be reasonable and enforce such covenants as reformed
against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities and its trade secrets), and further, that Employee will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. For purposes of this Agreement, "Confidential
Information" means information obtained by Employee during Employee's employment
relationship with the Company which concerns the affairs of the Company or its
Related Entities and which the Company has requested be held in confidence and
could reasonably expect to be held in confidence, or the disclosure of which
would likely be embarrassing, detrimental or disadvantageous to the Company or
its Related Entities. Confidential Information, however, shall not include
information which Employee can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry
through no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had
the right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
Page 9 of 14
<PAGE>
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
11. WORK FOR HIRE. Employee agrees that any ideas, concepts,
techniques, or computer programs relating to the business or operations of the
Company and its Related Entities which are developed by Employee during
Employee's employment hereunder, including each program and announcement
prepared for broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that
neither Employee nor, to the best of Employee's knowledge, information and
belief, any other person, has accepted or agreed to accept, or has paid or
provided or agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee further
represents and warrants that, during Employee's employment, Employee shall
comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger,
consolidation, dissolution or reorganization of the Company (including but not
limited to any reorganization where the Company is not the surviving or
resulting entity), or any transfer of all or substantially all of the assets of
the Company, the provisions of this Agreement shall inure to the benefit of and
shall be binding upon the surviving or resulting partnership or the
Page 10 of 14
<PAGE>
corporation (or other entity) or person(s) to which such assets shall be
transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy. Without limiting the generality of
the foregoing, Employee agrees that, in addition to all other rights and
remedies available at law or in equity, the Company shall be entitled to
enforcement of this Agreement in accordance with the principles of equity, the
remedy at law being hereby agreed and acknowledged by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
(b) If to the Company, addressed to:
Metro Traffic Control, Inc.
2800 Post Oak Blvd., Suite #4000
Houston, Texas 77056
Attention: President
Page 11 of 14
<PAGE>
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as to such jurisdiction be
deemed ineffective and deleted herefrom without affecting any other provision of
this Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable, the parties hereby agree and consent
that such provision shall be reformed to make it a valid and enforceable
provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all exhibits referred to
herein are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(A) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(B) SPONSOR(S). Any and all advertisers (including their subsidiaries
and affiliates) whose commercial material is to be or is incorporated in any one
or more programs or announcements, live or recorded, broadcast over the
facilities of the Company or by the Company.
(C) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities) that
directly or indirectly controls, is controlled by, or is under common control
with the Company (or its successor or assign). The term "entity" as used in
this Section 20(c) means an individual, corporation, partnership, joint venture,
limited liability partnership or limited liability company, trust,
unincorporated organization, association or other entity whose principal
business is gathering, disseminating or reporting traffic, news, video news,
sports, weather or other information or the sale or packaging of Competitive
Broadcast Advertising Vehicles. As used in this Section 20(c), the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a person or entity,
whether through the ownership of voting securities, by contract or otherwise.
Page 12 of 14
<PAGE>
(D) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than two radio stations in any one CMSA.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and
does hereby irrevocably waive the right to file any complaints against the
Company with any federal, state or local agencies, including but not limited to,
the Equal Employment Opportunity Commission, and the Texas or other state
Commission on Human Rights or to file any claim, institute litigation or other
legal action based on the employment relationship or any activity covered by the
terms of this agreement. The Employee agrees and acknowledges that in exchange
for the relinquishment of those rights that any dispute, controversy or claim
arising out of this Agreement, except for the injunctive relief provided for in
paragraphs 8 and 9 above, or the employment relationship between Employee and
the Company shall be finally settled by arbitration in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement and judgment upon the award
may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their respective heirs, executors,
successors and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the subject matter covered hereby and may be amended, waived or
terminated only by an instrument in writing executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and
Page 13 of 14
<PAGE>
this Agreement shall have no binding effect until execution hereof by both the
Company and Employee.
26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall
be interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the 31st day of
March 1997 to be EFFECTIVE FOR ALL PURPOSES as of the Effective Date.
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /s/ Shane E. Coppola
-----------------------------
Printed Name: Shane E. Coppola
Title: Executive Vice President
"EMPLOYEE"
D. Patrick LaPlatney
---------------------------------
D. Patrick LaPlatney
Address: 1943 S. Wendover Rd.
Charlotte, NC 28211
Page 14 of 14
<PAGE>
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is entered into by and between John
Tomlinson ("Employee") and METRO NETWORKS COMMUNICATIONS, INC., a Maryland
corporation with its principal office located in Harris County, Texas (the
"Company").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales force,
selling broadcast and other advertising, and developing, producing and
broadcasting traffic, news, sports, weather and other information reports
throughout the United States; and
WHEREAS, Employee has extensive management, marketing and operations
experience; and
WHEREAS, the Company desires to engage the services of Employee to
serve as a Senior Vice President-News of the Company on the terms and
conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee
accepts such employment, and agrees to devote Employee's full time and efforts
to the interests of the Company upon the terms and conditions hereinafter set
forth.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on January 1, 1998 the effective date (the "Effective Date") and shall
continue in effect until December 31, 1999 (the "Term"); provided, however, the
Company shall have the right to terminate this Agreement on December 31, 1998 by
giving the Employee written notice of such termination at least sixty (60) days
prior to such date. Unless otherwise terminated pursuant hereto, if Employee
continues to be employed by the Company after the Term, then Employee's
employment shall be deemed to continue on a month-to-month basis until such time
as either party shall deliver written notice to the other party and this
Agreement shall terminate thirty (30) days after the giving of such notice.
Except as otherwise set forth herein, if either party
<PAGE>
hereto desires to terminate this Agreement at the end of the Term or thereafter,
the same thirty (30) days prior written notice shall apply. The period from the
Effective Date through the date thirty (30) days from the date any notice of
termination referred to above is delivered is hereinafter referred to as the
"Employment Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as a Senior
Vice President- News of the Company or in such other position as is determined
from time to time by the Chief Executive Officer or President of the Company,
the Board of Directors of the Company or the Company's parent company's Board of
Directors (the "Board of Directors") or their designee. Subject to the
direction of the Chief Executive Officer or President of the Company, the Board
of Directors or their designee, Employee shall perform such duties as from time
to time may be delegated to Employee by the Chief Executive Officer, the
President, the Board of Directors, or their designee. Employee shall devote all
of Employee's professional time, energy and ability to the proper and efficient
conduct of the Company's business. Employee shall observe and comply with all
reasonable lawful directions and instructions by and on the part of the Chief
Executive Officer, the President, the Board of Directors or their designee and
endeavor to promote the interests of the Company and not at any time do anything
which may cause or tend to be likely to cause any loss or damage to the Company
in business, reputation or otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's business, as reasonably specified from time
to time by the Chief Executive Officer, the President, the Board of Directors or
their designee. Subject to the foregoing, Employee's specific responsibilities
shall include matters relating to the Company's news products. The Company may,
in its sole discretion, restrict, expand, change or otherwise alter the
Employee's duties, title, or responsibilities.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty. Employee further acknowledges that
any contracts or agreements, other than the Company's standard forms without any
Page 2
<PAGE>
alterations, modifications or deletions, must be reviewed by the Company's Chief
Executive Officer, President, Executive Vice President or General Counsel, prior
to submitting such contract or agreement to an employee, affiliate, sponsor or
any other party for execution, discussion or any other reason.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(A) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "Base Salary") of Sixteen
Thousand Six Hundred and Sixty-Six Dollars and Sixty-Seven Cents ($16,666.67).
Employee's Base Salary shall be payable semi-monthly in arrears on the tenth day
and on the twenty-fifth day of each calendar month or such other date in
conformity with the Company's payroll policies in effect from time to time. The
Base Salary shall increase five (5%) percent per annum during the Term on the
anniversary of the Effective Date.
(B) BONUS. Employee shall be eligible for a cash bonus of up to
Twenty-Five (25%) percent of Employee's Base Salary in the sole and absolute
discretion of the Board of Directors or its Compensation Committee or their
designee.
(C) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at Employee's own expense and without
reimbursement by the Company. Employee agrees that no travel expense will be
reimbursed unless booked through the Company's travel department.
Page 3
<PAGE>
6. BENEFITS.
(A) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(B) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right, if
exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving notice thereof to Employee in the event of any of the
following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof), (B) willfully breached any statutory or common law duty;
or (C) breached Section 3(c) or 3(d) of this Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in conduct which
would injure the reputation of the Company or otherwise adversely affect
its interest if Employee were retained as an employee of the Company;
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in applicable disability insurance policies)
to carry out or to perform the duties required of Employee hereunder for a
continuous period of ninety (90) days; provided, however, that Employee's
compensation during any period in which Employee is unable to perform the
duties required of Employee hereunder shall be reduced in accordance with
the Company's policies and by any disability payments (excluding any
reimbursements for medical expenses and the like) which Employee is
entitled to receive under group or other disability insurance policies of
the Company during such period;
Page 4
<PAGE>
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or obligations of any other
noncompetition and/or confidentiality agreements entered into between
Employee and the Company, or the Company's Related Entities (as defined in
Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee. Employee acknowledges that the
Company's business and Employee's responsibilities are nationwide. The
confidential information and trade secrets expected to be divulged to Employee
shall include information and trade secrets regarding the Company's business and
operations nationwide.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any
Page 5
<PAGE>
person, association, trust, partnership, joint venture, registered limited
liability partnership or limited liability company, corporation or other entity,
in any business in competition with that carried on by the Company or its
Related Entities. Employee shall not, without the Company's prior written
consent, engage in any activity during Employee's employment that would conflict
with, interfere with, impede or hamper the performance of Employee's duties for
the Company or would otherwise be prejudicial to the Company's business
interests. Employee shall refrain from any offensive or distasteful remarks or
conduct in performance of Employee's duties and shall faithfully comply to the
best of Employee's ability with all of the Company's decisions relating to on-
the-air material and the manner of delivering or using same. Employee shall not
commit any act or become involved in any situation or occurrence that, in the
Company's reasonable judgment, could tend to bring Employee or the Company into
public disrepute, contempt, scandal or ridicule, could provoke, insult or offend
the community or any group or class thereof, or could reflect unfavorably upon
the Company or any of its Sponsors or Corporate Affiliates. Employee shall
comply with all applicable laws and regulations governing the Company and its
business, including without limitation, regulations promulgated by the Federal
Communications Commission or any other regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"Noncompetition Period"), regardless of cause, Employee will not engage in or
carry on, directly or indirectly, either for Employee or as a member of an
association, trust, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (other than as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation, whose gross assets exceed $100,000,000), or as an
investor, officer or director of a corporation, or as an employee, agent,
trustee, associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the CMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business engaged in by the Company (or any
Related Entity) on the date of termination of employment as provided herein. The
activities of Employee sought to be restricted by the provisions of this Section
8(c) shall include, without limitation, (i) the management or operation of a
traffic, news, weather, sports or other information report gathering and
broadcast service, (ii)
Page 6
<PAGE>
soliciting Sponsors and dealing with accounts with respect thereto, (iii)
soliciting Corporate Affiliates to enter into any contract or arrangement with
any person or organization to provide traffic, news, weather, sports or other
information report gathering or broadcast services, (iv) broadcasting traffic,
news, weather or sports reports on television or radio, (v) the sale or
packaging of Competitive Broadcast Advertising Vehicles, as that term is defined
in Section 20 and (vi) forming or providing operational assistance to any
business or a division of any business engaged in the foregoing activities.
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on
Employee's activities specified herein, are reasonable and necessary for the
protection of the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that the Company shall be entitled to
injunctive relief (without bond or other undertaking).
(i) Employee and Company agree that to the extent a court of competent
jurisdiction or appropriate arbitral tribunal finds any of the foregoing
covenants to be overly broad based on applicable law, then the parties agree
that the court shall reform
Page 7
<PAGE>
the covenants to the extent necessary to cause such covenants to be reasonable
and enforce such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities, its strategic plans and its trade secrets), and further, that
Employee will return to the Company all written materials in Employee's
possession embodying such Confidential Information. For purposes of this
Agreement, "Confidential Information" means information obtained by Employee
during Employee's employment relationship with the Company which concerns the
affairs of the Company or its Related Entities and which the Company has
requested be held in confidence or could reasonably be expected to desire to be
held in confidence, or the disclosure of which would likely be embarrassing,
detrimental or disadvantageous to the Company or its Related Entities.
Confidential Information shall also include the terms of this Agreement (except
with respect to Employee's legal and tax advisors). Confidential Information,
however, shall not include information which Employee can show by written
document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through
no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to
Page 8
<PAGE>
injunctive or other equitable relief (without bond or undertaking) in any
proceeding which may be brought to enforce any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
11. WORK FOR HIRE. Employee agrees that any ideas, concepts,
techniques, or computer programs relating to the business or operations of the
Company and its Related Entities which are developed by Employee during
Employee's employment hereunder, including each program and announcement
prepared for broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that
neither Employee nor, to the best of Employee's knowledge, information and
belief, any other person, has accepted or agreed to accept, or has paid or
provided or agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee further
represents and warrants that, during Employee's employment, Employee shall
comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger,
consolidation, dissolution or reorganization of the Company
Page 9
<PAGE>
(including but not limited to any reorganization where the Company is not the
surviving or resulting entity), or any transfer of all or substantially all of
the assets of the Company, the provisions of this Agreement shall inure to the
benefit of and shall be binding upon the surviving or resulting partnership or
the corporation (or other entity) or person(s) to which such assets shall be
transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy. Without limiting the generality of
the foregoing, Employee agrees that, in addition to all other rights and
remedies available at law or in equity, the Company shall be entitled to
enforcement of this Agreement in accordance with the principles of equity
(without bond or undertaking), the remedy at law being hereby agreed and
acknowledged by Employee to be inadequate. Employee agrees to pay all costs and
reasonable attorneys' fees incurred by the Company to enforce its rights under
this Agreement, or in any litigation or controversy arising from or connected
with this Agreement.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
Page 10
<PAGE>
(b) If to the Company, addressed to:
Metro Networks Communications, Inc.
2800 Post Oak Blvd., Suite #4000
Houston, Texas 77056
Attention: President
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as to such jurisdiction be
deemed ineffective and deleted herefrom without affecting any other provision of
this Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable, the parties hereby agree and consent
that such provision shall be reformed to make it a valid and enforceable
provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all exhibits referred to
herein are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(A) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has or had a contract or other arrangement to provide traffic,
news, weather, sports or other information, whether by broadcast, computer or
any other means.
(B) SPONSOR(S). Any and all client advertisers of the Company
(including their subsidiaries and affiliates) including without limitation
advertisers whose commercial material is to be, is or was incorporated in any
one or more of the Company's programs or announcements, live or recorded,
broadcast over the facilities of the Company, by the Company, or pursuant to an
arrangement with a Corporate Affiliate.
(C) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities) that
directly or indirectly controls, is controlled by, or is under common control
with the Company (or its successor or assign). The term "entity" as used in
this Section 20(c) means an individual, corporation, partnership, joint venture,
limited liability partnership or limited liability company, trust,
unincorporated organization, association or other entity whose principal
business is gathering, disseminating or reporting
Page 11
<PAGE>
traffic, news, sports, weather or other information or the sale or packaging of
Competitive Broadcast Advertising Vehicles. As used in this Section 20(c), the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
(D) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to thirty second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before, within or after any such programming, or in connection with such
programming, and (ii) it is offered for sale in a package including the
broadcast of such commercial mentions or identification as a Sponsor of any such
programming on more than two radio stations in any one CMSA.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and
does hereby irrevocably waive the right to file any complaints against the
Company with any federal, state or local agencies, including but not limited to,
the Equal Employment Opportunity Commission, and the Texas or other state
Commission on Human Rights or to file any claim, institute litigation or other
legal action based on the employment relationship or any activity covered by the
terms of this agreement. The Employee agrees and acknowledges that in exchange
for the relinquishment of those rights that any dispute, controversy or claim
arising out of this Agreement, or the employment relationship between Employee
and the Company, except for equitable relief sought by the Company in aid of
arbitration, shall be finally settled by arbitration in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement and judgment upon the award
may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto , their respective heirs, executors,
successors and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the
Page 12
<PAGE>
parties with respect to the subject matter hereof. This Agreement contains the
entire agreement of the parties with respect to the subject matter covered
hereby and may be amended, waived or terminated only by an instrument in writing
executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall
be interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the 24th day of
December 1997 to be EFFECTIVE FOR ALL PURPOSES as of the Effective Date.
"COMPANY"
METRO NETWORKS COMMUNICATIONS, INC.
By: /s/ TM McCollum
-----------------------------
Printed Name: TM McCollum
-------------------
Title: Vice President H R
--------------------------
"EMPLOYEE"
/s/ John R. Tomlinson
---------------------------------
John Tomlinson
Address: 1230 N. State Pkwy #20A
--------------------------
Chicago, IL 60610
<PAGE>
EXHIBIT 10.23
AMENDMENT TO
EMPLOYMENT AGREEMENT
BETWEEN METRO TRAFFIC CONTROL, INC. AND GARY L. WOROBOW
The following, upon execution by the parties hereto shall constitute an
amendment to the Employment Agreement entered into by and between Metro Traffic
Control, Inc. (the "Company") and Gary Worobow ("Employee"), dated July, 1996
(the Agreement").
1. Section 4(a) of the Agreement relating to Base Salary (as defined in the
Agreement) shall be amended and restated as follows:
"(A) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "Base Salary") of NINE
THOUSAND SEVEN HUNDRED and NINETY ONE Dollars and SIXTY-SEVEN Cents ($9,791.67).
Commencing July 1, 1997, such monthly Base Salary shall increase to TWELVE
THOUSAND FIVE HUNDRED Dollars and NO Cents ($12,500.00). Commencing January 1,
1998, such monthly Base Salary shall increase to FIFTEEN THOUSAND FOUR HUNDRED
AND SIXTEEN Dollars and SIXTY-SEVEN Cents ($15,416.67). Employee's Base Salary
shall be payable semi-monthly in arrears on the tenth day and on the twenty-
fifth day of each calendar month or such other date in conformity with the
Company's payroll policies in effect from time to time. The Base Salary shall
increase five (5%) percent each year during the Term on the anniversary of the
closing of the Public Offering. Such increase shall be based upon the current
Base Salary on such anniversary dates."
2. All other provisions of the Agreement shall remain unmodified and in full
force and effect.
IN WITNESS WHEREOF, this Amendment is EXECUTED as of the 1st day of July, 1997.
METRO TRAFFIC CONTROL, INC. EMPLOYEE
BY: /S/ DAVID I. SAPERSTEIN /S/ GARY WOROBOW
-------------------------- ---------------------
NAME: GARY WOROBOW
TITLE:
<PAGE>
Exhibit 10.24
FIRST AMENDMENT
TO
CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is dated
as of the 30th day of September 1997, and entered into among METRO NETWORKS,
INC., a Delaware corporation (the "Borrower"), the Lenders party thereto, and
NATIONSBANK OF TEXAS, N.A., a national banking association, individually and as
Administrative Lender (in such latter capacity, the "Administrative Lender").
WITNESSETH:
WHEREAS, the Borrower, the Lenders, and the Administrative Lender entered
into a Credit Agreement, dated as of October 22, 1996, for a loan facility in
the amount of $30,000,000 (as amended, restated, waived or otherwise modified
from time to time, the "Credit Agreement"); and
WHEREAS, the Lenders, the Administrative Lender, and the Borrower have
agreed to amend the Credit Agreement to make certain changes to the terms
therein upon the terms and conditions set forth below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Borrower, the Lenders and the Administrative Lender agree as follows:
SECTION 1. Definitions. Unless specifically defined or redefined below,
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement.
SECTION 2. Amendment to Schedules and Exhibits. The table of Schedules
and Exhibits to the Credit Agreement on page v of the Credit Agreement shall be
amended to add to the end of the list of Exhibits "Exhibit I: Form of
Application for Letters of Credit".
SECTION 3. Addition of the definition of "Application". The definition of
"Application" shall be added to Article 1 in alphabetical order on page 3 of the
Credit Agreement as follows:
"Application" means that certain standard form application for letters of
credit from NationsBank of Texas, N.A. the form of which is attached hereto as
Exhibit I.
<PAGE>
SECTION 4. Amendment to Section 2.16(b) of the Credit Agreement. Section
2.16(b) on page 29 of the Credit Agreement shall be deleted in its entirety and
the following Section 2.16(b) shall be substituted in its stead:
(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. Prior to such issuance, the Borrower
shall deliver an executed and delivered Application providing for the
issuance of Letters of Credit (a "Letter of Credit Agreement"), provided
that if any terms and conditions of the Application 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 hereof or as otherwise agreed with the Borrower in connection
with such issuance.
SECTION 5. Amendment to Section 3.2 of the Credit Agreement. Section 3.2
on page 37 of the Credit Agreement shall be deleted in its entirety and the
following Section 3.2 shall be substituted in its stead:
Section 3.2 Conditions Precedent to All Advances and Letters of
Credit. The obligation of each Lender to make each Advance except any
Refinancing Advance, and the obligation of the Issuing Bank to issue each
Letter of Credit (including the initial Letter of Credit) hereunder is
subject to fulfilment of the following conditions immediately prior to or
contemporaneously with each such Advance or issuance:
(a) With respect to Advances other than Refinancing Advances and
each issuance of a Letter of Credit (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 of issuance, shall be true and
correct at such time in all material respects, both before and after
giving effect to the application of the proceeds of the Advance or
issuance;
(b) The incumbency of the Authorized Signatories and other
officers shall be as stated in the certificate of incumbency delivered
in the certificate
2
<PAGE>
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 or and Event of Default
hereunder, with respect to Advances other than Refinancing Advances
and with respect to issuance of each Letter of Credit;
(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;
(e) The Borrower shall have executed and delivered a Letter of
Credit Agreement with respect to any request for any Letter of Credit;
and
(f) 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.
SECTION 6. Amendment to Section 7.3(h) of the Credit Agreement. Section
7.3(h) on page 55 of the Credit Agreement shall be deleted in its entirety and
the following Section 7.3(h) shall be substituted in its stead:
(h) Other Investments primarily related the Borrower's Business not
to exceed $573,678.00 in aggregate purchase price amount, provided that no
Default exists prior to or after giving effect to the purchase of any such
Investment.
SECTION 7. Amendment to Section 7.6 of the Credit Agreement. Section 7.6
on page 56 of the Credit Agreement shall be deleted in its entirety and the
following Section 7.6 shall be substituted in its stead:
Section 7.6 Acquisitions. The Borrower shall not, and shall not
permit any Subsidiary to, make any Acquisition except
3
<PAGE>
(a) single Acquisitions, the Acquisition Consideration for
which does not exceed $3,500,000 and so long as in any fiscal year the
aggregate Acquisition Consideration paid by the Borrower and the
Subsidiaries for all Acquisitions during such fiscal year does not
exceed $7,500,000 and
(b) single Acquisitions the aggregate Acquisition Consideration
for which equal or exceeds $3,500,000, if each Lender receives
financial projections in form and substance acceptable to the Lenders
and demonstrating compliance with (i) the covenants described in
Section 6.3(a) hereof and (ii) 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 Maturity Date;
and, in the case of each permitted Acquisition set forth above, only so
long as in each such case (A) the Lenders shall have received prior written
notice at least 30 Business Days prior to the date of such transaction, (B)
the Administrative Lender shall have received at least 10 Business Days
prior to the date of such transaction a Compliance Certificate in the form
required by Section 6.3 hereof, but setting forth the covenant calculations
described in Section 6.3(a) hereof both prior to and after giving effect to
the proposed transaction, (C) no Default or Event of Default shall exist
prior to or after such Acquisition, (D) the Person who is, or whose assets
are being, acquired is engaged in the Borrower's Business, (E) the capital
stock, partnership interests and Intercompany Notes, as applicable, of the
Subsidiary being acquired are pledged pursuant to the appropriate Pledge
Agreement, (F) the assets of the Subsidiary being acquired, or the assets
being acquired, are pledged pursuant to the appropriate Security Agreement
and (G) the Subsidiary being acquired becomes party to a Subsidiary
Guaranty.
SECTION 8. Amendment to Section 7.11 of the Credit Agreement. Section
7.11 on page 58 of the Credit Agreement shall be deleted in its entirety and the
following Section 7.11 shall be substituted in its stead:
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 1.00
From July 1, 1997 through March 31, 1998 1.00 to 1.00
From April 1, 1998 and thereafter 1.35 to 1.00
4
<PAGE>
SECTION 9. Amendment to Section 11.6(d) of the Credit Agreement. Section
11.6(d) on page 72 of the Credit Agreement shall be deleted in its entirety and
the following Section 11.6(d) shall be substituted in its stead:
(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 Document; 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, Advance 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 and
(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. 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 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.
SECTION 10. Addition of Exhibit I. The Credit Agreement shall be amended
to add Exhibit I thereto, such Exhibit I to be in the form attached to this
First Amendment as Exhibit I.
SECTION 11. Affirmation. The Borrower hereby acknowledges and agrees that
nothing in this First Amendment shall affect the Borrower's obligations under
the Credit Agreement or the other Loan Documents executed in connection
therewith (except as specifically provided in this First Amendment), which
remain valid, binding and enforceable, and except as amended hereby, unamended,
or shall constitute a waiver by the Lenders of any of their rights or
5
<PAGE>
remedies, now or at any time in the future, with respect to any requirement
under the Credit Agreement or other Loan Documents or with respect to an Event
of Default or Default, occurring now or at any time in the future.
SECTION 12. Conditions Precedent. This First Amendment shall not be
effective until:
(a) all proceedings of the Borrower taken in connection with this
First Amendment and the transactions contemplated hereby shall be
satisfactory in form and substance to the Administrative Lender and Lenders
signatory hereto, and the Administrative Lender shall have received copies
of incumbency certificates, and
(b) the Administrative Lender and Lenders shall have each received
such documents, instruments, and certificates, etc., each in form and
substance satisfactory to the Lenders, as the Lenders shall deem necessary
or appropriate in connection with this First Amendment and the transactions
contemplated hereby.
SECTION 13. Representations and Warranties. The Borrower represents and
warrants to the Lenders and the Administrative Lender that (a) the Borrower has
the corporate power and has taken all necessary corporate action, to authorize
it to enter into and deliver this First Amendment and all related documentation,
(b) this First Amendment constitutes its legal, valid, and binding obligations,
enforceable in accordance with the terms hereof (subject as to enforcement of
remedies to any applicable bankruptcy, reorganization, moratorium, or other laws
or principles of equity affecting the enforcement of creditors' rights
generally), (c) there exists no Event of Default or Default under the Credit
Agreement after giving effect to this First Amendment, (d) its representations
and warranties set forth in the Credit Agreement and other Loan Documents are
true and correct on the date hereof after giving effect to this First Amendment,
(e) it has complied with all agreement and conditions to be complied with by it
under the Credit Agreement and the other Loan Documents by the date hereof, (f)
the Credit Agreement, as amended hereby, and the other Loan Documents remain
in full force and effect, and (g) no notice, or consent of, any Person is
required under the terms of any agreement of the Borrower in connection with
the execution of this First Amendment.
SECTION 14. Further Assurances. The Borrower shall execute and deliver
such further agreements, documents, instruments, and certificates in form and
substance satisfactory to the Administrative Lender, as the Administrative
Lender or any Lender may deem reasonably necessary or appropriate in connection
with this First Amendment.
SECTION 15. Counterparts. This First Amendment and the other Loan
Documents may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument. In making proof of any
such agreement, it shall not be necessary to produce or account for any
counterpart other than one signed by the party against which enforcement is
sought.
6
<PAGE>
SECTION 16. 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 AGREE 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 AGREES THAT
THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS FIRST AMENDMENT AND THE
OTHER LOAN DOCUMENTS.
SECTION 17. 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 FIRST
AMENDMENT AND MAKING ANY ADVANCES HEREUNDER.
SECTION 18. ENTIRE AGREEMENT. THIS FIRST AMENDMENT 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.
================================================================================
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
================================================================================
7
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executed as
of the date first set forth above.
BORROWER: METRO NETWORKS, INC.
/s/ TIM MCMILLIN
________________________________________
By: Tim McMillin
Its: Senior Vice President and Chief
Financial Officer
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
________________________________________
By: Whitney L. Busse
Its: Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A., as a Lender
________________________________________
By: Whitney L. Busse
Its: Vice President
THE BANK OF NOVA SCOTIA, as a Lender
________________________________________
By:_____________________________________
Its:____________________________________
IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executed as
of the date first set forth above.
BORROWER: METRO NETWORKS, INC.
________________________________________
By: Tim McMillin
Its: Senior Vice President and Chief
Financial Officer
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
/s/ WHITNEY L. BUSSE
________________________________________
By: Whitney L. Busse
Its: Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A., as a Lender
/s/ WHITNEY L. BUSSE
________________________________________
By: Whitney L. Busse
Its: Vice President
THE BANK OF NOVA SCOTIA, as a Lender
________________________________________
By:_____________________________________
Its:____________________________________
IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executed as
of the date first set forth above.
BORROWER: METRO NETWORKS, INC.
________________________________________
By: Tim McMillin
Its: Senior Vice President and Chief
Financial Officer
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
________________________________________
By: Whitney L. Busse
Its: Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A., as a Lender
________________________________________
By: Whitney L. Busse
Its: Vice President
THE BANK OF NOVA SCOTIA, as a Lender
/s/ VINCENT J. FITZGERALD, JR.
________________________________________
By: Vincent J. Fitzgerald, Jr.
Its: Authorized Signatory
8
<PAGE>
Each of the following signatories has reviewed the First Amendment and hereby
acknowledges the First Amendment and affirms that each Subsidiary Security
Agreement, Subsidiary Pledge Agreement, Subsidiary Guaranty and each other Loan
Document executed by such Subsidiary respectively, constitutes its legal,
valid, and binding obligation, enforceable in accordance with the terms thereof
(subject as to enforcement of remedies to any applicable bankruptcy,
reorganization, moratorium, or other laws or principles of equity affecting the
enforcement of creditors' rights generally).
METRO TRAFFIC CONTROL, INC.
/s/ TIMOTHY D. MCMILLIN
___________________________________
By: Timothy D. McMillin
Its: SVP and CFO
WASHINGTON NEWS NETWORK, INC.
/s/ TIMOTHY D. MCMILLIN
___________________________________
By: Timothy D. McMillin
Its: SVP and CFO
9
<PAGE>
EXHIBIT I
FORM OF APPLICATION FOR LETTERS OF CREDIT
10
<PAGE>
EXHIBIT 1
<TABLE>
<CAPTION>
APPLICATION AND AGREEMENT
NATIONSBANK FOR STANDBY LETTER OF CREDIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LETTER OF CREDIT DEPARTMENT Letter of Credit Number Date
Please issue an Irrevocable Letter of Credit in (For NationsBank use only)
favor of the Beneficiary substantially as shown
below and deliver the Credit by
[_] Regular Mail [_] Airmail [_] Courier [_] Teletransmission
- ------------------------------------------------------------------------------------------------------------------------------------
Applicant (full name and mailing address) BENEFICIARY (full name and mailing address; if courier delivery
requested, full street address must be provided)
For Account of (if different from Applicant)
- ------------------------------------------------------------------------------------------------------------------------------------
Advising Bank (if left blank, NationsBank will choose as Amount (in figures and words)
appropriate)
Currency (if left blank, U.S. dollars will apply)
-----------------------------------------------------------------------
Expiry Date (draft must be presented to drawee or for negotiation
[when negotiable] on or before)
- ------------------------------------------------------------------------------------------------------------------------------------
Available by draft(s) at SIGHT drawn at NationsBank's option, on NationsBank or NationsBank's correspondent when accompanied by the
following document(s): (Please check the documents and fill in the blanks below as applicable)
[_] A written statement purportedly signed by (if left blank the Beneficiary) __________________________ with the following wording:
Quote ______________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________ Close Quote
[_] Other
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
[_] Issue as per attached exhibit marked exhibit ____________________________ (exhibit must be signed by the Applicant and becomes
an integral part of this Application).
</TABLE>
<PAGE>
NOTE: If the Credit provides for automatic renewal without amendment, Applicant
agrees that it will notify NationsBank in writing at least sixty 60 days prior
to the last day specified in the Credit by which NationsBank must give notice of
nonrenewal as to whether or not it wishes the Credit to be renewed. Any decision
to renew or not renew the Credit shall be in NationsBank's sole discretion.
Applicant hereby acknowledges that in the event NationsBank notifies the
Beneficiary of the Credit that it has elected not to renew the Credit, the
Credit may be drawn on if permitted by the terms of the Credit and further
acknowledges and agrees that Applicant shall have no claim or cause of action
against NationsBank or defense against payment under the Agreement for
NationsBank's renewal or non-renewal of the Credit in the exercise of
NationsBank's discretion as set forth above.
Multiple Drawings [_] PROHIBITED (permitted if left blank)
- --------------------------------------------------------------------------------
Special instructions to NationsBank NOT TO BE INCLUDED IN THE CREDIT (if any):
- --------------------------------------------------------------------------------
The terms and conditions set out above and below, and any attached exhibits,
supplements or schedules referred to in this Application, have been reviewed by
Applicant, and by Applicant's signature below and for good and valuable
consideration. Applicant agrees to the same and to be obligated and liable under
the Agreement. In the event this Application requests an Account Party different
from Applicant, then such party will sign below as Co-Applicant.
COMPLETION AND SUBMITTAL OF THIS APPLICATION BY APPLICANT DOES NOT OBLIGATE
NATIONSBANK TO ENTER INTO THE AGREEMENT OR ISSUE THE REQUESTED CREDIT.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<TABLE>
<CAPTION>
<S> <C>
________________________________________________________________ _________________________________________________________________
Name of Company, or signature if Applicant is an individual Name of Company, or signature if Co-Applicant is an individual
By _____________________________________________________________ By ______________________________________________________________
Authorized Signature/Title Authorized Signature/Title
________________________________________________________________ _________________________________________________________________
Address Address
________________________________________________________________ _________________________________________________________________
________________________________________________________________ _________________________________________________________________
________________________________________________________________ _________________________________________________________________
Telephone Fax Telephone Fax
________________________________________________________________ _________________________________________________________________
Date Date
====================================================================================================================================
BANK USE ONLY
____________________________________________________________________________________________________________________________________
Approving NationsBank Officer - Signature Approving NationsBank Officer - Printed Officer Number
____________________________________________________________________________________________________________________________________
Officer - Title Officer - Interoffice Address Cost Center Number
____________________________________________________________________________________________________________________________________
Officer Telephone Number (area code and number) Purpose Code Officer Fax (area code and number)
====================================================================================================================================
Standard Letter 1: _________________________________________________________ by (Swift/telex/mail/fax)
Standard Letter 2: _________________________________________________________ by (Swift/telex/mail/fax)
Standard Letter 3: _________________________________________________________ by (Swift/telex/mail/fax)
</TABLE>
<PAGE>
1. DEFINITIONS.
In the Agreement:
(1) "Agreement" means the Application, the terms and conditions set out above
and below, and the Credit, together with any and all modifications, amendments
and extensions of any thereof.
(2) "Applicable Interest Rate" means, unless otherwise defined in and governed
by a separate agreement between NationsBank and Applicant, the lesser of the
maximum lawful rate permitted by applicable law or a per annum rate (calculated
on the basis of a 360 day year) equal to the sum of the prime rate of interest
established by NationsBank from time to time (which is not necessarily the
lowest or best rate of interest charged by NationsBank to any of its customers)
plus three percent.
(3) "Applicant" means, singularly or collectively, and, if more than one,
jointly and severally, each person or entity who has executed the Application as
Applicant or Co-Applicant.
(4) "Application" means the foregoing application of Applicant relating to the
Credit as such application may be amended or modified from time to time in
accordance herewith.
(5) "Credit" or "Letter of Credit" means the letter of credit issued pursuant to
the Application as it may be amended or modified from time to time in accordance
herewith.
(6) "Instrument" means the Credit or any draft, receipt, acceptance or written
demand (to include teletransmissions) for payment under the Credit.
(7) "NationsBank" means the banking subsidiary of NationsBank Corporation that
issues the Credit in the sole discretion of NationsBank.
(8) "property" means goods and any and all documents related thereto,
securities, funds, choses in action, and any and all other forms of property,
whether real, personal or mixed and any right or interest therein.
2. PROMISE TO PAY.
(a) As to instruments drawn under or purporting to be drawn under the Credit,
which are payable in United States currency: (i) in the case of each sight
instrument, Applicant will reimburse NationsBank, at the address specified by
NationsBank to Applicant, on demand, in United States currency, the amount paid
thereon, or, if so demanded by NationsBank, will pay to NationsBank in advance
the amount required to pay the same; and (ii) in the case of each time
instrument, Applicant will pay to NationsBank, at the address specified by
NationsBank to Applicant, in United States currency, the amount thereof, on
demand but in any event not later than one business day prior to maturity of
such time instrument at the place specified by the Credit for payment.
(b) As to instruments drawn under or purporting to be drawn under the Credit,
which are payable in currency other than United States currency: (i) in the case
of each sight instrument, Applicant will reimburse NationsBank, at the address
specified by NationsBank to Applicant, on demand, in United States currency, the
equivalent of the amount paid under the instrument at NationsBank's then current
selling rate of exchange for teletransmission to the place of payment in the
currency in which such instrument is payable, or, if so demanded by NationsBank,
will pay to NationsBank, in advance, in United States currency, the equivalent
of the amount required to pay the same; and (ii) in the case of each time
instrument, Applicant will pay to NationsBank, at the address specified by
NationsBank to Applicant, on demand but in any event sufficiently in advance of
maturity of such time instrument to enable NationsBank to arrange for cover to
reach the place of payment not later than three business days prior to maturity,
the equivalent of the time instrument United States currency at NationsBank's
then current selling rate of exchange for teletransmission to the place of
payment in the currency in which such instrument is payable. If for any cause
whatsoever there exists at the time in question no rate of exchange generally
current for effecting transfers as above described, or such currency is not
available for purchase by NationsBank, Applicant agrees to pay NationsBank on
demand, at NationsBank's election, (i) an amount in United States currency
equivalent to the actual cost to NationsBank of settlement of NationsBank's
obligation to the holder of the instrument or other person, however and whenever
such settlement shall be made by NationsBank, or (ii) an amount in United States
currency equivalent to the estimated cost to NationsBank, as projected by
NationsBank, of the future settlement of NationsBank's obligation to the holder
of the instrument or other person, provided that upon the actual settlement of
NationsBank's obligation, however and whenever occurring, NationsBank shall
reimburse Applicant or Applicant shall pay to NationsBank, as the case may be,
an amount in United States currency equal to the difference between the initial
estimated payment by Applicant to NationsBank and the actual settlement amount
paid by NationsBank.
(c) NationsBank may accept or pay any instrument presented to it, regardless of
when drawn and whether or not negotiated, if such instrument, the other required
documents and any transmittal advice are dated on or before the expiration date
of the Credit, and NationsBank may honor, as complying with the terms of the
Credit and of the Agreement, any instruments or other documents otherwise in
order signed or issued by any person who is, or is in good faith believed by
NationsBank to be, an administrator, executor, trustee in bankruptcy, debtor in
possession, conservator, assignee for the benefit of creditors, liquidator,
receiver or other legal representative or successor by operation of law of the
party authorized under the Credit to draw or issue such instruments or other
documents.
3. PROMISE TO PAY INTEREST AND FEES.
(a) Applicant will pay NationsBank, on demand: (i) NationsBank's commission at
such rate as NationsBank may determine to be proper, (ii) unless actually paid
or reimbursed to NationsBank by Beneficiary or another person or entity, all
charges and expenses paid or incurred by NationsBank in connection with the
Credit, including, without limitation, reasonable attorneys' fees for the
enforcement of any rights hereunder, and (iii) interest on any amounts due by
Applicant to NationsBank hereunder from the date due to the date of payment at
the Applicable Interest Rate.
(b) No provision of the Agreement shall require the payment or permit the
collection of interest in excess of the maximum rate permitted by applicable
law.
4. CLEAN ADVANCES.
If the Application requests inclusion in the Credit of any provision for clean
advances to the Beneficiary, NationsBank may place in the Credit such a
provision in that respect as NationsBank may deem appropriate, under which any
bank entitled to negotiate drafts under the Credit, acting in its discretion in
each instance and upon the request and receipt in writing from the Beneficiary,
may make one or more clean advances at any time on or prior to the date by which
drafts are to be negotiated under the Credit. The aggregate of such advances
shall in no event be more than the amount specified in the Application for clean
advances, and whether or not specified therein in no event shall any such
advance exceed the amount remaining available under the Credit at the time of
the advance. While it is expected by Applicant that each such advance will be
repaid by the Beneficiary to the bank that made the advance from the proceeds of
any drafts drawn under the Credit, should any such advance not be thus repaid,
Applicant will on demand pay NationsBank the amounts thereof as if such advances
were evidenced by drafts drawn under the Credit. It is understood that neither
NationsBank nor any bank which may make such advances shall be obligated to
inquire into the use that may be made thereof by the Beneficiary and that
NationsBank and each such bank shall be without liability for any wrongful use
that may be made by the Beneficiary of any funds so advanced.
5. UNIFORM CUSTOMS AND PRACTICE.
The Uniform Customs and Practice for Documentary Credits, as published as of the
date of issue of the Credit by the International Chamber of Commerce (the "UCP")
shall in all respects be deemed a part hereof as fully as if incorporated herein
and shall apply to the Credit. Unless expressly provided otherwise in the
Credit, in the event any provision of the UCP is or is construed to vary from or
be in conflict with the laws of the United States of America or any state
thereof, as from time to time amended and in force, the UCP shall prevail to the
extent permitted by applicable law.
Page 3
<PAGE>
6. LICENSES AND COMPLIANCE.
Applicant will procure promptly any necessary licenses for the services
performed or the import, export or shipping of property shipped under or
pursuant or in connection with the Credit, and will comply with all foreign and
domestic laws, rules and regulations now or hereafter applicable to the
transaction related to the Credit or applicable to the execution, delivery and
performance by Applicant of the Agreement. Applicant further agrees to furnish
to NationsBank such evidence in respect of the above as NationsBank may at any
time require.
7. INSURANCE.
Applicant shall keep such property as may be the subject of the Credit
adequately covered by insurance in amounts, against risks and with companies
satisfactory to NationsBank. Applicant hereby irrevocably grants its power of
attorney to NationsBank and any of its officers, with the power of substitution
to endorse any check in the name of Applicant received in payment of any loss or
adjustment.
8. DEFAULT
(a) In the event of the happening of any one or more of the borrowing events
(any such event being hereinafter called an "Event of Default"; namely, the
nonpayment of any obligations of Applicant to NationsBank under the Agreement or
otherwise), or to any other person or entity, now or hereafter existing when
due, or (ii) the failure of Applicant to perform or observe any other term or
covenant of the Agreement, or (iii) the dissolution or termination of existence
of Applicant, or (iv) the institution by or against Applicant of any proceeding
seeking to adjudicate Applicant a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of Applicant or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian, other
similar official for Applicant or for any substantial part of its property, or
(v) any seizure, vesting or intervention by or under authority of a government
by which the management of Applicant is displaced or its authority in the
control of its business is curtailed, or (vi) the attachment of or restraint as
to any funds or other property which may be in, or come into, the possession or
control of NationsBank, or of any third party acting on NationsBank's behalf,
for the account or benefit of Applicant, or the issuance of any order of court
or other legal process against the same, or (vii) the occurrence of any of the
above event with respect to any person or entity which has guaranteed any
obligations of Applicant to NationsBank (under the Agreement or otherwise);
then, or at any time after the happening of such event, the amount of the
Credit, as well as any and all other obligations of Applicant under the
Agreement, shall, at NationsBank's option, and whether or not otherwise then due
and payable, become due and payable immediately without demand upon or notice to
Applicant.
(b) Upon the occurrence and during the continuance of any Event of Default,
NationsBank is hereby authorized to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by NationsBank or any subsidiary or
affiliate of NationsBank to or for the credit or the account of Applicant
against any and all of Applicant's obligations to NationsBank under the
Agreement, irrespective of whether or not NationsBank shall have made any demand
under the Agreement and although such deposits, indebtedness or obligations may
be unmatured or contingent. NationsBank's rights under this Section 8(b) are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which NationsBank may have.
9. SECURITY.
(a) As collateral for the payment of any and all obligations of Applicant to
NationsBank under the Agreement, Applicant hereby grants to NationsBank a
security interest in (i) any and all documents of title, policies or
certificates of insurance and other documents accompanying or related to
instruments drawn under the Credit, and any and all other property shipped under
or in connection with the Credit or in any way related thereto or to any of the
instruments drawn thereunder (whether or not such documents or property are
released to or upon the order of Applicant in trust or otherwise) and (ii) any
and all proceeds and products of the foregoing. Also to secure the payment of
any and all obligations of Applicant under the Agreement, NationsBank shall be
subrogated to the rights (but shall have none of the obligations) of Applicant
in respect of any transaction to which the Credit relates. Insofar as any
property which may be held by NationsBank, or for NationsBank's account, as
collateral hereunder may be released to or upon the order of Applicant,
Applicant hereby acknowledges that such delivery of property is in trust pending
satisfaction of Applicant's payment obligations to NationsBank, and hereby
agrees to execute and/or file such receipts, agreements, forms or other
documents as NationsBank may request to further evidence NationsBank's interests
in such property, it being understood that NationsBank's rights as specified
therein shall be in furtherance of and in addition to (but not in limitation of)
NationsBank's rights hereunder. If at any time and from time to time NationsBank
in good faith deems itself insecure and requires collateral (or additional
collateral), Applicant will, on demand, assign and deliver to NationsBank as
security for any and all obligations under the Agreement, collateral of a type
and value satisfactory to NationsBank or pledge such cash collateral as
NationsBank may require. NationsBank is hereby authorized, at its option at any
time and with or without notice to Applicant, to transfer to or register in its
name or the name of any NationsBank's nominees all or any part of the property
subject to any of the security interests granted under or contemplated by the
Agreement. NationsBank is also authorized, at its option, to file financing
statements without the signature of Applicant with respect to all or any part of
such property. Applicant will pay the cost of any such filing and, upon
NationsBank's request, sign such instruments, documents or other papers, and
take such other action, as NationsBank may reasonably require to perfect such
security interests.
(b) If any Event of Default shall have occurred and be continuing, NationsBank
may exercise in respect of the property subject to any of the security interests
granted under or contemplated by the Agreement all the rights and remedies of a
secured party on default under the applicable Uniform Commercial Code or any
other applicable law, and also may, without notice except as specified below,
sell such property or any part thereof in one or more parcels at public or
private sale, at any NationsBank office or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as NationsBank may deem commercially
reasonable. To the extent notice of sale of such property shall be required by
law, reasonable notification shall be satisfied by written notice mailed or
delivered to Applicant at the address specified above at least five business
days prior to the date of public sale or prior to the date after which private
sale is to be made. Applicant will pay to NationsBank on demand all costs and
expenses (including, without limitation, reasonable attorney's fees and legal
expenses) related or incidental to the custody, preservation or sale of, or
collection from, or other realization upon, any of such property or related or
incidental to the establishment, preservation or enforcement of NationsBank's
rights in respect of any such property. In the event of sale of, collection
from, or other realization upon all or any part of such property, NationsBank
may, in its discretion, hold the proceeds thereof as additional collateral
hereunder or then or at any time thereafter apply the proceeds thereof to the
payment of such of the costs and expenses referred to above and such of the
obligations of Applicant under the Agreement, whether or not then due, as
NationsBank may determine in its discretion, any surplus to be paid over to
Applicant or to whomever may be lawfully entitled to receive such surplus.
10. INDEMNITY.
Applicant will indemnify and hold NationsBank (such term to include for purposes
of this paragraph NationsBank's affiliates and its affiliates, officers,
directors, employees and agents) harmless from and against (i) all loss or
damage arising out of NationsBank's issuance of, or any other action taken by
NationsBank in connection with, the Credit other than loss or damage resulting
from the gross negligence or willful misconduct of the party seeking
indemnification, and (ii) all costs and expenses (including reasonable
attorney's fees and legal expenses) of all claims or legal proceedings arising
out of NationsBank's issuance of the Credit or incident to the collection of
amounts owed by Applicant hereunder or the enforcement of NationsBank's rights
hereunder, including, without limitation, legal proceedings related to any court
order, injunction, or other process or decree restraining or seeking to restrain
NationsBank from paying any amount under the Credit. Additionally, Applicant
will indemnify and hold NationsBank harmless from and against all claims,
losses, damages, suits, costs or expenses arising out of Applicant's failure to
timely procure licenses or comply with applicable laws, regulations or rules, or
any other conduct or failure of Applicant relating to or affecting the Credit.
Page 4
<PAGE>
11. EFFECT OF WAIVERS.
No delay, extension of time, renewal, compromise or other indulgence which may
occur or be granted by NationsBank shall impair NationsBank's rights or powers
hereunder. NationsBank shall not be deemed to have waived any of its rights
hereunder, unless NationsBank or its authorized agent shall have signed such
waiver in writing.
12. FINANCIAL INSTITUTION APPLICANT
If Applicant or Co-Applicant is a financial institution (the "Financial
Institution") the Financial Institution hereby requests the issuance of the
Credit for its customer (the "Customer"), who has also executed the Application
as Applicant or Co-Applicant. In consideration of such issuance and as a direct
and primary obligation, the financial Institution agrees to pay to NationsBank
all amounts owed by the Customer under the Agreement when due, and to pay to
NationsBank its fees and expenses according to its fee schedule from time to
time in effect. The financial Institution hereby grants to NationsBank a
security interest in all of the property in which the Customer has heretofore
granted or may hereafter grant to the Financial Institution a security interest
secure the obligations of the Customer to the Financial Institution arising out
of the execution of the Application by the Financial Institution.
13. MISCELLANEOUS
(a) Any notice from NationsBank to Applicant shall be deemed given when mailed,
postage paid, or when delivered to a courier, fee paid by shipper, addressed to
Applicant at the last business address furnished by Applicant to NationsBank, or
when confirmed by electronic confirmation to NationsBank as having been
delivered via facsimile or other teletransmission. Any notice from Applicant to
NationsBank shall be sent to the address of NationsBank specified by NationsBank
to Applicant and shall be effective upon receipt by NationsBank.
(b) Each provision of the Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but if any provision of the Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of the
Agreement.
(c) If any law, treaty, regulation or the interpretation thereof by any court or
administrative or governmental authority shall impose, modify or deem applicable
any capital, reserve, insurance premium or similar requirements against letters
of credit issued by NationsBank and the result thereof shall be to increase the
cost to NationsBank of making any payment under or issuing or maintaining the
Credit or to reduce the yield to NationsBank in connection with the Credit or
the Agreement, then, on demand, Applicant will pay to NationsBank, from time to
time, such additional amounts as NationsBank may in good faith determine to be
necessary to compensate NationsBank for such increased cost or reduced yield.
(d) Any and all payments made to NationsBank hereunder shall be made free and
clear of and without deduction for any present or future taxes, levies, imposts,
deductions, charges, or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on net income and all income and franchise taxes of the
United States and any political subdivisions thereof (such nonexcluded taxes
being herein called "Taxes"). If Applicant shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 13(d)), NationsBank shall receive an amount equal to the sum
NationsBank would have received had no such deductions been made, (ii) Applicant
shall make such deductions, and (iii) Applicant shall pay the full amount
deducted to the relevant authority in accordance with applicable law. Applicant
will indemnify NationsBank for the full amount of Taxes (including, without
limitation, any Taxes imposed by any jurisdiction on amounts payable under this
Section 13(d)) paid by NationsBank and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes were correctly or legally assessed. This indemnification shall be
made within 30 days from the date NationsBank makes written demand therefor.
Within 30 days after the date of any payment of Taxes, Applicant will furnish to
NationsBank the original or a certified copy of a receipt evidencing payment
thereof.
(e) The Agreement shall be binding upon Applicant, its successors and assigns,
and shall inure to the benefit of NationsBank, its successors, transferees and
assigns; provided that any assignment by Applicant of any of its rights or
obligations under the Agreement without the prior written consent of NationsBank
shall be void.
(f) Applicant hereby authorizes NationsBank, in NationsBank's discretion, to set
forth the terms of the Application in the Credit in such language as NationsBank
deems appropriate, with variations not materially inconsistent with the
Application.
(g) Any action, inaction, waiver or omission taken or suffered by NationsBank or
by any of NationsBank's correspondents under or in connection with the Credit or
any related instruments, services or property, if in good faith and in
conformity with foreign or domestic laws, regulations or customs applicable
thereto, shall be binding upon Applicant and shall not place NationsBank or any
of NationsBank's correspondents under any resulting liability to Applicant.
Without limiting the generality of the foregoing, NationsBank and NationsBank's
correspondents may act in reliance upon any written, oral, telephonic,
telegraphic, facsimile or other request or notice, believed in good faith to
have been authorized, whether or not given or signed by an authorized person and
by such written,oral, telephonic, telegraphic, facsimile or other request or
notice, shall be binding on Applicant.
(h) Except as provided in Section 13(g), no term or provision of the Agreement
can be changed orally, and no executory agreement shall be effective to modify
or to discharge the Agreement unless such executory agreement is in writing and
signed by NationsBank. Applicant's payment and indemnity obligations under the
Agreement shall survive payment under or expiration of the Credit or termination
of this Agreement.
4. JURISDICTION AND WAIVER.
Applicant hereby irrevocably submits to the non-exclusive jurisdiction of any
State or Federal court sitting in the city, county, or district in which the
principal office of NationsBank is located over any action or proceeding arising
out of or relating to the Agreement, and Applicant hereby irrevocable agrees
that all claims in respect to such action or proceeding may be heard and
determined in such State or Federal court. APPLICANT HEREBY IRREVOCABLY WAIVES
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING AND THE LACK OF PERSONAL
JURISDICTION. TO THE FULLEST EXTENT IT MAY LAWFULLY AND EFFECTIVELY DO SO, EACH
OF APPLICANT AND NATIONSBANK WAIVES THE RIGHT TO TRIAL BY JURY. Applicant
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to Applicant at the last
business address furnished by Applicant to NationsBank. Applicant agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing, however, in this Section 14, shall affect the right of
NationsBank to serve legal process in any other manner permitted by law or
affect the right of NationsBank to bring any action or proceeding against
Applicant or its property in the courts of any other jurisdiction. Moreover, to
the extent that Applicant has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise, with respect to itself or its property. Applicant hereby irrevocably
waives such immunity in respect of its obligations under the Agreement.
15. AUTOMATIC PAYMENT
[ ] Applicant has elected to authorize NationsBank to effect payment of sums due
under this Agreement by means of debiting Applicant's account number __________.
This authorization shall not affect the obligation of Applicant to pay such
sums when due without notice if there are insufficient funds in such account to
make such payment in full when due, or if NationsBank fails to debit the
account.
Page 5
<PAGE>
NATIONSBANK OF TEXAS,N.A.
METRO NETWORKS, INC.
CREDIT AGREEMENT
October 22, 1996
Commitment: $30,000,000
Assignment and Acceptance Agreement with Bank of Nova Scotia (12/18/96) sold
46 2/3%
Interest Rate (Applicable Margin) (page 3):
Prime Rate LIBOR
Leverage Ratio Basis Basis
-------------- ---------- -----
(i) not less than 1.5 to 1 0.500 1.500
(ii) less than 1:5 to 1
not less than 1.0 to 1 0.250 1.250
(iii) less than 1.0 to 1
not less than .5 to 1 0.000 1.000
(iv) less than 0.5 to 1 0.000 .750
Adjust Applicable Margin on quarterly basis effective 3 Business Days after
receipt of financial statements required to be delivered pursuant Sec 6.1(b) or
6.2(b). (After final quarter can deliver unaudited financial statements for
purpose of adjustment.) If not received Applicable Margin is not less than 1.5
to 1 until received.
Default Rate: Prime + 2%
Interest calculation (Sec 2.3) (page 19)
Prime Advances: actual days/365 or 366
Paid on Quarterly Date (last Business Day of March,
June, September, December)
LIBOR Advances: actual/360
Paid on due date
If Interest Period greater than 3 months, pay on
Quarterly Date in addition to due date
LIBOR periods available (page 8) 1,2,3,6,12 (if available) month
Limited to 6 LIBOR advances outstanding
LIBOR rate determined 2 Business Days prior
Principal Payments (Schedule Reductions) (page 22)
5% of $30,000,000 each quarter
To extent amount borrowed exceeds cumulative effect of Commitment
Reduction
Commencing on Commitment Reduction Date (last Business Day of
March 1999)
Remaining balance due last Business Day of December 2003 (Maturity
Date)
If last principal and/or interest payment date falls on non-Business Day:
Payment due on next Business Day until next Business Day is in the next
month
Then payment due on preceding Business Day
<PAGE>
Commitment Fee (Section 2.4) (page 20)
Agreement Date through end of the fiscal quarter immediately preceding any
fiscal quarter that outstanding advances exceed $10,000,000
(i) .25%* ($10,000,000-daily average advances outstanding)+
(ii) .1875%* $20,000,000
After exceed $10,000,000
.25%* daily unused Commitment
Reimbursement Obligations reduce amount of unused Commitment
Reimbursement Obligations maximum aggregate amount available under Letters
of Credit
Hedging (Section 5.12) (page 48)
Not less than 50% of Advances less $5,000,000
Mutually acceptable to Borrower and Lender
Grace period (Section 8.1(b)) (page 60)
Interest: Earlier of 2 Business Days after notice or 3 days from due
Principal: None
Prepayment (Section 2.5) (page 21)
Voluntary prepayment without penalty as long as not breaking LIBOR Advance
Mandatory prepayment pay Prime Advances first, then LIBOR Advances
Prepayments from Excess Cash Flow
Prepay 50% of Excess Cash Flow prior to dividend
No later than March 31 of following year
Prepayments shall include accompanying accrued interest
Minimum prepayments
Prime: $50,000 in $10,000 increments
LIBOR $100,000 in $100,000 increments
Following Commitment Reduction Date prepayments don't reduce Scheduled
Reductions
Can reduce Commitment in whole or part (3 Business Days notice)
Change of Control (Section 8.1(o)) (page 62) is a default
<PAGE>
REPORTING REQUIREMENTS AND COVENANTS
Quarterly (Section 6.1) (page 49)
(a) within 50 days of quarter end
Combined cash balance sheet, income statement, change in cash
Current quarter and year to date
Comparative to previous year
Officer's certificate (President, Vice-President, Treasurer, or
Chief Financial Officer)
(b) within 45 days of quarter end
Combined balance sheet, income statement, change in cash
Current quarter and year to date
Comparative to previous year
Officer's certificate
Detail separately cash vs. barter
Annual (Section 6.2) (page 49)
(a) Within 95 days
Combined cash balance sheet (current & previous year)
Combined cash statements of earnings, changes in shareholder's equity,
changes in cash
Comparative to previous year
Certified by independent certified public accountant
(b) Within 90 days
Combined balance sheet (current & previous year)
Combined statements of earnings, changes in shareholder's equity,
changes in cash
Comparative to previous year
Detail separately cash vs. barter
Certified by independent certified public accountant
No default letter (from public accountants) to be delivered simultaneously
with (a) & (b)
Within 60 days: Combined operating budget
Compliance Certificate (page 50)
Calculation of Leverage Ratio
Calculation of:
7.1(e) Subordinated Indebtedness
7.1(f) Other Indebtedness
7.3(h) Permitted Investments
7.6 Acquisitions
7.10 Leverage Ratio
7.11 Fixed Charges Coverage
7.12 Debt Service Coverage Ratio
7.18 Affiliation Agreements
Agreement outstanding Advances and Reimbursement Obligations demonstrating
compliance
Compliance Certificate should be substantially in the form of Exhibit G
<PAGE>
COVENANTS:
Excess Cash Flow and ratios 7.10, 7.11, 7.12 cash financial statements only
(no barter)
7.1 Permitted Indebtedness (page 54)
Prior debt (Schedule 8) (no increases)
Subordinated Debt up to $5,000,000
10 days prior to incurrence deliver Compliance Certificate
Can't pay, modify, etc. if in default (Section 7.17) (page 59)
Other Indebtedness up to $2,000,000
7.3 Investments (page 55)
Prior investments (Schedule 7)
$500,000 Other Investments (if no default) related primarily to Borrower's
business
CD's, Commercial paper (A-1/P-1) (under 1 year), Treasury obligations
(under 365 days), Investment grade (highest 2) corporate obligations
7.6 Acquisitions (page 56)
Single acquisition limit: $2,500,000
Annual aggregate limit: $5,000,000
i 30 days notice
ii 10 days prior Compliance Certificate & covenant calculations
Before and after acquisition
iii No default
iv Engaged in Borrower's business
v & vi Pledged
vii Subsidiary (if applicable) becomes party to Subsidiary Guaranty
In addition, if greater than or equal to $2,500,000
Financial projections
Covenant compliance demonstrated
7.7 Dividends (page 57)
Must comply with 2.5(c) (Prepayments from Excess Cash Flow)
Not exceed 10% Excess Cash Flow
No Default or Event of Default
Excess Cash Flow (annual basis):
Operating Cash Flow
less Capital Expenditures
less cash taxes
less principal, interest, fees, other amounts scheduled to be paid on
Indebtedness
<PAGE>
7.10 Leverage Ratio (page 57)
Not permit to be greater than:
From Agreement Date through 3/31/98: 2.00 to 1
4/1/98 through 3/1/99: 1.50 to 1
4/1/98 and thereafter: 1.00 to 1
Leverage Ratio = Total Debt/Operating Cash Flow (4 most recently ended
quarters)
Total Debt:
Excluding Intercompany Notes
(a) all principal and interest owing under Loan Documents
(b) all debt evidenced by promissory note or other borrowed
money
(c) all Capitalized Lease Obligations
(d) all Guaranties
(e) all reimbursement obligations for letters of credit
(f) all Seller Obligations
Operating Cash Flow:
Sum of (a) pre-tax net income
Excludes
(i) extraordinary gain (ii) loss including net
gain/loss on sale of assets other than in the
ordinary course of business (iii) non-cash credits
to extent included in net income (iv) any Seller
Obligation to extent treated as expense
Plus (b) interest expense, depreciation and amortization, and
other non-cash expense
Includes any acquisitions made during previous 4 quarters
Excludes any disposals made during previous 4 quarters
7.11 Fixed Charges Coverage (page 58)
Ratio of Operating Cash Flow (last 4 quarters) to Fixed Charges (last 4
quarters) not to be less:
From Agreement Date through 6/30/97: 1.25 to 1
7/1/97 and thereafter 1.35 to 1
Fixed Charges:
(a) all payments of principal, interest, fees on
Indebtedness
(b) payments under Capitalized Leases
(c) Capital Expenditures
(d) cash taxes
Includes any acquisitions made during previous 4 quarters
Excludes any disposals made during previous 4 quarters
<PAGE>
Indebtedness:
(a) liabilities except general contingency or deferred tax
reserves
(b) market value of any property that a Lien has been
granted to secure any obligation
(c) to extent not included Capitalized Lease Obligations,
all guaranties, obligations under sales and leaseback
arrangements, obligations under Interest Hedge
Agreements, indebtedness for borrowed money
(Intercompany Notes excluded for covenants), all
reimbursement obligations under letters of credit
(d) any withdrawal liability under ERISA
(e) Seller Obligations
7.12 Debt Service Coverage Ratio (page 58)
Ratio of Operating Cash Flow (last 4 quarters) to Pro-Forma Debt Service (4
succeeding quarters) not be less than 1.75 to 1 at end of each fiscal
quarter
Pro-Forma Debt Service:
Principal, interest, fees on Indebtedness for succeeding 4 fiscal
quarters
Interest rate = rate on date of determination
7.18 Affiliate Contracts (page 59)
Affiliate Contracts greater than = to Affiliate Contracts previous quarter
Only a Default if miss in 2 consecutive quarters
<PAGE>
LETTERS OF CREDIT
Letters of Credit (Section 2.6) (page 28-34)
Not to exceed the lesser of
(i) $2,500,000 or
(ii) Commitment - Advances outstanding
Expiration not later than earlier of
(i) Maturity Date
(ii) One year
Auto renewal if no Default or Event of Default
3. Business Days notice from Authorized Signatory
Notice should include:
(a) date of issuance (Business Day)
(b) maximum
(c) expiration
(d) name and address of beneficiary
(e) form of Letter of Credit
(f) other required relevant information
Credit Fees
$500 issuance fee
Quarterly in arrears
Actual days/360
Same methodology for rate adjustment as Applicable Margin
<TABLE>
<CAPTION>
<S> <C>
(A) If Leverage Ratio is not less than 1.5 to 1 1.500%
(B) If Leverage Ratio is less than 1.5 to 1 but is not less than 1.0 to 1 1.25%
(C) If Leverage Ratio is less than 1.0 to 1 but is not less than 0.5 to 1 1.00%
(D) If Leverage Ratio is less than 0.5 to 1 0.75%
</TABLE>
Event of Default can require 100% of Letter of Credit to be put in
collateral account
Can charge $1,000 per year for collateral account
Section 3.2 (pages 37-38)
Conditions precedent to all Advance (other than Refinancing Advances) and
Letters of Credit
(a) all representations and warranties true and correct at such time
in all material respects
(b) incumbency certificate (closing OK if no contrary notice)
(c) No Default with respect to Advances or LOC (other than Refinancing
Advances)
(d) No Event of Default with respect to any Refinancing Advance
(e) Aggregates Advances & available for draw under LOC less than =
Commitment
Each request shall constitute a rep and warranty that Section 3.2
satisfied
<PAGE>
EXHIBIT 10.25
FIRST AMENDMENT TO SUBLEASE AGREEMENT
THIS FIRST AMENDMENT TO SUBLEASE AGREEMENT (this "First Amendment") is
made effective this 1st day of March, 1998 (the "Effective Date"), by and
between TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware corporation
("Landlord") and METRO NETWORKS COMMUNICATIONS, INC., a Maryland corporation,
formerly METRO TRAFFIC CONTROL, INC., a Maryland corporation, ("Tenant").
W I T N E S S E T H:
WHEREAS, Post Oak/Alabama Partnership, as Landlord ("Prime Landlord")
and Landlord, as Tenant, entered into that certain Lease Agreement dated October
5, 1981 (as amended, the "Prime Lease"), whereby Landlord leased certain space
in the Building (as defined in the Prime Lease) from Prime Landlord, all as more
particularly described in the Prime Lease; and
WHEREAS, Landlord and Tenant entered into that certain Sublease
Agreement dated January 5, 1996 (the "Sublease") whereby Landlord subleased to
Tenant approximately 28,216 square feet of Net Rentable Area in the Building, as
more fully described in the Sublease; and
WHEREAS, pursuant to Section 3.02 of the Sublease, on or about August 1,
1996, Tenant exercised its right to add an additional 2,628 square feet of Net
Rentable Area (the "First Additional Space") in the Building; and
WHEREAS, pursuant to Section 3.02 of the Sublease, Tenant has requested
to lease an additional 2,586 square feet of Net Rentable Area (the "Remaining
Additional Space") and Landlord and Tenant desire to amend the Sublease as of
the Effective Date to reflect an increase in (i) the Demised Premises, (ii) the
Improvement Allowance, (iii) the Annual Basic Rent and Monthly Base Rent, and
(iv) a decrease in the Additional Space.
NOW, THEREFORE, in consideration of Ten And No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. The above recitals are incorporated herein by reference.
2. The definition of "Demised Premises" in Article 1 of the Sublease
shall be deleted and the following shall be substituted therefore:
"Demised Premises" shall refer to approximately 22,606 square feet of
Net Rentable Area located on Floor 40, approximately 5610 square feet of Net
Rentable Area located on Floor 39, approximately 2,628 square feet of Net
Rentable Area located on Floor 39 (a portion of the Additional Space as defined
in Section 3.02), approximately 2,586 of Net Rentable Area located on Floor 39
(the remaining Additional Space), as more particularly shown on Exhibit "A"
<PAGE>
attached hereto, and any Expansion Space which becomes a part of the Demised
Premises pursuant to Section 3.03.
3. The Improvement Allowance as defined in Section 4.02 of the Sublease
shall increase from Six Hundred Sixteen Thousand Eight Hundred Eighty And No/100
Dollars ($616,880.00) to Six Hundred Fifty-Nine Thousand Nine Hundred Eleven And
Four/100 Dollars ($659,911.04). Of the Six Hundred Fifty-Nine Thousand Nine
Hundred Eleven and Four/100 Dollars ($659,911.04) amount, Six Hundred Sixteen
Thousand Eight Hundred Eighty And No/100 Dollars ($616,880.00) has previously
been paid to Tenant leaving a remaining balance of Forty-Three Thousand
Thirty-One and Four/100 Dollars ($43,031.04) for use as an improvement allowance
for the remaining Additional Space on Floor 39.
4. The Annual Basic Rent and Monthly Basic Rent as defined in Section
5.01 of the Sublease shall be as follows:
Lease Year Annual Basic Rent Monthly Basic Rent
- --------------------- ----------------- ------------------
March 1, 1998 through $202,251.50 $16,854.29
March 31, 1999
April 1, 1999 through $235,681.50 $19,640.13
March 31, 2002
April 1, 2002 through $269,111.50 $22,425.96
March 29, 2004
5. As described in Section 3.2 of the Sublease, the Additional Space
shall decrease from 5,214 square feet of Net Rentable Area to 0 square feet of
Net Rentable Area as indicated on attached Exhibit "A".
6. Except as expressly amended hereby, all other items and provisions of
the Sublease remain unchanged and continue to be in full force and effect and
are hereby ratified and confirmed by Landlord and Tenant and the execution of
this amendment shall in no event be deemed to constitute a waiver of any right
or claim of either Landlord or Tenant under or by virtue of the Sublease.
7. This First Amendment may be executed in multiple counterparts, and by
the parties hereto on separate counterparts, each of which shall be deemed to be
an original, and all of which together shall constitute but one agreement.
8. The terms of this First Amendment shall control over any conflicts
between the terms of the Sublease and this First Amendment.
-2-
<PAGE>
9. This First Amendment sets forth all covenants, agreements and
understandings between Landlord and Tenant with respect to the subject matter
herreof and there are no other covenants, conditions or understandings, either
written or oral, between the parties hereto except as set forth int he Sublease
and this First Amendment.
10. Tenant warrants and represents unto Landlord that (i) Tenant is a
duly organized and existing legal entity, in good standing in the State of
Texas, (ii) Tenant has full right and authority to execute, deliver and perform
this First Amendment; (iii) the person executing this First Amendmetn was
authorized to do so; and (iv) upon request of landlord, such person will deliver
to Landlord satisfactory evidence of his or her authority to execute this First
Amendment on behalf of Tenant.
11. This First Amendment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have duly caused this Amendment
to be executed by their respective representatives, thereunto duly authorized,
as of the day and year first above written.
"Landlord"
TRANSCONTINENTAL GAS PIPE LINE
ATTEST: CORPORATION, a Delaware corporation
CUBA WADLINGTON, JR.
______________________ By: __________________________________________
Secretary [Seal] CUBA WADLINGTON, JR.
Printed: _____________________________________
SENIOR VICE PRESIDENT & GENERAL MGR
Title: _______________________________________
2/25/98
Date: ________________________________________
-3-
<PAGE>
"Tenant"
METRO NETWORKS COMMUNICATIONS, INC.
ATTEST: a Maryland corporation
/s/ Tami E. LeBlanc By: /s/ Timothy D. McMillin
- ------------------------ --------------------------
Assistant Printed: Timothy D. McMillin
Secretary [Seal] ---------------------
Title: Senior V.P. and C.F.O.
-----------------------
Date: 2/17/98
------------------------
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
Before me, a Notary Public in and for said County and State, on this
25th day of February, 1998, personally appeared Cuba Wadlington, Jr., to me
known to be the identical person who subscribed the name of TRANSCONTINENTAL GAS
PIPE LINE CORPORATION, a Delaware corporation, thereof to the foregoing
instrument as its SV President and acknowledged to me that he/she executed the
same as his/her free and voluntary act and deed and as the free and voluntary
act and deed of such corporation, for the uses and purposes therein set forth.
/s/ Helen Dworsky
------------------
Notary Public
My Commission Expires:
3/24/98
- ----------------------
[SEAL]
-4-
<PAGE>
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
Before me a Notary Public in and for said County and State, on this 17th
day of February, 1998, personally appeared Timothy D. McMillin, to me known to
be the identical person who subscribed the name of METRO NETWORKS
COMMUNICATIONS, INC., a Maryland corporation, thereof to the foregoing
instrument as its SV President, and acknowledged to me that he/she executed the
same as his/her free and voluntary act and deed and as the free and voluntary
act and deed of such corporation, for the uses and purposes therein set forth.
/s/ Mary C. Gabel
------------------
Notary Public
My Commission Expires:
8-31-98
- ----------------------
[SEAL]
-5-
<PAGE>
[PICTURE OF FLOOR PLAN APPEARS HERE]
__|__ N
|
Exhibit "A"
Floor 39
<PAGE>
STATE OF MARYLAND
585293
STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street Baltimore, Maryland 21201
DATE: NOVEMBER 19, 1997
THIS IS TO ADVISE YOU THAT THE ARTICLES OF AMENDMENT WITH A NAME CHANGE
FOR METRO TRAFFIC CONTROL, INC. CHANGING TO METRO NETWORKS COMMUNICATIONS, INC.
WERE RECEIVED AND APPROVED FOR RECORD ON NOVEMBER 19, 1997 AT 11:00 AM.
FEE PAID: 50.00
[LOGO APPEARS HERE]
JOSEPH V. STEWART
CHARTER SPECIALIST
AT5-031
<PAGE>
EXHIBIT 10.26
METRO NETWORKS, INC.
1997 STOCK OPTION PLAN
<PAGE>
METRO NETWORKS, INC.
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
SECTION 1
DEFINITIONS............................................... -1-
SECTION 2
THE PLAN.................................................. -3-
2.1. Name.............................................. -3-
2.2. Purpose........................................... -3-
2.3. Intention......................................... -3-
SECTION 3
ADMINISTRATION............................................ -4-
3.1. Administration.................................... -4-
3.2. Duties............................................ -4-
3.3. Registered Shares................................. -4-
SECTION 4
PARTICIPATION............................................. -5-
4.1. Eligibility....................................... -5-
4.2. Ten-Percent Stockholders.......................... -5-
SECTION 5
SHARES SUBJECT TO PLAN.................................... -6-
5.1. Shares Available for Options...................... -6-
5.2. Adjustments....................................... -6-
SECTION 6
OPTIONS................................................... -7-
6.1. Option Grant and Agreement........................ -7-
6.2. Conditions with Respect to Incentive Stock
Options........................................... -7-
6.3. Option Price...................................... -8-
6.4. Option Term....................................... -8-
6.5. Limitations on Exercise of Options................ -8-
6.6. Method of Exercising Options; Withholding
Tax............................................... -9-
6.7. Rights in the Event of Sale, Merger or
Other Reorganization.............................. -10-
-i-
<PAGE>
6.8. Rights in the Event of Death...................... -11-
6.9. Rights in the Event of Total and Permanent
Disability........................................ -11-
6.10. Rights in the Event of Termination of
Employment........................................ -11-
SECTION 7
SHARES ISSUED PURSUANT TO AN OPTION....................... -12-
7.1. Issuance of Certificates.......................... -12-
7.2. Compliance with Securities and Other Laws......... -13-
7.3. Requirements in the Event of a Disposition
of Shares......................................... -13-
7.4. Legend............................................ -13-
SECTION 8
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN........... -13-
8.1. Board Termination, Amendment and
Modification of Plan.............................. -13-
8.2. Plan Termination.................................. -14-
8.3. Effect of Termination, Amendment or
Modification of Plan.............................. -14-
SECTION 9
MISCELLANEOUS............................................. -14-
9.1. No Employment Rights.............................. -14-
9.2. Binding Effect.................................... -14-
9.3. Singular, Plural, Gender.......................... -14-
9.4. Headings.......................................... -15-
9.5. Effective Date; Ratification by Stockholders...... -15-
9.6. Rights as Stockholder............................. -15-
9.7. Applicable Law.................................... -15-
9.8. Reports........................................... -15-
-ii-
<PAGE>
PLAN SUMMARY
The Plan is designed to advance the Company's interests by encouraging
employees and Non-Employee Directors of the Company and its Subsidiaries to
acquire a proprietary interest in the Company. It provides that an aggregate of
1,500,000 shares of the Company's Common Stock may be optioned to employees and
Non-Employee Directors of the Employer Company. Options granted under the Plan
may be either Incentive Stock Options, which qualify for favorable federal
income tax treatment, or Nonstatutory Stock Options. All employees of the
Employer Company are eligible to receive Incentive Stock Options or Nonstatutory
Stock Options, but the Administrator is entitled to select the individuals to
whom such options actually will be granted and to determine whether the options
will be Incentive Stock Options or Nonstatutory Stock Options. All Non-Employee
Directors are eligible to receive Nonstatutory Stock Options.
To meet the statutory requirements for Incentive Stock Options under
Corporation Section 422 of the Internal Revenue Code of 1986, as amended, the
Plan provides the purchase price of the optioned stock must be fixed at no less
than the fair market value of the Company's Common Stock as of the time the
Option is granted (or in the case of an Optionee who beneficially owns more than
ten percent (10%) of the total combined voting power of all classes of
outstanding shares of capital stock of the Employer Company or its Parent or
Subsidiary, no less than one hundred ten percent (110%) of the fair market value
of the Company's Common Stock as of the time the Option is granted). To the
extent that the aggregate fair market value of stock exercisable by an Optionee
for the first time in any one calendar year under all plans of the Employer
Company and any Parent and Subsidiary exceeds $100,000, options for such shares
shall not be considered Incentive Stock Options but instead shall be considered
Nonstatutory Stock Options granted under the Plan. Incentive Stock Options
granted under the Plan are nontransferable (other than by will or the laws of
descent and distribution) and Incentive Stock Options may not be exercised more
than ten years (five years in the case of an Optionee who beneficially owns more
than ten percent (10%) of the total combined voting power of all classes of
outstanding shares of capital stock of the Employer Company or Parent or
Subsidiary) after the date they are granted.
-i-
<PAGE>
The Company will receive no cash consideration for granting Options
under the Plan. However, when an Option is exercised, the holder is required to
pay the Option Price for the number of shares of stock to be issued under the
exercised Option.
The Plan will be administered by the Administrator and will terminate
five years after the earlier of the date it is adopted by the Board of Directors
or the date it is approved by the Company's stockholders, unless earlier ter
minated by the Administrator.
-ii-
<PAGE>
METRO NETWORKS, INC.
1997 STOCK OPTION PLAN
SECTION 1
DEFINITIONS
As used herein, the following terms have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Administrator" means the Board or the Com mittee, whichever shall
be administering the Plan from time to time in the discretion of the Board, as
described in Section 3 of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the committee appointed by the Board in
accordance with Section 3 of the Plan.
(f) "Company" means Metro Networks, Inc., a Delaware corporation.
(g) "Employee" means an individual who is employed (within the meaning
of Section 3401 of the Code and the regulations thereunder) by the Company or a
subsidiary of the Company.
(h) "Employer Company" means the Company, whether the Company or a
Subsidiary Corporation of the Company, which employs the Employee.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value of Shares" shall mean (i) if the Shares are not
publicly traded on the day in question, the fair market value of the Shares on
the day in question as determined and set forth in writing by the Administrator
(which, in making such determination, shall
<PAGE>
make a good faith effort to establish the true fair market value of the Shares
as of such date using such methods as it deems appropriate, including
independent appraisals, and taking into consideration any requirements set forth
in the Code or the regulations thereunder) or (ii) if the Shares are publicly
traded on the day in question, the closing price of the Shares on the day in
question. The closing price shall be the average of the highest and lowest
quoted selling prices on the New York Stock Exchange or, if the Shares are not
listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Shares are listed or admitted to trading or, if
not listed or admitted to trading on any national securities exchange, as
reported by the Nasdaq Stock Market's National Market on the day in question.
(k) "Incentive Stock Option" means an Option for Shares which
qualifies for treatment pursuant to Section 422 of the Code.
(l) "Non-Employee Director" shall have the meaning assigned to this
phrase in Rule 16b-3 of the Securities and Exchange Commission adopted under the
Exchange Act.
(m) "Nonstatutory Stock Option" means an Option which is not an
Incentive Stock Option and which is designated as a Nonstatutory Stock Option by
the Board.
(n) "Option" means an option to purchase a Share pursuant to the
provisions of this Plan.
(o) "Optionee" means an Employee or Non-Employee Director to whom an
Option has been granted hereunder.
(p) "Option Price" means the price per share of the Shares subject to
each option as provided in Section 6.3.
(q) "Option Term" means the period of time during which an Option may
be exercised.
(r) "Parent Corporation" shall have the meaning assigned to that term
under Section 424 of the Code.
(s) "Plan" means the Metro Networks, Inc. 1997 Stock Option Plan, the
terms of which are set forth herein.
(t) "Share" or "Shares" means Common Stock of the Company, par value
$.001 per share, or, in the event that
-2-
<PAGE>
the outstanding Shares are hereafter changed into or ex changed for different
shares or securities of the Company or some other corporation or other entity,
such other shares or securities.
(u) "Stock Option Agreement" means the agreement described in Section
6.1 between the Company and the Optionee under which the Optionee may purchase
Shares hereunder.
(v) "Subsidiary Corporation" shall have the meaning assigned to that
term under Section 424 of the Code.
(w) "Total and Permanent Disability" means the inability of an
Employee to engage in any substantial gain ful activity by reason of any
medically determinable physi cal or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve months.
SECTION 2
THE PLAN
2.1 Name. This Plan shall be known as "Metro Networks, Inc. 1997
Stock Option Plan".
2.2 Purpose. The purpose of this Plan is to ad vance the interests
of the Company and its stockholders by affording Employees of the Employer
Company and Non-Employee Directors an opportunity to acquire or increase their
proprietary interest in the Company by the grant to such individuals of Options
under the terms set forth herein. By thus encouraging such individuals to
acquire or increase their proprietary interest in the Company, the Company seeks
to attract, motivate and retain those highly competent individuals upon whose
judgment, initiative, leadership, and continued efforts the success of the
Company in large measure depends.
2.3 Intention. It is intended that the Options issued as Incentive
Stock Options under this Plan will qualify as Incentive Stock Options under
Section 422 of the Code and the terms of this Plan shall be interpreted in
accordance with such intention.
-3-
<PAGE>
SECTION 3
ADMINISTRATION
3.1 Administration. The Plan shall be adminis tered, in the
discretion of the Board from time to time, by the Board or by the Committee
acting as the Administrator. The Committee shall be appointed by the Board, in a
manner consistent with the Company's Bylaws, and shall consist of not less than
two (2) members of the Board. The Board may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee, however
caused, shall be filled by the Board. The Board may appoint one (1) of the
members of the Committee as Chairman. The Administrator shall hold meetings at
such times and places as it may determine. Acts of a majority of the
Administrator at which a quorum is present, or acts reduced to or approved in
writing by the unanimous consent of the members of the Administrator, shall be
the valid acts of the Administrator.
3.2 Duties. The Administrator shall from time to time at its
discretion select the Employees and Non-Employee Directors who are to be granted
Options, determine the number of Shares to be subject to Options to be granted
to each Optionee and designate such Options as Incentive Stock Options or
Nonstatutory Stock Options; provided that Options granted to Non-Employee
Directors shall be Nonstatutory Stock Options. The interpretation and
construction by the Administrator of any provisions of the Plan or of any Option
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
3.3 Registered Shares. If any Shares are registered under Section 12
of the Exchange Act, then notwithstanding the first or second sentence of
Section 3.2 after such registration the grant of any Option under the Plan to
any person who shall be an officer (as defined in Section 16 of the Exchange
Act) of the Employer Company at the time of such grant shall only be made either
(A) with the approval of the Board or (B) with the approval of the Committee if
all of the members of the Committee are Non-Employee Directors.
-4-
<PAGE>
SECTION 4
PARTICIPATION
4.1 Eligibility. The Optionees shall be such persons (collectively,
"Participants"; individually a "Par ticipant") as the Administrator may select
from among the following classes of persons, subject to the terms and conditions
of Section 4.2 below:
(a) Employees and Non-Employee Directors of the Company; and
(b) Employees and Non-Employee Directors of the Company's
Subsidiary Corporations.
4.2 Ten-Percent Stockholders. A Participant who beneficially owns
more than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company, as determined under Sections 422 and 424 of
the Code, shall not be eligible to receive an Incentive Stock Option unless (i)
the Option Price of the Shares subject to such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such Shares on the date of grant
and (ii) such Option by its terms is not exercisable after the expiration of
five (5) years from the date of grant.
(a) Stock Ownership. For purposes of Sec tion 4.2 above, in
determining stock ownership, a Partici pant's beneficial ownership of any class
of outstanding stock of the Employer Company or a Parent Corporation or a
Subsidiary Corporation shall be determined as provided in Rule 16a-1(a) of the
Securities and Exchange Commission adopted under the Exchange Act, and in any
event (i) such Participant shall be considered as owning the stock owned,
directly or indirectly, by or for his or her brothers and sisters, spouse,
ancestors and lineal descendants; (ii) stock owned, directly or indirectly, by
or for a corporation, partnership, estate or trust shall be considered as being
owned proportionately by or for its stockholders, partners or beneficiaries; and
(iii) stock with respect to which such Participant holds an Option shall not be
counted.
(b) Outstanding Stock. For purposes of Section 4.2 above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant of the Option to the Optionee. "Outstanding stock"
shall not include shares authorized for issue under out-
-5-
<PAGE>
standing Options held by the Optionee or by any other person.
SECTION 5
SHARES SUBJECT TO PLAN
5.1 Shares Available for Options. Subject to adjustment pursuant to
the provisions of Section 5.2 hereof, the total number of Shares which may be
issued upon the ex ercise of all Options shall not exceed 1,500,000 Shares.
Such Shares may be either authorized and unissued Shares or issued Shares which
have been reacquired by the Company. If any Option shall expire or terminate
for any reason without having been exercised in full, new Options may be granted
covering Shares originally set aside for the exercise of such expired or
terminated Option.
5.2 Adjustments.
(a) Stock Splits and Dividends. Subject to any required action by the
Board and/or stockholders, the number of Shares covered by the Plan as provided
in Section 5.1 hereof, the number of Shares covered by each outstanding Option
and the Option Price thereof shall be proportionately adjusted for any increase
or decrease in the number of issued Shares resulting from a subdivision or
consolidation of Shares or the payment of a stock dividend (but only if paid in
Shares), a stock split or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company.
(b) Mergers. Subject to any required action by the Board and/or
stockholders, if the Company shall merge with another corporation and the
Company is the surviving corporation in such merger and under the terms of such
merger the Shares outstanding immediately prior to the merger remain outstanding
and unchanged, each outstanding Option shall continue to apply to the Shares
subject thereto and shall also pertain and apply to any additional securities
and other property, if any, to which a holder of the number of Shares subject to
the Option would have been entitled as a result of the merger.
(c) Adjustment Determination. To the extent that the foregoing
adjustments relate to securities of the Company, such adjustments shall be made
by the Administrator, whose determination shall be conclusive and binding on all
persons. In computing any adjustment under
-6-
<PAGE>
this Section 5.2, any fractional Share which might otherwise become subject to
an Option shall be eliminated.
SECTION 6
OPTIONS
6.1 Option Grant and Agreement. Each Option grant shall be evidenced
by a written Stock Option Agreement, dated as of the date of grant and executed
by the Company and the Optionee, which Stock Option Agreement shall set forth
the number of Options granted, whether the Options are Incentive Stock Options
or Nonstatutory Stock Options, the Option Price, the Option Term and such other
terms and conditions as may be determined appropriate by the Administrator,
provided that such terms and conditions are consistent with the Plan. The Stock
Option Agreement shall incorporate this Plan by reference and provide that any
inconsistencies or disputes shall be resolved in favor of the Plan language.
6.2 Conditions with Respect to Incentive Stock Options. Each
Incentive Stock Option shall be subject to the following conditions, which
conditions shall be stated within the applicable Stock Option Agreement. Any
Incentive Stock Option which does not comply with these provisions shall not be
considered an Incentive Stock Option and instead shall be considered a
Nonstatutory Option issued under the Plan:
(a) To the extent that the aggregate Fair Market Value of Shares
(determined as of the time an Option is granted) exercisable for the first
time by an Optionee during any calendar year under this Plan and all
similar plans maintained by the Employer Company and its Subsidiary
Corporation and its Parent Corporation exceeds $100,000, such excess
Options shall be deemed Nonstatutory Stock Options.
(b) Options granted to an Optionee may be exercised in any order,
so that an Optionee may exer cise an Option if another Option, granted to
him at an earlier time, remains outstanding.
(c) No Incentive Stock Option may be assigned or transferred by
an Optionee other than by will or by the laws of descent and distribution.
During the lifetime of an Incentive Stock Optionee, the Option may be
exercisable only by the Optionee. Transfer of an Incentive Stock Option by
will or by the
-7-
<PAGE>
laws of descent and distribution shall not be effective to bind the Company
unless the Company shall have been furnished with written notice thereof
and an authenti cated copy of the will or such other evidence as the Board
may deem necessary to establish the validity of the transfer and the
acceptance by the transferee of the terms and conditions of such Incentive
Stock Option.
(d) The maximum number of Options which any Participant may
receive under the Plan during any calendar year is 100,000.
6.3 Option Price. The Option Price shall be determined by the
Administrator, subject to any limitations imposed by this Plan. The Option
Price for Incentive Stock Options shall not be less than the Fair Market Value
of Shares on the date such Incentive Stock Options are granted and, in the case
of Incentive Stock Options granted to an Optionee described in Section 4.2
hereof, the Option Price shall not be less than one hundred ten percent (110%)
of the Fair Market Value of Shares on the date of grant.
6.4 Option Term. The Option Term shall be deter mined by the
Administrator, subject to any limitations im posed by this Plan, but in any
event shall not be more than ten years from the date such Option is granted,
and, in the case of an Incentive Stock Option granted to an Optionee described
in Section 4.2 hereof, shall not be more than five years from the date such
Option is granted. Options may be subject to earlier termination as provided in
this Plan.
6.5 Limitations on Exercise of Options. Notwith standing anything
contained in this Plan to the contrary:
(a) Options may not be exercised until the Plan has been ratified
by the stockholders as provided in Section 9.5.
(b) Options shall be exercised in full or in such equal or
unequal installments as the Administrator shall determine; provided that if
an Optionee does not purchase all of the Shares which the Optionee is
entitled to purchase on a certain date or within an established installment
period, the Optionee's right to purchase any unpurchased Shares shall
continue during the Option Term (taking into account any early termina
tion of such Option Term which may be provided for under the Plan).
-8-
<PAGE>
(c) If any Shares are registered under Section 12 of the Exchange
Act, all Options granted thereafter to an officer (as defined in Section 16
of the Exchange Act) of the Company shall be subject to the limitation that
such Options shall not be exercised within six (6) months from the date of
grant.
6.6 Method of Exercising Options; Withholding Tax. Options shall be
exercised by a written notice, de livered to the Company at its principal office
in Houston, Texas or such other address that may be designated by the Company,
specifying the number of Shares to be purchased and tendering payment in full
for such Shares. Payment may be tendered in cash or by certified, bank
cashier's or teller's check or by Shares (valued at Fair Market Value as of the
date of tender), or some combination of the foregoing or such other form of
consideration which has been approved by the Board or the Committee, including
any approved cashless exercise mechanism. The right to deliver in full or
partial payment of such Option Price any consideration other than cash shall be
limited to such frequency as the Board or the Committee shall determine in its
absolute discretion. In the event all or part of the Option Price is paid in
Shares, any excess of the value of such Shares over the Option Price will be
returned to the Optionee as follows: (i) any whole Share remaining in excess of
the Option Price will be re turned in kind, and may be represented by one or
more share certificates; and (ii) any partial Shares remaining in ex cess of
the Option Price will be returned in cash.
In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
withholding requirements. Payment of such withholding re quirements may be
made, in the discretion of the Administra tor, (i) in cash, (ii) by delivery of
Shares registered in the name of the Optionee, or by the Company not issuing
such number of Shares subject to the Option, having a Fair Market Value at the
time of exercise equal to the amount to be withheld, (iii) by the Company not
issuing such number of Shares subject to the Option as have a Fair Market Value
at the time of exercising equal to the amount to be withheld or (iv) any
combination of (i), (ii) and (iii) above.
-9-
<PAGE>
6.7 Rights in the Event of Sale, Merger or Other Reorganization.
Except as expressly provided in Section 5.2 and this Section 6.7, the Optionee
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of assets or stock
of another corporation, and any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or Option Price of Shares subject to an Option. The grant of an Option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dis solve,
liquidate, sell or transfer all or any part of its business or assets. In any
such event (other than a merger in which the Company is the surviving
corporation as described in Section 5.2(b) and under the terms of which the
shares of Common Stock outstanding immediately prior to the merger remain
outstanding and unchanged), all rights of the Optionee with respect to the
unexercised portion of any Option shall wholly and completely terminate and all
Options shall be canceled at the time of any such merger, consolidation, sale or
transfer of assets, liquidation or dissolution, except to the extent that any
agreement or undertaking of any party to any such merger, consolidation, or sale
or transfer of assets, or any plan pursuant to which such liquidation or
dissolution is effected, shall make specific provision with respect to the Plan
and the rights of Optionees with respect to Options granted thereunder.
Notwithstanding the foregoing, the holder of any such Option or right
theretofore granted and still outstanding shall have the right immediately prior
to the effective date of such merger, consolidation, sale or transfer of assets,
liquidation or dissolution to exercise such Option in whole or in part without
regard to any installment provision that may have been made part of the terms
and conditions of such Option or right; provided, that any conditions precedent
to such exercise set forth in the Stock Option Agreement referred to in Section
6.1 above, other than the passage of time, have occurred. In no event, however,
may any Incentive Stock Option which becomes exercisable pursuant to this
Section 6.7 be exercised, in whole or in part, later than the date preceding the
tenth anniversary date of the grant thereof.
-10-
<PAGE>
6.8 Rights in the Event of Death. If an Optionee's employment with
the Employer Company or service as a Non-Employee Director terminated on account
of death, the person or persons who shall have acquired the right, by will or
the laws of descent and distribution, to exercise the Optionee's Options shall
continue to have (subject to Sections 6.2 and 6.5 above) the right, for a period
which shall not exceed the earlier of the remaining Option Term (taking into
account any earlier termination date provided by the Plan) or one year from the
date of such Optionee's death, to exercise any Options which such Optionee would
have been entitled to exercise on the date of such Optionee's death. At the
expiration of such one year period, or such earlier time as may be applicable,
any such Options which remain unexercised shall expire. In no event may any
Options be exercised that could not have been exer cised by an Optionee on the
date of such Optionee's death.
6.9 Rights in the Event of Total and Permanent Disability. If an
Optionee's employment with the Employer Company or service as a Non-Employee
Director is terminated on account of Total and Permanent Disability, the
Optionee shall have (subject to Sections 6.2 and 6.5 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's Total and Permanent Disability, to exercise any
Options which such Optionee would have been entitled to exercise on the date of
such Optionee's Total and Permanent Disability. At the expiration of such one
year period, or such earlier time as may be applicable, any such Options which
remain unexercised shall expire. In no event may any Options be exercised that
could not have been exercised by an Optionee on the date of such Optionee's
Total and Permanent Disability.
6.10 Rights in the Event of Termination of Employment or Service. In
the event that an Optionee's employment with the Employer Company or service as
a Non-Employee Director terminates, other than by reason of death or Total and
Permanent Disability or termination for "cause", the Optionee shall have
(subject to Sections 6.2 and 6.5 above) the right, for a period which shall not
exceed the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or three months from such termination of
employment or service as a Non-Employer Director, to exercise any Options which
such Optionee would have been entitled to exercise on the date of such
Optionee's termination. At the expiration of such three month period, or such
earlier time as may be
-11-
<PAGE>
applicable, any such Options which remain unexercised shall expire. In no event
may any Options be exercised that could not have been exercised by an Optionee
on the date of such Optionee's termination of employment or service.
Notwithstanding the foregoing, if an Optionee's employment or service is
terminated for "cause", the Company may notify the Optionee that any Options not
exercised prior to the termination are canceled. For purposes hereof, a
termination of employment or service for "cause" shall include, but not be
limited to, dismissal as a result of (1) Optionee's conviction of any crime or
offense involving money or other property of the Company or its subsidiaries or
which constitutes a felony in the jurisdiction involved; (2) Optionee's gross
negligence, gross incompetence or willful misconduct in the performance of his
or her duties; or (3) Optionee's willful failure or refusal to perform his or
her duties.
SECTION 7
SHARES ISSUED PURSUANT TO AN OPTION
7.1 Issuance of Certificates. The Company shall not be required to
issue or deliver any certificate for Shares purchased upon the exercise of any
Option, or any portion thereof, prior to fulfillment of all of the follow ing
applicable conditions:
(a) The admission of such Shares to listing on all stock
exchanges or markets on which the Shares are then listed to the extent such
admission is necessary;
(b) The completion of any registration or other qualification of
such Shares under any federal or state securities laws or under the rulings
or regula tions of the Securities and Exchange Commission or any other
governmental regulatory body, which the Board shall in its sole discretion
deem necessary or advisa ble, or the determination by the Board in its
sole dis cretion that no such registration or qualification is required;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency which the Board shall, in its sole
discretion, deter mine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Board
-12-
<PAGE>
from time to time may establish for reasons of adminis trative convenience.
7.2 Compliance with Securities and Other Laws. In no event shall the
Company be required to sell, issue or deliver Shares pursuant to Options if in
the opinion of the Board the issuance thereof would constitute a violation by
either the Optionee or the Company of any provision of any law or regulation of
any governmental authority or any se curities exchange. As a condition of any
sale or issuance of Shares pursuant to Options, the Company may place legends on
the Shares, issue stop-transfer orders and require such agreements or
undertakings from the Optionee as the Company may deem necessary or advisable to
assure compliance with any such law or regulation, including if the Company or
its counsel deems it appropriate, representations from the Op tionee that the
Optionee is acquiring the Shares solely for investment and not with a view to
distribution and that no distribution of the Shares acquired by the Optionee
will be made unless registered pursuant to applicable federal and state
securities laws or unless, in the opinion of counsel to the Company, such
registration is unnecessary.
7.3 Requirements in the Event of a Disposition of Shares. Any
Optionee, or person representing such Optionee, who sells, exchanges, transfers
or otherwise disposes of any Shares acquired pursuant to the exercise of an
Option within two years following the grant of such Option or within one year
following the actual transfer of such Shares to the Optionee, shall be obligated
to notify the Company in writing of the date of disposition, the number of
Shares so disposed and the amount of consideration received as a re sult of
such disposition. The Company shall have the right to take whatever reasonable
action it deems appropriate against an Optionee, including early termination of
any Options which remain outstanding, in order to recover any additional taxes
the Company incurs as a result of such Optionee's failure to so notify the
Company.
7.4 Legend. All certificates for Shares purchased upon the exercise of
an Incentive Stock Option shall bear a legend indicating that such Shares were
issued pursuant to an Incentive Stock Option Plan.
SECTION 8
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
8.1 Board Termination, Amendment and Modification of Plan. The Board
may at any time amend or modify the
-13-
<PAGE>
Plan; provided, however, that no such action of the Board, without approval of
the stockholders of the Company (in the same manner as provided in Section 9.5),
may:
(a) Increase the benefits accruing to Participants under the
Plan;
(b) Increase the number of Shares which may be issued under the
Plan;
(c) Modify the requirements as to eligibility for participation
in the Plan;
(d) Change the Option Price with respect to any outstanding
Option other than to change the manner of determining the Fair Market Value
of the Shares to conform with any then applicable provisions of the Code or
regulations or rulings thereunder; or
(e) Amend this Section 8.1 to defeat its purpose.
8.2 Plan Termination. Unless terminated earlier as provided in
Section 8.1, the Plan shall terminate five years from the date it is adopted by
the Board or, if earlier, five years from the date it is approved by
stockholders of the Company and no Option shall be granted under this Plan after
such date.
8.3 Effect of Termination, Amendment or Modification of Plan.
Notwithstanding Sections 8.1 and 8.2, no termination, amendment or modification
of the Plan shall in any manner affect any Option theretofore granted under the
Plan without the consent of the Optionee or a person who shall have acquired the
right to exercise the Option by will or the laws of descent and distribution.
SECTION 9
MISCELLANEOUS
9.1 No Employment Rights. Nothing in the Plan or in any Option
granted hereunder or in any Stock Option Agreement relating thereto shall confer
upon any individual the right to continue in the employ or service of the
Employer Company.
9.2 Binding Effect. The Plan shall be binding upon the successors
and assigns of the Company.
-14-
<PAGE>
9.3 Singular, Plural, Gender. Whenever used herein, except where the
context clearly indicates to the contrary, nouns in the singular shall include
the plural, and the masculine pronoun shall include the feminine gender.
9.4 Headings. Headings of the Sections hereof are inserted for
convenience and reference and constitute no part of the Plan.
9.5 Effective Date; Ratification by Stockholders. This Plan shall
become effective upon its adoption by the Board but is subject to the
ratification and approval by the affirmative vote of the holders of a majority
of the Com pany's outstanding shares of capital stock within 12 months
following such adoption. If this Plan is not so approved by the stockholders
this Plan shall become null and void and of no force or effect. Any Options
granted pursuant to the Plan may not be exercised until the Plan shall have been
ratified and approved by the stockholders pursuant to this Section.
9.6 Rights as Stockholder. An Optionee or trans feree of an Option
shall have no rights as a stockholder with respect to any Shares subject to such
Option prior to the purchase of such Shares by exercise of such Option as
provided herein.
9.7 Applicable Law. This Plan and the Options granted hereunder
shall be interpreted, administered and otherwise subject to the laws of the
State of Texas, except to the extent the General Corporation Law of Delaware
shall govern.
9.8 Reports. The Company will comply with all applicable reporting
requirements applicable to Incentive Stock Options under the Code.
-15-
<PAGE>
EXHIBIT 21.1
METRO NETWORKS, INC.
SUBSIDIARIES OF THE COMPANY
FISCAL 1997
The following is a list of subsidiaries of Metro Networks, Inc. (the Parent)
and their state of incorporation as of December 31, 1997. Unless otherwise
noted, all subsidiaries are 100% owned by the Parent Company.
Metro Networks, Inc.--Incorporated in the State of Delaware
Metro Networks Communications, Inc., formerly Metro Traffic Control, Inc.--
Incorporated in the State of Maryland
Washington News Networks, Inc.--Incorporated in the District of Columbia
(80% owned)
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS CONSENT
The Board of Directors
Metro Networks, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-23561 and No. 333-32549) on Form S-8 of Metro Networks, Inc. of our report
dated March 9, 1998 relating to the consolidated balance sheets of Metro
Networks, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, cash flows and stockholders
equity for each of the years in the three-year period ended December 31, 1997,
which report appears in the December 31, 1997 annual report on Form 10-K of
Metro Networks, Inc. and subsidiaries.
KPMG Peat Marwick LLP
Houston, Texas
March 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 25,087
<SECURITIES> 777
<RECEIVABLES> 45,226
<ALLOWANCES> 0
<INVENTORY> 686
<CURRENT-ASSETS> 72,479
<PP&E> 34,227
<DEPRECIATION> 9,838
<TOTAL-ASSETS> 115,073
<CURRENT-LIABILITIES> 24,373
<BONDS> 0
0
3
<COMMON> 16
<OTHER-SE> 88,274
<TOTAL-LIABILITY-AND-EQUITY> 115,073
<SALES> 139,125
<TOTAL-REVENUES> 139,125
<CGS> 93,750
<TOTAL-COSTS> 114,053
<OTHER-EXPENSES> (1,865)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 230
<INCOME-PRETAX> 26,364
<INCOME-TAX> 11,164
<INCOME-CONTINUING> 15,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 343
<NET-INCOME> 15,543
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.93
</TABLE>
