As filed with the Securities and Exchange Commission on July 3, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RADIO ONE, INC.
RADIO ONE LICENSES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 4832 52-1166660
DELAWARE 4832 52-2037797
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
</TABLE>
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5900 PRINCESS GARDEN PARKWAY, 7TH FLOOR
LANHAM, MARYLAND 20706
TELEPHONE: (301) 306-1111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ALFRED C. LIGGINS, III
5900 PRINCESS GARDEN PARKWAY, 7TH FLOOR
LANHAM, MARYLAND 20706
TELEPHONE: (301) 306-1111
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
RICHARD L. PERKAL
KIRKLAND & ELLIS
655 FIFTEENTH STREET, N.W., SUITE 1200
WASHINGTON, D.C. 20005
TELEPHONE: (202) 879-5000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. -
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [x]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
====================================================================================================================================
TITLE OF EACH PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series B 12% Senior Subordinated Notes
due 2004 ................................. $85,478,000 $1,000 principal amount $ 85,478,000 $25,903
Guarantees of Series B 12% Senior Subordi-
nated Notes due 2004 ..................... $85,478,000 (2) (2) None
====================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) No further fee is payable pursuant to Rule 457(n).
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 3, 1997
PROSPECTUS RADIO ONE, INC.
OFFER TO EXCHANGE ITS SERIES B 12%
[GRAPHIC OMITTED] SENIOR SUBORDINATED NOTES DUE 2004
FOR ANY AND ALL OF ITS OUTSTANDING 12%
SENIOR SUBORDINATED NOTES DUE 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997,
UNLESS EXTENDED.
Radio One, Inc., a Delaware corporation (the "Company"), hereby offers (the
"Exchange Offer"), upon the terms and conditions set forth in this Prospectus
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its Series B 12% Senior
Subordinated Notes due 2004 (the "Exchange Notes"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this prospectus is a part, for each $1,000
principal amount of its outstanding 12% Senior Subordinated Notes due 2004 (the
"Notes"), of which $85,478,000 principal amount is outstanding. The form and
terms of the Exchange Notes are the same as the form and terms of the Notes
(which they replace) except that the Exchange Notes will bear a Series B
designation and will have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and will not contain
certain provisions relating to an increase in the interest rate which were
included in the terms of the Notes in certain circumstances relating to the
timing of the Exchange Offer. The Exchange Notes will evidence the same debt as
the Notes (which they replace) and will be issued under and be entitled to the
benefits of the Indenture dated as of May 15, 1997 among the Company, Radio One
Licenses, Inc. and United States Trust Company of New York (the "Indenture")
governing the Notes. See "The Exchange Offer" and "Description of Exchange
Notes."
The Exchange Notes will be unsecured obligations of the Company and the
payment of the principal of, premium (if any) and interest on the Exchange Notes
will be subordinate in right of payment to the prior payment in full in cash of
all Senior Debt (as defined) of the Company. The Exchange Notes will rank pari
passu in right of payment with all senior subordinated indebtedness of the
Company and senior in right of payment to all other subordinated indebtedness of
the Company issued after the Exchange Offer. The Exchange Notes will be
guaranteed to the maximum extent permitted by law, jointly and severally, and on
an unsecured senior subordinated basis, by Radio One Licenses, Inc., a wholly
owned subsidiary of the Company, and, subject to certain exceptions, all future
subsidiaries of the Company (collectively, the "Subsidiary Guarantors"). After
giving pro forma effect to the Transactions (as defined) as of March 30, 1997,
the Company and the Subsidiary Guarantors would have had approximately $46,000
of Senior Debt outstanding.
The Company will accept for exchange any and all Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on , 1997, unless
extended by the Company in its sole discretion (the "Expiration Date"). Tenders
of Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date.
The Exchange Offer is subject to certain customary conditions. The Notes were
sold by the Company on May 19, 1997 to the Initial Purchasers (as defined) in a
transaction not registered under the Securities Act in reliance upon an
exemption under the Securities Act. The Initial Purchasers subsequently placed
the Notes with qualified institutional buyers in reliance upon Rule 144A under
the Securities Act and with a limited number of institutional accredited
investors that agreed to comply with certain transfer restrictions and other
conditions. Accordingly, the Notes may not be reoffered, resold or otherwise
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Registration Rights
Agreement (as defined) entered into by the Company in connection with the
offering of the Notes. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. See "The Exchange Offer-Purpose and
Effect of the Exchange Offer" and "The Exchange Offer-Resale of the Exchange
Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days after
the Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Notes not tendered and accepted in the Exchange Offer will
continue to hold such Notes and will be entitled to all the rights and benefits
and will be subject to the limitations applicable thereto under the Indenture
and with respect to transfer under the Securities Act. The Company will pay all
the expenses incurred by it incident to the Exchange Offer. See "The Exchange
Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DESCRIPTION OF CERTAIN RISKS
TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is , 1997
[Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.]
<PAGE>
[PICTURES]
2
<PAGE>
There has not previously been any public market for the Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors-Absence of a Public Market."
Moreover, to the extent that Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Notes could
be adversely affected.
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to this Exchange Offer
will be issued in the form of a Global Certificate (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC" or the
"Depositary") and registered in its name or in the name of Cede & Co., its
nominee. Beneficial interests in the Global Certificate representing the
Exchange Notes will be shown on, and transfers thereof to qualified
institutional buyers will be effected through, records maintained by the
Depositary and its participants. After the initial issuance of the Global
Certificate, Exchange Notes in certified form will be issued in exchange for the
Global Certificate only on the terms set forth in the Indenture. See
"Description of Exchange Notes-Book-Entry, Delivery and Form."
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company and the Exchange Offer, reference is made to the
Exchange Offer Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the Commission at 75 Park
Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Additionally, the
Commission maintains a web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission, including the Company.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Company will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports and
other information with the Commission. The obligation of the Company to file
periodic reports and other information with the Commission will be suspended if
the Exchange Notes are held of record by fewer than 300 holders as of the
beginning of any fiscal year of the Company other than the fiscal year in which
the Exchange Offer Registration Statement is declared effective. The Company
will nevertheless be required to continue to file reports with the Commission if
the Exchange Notes are listed on a national securities exchange. In the event
the Company ceases to be subject to the informational requirements of the
Exchange Act, the Company will be required under the Indenture to continue to
file with the Commission the annual reports, information, documents or other
reports which would be required pursuant to the informational requirements of
the Exchange Act. Under the Indenture, the Company shall provide the Trustee and
the holders of the Exchange Notes with such reports, information, and documents
at the times specified for filing under the Exchange Act. The Company will also
furnish such other reports as may be required by law.
3
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER THE HEADINGS
"PROSPECTUS SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" AND "THE
TRANSACTIONS-ACQUISITIONS" AND LOCATED ELSEWHERE HEREIN REGARDING THE COMPANY'S
FINANCIAL POSITION AND BUSINESS STRATEGY, MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS
("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT
LIMITATION IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS
BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
Unless the context otherwise requires, references in this Prospectus to the
"Company" and "Radio One" refer to Radio One, Inc., a Delaware corporation, and
Radio One Licenses, Inc., a Delaware corporation and a wholly owned subsidiary
of the Company (the "License Company"), and their respective predecessors. See
"Market and Industry Data" for a description of the sources of information
regarding population data and market and industry data included in this
Prospectus.
THE COMPANY
Radio One, founded in 1980, is the largest radio broadcasting company in
the United States exclusively targeting African-Americans. The Company is
currently negotiating the acquisition of WYCB-AM pursuant to a non-binding
amended letter of intent (the "DC Acquisition"). WYCB-AM is currently the
top-rated Gospel radio station in Washington, D.C. After giving effect to the DC
Acquisition, the Company will own and operate a total of nine radio stations
(five FM and four AM) in three of the top-15 African-American markets. The
Company seeks to expand within its existing markets and into new, primarily
top-30 African-American markets. The Company believes that the African-American
community is an attractive target market for radio broadcasters and that the
Company has a competitive advantage serving this target market due in part to
its African-American ownership and its active involvement in the
African-American community.
After giving effect to the DC Acquisition, the Company will own and operate
four radio stations in Washington, D.C., the third largest African-American
market with an MSA (as defined) population of approximately 4.2 million in 1995
(approximately 27.4% of which was African-American), and four radio stations in
Baltimore, the eleventh largest African-American market with an MSA population
of approximately 2.5 million in 1995 (approximately 26.0% of which was
African-American). The Company has recently entered the Philadelphia market
pursuant to the acquisition of WPHI-FM (formerly WDRE-FM) (the "Philadelphia
Acquisition," and together with the DC Acquisition, the "Acquisitions"), the
sixth largest African-American market with an MSA population of approximately
4.9 million in 1995 (approximately 19.9% of which was African-American). On a
pro forma basis after giving effect to the Acquisitions and the other
Transactions (as defined), the Company would have had net broadcast revenues,
broadcast cash flow and EBITDA of approximately $28.0 million, $11.3 million,
and $9.5 million, respectively, for the fiscal year ended December 31, 1996 and
approximately $6.2 million, $1.7 million and $1.1 million, respectively, for the
three months ended March 30, 1997. See "Pro Forma Consolidated Financial Data."
The Company believes that operating radio stations targeting the
African-American population presents significant growth opportunities for the
following reasons:
o Rapid Population Growth. According to data compiled by the U.S. Department
of Commerce, Bureau of the Census (the "Census Bureau"), from 1980 to 1995,
the African- American population increased from approximately 26.7 million
to 33.1 million (a 24.0% increase, compared to a 16.0% increase in the
population as a whole). Furthermore, the African-American population is
expected to exceed 40 million by 2010 (a more than 20% increase from 1995,
compared to an expected increase of 13% for the population as a whole).
o Higher Income Growth. According to data compiled by the Census Bureau, from
1980 to 1995, the rate of increase in median household income in 1995
adjusted dollars for African-Americans was approximately 12.3% compared to
3.9% for the population as a whole.
5
<PAGE>
o Concentrated Presence in Urban Markets. Approximately 58% of the
African-American population is located in the top-30 African-American
markets, and the Company believes that the African-American community is
usually geographically concentrated in such markets. This con- centration
of African-Americans may enable the Company to reach a large portion of its
target population with radio stations that may have less powerful signals,
thus potentially lowering the Company's acquisition and operating costs.
o Fewer Signals Required. The Company believes the current industry trend is
for radio broadcasters to acquire the maximum number of radio stations
allowed in a market under Federal Communications Commission ("FCC")
ownership rules (up to eight radio stations in the largest markets with no
more than five being FM or AM), unless restricted by other regulatory
authorities. However, relative to radio broadcasters targeting a broader
audience, the Company believes it can cover the various segments of its
target niche market with fewer programming formats and therefore fewer
radio station signals than the maximum allowed.
o Strong Audience Listenership and Loyalty. Based upon reports by Arbitron
(as defined) the Company believes that as a group, African-Americans
generally spend more time listening to radio than non-African-American
audiences. For example, during 1996, African-Americans among all persons
12-years-old and older ("12-plus" or the "12-plus market") in the ten
largest 12-plus markets listened to radio broadcasts an average of 27.2
hours per week compared to 22.9 hours per week for non-African-Americans in
such markets. In addition, the Company believes African-American radio
listeners exhibit a greater degree of loyalty to radio stations which
target the African-American community because those radio stations become a
valuable source of entertainment and information consistent with the
community's interests and lifestyles. As a result, the Company believes
that its target demographic group provides greater audience ratings
stability than that of other demographic groups.
o Cost Effective for Advertisers. The Company believes that advertisers can
reach the African- American community more cost effectively through radio
broadcasting than through newspapers or television because the Company's
radio broadcasts specifically target the African-American community while
newspapers and television typically target a much more diverse audience.
Radio One is led by its Chairperson, Ms. Catherine L. Hughes, who is one of
the Company's founders, and her son, Mr. Alfred C. Liggins, III, its Chief
Executive Officer and President, who together have over three decades of
operating experience in radio broadcasting. Ms. Hughes and Mr. Liggins, together
with a strong management team, have implemented a successful strategy of
acquiring and turning around underperforming radio stations in top-30
African-American markets. In both Baltimore and Washington, D.C., the Company
has increased audience share at each radio station it has acquired. For all of
1996, the Company's radio stations, on a combined basis, were ranked first in
combined audience share of radio stations targeting African-Americans in both
Baltimore and Washington, D.C. and were ranked first and second in combined
revenue share of radio stations targeting African-Americans in Baltimore and
Washington, D.C., respectively. The Company believes that it is well-positioned
to apply its successful operating strategy to other radio stations in existing
and new markets as attractive acquisition opportunities arise.
6
<PAGE>
The following table sets forth certain information with respect to Radio
One and its markets:*
<TABLE>
<CAPTION>
PRO FORMA COMPANY DATA MARKET DATA
-------------------------------------------------------------- -----------------------
NUMBER OF AFRICAN-AMERICAN RANKING BY
STATIONS MARKET ENTIRE MARKET SIZE OF
----------- ---------------------- ---------------------- AFRICAN-
AUDIENCE REVENUE AUDIENCE REVENUE RADIO AMERICAN
MARKET FM AM RANK RANK SHARE SHARE REVENUE POPULATION
- ------------------------ ---- ---- ---------- --------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Washington, D.C. ...... 2 2 1 2 11.4% 9.2% $187.9 3
Baltimore ............ 2 2 1 1 13.3% 12.5% 86.8 11
Philadelphia ......... 1 - NM NM 1.9% 1.2% 203.8 6
</TABLE>
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* Table assumes the consummation of the DC Acquisition and summarizes more
detailed information provided under "Business- General." "NM" means not
meaningful. Radio revenue for markets is in millions of dollars.
Historically, the financing for the Company's operations and expansion has
been provided by certain venture capital firms, several of which have made
multiple investments in the Company, including investments in the Company's
Senior Preferred Stock (as defined). As a result of warrants received in
connection with these investments, these venture capital firms currently have
the right to acquire approximately 51.5% of the Company's Common Stock (as
defined), subject to FCC approval. Two of the largest investors in the Company,
Syncom Capital Corporation ("Syncom") and Alta Subordinated Debt Partners III,
L.P. ("Alta"), an entity controlled by Burr, Egan, Deleage & Co., have
significant experience investing in radio broadcasting companies. As of March
15, 1997, Syncom and Alta had the right to collectively acquire approximately
23% of the Company's Common Stock and hold collectively approximately 41% of the
Company's Senior Preferred Stock. See "Principal Stockholders" and "Description
of Capital Stock."
OPERATING STRATEGY
In order to maximize broadcast cash flow at each of its radio stations, the
Company strives to create and operate the leading radio station group, in terms
of audience share, serving the African-American community and to effectively
convert these audience share ratings into advertising revenue while controlling
the costs associated with each radio station's operations. The success of the
Company's strategy relies on the following: (i) market research, targeted
programming and marketing; (ii) significant community involvement; (iii)
aggressive sales efforts; (iv) advertising partnerships and special events; (v)
strong management and performance-based incentives; and (vi) radio station
clustering, programming segmentation and sales bundling.
ACQUISITION STRATEGY
Radio One's primary acquisition strategy is to acquire and turn around
underperforming radio stations in the top-30 African-American markets. The
Company considers acquisitions in existing markets where expanded coverage is
desirable and considers acquisitions in new markets where the Company believes
it is advantageous to establish a presence. In analyzing potential acquisition
candidates, the Company generally considers (i) whether the radio station has a
signal adequate to reach a large percentage of the African-American community in
a market, (ii) whether the Company can reformat or improve the radio station's
programming in order to profitably serve the African-American community, (iii)
whether the radio station affords the Company the opportunity to segment program
formats within a market in which the Company already maintains a presence, (iv)
whether the Company can increase broadcast revenues of the radio station through
aggressive marketing, sales and promotions, (v) the price and terms of the
purchase, (vi) the level of performance that can be expected from the radio
station under the Company's management and (vii) the number of competitive radio
stations in the market.
7
<PAGE>
The Company believes that large segments of the African-American population
in its target markets are often concentrated in certain geographic sections of
such markets. The Company further believes that this geographic concentration
may provide it with an opportunity to acquire less expensive radio stations with
less powerful signals without materially diminishing the Company's coverage of
the African-American community. As a result, the Company believes it can have a
competitive advantage in securing a substantial share of the radio revenue at a
potentially lower acquisition cost per listener than radio stations targeting
other demographic groups.
THE TRANSACTIONS
The "Transactions" refer collectively to the offering of the Notes (the
"Notes Offering"), the Philadelphia Acquisition, the DC Acquisition, the
Existing Notes Exchange (as defined) and the Related Adjustments. See "The
Transactions." The "Related Adjustments" consist of (i) the Company's move to
the Lanham Offices (as defined) and the net saving related thereto, and (ii) the
elimination of certain station expenses which are not expected to recur after
the consummation of the Acquisitions. See "Pro Forma Consolidated Financial
Data."
THE NOTES OFFERING
NOTES..................... The Notes were sold by the Company on May 19, 1997
to Credit Suisse First Boston Corporation and
NationsBanc Capital Markets, Inc. (the "Initial
Purchasers") pursuant to a Purchase Agreement dated
as of May 14, 1997 (the "Purchase Agreement"). The
Initial Purchasers subsequently resold the Notes to
qualified institutional buyers pursuant to Rule
144A under the Securities Act and to a limited
number of institutional accredited investors that
agreed to comply with certain transfer restrictions
and other conditions.
REGISTRATION
RIGHTS AGREEMENT ...... Pursuant to the Purchase Agreement, the Company,
the License Company and the Initial Purchasers
entered into a Registration Rights Agreement dated
as of May 14, 1997 (the "Registration Rights
Agreement"), which grants the holder of the Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
rights which terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED ...... $85,478,000 aggregate principal amount of Series B
12% Senior Subordinated Notes due 2004 (the
"Exchange Notes").
THE EXCHANGE OFFER...... $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of Notes.
As of the date hereof, $85,478,000 aggregate
principal amount of Notes are outstanding. The
Company will issue the Exchange Notes to holders on
or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within
8
<PAGE>
the meaning of Rule 405 under the Securities Act)
without compliance with the registration and
prospectus delivery provisions of the Securi- ties
Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business
and that such holder does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Notes where
such Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The Company
has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for
use in connection with any such resale. See "Plan
of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
EXPIRATION DATE ......... 5:00 p.m., New York City time, on , 1997
unless the Exchange Offer is extended by the
Company in its sole discretion, in which case the
term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
NOTES .................. Each Exchange Note will bear interest from its
issuance date. Holders of Notes that are accepted
for exchange will receive, in cash, accrued
interest thereon to, but not including, the
issuance date of the Exchange Notes. Such interest
will be paid with the first interest payment on the
Exchange Notes. Interest on the Notes accepted for
exchange will cease to accrue upon issuance of the
Exchange Notes.
CONDITIONS TO THE
EXCHANGE OFFER ....... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer-Conditions."
9
<PAGE>
PROCEDURES FOR TENDERING
NOTES .................. Each holder of Notes wishing to accept the Exchange
Offer must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof or
transmit an Agent's Message (as defined) in
connection with a book-entry transfer, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile or such
Agent's Message, together with the Notes and any
other required documentation to the Exchange Agent
(as defined) at the address set forth herein. By
executing the Letter of Transmittal (or facsimile
thereof) or Agent's Message, each holder will
represent to the Company that, among other things,
the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such
Exchange Notes, whether or not such person is the
holder, that neither the holder nor any such other
person has any arrangement or understanding with
any person to participate in the distribution of
such Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company. See "The Exchange Offer- Purpose and
Effect of the Exchange Offer" and "-Procedures for
Tendering."
UNTENDERED NOTES......... Following the consummation of the Exchange Offer,
holders of Notes eligible to participate but who do
not tender their Notes will not have any further
exchange rights and such Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such
Notes could be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE ............... The Notes that are eligible but not exchanged
pursuant to the Exchange Offer will remain
restricted securities. Accordingly, such Notes may
be resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange Offer-
Consequences of Failure to Exchange."
SHELF
REGISTRATION STATEMENT... If any holder of the Notes (other than any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has provided information regarding such
holder and the distribution of such holder's Notes
to the Company for use therein, the Company has
agreed to register the Notes on a shelf
registration statement (the "Shelf Registration
Statement") and use its best efforts to cause it to
be declared effective by the Commission as promptly
as practical on or after the consummation of the
Exchange Offer. The Company has agreed to maintain
the effectiveness of the Shelf Registration
Statement for, under certain circumstances, a
maximum of three years, to cover resales of the
Notes held by any such holders.
10
<PAGE>
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS ....... Any beneficial owner whose Notes are registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Notes, either make appropriate
arrangements to register ownership of the Notes in
such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
The Company will keep the Exchange Offer open for
not less than twenty days in order to provide for
the transfer of registered ownership.
GUARANTEED DELIVERY
PROCEDURES............... Holders of Notes who wish to tender their Notes and
whose Notes are not immediately available or who
cannot deliver their Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent (or
comply with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer-
Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS ...... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF NOTES AND
DELIVERY OF
EXCHANGE NOTES.......... The Company will accept for exchange any and all
Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer- Terms of the Exchange Offer."
FEDERAL INCOME TAX
CONSEQUENCES ............ The exchange pursuant to the Exchange Offer should
not be a taxable event for Federal income tax
purposes. See "Certain Federal Tax Consequences."
USE OF PROCEEDS......... There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
EXCHANGE AGENT............ United States Trust Company of New York.
THE EXCHANGE NOTES
GENERAL .................. The form and terms of the Exchange Notes are the
same as the form and terms of the Notes (which they
replace) except that (i) the Exchange Notes bear a
Series B designation, (ii) the Exchange Notes have
been registered under the Securities Act and,
therefore, will not bear legends restricting the
transfer thereof, and (iii) the holders of Exchange
Notes will not be entitled to certain rights under
the Registration Rights Agreement, including the
provisions providing for an increase in the
11
<PAGE>
interest rate on the Notes in certain circumstances
relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is
consummated. See "The Exchange Offer-Purpose and
Effect of the Exchange Offer." The Exchange Notes
will evidence the same debt as the Notes and will
be entitled to the benefits of the Indenture. See
"Description of Exchange Notes." The Notes and the
Exchange Notes are referred to herein collectively
as the "Senior Subordinated Notes."
SECURITIES OFFERED ...... $85,478,000 aggregate principal amount of Series B
12% Senior Subordinated Notes due 2004 of the
Company.
MATURITY DATE ............ May 15, 2004
INTEREST.................. Cash interest on the Exchange Notes will accrue at
a rate of 7% per annum on the principal amount of
the Exchange Notes through and including May 15,
2000, and at a rate of 12% per annum on the
principal amount of the Exchange Notes after such
date. Cash interest will be payable semi-annually
on May 15 and November 15 of each year, commencing
November 15, 1997.
OPTIONAL REDEMPTION...... The Exchange Notes are redeemable at any time and
from time to time at the option of the Company, in
whole or in part, on or after May 15, 2001, at the
redemption prices set forth herein plus accrued and
unpaid interest to the date of redemption. In
addition, on or prior to May 15, 2000, the Company
may redeem, at its option, up to 25% of the
aggregate original principal amount of the Exchange
Notes with the net proceeds of one or more Public
Equity Offerings (as defined) at 112% of the
Accreted Value (as defined) thereof, together with
accrued and unpaid interest, if any, to the date of
redemption, as long as at least $64,109,000 of the
aggregate principal amount of the Exchange Notes
remains outstanding after each such redemption. See
"Description of Exchange Notes-Optional
Redemption."
CHANGE OF CONTROL ....... Upon a Change of Control (as defined), the Company
will be required to offer to repurchase the
Exchange Notes at 101% of the Accreted Value
thereof plus accrued and unpaid interest, if any,
to the date of repurchase. See "Risk
Factors-Leverage and Debt Service; Refinancing
Required" and "Description of Exchange
Notes-Certain Covenants-Change of Control."
RANKING AND GUARANTEES .. The Exchange Notes will be unsecured obligations of
the Company and the payment of the principal of,
premium (if any) and interest on the Exchange Notes
will be subordinate in right of payment to the
prior payment in full in cash of all Senior Debt
(as defined) of the Company. The Exchange Notes
will rank pari passu in right of payment with all
senior subordinated indebtedness of the Company and
senior in right of payment to all other
subordinated indebtedness of the Company issued
after this Offering. The Exchange Notes will be
guaranteed (the "Subsidiary Guarantees") to the
maximum extent permitted by law, jointly and
severally, on an unsecured senior subordinated
basis, by the License Company (as defined) and,
subject to certain exceptions, all future
Restricted Subsidiaries (as de-
12
<PAGE>
fined) (collectively, the "Subsidiary Guarantors").
See "Description of Exchange Notes- Guarantees."
The Subsidiary Guarantees will be subordinated to
all existing and future Senior Debt of such
Subsidiary Guarantors, including any guarantees of
Senior Debt. After giving pro forma effect to the
Transactions as of December 31, 1996, the Company
and the Subsidiary Guarantors would have had
approximately $46,000 of Senior Debt outstanding.
The indenture governing the Exchange Notes (the
"Indenture") will permit the Company to incur
additional Senior Debt (subject to certain
limitations) but will prohibit the Company from
incurring additional Indebtedness (as defined) that
is senior to the Exchange Notes and subordinated to
any Senior Debt. See "Description of Exchange Notes
- Subordination."
MODIFICATION OF
THE INDENTURE ......... The Company and the Trustee, with the consent of
the holders of a majority in aggregate principal
amount of the outstanding Senior Subordinated
Notes, may amend the Indenture; provided, however,
that consent is required from the holder of each
such Senior Subordinated Note affected thereby in
instances such as reductions in the amount or
changes in the timing of interest payments, or
reductions in the principal and changes in the
maturity of the Senior Subordinated Notes. See
"Description of Exchange Notes - Modification and
Waiver."
EVENTS OF DEFAULT ...... An Event of Default (as defined) occurs under the
Indenture in instances such as the failure to pay
principal when due, the failure to pay any interest
within 30 days of when such interest is due and
payable, the failure to perform or comply with
various covenants under the Indenture or the
default under the terms of certain other
indebtedness of the Company. See "Description of
Exchange Notes - Events of Default."
RESTRICTIVE COVENANTS... The Indenture contains certain restrictive
covenants with respect to the Company and its
Restricted Subsidiaries (as defined), including
limitations on (a) the sale of assets, including
the equity interests of the Company's Restricted
Subsidiaries, (b) asset swaps, (c) the payment of
Restricted Payments (as defined), (d) the
incurrence of indebtedness and issuance of
preferred stock by the Company or its Restricted
Subsidiaries, (e) the issuance of Equity Interests
(as defined) by a Restricted Subsidiary, (f) the
payment of dividends on the capital stock of the
Company and the purchase, redemption or retirement
of the capital stock or subordinated indebtedness
of the Company, (g) certain transactions with
affiliates, (h) the incurrence of senior
subordinated debt (i) certain consolidations and
mergers. The Indenture also prohibits certain
restrictions on distributions from Restricted
Subsidiaries. All of these limitations and
prohibitions, however, are subject to a number of
important qualifications. See "Description of
Exchange Notes-Certain Covenants."
13
<PAGE>
TRUSTEE .................. United States Trust Company of New York. Except
during the continuance of an Event of Default, the
Trustee will perform only such duties as are
specifically set forth in the Indenture. If an
Event of Default occurs and is continuing, the
Trustee or the holders of at least 25% in principal
amount of the outstanding Senior Subordinated Notes
may declare the Accreted Value of and accrued but
unpaid interest, if any, on all the Exchange Notes
to be due and payable.
For additional information regarding the Exchange Notes, see "Description
of Exchange Notes."
RISK FACTORS
Holders of the Notes should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data included in
this Prospectus prior to tendering their Notes in the Exchange Offer.
14
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table contains summary historical and pro forma consolidated
financial information with respect to the Company. The summary historical
consolidated financial data has been derived from the historical consolidated
financial statements of the Company, including the Consolidated Financial
Statements of the Company for the three fiscal years ended December 31, 1996
included elsewhere in this Prospectus, which have been audited by Arthur
Andersen LLP, independent public accountants. The consolidated financial data
for the three months ended March 31, 1996 and March 30, 1997 have been derived
from unaudited consolidated financial statements of the Company which, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial condition and
results of operations of the Company. The summary pro forma financial
information has been derived from the pro forma financial information set forth
under "Pro Forma Consolidated Financial Data" and gives pro forma effect to the
Transactions, including the Notes Offering, the Philadelphia Acquisition, the DC
Acquisition, the Existing Notes Exchange and the Related Adjustments for the
fiscal year ended December 31, 1996 and the three months ended March 30, 1997.
The summary historical and pro forma consolidated financial information should
be read in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition," "Pro Forma Consolidated Financial Data" and
the Consolidated Financial Statements of the Company included elsewhere in this
Prospectus. The summary pro forma consolidated financial information does not
purport to represent what the Company's results of operations or financial
condition would actually have been had the Transactions occurred on the dates
indicated therein or to project the Company's results of operations or financial
condition for any future period or date.
<TABLE>
<CAPTION>
HISTORICAL(a)
----------------------------------------------------------------------------
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------------------------------ ---------------------
DEC. 27, DEC. 26, DEC. 25, DEC. 31, DEC. 31, MAR. 31, MAR. 30,
1992 1993 1994 1995 1996 1996 1997(b)
---------- ---------- ---------- --------------------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net broadcast revenues(b), (c) ......... $ 10,833 $ 11,638 $ 15,541 $ 21,455 $ 23,702 $ 4,670 $ 5,533
Station operating expenses ............ 6,036 6,972 8,506 11,736 13,927 3,275 3,975
Corporate expenses(b), (d) ............ 553 683 1,128 1,995 1,793 346 695
Depreciation and amortization ......... 2,299 1,756 2,027 3,912 4,262 1,183 1,079
-------- -------- -------- --------- -------- --------- ---------
Operating income (loss) ............... 1,945 2,227 3,880 3,812 3,720 (134) (216)
Interest expense(e) ..................... 1,890 1,983 2,665 5,289 7,252 1,792 1,765
Other (income) expenses, net ............ (72) - (38) (89) 77 - (21)
Income tax expense(f) .................. - 92 30 - - - -
-------- -------- -------- --------- -------- --------- ---------
Net income (loss) before extraordi-
nary item ............................. 127 152 1,223 (1,388) (3,609) (1,926) (1,960)
Extraordinary loss ..................... - 138 - 468 - - -
-------- -------- -------- --------- -------- --------- ---------
Net income (loss) ..................... $ 127 $ 14 $ 1,223 $ (1,856) $ (3,609) $ (1,926) $ (1,960)
======== ======== ======== ========= ======== ========= =========
OTHER DATA:
Broadcast cash flow(g) .................. $ 4,797 $ 4,666 $ 7,035 $ 9,719 $ 9,775 $ 1,395 $ 1,558
Broadcast cash flow margin(h) ......... 44.3% 40.1% 45.3% 45.3% 41.2% 29.9% 28.2%
EBITDA(i) .............................. $ 4,244 $ 3,983 $ 5,907 $ 7,724 $ 7,982 $ 1,049 $ 863
Cash interest(j) ........................ 1,909 1,946 2,356 5,103 4,815 1,142 695
Capital expenditures(k) ............... 708 212 639 224 251 46 119
Ratio of earnings to fixed charges(l) ... 1.1x 1.1x 1.5x - - - -
Ratio of total debt to EBITDA(m) ......
Ratio of EBITDA to interest expense .
Ratio of EBITDA to cash interest ......
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents ............... $ 1,708 $ 4,254 $ 3,293
Working capital(n) ..................... 6,404 5,370 6,253
Intangible assets, net .................. 39,358 42,426 38,401
Total assets ........................... 51,777 54,849 51,481
Debt, including current portion and de-
ferred interest(l) ..................... 64,939 62,503 65,600
Senior Preferred Stock .................. - - -
Total stockholders' equity (deficit) ... (15,003) (11,191) (16,963)
</TABLE>
<PAGE>
PRO FORMA PRO FORMA
------------ -----------
THREE
FISCAL YEAR MONTHS
ENDED ENDED
----------- ----------
DEC. 31, MAR. 30,
1996 1997
----------- -----------
STATEMENT OF OPERATIONS:
Net broadcast revenues(b), (c) ......... $ 27,974 $ 6,153
Station operating expenses ............ 16,737 4,481
Corporate expenses(b), (d) ............ 1,793 588
Depreciation and amortization ......... 7,682 1,941
-------- ---------
Operating income (loss) ............... 1,762 (857)
Interest expense(e) ..................... 9,615 2,397
Other (income) expenses, net ............ (48) (21)
Income tax expense(f) .................. - -
-------- ---------
Net income (loss) before extraordi-
nary item ............................. (7,805) (3,233)
Extraordinary loss ..................... - -
-------- ---------
Net income (loss) ..................... $ (7,805) $ (3,233)
======== =========
OTHER DATA:
Broadcast cash flow(g) .................. $ 11,237 $ 1,672
Broadcast cash flow margin(h) ......... 40.2% 27.2%
EBITDA(i) .............................. $ 9,444 $ 1,084
Cash interest(j) ........................ 5,983 1,496
Capital expenditures(k) ............... 1,551 1,419
Ratio of earnings to fixed charges(l) ... - -
Ratio of total debt to EBITDA(m) ...... 7.9x
Ratio of EBITDA to interest expense ..... 1.0x
Ratio of EBITDA to cash interest ...... 1.6x
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents ............... $ 4,396
Working capital(n) ..................... 7,285
Intangible assets, net .................. 64,851
Total assets ........................... 79,470
Debt, including current portion and de-
ferred interest(l) ..................... 75,046
Senior Preferred Stock .................. 20,518
Total stockholders' equity (deficit) ... (19,009)
15
<PAGE>
(footnotes relate to previous page)
- ----------
(a) Year-to-year comparisons are significantly affected by the timing of the
Company's acquisition of various radio stations during the periods covered.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and note (j) below. Prior to the fiscal year ended
December 31, 1996, the Company's accounting reporting period was based on a
fifty-two/fifty-three week period ending on the last Sunday of each
calendar year. During 1996, the Company elected to end its fiscal year on
December 31 of each year.
(b) Includes $107,000 related to the LMA under which the Company began to
operate WHPI-FM on February 8, 1997.
(c) Net broadcast revenues are gross revenues less agency commissions. Net
broadcast revenues include historical broadcast revenues of each radio
station acquired (or to be acquired, in the case of pro forma data) from
the date of acquisition (or assumed date of acquisition, in the case of pro
forma data) and do not reflect the impact of any changes or planned changes
to programming formats at such acquired radio stations.
(d) Corporate expenses include all expenses incurred which are not associated
with or attributable to the operations of any individual radio station,
including compensation and benefits paid to senior management, rent of
corporate offices, general liability and keyman life insurance,
professional fees, and travel and entertainment expenses.
(e) Interest expense includes non-cash interest, such as the accretion of
principal, the amortization of discounts on debt and the amortization of
deferred financing costs. The calculation of pro forma interest expense is
based on a yield to maturity of 12% per annum (computed on a semi-annual
bond equivalent basis), including cash interest payable at 7% per annum on
the principal amount during the first three years and cash interest payable
at 12% per annum thereafter.
(f) Effective January 1, 1996, the Company elected to be treated as an S
Corporation for U.S. federal and state income tax purposes and, therefore,
it generally has not been subject to income tax at the corporate level
since that date. In connection with the consummation of the Existing Notes
Exchange, the Company's S Corporation status was terminated.
(g) Broadcast cash flow means EBITDA before corporate expenses. Although
broadcast cash flow is not calculated in accordance with generally accepted
accounting principles ("GAAP"), it is widely used in the broadcast industry
as a measure of a radio broadcasting company's performance. Broadcast cash
flow should not be considered in isolation from or as a substitute for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as a measure of
profitability or liquidity.
(h) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcast revenues.
(i) EBITDA means operating income (loss) before depreciation and amortization.
Although EBITDA is not calculated in accordance with GAAP, it is widely
used as a measure of a company's ability to service and/or incur debt.
EBITDA should not be considered in isolation from or as a substitute for
net income (loss), cash flows from operating activities and other income or
cash flow statement data prepared in accordance with GAAP, or as a measure
of profitability or liquidity.
(j) Cash interest is calculated as interest expense less non-cash interest,
including the accretion of principal, the amortization of discounts on debt
and the amortization of deferred financing costs, for the indicated period.
The calculation of pro forma cash interest utilizes the interest rates
applicable to the Notes: 7% per annum on the aggregate principal amount of
the Notes during the period presented, which aggregate principal amount is
based on a yield to maturity of 12% per annum (computed on a semi-annual
bond equivalent basis), including cash interest payable at 7% per annum on
the principal amount during the first three years and cash interest payable
at 12% per annum thereafter.
(k) Excludes capital expenditures in connection with all radio station
acquisitions by the Company which occurred during the periods presented
including: (i) WWIN-FM and WWIN-AM acquired in January 1992 for total
consideration of approximately $4.7 million, (ii) WERQ-FM and WOLB-AM
(previously WERQ-AM) acquired in September 1993 for total consideration of
approximately $9.0 million and (iii) WKYS-FM acquired in June 1995 for
total consideration of approximately $34.4 million.
(l) For purposes of this calculation, earnings consist of net income (loss)
before income taxes, extraordinary items and fixed charges. Fixed charges
consist of interest expense, including the amortization of discounts on
debt and the amortization of deferred financing costs, and the component of
rental expense believed by management to be representative of the interest
factor thereon. Earnings were insufficient to cover fixed charges for the
fiscal years ended December 31, 1995 and 1996 and for the three months
ended March 31, 1996 and March 30, 1997 by approximately $1.4 million, $3.6
million, $1.8 million and $2.0 million, respectively, and on a pro forma
basis for the year ended December 31, 1996 and for the three months ended
March 30, 1997 by approximately $7.8 million and $3.2 million, resectively.
(m) Debt means long-term indebtedness, including the current portion thereof
and deferred interest, net of unamortized discount on such indebtedness.
(n) Working capital means current assets less current liabilities, excluding
the current portion of long-term debt.
16
<PAGE>
RISK FACTORS
In addition to the other information and data included in this Prospectus,
the following factors should be considered carefully before tendering in the
Exchange Offer.
LEVERAGE AND DEBT SERVICE; REFINANCING REQUIRED
The Company incurred significant debt in connection with the Transactions.
As of December 31, 1996, after giving pro forma effect to the Transactions, the
Company would have had outstanding indebtedness of approximately $75.0 million,
Senior Preferred Stock with an aggregate liquidation value of $20.5 million and
stockholders' deficit of approximately $19.0 million. For the year ended
December 31, 1996 and for the three months ended March 30, 1997, after giving
pro forma effect to the Transactions, the Company's earnings would have been
inadequate to cover fixed charges by approximately $7.8 million and $3.2
million, respectively. See "Pro Forma Consolidated Financial Data" and "Selected
Historical Consolidated Financial Data." The Company's highly leveraged
financial position poses substantial risks to holders of the Exchange Notes,
including the risks that: (i) a substantial portion of the Company's cash flow
from operations is required to be dedicated to the payment of interest on the
Exchange Notes and the payment of principal and interest under any Senior Debt;
(ii) the Company's highly leveraged position may impede its ability to obtain
financing in the future for working capital, capital expenditures and general
corporate purposes, including acquisitions; and (iii) the Company's highly
leveraged financial position may make it more vulnerable to economic downturns
and may limit its ability to withstand competitive pressures. The Company
believes that, based on its current level of operations, it will have sufficient
capital to carry on its business and will be able to make the scheduled cash
interest payments on the Exchange Notes and meet its other obligations and
commitments. However, there can be no assurance that the future cash flow of the
Company will be sufficient to make the scheduled cash interest payments of the
Exchange Notes and meet the Company's other obligations and commitments. If the
Company is unable to generate sufficient cash flow from operations in the future
to make the scheduled cash interest payments on the Exchange Notes and to meet
its other obligations and commitments, the Company will be required to adopt one
or more alternatives, such as refinancing or restructuring its indebtedness,
selling material assets or operations, or seeking to raise additional debt or
equity capital. Furthermore, the Company believes it will be necessary to
refinance the Exchange Notes at or prior to the scheduled maturity date in 2004.
There can be no assurance that any of these actions could be effected on a
timely basis or on satisfactory terms or that these actions would enable the
Company to continue to satisfy its capital requirements. In addition, the terms
of existing or future debt agreements, including the Indenture, may prohibit the
Company from adopting any of these alternatives. In addition, the Company does
not have sufficient funds available to purchase all of the outstanding Exchange
Notes were they to be tendered in response to an offer made as a result of a
Change of Control, and certain provisions of the agreements which may govern
Senior Debt may restrict such purchase. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition-Liquidity and Capital
Resources," and "Description of Exchange Notes."
SUBORDINATION OF EXCHANGE NOTES
The Exchange Notes will be unsecured senior subordinated obligations of the
Company and will be subordinated in right of payment to all existing and future
Senior Debt of the Company. In the event of a bankruptcy, liquidation,
reorganization or other winding up of the Company, the assets of the Company
will be available to pay obligations on the Exchange Notes only after all Senior
Debt of the Company has been paid in full, and, as a result, there may not be
sufficient assets remaining to pay amounts due on the Exchange Notes. In the
event of a payment default with respect to any Senior Debt of the Company, no
payments may be made on account of principal, premium, if any, or interest on
the Exchange Notes until such default has been cured or waived. In addition,
under certain circumstances, no payments may be made for a specified period with
respect to principal, premium, if any, or interest on the Exchange Notes if
certain non-payment defaults exist with respect to certain Senior Debt of the
Company. See "Description of Exchange Notes."
17
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its senior
management team including, in particular, Ms. Catherine L. Hughes and her son,
Mr. Alfred C. Liggins, III. Although the Company believes it can adequately
replace key employees in an orderly fashion should the need arise, there can be
no assurance that the loss of such key personnel would not have a material
adverse effect on the Company. The Company maintains key man life insurance
for, and anticipates entering into employment contracts with, Ms. Hughes and
Mr. Liggins. See "Management."
CONTROLLING STOCKHOLDERS
Ms. Catherine L. Hughes and her son, Mr. Alfred C. Liggins, III,
collectively hold approximately 99.3% of the outstanding voting power of the
Company's capital stock and thus have the voting power to control all matters
submitted for a vote to the stockholders of the Company. Such control may have
the effect of discouraging certain types of transactions involving an actual or
potential change of control of the Company. However, certain investors in the
Company hold the Warrants (as defined) which entitle them to acquire
approximately 51.5% of the voting power of the Company on a fully-diluted basis,
and thus to control matters requiring a majority vote, subject to FCC approval.
The exercise by the holders of their Warrants will not, in and of itself,
constitute a Change of Control under the Indenture. Additionally, subject to the
terms of the Standstill Agreement (as defined) which the Company entered into
with the Trustee (as defined) on behalf of the holders of the Senior
Subordinated Notes, and the Bank in connection with the New Credit Facility (as
defined), each of the Preferred Stockholders' Agreement (as defined) and the
Warrantholders' Agreement (as defined) will give the holders of a majority of
the outstanding shares of Senior Preferred Stock the right to cause either the
sale of the entire business of the Company or to refinance and to repay the New
Credit Facility, if entered into by the Company, the Exchange Notes, the Senior
Preferred Stock and the Warrants and other equity interests of the Company, upon
the breach by the Company of certain of its obligations under the agreements
governing the Senior Preferred Stock and the Warrants.
RESTRICTIONS IMPOSED BY THE PREFERRED STOCKHOLDERS' AGREEMENT
The Preferred Stockholders' Agreement contains various covenants which
restrict the Company's ability to, among other things, incur indebtedness for
borrowed money or liens, sell a material portion of its assets, merge or acquire
additional businesses, make loans to or investments in others, enter into
sale-leaseback transactions, amend its certificate of incorporation or bylaws,
change its accounting policies, engage in affiliate transactions, declare or pay
dividends or sell or issue capital stock. Generally, compliance with the terms
of the Preferred Stockholders' Agreement may be waived by the holders of a
majority of the outstanding shares of Senior Preferred Stock. However, any
amendments to the covenants regarding the prohibition on mergers and
acquisitions of additional businesses or the distribution, redemption or
issuance of capital stock will require the consent of the holders of at least
eighty percent of the outstanding shares of Senior Preferred Stock. These
restrictions severely limit the ability of the Company to take various actions
without the consent of the holders of a requisite percentage of the outstanding
shares of Senior Preferred Stock. In addition, if the Company fails to comply
with such covenants, the dividend rate payable by the Company with respect to
the Senior Preferred Stock will, at the election of the holders of a majority of
the outstanding shares of the Senior Preferred Stock, increase to 18% per annum
(except in certain specified circumstances). Furthermore, if certain material
covenants are violated, the holders of a majority of the outstanding shares of
Senior Preferred Stock will have the right, subject to the terms of the
Standstill Agreement, to cause the Company to enter into a signed agreement for
the sale of the Company or the assets thereof or a signed financing commitment
letter with an institutional lender providing for funds sufficient to repay, in
order of seniority, the New Credit Facility, the Exchange Notes, the Senior
Preferred Stock and the value of the Warrants, and close such transaction upon
FCC approval. See "Description of Capital Stock-Senior Preferred Stock."
RESTRICTIONS IMPOSED BY THE NEW CREDIT FACILITY; PLEDGE OF ASSETS
Assuming the Company enters into the New Credit Facility, the New Credit
Facility will contain certain financial and other covenants, including the
maintenance of certain financial tests and ratios, limitations on capital
expenditures and restrictions on the incurrence of debt or liens, the sale of
assets,
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<PAGE>
the payment of dividends and transactions with affiliates. In addition, the New
Credit Facility, if entered into by the Company, will provide for various events
of default including an event of default upon the occurrence of a change of
control. These covenants would limit the operating flexibility of the Company,
and a failure to comply with the covenants included in the New Credit Facility
would generally result in an event of default thereunder, permitting holders of
the indebtedness thereunder to accelerate the maturity and to foreclose upon the
collateral securing such indebtedness. Under any such circumstances, there can
be no assurance that the Company would have sufficient assets to satisfy all of
its obligations, including its obligations on the Exchange Notes. See "Certain
Indebtedness-New Credit Facility."
The obligations of the Company and the Subsidiary Guarantors under the New
Credit Facility, if entered into by the Company, are expected to be secured by a
first priority perfected security interest in: (i) all of the Common Stock of
the Company and its direct and indirect Subsidiaries (subject to certain
exceptions), including all Warrants or options and other similar securities to
purchase such securities and (ii) substantially all of the assets of the Company
and its direct and indirect Subsidiaries (subject to certain exceptions)
including, without limitation, any and all licenses of the Company and its
direct and indirect Subsidiaries (subject to certain exceptions) issued by the
Federal Communications Commission (the "FCC") to the maximum extent permitted by
law. See "Certain Indebtedness-New Credit Facility." If the Company becomes
insolvent or is liquidated or if the indebtedness, if any, under the New Credit
Facility is accelerated, the lenders under the New Credit Facility would be
entitled to payment in full prior to any payment to holders of the Exchange
Notes. In such event, it is possible that there would be no assets remaining
from which claims of the holders of Exchange Notes could be satisfied or, if any
assets remained, such assets might be insufficient to fully satisfy such claims.
POTENTIAL CONFLICTS OF INTEREST
Mr. Liggins, who is the Chief Executive Officer and President of the
Company, is also the President of Radio One of Atlanta, Inc. ("ROA"), which owns
and operates one radio station in Atlanta and has a minority interest in Dogwood
Communications, Inc. ("Dogwood"). Dogwood holds a construction permit for
another radio station in the Atlanta area. Mr. Liggins has voting control of ROA
and owns approximately 47.0% of its outstanding capital stock. Mr. Liggins'
involvement with ROA may from time to time give rise to conflicts of interest
between ROA and the Company and may give rise to conflicting obligations for Mr.
Liggins. Such conflicts of interest could arise with respect to business
dealings between ROA and the Company, including potential acquisitions of
businesses or properties. The Company's board of directors will form an audit
committee of the board, two of the members of which will be directors who are
not employees of the Company. The audit committee will address certain potential
conflicts of interest and conflicting obligations that may arise with respect to
Mr. Liggins. In addition to Mr. Liggins' involvement with ROA, the Company's
Vice President of Programming is employed by ROA and programs ROA's radio
station. The Company also provides certain corporate services to ROA including
accounting, financial and strategic planning, other general management services
and programming services to ROA pursuant to a management agreement. In exchange
for such corporate services, the Company is paid an annual retainer of $100,000
and is reimbursed for all of its out-of-pocket expenses incurred in connection
with the performance of such corporate services. Alta Subordinated Debt Partners
III, L.P. ("Alta") and Syncom are holders of the approximately 34.5% and 6.5%,
respectively, of the outstanding shares of the Senior Preferred Stock, and are
holders of Warrants, which upon exercise entitle them to purchase for nominal
consideration approximately 10.3% and 12.7%, respectively, of the outstanding
shares of the Company's Class A Common Stock on a fully diluted basis. Alta and
Syndicated Communications Venture Partners II, L.P., an affiliate of Syncom
("Syncom Venture"), hold approximately 15.0% and 24.0%, respectively, of the
outstanding shares of Class A Common Stock of ROA, are each entitled to elect a
director to ROA's board of directors and are also holders of certain
indebtedness of ROA. See "Principal Stockholders." The employment of the
Company's Vice President of Programming by ROA, the Company's management
agreement with ROA and Alta's and Syncom Venture's significant interests in ROA
may also give rise to conflicts of interest and conflicting obligations
particularly in terms of reducing the amount of time certain resources are
available to the Company. Although the Company does not believe any conflicts of
interest or conflicting obligations will adversely affect the Company's
operations, there can be no assurance that the Compa-
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<PAGE>
ny's operations will not be adversely affected or that any present or future
conflicts of interest or conflicting obligations will be resolved in favor of
the Company. See "Certain Transactions-Radio One of Atlanta, Inc." In addition,
there can be no assurance that Mr. Liggins will not seek, either individually or
together with Alta, Syncom, Syncom Venture or other holders of Common Stock,
Warrants or Senior Preferred Stock, to acquire additional radio stations in the
future through entities other than the Company or its Restricted Subsidiaries.
FAILURE TO CONSUMMATE THE DC ACQUISITION
The Company's amended letter of intent with respect to the DC Acquisition
is non-binding and the consummation of the DC Acquisition is not a condition to
the consummation of the Exchange Offer. Pursuant to the terms of the amended
letter of intent, the Company and the seller of WYCB-AM are currently
negotiating the form of the total consideration to be paid by the Company,
(i.e., cash, notes or a combination thereof). In addition, consummation of the
DC Acquisition is subject to certain conditions, including the execution of a
definitive acquisition agreement and the receipt of certain approvals from the
FCC. Therefore, there can be no assurance that the DC Acquisition will be
consummated by the Company or, if it is consummated, whether it will be
consummated on the terms outlined herein. In addition, the non-binding letter of
intent provides for liquidated damages of $100,000 payable by the Company should
the Company materially breach the definitive acquisition agreement when, and if,
entered into by the Company. If the DC Acquisition is not consummated, the
results of operations and financial condition of the Company would be adversely
affected. In addition, in the event the total consideration to be paid by the
Company in connection with the consummation of the DC Acquisition includes notes
payable by the Company, the Company's ability to incur additional indebtedness
under the terms of the Indenture or otherwise will be adversely affected. See
"Pro Forma Consolidated Financial Data."
EXPANSION THROUGH ACQUISITIONS
The Company intends to continue to pursue the acquisition of additional
radio stations. Acquisitions of radio stations are subject to FCC approval and
the FCC limits the number and location of broadcasting properties that any one
person or entity (including its affiliates) may own. The market to purchase
radio stations is highly competitive, and many other potential acquirors have
greater resources than the Company available to effect such acquisitions.
Accordingly, there can be no assurance that the Company will be able to make
future acquisitions at prices acceptable to the Company. In addition, rapidly
growing businesses frequently experience unforeseen expenses and delays in
completing acquisitions, as well as difficulties and complications in
integrating the acquired operations without disruption in the overall
operations. As a result, acquisitions could adversely affect the Company's
operating results in the short term as a result of several factors, including
increased capital requirements. In addition, there can be no assurance that the
Company will have the resources necessary to acquire additional radio stations.
See "-Leverage and Debt Service; Refinancing Required."
COMPETITION
The financial success of each of the Company's radio stations depends, to a
significant degree, upon its audience share, its share of the overall radio
advertising revenue within a specific market and the economic health of that
market. Audience share and advertising revenue of the Company's individual radio
stations are subject to change, and any adverse change in a particular market
could have a material adverse effect on the total revenue and broadcast cash
flow of the Company. The Company's radio stations compete for audience share and
advertising revenue directly with other FM and AM radio stations and with other
media within their respective markets. While the Company already competes with
other radio stations with comparable programming formats in each of its markets,
if another radio station in the market were to convert its programming format to
a format similar to one of the Company's radio stations, if a new radio station
were to adopt a competitive format or if an existing competitor were to
strengthen its operations, the Company's radio stations could suffer a reduction
in audience share and/or advertising revenue and could require increased
promotion and other expenses. In addi-
20
<PAGE>
tion, certain of the Company's radio stations compete, and in the future other
radio stations of the Company may compete, with radio station clusters operated
by a single operator. There can be no assurance that the Company's radio
stations will be able to maintain or increase their current audience shares and
radio advertising revenue. See "Business-Competition."
Radio broadcasting is also subject to competition from new media
technologies that may be or are being developed or have been introduced, such as
the delivery of audio programming through cable television wires or the
introduction of digital audio broadcasting ("DAB"). DAB may provide a medium for
the delivery by satellite or terrestrial means of multiple audio programming
formats to local and national audiences. The Company cannot predict the effect,
if any, that any such new technologies may have on the radio broadcasting
industry or on the Company. See "Business-Federal Regulation of Radio
Broadcasting."
EFFECTS OF CHANGES IN THE RADIO BROADCASTING INDUSTRY
The profitability of the Company's radio stations is subject to various
factors which influence the radio broadcasting industry as a whole. The
Company's radio stations may be affected by changes in audience tastes,
priorities of advertisers, new laws and governmental regulations and policies,
changes in broadcast technical requirements, proposals to limit the tax
deductibility of expenses incurred by advertisers and changes in the willingness
of financial institutions and other lenders to finance radio station
acquisitions and operations. The Company cannot predict which, if any, of these
factors might have a significant impact on the radio broadcasting industry in
the future, nor can it predict what impact, if any, the occurrence of these
events might have on the Company's operations.
GOVERNMENT REGULATION
Each of the Company's radio stations operates pursuant to one or more
licenses issued by the FCC that have a maximum term of eight years prior to
renewal. The Company's radio operating licenses expire at various times from
August 1, 1998 to October 1, 2003, except that the license for WOL-AM expired on
October 1, 1995. The Company's timely filing of a license renewal application
has automatically extended the license term of WOL-AM until the FCC takes action
on the Company's renewal application. Although the Company may apply to renew
its FCC licenses, third parties may challenge the Company's renewal
applications. Except for a complaint filed against WOL-AM, the Company is not
aware of any facts or circumstances that would prevent the Company from having
its current licenses renewed. Furthermore, the Company believes that the
complaint filed against WOL-AM will be resolved satisfactorily and the license
of that radio station renewed. However, there can be no assurance that any of
the Company's radio station licenses will be renewed. See "Business-Federal
Regulation of Radio Broadcasting." In addition, if the Company or any of its
stockholders, officers or directors violates the FCC's rules and regulations or
the Communications Act of 1934, as amended (the "Communications Act"), or is
convicted of a felony, the FCC may in response to a petition from a third party
or on its own motion, in its discretion, commence a proceeding to impose
sanctions upon the Company which would involve the imposition of monetary
penalties, the revocation of the Company's broadcast licenses or other
sanctions. If the FCC were to issue an order denying a license renewal
application or revoking a license, the Company would be required to cease
operating the radio station subject to the license only after the Company had
exhausted administrative review without success.
The radio broadcasting industry is subject to extensive and changing
regulation. Among other things, the Communications Act and FCC rules and
policies limit the number of broadcasting properties that any person or entity
may own (directly or by attribution) in any market and require FCC approval for
transfers of control of FCC licensees and assignments of FCC licenses. The
filing of petitions or complaints against the Company or other FCC licensees
could result in the FCC delaying the grant of, or refusing to grant, its consent
to the assignment or transfer of licenses to or from an FCC licensee. In certain
circumstances, the Communications Act and FCC rules will operate to impose
limitations on non-U.S. ownership and voting of the capital stock of the
Company. See "Business-Federal Regulation of Radio Broadcasting."
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<PAGE>
Under various federal, state and local environmental laws, an owner or
operator of real property may become liable for the costs of removal or
remediation of certain hazardous substances released on its property. Such laws
often impose liability without regard to whether the owner or operator knew of,
or was responsible for, the release of such hazardous substances. The Company
believes it is in substantial compliance with all existing laws and regulations
and has obtained or applied for the necessary permits to conduct its business.
ANTITRUST MATTERS
An important element of the Company's growth strategy involves the
acquisition of additional radio stations. Following the passage of the
Telecommunications Act of 1996, the Antitrust Division of the Department of
Justice (the "Antitrust Division") has become more aggressive in reviewing
proposed acquisitions of radio stations and radio station networks which would
otherwise comply with the FCC's ownership limitations, particularly in instances
where the proposed acquiror already owns one or more radio stations in a
particular market and the acquisition involves another radio station in the same
market. Recently, the Antitrust Division has obtained consent decrees requiring
an acquiror to dispose of at least one radio station in a particular market
where the acquisition (which otherwise complied with the FCC's ownership
limitations) would have resulted in a concentration of market share by the
acquiror. In that case, it was unclear whether the post-acquisition
concentration of combined market share or combined advertising revenues of the
acquiror was the factor which caused the Antitrust Division to require
divestiture. Additionally, any radio station acquisitions by the Company are
potentially subject to review by the Federal Trade Commission (the "FTC"). There
can be no assurance that the Antitrust Division or the FTC will not seek to bar
the Company from acquiring additional radio stations in a market where the
Company's existing radio stations already have a significant market share.
SEASONALITY OF BUSINESS
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by local and
national advertisers. The Company's first fiscal quarter generally produces the
lowest revenue for the year.
FRAUDULENT TRANSFER STATUTES
The incurrence by the Company and the Subsidiary Guarantors of indebtedness
such as the Notes, the Exchange Notes and the Guarantees to finance the
Transactions may be subject to review under relevant state and federal
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on
behalf of unpaid creditors of the Company or the Subsidiary Guarantors. Under
these laws, if a court were to find that, after giving effect to the sale of the
Notes and the application of the net proceeds therefrom, either (a) the Company
or the Subsidiary Guarantors incurred such indebtedness with the intent of
hindering, delaying or defrauding creditors or (b) the Company or the Subsidiary
Guarantors received less than reasonably equivalent value or consideration for
incurring such indebtedness and (i) was insolvent or was rendered insolvent by
reason of such transactions, (ii) was engaged in a business or transaction for
which the assets remaining with the Company or the Subsidiary Guarantors
constituted unreasonably small capital or (iii) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
such court may subordinate such indebtedness to presently existing and future
indebtedness of the Company or the Subsidiary Guarantors, as the case may be,
avoid the issuance of such indebtedness and direct the repayment of any amounts
paid thereunder to the Company's or the Subsidiary Guarantors', as the case may
be, creditors or take other action detrimental to the holders of such
indebtedness.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all of its liabilities, including contingent
liabilities, were greater than the value of all of its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and matured.
22
<PAGE>
There can be no assurance as to what standard a court would apply in order
to determine solvency. To the extent that proceeds from the sale of the Notes
were used to finance the Transactions, a court may find that the Company or the
Subsidiary Guarantors, as the case may be, did not receive fair consideration or
reasonably equivalent value for the incurrence of the indebtedness represented
thereby. In addition, if a court were to find that any of the components of the
Transactions constituted a fraudulent transfer, to the extent that the proceeds
from the sale of the Notes were used to finance such Transactions, a court may
find that the Company or the Subsidiary Guarantors, as the case may be, did not
receive fair consideration or reasonably equivalent value for the incurrence of
the indebtedness represented by the Notes or the Guarantees, as the case may be.
Pursuant to the terms of the Guarantees, the liability of each Subsidiary
Guarantor is limited to the maximum amount of indebtedness permitted, at the
time of the grant of such Guarantee, to be incurred in compliance with
fraudulent conveyance or similar laws.
Each of the Company and the Subsidiary Guarantors believes that it received
or will receive equivalent value at the time the indebtedness under the Notes,
the Exchange Notes and the Guarantees was or is incurred. In addition, neither
the Company nor the Subsidiary Guarantors believes that it, after giving effect
to the Transactions, (i) was insolvent or rendered insolvent, (ii) was engaged
in a business or transaction for which its remaining assets constituted
unreasonably small capital or (iii) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they mature. These beliefs
are based on the Company's operating history and analysis of internal cash flow
projections and estimated values of assets and liabilities of the Company and
the Subsidiary Guarantors at the time of the Notes Offering. There can be no
assurance, however, that a court passing on these issues would make the same
determination.
ABSENCE OF PUBLIC MARKET
Prior to the Exchange Offer, there has not been any public market for the
Notes. The Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in this
Exchange Offer. The holders of Notes (other than any such holder that is an
affiliate of the company within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Company may be required to file a Shelf
Registration Statement with respect to such Notes. The Exchange Notes will
constitute a new issue of securities with no established trading market. The
Company does not intend to list the Exchange Notes on any national securities
exchange or to seek approval for quotation through any automated quotation
system. The Initial Purchasers of the Notes currently make a market in the
Notes, but they are not obligated to do so and may discontinue such market
making at any time. In addition, such market making activity will be subject to
the limits imposed by the Securities Act and the Exchange Act and may be limited
during the Exchange Offer and the pendency of the Shelf Registration Statement.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or as to the liquidity of the trading market
for the Exchange Notes. If a trading market does not develop or is not
maintained, holders of the Exchange Notes may experience difficulty in reselling
the Exchange Notes or may be unable to sell them at all. If a market for the
Exchange Notes develops, any such market may be discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financing
condition of the Company, the Exchange Notes may trade at a discount from their
principal amount.
23
<PAGE>
THE TRANSACTIONS
ACQUISITIONS
Philadelphia Acquisition
In December 1996, the Company entered into an agreement to acquire the
assets of WPHI-FM in Philadelphia for a total consideration of $20.0 million,
subject to certain closing adjustments, and deposited $1.0 million in escrow to
be applied toward the purchase price. On February 4, 1997 and March 27, 1997,
the FCC issued approvals for the transfer of the FCC license for WPHI-FM to an
entity controlled by the Company. On February 8, 1997, the Company entered into
an LMA with the then-owner of WPHI-FM, and the radio station's programming
format was converted from Modern Rock to Young Urban Contemporary, targeting 18
to 34-year-old African-Americans. The LMA allowed the Company to program WPHI-FM
24 hours a day, seven days a week, and continued in effect until the
consummation of the Philadelphia Acquisition on May 19, 1997. On March 28, 1997,
the Company released the $1.0 million deposit from escrow to the then-current
owner simultaneously with the execution of closing documents related to the
Philadelphia Acquisition by the Company and the then-current owner, which were
held in escrow. On April 18,1997, the Company made a non-refundable $600,000
prepayment of the $20.0 million total consideration for the Philadelphia
Acquisition. On May 19, 1997 the closing documents for the Philadelphia
Acquisition were released and became effective simultaneously with the payment
of approximately $18.7 million (the remaining portion of the purchase price and
certain payments due under the related LMA). WPHI-FM is licensed as a Class A
facility and is permitted to operate at the equivalent of 3,000 watts at 100
meters. The radio station broadcasts from a 1,000 foot tower at a tower farm in
north Philadelphia. Although WPHI-FM is a lower powered radio station, the
Company believes it adequately reaches at least 90% of the African-Americans in
the Philadelphia market.
DC Acquisition
In March 1997, the Company entered into a binding letter of intent to
acquire the stock of the corporation holding WYCB-AM, currently Washington,
D.C.'s top-rated Gospel radio station, for a total consideration of $4.0
million, subject to certain closing adjustments, which is approximately 5.1
times proforma broadcast cash flow for the year ended December 31, 1996. This
letter of intent expired by its terms. On July 1, 1997, the Company and the
seller of WYCB-AM entered into an amendment to this letter of intent pursuant
to which the Company and the Seller have agreed, among other things, to
negotiate in good faith the form of the total consideration (i.e., cash, notes
or a combination thereof), to recast the letter of intent as non-binding, and to
terminate the prohibition on solicitation or negotiation by the seller with
prospective purchasers other than the Company. For purposes of the pro forma
financial data included herein, it has been assumed that the $4.0 million total
consideration will be paid in cash. The DC Acquisition, if consummated, would
expand the Company's coverage in an existing market and will permit the Company
to target another segment of the African-American community in that market. See
"Business-Acquisition Strategy." The DC Acquisition is contingent upon an
agreement with respect to the form of the total consideration, and certain other
matters, including the execution of a definitive acquisition agreement and the
receipt of final approval from the FCC for the transfer of the FCC license for
WYCB-AM. In addition, such amended letter of intent provides for liquidated
damages of $100,000 payable by the Company should the Company materially breach
the definitive acquisition agreement when, and if, it is entered into by the
Company. The Company anticipates completing the DC Acquisition in the fourth
quarter of 1997. There can be no assurance of the consummation of the DC
Acquisition. See "Risk Factors-Failure to Consummate the DC Acquisition."
EXISTING NOTES EXCHANGE
On May 19, 1997, all of the holders of the Company's 15% Subordinated
Promissory Notes due 2003 (together with any and all accrued interest thereon,
the "Existing Notes") exchanged all of their Existing Notes for shares of Senior
Preferred Stock (the "Existing Notes Exchange") pursuant to the Preferred
Stockholders' Agreement (as defined). See "Description of Capital Stock-Senior
Preferred Stock."
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<PAGE>
REFINANCING
On May 19, 1997 the Company effected the following additional Transactions:
(i) the Notes Offering and (ii) the repayment of all outstanding obligations
under the Company's "Existing Credit Facility.
The Exchange Offer results in no sources or use of cash to the Company. The
sources and uses of cash which occurred in connection with the closing of the
Transactions on May 19, 1997 (assuming that the DC Acquisition was consummated
for a total cash consideration as of such date) are set forth below (dollars in
thousands):
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------
<S> <C>
Repayment of Existing Credit Facility .............................. $45,121
Philadelphia Acquisition ....................................... 18,686
DC Acquisition(a) ............................................. 4,000
Estimated leasehold improvements and new equipment in respect of
the Lanham Offices ............................................. 1,300
General purposes, including working capital ..................... 1,893
Estimated fees and expenses .................................... 4,000
---------
Total ......................................................... $75,000
=========
</TABLE>
- ----------
(a) In connection with the DC Acquisition, the Company has entered into a
non-binding letter of intent, as amended, to acquire WYCB-AM for $4.0
million, subject to certain closing adjustments. The Company anticipates
consummating the DC Acquisition in the fourth quarter of 1997. Pursuant to
the terms of such letter of intent, the Company and the seller of WYCB-AM
are currently negotiating the terms of payment of the $4.0 million
consideration. In the event the DC Acquisition is not consummated or in the
event all or a portion of the $4.0 million consideration is not paid by the
Company in cash, the gross proceeds which are not used for that purpose
shall be used for general purposes, including working capital and possible
acquisitions. See "The Transactions-Acquisitions."
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer. The gross proceeds of $75.0 million from the issuance of the
Notes on May 19, 1997 were used to: (i) repay all of the outstanding
indebtedness under the Amended and Restated Credit Agreement, dated as of June
6, 1995, among Radio One, NationsBank of Texas, N.A., as agent and lender, and
the other lenders named therein, as amended (the "Existing Credit Facility");
(ii) fund the balance of the total consideration in respect of the Philadelphia
Acquisition and certain payments due under the related LMA; (iii) pay for the
leasehold improvements and new equipment in respect of the Lanham Offices and
other amounts associated with moving the Company's Washington, D.C. offices and
studios; (iv) provide funding for other general purposes, including working
capital; and (v) pay the related fees and expenses in connection with the
consummation of the Transactions. See "The Transactions."
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 30, 1997 on an actual basis and on a pro forma basis after giving effect
to the Transactions. The information in this table should be read in conjunction
with "Pro Forma Consolidated Financial Data," "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 30, 1997
-----------------------------------
(UNAUDITED)
PRO
ACTUAL FORMA
--------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ....................................... $ 3,293 $ 4,396
========== ===========
Total debt (including current portion and deferred interest):(a)
Existing Credit Facility (b) ................................. $ 45,597 $ -
12% Senior Subordinated Notes Due 2004 ........................ - 75,000
Existing Notes ................................................ 19,957(e) -
Notes payable ................................................ 46 46
---------- -----------
Total debt ................................................... 65,600 75,046
---------- -----------
Senior Preferred Stock(c) ....................................... - 20,518 (f)
---------- -----------
Stockholders' equity (deficit):
Common A Common Stock ($.01 par value, 1,000 shares autho-
rized, 138.45 shares issued and outstanding) ................. - -
Common B Common Stock ($.01 par value, 2,000 shares autho-
rized, no shares issued and outstanding) ..................... - -
Additional paid-in capital(d) ................................. 1,205 1,205
Accumulated earnings (deficit) .............................. (18,168) (20,214)(g)
---------- -----------
Total stockholders' equity (deficit) ........................ (16,963) (19,009)
---------- -----------
Total capitalization ....................................... $ 48,637 $ 76,555
========== ===========
</TABLE>
- ----------
(a) See Notes to the Consolidated Financial Statements of the Company for
additional information regarding the components and terms of the Existing
Credit Facility, the Existing Notes and notes payable.
(b) All indebtedness under the Existing Credit Facility was repaid concurrently
with the consummation of the Notes Offering. See "Use of Proceeds."
(c) Consists of: (i) Series A 15% Senior Cumulative Redeemable Preferred Stock,
par value $.01 per share, of which 100,000 shares will be authorized and
83,200 shares would have been issued and outstanding, assuming the
consummation of the Existing Notes Exchange as of March 30, 1997, and (ii)
Series B 15% Senior Cumulative Redeemable Preferred Stock, par value $.01
per share, of which 150,000 shares will be authorized and 121,980 shares
would have been issued and outstanding, assuming the consummation of the
Existing Notes Exchange as of March 30, 1997.
(d) Includes approximately $690,000 allocable to warrants to purchase the
Company's Common Stock which were originally issued in conjunction with
the Existing Notes and were amended and restated in connection with the
consummation of the Notes Offering. See "Description of Capital
Stock-Warrants to Purchase Common Stock."
(e) Includes approximately $3.5 million in accrued and unpaid interest.
<PAGE>
(f) Reflects issuance of shares of Senior Preferred Stock with an aggregate
liquidation value of approximately $20.5 million in exchange for outstanding
indebtedness under the Existing Notes consisting of approximately $16.4
million in principal, $3.5 million in accrued and unpaid interest and
$561,000 in unamortized debt discount, assuming the consummation of the
Existing Notes Exchange as of March 30, 1997.
(g) Pro forma accumulated earnings (deficit) reflects the recognition of
approximately $2.0 million in extraordinary loss resulting from the early
repayment of the Existing Credit Facility and the Existing Notes, consisting
of the write-off of approximately $1.4 million in deferred financing costs
on the Existing Credit Facility and approximately $561,000 in unamortized
discounts on the Existing Notes.
26
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial statements (the
"Pro Forma Consolidated Financial Statements") are based on the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus,
adjusted to give effect to the Transactions, which include (i) this Exchange
Offer, (ii) the Notes Offering, (iii) the Philadelphia Acquisition, (iv) the DC
Acquisition, (v) the Existing Notes Exchange and (vi) the Related Adjustments.
The Unaudited Pro Forma Consolidated Statement of Operations Data and Other Data
gives effect to the Transactions as if they had occurred as of January 1, 1996,
and the Unaudited Pro Forma Consolidated Balance Sheet gives effect to the
Transactions as if they had occurred as of March 30, 1997. The Transactions are
described in the accompanying notes to the Pro Forma Consolidated Financial
Statements. The pro forma data are based upon available information and certain
assumptions that management believes are reasonable. The Pro Forma Consolidated
Financial Statements do not purport to represent what the Company's results of
operations or financial condition would actually have been had the Transactions
occurred on such dates or to project the Company's results of operations or
financial condition for any future period or date. The Pro Forma Consolidated
Financial Statements should be read in conjunction with the Consolidated
Financial Statements of the Company and the historical consolidated financial
statements of Jarad Broadcasting Company of Pennsylvania, Inc., the former owner
of WPHI-FM, included elsewhere in this Prospectus, and "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
The Acquisition will be accounted for using the purchase method of
accounting. After each of the Acquisitions, the total consideration of such
acquisition has been or will be allocated to the tangible and intangible assets
acquired and liabilities assumed, if any, based upon their respective estimated
fair values. The allocation of the aggregate total consideration included in the
Pro Forma Consolidated Financial Statements is preliminary as the Company
believes further refinement is impractical at this time. However, the Company
does not expect that the final allocation of such total consideration will
materially differ from the preliminary allocations set forth herein.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------------------------------
POST-NOTES
OFFERING,
NOTES OFFERING EXISTING NOTES
PHILADELPHIA PHILADELPHIA AND EXISTING EXCHANGE AND DC DC
RADIO ONE ACQUISITION ACQUISITION NOTES PHILADELPHIA ACQUISITION ACQUISITION
HISTORICAL HISTORICAL ADJUSTMENTS EXCHANGE ACQUISITION HISTORICAL ADJUSTMENTS
------------ ------------- -------------- ---------------- --------------- ------------ ----------- -
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net broadcast revenues(a) . $ 23,702 $ 2,856 $ - $ - $ 26,558 $ 1,416 $ -
Station operating expenses. 13,927 2,423 (72)(l) (167)(q) 16,111 750 (124)(l)
Corporate expenses(b) ...... 1,793 14 (14)(m) - 1,793 94 (94)(m)
Depreciation and amortiza-
tion ....................... 4,262 270 2,815 (n) 62(q) 7,409 218 55(t)
--------- ------- --------- -------- --------- ------- --------
Operating income ............ 3,720 149 (2,729) 105 1,245 354 163
Interest expense(c) ......... 7,252 339 (339)(o) 2,363(r) 9,615 444 (444)(o)
Other (income) expenses,
net ........................ 77 - - (125)(s) (48) - -
Income tax expense (ben-
efit)(d) ................... - (98) 98(p) - - - -
--------- ------- --------- -------- --------- ------- --------
Net income (loss) ......... $ (3,609) $ (92) $(2,488) $(2,133) $ (8,322) $ (90) $ 607
========= ======= ========= ======== ========= ======= ========
OTHER DATA:
Broadcast cash flow (e) .........................................................................................................
Broadcast cash flow margin (f)...................................................................................................
EBITDA (g) .....................................................................................................................
Cash interest (h)................................................................................................................
Capital expenditures (i) ........................................................................................................
Ratio of earnings to fixed charges (j) ..........................................................................................
Ratio of total debt to EBITDA (k) ...............................................................................................
Ratio of EBITDA to interest expense .............................................................................................
Ratio of EBITDA to cash interest ...............................................................................................
</TABLE>
FISCAL
YEAR ENDED
DEC. 31, 1996
-------------
PRO
FORMA
-------------
STATEMENT OF OPERATIONS:
Net broadcast revenues(a) ................ $ 27,974
Station operating expenses................ 16,737
Corporate expenses(b) ................... 1,793
Depreciation and amortiza-
tion .................................... 7,682
---------
Operating income ......................... 1,762
Interest expense(c) ...................... 9,615
Other (income) expenses,
net ..................................... (48)
Income tax expense (ben-
efit)(d) ................................ -
---------
Net income (loss) ...................... $ (7,805)
=========
OTHER DATA:
Broadcast cash flow (e) ....................$ 11,237
Broadcast cash flow margin (f).............. 40.2%
EBITDA (g) ................................$ 9,444
Cash interest (h)........................... 5,983
Capital expenditures (i) ................... 1,551
Ratio of earnings to fixed charges (j) ..... -
Ratio of total debt to EBITDA (k) .......... 7.9x
Ratio of EBITDA to interest expense ........ 1.0x
Ratio of EBITDA to cash interest .......... 1.6x
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 30, 1997 (UNAUDITED)
-------------------------------------------------------------------------------------------
POST-NOTES
OFFERING,
NOTES OFFERING EXISTING NOTES
PHILADELPHIA PHILADELPHIA AND EXISTING EXCHANGE AND DC
RADIO ONE ACQUISITION ACQUISITION NOTES PHILADELPHIA ACQUISITION
HISTORICAL HISTORICAL ADJUSTMENTS EXCHANGE ACQUISITION HISTORICAL
------------ -------------- ----------------- ---------------- --------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net broadcast revenues(a) ... $ 5,533 $ 418 $ (107)(u) $ - $ 5,844 $ 309
Station operating expenses... 3,975 387 - (45)(q) 4,317 195
Corporate expenses(b) ...... 695 - - (107)(u) 588 24
Depreciation and amortiza-
tion ........................ 1,079 68 703(n) 22(q) 1,872 54
--------- ------- ---------- -------- ---------- -------
Operating income ............ (216) (37) (810) 130 (933) 36
Interest expense(c) ......... 1,765 86 (86)(o) 632(r) 2,397 92
Other (income) expenses,
net ........................ (21) - - - (21) -
Income tax expense (ben-
efit)(d) ................... - (49) (49)(p) - - -
--------- ------- ---------- -------- ---------- -------
Net income (loss) ......... $ (1,960) $ (74) $ (773) $ (502) $ (3,309) $ (56)
========= ======= ========== ======== ========== =======
OTHER DATA:
Broadcast cash flow (e)..................................................................................................
Broadcast cash flow margin (f)...........................................................................................
EBITDA (g) ..............................................................................................................
Cash interest (h)........................................................................................................
Capital expenditures (i).................................................................................................
Ratio of earnings to fixed charges (j)...................................................................................
</TABLE>
THREE MONTHS ENDED
MARCH 30, 1997 (UNAUDITED)
----------------------------
DC
ACQUISITIONS PRO
ADJUSTMENTS FORMA
------------- --------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS:
Net broadcast revenues(a) ................. $ - $ 6,153
Station operating expenses................. (31)(1) 4,481
Corporate expenses(b) .................... (24)(m) 588
Depreciation and amortiza-
tion ...................................... 15(t) 1,941
------- ----------
Operating income .......................... 40 (857)
Interest expense(c) ....................... (92)(o) 2,397
Other (income) expenses,
net ...................................... - (21)
Income tax expense (ben-
efit)(d) ................................. - -
------- ----------
Net income (loss) ....................... $ 132 $ (3,233)
======= ==========
OTHER DATA:
Broadcast cash flow (e)................................ 1,672
Broadcast cash flow margin (f)......................... 27.2%
EBITDA (g) ............................................ 1,084
Cash interest (h)...................................... 1,496
Capital expenditures (i)............................... 1,419
Ratio of earnings to fixed charges (j)................. -
28
<PAGE>
- ----------
(a) Net broadcast revenues are gross revenues less agency commissions. Net
broadcast revenues include historical broadcast revenues of each radio
station acquired or to be acquired pursuant to the Acquisitions as if such
acquisition occurred as of January 1, 1996, and do not reflect the impact
of the conversion of WPHI-FM's programming format from Modern Rock to Young
Urban Contemporary.
(b) Corporate expenses include all expenses incurred which are not associated
with or attributable to the operations of any individual radio station,
including compensation and benefits paid to senior management, rent of
corporate offices, general liability and keyman life insurance,
professional fees, and travel and entertainment expenses.
(c) Interest expense includes non-cash interest, such as accretion of
principal, the amortization of discounts on debt and the amortization of
deferred financing costs. See footnote (r) below.
(d) Effective January 1, 1996, the Company elected to be treated as an S
Corporation for U.S. federal and state income tax purposes and, therefore,
it generally has not been subject to income tax at the corporate level
since that time. In connection with the consummation of the Existing Notes
Exchange, the Company's S Corporation status was terminated.
(e) Broadcast cash flow means EBITDA before corporate expenses. Although
broadcast cash flow is not calculated in accordance with GAAP, it is widely
used in the broadcast industry as a measure of a radio broadcasting
company's performance. Broadcast cash flow should not be considered in
isolation from or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with GAAP, or as a measure of profitability or liquidity.
(f) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcast revenues.
(g) EBITDA means operating income (loss) before depreciation and amortization.
Although EBITDA is not calculated in accordance with GAAP, it is widely
used as a measure of a company's ability to service and/or incur debt.
EBITDA should not be considered in isolation from or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with GAAP, or as a measure of
profitability or liquidity.
(h) Cash interest is calculated as interest expense less non-cash interest,
including the accretion of principal, the amortization of discounts on debt
and the amortization of deferred financing costs. The calculation utilizes
the interest rates applicable to the Notes: 7% per annum on the aggregate
principal amount of the Notes during the period presented, which aggregate
principal amount is based on a yield to maturity of 12% per annum (computed
on a semi-annual bond equivalent basis), including cash interest payable at
7% per annum on the principal amount and amortization of the original issue
discount during the first three years and cash interest payable at 12% per
annum thereafter.
(i) Excludes capital expenditures in connection with the Acquisitions, but
includes leasehold improvements made with a portion of the proceeds of the
Notes Offering.
(j) For purposes of this calculation, earnings consist of net income (loss)
before income taxes, extraordinary items and fixed charges. Fixed charges
consist of interest expense, including the amortization of discounts on
debt, the amortization of deferred financing costs, and the component of
rental expense believed by management to be representative of the interest
factor thereon. Earnings were insufficient to cover fixed charges on a pro
forma basis for the fiscal year ended December 31, 1996 and for the three
months ended March 30, 1997 by approximately $7.8 million and $2.0 million,
respectively.
(k) Debt means long-term indebtedness, including the current portion thereof
and deferred interest, net of unamortized discount on such indebtedness.
(l) To eliminate certain station expenses which are not expected to be incurred
after consummation of the Philadelphia Acquisition and DC Acquisition for
services performed by the Company's existing corporate staff and which can
be performed without any increased cost.
(m) Because the Company centralizes its corporate functions, corporate expenses
of the radio stations acquired pursuant to the Acquisitions have not been
carried forward into the pro forma financial statements as these expenses
represent the cost of services redundant to those provided (or to be
provided) by the Company and compensation paid to owners and certain
employees whom the Company plans not to retain.
29
<PAGE>
(n) To record adjustments to depreciation and amortization in connection with
the Philadelphia Acquisition, calculated as follows:
<TABLE>
<CAPTION>
FOR THE THREE
FISCAL YEAR ENDED MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
------------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Amortization of FCC license of approximately $15.9 million over 15 years . $ 1,058 $ 264
Amortization of non-compete agreements of $4.0 million over 2 years ...... 2,000 500
Depreciation of property and equipment of $135,000 over 5 years ......... 27 7
Less: Depreciation and amortization previously recorded ............... (270) (68)
------- -----
Total .................................................................. $ 2,815 $ 703
======= =====
</TABLE>
The pro forma adjustments for depreciation and amortization of the total
consideration of the Philadelphia Acquisition are based upon estimates by
management, which management believes are reasonable.
(o) To reflect the elimination of historical interest expense related to
indebtedness of the radio stations acquired pursuant to the Philadelphia
Acquisition and the DC Acquisition.
(p) To reflect the elimination of the historical income tax benefit associated
with the operation of the radio station acquired pursuant to the
Philadelphia Acquisition.
(q) To reflect the net reduction in rent expense and the net increase in
depreciation expense of leasehold improvement related to terminating its
prior office lease in Washington, D.C. (the "Existing DC Offices") and
entering the lease of the Lanham Offices (as defined), calculated as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
----------------------------- ----------------------------
DEPRECIATION DEPRECIATION
RENT EXPENSE EXPENSE RENT EXPENSE EXPENSE
-------------- -------------- -------------- -------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Elimination of expenses associated with the Existing DC Offices . $ (365) $(25) $ (92) $ -
Expense associated with leasing the Lanham Offices. ............ 198 87 47 22
------- ------ ------ ----
Total ......................................................... $ (167) $ 62 $ (45) $22
======= ====== ====== ====
</TABLE>
(r) To reflect interest expense related to the Notes, and the reduction in
interest expense related to the repayment of the Existing Credit Facility
and the Existing Notes Exchange, including related amortization of original
issue discount and amortization of financing costs, calculated as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
------------------- -------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
Interest on the Notes ............................................................ $ 9,090 $ 2,273
Amortization of deferred financing costs related to the Notes of $4.0 million to be
amortized using the effective interest method .................................... 525 131
Less: Interest on Existing Credit Facility and the Existing Notes, including amor-
tization of discounts on debt .................................................... (6,851) (1,700)
Amortization of deferred financing costs for Existing Credit Facility and the
Existing Notes .................................................................. (401) (72)
-------- --------
Total ............................................................................ $ 2,363 $ 632
======== ========
</TABLE>
Interest expense calculation utilizes the interest rate applicable to the Notes:
a yield to maturity of 12% per annum (computed on a semi-annual bond equivalent
basis), including cash interest payable at 7% per annum on the principal amount
during the first three years and cash interest payable at 12% per annum
thereafter.
(s) To reflect write-off of leasehold improvements with respect to the Existing
DC Offices.
30
<PAGE>
(t) To reflect change in depreciation and amortization in connection with the
DC Acquisition, calculated as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
------------------- -------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
Amortization of FCC license of $4.0 million to be amortized over 15 years $ 267 $ 67
Amortization of net liability assumed over 15 years ..................... 6 2
Less: Depreciation previously recorded ................................. (218) (54)
------ -----
Total .................................................................. $ 55 $ 15
====== =====
</TABLE>
The pro forma adjustments for depreciation and amortization of the purchase
price of the DC Acquisition are based upon estimates by management, which
management believes are reasonable.
(u) To adjust for nonrecurring LMA fees with respect to the Philadelphia
Acquisition.
31
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF MARCH 30, 1997
--------------------------------------------------------------------------------------
POST-NOTES
OFFERING,
EXISTING NOTES
NOTES OFFERING EXCHANGE AND
RADIO ONE PHILADELPHIA AND EXISTING NOTES PHILADELPHIA DC
HISTORICAL(b) ACQUISITION EXCHANGE ACQUISITION ACCQUISITION
--------------- ------------------------------------- --------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents .................. $ 3,293 $ (19,000)(c) $ 24,103 (d) $ 8,396 $ (4,000)(i)
Trade accounts receivable, net ............ 5,470 - - 5,470 -
Prepaid expenses and other ............... 334 - - 334 -
--------- ------------ ----------- --------- -----------
Total current assets ..................... 9,097 (19,000) 24,103 14,200 (4,000)
--------- ------------ ----------- --------- -----------
Property and equipment, net ............... 2,957 136 (c) 1,300 (d) 4,393 -
Intangible assets, net ..................... 38,401 19,864 (c) 2,515 (e) 60,780 4,071 (j)
Other assets .............................. 1,026 (1,000)(c) - 26 -
--------- ------------ ----------- --------- -----------
Total assets .............................. $ 51,481 $ - $ 27,918 $ 79,399 $ 71
========= ============ =========== ========= ===========
LIABILITIES:
Current liabilities:
Accounts payable and accrued expenses ...... $ 2,844 $ - $ - 2,844 $ 71 (j)
Current portion of long-term debt ......... 5,633 - (5,622)(f) 11 -
--------- ------------ ----------- --------- -----------
Total current liabilities .................. 8,477 - (5,622) 2,855 71
Long-term debt and deferred interest ...... 59,967 - 15,068 (f) 75,035 -
--------- ------------ ----------- --------- -----------
Total liabilities ........................ 68,444 - 9,446 77,890 71
--------- ------------ ----------- --------- -----------
SENIOR PREFERRED STOCK:
Senior Preferred Stock(a) .................. - - 20,518 (g) 20,518 -
STOCKHOLDERS' EQUITY (DEFICIT):
Class A Common Stock ($.01 par value per
share, 1,000 shares authorized, 138.45
shares issued and outstanding) ............ - - - - -
Class B Common Stock ($.01 par value per
share, 1,000 shares authorized, 138.45
shares issued and outstanding) ............ - - - - -
Additional paid in capital .................. 1,205 - - 1,205 -
Accumulated earnings (deficit) ............ (18,168) - (2,046)(h) (20,214) -
--------- ------------ ----------- --------- -----------
Total stockholders' equity (deficit) ...... (16,963) - (2,046) (19,009) -
--------- ------------ ----------- --------- -----------
Total liabilities and stockholders' eq-
uity (deficit) ........................... $ 51,481 $ - $ 27,918 $ 79,399 $ 71
========= ============ =========== ========= ===========
</TABLE>
<PAGE>
AS OF MARCH 30, 1997
----------------------
PRO FORMA
---------------
ASSETS:
Current assets:
Cash and cash equivalents .................. $ 4,396
Trade accounts receivable, net ............ 5,470
Prepaid expenses and other ............... 334
---------
Total current assets ..................... 10,200
---------
Property and equipment, net ............... 4,393
Intangible assets, net ..................... 64,851
Other assets .............................. 26
---------
Total assets .............................. $ 79,470
=========
LIABILITIES:
Current liabilities:
Accounts payable and accrued expenses ...... 2,915
Current portion of long-term debt ......... 11
---------
Total current liabilities .................. 2,926
Long-term debt and deferred interest ...... 75,035
---------
Total liabilities ........................ 77,961
---------
SENIOR PREFERRED STOCK:
Senior Preferred Stock(a) .................. 20,518
STOCKHOLDERS' EQUITY (DEFICIT):
Class A Common Stock ($.01 par value per
share, 1,000 shares authorized, 138.45
shares issued and outstanding) ............ -
Class B Common Stock ($.01 par value per
share, 1,000 shares authorized, 138.45
shares issued and outstanding) ............ -
Additional paid in capital .................. 1,205
Accumulated earnings (deficit) ............ (20,214)
---------
Total stockholders' equity (deficit) ...... (19,009)
---------
Total liabilities and stockholders' eq-
uity (deficit) ........................... $ 79,470
=========
32
<PAGE>
- ----------
(a) Consists of: (i) Series A 15% Senior Cumulative Redeemable Preferred Stock,
par value $.01 per share, of which 100,000 shares will be authorized and
83,200 shares would have been issued and outstanding, assuming the
consummation of the Existing Notes Exchange as of March 30, 1997, and (ii)
Series B 15% Senior Cumulative Redeemable Preferred Stock, par value $.01
per share, of which 150,000 shares will be authorized and 121,980 shares
would have been issued and outstanding, assuming the consummation of the
Existing Notes Exchange as of March 30, 1997.
(b) See the Consolidated Financial Statements included elsewhere in this
Prospectus.
(c) To reflect the allocation of the purchase price to be paid in connection
with the Philadelphia Acquisition among tangible and intangible assets
based upon estimated fair market values as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Intangible Assets ............................................................ $ 19,864
Property and equipment, net .......................................... 136
Total consideration ................................................ 20,000
Less: Released escrow deposit ....................................... (1,000)
---------
Non-refundable acquisition prepayment .............................. (600)
---------
Total Consideration, net of escrow deposit and prepayment ............ 18,400
Amount to repay loan used to fund non-refundable acquisition prepay-
ment 600
---------
Total payments ............................................................... $ 19,000
=========
</TABLE>
(d) To reflect increase in cash and cash equivalents as a result of the
issuance of the Notes, calculated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Gross proceeds of the Notes ................................................ $ 75,000
Repayment of Existing Credit Facility .............................. (45,597)
Estimated leasehold improvements and new equipment in respect of the
Lanham Offices ................................................... (1,300)
Estimated financing fees and expenses .............................. (4,000)
---------
Cash and cash equivalents remaining from this Offering ............ $ 24,103
=========
</TABLE>
(e) To reflect the change in deferred financing costs as a result of the Notes
Offering, calculated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred financing costs associated with the Notes .............................. $ 4,000
Less: Write-off of deferred financing costs associated with the retirement
of the Existing Credit Facility and the Existing Notes Exchange .................. (1,485)
--------
Total .................................................................. $ 2,515
========
</TABLE>
(f) To reflect the issuance of the Notes, the repayment of indebtedness under
the Existing Credit Facility and the Existing Notes Exchange, calculated as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Gross proceeds of the Notes ............................................. $ 75,000
Less: Long-term portion of indebtedness under the Existing Credit Facil-
ity (39,975)
Existing Notes Exchange, net of unamortized discounts on debt . (19,957)
---------
Total long-term debt and deferred interest .............................. 15,068
Less: Current portion of indebtedness under the Existing Credit Facility . (5,622)
---------
Total .................................................................. $ 9,446
=========
</TABLE>
33
<PAGE>
(g) To reflect the issuance of the Senior Preferred Stock pursuant to the
Existing Notes Exchange.
(h) To reflect the increase in accumulated deficit, calculated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Loss on early retirement of debt ............................................. $ (561)
Write-off of deferred financing costs related to the Existing Credit Facility
and the Existing Notes ...................................................... (1,485)
----------
Total ..................................................................... $ (2,046)
==========
</TABLE>
(i) To reflect payment of total consideration for the DC Acquisition.
(j) To reflect the allocation of the total consideration to be paid in
connection with the DC Acquisition among intangible assets and
liabilities based upon preliminary estimated fair market values,
calculated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Intangible assets ........................................................... $ 4,071
Payables assumed ........................................................... (71)
----------
Total consideration ...................................................... $ 4,000
==========
</TABLE>
34
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table contains selected historical consolidated financial
information with respect to the Company. The selected historical consolidated
financial data has been derived from the consolidated financial statements of
the Company, including the Consolidated Financial Statements of the Company for
the three fiscal years ended December 31, 1996, which have been audited by
Arthur Andersen LLP, independent public accountants. The consolidated financial
data for the three months ended March 31, 1996 and March 30, 1997 have been
derived from unaudited consolidated financial statements of the Company which,
in the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
condition and results of operations of the Company. The selected historical
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Consolidated Financial Statements of the Company included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(a)
---------------------------------
DEC. 27, DEC. 26, DEC. 25,
1992 1993 1994
---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net broadcast revenues(b) .................. $ 10,833 $ 11,638 $ 15,541
Station operating expenses .................. 6,036 6,972 8,506
Corporate expenses(c) ..................... 553 683 1,128
Depreciation and amortization ............... 2,299 1,756 2,027
-------- --------- ---------
Operating income (loss) .................. 1,945 2,227 3,880
Interest expense(d) ........................ 1,890 1,983 2,665
Other (income) expenses, net ............... (72) - (38)
-------- --------- ---------
Net income (loss) before taxes and ex-
traordinary item .......................... 127 244 1,253
Income tax expense (benefit)(e) ............ - 92 30
-------- --------- ---------
Net income (loss) before extraordinary
items .................................... 127 152 1,223
Extraordinary loss ........................ - 138 -
-------- --------- ---------
Net income (loss) ........................ $ 127 $ 14 $ 1,223
======== ========= =========
OTHER DATA:
Broadcast cash flow(f) ..................... $ 4,797 $ 4,666 $ 7,035
Broadcast cash flow margin(g) ............... 44.3% 40.1% 45.3%
EBITDA(h) ................................. $ 4,244 $ 3,983 $ 5,907
Cash interest(i) ........................... 1,909 1,946 2,356
Capital expenditures(j) ..................... 708 212 639
Ratio of earnings to fixed charges(k) ...... 1.1 x 1.1 x 1.5 x
Balance Sheet Data (at period end):
Cash and cash equivalents .................. $ 2,628 $ 1,110 $ 1,417
Working capital(l) ........................ 4,032 3,052 3,378
Intangible assets, net ..................... 6,921 13,380 11,705
Total assets .............................. 13,551 20,660 20,566
Debt, including current portion and deferred
interest(m) .............................. 17,732 24,709 23,049
Total stockholders' equity (deficit) ...... (5,486) (5,498) (4,367)
<CAPTION>
FISCAL YEAR ENDED(a) THREE MONTHS ENDED
------------------------- -------------------------
(UNAUDITED)
DEC. 31, DEC. 31, MAR. 31, MAR. 30,
1995 1996 1996 1997
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net broadcast revenues(b) .................. $ 21,455 $ 23,702 $ 4,670 $ 5,533
Station operating expenses .................. 11,736 13,927 3,275 3,975
Corporate expenses(c) ..................... 1,995 1,793 346 695
Depreciation and amortization ............... 3,912 4,262 1,183 1,079
--------- --------- ---------- ----------
Operating income (loss) .................. 3,812 3,720 (134) (216)
Interest expense(d) ........................ 5,289 7,252 1,792 1,765
Other (income) expenses, net ............... (89) 77 - (21)
--------- --------- ---------- ----------
Net income (loss) before taxes and ex-
traordinary item .......................... (1,388) (3,609) (1,926) (1,960)
Income tax expense (benefit)(e) ............ - - - -
--------- --------- ---------- ----------
Net income (loss) before extraordinary
items .................................... (1,388) (3,609) (1,926) (1,960)
Extraordinary loss ........................ 468 - - -
--------- --------- ---------- ----------
Net income (loss) ........................ $ (1,856) $ (3,609) $ (1,926) $ (1,960)
========= ========= ========== ==========
OTHER DATA:
Broadcast cash flow(f) ..................... $ 9,719 $ 9,775 $ 1,395 $ 1,588
Broadcast cash flow margin(g) ............... 45.3% 41.2% 29.9% 28.2%
EBITDA(h) ................................. $ 7,724 $ 7,982 $ 1,049 $ 863
Cash interest(i) ........................... 5,103 4,815 1,142 695
Capital expenditures(j) ..................... 224 251 46 119
Ratio of earnings to fixed charges(k) ...... - - - -
Balance Sheet Data (at period end):
Cash and cash equivalents .................. $ 2,703 $ 1,708 $ 4,254 $ 3,293
Working capital(l) ........................ 5,996 6,404 5,370 6,253
Intangible assets, net ..................... 43,455 39,358 42,426 38,401
Total assets .............................. 55,894 51,777 54,849 51,481
Debt, including current portion and deferred
interest(m) .............................. 64,585 64,939 62,503 65,600
Total stockholders' equity (deficit) ...... (11,394) (15,003) (11,191) (16,963)
</TABLE>
- ----------
(a) Year-to-year comparisons are significantly affected by the Company's
acquisition of various radio stations during the periods covered. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and note (j) below. Prior to the fiscal year ended
December 31, 1996, the Company's accounting reporting period was based on a
fifty-two/fifty- three week period ending on the last Sunday of the
calendar year. During 1996, the Company elected to end its fiscal year on
December 31 of each year.
(b) Net broadcast revenues are gross revenues less agency commissions. Net
broadcast revenues include historical broadcast revenues of each radio
station acquired from the date of acquisition and do not reflect the impact
of any changes to programming formats at such acquired radio stations.
(c) Corporate expenses include all expenses incurred which are not associated
with or attributable to the operations of any
35
<PAGE>
individual radio station, including compensation and benefits paid to
senior management, rent of corporate offices, general liability and keyman
life insurance, professional fees, and travel and entertainment expenses.
(d) Interest expense includes non-cash interest, such as the accretion of
principal, the amortization of discounts on debt and the amortization of
deferred financing costs.
(e) Effective January 1, 1996, the Company elected to be treated as an S
Corporation for U.S. federal and state income tax purposes and, therefore,
it generally has not been subject to income tax at the corporate level
since that time. In connection with the consummation of the Existing Notes
Exchange, the Company's S Corporation status was terminated.
(f) Broadcast cash flow means EBITDA before corporate expenses. Although
broadcast cash flow is not calculated in accordance with GAAP, it is widely
used in the broadcast industry as a measure of a radio broadcasting
company's performance. Broadcast cash flow should not be considered in
isolation from or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with GAAP, or as a measure of profitability or liquidity.
(g) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcast revenues.
(h) EBITDA means operating income (loss) before depreciation and amortization.
Although EBITDA is not calculated in accordance with GAAP, it is widely
used as a measure of a company's ability to service and/or incur debt.
EBITDA should not be considered in isolation from or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with GAAP, or as a measure of
profitability or liquidity.
(i) Cash interest is calculated as interest expense less non-cash interest,
including the accretion of principal, the amortization of discounts on debt
and the amortization of deferred financing costs, for the indicated period.
(j) Excludes capital expenditures in connection with all radio station
acquisitions by the Company which occurred during the periods presented,
including: (i) WWIN-FM and WWIN-AM acquired in January 1992 for total
consideration of approximately $4.7 million, (ii) WERQ-FM and WOLB-AM
(previously WERQ-AM) acquired in September 1993 for total consideration of
approximately $9.0 million and (iii) WKYS-FM acquired in June 1995 for
total consideration of approximately $34.4 million.
(k) For purposes of this calculation, earnings consist of net income (loss)
before income taxes, extraordinary items and fixed charges. Fixed charges
consist of interest expense, including the amortization of discounts on
debt and the amortization of deferred financing costs, and the component of
rental expense believed by management to be representative of the interest
factor thereon. Earnings were insufficient to cover fixed charges for the
fiscal years ended December 31, 1995 and 1996, and for the three months
ended March 31, 1996 and March 30, 1997 by approximately $1.4 million, $3.6
million, $1.8 million and $2.0 million, respectively.
(l) Working capital means current assets less current liabilities, excluding
current portion of long-term debt.
(m) Debt means long-term indebtedness, including the current portion thereof,
net of unamortized discounts on such indebtedness.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The primary source of the Company's revenue is the sale of broadcasting
time on its radio stations for advertising. The Company's significant broadcast
expenses are employee salaries and commissions, programming expenses,
advertising and promotion expenses, rental of premises for studios and rental of
transmission tower space and music license royalty fees. The Company strives to
control these expenses by centralizing certain functions such as finance and
accounting, and the overall programming management function as well as using its
multiple stations, market presence and purchasing power to negotiate favorable
rates with certain vendors and national representative selling agencies. See
"Business-Operating Strategy."
The Company's revenues are affected primarily by the advertising rates the
Company's radio stations are able to charge as well as the overall demand for
radio advertising time in a market. Advertising rates are based primarily on (i)
a radio station's audience share in the demographic groups targeted by
advertisers, as measured principally by quarterly reports (and to a lesser
extent, by monthly reports) by Arbitron, (ii) the number of radio stations in
the market competing for the same demographic groups and (iii) the supply of and
demand for radio advertising time. Advertising rates are generally highest
during morning and afternoon commuting hours. Most of the Company's revenues are
generated from local advertising, which is sold by each radio station's sales
staff. During the three months ended March 31, 1996 and March 30, 1997,
approximately 66% and 21% and 64% and 25% of the Company's net broadcast
revenues were generated from local and national advertising, respectively.
During fiscal year 1996, approximately 66% and 27% of the Company's net
broadcast revenues were generated from local and national advertising,
respectively. During fiscal year 1995, local and national advertising
represented approximately 64% and 30% of the Company's net broadcast revenues,
respectively. In the radio broadcasting industry, radio stations often utilize
trade (or barter) agreements to generate advertising time sales in exchange for
goods or services (such as travel and lodging), instead of cash. Approximately
4%, 4%, 5%, 8% and 4% of net broadcast revenues consisted of barter transactions
in the fiscal years ended December 24, 1994, December 31, 1995, December 31,
1996, and for the three months ended March 31, 1996 and March 30, 1997,
respectively. Net broadcast revenue also includes revenue from special events
(entrance fees for attendees and booth rent to vendors), transmission tower
income and the collection of an annual management fee of approximately $100,000
from Radio One of Atlanta, Inc. for various corporate services provided by the
Company. See "Certain Transactions."
The performance of an individual radio station or group of radio stations
in a particular market is customarily measured by its ability to generate net
revenues and broadcast cash flow (i.e., EBITDA plus corporate expenses),
although broadcast cash flow is not a measure utilized under generally accepted
accounting principles. Broadcast cash flow should not be considered in isolation
from, nor as a substitute for, operating income, net income, cash flow, or other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles, nor as a measure of the Company's
profitability or liquidity. Despite its limitations, broadcast cash flow is
widely used in the broadcasting industry as a measure of a company's operating
performance because it provides a meaningful measure of comparative radio
station performance, without regard to items such as depreciation and
amortization (which can vary depending upon accounting methods and the book
value of assets, particularly in the case of acquisitions) and corporate
expenses.
Radio One's operating results in any period may be affected by advertising
and promotion expenses that do not produce commensurate revenues in the period
in which such expenses are incurred. The Company generally incurs advertising
and promotion expenses in order to increase listenership and Arbitron ratings.
Increased advertising revenue may wholly or partially lag behind the incurrence
of such advertising and promotion expenses because Arbitron only reports
complete ratings information quarterly.
Since 1990, the Company has acquired several radio stations. Most
recently, the Company acquired a radio station in Philadelphia on May 19, 1997,
and, pursuant to an amended non-binding letter of intent, is negotiating the
acquisition of a radio station in Washington, D.C. See "The Transactions-
37
<PAGE>
Acquisitions." During the most recent three fiscal years, the Company completed
one acquisition, which was its acquisition in June 1995 of WKYS-FM, a radio
station located in Washington, D.C., for total consideration of approximately
$34.4 million. The results of operations for WKYS-FM for the second half of
fiscal year 1995 and for fiscal year 1996 are included in the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus. The
discussion below concerning results of operations reflects the operations of
radio stations owned and operated by Radio One during the periods presented and
therefore does not include the pro forma results related to the Acquisitions. As
a result of the acquisition of WKYS-FM in June 1995, the Company's historical
financial data prior to such time are not directly comparable to the Company's
historical financial data subsequent thereto.
RESULTS OF OPERATIONS
The following table summarizes the Company's historical consolidated
results of operations:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE MONTHS ENDED
---------------------------------------------------- ---------------------------
DEC. 25, DEC. 31, DEC. 31, MAR. 31, MAR. 30,
1994 1995 1996 1996 1997
---------- ------------- ----------------------- ----------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net broadcast revenues ............ $ 15,541 $ 21,455 $ 23,702 $ 4,670 $ 5,533
Station operating expenses ......... 8,506 11,736 13,927 3,275 3,975
Corporate expenses .................. 1,128 1,995 1,793 346 695
Depreciation and amortization ...... 2,027 3,912 4,262 1,183 1,079
--------- ---------- ---------- ---------- ----------
Operating income (loss) ............ 3,880 3,812 3,720 (134) (216)
Interest expense .................. 2,665 5,289 7,252 1,792 1,765
Other (income) expenses, net ...... (38) (89) 77 - (21)
Income tax expense .................. 30 - - - -
--------- ---------- ---------- ---------- ----------
Net income (loss) before extraor-
dinary item ....................... 1,223 (1,388) (3,609) (1,926) (1,960)
Extraordinary loss .................. - 468 - - -
--------- ---------- ---------- ---------- ----------
Net income (loss) .................. $ 1,223 $ (1,856) $ (3,609) $ (1,926) $ (1,960)
========= ========== ========== ========== ==========
OTHER DATA:
Broadcast cash flow ............... $ 7,035 $ 9,719 $ 9,775 $ 1,395 1,588
Broadcast cash flow margin ......... 45.3% 45.3% 41.2% 29.9% 28.2%
EBITDA .............................. $ 5,907 $ 7,724 $ 7,982 1,049 863
</TABLE>
- ----------
THREE-MONTH PERIOD ENDED MARCH 30, 1997 COMPARED TO THREE-MONTH PERIOD ENDED
MARCH 31, 1996
Including WPHI-FM Activity
The Company realized a net revenue increase of 18.5% to approximately $5.5
million in the first quarter of 1997 compared to the first quarter of 1996 as
WPHI-FM contributed marginally to the revenue growth of the Company due to its
start-up nature.
Station operating expenses increased 21.4% to approximately $4.0 million in
the first quarter of 1997 compared to the first quarter of 1996 as the Company
built its staffing at WPHI-FM during the first quarter of 1997.
Broadcast cash flow increased 4.2% to approximately $1.6 million in the
first quarter of 1997 compared to the first quarter of 1996 as the start-up
losses for WPHI-FM offset the cash flow growth in the Company's other markets.
Corporate expenses increased 100% to approximately $695,000 in the first
quarter of 1997 from the first quarter of 1996 as the Company incurred fees
under the LMA relating to WPHI-FM for seven weeks in the first quarter of 1997.
38
<PAGE>
Operating income declined to approximately ($216,000) in the first quarter
of 1997, from approximately ($134,000) in the first quarter of 1996, due to the
increase in corporate expenses.
Interest expense for the first quarter of 1997 was flat compared to the
first quarter of 1996 at approximately $1.8 million as lower balances on the
Company's Existing Credit Facility were offset by higher interest accretion on
the Company's Existing Notes.
Excluding WPHI-FM Activity
Net broadcast revenues of the Company, excluding the results of WPHI-FM,
for the fiscal quarter ended March 30, 1997 increased 16.3% to approximately
$5.4 million from approximately $4.7 million for the fiscal quarter ended March
31, 1996. This increase was primarily attributable to stronger station ratings
and higher industry revenues in the Company's Washington, DC and Baltimore,
Maryland markets.
Station operating expenses in the first quarter of 1997 increased 13.8% to
approximately $3.7 million from approximately $3.3 million for the first quarter
of 1996 due to higher sales, programming and promotion expenses.
Broadcast cash flow increased 22.2% to approximately $1.7 million in the
first quarter of 1997 from approximately $1.4 million in the first quarter of
1996 due to increased revenue offset slightly by higher station operating
expenses.
Corporate expenses increased 70% in the first quarter of 1997 to
approximately $588,000 from approximately $346,000 for the first quarter of 1996
as the Company realized increases in various expenses associated with potential
acquisitions activity, the Company's Washington, DC headquarters relocation and
professional services expenses.
Operating income increased to approximately $38,000 in the first quarter of
1997 from approximately ($134,000) in the first quarter of 1996 due to higher
broadcast cashflow and slightly lower depreciation and amortization offset by
higher corporate expenses.
Interest expense for the first quarter of 1997 was flat compared to the
first quarter of 1996 at approximately $1.8 million as lower balances on the
Company's Existing Credit Facility were offset by higher interest accretion on
the Company's Existing Notes.
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
Net broadcast revenues of the Company for the fiscal year ended December
31, 1996 increased by 10.5% to approximately $23.7 million from approximately
$21.5 million for the fiscal year ended December 31, 1995. This increase was
primarily attributable to gains in both the Company's Washington, D.C. and
Baltimore operations. Net broadcast revenue increased by 12.1% in Washington,
D.C. to approximately $14.3 million from approximately $12.7 million, due to the
impact of a full year of advertising revenue for WKYS-FM which was acquired in
June 1995, offset by an 8.2% revenue decline to approximately $8.2 million from
approximately $8.9 million for the WMMJ-FM/WOL-AM radio station combination.
Subsequent to the acquisition of WKYS-FM in 1995 and for most of 1996, high
turnover among the sales staff relating to the integration of the existing and
acquired sales staffs and a flat Washington, D.C. radio market led to lower than
expected advertising revenues. However, by July 1996, Radio One had hired three
highly experienced sales managers who contributed to the improvement in the
Company's performance, as reflected in the Company's improving revenues in the
fourth quarter of 1996. In Baltimore, net broadcast revenue increased by 6.8% to
approximately $9.4 million from approximately $8.8 million. This increase was
due primarily to a 4.9% increase to approximately $4.3 million from
approximately $4.1 million at the Company's WWIN-FM/WWIN-AM combination and an
11.9% increase to approximately $4.8 million from approximately $4.3 million at
the Company's WOLB-AM/WERQ-FM combination, as both radio station combinations
benefited from increasing ratings through much of the year.
39
<PAGE>
Station operating expenses of the Company for the fiscal year ended
December 31, 1996 increased by 18.7% to approximately $13.9 million from
approximately $11.7 million for the fiscal year ended December 31, 1995. This
increase in radio station operating expenses was due primarily to a 32.8%
increase to approximately $7.9 million from approximately $6.0 million in the
Company's Washington, D.C. operations due to the acquisition of WKYS-FM, the
costs of integrating that radio station into the Company's operations and higher
marketing and promotion expenses for all three of the Company's radio stations
in the market. Additionally, in conjunction with the reorganization of the
Company's Washington, D.C. operations following the acquisition of WKYS-FM, the
Company hired three highly experienced sales managers in Washington, D.C. as
well as a prominent on-air personality for its morning program on WKYS-FM which
positively impacted the Company's revenues and ratings beginning late in the
fourth quarter of 1996. In the Company's Baltimore operations, station operating
expenses increased by 4.1% to approximately $6.0 million from approximately $5.7
million as a result of the addition of a new high-profile on-air personality for
one of the Baltimore radio station's morning shows offset by effective expense
management. The relatively smaller increase in station operating expenses in
Baltimore helped mitigate the overall impact of higher station operating
expenses in Washington, D.C.
Broadcast cash flow of the Company for the fiscal year ended December 31,
1996 increased by 0.6% to approximately $9.8 million from approximately $9.7
million for the fiscal year ended December 31, 1995. The broadcast cash flow
margin decreased to 41.2% from 45.3% due to the factors noted above.
Corporate expenses of the Company for the fiscal year ended December 31,
1996 decreased by 10.1% to approximately $1.8 million from approximately $2.0
million for the fiscal year ended December 31, 1995. This decrease was due to a
$778,000 non-cash compensation expense incurred during the fiscal year ended
December 31, 1995 related to the grant of a stock option to Mr. Liggins to
purchase shares of the Company's Common Stock, 57.45 of which vested in fiscal
1995. This decrease was partially offset by significantly higher legal and
professional expenses during the fiscal year ended December 31, 1996, as well as
expenses associated with the potential acquisition of various radio stations.
Operating income of the Company for the fiscal year ended December 31, 1996
decreased by 2.4% to approximately $3.7 million from approximately $3.8 million
for the fiscal year ended December 31, 1995 as a result of the factors noted
above as well as an increase in depreciation and amortization expense associated
with the inclusion of WKYS-FM in Company's financial statements for the full
year.
Interest expense of the Company for the fiscal year ended December 31, 1996
increased by 37.1% to approximately $7.3 million from approximately $5.3 million
for the fiscal year ended December 31, 1995, as the higher debt levels
associated with the acquisition of WKYS-FM impacted the Company's financial
statements for a full year.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 25,
1994
Net broadcast revenues of the Company for the fiscal year ended December
31, 1995 increased 38.1% to approximately $21.5 million from approximately $15.5
million for the fiscal year ended December 25, 1994. The 38.2% revenue increase
in Washington, D.C. to approximately $12.7 million from approximately $9.2
million was due primarily to the acquisition of WKYS-FM in June 1995, while the
revenue for the WMMJ-FM/WOL-AM radio station group was flat year-to-year. The
approximate 38.4% revenue increase in Baltimore to approximately $8.8 million
from approximately $6.4 million was due to increases of approximately 32.0% to
approximately $4.1 million from approximately $3.1 million at the Company's
WWIN-FM/WWIN-AM combination and a 43.0% increase to approximately $4.3 million
from approximately $3.0 million at the Company's WOLB-AM/WERQ-FM combination, as
both radio station combinations benefited from increasing ratings throughout
much of the year.
Station operating expenses of the Company for the fiscal year ended
December 31, 1995 increased by 38.0% to approximately $11.7 million from
approximately $8.5 million for the fiscal year ended December 25, 1994. This
increase in radio station operating expenses was due primarily to an increase of
38.5% to approximately $6.0 million from approximately $4.3 million in the
Company's Washington, D.C. operations due to the acquisition of WKYS-FM, the
costs of integrating that radio station into the Company's operations and higher
programming and administrative expenses for all three of the Com-
40
<PAGE>
pany's radio stations in that market. This increase was matched by a similar
increase of 37.4% to approximately $5.7 million from approximately $4.2 million
in the Company's Baltimore operations due to higher programming and
administrative costs as the Company expanded its operations and presence in the
market and increased its revenues.
Broadcast cash flow of the Company for the fiscal year ended December 31,
1995 increased by 38.2% to approximately $9.7 million from approximately $7.0
million for the fiscal year ended December 25, 1994 due primarily to the
acquisition of WKYS-FM. The broadcast cash flow margin was 45.3% for each year.
Corporate expenses of the Company for the fiscal year ended December 31,
1995 increased 76.9% to approximately $2.0 million from approximately $1.1
million for the fiscal year ended December 25, 1994. This increase was due to a
$778,000 non-cash compensation expense during the fiscal year ended December 31,
1995, related to the grant of a stock option to Mr. Liggins to purchase shares
of the Company's Common Stock, 57.45 of which vested in fiscal 1995, which was
partially offset by effective expense management and the absence of additional
corporate staffing requirements.
Operating income of the Company for the fiscal year ended December 31, 1995
decreased by 1.8% to approximately $3.8 million from approximately $3.9 million
for the fiscal year ended December 25, 1994, as a result of factors noted above
and higher depreciation and amortization associated with the acquisition of
WKYS-FM.
Interest expense of the Company for the fiscal year ended December 31, 1995
increased by 98.5% to approximately $5.3 million from approximately $2.7 million
for the fiscal year ended December 25, 1994, as the Company incurred additional
debt associated with the acquisition of WKYS-FM in June 1995.
LIQUIDITY AND CAPITAL RESOURCES
On June 6, 1995, the Company entered into the Existing Credit Facility with
NationsBank of Texas, N.A. (the "Bank") as lender and agent for two other
commercial banks providing the Company with a revolving line of credit of up to
$53.0 million which was used by the Company, among other things, to consummate
the acquisition of WKYS-FM and to refinance its then outstanding indebtedness.
At the closing of the acquisition of WKYS-FM, the Company borrowed $48.0 million
under the Existing Credit Facility. The Existing Credit Facility required the
Company to make monthly interest payments and the amount of the commitment steps
down quarterly, and thus quarterly principal payments were made to the extent
required by the Existing Credit Facility. The Company satisfied all debt service
requirements under the Existing Credit Facility and all of its working capital
requirements out of operating cash flow since June 6, 1995, although amendments
and/or waivers were required under the Existing Credit Facility and the
Securities Purchase Agreement at various times during 1996 and 1997 to waive
various covenant defaults and/or to amend covenant levels including, in some
cases, the violation of leverage ratio covenants and other coverage ratios.
Pursuant to an amendment entered into in April 1997, the Company borrowed
$850,000 under the Existing Credit Facility to make a non-refundable prepayment
of $600,000 of the $20.0 million total consideration for the Philadelphia
Acquisition and to fund $250,000 in tenant improvements to the Lanham Offices.
All of the indebtedness outstanding under the Existing Credit Facility was
repaid from the proceeds of the Notes.
Radio One will either (i) pursuant to a commitment letter with NationsBank
of Texas, N.A. (the "Bank"), amend and restate the Existing Credit Facility to
provide for a revolving credit facility with a maximum borrowing capacity of
$7.5 million to be used for working capital, capital expenditures and other
corporate purposes (the "New Credit Facility") or (ii) terminate the Existing
Credit Facility. If entered into by the Company, the New Credit Facility would
terminate on the third anniversary of its closing, at which time any outstanding
principal balance together with all accrued and unpaid interest thereon would
become due and payable. See "Description of Certain Indebtedness-New Credit
Facility." Assuming the New Credit Facility is entered into by the Company, the
Company expects to repay any future advances under the New Credit Facility out
of the operating cash flow. The Company is currently exploring alternative
sources of financing in the event the Company elects not to enter into the New
Credit Facility. See "Description of Certain Indebtedness-New Credit Facility."
41
<PAGE>
Net cash provided by the Company's operating activities for the fiscal year
ended December 31, 1996 increased by approximately $691,900 to $2.6 million from
approximately $1.9 million for the fiscal year ended December 31, 1995. This
increase was due to lower cash interest payments for the fiscal year ended
December 31, 1996 as the Company made a cash interest payment on its Existing
Notes at the end of fiscal year 1995, and due to an increase in operating
income.
Net cash provided by the Company's operating activities for the fiscal year
ended December 31, 1995 decreased by 41.8% to approximately $1.9 million from
approximately $3.3 million for the fiscal year ended December 25, 1994,
resulting from higher cash interest payments and an increase in accounts
receivable offset by an increase in operating income.
Cash used in the Company's investing activities for the fiscal years ended
December 31, 1996, December 31, 1995 and December 25, 1994, was approximately
$1.3 million, $33.9 million, and $1.2 million, respectively. The significant
increase in cash used for investment activities in fiscal 1995 was due to the
acquisition of WKYS-FM for $34.4 million in June of that year.
Cash provided by (used in) the Company's financing activities for the
fiscal years ended December 31, 1996, December 31, 1995 and December 25, 1994
was approximately $(2.4) million, $33.3 million and $(1.8) million,
respectively. The significant increase in cash provided by financing activities
for the fiscal year ended December 31, 1995 resulted primarily from a
refinancing completed in conjunction with the acquisition of WKYS-FM, net of the
purchase of certain stock warrants for approximately $6.6 million.
Capital expenditures of the Company, excluding the acquisition of radio
stations, for its fiscal years ended December 31, 1996, December 31, 1995 and
December 25, 1994 were approximately $251,000, $225,000 and $636,000,
respectively. The Company expects that capital expenditure requirements will be
approximately $1.8 million for the fiscal year ended December 31, 1997, which it
believes will be sufficient to finance the leasehold improvements and new
equipment related to the move to the Lanham Offices for the Company's
Washington, D.C. radio stations, new digital studios for the Company's Baltimore
radio stations, as well as maintenance capital expenditures of approximately
$300,000.
The Company continuously reviews, and is currently reviewing, opportunities
to acquire additional radio stations, primarily in the top-30 African-American
markets. As of the date hereof, except in connection with the DC Acquisition,
the Company has no written or oral understandings, letters of intent or
contracts to acquire radio stations. The Company anticipates that any future
radio station acquisitions would be financed through funds generated from
operations, equity financings, permitted debt financings, debt financings
through Unrestricted Subsidiaries (as defined) or a combination thereof.
However, there can be no assurance that any such financing, if available, will
be available on favorable terms. See "Risk Factors-Leverage and Debt Service;
Refinancing Required" and "-Expansion through Acquisitions."
After giving effect to the termination of the S Corporation status of the
Company as if it had occurred on December 31, 1996, the Company would have had
an accumulated net operating loss ("NOL") carryforward for U.S. federal income
tax purposes of approximately $60,000. This accumulated NOL carryforward was
incurred prior to the fiscal year ended December 31, 1996 and excludes the net
losses for income tax purposes incurred during the fiscal year ended December
31, 1996, which were passed through to the stockholders of the Company at the
end of such period. The S Corporation status of the Company was terminated in
connection with the consummation of the Existing Notes Exchange. Generally, a
corporation may carry forward for fifteen years (including any years in which
the Company was an S corporation) an NOL incurred in any taxable year to offset
taxable income in a future year. There can be no assurance that the Company will
be able to use its accumulated NOLs in future tax years.
The Indenture imposes certain restrictions on the Company, including
restrictions on its ability to incur indebtedness, pay dividends, make
investments, sell assets and engage in certain other activities affecting the
Company's liquidity. See "Description of Exchange Notes." In addition, in the
event the Company enters into the New Credit Facility, the New Credit Facility
will contain numerous restrictions in addition to those set forth in the
Indenture. See "Description of Certain Indebtedness-New Credit Facility."
42
<PAGE>
Management believes that, based on current levels of operations and
anticipated internal growth, cash flow from operations together with other
available sources of funds will be adequate for the foreseeable future to make
required payments of interest on the Company's indebtedness, to fund anticipated
capital expenditures and working capital requirements and to enable the Company
to comply with the terms of its debt agreements. The ability of the Company to
meet its debt service obligations and reduce its total debt, and the Company's
ability to refinance the Exchange Notes at or prior to their scheduled maturity
date in 2004, will depend upon the future performance of the Company which, in
turn, will be subject to general economic conditions and to financial, business
and other factors, including factors beyond the Company's control. See "Risk
Factors-Leverage and Debt Service; Refinancing Required" and "Description of
Exchange Notes."
IMPACT OF INFLATION
The Company believes that inflation has not had a material impact on its
results of operations for each of its fiscal years in the three-year period
ended December 31, 1996 or for the three month period ended March 30, 1997.
However, there can be no assurance that future inflation would not have an
adverse impact on the Company's operating results and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation." With respect to stock options granted to employees, SFAS No. 123
permits companies to continue using the accounting method promulgated by
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees," to measure compensation expense or to adopt the fair
value based method prescribed by SFAS No. 123. If APB No. 25's method is
continued, pro forma disclosures are required as if SFAS No. 123 accounting
provisions were followed. Management has elected to continue to measure
compensation expenses under APB No. 25. The adoption of SFAS No. 123 had no
material impact on the Company's results of operations and did not require pro
forma disclosures in the Consolidated Financial Statements included elsewhere
in this Prospectus.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 is effective
for financial statements for fiscal years beginning after December 15, 1995. The
adoption of SFAS No. 121 on January 1, 1996, had no material impact on the
Company's financial position or results of operations.
43
<PAGE>
BUSINESS
GENERAL
Radio One, founded in 1980, is the largest radio broadcasting company in
the United States exclusively targeting African-Americans. After giving effect
to the DC Acquisition, the Company will own and operate a total of nine radio
stations (five FM and four AM) in three of the top-15 African- American markets.
The Company seeks to expand within its existing markets and into new, primarily
top-30 African-American markets. The Company believes that the African-American
community is an attractive target market for radio broadcasters and that the
Company has a competitive advantage serving this target market due in part to
its African-American ownership and its active involvement in the
African-American community.
The Company, pursuant to a non-binding amended letter of intent, is
negotiating the acquisition of WYCB-AM, currently the top-rated Gospel radio
station in Washington, D.C. After giving effect to the DC Acquisition, the
Company will own and operate four radio stations in Washington, D.C., the third
largest African-American market with an MSA population of approximately 4.2
million in 1995 (approximately 27.4% of which was African-American), and four
radio stations in Baltimore, the eleventh largest African-American market with
an MSA population of approximately 2.5 million in 1995 (approximately 26.0% of
which was African-American). The Company also has recently entered the
Philadelphia market, the sixth largest African-American market with an MSA
population of approximately 4.9 million in 1995 (approximately 19.9% of which
was African-American), and is programming WPHI-FM with a Young Urban
Contemporary format.
The Company believes that operating radio stations targeting the
African-American population presents significant growth opportunities for the
following reasons:
o Rapid Population Growth. According to data compiled by the Census Bureau,
from 1980 to 1995, the African-American population increased from
approximately 26.7 million to 33.1 million (a 24% increase, compared to a
16% increase in the population as a whole). Furthermore, the
African-American population is expected to exceed 40 million by 2010 (more
than a 21% increase from 1995, compared to an expected increase of 13% for
the population as a whole).
o Higher Income Growth. According to data compiled by the Census Bureau, from
1980 to 1995, the rate of increase in median household income in 1995
adjusted dollars for African-Americans was approximately 12.3%, compared to
3.9% for the population as a whole.
o Concentrated Presence in Urban Markets. Approximately 58% of the
African-American population is located in the top-30 African-American
markets and the Company believes that the African-American community is
usually geographically concentrated in such markets. This concentration of
African-Americans may enable the Company to reach a large portion of its
target population with radio stations that may have less powerful signals,
thus potentially lowering the Company's acquisition and operating costs.
o Fewer Signals Required. The Company believes the current industry trend is
for radio broadcasters to acquire the maximum number of radio stations
allowed in a market under FCC ownership rules (up to eight radio stations
in the largest markets with no more than five being FM or AM), unless
restricted by other regulatory authorities. However, relative to radio
broadcasters targeting a broader audience, the Company believes it can
cover the various segments of its target niche market with fewer
programming formats and therefore fewer radio stations than the maximum
allowed.
o Strong Audience Listenership and Loyalty. Based upon Arbitron reports,
the Company believes, as a group, African-Americans generally spend more
time listening to radio than non-African- American audiences. For example,
during 1996, African-Americans in the ten largest 12-plus markets listened
to radio broadcasts an average of 27.2 hours per week compared to 22.9
hours per week for non-African-Americans in such markets. In addition, the
Company believes African-American radio listeners exhibit a greater degree
of loyalty to radio stations targeting a
44
<PAGE>
segment of the African-American community because those radio stations
become a valuable source of entertainment and information consistent with
the community's interests and lifestyles. As a result, the Company believes
that its target demographic group provides greater audience stability than
that of other demographic groups.
o Cost Effective for Advertisers. The Company believes that advertisers can
reach the African- American community more cost effectively through radio
broadcasting than through newspapers or television because the Company's
radio broadcasts specifically target the African-American community while
newspapers and television typically target a much more diverse audience.
TOP-30 AFRICAN-AMERICAN MARKETS IN THE UNITED STATES(a)
<TABLE>
<CAPTION>
AFRICAN- PERCENTAGE OF AFRICAN-
AMERICAN AMERICANS
POPULATION IN OF OVERALL POPULATION
RANK MARKET THE MARKET IN THE MARKET
- ------ -------------------------------------- --------------- -----------------------
<S> <C> <C> <C>
1. New York 3,723,000 22.3%
2. Chicago 1,645,000 19.5%
3. WASHINGTON, D.C. 1,149,000 27.4%
4. Los Angeles 1,130,000 9.5%
5. Detroit 1,007,000 22.6%
6. PHILADELPHIA 973,000 19.9%
7. Atlanta 919,000 26.4%
8. Houston/Galveston 781,000 18.6%
9. Miami/Ft. Lauderdale/Hollywood 716,000 20.7%
10. Dallas/Ft. Worth 647,000 14.6%
11. BALTIMORE 645,000 26.0%
12. San Francisco 602,000 9.3%
13. Memphis 481,000 41.5%
14. New Orleans 460,000 36.2%
15. Norfolk/Virginia Beach/Newport News 443,000 29.6%
16. St. Louis 439,000 17.2%
17. Cleveland 399,000 18.8%
18. Boston 283,000 7.4%
19. Richmond 282,000 30.2%
20. Charlotte/Gastonia/Rock Hill 266,000 20.5%
21. Birmingham 261,000 27.4%
22. Raleigh/Durham 244,000 24.2%
23. Milwaukee/Racine 238,000 14.5%
24. Greensboro/Winston Salem/High Point 226,000 20.0%
25. Cincinnati 218,000 11.4%
26. Kansas City 217,000 13.1%
27. Tampa/St. Petersburg/Clearwater 202,000 9.2%
28. Jacksonville 201,000 19.8%
29. Indianapolis 193,000 14.2%
30. Pittsburgh 187,000 7.8%
</TABLE>
- ----------
(a) Estimates based upon BIA Marketing Report, 1997 First Edition (as defined).
Bold text indicates markets in which the Company owns and operates a radio
station.
45
<PAGE>
Listed below is selected information relating to the Company's radio
stations and markets (including the radio station which is the subject of the DC
Acquisition):
<TABLE>
<CAPTION>
AFRICAN-AMERICAN MARKET
-----------------------------------------------
RANK BY SIZE OF TARGET
AFRICAN- TARGET AUDIENCE
MARKET AND STATION PROGRAM TARGET AMERICAN AUDIENCE SHARE REVENUE
CALL LETTERS(a) FORMAT(d) AGE GROUP POPULATION(e) SHARE(f) RANK(g) RANK(h)
- -------------------- ------------ ----------- ----------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
WASHINGTON, D.C. 3 30.9% 1 2
WKYS-FM Young UC 18-34 11.6% 4
WMMJ-FM Urban AC 25-54 12.4% 3
WOL-AM Black Talk 35-64 2.8% 8
WYCB-AM(b) Gospel 35-64 4.1% 6
BALTIMORE 11 40.3% 1 1
WERQ-FM Young UC 18-34 22.2% 1
WOLB-AM Black Talk 35-64 3.0% 9
WWIN-FM Urban AC 25-54 10.3% 3
WWIN-AM Gospel 35-64 4.8% 5
PHILADELPHIA 6 NM NM NM
WPHI-FM(c) Young UC 18-34
</TABLE>
<TABLE>
<CAPTION>
ENTIRE MARKET
-----------------------------------------------------------------------
12-PLUS TARGET
MARKET AND STATION 12-PLUS AUDIENCE AGE GROUP
AUDIENCE SHARE AUDIENCE SHARE RADIO REVENUE REVENUE
CALL LETTERS(a) SHARE(i) RANK(i) RANK(j) REVENUE(k) SHARE(l) RANK(m)
- ------------------- ---------- ---------- ---------------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
WASHINGTON, D.C 11.4% N/A NM $187.9 9.2% N/A
WKYS-FM 4.8% 5 2 3.3% 14
WMMJ-FM 4.2% 7 4(t) 3.4% 13
WOL-AM 1.0% 21 24(t) 1.8% 18
WYCB-AM(b) 1.4% 19 17 0.7% N/A
BALTIMORE 13.3% N/A NM 86.8 12.5% N/A
WERQ-FM 7.7% 1 1 6.7% 8
WOLB-AM 0.9% 23(t) 17(t) (n) (n)
WWIN-FM 3.2% 9 8 5.8% 10
WWIN-AM 1.5% 16 15(t) (o) (o)
PHILADELPHIA 1.9% N/A NM 203.8 1.2% 18
WPHI-FM(c) 1.9% 18 NA 1.2% 18
</TABLE>
- ----------
As used in this table, "N/A" means not applicable or not available, "NM" means
not meaningful and "(t)" means tied with one or more radio stations.
(a) Actual city license may be different from the metropolitan market serviced.
Market names used in this table are Arbitron's MSAs for the markets served
by the Company.
(b) The Company anticipates this radio station will be acquired in the fourth
quarter of 1997. See "The Transactions- Acquisitions."
(c) WPHI-FM, acquired on May 19, 1997 pursuant to the Philadelphia Acquisition,
had a Modern Rock format prior to February 1997 when the Company entered
into an LMA with the then-owner to program the radio station. Therefore,
certain information provided is either not meaningful or reflects ratings
and other data under the previous format. See "The Transactions-
Acquisitions."
(d) Programming formats of the Company include: Black Talk, Urban Adult
Contemporary ("Urban AC"), Gospel and Young Urban Contemporary ("Young
UC").
(e) Based upon the BIA Market Report, 1997 (First Edition).
<PAGE>
(f) Based upon all 12-plus African-Americans according to the Arbitron Market
Report for Fall 1996 (as defined).
(g) Rank for each radio station based upon 12-plus African-Americans according
to the Arbitron Market Report for Fall 1996. Rank for each market based
upon management's estimate after reviewing audience share ratings for
12-plus African- Americans according to the Arbitron Market Report for Fall
1996 and grouping radio stations targeting African-Americans into known
radio station clusters.
46
<PAGE>
(h) Revenue rank for each market based upon management's estimate after
reviewing gross revenues for individual radio stations that are reported in
the Hungerford Report (Dec. 1996) (as defined) and grouping radio stations
targeting African- Americans into known ownership clusters.
(i) Based upon all persons 12-plus according to the Arbitron Market Report for
Fall 1996.
(j) Based upon each radio station's rank among its African-American target age
group according to the Arbitron Market Report for Fall 1996.
(k) Gross revenues in millions of dollars. For Washington, D.C. and Baltimore,
based upon the Hungerford Report, (Dec. 1996). For Philadelphia, based upon
the Miller Kaplan Report, (Dec. 1996) (as defined), which excludes barter
transactions from its reported figures.
(l) Revenue share for individual radio stations in Washington, D.C. and
Baltimore based upon the Hungerford Report (Dec. 1996), except for WYCB-AM
which does not report to Hungerford. Revenue share for WYCB-AM represents
the radio station's net revenues as a percentage of the market radio
revenue reported by the Hungerford Report, (Dec.1996), as adjusted for
WYCB-AM's net revenues. Revenue share for the Baltimore market is based
upon the Hungerford Report (Dec. 1996). Revenue share for the Washington,
D.C. market is based upon the Hungerford Report (Dec. 1996) as adjusted for
WYCB-AM's net revenues. Revenue share for WPHI-FM and Philadelphia is based
upon the Miller Kaplan Report (Dec. 1996), which excludes barter
transactions from its reported figures.
(m) For radio stations in Washington, D.C. and Baltimore, based upon the
Hungerford Report, (Dec. 1996). For WPHI-FM, based upon the Miller Kaplan
Report, (Dec. 1996), which excludes barter transactions from its reported
figures.
(n) WERQ-FM and WOLB-AM report revenue data to Hungerford on a combined basis.
Therefore, only one revenue share and revenue rank is provided for WERQ-FM
and WOLB-AM.
(o) WWIN-FM and WWIN-AM report revenue data to Hungerford on a combined basis.
Therefore, only one revenue share and revenue rank is provided for WWIN-FM
and WWIN-AM.
OPERATING STRATEGY
In order to maximize broadcast cash flow at each of its radio stations, the
Company strives to create and operate the leading radio station group, in terms
of audience share, serving the African-American community and to effectively
convert these audience share ratings to advertising revenue while controlling
the costs associated with each radio station's operations. The success of the
Company's strategy relies on the following: (i) market research, targeted
programming and marketing; (ii) significant community involvement; (iii)
aggressive sales efforts; (iv) advertising partnerships and special events; (v)
strong management and performance-based incentives; and (vi) radio station
clustering, programming segmentation and sales bundling.
Market Research, Targeted Programming and Marketing
The Company uses market research to tailor the programming, marketing and
promotions of its radio stations to maximize audience share. To achieve these
goals, the Company uses market research to identify unserved or underserved
markets or segments of the African-American community in its current and in new
markets and to determine whether to acquire a new radio station or reprogram one
of its existing radio stations to target those markets or segments.
The Company also seeks to reinforce its targeted programming by creating a
distinct and marketable identity for each of its radio stations. To achieve this
objective, in addition to its significant community involvement discussed below,
the Company employs and promotes distinct, high-profile on-air personalities at
many of its radio stations, many of whom have strong ties to the
African-American community.
Significant Community Involvement
The Company believes its active involvement and significant business and
political relationships in the African-American community, together with its
African-American ownership, provide a competitive advantage in targeting
African-American audiences. In this way, the Company believes its proactive
involvement in the African-American communities in each of its markets greatly
improves the marketability of its radio broadcast time to advertisers who are
targeting such communities.
Management believes that a radio station's image should reflect the
lifestyle and viewpoints of the target demographic group it serves. Due to the
Company's fundamental understanding of the African-
47
<PAGE>
American community, management believes it is able to identify music and musical
styles, as well as political and social trends and issues, early in their
evolution. This understanding is then integrated into all aspects of the
Company's operations and enables it to create enhanced awareness and name
recognition in the marketplace. In addition, the Company believes its
multi-level approach to community involvement leads to increased effectiveness
in developing and updating its programming formats. Management believes its
enhanced awareness and more effective programming formats lead to greater
listenership and higher ratings over the long-term.
The Company has a history of sponsoring events that showcase its commitment
to the African-American community including:
o heightening the awareness of certain diseases and holding fundraisers to
fund the search for cures for diseases which disproportionately impact
African-Americans, such as sickle-cell anemia and leukemia;
o developing contests specifically designed to assist African-American
single mothers with day care expense;
o fundraising for the many African-American churches throughout the country
which have been the recent target of arsonists; and
o organizing seminars designed to educate African-Americans on personal
issues that include buying a home, starting a business and developing a
credit history, and providing information regarding financial planning and
health care.
Aggressive Sales Efforts
The Company has assembled an effective, highly-trained sales staff focused
on converting the Company's audience share into revenue. The Company employs a
dual sales strategy of selling stations individually where appropriate, by
targeting a certain demographic segment, or in combination by focusing on the
complementary aspects of the Company's multiple stations.
Advertising Partnerships and Special Events
The Company believes that in order to create advertiser loyalty it must
strive to be the recognized expert in marketing to the African-American consumer
in its markets. The Company believes that it has achieved this recognition by
focusing on serving the African-American consumer and by creating innovative
advertising campaigns and promotional tie-ins. The Company sponsors several
major entertainment events each year. The Stone Soul Picnic, which was developed
by the Company in 1989, is an all-day free outdoor concert which showcases
advertisers, local merchants and other organizations desiring exposure to over
100,000 people in each of Washington, D.C. and Baltimore. The People's Expo is
another major event the Company sponsors every March in Washington, D.C. and
Baltimore. This event provides entertainment, shopping and educational seminars
to the Company's listeners and others from the communities that the Company
serves. In connection with these events, advertisers buy signage, booth space
and broadcast promotions to sell cars, groceries, clothing, financial services
and other products and/or services to the African-American consumer.
Strong Management and Performance-Based Incentives
The Company focuses on hiring highly motivated and talented individuals in
each functional area of the organization who can effectively help the Company
implement its strategies of growth and value creation. The Company's management
team is comprised of a diverse group of individuals who bring strong expertise
to their respective functional areas. Furthermore, the Company looks to promote
from within and, thus, aims to build a middle management and lower-level
employee base comprised of individuals with great potential, the ability to
operate with high levels of autonomy and the appropriate team-orientation which
will enable them to grow their careers within the organization.
To enhance the quality of management in the sales and programming areas of
the Company, General Managers, Sales Managers and Program Directors have
significant portions of their compensation tied to the achievement of certain
performance goals. General Managers' compensation is based partially on
achieving cash flow benchmarks which creates an incentive for management to
focus not only
48
<PAGE>
on sales growth, but also on expense control. Additionally, Sales Managers and
sales personnel have incentive packages based on sales goals, and Program
Directors and on-air talent have incentive packages focused on maximizing
overall ratings as well as ratings in specific target segments.
Radio Station Clustering, Programming Segmentation and Sales Bundling
The Company strives to build clusters of radio stations in its markets,
with each radio station targeting different demographic segments of the
African-American population. This clustering and programming segmentation
strategy allows the Company to achieve greater penetration into each segment of
its target market. The Company is then able to offer advertisers multiple
audiences and to bundle the radio stations for advertising sales purposes when
advantageous.
The Company believes there are several potential benefits that result from
operating multiple radio stations within the same market. First, each additional
radio station in a market provides the Company with a larger percentage of the
prime advertising time available for sale within that market. Second, the more
signals programmed by the Company, the greater the market share the Company can
achieve in its target demographic groups through the use of segmented
programming. Third, the Company is often able to consolidate sales, promotional,
technical support and corporate functions to produce substantial cost savings.
Finally, the purchase of additional radio stations in an existing market allows
the Company to take advantage of its market expertise and existing relationships
with advertisers.
ACQUISITION STRATEGY
Radio One's primary acquisition strategy is to acquire and turn around
under performing radio stations in the top-30 African-American markets. The
Company considers acquisitions in existing markets where expanded coverage is
desirable and considers acquisitions in new markets where the Company believes
it is advantageous to establish a presence. In analyzing potential acquisition
candidates, the Company generally considers (i) whether the radio station has a
signal adequate to reach a large percentage of the African-American community in
a market, (ii) whether the Company can reformat or improve the radio station's
programming in order to profitably serve the African-American community, (iii)
whether the radio station affords the Company the opportunity to segment program
formats within a market in which the Company already maintains a presence, (iv)
whether the Company can increase broadcast revenues of the radio station through
aggressive marketing, sales and promotions, (v) the price and terms of the
purchase, (vi) the level of performance that can be expected from the radio
station under the Company's management and (vii) the number of competitive radio
stations in the market.
The Company believes that large segments of the African-American population
in its target markets are often concentrated in certain geographic sections of
such markets. The Company further believes that this geographic concentration
may provide it with an opportunity to acquire less expensive radio stations with
less powerful signals without materially diminishing the Company's coverage of
the African-American community. As a result, the Company believes it can have a
competitive advantage in securing a substantial share of the radio revenue at a
potentially lower acquisition cost per listener than radio stations targeting
other demographic groups.
The Company does not apply a fixed formula to determine the purchase price
of radio stations and does not focus solely on multiples of broadcast cash flow.
Rather the Company seeks to acquire radio stations consistent with its
acquisition and operating strategies. The Company will continue to evaluate
potential acquisitions in the top-30 African-American markets.
STATION OPERATIONS
The following is a general description of each of the Company's markets and
its radio stations in each market. As noted, the data provided in the tables
below includes information during periods the radio stations listed were not
owned or operated by the Company.
49
<PAGE>
Washington, D.C.
The Washington, D.C. market is estimated to be the eighth largest radio
market in terms of population and had 1996 radio advertising revenues totaling
an estimated $187.9 million. In 1995, Washington, D.C. had the third largest
African-American population in the United States with an MSA population of
approximately 4.2 million (approximately 27.4% of which was
African-American).The Company believes it owns the strongest franchise (in terms
of audience share and number of radio stations) of African-American targeted
radio stations in the Washington, D.C. market with two of the four FM radio
stations and, after giving effect to the DC Acquisition, two of the three AM
radio stations that target African-Americans.
<TABLE>
<CAPTION>
1994(d) 1995(d) 1996(d) FALL 1996(d)
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
WKYS-FM(a)
Audience share (12-plus) ......... 3.8% 3.8% 4.5% 4.8%
Audience share rank (12-plus) ...... 10 9 (t) 6 (t) 5
Audience share (18-34) ............ 5.6% 5.8% 7.5% 8.8%
Audience share rank (18-34) ......... 6 6 2 2
Revenue share ..................... 5.1% 3.8% 3.3% N/A
Revenue rank ........................ 8 14 14 N/A
WMMJ-FM(b)
Audience share (12-plus) ............ 4.3% 3.7% 4.5% 4.2%
Audience share rank (12-plus) ...... 7 11 (t) 6 (t) 7
Audience share (25-54) ............ 5.3% 4.6% 5.4% 5.1%
Audience share rank (25-54) ......... 4 (t) 8 3 (t) 4 (t)
Revenue share ..................... 3.8% 3.7% 3.4% N/A
Revenue rank ........................ 14 15 13 N/A
WOL-AM(b)
Audience share (12-plus) ............ 1.7% 1.7% 1.0% 1.0%
Audience share rank (12-plus) ...... 18 19 23 (t) 21 (t)
Audience share (35-64) ............ 2.3% 2.3% 1.1% 1.0%
Audience share rank (35-64) ......... 16 (t) 14 (t) 23 24 (t)
Revenue share ..................... 2.1% 2.0% 1.8% N/A
Revenue rank ........................ 19 18 18 N/A
WOL-AM and WMMJ-FM
(combined)(b)
Audience share (12-plus) ......... 6.0% 5.4% 5.5% 5.2%
Audience share (25-54) ............ 6.9% 6.4% 6.2% 5.8%
Revenue share ..................... 5.9% 5.6% 5.3% N/A
Revenue rank ........................ 7 7 8 N/A
WYCB-AM(c)
Audience share (12-plus) ............ 1.2% 1.6% 1.3% 1.4%
Audience share rank (12-plus) ...... 21 20 20 19
Audience share (35-64) ............ 1.3% 1.7% 1.5% 1.6%
Audience share rank (35-64) ......... 22 19 18 17
Revenue share ..................... N/A N/A 0.7% N/A
Revenue rank ........................ N/A N/A N/A N/A
</TABLE>
- ----------
Asused in this table, "N/A" means not applicable or not available and "(t)"
means tied with one or more radio stations.
(a) WKYS-FM was acquired by the Company on June 6, 1995.
(b) WOL-AM and WMMJ-FM advertising time is sold in combination.
(c) The Company intends to acquire WYCB-AM in the fourth quarter of 1997. See
"The Transactions-Acquisitions."
(d) Audience share and audience share rank data is based on Arbitron four book
averages for the years indicated and the Arbitron Market Report for Fall
1996. Revenue share and rank data are based upon the Radio Revenue Report
of Hungerford for December 1996, 1995 and 1994, except for WYCB-AM which
does not report to Hungerford. Revenue share for WYCB-AM represents the
radio station's net revenues as a percentage of the market radio revenue
reported by the Hungerford Report, (Dec. 1996), as adjusted for WYCB-AM's
net revenues.
50
<PAGE>
WOL-AM. The Company's first radio station, WOL-AM, was purchased in 1980
for approximately $900,000. WOL-AM was a music station with declining revenue
share and audience share that the Company converted to one of the country's
first all-talk radio stations targeting African-Americans. The Company's
Chairperson, Ms. Catherine L. Hughes, who hosted WOL-AM's daily four-hour
morning show from 1983 to 1995, created a valuable niche for the radio station
as "The Voice of Washington's Black Community." The Company believes that WOL-AM
is a vital communications platform for the community, political and business
leaders in its market. WOL-AM's ratings have historically fluctuated between a
1% and 2% audience share in the 12-plus market.
WMMJ-FM. The Company's second radio station in Washington, D.C., WMMJ-FM,
was purchased in 1987 for approximately $7.5 million. At the time, WMMJ-FM was
being programmed in a general market adult contemporary format, which led it to
garner a 1.2% audience share of the 12-plus market. However, given its
relatively low signal strength (the radio station was a Class A with 3,000 watts
of power; it has since been upgraded to 6,000 watts) and low ratings, it was
generating minimal revenues and little or no broadcast cash flow. After
extensive research by the Company, WMMJ-FM was the first FM radio station on the
East Coast to introduce an Urban Adult Contemporary ("Urban AC") programming
format. This format focuses on African-Americans in the 25 to 54 age group and
provides adult-oriented Urban Contemporary music from the 1960s, 1970s, 1980s
and 1990s. The Urban AC format was almost immediately successful, and today
WMMJ-FM, with a 4.2% audience share in the 12-plus market, is a consistent top
five radio station among all 25 to 54-year-olds in Washington, D.C. with a
long-standing and loyal listener base.
WKYS-FM. The Company's third radio station in Washington, D.C., WKYS-FM,
was purchased in June 1995 for approximately $34.4 million. WKYS-FM is a Class B
Young Urban Contemporary radio station targeting 18 to 34-year-old
African-American adults. From 1978 to 1989, WKYS-FM was Washington, D.C.'s
perennial Urban Contemporary leader and was frequently the market's number one
radio station overall. However, in 1987, WPGC-FM (now owned by CBS
Corporation("CBS")) changed its format from Adult Contemporary to CHR/Urban and
in Spring of 1989, replaced WKYS-FM as the number one urban radio station in
terms of audience share. From 1986 to the Fall of 1994, WKYS-FM's overall
ratings rank fell from number one to number twelve with a 3.3% audience share of
the 12-plus market, while WPGC-FM moved from near the bottom to number one with
a 9.0%audience share of the 12-plus market. In 1995, WPGC-FM was the market's
number one billing radio station with over $20.0 million in revenues. By 1995,
the former owner of WKYS-FM had abandoned the 18 to 34-year- old demographic
group and begun to target 25 to 54-year-olds, making it a direct competitor to
Radio One's WMMJ-FM instead of CBS's WPGC-FM. When the Company purchased WKYS-FM
in June 1995, it repositioned its programming away from WMMJ-FM and back towards
18 to 34-year-olds and WPGC- FM. Since June 1995, the Company has been able to
dramatically increase WKYS-FM's overall 12-plus market audience share rank to
number five with a 4.8% audience share, and to number two among 18 to
34-year-olds with an 8.8% audience share of that market. During this same period
of time, WPGC-FM has remained number one in the 12-plus market and 18 to
34-year-olds ratings, but its audience share has fallen dramatically from a 9.0%
to a 6.1% audience share of the 12-plus market and from a 14.4% to a 10.2%
audience share among 18 to 34-year-olds.
WYCB-AM. The Company is currently negotiating the acquisition of WYCB-AM,
Washington D.C.'s top-rated Gospel radio station, pursuant to a non-binding
amended letter of intent. See "The Transactions-Acquisitions." The Company
believes the acquisition of WYCB-AM, with its Gospel programming format, would
provide the Company with access to another segment of the African- American
community in Washington, D.C., and complement its existing radio station group.
Baltimore, Maryland
The Baltimore market is the 19th largest radio market in terms of
population and had 1996 radio advertising revenues totaling an estimated $86.8
million. In 1995, Baltimore had the eleventh largest African-American population
in the United States with an MSA population of approximately 2.5 million
(approximately 26.0% of which was African-American). The Company believes
Baltimore is "under radioed" with only 15 viable FM radio stations (according to
Duncan's Radio Market Guide (as de
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<PAGE>
fined)), in part because of its close proximity to Washington, D.C., making
Baltimore a particularly attractive market. The Company believes it owns the
strongest franchise of African-American targeted radio stations in the Baltimore
market with two of the three FM radio stations and two of the four AM radio
stations which target African-Americans.
<TABLE>
<CAPTION>
1994(c) 1995(c) 1996(c) FALL 1996(c)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
WERQ-FM(a)
Audience share (12-plus) ............ 5.6% 5.2% 6.4% 7.7%
Audience share rank (12-plus) ...... 6 7 4 1
Audience share (18-34) ............ 8.3% 8.6% 10.7% 13.3%
Audience share rank (18-34) ......... 3 2 2 1
WOLB-AM(a)
Audience share (12-plus) ............ 0.4% 0.9% 0.6% 0.9%
Audience share rank (12-plus) ...... 32(t) 23 (t) 28 (t) 23 (t)
Audience share (35-64) ............ 0.6% 1.1% 0.9% 1.6%
Audience share rank (35-64) ...... 26 (t) 19 (t) 23 17 (t)
WERQ-FM and WOLB-AM (Combined)(a)
Audience share (12-plus) ............ 6.0% 6.1% 7.0% 8.6%
Audience share (25-54) ............ 4.3% 4.9% 5.7% 7.4%
Revenue share ..................... 5.2% 6.7% 6.7% N/A
Revenue rank ........................ 8 8 8 N/A
WWIN-FM(b)
Audience share (12-plus) ............ 3.3% 4.0% 3.6% 3.2%
Audience share rank (12-plus) ...... 11 10 10 9
Audience share (25-54) ............ 4.5% 5.5% 4.9% 4.2%
Audience share rank (25-54) ...... 7 5 7 (t) 8
WWIN-AM(b)
Audience share (12-plus) ......... 1.0% 1.1% 1.1% 1.5%
Audience share rank (12-plus) ...... 21 18 (t) 20 (t) 16
Audience share (35-64) ............ 1.2% 1.1% 1.4% 1.8%
Audience share rank (35-64) ...... 19 (t) 19 (t) 18 15(t)
WWIN-FM and WWIN-AM (Combined)(b)
Audience share (12-plus) ............ 4.3% 5.1% 4.7% 4.7%
Audience share (25-54) ............ 5.6% 6.6% 6.0% 5.7%
Revenue share ..................... 5.1% 5.7% 5.8% N/A
Revenue rank ........................ 9 10 10 N/A
</TABLE>
- ----------
As used in this table, "N/A" means not applicable or not available and "(t)"
means tied with one or more radio stations.
(a) Based upon the Hungerford Report, (Dec. 1996). WERQ-FM and WOLB-FM jointly
report revenue data to Hungerford.
(b) Based upon the Hungerford Report, (Dec. 1996). WWIN-FM and WWIN-AM jointly
report revenue data to Hungerford.
(c) Audience share and audience share rank data are based on Arbitron four book
averages for the years indicated and the Arbitron Market Report for Fall
1996. Revenue share and rank data are based on the Radio Revenue Report by
Hungerford for December 1996, 1995 and 1994.
WWIN-FM and WWIN-AM. In January 1992, the Company made its first
acquisition outside of the Washington, D.C. market with the purchase of two
Baltimore radio stations, WWIN-FM and WWIN- AM, for approximately $4.7 million.
At the time, these two radio stations were Black Adult Contemporary and Gospel
radio stations, respectively. Combined, the two Baltimore radio stations had
approxi-
52
<PAGE>
mately $2.5 million in revenue and approximately $400,000 in broadcast cash
flow. During Radio One's first full year of ownership, through aggressive
selling efforts and expense control, revenues increased to approximately $3.5
million, and broadcast cash flow increased to approximately $1.0 million.
Additionally, at the time of the acquisition, WWIN-FM was a weak second to
WXYV-FM, the dominant Urban Contemporary radio station in the market, with less
than one-third of that radio station's market share. Today, WWIN-FM is a leading
urban radio station, second only to the Company's WERQ-FM, among 25 to
54-year-olds in the Baltimore market (in terms of audience share) and has
revenues approaching those of WXYV-FM, while WWIN-AM continues to occupy an
attractive niche on the AM frequency with its Gospel programming format.
WERQ-FM and WOLB-AM. In September 1993, the Company made another
acquisition in the Baltimore market with the purchase of WERQ-FM and WERQ-AM for
approximately $9.0 million. WERQ-FM, which has a full-powered signal, was, at
the time of its acquisition, a CHR/Urban radio station, while WERQ-AM was a
satellite-fed, all-news radio station. Combined, these radio stations were
losing approximately $600,000 per year. The Company proceeded to convert the
format of WERQ-FM to a more focused young Urban Contemporary format targeted at
18 to 34-year-old African-Americans, while WERQ-AM was changed to WOLB-AM and
simulcast with the Company's Black Talk radio station in Washington, D.C.,
WOL-AM. These moves, in conjunction with more aggressive sales efforts and
savings from radio station clustering, increased revenues by approximately $1.0
million and eliminated the operating loss in these radio stations' first full
year of ownership by Radio One. Over time, WERQ-FM's audience share increased
dramatically, and today, it is the number one radio station in the 12-plus
market, with over twice the audience share of its primary competition, WXYV-FM.
Philadelphia, Pennsylvania
The Philadelphia market is the fifth largest radio market in terms of MSA
population and had 1996 radio advertising revenues totaling an estimated $203.8
million. In 1995, Philadelphia had the sixth largest African-American population
in the United States with an MSA population of approximately 4.9 million
(approximately 19.9% of which was African-American).
WPHI-FM. On February 8, 1997, the Company entered into an LMA with the
then-current owner of WPHI-FM, and the radio station's programming format
changed from Modern Rock to young Urban Contemporary targeting 18 to 34-year-old
African-Americans like WKYS-FM, one of the Company's radio stations in
Washington, D.C., and WERQ-FM, one of the Company's radio stations in Baltimore.
On May 19, 1997, the Company acquired WPHI-FM, providing the Company with an
opportunity to apply its operating strategy in another top-30 African-American
market. Although WPHI-FM is a lower powered radio station, the Company believes
it adequately reaches at least 90% of the African- Americans in Philadelphia.
The Company believes WPHI-FM fit the Company's acquisition model of finding
lower powered and lower priced radio stations that will adequately cover a
target African- American population due to the relatively high concentration in
certain geographic sections of a market.
ADVERTISING REVENUES
Substantially all of the Company's revenues are generated from the sale of
local and national advertising for broadcast on its radio stations. Additional
broadcasting revenue is generated from network compensation payments and other
miscellaneous transactions. Local sales are made by the sales staffs located in
Washington, D.C., Baltimore and Philadelphia. National sales are made by firms
specializing in radio advertising sales on the national level, in exchange for a
commission from the Company that is based on a percentage of the Company's gross
revenue from the advertising obtained. Approximately 66% and 64% of the
Company's net broadcasting revenues for the fiscal year ended December 31, 1996
and for the three months ended March 30, 1997 were generated from the sale of
local advertising and 27% and 25%, respectively, from sales to national
advertisers.
The Company believes that advertisers can reach the African-American
community more cost- effectively through radio broadcasting than through
newspapers or television. Advertising rates charged by radio stations are based
primarily on (i) a radio station's audience share within the demographic
53
<PAGE>
groups targeted by the advertisers, (ii) the number of radio stations in the
market competing for the same demographic groups and (iii) the supply and demand
for radio advertising time. Advertising rates are generally highest during the
morning and afternoon commuting hours.
A radio station's listenership is reflected in ratings surveys that
estimate the number of listeners tuned to a radio station and the time they
spend listening to that radio station. Each radio station's ratings are used by
its advertisers and advertising representatives to consider advertising with the
radio station, and are used by the Company to chart audience growth, set
advertising rates and adjust programming. The radio broadcast industry's
principal ratings are the Arbitron ratings. Arbitron publishes monthly and
quarterly ratings surveys for significant domestic radio markets. These surveys
are the Company's primary source of ratings data with respect to its radio
stations. See "Market and Industry Data."
COMPETITION
Radio broadcasting is a highly competitive business. Each of the Company's
radio stations competes for audience share and advertising revenue directly with
other radio stations, as well as with other media such as billboards, newspapers
and television. There are well-capitalized firms competing in the same
geographic markets as the Company, many of which have greater financial
resources.
The financial success of each of the Company's radio stations depends, to a
significant degree, upon its audience ratings, its share of the overall radio
advertising revenue within a specific market and the economic health of that
market. The audience ratings and advertising revenue of the Company's individual
radio stations are subject to change, and any adverse change in a particular
market could have a material adverse effect on the total revenue and broadcast
cash flow of the Company. The Company's radio stations compete for audience
share and advertising revenue directly with other FM and AM radio stations and
with other media within their respective markets. While the Company already
competes with other radio stations with comparable programming formats in each
of its markets, if another radio station in the market were to convert its
programming format to a format similar to one of the Company's radio stations,
if a new radio station were to adopt a competitive format or if an existing
competitor were to strengthen its operations, the Company's radio stations could
suffer a reduction in ratings and/or advertising revenue and could require
increased promotion and other expenses. In addition, certain of the Company's
radio stations compete, and in the future other radio stations of the Company
may compete, with duopolies or other combinations of radio stations operated by
a single operator.
Radio broadcasting is also increasingly subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems or the introduction of digital
audio broadcasting ("DAB"). DAB may provide a medium for the delivery by
satellite or terrestrial means of multiple audio programming formats to local
and national audiences. The Company cannot predict the effect, if any, that any
such new technologies may have on the radio broadcasting industry. See "Risk
Factors-Competition."
An important element of the Company's growth strategy involves the
acquisition of additional radio stations. Following the passage of the
Telecommunications Act of 1996, the Antitrust Division of the Department of
Justice has become more aggressive in reviewing proposed acquisitions of radio
stations and radio station networks which otherwise complied with the FCC's
ownership limitations, particularly in instances where the proposed acquiror
already owns one or more radio stations in a particular market and the
acquisition involves another radio station in the same market. Recently, the
Antitrust Division has obtained consent decrees requiring an acquiror to dispose
of at least one radio station in a particular market where the acquisition
(which would otherwise comply with the FCC's ownership limitations) would have
resulted in a concentration of market share by the acquiror. In that case, it is
unclear whether the post-acquisition concentration of combined market share or
combined advertising revenues of the acquiror was the factor which caused the
Antitrust Division to require divestiture. Additionally, any acquisitions are
potentially subject to review by the Federal Trade Commission. See "Risk
Factors-Antitrust Matters."
54
<PAGE>
EMPLOYEES
The Company employs approximately 225 people, approximately 60 of whom are
part-time employees. The Company's employees are not unionized. The Company has
not experienced any work stoppages and believes its relations with its employees
are satisfactory.
Each radio station has its own on-air personalities and clerical staff.
However, in an effort to control broadcast and corporate expenses, Radio One
centralizes certain radio station functions by market location. For example, the
Company employs one General Manager for each of its markets who is responsible
for all of the Company's radio stations located in such markets and the
Company's Vice President of Programming oversees programming for all of the
Company's radio stations.
FEDERAL REGULATION OF RADIO BROADCASTING
The radio broadcasting industry is subject to extensive and changing
regulation over, among other things, programming, technical operations and
business and employment practices. The Federal Communications Commission
regulates radio broadcast stations pursuant to the Communications Act of 1934,
as amended. The Communications Act permits the operation of radio broadcast
stations only in accordance with a license issued by the FCC upon a finding that
the grant of a license would serve the public interest, convenience and
necessity. The Communications Act provides for the FCC to exercise its licensing
authority to provide a fair, efficient and equitable distribution of broadcast
service throughout the United States. Among other things, the FCC assigns
frequency bands for radio broadcasting; determines the particular frequencies,
locations and operating power of radio broadcast stations; issues, renews,
revokes and modifies radio broadcast station licenses; regulates transmitting
equipment used by radio broadcast stations; adopts and implements regulations
and policies that directly or indirectly affect the ownership, operation,
program content and employment and business practices of radio broadcast
stations; and has the power to impose penalties, including monetary forfeitures,
for violations of its rules and the Communications Act.
The Communications Act prohibits the sale or assignment of an FCC license,
or other transfer of control of an FCC licensee, without the prior approval of
the FCC. In determining whether to grant requests for consents to assignments or
transfers, and in determining whether to grant or renew a radio broadcast
license, the FCC considers a number of factors pertaining to the licensee (and
any proposed licensee), including restrictions on foreign ownership, compliance
with FCC media ownership rules, licensee "character" and compliance with the
Anti-Drug Abuse Act of 1988.
The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies. This summary does not
purport to be complete and is qualified in its entirety by the text of the
Communications Act, the FCC's rules, and the public notices and rulings of the
FCC. A potential investor should refer to these FCC rules and policies for
further information concerning the nature and extent of federal regulation of
radio broadcast stations. A licensee's failure to observe these or other FCC
rules and policies may result in the imposition of various sanctions, including
admonishment, fines, the grant of "short" (less than the full eight-year)
renewal terms, grant of a license with conditions or, for particularly egregious
violations, the denial of a license renewal application, the revocation of FCC
license or the denial of FCC consent to acquire additional broadcast properties.
The Congress and the FCC have had under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, affect the operation, ownership
and profitability of Radio One's radio stations, result in the loss of audience
share and advertising revenues for Radio One's radio broadcast stations or
affect its ability to acquire additional radio broadcast stations or finance
such acquisitions. Such matters may include changes to the license authorization
and renewal process; proposals to impose spectrum use or other fees on FCC
licensees; auction of new broadcast licenses; changes to the FCC's equal
employment opportunity regulations and other matters relating to involvement of
minorities and women in the broadcasting industry; proposals to change rules
relating to political broadcasting and other changes regarding program content;
proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages; technical and frequency allocation matters, including those
relative to the implementation of digital audio broadcasting on both a satellite
and terrestrial basis; changes in broadcast cross-interest, multiple own-
55
<PAGE>
ership, foreign ownership, cross-ownership and ownership attribution policies;
changes to technical broadcast requirements; proposals to allow telephone
companies to deliver audio and video programming to homes in their service
areas; and proposals to alter provisions of the tax laws affecting broadcast
operations and acquisitions.
The Company cannot predict whether or not any such changes might be adopted
nor can it predict what other matters might be considered in the future, nor can
it judge in advance what impact, if any, the implementation of any of these
proposals or changes might have on its business.
FCC Licenses. The Communications Act provides that a broadcast station
license may be granted to any applicant if the public interest, convenience and
necessity will be served thereby, subject to certain limitations. In making
licensing determinations, the FCC considers an applicant's legal, technical,
financial and other qualifications. The FCC grants radio broadcast station
licenses for specific periods of time, and, upon application, may renew them for
additional terms. Under the Communications Act, radio broadcast station licenses
may be granted for a maximum term of eight years.
Generally, the FCC renews radio broadcast licenses without a hearing upon a
finding that: (i) the radio station has served the public interest, convenience
and necessity, (ii) there have been no serious violations by the licensee of the
Communications Act or FCC rules and regulations, and (iii) there have been no
other violations of the Communications Act or FCC rules and regulations which,
taken together, indicate a pattern of abuse. After considering these factors,
the FCC may grant the license renewal application with or without conditions,
including renewal for a lesser term, or hold an evidentiary hearing. In
addition, the Communications Act authorizes the filing of petitions to deny a
license renewal during specific periods of time after a renewal application has
been filed. Interested parties, including members of the public, may use such
petitions to raise issues concerning a renewal applicant's qualifications. If a
substantial and material question of fact concerning a renewal or other
application is raised by the FCC or other interested parties, or if for any
reason the FCC cannot determine that grant of the renewal application would
serve the public interest, convenience and necessity, the FCC will hold an
evidentiary hearing on the application. If as a result of an evidentiary hearing
the FCC determines that the licensee has failed to meet the requirements
specified above and that no mitigating factors justify the imposition of a
lesser sanction, then the FCC may deny a license renewal application. Only after
a license renewal application is denied will the FCC accept and consider
competing applications for the vacated frequency. Also, during certain periods
when a renewal application is pending, the transferability of the applicant's
license may be restricted. Historically, the company's management has not
experienced any material difficulty in renewing any licenses for radio stations
under its control. A license renewal application for radio station WOL-AM,
Washington, D.C., remains pending. No petitions to deny the application and no
competing applications for the broadcast frequency were filed. However, action
on the renewal application has apparently been delayed due to the processing by
the FCC of a pending complaint against WOL-AM alleging that programming material
broadcast on the radio station was indecent and obscene. It is unlikely that
such a complaint would result in a denial of the renewal application. Rather, it
is most likely that the renewal application will be granted and that the
complaint will be resolved by the FCC with a minor sanction, if any, against
WOL-AM. If a sanction is imposed, the Company expects that WOL-AM would receive
at most a small fine. The term of the licenses for WOL-AM and associated
broadcast auxiliary radio stations was to expire on October 1, 1995. However,
pursuant to Section 307 of the Communications Act (i) Radio One's timely filing
of a license renewal application for the license for WOL-AM has automatically
extended the license term until the FCC takes action on the renewal application;
and (ii) the license term for each of the broadcast auxiliary licenses used in
conjunction with WOL-AM is concurrent with the license for WOL-AM. If, as the
Company expects, the WOL-AM license renewal application is renewed without a
sanction greater than a monetary fine, such renewal of the license and broadcast
auxiliary licenses would be for a license term ending no earlier than October 1,
2003. There can be no assurance, however, that each of Radio One's licenses will
necessarily be renewed or, if renewed, be renewed for a full license term or be
renewed without conditions.
The FCC classifies each AM and FM radio station. An AM radio station
operates on either a clear channel, regional channel or local channel. A clear
channel is one on which AM radio stations are assigned to serve wide areas,
particularly at night. Clear channel AM radio stations are classified as
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<PAGE>
either: (i) Class A radio stations, which operate unlimited time and are
designed to render primary and secondary service over an extended area, or (ii)
Class B radio stations, which operate unlimited time and are designed to render
service only over a primary service area. Class D radio stations, which operate
either daytime, or unlimited time with low nighttime power, may operate on the
same frequencies as clear channel radio stations. A regional channel is one on
which Class B and Class D AM radio stations may operate and serve primarily a
principal center of population and the rural areas contiguous to it. A local
channel is one on which AM radio stations operate unlimited time and serve
primarily a community and the suburban and rural areas immediately contiguous to
it. A Class C AM radio station operates on a local channel and is designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM radio station are
determined by its class. Possible FM class designations depend upon the
geographic zone in which the transmitter of the FM radio station is located. In
general, commercial FM radio stations are classified as follows, in order of
increasing power and antenna height: Class A, B1, C3, B, C2, C1 or C radio
stations.
The following table sets forth with respect to each of the Company's radio
stations: (i) the market, (ii) the radio station call letters, (iii) the year of
acquisition, (iv) the FCC license classification, (v) the effective radiated
power ("ERP"), if an FM radio station, or the power, if an AM radio station,
(vi) the antenna height above average terrain ("HAAT"), if an FM radio station,
or the above insulator measurement ("AI"), if an AM radio station, (vii) the
operating frequency and (viii) the date on which the radio station's FCC license
expires.
<TABLE>
<CAPTION>
ERP (FM) HAAT (FM)
STATION YEAR OF FCC POWER (AM) AI (AM) EXPIRATION
MARKET(a) CALL LETTERS ACQUISITION CLASS IN WATTS(b) IN METERS(c) FREQUENCY DATE OF LICENSE
- ------------------ -------------- ------------- ------- ------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Washington, D.C. WOL-AM 1980 C 1,000 52.1 1450 kHz 10/1/1995(d)
WMMJ-FM 1987 A 2,900(e) 146.0 102.3 MHz 10/1/2003
WKYS-FM 1995 B 24,000(f) 215.0 93.9 MHz 10/1/2003
WYCB-AM (g) C 1,000 50.9 1340 kHz 10/1/2003
Baltimore WWIN-AM 1992 C 1,000 61.0 1400 kHz 10/1/2003
WWIN-FM 1992 A 3,000 91.0 95.9 MHz 10/1/2003
WOLB-AM 1993 D 1,000 85.4 1010 kHz 10/1/2003
WERQ-FM 1993 B 37,000 174.0 92.3 MHz 10/1/2003
Philadelphia WPHI-FM (h) A 340(i) 305.0 103.9 MHz 8/1/1998
</TABLE>
- ----------
(a) A broadcast station's market may be different from its community of
license.
(b) The coverage of an AM radio station is chiefly a function of the power of
the radio station's transmitter, less dissipative power losses and any
directional antenna adjustments. For FM radio stations, signal coverage area
is chiefly a function of the ERP of the radio station's transmitter and the
HAAT of the radio station's antenna.
(c) The height of an AM radio station's antenna is measured by reference to AI
and the height of an FM radio station's antenna is measured by reference to
HAAT.
(d) The license renewal application for WOL-AM is pending as discussed above.
(e) WMMJ-FM uses a directional antenna and it operates at a power equivalent to
6,000 watts at 100 meters.
(f) WKYS-FM and WERQ-FM operate at powers equivalent to 50,000 watts at 150
meters. WERQ-FM uses a directional antenna.
(g) The Company anticipates that it will acquire this radio station in the
fourth quarter of 1997. See "The Transactions-Acquisitions."
(h) WPHI-FM operates at a power equivalent to 3,000 watts at 100 meters.
Ownership Matters. The Communications Act requires prior approval of the
FCC for the assignment of a broadcast license or the transfer of control of a
corporation or other entity holding a license. In determining whether to
approve an assignment of a radio broadcast license or a transfer of control of
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a broadcast licensee, the FCC considers, among other things, the financial and
legal qualifications of the prospective assignee or transferee, including
compliance with FCC restrictions on non-U.S. citizen or entity ownership and
control, compliance with FCC rules limiting the common ownership of certain
"attributable" interests in broadcast and newspaper properties, the history of
compliance with FCC operating rules, and the "character" qualifications of the
transferee or assignee and the individuals or entities holding "attributable"
interests in them. Applications to the FCC for assignments and transfers are
subject to petitions to deny by interested parties.
Under the Communications Act, a broadcast license may not be granted to or
held by any corporation that has more than one-fifth of its capital stock owned
or voted by non-U.S. citizens or entities or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations. Furthermore,
the Communications Act provides that no FCC broadcast license may be granted to
any corporation directly or indirectly controlled by any other corporation of
which more than one-fourth of its capital stock is owned of record or voted by
non-U.S. citizens if the FCC finds the public interest will be served by the
refusal of such license. These restrictions apply in modified form to other
forms of business organizations, including partnerships, and limited liability
companies.
The FCC generally applies its other broadcast ownership limits to
"attributable" interests held by an individual, corporation, partnership or
other association or entity, including limited liability companies. In the case
of a corporation holding broadcast licenses, the interest of officers, directors
and those who, directly or indirectly have the right to vote five percent or
more of the stock of a licensee corporation are generally deemed attributable
interests, as are positions as an officer or director of a corporate parent of a
broadcast licensee. The FCC treats all partnership interests as attributable,
except for those limited partnership interests that are "insulated" from
"material involvement" in the media- related activities of the partnership under
FCC policies. The FCC currently treats limited liability companies like limited
partnerships for purposes of attribution. Stock interests held by insurance
companies, mutual funds, bank trust departments and certain other passive
investors that hold stock for investment purposes only become attributable with
the ownership of ten percent or more of the stock of the corporation holding
broadcast licenses. To assess whether a voting stock interest in a direct or an
indirect parent corporation of a broadcast licensee is attributable, the FCC
uses a "multiplier" analysis in which non-controlling voting stock interests are
deemed proportionally reduced at each non-controlling link in a
multi-corporation ownership chain. For a person or entity with an attributable
interest in a radio broadcast station, a time brokerage agreement with another
radio station in the same market creates an attributable interest in the
brokered radio station as well as for purposes of the FCC's local radio station
ownership rules, if the agreement affects more than 15% of the brokered radio
station's weekly broadcast hours. See "-Local Marketing Agreements."
Debt instruments, non-voting stock, options and warrants for voting stock
that have not yet been exercised, insulated limited partnership interests where
the limited partner is not "materially involved" in the media-related activities
of the partnership, and minority voting stock interests in corporations where
there is a single holder of more than 50% of the outstanding voting stock whose
vote is sufficient to affirmatively direct the affairs of the corporation,
generally do not subject their holders to attribution. The FCC's rules also
specify other exceptions to these general principles for attribution. The FCC is
currently evaluating whether to: (i) raise the benchmark for voting stock from
five to ten percent, (ii) raise the benchmark for passive investors from ten to
twenty percent, (iii) continue the single 50% stockholder exception, and/or (iv)
attribute non-voting stock or perhaps non-voting stock interests when combined
with other rights such as voting shares or contractual relationships.
The Communications Act and FCC rules generally restrict ownership operation
or control of, or the common holding of attributable interests in, (i) radio
broadcast stations above certain limits servicing the same local market, (ii) a
radio broadcast station and a television broadcast station servicing the same
local market, and (iii) a radio broadcast station and a daily newspaper serving
the same local market. These rules include specific signal contour overlap
standards to determine compliance. Under these "cross-ownership" rules, the
Company, absent waivers, would not be permitted to acquire an attributable
interest in any daily newspaper or television broadcast station (other than a
low-powered television station) in a local market where it then owned any radio
broadcast station, or where its stockholders,
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officers or directors had an attributable interest. The FCC's rules provide for
the liberal grant of a waiver of the rule prohibiting common ownership of radio
and television stations in the same geographic market in the top 25 television
markets if certain conditions are satisfied, and the FCC will consider waivers
in other markets under more restrictive standards. The FCC is reviewing its ban
on the common ownership of a radio station and a television station or newspaper
including extending the policy of liberal waivers of common ownership of radio
and television stations to the top 50 television markets.
Although current FCC nationwide radio broadcast ownership rules allow one
entity to own, control or hold attributable interests in an unlimited number of
FM radio stations and AM radio stations nationwide, the FCC's rules limit the
number of radio broadcast stations in local markets in which a single entity may
own an attributable interest as follows:
o In a radio market with 45 or more commercial radio stations, a party may
own, operate, or control up to 8 commercial radio stations, not more than 5
of which are in the same service (AM or FM).
o In a radio market with between 30 and 44 (inclusive) commercial radio
stations, a party may own, operate, or control up to 7 commercial radio
stations, not more than 4 of which are in the same service (AM or FM).
o In a radio market with between 15 and 29 (inclusive) commercial radio
stations, a party may own, operate, or control up to 6 commercial radio
stations, not more than 4 of which are in the same service (AM or FM).
o In a radio market with 14 or fewer commercial radio stations, a party may
own, operate, or control up to 5 commercial radio stations, not more than 3
of which are in the same service (AM or FM), except that a party may not
own, operate, or control more than 50 percent of the radio stations in such
market.
Because of these multiple and cross-ownership rules, if a stockholder of
Radio One holds an "attributable" interest in Radio One, such stockholder,
officer or director may violate the FCC's rules if such person or entity also
holds or acquires an attributable interest in other television or radio
stations, or in daily newspapers, depending on the number and location of those
radio stations and the location of those television broadcast stations or daily
newspapers. If an attributable stockholder, officer or director of Radio One
violates any of these ownership rules, the Company may be unable to obtain from
the FCC one or more authorizations needed to conduct its radio station business
and may be unable to obtain FCC consents for certain future acquisitions. As
long as one person or entity holds more than 50% of the voting power of the
Common Stock of the Company where the vote of such person or entity is
sufficient to affirmatively direct the affairs of the Company, another
stockholder, unless serving as an officer and/or director, generally would not
hold an attributable interest in Radio One. As of March 15, 1997, Ms. Hughes
owned approximately 54.2% of the total voting power of the Common Stock of the
Company. However, if the Warrants are exercised, Ms. Hughes ownership is reduced
to approximately 26.3% and no one person or entity would hold sufficient voting
power to direct the affairs of the Company.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station, daily newspaper or cable system from having a "meaningful"
non-attributable interest in another broadcast station or daily newspaper in the
same local market. "Meaningful" interests could include, among other things,
significant equity interests (including non-voting stock, voting stock, limited
partnership and limited liability company interests) and key management
positions. The FCC has issued a further notice of proposed rulemaking in a
long-pending proceeding under which the FCC is considering whether and how to
modify this policy.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." Since the late 1980's, the FCC gradually has
relaxed or eliminated many of the more formalized procedures it developed to
promote the broadcast of certain types of programming responsive to the needs of
a radio station's community. Nevertheless, a broadcast licensee continues to be
required to
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present programming in response to community problems, needs and interests and
to maintain certain records demonstrating its responsiveness. The FCC will
consider complaints from listeners about a broadcast station's programming when
it evaluates the licensee's renewal application, but listeners' complaints also
may be filed and considered at any time. Stations also must follow various FCC
rules that regulate, among other things, political advertising, the broadcast of
obscene or indecent programming, sponsorship identification, the broadcast of
contests and lotteries and technical operation (including limits on human
exposure to radio frequency radiation). From time to time, complaints may be
filed against the Company's radio stations alleging violations of these or other
rules. One complaint is pending against the Company alleging indecent and
obscene broadcasts on radio station WOL-AM during 1993. The Company believes
that this complaint will not result in either monetary forfeitures of a material
nature or any other regulatory action which might have a materially adverse
effect on the Company's radio stations or FCC licenses.
In addition, licensees must develop and implement programs designed to
promote equal employment opportunities and must submit reports to the FCC on
these matters annually and in connection with the licensee's renewal
application. The FCC rules also prohibit a broadcast licensee from simulcasting
more than 25% of its programming on another radio station in the same broadcast
service (that is, AM/AM or FM/FM). The simulcasting restriction applies if the
licensee owns both radio broadcast stations or owns one and programs the other
through a local marketing agreement, provided that the contours of the radio
stations overlap in a certain manner. Failure to observe these or other rules
and policies can result in the imposition of various sanctions, including fines
or conditions, the grant of "short" (less than the maximum eight year) renewal
terms or, for particularly egregious violations, the denial of a license renewal
application or the revocation of a license.
Local Marketing Agreements. Often radio stations enter into LMAs or time
brokerage agreements. These agreements take various forms. Separately owned and
licensed radio stations may agree to function cooperatively in programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each radio station maintain independent control over the programming
and other operations of its own radio station. One type of time brokerage
agreement is a programming agreement between two separately owned radio stations
that serve a common service area whereby the licensee of one radio station
programs substantial portions of the broadcast day of the other licensee's radio
station (subject to ultimate editorial and other controls being exercised by the
radio station licensee) and sells advertising time during these program
segments. The FCC has held that such agreements do not violate the
Communications Act as long as the licensee of the radio broadcast station that
is being substantially programmed by another entity (i) remains completely
responsible for, and maintains control over, the operation of its radio station,
and (ii) otherwise ensures the radio station's compliance with applicable FCC
rules and policies.
A radio broadcast station that brokers time on another radio broadcast
station or engages in a time brokerage agreement with a radio broadcast station
in the same market will be considered to have an attributable ownership interest
in the brokered radio station for purposes of the FCC's local ownership rules,
if the time brokerage arrangement covers more than 15% of the brokered weekly
broadcast hours. As a result, a radio broadcast station may not enter into a
time brokerage agreement that allows it to program more than 15% of the
broadcast time, on a weekly basis, of another local radio broadcast station that
it could not own under the FCC's local multiple ownership rules. The FCC is
considering whether it should treat as attributable multiple business
arrangements among local radio stations such as joint sales accompanied by debt
financing. Also, as described above, FCC rules prohibit a radio broadcast
licensee from simulcasting more than 25% of its programming on another radio
broadcast station in the same broadcast service (that is, AM/AM or FM/FM) where
the two radio stations serve substantially the same geographic area, whether the
licensee owns both radio stations or owns one radio station and programs the
other through a time brokerage agreement. Thus far, the FCC has not considered
what relevance, if any, a time brokerage agreement may have upon its evaluation
of a licensee's performance at renewal time. On February 8, 1997, the Company
entered into an LMA with the then-owner of WPHI-FM in Philadelphia. The LMA
allowed the Company to program WPHI-FM 24 hours a day,
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seven days a week, and continued in effect until the consummation of the
Philadelphia Acquisition on May 19, 1997. Radio One may enter into additional
LMAs in the future.
In 1985, the FCC adopted rules regarding human exposure to levels of radio
frequency ("RF") radiation. These rules require applicants for renewal of
broadcast licenses or modification of existing licenses to inform the FCC at the
time of filing such applications whether an existing broadcast facility would
expose people to RF radiation in excess of certain guidelines. The FCC adopted
more restrictive radiation limits which are to become effective September 1,
1997.
Digital Audio Broadcasting. The FCC recently has allocated spectrum to a
new technology, digital audio broadcasting, to deliver satellite-based audio
programming to a national or regional audience and issued regulations for a DAB
service on March 3, 1997. DAB may provide a medium for the delivery by satellite
or terrestrial means of multiple new audio programming formats with compact disc
quality sound to local and national audiences. It is not known at this time
whether this technology also may be used in the future by existing radio
broadcast stations either on existing or alternate broadcasting frequencies. In
addition, applicants who applied to the FCC for authority to offer multiple
channels of digital, satellite-delivered S-Band aural services that could
compete with conventional terrestrial radio broadcasting participated in an
auction of the spectrum reserved for DAB held in April 1997. Two licenses were
awarded through the auction pursuant to which the licensees will be permitted to
sell advertising and lease channels. The FCC's rules require that the service
begin by 2001 and be fully operational by 2003. These satellite radio services
use technology that may permit higher sound quality than is possible with
conventional AM and FM terrestrial radio broadcasting. Recently, the FCC
proposed to establish a new Wireless Communications Service ("WCS") in the
2305-2320 and 2345-2360 MHZ bands (the "WCS Spectrum"). The FCC also proposed to
award one or more licenses for the WCS Spectrum by competitive bidding using
multiple round electronic auction procedures which occurred in April 1997.
Licensees would be permitted to provide any fixed, mobile, radio location
services, or digital satellite radio service using the WCS Spectrum.
Implementation of DAB would provide an additional audio programming service that
could compete with the Company's radio stations for listeners, but the effect
upon the Company cannot be predicted.
SUBSIDIARIES AND RELATED ENTITIES
The FCC licenses for each of the radio stations operated by Radio One are
held by Radio One Licenses, Inc. a Delaware corporation and a wholly-owned
subsidiary of the Company ("License Company"). License Company holds no other
material assets. The Company does not have any subsidiaries other than License
Company but it may have other subsidiaries in the future.
TRADEMARKS AND PATENTS
Radio One owns numerous domestic trademark registrations, a few pending
trademark applications and a registered copyright related to the business of the
Company's radio stations. Radio One does not own any patents or patent
applications. The Company's management does not believe that any of Radio One's
trademarks, or its copyright, are material to the Company's business or
operations.
PROPERTIES AND FACILITIES
In addition to Radio One's principal executive offices, the types of
properties required to support each of the Company's radio stations include
offices, studios, transmitter sites and antenna sites. The Company owns and
leases transmitter and antenna sites in the Baltimore market, and owns and
leases transmitter and antenna sites for its radio stations in the Washington,
D.C. market and for WPHI-FM.
Radio One leases its current principal executive offices which are located
in the office building located at 5900 Princess Garden Parkway, Lanham, Maryland
(the "Lanham Offices"). The Company expects to move the studios for the
Company's Washington, D.C. radio stations within such offices later this year.
The Lanham Offices are leased from National Life Insurance Company, a Vermont
corporation, pursuant to a lease agreement (the "Lanham Lease"). The Lanham
Lease has a term of fifteen years with lease payments of approximated $198,000
per annum at lease commencement, increasing to
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approximately $390,000 per annum by lease expiration, payable in equal monthly
installments. It is anticipated the Company will spend an estimated $1.3 million
in tenant improvements and new equipment in connection with taking possession of
the Lanham Offices in May 1997 in order to adequately equip the space with
office and studio amenities to be used by the Company. The Company has an
option, which has been exercised, to purchase the office building located at
5900 Princess Garden Parkway, Lanham, Maryland (the "Lanham Building") in which
the Lanham Offices are located. If the average monthly building rents for the
Lanham Building for July and August 1997 equal or exceed a stated minimum gross
rent amount, the closing of the Company's purchase of the Lanham Building will
occur on September 30, 1997. If the minimum gross rent amount is not met for
such period, the Company may waive the minimum gross rent condition and proceed
to close the purchase of the Lanham Building or elect to postpone the closing,
on a month-to-month basis, until the average monthly building rents for a
two-month period equal or exceed the minimum gross rent amount. If the minimum
gross rent condition has not been met and therefore the closing has not occurred
on or prior to July 31, 1998, or if, prior to receipt of notice that the gross
rent condition has been met, the Company delivers written notice that it shall
not proceed to closing on or before such date, the Company shall have no further
obligation to purchase the Lanham Building and the seller shall pay to the
Company an amount, not to exceed $240,000, equal to the Company's expenditures
for tenant improvements to the Lanham Building. The Company may assign its right
to purchase the Lanham Building to Mr. Liggins or an entity controlled by Mr.
Liggins and has agreed to provide to the holders of the Senior Preferred Stock
an opportunity to purchase an interest in the Lanham Building in the event the
Company or its assignee consummates the purchase of the Lanham Building. See
"Certain Transactions-Office Leases."
Radio One leases office space and studio facilities for its Baltimore,
Maryland radio stations, which are located at 100 St. Paul Street, Baltimore,
Maryland (the "Baltimore Lease") from Chalrep Limited Partnership, a Maryland
limited partnership controlled by Ms. Hughes and Mr. Liggins ("Chalrep"). The
Baltimore Lease has a term of ten years expiring October 31, 2003, with an
option to extend the term an additional five years under certain conditions. The
Baltimore Lease provides for lease payments of $96,000 per annum during the
first five years and $120,000 per annum during years six through ten. The lease
payments under the Baltimore Lease are payable in equal monthly installments.
Under the Baltimore Lease, the Company is also responsible for a share of the
real estate taxes, operating costs and administrative expenses allocable to the
Company pursuant to a formula contained in the Baltimore Lease. See "Certain
Transactions-Office Leases."
The Company owns substantially all of its other equipment, consisting
principally of transmitting antennae, transmitters, studio equipment and office
equipment. The towers, antennae and other transmission equipment used by the
Company's radio stations are generally in good condition, although opportunities
to upgrade facilities are periodically reviewed.
The Company believes that its facilities for its radio stations in
Washington, D.C., Baltimore, Maryland and Philadelphia, Pennsylvania are
suitable and of adequate size for its current and intended purposes.
LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened to which the Company
is a party or to which any of its properties are subject, other than routine
litigation incidental to its business which either is covered by insurance or is
not expected to have a material adverse effect on the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company, as well as additional
information with respect to those persons, are set forth in the table below. All
directors serve for the term for which they are elected or until their
successors are duly elected and qualified or until death, retirement,
resignation or removal. The Company anticipates entering into employment
agreements with each of the executive officers of the Company as described
below. The executive officers and directors of Radio One are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- ----- -----------------------------------------------------
<S> <C> <C>
Catherine L. Hughes(a) ......... 50 Chairperson of the Board and Director
Alfred C. Liggins, III(a) ...... 32 Chief Executive Officer, President and Director
Scott R. Royster ............... 32 Executive Vice President and Chief Financial Officer
Terry L. Jones(b) ............... 50 Director
Brian W. McNeill(b) ............ 41 Director
P. Richard Zitelman(b) ......... 41 Director
</TABLE>
- ----------
(a) Mr. Alfred C. Liggins, III is the son of Ms. Catherine L. Hughes.
(b) Member of the Compensation Committee.
Ms. Hughes has been Chairperson of the Board, Secretary and a Director of
Radio One since 1980, and was Chief Executive Officer of Radio One from 1980 to
1997. She was one of the founders of Radio One's predecessor in 1980. Since
1980, Ms. Hughes has worked in various capacities for the Company including
President, General Manager, General Sales Manager and talk show host. She began
her career in radio as the General Sales Manager of WHUR-FM, the Howard
University-owned, urban-contemporary radio station.
Mr. Liggins has been Chief Executive Officer since 1997, and President,
Treasurer and a Director of Radio One since 1989. Mr. Liggins joined the
Company in 1985 as an Account Manager at WOL-AM. In 1987 he was promoted to
General Sales Manager and promoted again in 1988 to General Manager overseeing
the Company's Washington, D.C. operations. In 1989, Mr. Liggins became
President of Radio One and engineered the Company's expansion into other
markets. Mr. Liggins is a 1995 graduate of the Wharton School of
Business/Executive M.B.A. Program.
Mr. Royster has been Executive Vice President of the Company since 1997 and
Chief Financial Officer of the Company since 1996. Prior to joining the Company,
he served as an independent consultant to Radio One. From 1995 to 1996, Mr.
Royster was a principal at TSG Capital Group, LLC, a private equity investment
firm located in Stamford, Connecticut, which has been an investor in the Company
since 1987. Mr. Royster has also served as an associate and later a principal at
Capital Resource Partners from 1992 to 1995, a private capital investment firm
in Boston, Massachusetts, and as an analyst at Chemical Banking Corporation (now
Chase Banking Corporation) and a Senior Analyst at Chemical Venture Partners
(now Chase Venture Partners) from 1987 to 1990. Mr. Royster is a 1987 graduate
of Duke University and a 1992 graduate of Harvard Business School.
Mr. Jones has been a director of Radio One since 1995. Since 1990, Mr.
Jones has been President of Syndicated Communications, Inc. ("Syncom I"), a
communications venture capital investment company, and its wholly owned
subsidiary, Syncom. He joined Syncom I in 1978 as a Vice President. Mr. Jones
serves in various capacities, including director, president, general partner
and vice president, for various other entities affiliated with Syncom I. He
also serves on the board of directors of the National Association of Investment
Companies, Delta Capital Corporation, Sun Delta Capital Access Center and the
Southern African Enterprise Development Fund. Mr. Jones earned his B.S. degree
from Trinity College, his M.S. from George Washington University and his M.B.A.
from Harvard Business School.
Mr. McNeill has been a director of Radio One since 1995. Since 1986, Mr.
McNeill has been a General Partner of Burr, Egan, Deleage & Co., a major
private equity firm which specializes in investments in the communications and
technology industries. He has served as a director in many private
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radio and television broadcasting companies such as Tichenor Media Systems,
OmniAmerica Group, Panache Broadcasting and Shockley Communications. From 1979
to 1986, he worked at the Bank of Boston where he started and managed that
institution's broadcast lending group. Mr. McNeill is a graduate of Holy Cross
College and has earned an M.B.A. from the Amos Tuck School at Dartmouth
College.
Mr. Zitelman has been a director of Radio One since 1995. Since 1985, Mr.
Zitelman has been the President and sole principal of the Zitelman Group, Inc.,
a consulting firm. Since 1984, Mr. Zitelman has been involved in the ownership
and financial oversight of various radio stations. Mr. Zitelman is currently a
principal and Chief Financial Officer of Spring Broadcasting, L.L.C. which owns
and operates nine radio stations in four markets. From 1985 to 1994, Mr.
Zitelman was a principal of Media Capital, Inc., which invested in, operated
and later sold various radio stations. Mr. Zitelman is a certified public
accountant and earned his B.S. from the Wharton School of Business at the
University of Pennsylvania.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company intends to form an Audit Committee of the board of directors of
Radio One. At least two of the directors serving on such Audit Committee will be
directors who are not employees of the Company.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors
Non-officer directors of the Company are reimbursed for all out-of-pocket
expenses related to meetings attended. Non-officer directors receive no
additional compensation for their services as directors of the Company, except
for Mr. Zitelman, whose consulting firm bills the Company for the time he spends
attending board meetings at his standard hourly consulting rate. Mr. Zitelman,
through his consulting firm, received a fee for consulting services rendered in
connection with the Philadelphia Acquisition. See "Certain Transactions-Other
Affiliated Transactions." Officers of the Company who serve as directors do not
receive compensation for their services as directors other than the compensation
they receive as officers of the Company.
Executive Compensation
The following information relates to compensation of the Company's Chief
Executive Officer and each of its other executive officers (the "Named
Executives") during the fiscal year ended December 31, 1996. The following
information does not reflect any compensation awarded to, earned by or paid to
the Named Executives subsequent to December 31, 1996, except as may otherwise be
indicated.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ------------------------------------ ------ --------------- --------- -------------
<S> <C> <C> <C> <C>
Catherine L. Hughes ............... 1996 $150,000 $31,447 $18,321
Chairperson of the Board
and Secretary
Alfred C. Liggins, III ............ 1996 150,000 - 19,486
Chief Executive Officer,
President and Treasurer
Scott R. Royster .................. 1996 55,577(a) - -
Executive Vice President and Chief
Financial Officer
</TABLE>
(a) Mr. Royster provided consulting services for the Company in July 1996 and
joined the Company as an employee in August 1996. Disclosed compensation
represents consulting fees received by Mr. Royster and the portion of his
$125,000 annual salary paid during 1996.
EMPLOYMENT AGREEMENTS
Ms. Catherine L. Hughes is the Company's Chairperson of the Board. For the
fiscal year ended December 31, 1996, the Company paid Ms. Hughes an annual
salary of $150,000 and a bonus of $31,447 and reimbursed her in the aggregate
amount of $18,321 for various expenses incurred by Ms. Hughes, which represents
additional compensation. The Company anticipates entering into an employment
agreement with Ms. Hughes which would provide for Ms. Hughes to serve as the
Company's Chairperson of the Board with an annual base compensation of $225,000,
subject to an annual increase and an annual bonus at the discretion of the
Company's board of directors. The Company currently compensates Ms. Hughes in
accordance with the terms of such anticipated employment agreement.
Mr. Alfred C. Liggins, III is the Company's Chief Executive Officer and
President. For the fiscal year ended December 31, 1996, the Company paid Mr.
Liggins an annual salary of $150,000 and reimbursed him in the aggregate amount
of $19,486 for various expenses incurred by Mr. Liggins, which represents
additional compensation. The Company anticipates entering into an employment
agreement with Mr. Liggins which would provide for Mr. Liggins to serve as the
Company's Chief Executive Officer and President with an annual base compensation
of $225,000, subject to an annual increase and an annual bonus at the discretion
of the Company's board of directors. The Company currently compensates Mr.
Liggins in accordance with the terms of such anticipated employment agreement.
The Company and Mr. Liggins are currently negotiating the terms of an equity
incentive plan for Mr. Liggins based upon certain performance criteria.
Mr. Scott R. Royster is the Company's Executive Vice President and Chief
Financial Officer. For the fiscal year ended December 31, 1996, the Company paid
Mr. Royster $48,077 of his annual salary of $125,000 and $7,500 in consulting
fees. The Company anticipates entering into a three-year employment agreement
with Mr. Royster pursuant to which Mr. Royster will continue to serve as the
Company's Chief Financial Officer and will receive an annual base compensation
of $165,000, subject to an annual increase and an annual bonus at the discretion
of the Company's board of directors. The Company currently compensates Mr.
Royster in accordance with the terms of such anticipated employment agreement.
401(k) PLAN
The Company has adopted and maintains a defined contribution plan that is
qualified pursuant to Sections 401(a) and 401(k) of the Code. All regular
employees who have been employed by the Company for at least 90 days are
eligible to participate in the plan. For each employee who elects to participate
in the plan and makes a contribution thereto, the Company may make a
discretionary matching contribution and/or a discretionary profit sharing
contribution on an annual basis.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information immediately following
consummation of the Transactions which occured on May 19 1997 regarding the
Company's capital stock, including (a) the beneficial ownership of the Common
Stock and the Senior Preferred Stock and (b) the beneficial ownership of the
Common Stock and Senior Preferred Stock by (i) each person beneficially owning
more than 5% of the outstanding shares of Common Stock or the Senior Preferred
Stock, (ii) each of Radio One's directors, (iii) each of the Named Executives in
the table under "Management-Compensation of Directors and Executive
Officers-Summary Compensation Table," and (iv) all of Radio One's directors and
executive officers as a group. See "Description of Capital Stock."
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF SENIOR
BENEFICIALLY OWNED, PREFERRED
WITHOUT SHARES OF COMMON STOCK STOCK BENEFICIALLY OWNED
GIVING EFFECT TO EXERCISE BENEFICIALLY OWNED, AFTER THE NOTES OFFERING
OF THE GIVING EFFECT TO EXERCISE AND THE
WARRANTS(a) OF THE WARRANTS(a) EXISTING NOTES EXCHANGE
------------------------- ------------------------- ------------------------
PERCENT OF PERCENT OF PERCENT OF
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES
SHARES(b) OUTSTANDING SHARES(b) OUTSTANDING SHARES OUTSTANDING
----------- ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Catherine L. Hughes(c)(d) ............... 75.00 26.3% 75.00 26.3% - -
Alfred C. Liggins, III(c)(d) ............ 62.45 21.9% 62.45 21.9% - -
Terry L. Jones(e)(f) ..................... - - 36.12 12.7% 13,595.69 6.5%
Brian W. McNeill(g)(f) .................. - - 29.52 10.3% 72,139.57 34.5
ALTA Subordinated Debt Partners III,
L.P(h)(i) .............................. - - 29.52 10.3% 72,139.57 34.5
Alliance Enterprise Corporation(h)(j) ... - - 18.70 6.6% 9,126.55 4.4
BancBoston Investments Inc.(h)(k) ...... - - 20.15 7.1% 49,249.44 23.5
Capital Dimensions Venture Fund,
Inc.(h)(l) .............................. - - 15.24 5.3% 37,258.14 17.8
Fulcrum Venture Capital Corpora-
tion(h)(m) .............................. - - 15.61 5.5% 9,650.09 4.6
Syncom Capital Corporation(h)(n) ......... - - 36.12 12.7% 13,595.69 6.5
All Directors and Executive Officers of
Radio One as a group(o) ............... 137.45 99.3% 137.45 48.1% - -
</TABLE>
- ----------
(a) The "Warrants" refer to the amended and restated warrants to purchase
147.04 shares of Common Stock issued by the Company on May 19, 1997. The
information as to beneficial ownership is based on statements furnished to
Radio One by the beneficial owners. As used in this table, "beneficial
ownership" means the sole or shared power to vote or direct the voting of a
security, or the sole or shared investment power with respect to a security
(i.e., the power to dispose of, or direct the disposition of, a security).
Other than with respect to the Warrants, a person is deemed as of any date
to have "beneficial ownership" of any security that such person has the
right to acquire within 60 days of such date. For purposes of computing the
percentage of outstanding shares held by each person named above, other
than with respect to the Warrants, any security that such person has the
right to acquire within 60 days of the date of the calculation is deemed to
be outstanding, but is not deemed to be outstanding for purposes of
computing the percentage ownership of any other person. The Company and Mr.
Liggins are currently negotiating the terms of an equity incentive plan for
Mr. Liggins based upon certain performance criteria.
(b) The shares of Common Stock are subject to a voting agreement with respect
to the election of Radio One's directors (which is included in the
Warrantholders' Agreement). See "Description of Capital Stock."
(c) The business address for such persons is c/o Radio One, 5900 Princess
Garden Parkway, 7th Floor, Lanham, Maryland 20706.
(d) Ms. Hughes and Mr. Liggins may be deemed to share beneficial ownership of
shares of capital stock owned by each other by virtue of the fact that Ms.
Hughes is Mr. Liggins' mother. Each of Ms. Hughes and Mr. Liggins disclaims
such beneficial ownership.
(e) Represents immediately exercisable Warrants to purchase 36.12 shares of
Common Stock held by Syncom. Mr. Jones is the President of Syncom and his
address is c/o Syncom Capital Corporation, 8401 Colesville Road, Suite 300,
Silver Spring, MD 20910. Mr. Jones may be deemed to share beneficial
ownership of shares of Common Stock issuable to Syncom upon exercise of the
Warrants by virtue of his affiliation with Syncom. Mr. Jones disclaims
beneficial ownership in such shares.
(f) Mr. Jones may be deemed to share beneficial ownership of shares of Senior
Preferred Stock to be owned of record by Syncom by virtue of his
affiliation with Syncom. Mr. Jones disclaims any beneficial ownership of
such shares of Senior Preferred Stock. Mr. McNeill may be deemed to share
beneficial ownership of Senior Preferred Stock to be owned of record
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by Alta subsequent to the consummation of the Existing Notes Exchange by
virtue of his affiliation with Alta. Mr. McNeill disclaims any beneficial
ownership of such shares.
(g) Represents immediately exercisable Warrants to purchase 29.52 shares of
Common Stock held by Alta Subordinated Debt Partners III, L.P. Mr. McNeill
is a general partner of Alta Subordinated Debt Partners III, L.P. and his
address is c/o Alta Subordinated Debt Partners III, L.P., c/o Burr, Egan,
Deleage & Co., One Post Office Square, Boston, MA 02109. Mr. McNeill may be
deemed to share beneficial ownership of shares of Common Stock issuable to
Alta Subordinated Debt Partners III, L.P. upon exercise of the Warrants by
virtue of his affiliation with Alta Subordinated Debt Partners III, L.P.
Mr. McNeill disclaims any beneficial ownership of such shares.
(h) The Warrants are subject to the terms of a Standstill Agreement dated as of
May 19, 1997 among Radio One, the subsidiaries of Radio One, NationsBank of
Texas, N.A., the Trustee, and the other parties named therein (the
"Standstill Agreement") which provides, among other things, that for so
long as the New Credit Facility, if any, or the Exchange Notes are
outstanding, the Warrants are collectively only exercisable for up to (but
not including) 50% of the Common Stock. Although the Warrants are currently
exercisable, the holders of a majority of the outstanding shares of Senior
Preferred Stock must exercise their Warrants if any are to be exercised
prior to the eighth anniversary of the Issue Date.
(i) Represents immediately exercisable Warrants to acquire 29.52 shares of
Common Stock. The principal address of Alta Subordinated Debt Partners III,
L.P. is c/o Burr, Egan, Deleage & Co., One Post Office Square, Boston, MA
02109.
(j) Represents immediately exercisable Warrants to acquire 18.70 shares of
Common Stock. The principal address of Alliance Enterprise Corporation is
12655 N. Central Expressway, Suite 700, Dallas, TX 75243.
(k) Represents immediately exercisable Warrants to acquire 20.15 shares of
Common Stock. The principal address of BancBoston Investments, Inc. is 100
Federal Street, 32nd Floor, Boston, MA 02110.
(l) Represents immediately exercisable Warrants to acquire 15.24 shares of
Common Stock. The principal address of Capital Dimensions Venture Fund,
Inc. is 2 Appletree Square, Suite 335-T, Minneapolis, MN 55425.
(m) Represents immediately exercisable Warrants to acquire 15.61 shares of
Common Stock. The principal address of Fulcrum Venture Capital Corporation
is 300 Corporate Point, Suite 380, Culver City, CA 90230.
(n) Represents immediately exercisable Warrants to acquire 36.12 shares of
Common Stock. The principal address of Syncom Capital Corporation is 8401
Colesville Road, Suite 300, Silver Spring, MD 20910.
(o) The shares of Common Stock set forth on this line do not include any shares
of Common Stock or Senior Preferred Stock which Mr. Jones and Mr. McNeill
may be deemed to beneficially own. See footnotes (e), (f) and (g), above.
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CERTAIN TRANSACTIONS
RADIO ONE OF ATLANTA, INC.
Mr. Liggins, who is the Chief Executive Officer and President of the
Company, is also the President of Radio One of Atlanta, Inc., which owns and
operates one radio station in Atlanta and owns a minority interest in Dogwood.
Dogwood holds an FCC construction permit to establish another radio station in
the Atlanta area. Mr. Liggins has voting control of ROA, subject to certain
conditions, and owns approximately 47% of the outstanding capital stock of ROA.
See "Risk Factors-Potential Conflicts of Interest."
The Company has entered into a management agreement with ROA whereby the
Company provides accounting, financial and strategic planning, other general
management services and general programming support services to ROA and Dogwood.
In exchange for such corporate services, the Company is paid an annual retainer
of approximately $100,000 and is reimbursed for all of its out-of-pocket
expenses incurred in connection with the performance of such corporate services.
The Company believes that the compensation paid to the Company under such
management agreement and the other material terms thereof are not materially
different than if the agreement were with an unaffiliated third party.
In addition, Mr. Liggins received a lump sum fee of $50,000 from ROA in
April 1997 as compensation for services he personally provided to ROA. Mr.
Liggins has not previously received any compensation from ROA or Dogwood. The
Company's Vice President of Programming, Steve Hegwood, is also employed by ROA
and is paid a salary for programming ROA's radio station in addition to the
salary he receives from the Company. Mr. Hegwood utilized certain resources and
the services of certain employees of the Company in performance of his services
for ROA.
OFFICE LEASES
Lanham, Maryland
The Company's principal executive offices for its Washington, D.C. radio
stations are located in the office building located at 5900 Princess Garden
Parkway, Lanham, Maryland, and the studios for the Company's Washington, D.C.
radio stations will be moved within such offices later this year. The Company
leases these offices from National Life Insurance Company, a Vermont corporation
(the "Landlord"). The Landlord has granted the Company, and the Company has
exercised, an option to purchase the Lanham Building for $3.75 million, less a
credit of up to $288,000 (related to the tenant improvements the Company is
making to the Lanham Offices, and the rent payments the Company is making for
the Lanham Offices) and subject to an increase attributable to the Company's pro
rata share of the costs paid by the Landlord in connection with entering into
each lease of a portion of the Lanham Building. If the average monthly building
rents for the Lanham Building for July and August 1997 equal or exceed a stated
minimum gross rent amount, the closing of the Company's purchase of the Lanham
Building will occur on September 30, 1997. If the minimum gross rent amount is
not met for such period, the Company may waive the minimum gross rent condition
and proceed to close the purchase of the Lanham Building or elect to postpone
the closing, on a month-to-month basis, until average monthly building rents for
a two-month period equal or exceed the minimum gross rent amount. If the minimum
gross rent condition has not been met and therefore the closing has not occurred
on or prior to July 31, 1998, or if, prior to receipt of notice that the gross
rent condition has been met, the Company delivers written notice that it shall
not proceed to closing on or before such date, the Company shall have no further
obligation to purchase the Lanham Building and the seller shall pay to the
Company an amount, not to exceed $240,000, equal to the Company's expenditures
for tenant improvements to the Lanham Building. The Company expects to assign
its right to purchase the Lanham Building to Mr. Liggins in order to preserve
the Company's borrowing capacity. The holders of the Senior Preferred Stock will
be provided with an opportunity to purchase an interest in the Lanham Building
at the closing, if any, of the purchase of the Lanham Building. Mr. Liggins will
be assigned the Lanham Lease by the Landlord at the closing, if any, of the
purchase of the Lanham Building and the Company shall continue to make lease
payments to Mr. Liggins (or such assignee). In addition, if the closing of the
purchase of the Lanham Building occurs, Mr. Liggins (or his assignee) will be
required to pay the Company consideration, in
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<PAGE>
some form, in an amount equal to an aggregate of $288,000. Such consideration
could take the form of a reduction in the Company's lease payment obligations in
respect of the Lanham Offices, the transfer of an interest in the Lanham
Building to the Company or some other form. The Company's management believes
that the terms of the Lanham Lease are not materially different than if the
agreement were with an unaffiliated third party with no option to purchase the
underlying property. See "Business-Properties."
Baltimore, Maryland
Radio One leases office space located at 100 St. Paul Street, Baltimore,
Maryland from Chalrep, a limited partnership controlled by Ms. Hughes and Mr.
Liggins. The Company's management believes that the terms of this lease are not
materially different than if the agreement were with an unaffiliated third
party. See "Business-Properties."
OTHER AFFILIATED TRANSACTIONS
The Zitelman Group, Inc. received a fee of $50,000 for consulting services
rendered in connection with the Philadelphia Acquisition. The Zitelman Group,
Inc. is wholly owned by Mr. Zitelman, who serves as a member of the Company's
board of directors and is a member of the Company's Compensation Committee. The
Zitelman Group, Inc. also receives consulting fees for the time Mr. Zitelman
spends attending the Company's board meetings and providing other consulting
services to the Company, at his standard hourly consulting rate.
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<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes offered hereby will be issued as a separate series of
Notes pursuant to the Indenture dated as of May 15, 1997, among the Company,
Radio One Licenses, Inc. and United States Trust Company of New York, as trustee
(the "Trustee"). The following is a summary of certain provisions of the
Indenture and the Exchange Notes, a copy of which Indenture and the form of
Exchange Notes may be obtained from the Company The following summary of certain
provisions of the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended. Definitions
of certain capitalized terms used in the following summary are set forth under
"-Certain Definitions."
GENERAL
The Notes are and the Exchange Notes will be, senior subordinated,
unsecured obligations of the Company, limited to $85,478,000 aggregate principal
amount, and will mature on May 15, 2004. The Senior Subordinated Notes will bear
cash interest from May 19, 1997 to and including May 15, 2000 at a rate per
annum of 7% on the aggregate principal amount of the Senior Subordinated Notes,
and after May 15, 2000 until maturity at a rate per annum of 12% on the
aggregate principal amount of the Senior Subordinated Notes. Interest will be
payable semi-annually on May 15 and November 15 of each year, commencing
November 15, 1997, to the holders of record at the close of business on the
preceding May 1 or November 1, as the case may be. The Senior Subordinated Notes
will bear interest on overdue principal and premium, if any, and, to the extent
permitted by law, overdue interest at the rate per annum shown on the front
cover of this Prospectus plus 2%. Interest on the Senior Subordinated Notes will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple thereof. No
service charge will be made for any registration of transfer or exchange of
Exchange Notes, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Exchange Notes will not
be redeemable at the option of the Company prior to May 15, 2001. Thereafter,
the Exchange Notes will be subject to redemption, at the option of the Company,
in whole or in part, at any time and from time to time upon not less than 30 nor
more than 60 days' notice mailed to each Holder's registered address. The
Exchange Notes will be subject to redemption in amounts of $1,000 or an integral
multiple of $1,000 at the following Redemption Prices (expressed as percentages
of principal amount) plus accrued and unpaid interest, if any, to but excluding
the Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the 12-month period
beginning on May 15 of each of the years indicated below:
YEAR REDEMPTION PRICE
------------ -----------------
2001 ........................ 106%
2002 ........................ 104%
2003 ........................ 100%
In addition, the Company may redeem in the aggregate up to 25% of the
original principal amount of Senior Subordinated Notes at any time and from time
to time prior to May 15, 2000 at a Redemption Price equal to 112% of the
Accreted Value of the Senior Subordinated Notes plus accrued and unpaid interest
to the Redemption Date out of the net proceeds of one or more Public Equity
Offerings; provided, that at least $64,109,000 in aggregate principal amount of
Senior Subordinated Notes remains outstanding immediately after the occurrence
of any such redemption and that any such redemption occurs within 180 days
following the closing of each such Public Equity Offering.
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<PAGE>
In the case of any partial redemption, selection of the Senior Subordinated
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate, although no Senior Subordinated Note of $1,000 in original
principal amount or less shall be redeemed in part. If any Exchange Note is to
be redeemed in part only, the notice of redemption relating to such Exchange
Note shall state the portion of the principal amount thereof to be redeemed. A
new Exchange Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Exchange Note. On and after the Redemption Date, interest will cease to
accrue on Exchange Notes or portions of Exchange Notes called for redemption.
GUARANTEES
The obligations of the Company pursuant to the Exchange Notes, including
the repurchase obligation resulting from a Change of Control, will be
unconditionally guaranteed, jointly and severally, on an unsecured senior
subordinated basis, by the License Subsidiary and each of the other Subsidiary
Guarantors pursuant to the Subsidiary Guarantees. Each Subsidiary Guarantee will
be limited to an amount not to exceed the maximum amount that can be guaranteed
by the applicable Subsidiary Guarantor without rendering the Subsidiary
Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. If a Subsidiary Guarantee were to
be rendered voidable, it could be subordinated by a court to all other
indebtedness (including guarantees and other contingent liabilities) of the
applicable Subsidiary Guarantor, and, depending on the amount of such
indebtedness, a Subsidiary Guarantor's liability on its Subsidiary Guarantee
could be reduced to zero. See "Risk Factors-Fraudulent Transfer Statutes."
Pursuant to the Indenture, a Subsidiary Guarantor may consolidate with,
merge with or into, or transfer all or substantially all its assets to any other
Person to the extent described below under "- Limitation on Merger,
Consolidation and Sale of Assets;" provided, however, that if such other Person
is not the Company, such Subsidiary Guarantor's obligations under its Subsidiary
Guarantee must be expressly assumed by such other Person. However, upon the sale
or other disposition (including by way of consolidation or merger) of a
Subsidiary Guarantor or the sale or disposition of all or substantially all the
assets of a Subsidiary Guarantor (in each case other than to an Affiliate of the
Company) permitted by the Indenture, such Subsidiary Guarantor will be released
and relieved from all its obligations under its Subsidiary Guarantee. See
"-Limitation on Merger, Consolidation and Sale of Assets."
SUBORDINATION
The Exchange Notes will, to the extent set forth in the Indenture, be
subordinate in right of payment to the prior payment in full in cash or Cash
Equivalents of all Senior Debt. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency or similar proceedings of the Company, the holders of Senior Debt
will first be entitled to receive payment in full of such Senior Debt in cash or
Cash Equivalents before the Holders of the Exchange Notes will be entitled to
receive any payment in respect of the principal of (and premium, if any) or
interest on the Exchange Notes. In the event that, notwithstanding the
foregoing, the Trustee or the Holder of any Exchange Note receives any payment
or distribution of assets of the Company of any kind or character before all the
Senior Debt is paid in full in cash or Cash Equivalents, then such payment or
distribution will be required to be paid over or delivered forthwith to the
trustee in bankruptcy or other Person making payment or distribution of assets
of the Company for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay the Senior Debt in full in cash or Cash
Equivalents.
In the event that any of the Exchange Notes are declared due and payable
prior to their stated maturity, the holders of Senior Debt shall be entitled to
receive payment in full in cash or Cash Equivalents of all Senior Debt before
the holders of the Exchange Notes shall be entitled to receive any payment on
account of the principal of (or premium, if any) or interest on the Exchange
Notes or on account of the purchase or redemption or other acquisition of the
Exchange Notes.
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The Company may not make any payments on account of the Exchange Notes or
on account of the purchase, redemption or other acquisition of Exchange Notes
following the maturity (on the due date, upon acceleration or otherwise) of any
Senior Debt until such Senior Debt is paid in full in cash or Cash Equivalents.
The Company also may not make any payments on the account of the Exchange Notes
or on account of the purchase or redemption or other acquisition of Exchange
Notes if there shall have occurred and be continuing a default in the payment of
Senior Debt (a "Payment Default"). In addition, if any default (other than a
Payment Default) with respect to any Designated Senior Debt permitting the
holders thereof (or a percentage thereof or a trustee on behalf thereof) to
accelerate the maturity thereof (a "Nonmonetary Default") has occurred and is
continuing and the Company and the Trustee have received written notice thereof
from the representatives of holders of such Designated Senior Debt, then the
Company may not make any payments (other than payments previously made pursuant
to the provisions described under "-Defeasance") on account of the Exchange
Notes or on account of the purchase or redemption or other acquisition of
Exchange Notes for a period (a "blockage period") commencing on the date the
Company and the Trustee receive such written notice and ending on the earlier of
(x) 179 days after such date and (y) the date, if any, on which the Designated
Senior Debt to which such default relates is discharged or such default is
waived or otherwise cured. In any event, not more than one blockage period may
be commenced during any period of 360 consecutive days and there shall be a
period of at least 181 consecutive days in each period of 360 consecutive days
when no blockage period is in effect. No Nonmonetary Default that existed or was
continuing on the date of the commencement of any blockage period with respect
to the Designated Senior Debt initiating such blockage period will be, or can
be, made the basis for the commencement of a subsequent blockage period, unless
such default has been cured or waived for a period of not less then 180
consecutive days. In the event that, notwithstanding the foregoing, the Company
makes any payment to the Trustee or the Holder of any Exchange Note prohibited
by these subordination provisions, then such payment will be required to be paid
over and delivered forthwith to the holders of the Senior Debt remaining unpaid,
to the extent necessary to pay in full in cash or cash equivalents all the
Senior Debt.
Each Subsidiary Guarantee will, to the extent set forth in the Indenture,
be subordinated in right of payment to the prior payment in full in cash or cash
equivalents of all Senior Debt of such Subsidiary Guarantor and will be subject
to the rights of holders of Designated Senior Debt of such Subsidiary Guarantor
to initiate blockage periods upon terms substantially comparable to the
subordination of the Exchange Notes to all Senior Debt of the Company.
Consistent with the subordination of the Subsidiary Guarantees, the Indenture
will provide that for purposes of any applicable fraudulent transfer or similar
laws, indebtedness under the Credit Agreement will be deemed to have been
incurred prior to the incurrence by any Subsidiary Guarantor of its liabilities
under its Subsidiary Guarantee. See "Risk Factors-Fraudulent Transfer Statutes."
By reason of such subordination, in the event of insolvency, certain
creditors of the Company or a Subsidiary Guarantor who are not holders of Senior
Debt may recover less, ratably, than holders of Senior Debt and may recover
more, ratably, than the Holders of the Exchange Notes.
The subordination provisions described above will cease to be applicable to
the Exchange Notes and the Subsidiary Guarantees upon any defeasance or covenant
defeasance of the Exchange Notes as described under "-Defeasance".
The Company and the Subsidiary Guarantors expect to incur additional
Indebtedness constituting Senior Debt. The Indenture does not prohibit or limit
the incurrence of additional Senior Debt, provided that the incurrence of such
Senior Debt is otherwise permitted thereunder including under the limitations
described under "Certain Covenants-Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock".
BOOK-ENTRY, DELIVRY AND FORM
The Exchange Notes will initially be issued in the form of one Global Note,
except as described below. The Global Note will be deposited promptly after the
Expiration Date with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., a nominee of the
Depositary. Except as set forth below, the Global Note may be transferred, in
whole and not in part,
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<PAGE>
only to the Depositary or another nominee of the Depositary. Investors may hold
their beneficial interests in the Global Note directly through the Depositary if
they have an account with the Depositary or indirectly through organizations
which have accounts with the Depositary.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depositary was created to hold securities
of institutions that have accounts with the Depositary ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Access to the Depositary's book-entry system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, whether
directly or indirectly.
Upon the issuance of the Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the principal amount of the
Exchange Notes represented by such Global Note to the accounts of participants.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Notes will be shown on, and the transfer
of those ownership interests will be effected only through, records maintained
by the Depositary (with respect to participants' interests) and such
participants (with respect to the owners of beneficial interests in the Global
Note other than participants). The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Note, the Depositary or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Exchange Notes
for all purposes of such Exchange Notes and the Indenture. Except as set forth
below, owners of beneficial interests in the Global Note will not be entitled to
have the Exchange Notes represented by the Global Note registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Exchange Notes in definitive form and will not be considered to be
the owners of any Exchange Notes under the Global Note. The Company understands
that under existing industry practice, in the event an owner of a beneficial
interest in the Global Note desires to take any action that the Depositary, as
the holder of the Global Note, is to take, the Depositary would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payment of principal of and interest on Exchange Notes represented by the
Global Note registered in the name of and held by the Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner and holder of the Global Note.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depositary or its nominee. The Company also expects
that payments by participants to owners of beneficials interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Exchange Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between the Depositary and
its participants or the relationship between such participants and the owners of
beneficial interests in the Global Note owning through such participants.
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Unless and until it is exchanged in whole or in part for certificated
Exchange Notes in definitive form, the Global Note may not be transferred except
as a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Certificated Securities
The Exchange Notes represented by the Global Note are exchangeable for
certificated Exchange Notes in definitive form of like tenor as such Exchange
Notes ("Certificated Securities") in denominations of U.S. $1,000 and integral
multiples thereof if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the Global Note or if at any
time the Depositary ceases to be a clearing agency registered under the Exchange
Act, (ii) the Company in its discretion at any time determines not to have all
of the Exchange Notes evidenced by the Global Note or (iii) a default entitling
the holders of the Exchange Notes to accelerate the maturity thereof has
occurred and is continuing. Any Exchange Note that is exchangeable pursuant to
the preceding sentence is exchangeable for Certificated Securities issuable in
authorized denominations and registered in such names as the Depositary shall
direct. Subject to the foregoing, the Global Note is not exchangeable, except
for a Global Note of the same aggregate denomination to be registered in the
name of the Depositary or its its nominee.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any participant or indirect participant in identifying the
beneficial owners of the Exchange Notes, and the Company and the Trustee may
conclusively rely on, and shall be protected in relying on, instructions from
the Depositary for all purposes (including with respect to the registration and
delivery, and their respective principal amounts, of the Exchange Notes to be
issued).
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from such sources that the
Company believes to be reliable. The Company will have no responsibility for the
performance by the Depositary or its participants of their respective
obligations as described hereunder or under the rules and procedures governing
their respective operations.
SAME-DAY PAYMENT
The Indenture will require that payments in respect of Exchange Notes
(including principal, premium and interest) be made by mailing a check to each
holder's registered address; provided, however, that payments shall be made,
upon request, by wire transfer of immediately available funds to U.S. dollar
accounts in a bank in the United States specified by holders of Exchange Notes
in an aggregate principal amount of $1 million or more and payments to the
Depositary shall be made by wire transfer of immediately available funds.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Certain Asset Sales. The Company will not, and will not
permit any of its Restricted Subsidiaries to:
(i) sell, lease, transfer, convey or otherwise dispose of any assets
(including by way of a saleand-leaseback) other than in the ordinary course
of business, or
(ii) issue or sell Equity Interests of any of its Restricted
Subsidiaries,
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in each case, whether in a single transaction or a series of related
transactions, to any Person (other than (x) an issuance, sale, lease, conveyance
or disposal by a Restricted Subsidiary to the Company or one of its Wholly Owned
Restricted Subsidiaries, (y) an Asset Swap permitted by the covenant described
under "-Limitation on Asset Swaps" or (z) the sale of the Equity Interests of
any Unrestricted Subsidiary) (each of the foregoing, an "Asset Sale"), unless:
(x) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets or Equity Interests sold or otherwise
disposed of;
(y) at least 80% of such consideration is in the form of cash and Cash
Equivalents; and
(z) if such Asset Sale includes Equity Interests of any Restricted
Subsidiary, 100% of the Equity Interests of such Restricted Subsidiary owned
by the Company or any other Restricted Subsidiary are sold or otherwise
disposed of in such Asset Sale.
Following any Asset Sale, the Company may elect to apply all or a portion
of the Net Proceeds from such Asset Sale, within 360 days of such Asset Sale,
(a) to permanently reduce or satisfy any Senior Debt (and, in the event that
such Senior Debt is extended under a revolving credit or similar facility, to
permanently reduce the aggregate commitments thereunder as then in effect) or
(b) to acquire Broadcast Assets. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Senior Debt or invest such Net
Proceeds in Permitted Investments or to reduce loans outstanding under any
revolving credit facility of the Company or any Restricted Subsidiary. Any Net
Proceeds from an Asset Sale not applied to the reduction of Senior Debt or to
the acquisition of Broadcast Assets as provided in the first sentence of this
paragraph, upon expiration of such 360-day period will be deemed to constitute
"Excess Proceeds."
Whenever aggregate Excess Proceeds realized since the Issue Date minus the
aggregate purchase price of Notes which have been the subject of any previous
Offer to Purchase ("Net Excess Proceeds") exceeds $5.0 million the Company will
commence an Offer to Purchase within 30 days after the date on which the Net
Excess Proceeds exceeded $5.0 million. Such Offer to Purchase shall be for a
principal amount of Senior Subordinated Notes then outstanding having an
aggregate purchase price equal to such Net Excess Proceeds in accordance with
the procedures set forth in the Indenture.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries will not be required to apply any Net Proceeds in
accordance with this covenant except to the extent that the aggregate Net
Proceeds from all Asset Sales which are not applied in accordance with this
covenant exceeds $1.0 million.
For the purpose of this covenant, the following are deemed to be cash: (x)
the assumption of Senior Debt of the Company or any Restricted Subsidiary and
the release of the Company or such Restricted Subsidiary from all liability on
such Senior Debt in connection with such Asset Sale (other than customary
indemnification provisions relating thereto which do not involve the repayment
of funded indebtedness) and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
Limitation on Asset Swaps. The Company will not, and will not permit any
Restricted Subsidiary to, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement to swap assets and
immediately after giving effect to the proposed Asset Swap, no Default or
Event of Default shall have occurred and be continuing;
(ii) at the time of entering into the agreement to swap assets and after
giving pro forma effect to the proposed Asset Swap as if such Asset Swap had
occurred at the beginning of the applicable four-quarter period, the Company
would be permitted to incur at least $1.00 of additional Indebtedness under
the Debt to EBITDA Ratio test described below under "-Limitation on
Incurrence of Indebtedness and Issuance of Preferred Stock";
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(iii) after giving pro forma effect to the proposed Asset Swap as if such
Asset Swap had occurred at the beginning of the four most recent full fiscal
quarters ending immediately prior to the date of the proposed Asset Swap, the
ratio of (A) EBITDA of the Company and its Restricted Subsidiaries on a
consolidated basis for such four-quarter period to (B) the Consolidated Cash
Interest Expense of the Company and its Restricted Subsidiaries for such
four-quarter period exceeds 1.2 to 1.0; and
(iv) the respective Fair Market Values of the assets being purchased and
sold by the Company or any of its Restricted Subsidiaries are substantially
the same at the time of entering into the agreement to swap assets.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, the Company would not be
permitted to incur at least $1.00 of additional Indebtedness under the Debt to
EBITDA Ratio test described below under "-Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock", or (3) the aggregate amount of
such Restricted Payment and all other Restricted Payments since the Issue Date
would exceed the sum of:
(A) an amount equal to the Company's EBITDA cumulated from April 1,
1997 to the end of the Company's most recently ended full fiscal quarter,
taken as a single accounting period, minus 1.4 times the sum of (i) the
Company's Consolidated Interest Expense from April 1, 1997 to the end of
the Company's most recently ended full fiscal quarter, taken as a single
accounting period, plus (ii) all dividends or other distributions paid or
made by the Company or any Restricted Subsidiary on any Disqualified
Stock of the Company or any of its Subsidiaries during such period;
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Equity Interests (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an
employee stock ownership plan or to a trust established by the Company or
any of its Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company convertible or exchangeable for Equity
Interests (other than Disqualified Stock) of the Company (less the amount
of any cash, or the fair value of any property distributed by the Company
upon such conversion or exchange other than Equity Interests not
constituting Disqualified Stock); and
(D) an amount equal to the sum of (i) the net reduction in Investments
in Unrestricted Subsidiaries resulting from dividends, repayments of
loans or advances or other transfers of assets, in each case to the
Company or any Restricted Subsidiary from Unrestricted Subsidiaries, and
(ii) the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary; provided, that the foregoing sum shall not exceed,
in the case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or
any Restricted Subsidiary in such Unrestricted Subsidiary.
(b) Notwithstanding the provisions of the foregoing paragraph (a), the
foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment made out of the proceeds of the substantially
concurrent sale of, and any acquisition of any Equity Interest of the Company
made by exchange for, Equity Interests of the Company (other than
Disqualified Stock and Capital Stock issued or sold to a Subsidiary of
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the Company or an employee stock ownership plan or to a trust established by
the Company or any of its Subsidiaries for the benefit of their employees);
provided, that (A) such Restricted Payment shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Debt made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to the
covenant described under "-Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock"; provided, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with this
covenant; provided, that (A) at the time of payment of such dividend, no
Default shall have occurred and be continuing (or result therefrom), and (B)
such dividend shall be included in the calculation of the amount of
Restricted Payments from and after such time;
(iv) loans to members of management of the Company or any Restricted
Subsidiary the proceeds of which are used for a concurrent purchase of Equity
Interests of the Company or a capital contribution to the Company (provided
that the proceeds from such purchase of Equity Interests or capital
contribution shall be excluded from the calculation of amounts under clause
(3)(B) of paragraph (a) above); provided, that such loans shall be included
in the calculation of the amount of Restricted Payments from and after such
time;
(v) any principal payment on, or purchase, redemption, defeasance or
other acquisition or retirement for value of, any Indebtedness that is
subordinated by its terms to the Senior Subordinated Notes out of Excess
Proceeds available for general corporate purposes after consummation of all
required purchases of Senior Subordinated Notes pursuant to an Offer to
Purchase, provided, that the amount of such payments shall be excluded in the
calculation of the amount of Restricted Payments from and after such time;
and
(vi) repurchases of Equity Interests of the Company from any employee of
the Company (other than a Principal Shareholder) whose employment with the
Company has ceased; provided, that the aggregate amount of such repurchases
shall not exceed $500,000 in any year; provided further, that the amount of
such payments shall be included in the calculation of the amount of
Restricted Payments from and after such time.
Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company will not, and will not permit any of its Restricted Subsidiaries to,
Incur any Indebtedness (including Acquired Debt) or issue any preferred stock,
except that the Company may:
(i) issue preferred stock that is not Disqualified Stock at any time,
and
(ii) Incur Indebtedness or issue Disqualified Stock if the Debt to EBITDA
Ratio of the Company and its Restricted Subsidiaries at the time of
Incurrence of such Indebtedness or issuance of such Disqualified Stock, after
giving pro forma effect thereto, does not exceed 7.0 to 1.0; provided that
any such Indebtedness (other than Senior Debt) Incurred by the Company shall,
at the time of Incurrence, have a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of the Notes.
The foregoing limitations will not apply to the Incurrence of any of the
following:
(a) Indebtedness consisting of Senior Bank Debt; provided, that the
aggregate principal amount outstanding at any time under this clause (a) does
not exceed $10 million;
(b) Existing Indebtedness;
(c) Indebtedness represented by the Senior Subordinated Notes and the
Subsidiary Guarantees;
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(d) Refinancing Indebtedness, provided, that
(1) the principal amount of such Refinancing Indebtedness shall
not exceed the principal amount of Indebtedness or amount of
Disqualified Stock so extended, refinanced, renewed, replaced,
substituted, defeased or refunded (plus the amount of expenses
incurred and premiums paid in connection therewith),
(2) with respect to Refinancing Indebtedness of any Indebtedness
other than Senior Debt or Disqualified Stock, the Refinancing
Indebtedness shall have a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced,
substituted, defeased or refunded, and
(3) with respect to Refinancing Indebtedness of Indebtedness other
than Senior Debt or any Disqualified Stock incurred by: (i) the
Company, such Refinancing Indebtedness shall rank no more senior, and
shall be at least as subordinated, in right of payment to the Senior
Subordinated Notes as the Indebtedness being extended, refinanced,
replaced, renewed, substituted, defeased or refunded; and (ii) a
Subsidiary Guarantor, such Refinancing Indebtedness shall rank no more
senior, and shall be at least as subordinated, in right of payment to
the Subsidiary Guarantee of such Subsidiary Guarantor as the
Indebtedness being extended, refinanced, replaced, renewed,
substituted, defeased or refunded;
(e) intercompany Indebtedness between the Company and any of its Wholly
Owned Restricted Subsidiaries;
(f) Hedging Obligations, including interest rate swap obligations, that are
incurred in the ordinary course of business for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness which
Indebtedness is permitted by the terms of the Indenture to be outstanding;
(g) guarantees by the Company and the Subsidiary Guarantors of any
Indebtedness of the Company or any Restricted Subsidiary permitted under this
covenant;
(h) Indebtedness of the Company or any Restricted Subsidiary consisting of
indemnification, adjustment of purchase price or similar obligations, in each
case incurred in connection with the disposition of any assets of the Company or
any Restricted Subsidiary; and
(i) Indebtedness of the Company or any of its Restricted Subsidiaries (in
addition to Indebtedness permitted by clauses (b) - (h) of this section) in an
aggregate principal amount at any time outstanding that, together with any
Indebtedness incurred pursuant to clause (a) of this section, does not exceed $5
million.
Limitation on Restricted Subsidiary Equity Interests. The Company will not
permit any Restricted Subsidiary to issue any Equity Interests, except for (i)
Equity Interests issued to and held by the Company or a Wholly Owned Restricted
Subsidiary, and (ii) Equity Interests issued by a Person prior to the time (A)
such Person becomes a Restricted Subsidiary, (B) such Person merges with or into
a Restricted Subsidiary or (C) a Restricted Subsidiary merges with or into such
Person; provided that such Equity Interests were not issued or incurred by such
Person in anticipation of the type of transaction contemplated by subclause (A),
(B) or (C).
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(i) (a) pay dividends or make any other distributions to the Company or
any other Restricted Subsidiary (1) on its Equity Interests or (2) with
respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary,
(ii) make loans or advances to the Company or any other Restricted
Subsidiary, or
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(iii) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(A) any Existing Indebtedness;
(B) applicable law;
(C) any instrument governing Indebtedness or Equity Interests of a
Person acquired by the Company or any of its Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), provided that (1) such restriction is not applicable to any
other Person or the properties or assets of any other Person, and (2) the
consolidated net income (loss) of such acquired Person for any period
prior to such acquisition shall not be taken into account in determining
whether such acquisition was permitted by the terms of the Indenture;
(D) by reason of customary nonassignment provisions in leases entered
into in the ordinary course of business and consistent with past
practices;
(E) Purchase Money Indebtedness for property acquired in the ordinary
course of business that only impose restrictions on the property so
acquired;
(F) Refinancing Indebtedness permitted under the Indenture, provided
that the restrictions contained in the agreements governing such
Refinancing Indebtedness are no more restrictive in the aggregate than
those contained in the agreements governing the Indebtedness being
refinanced immediately prior to such refinancing;
(G) the Credit Agreement;
(H) agreements relating to the financing of the acquisition of real or
tangible personal property acquired after the date of the Indenture,
provided, that such encumbrance or restriction relates only to the
property which is acquired and, in the case of any encumbrance or
restriction that constitutes a Lien, such Lien constitutes a Purchase
Money Lien; or
(I) any restriction or encumbrance contained in contracts for sale of
assets in respect of the assets being sold pursuant to such contract.
Transactions with Affiliates. The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into any contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any Affiliate of the
Company or any Restricted Subsidiary (each of the foregoing, an "Affiliate
Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with a non-Affiliated Person;
(ii) such Affiliate Transaction is approved by a majority of the
disinterested members of the Company's Board of Directors; and
(iii) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving aggregate payments
in excess of $1.0 million, an Officers' Certificate certifying that such
Affiliate Transaction complies with clauses (i) and (ii) above; and
(b) with respect to any Affiliate Transaction (or series of related
transactions) with an aggregate value in excess of $5.0 million, an opinion from
a nationally recognized investment bank to the effect that the transaction is
fair to the Company or the Restricted Subsidiary, as the case may be, from a
financial point of view; provided that none of the following shall constitute an
Affiliate Transaction:
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(A) employment arrangements (including customary benefits thereunder)
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary;
(B) transactions solely between or among the Company and its Wholly
Owned Restricted Subsidiaries or solely between or among Wholly Owned
Restricted Subsidiaries;
(C) transactions permitted by the provisions of the Indenture
described above under "Limitation on Restricted Payments;"
(D) any agreement as in effect on the Issue Date or any amendment
thereto or any transaction contemplated thereby (including pursuant to
any amendment thereto) and any replacement agreement thereto so long as
any such amendment or replacement agreement is not more disadvantageous
to the holders of Senior Subordinated Notes in any material respect than
the original agreement as in effect on the Issue Date;
(E) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party on the Issue
Date;
(F) services provided to any Unrestricted Subsidiary of the Company
for fees approved by the Board of Directors; and
(G) the issuance, sale or other disposition of any Equity Interest
(other than Disqualified Stock) of the Company, including any
equity-related agreements relating thereto such as registration rights
and voting agreements so long as such agreements do not result in such
Equity Interests being Disqualified Stock.
Limitation on Senior Subordinated Debt. The Company will not Incur (i) any
Indebtedness that is subordinate or junior in ranking in right of payment by its
terms to any Senior Debt of the Company and senior in right of payment by its
terms to the Senior Subordinated Notes or (ii) any Secured Debt that is not
Senior Debt unless contemporaneously therewith effective provision is made to
secure the Senior Subordinated Notes equally and ratably with such Secured Debt
for so long as such Secured Debt is secured by a Lien.
The Company will not permit any Subsidiary Guarantor to Incur (i) any
Indebtedness that is subordinated or junior in ranking in right of payment to
its Senior Debt and senior in right of payment to its Subsidiary Guarantee or
(ii) any Secured Debt that is not Senior Debt unless contemporaneously therewith
effective provision is made to secure its Subsidiary Guarantee equally and
ratably with such Secured Debt for so long as such Secured Debt is secured by a
Lien.
SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide the Trustee and Noteholders with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and other reports to be so
filed and provided at the times specified for the filing of such information,
documents and reports under such Sections.
Ratings for Senior Subordinated Notes. The Company shall use its reasonable
best efforts to obtain by June 30, 1998 the publication of ratings for the
Senior Subordinated Notes from Moody's Investors Service, Inc. and from Standard
and Poor's Ratings Group (or any successor to either of them) or, in the event
that either of such entities at such time no longer publishes ratings for
long-term debt securities, then any other nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act).
Change of Control. Upon the occurrence of a Change of Control, the Company
will be required to commence an Offer to Purchase all Senior Subordinated Notes
then outstanding in accordance with the procedures set forth in the Indenture.
The Company shall comply, to the extent applicable, with the
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requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with an Offer to Purchase Senior Subordinated Notes
pursuant to this covenant. To the extent the provisions of any securities laws
or regulations conflict with the provisions of this covenant, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this covenant by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of Indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenants described under "-Certain CovenantsLimitation on Incurrence of
Indebtedness and Issuance of Preferred Stock."
Such restrictions can only be waived with the consent of the holders of a
majority in principal amount of the Senior Subordinated Notes then outstanding.
Except for the limitations contained in such covenants, however, the Indenture
will not contain any covenants or provisions that may afford holders of the
Senior Subordinated Notes protection in the event of a highly leveraged
transaction.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require the Company to commence an
Offer to Purchase the Senior Subordinated Notes could cause a default under such
indebtedness, even if the Change of Control itself does not, due to the
financial effect of such Offer to Purchase on the Company. Finally, the
Company's ability to pay cash to the holders of Senior Subordinated Notes
following the occurrence of a Change of Control may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make an Offer to Purchase the Senior
Subordinated Notes. The provisions under the Indenture relative to the Company's
obligation to make an Offer to Purchase the Senior Subordinated Notes as a
result of a Change of Control may be waived or modified with the written consent
of the holders of a majority in principal amount of the Senior Subordinated
Notes.
Future Subsidiary Guarantors. The Company will (i) cause each Person which,
after the Issue Date, becomes a Wholly Owned Restricted Subsidiary of the
Company to execute and deliver a supplemental indenture and thereby become a
Subsidiary Guarantor bound by the Subsidiary Guarantee of the Senior
Subordinated Notes in the form set forth in the Indenture (without such
Subsidiary Guarantor being required to execute and deliver its Subsidiary
Guarantee endorsed on the Senior Subordinated Notes) and (ii) deliver to the
Trustee an Opinion of Counsel, in form and substance reasonably satisfactory to
the Trustee, that the Subsidiary Guarantee of such Subsidiary Guarantor is a
valid and legally binding obligation of such Subsidiary Guarantor.
The Subsidiary Guarantors will, jointly and severally, unconditionally
guarantee the due and punctual payment of the principal, premium, if any, and
interest on the Senior Subordinated Notes on an unsecured senior subordinated
basis pursuant to the Subsidiary Guarantees as described under "Subordination".
See "Risk Factors-Fraudulent Transfer Statutes." All Subsidiary Guarantors may
be released from their obligations under the Subsidiary Guarantees as described
under "-Defeasance", and any Subsidiary Guarantor may be released from its
obligations under its Subsidiary Guarantee as described under "-Limitation on
Merger, Consolidation and Sale of Assets."
LIMITATION ON MERGER, CONSOLIDATION AND SALE OF ASSETS
(a) The Company may not consolidate or merge with or into (whether or not
the Company is the Surviving Person), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another Person, unless:
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(i) the Surviving Person is a corporation organized or existing under
the laws of the United States, any state thereof or the District of
Columbia;
(ii) the Surviving Person (if other than the Company) assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee;
(iii) at the time of and immediately after such Disposition, no Default
shall have occurred and be continuing;
(iv) the Surviving Person will, at the time of such Disposition and after
giving pro forma effect thereto, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt to EBITDA Ratio test described
under "-Certain Covenants-Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(v) the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with the Indenture.
(b) In the event of a sale of all or substantially all of the assets of any
Subsidiary Guarantor or all of the Equity Interests of any Subsidiary Guarantor,
by way of merger, consolidation or otherwise, then the Surviving Person of any
such merger or consolidation, or such Subsidiary Guarantor, if all of its Equity
Interests are sold, shall be released and relieved of any and all obligations
under the Subsidiary Guarantee of such Subsidiary Guarantor if:
(1) the Person surviving such merger or consolidation or acquiring
the Equity Interests of such Subsidiary Guarantor is not a Restricted
Subsidiary of the Company;
(2) the Net Proceeds from such sale are applied as described under
"-Certain Covenants-Limitation on Certain Asset Sales"; and
(3) such Subsidiary Guarantor is released from its guarantees of
other Indebtedness of the Company or any Restricted Subsidiary.
(c) Except as provided in the preceding sentence, no Subsidiary Guarantor
may consolidate or merge with or into (whether or not such Person is Affiliated
with such Subsidiary Guarantor and whether or not the Guarantor is the Surviving
Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets in one or more related transactions, to another
Person unless:
(1) the Surviving Person is the Company or one of its Wholly
Owned Restricted Subsidiaries;
(2) the Surviving Person is a corporation organized or existing
under the laws of the United States, any state thereof or the District
of Columbia;
(3) the Surviving Person (if other than the Subsidiary Guarantor)
assumes all the obligations of the Subsidiary Guarantor under the
Senior Subordinated Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; and
(4) at the time of and immediately after such Disposition, no
Default shall have occurred and be continuing.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of all other Terms used in the
Indenture.
"Accreted Value" means, as of any date (the "Specified Date"), the amount
provided below for each $1,000 principal amount of Senior Subordinated Notes:
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(i) if the Specified Date occurs on one of the following dates (each, a
"Semi-Annual Accrual Date"), the Accreted Value will equal the amount set forth
below for such Semi-Annual Accrual Date:
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
-------------------------- ---------------
November 15, 1997 ...... $ 894.69
May 15, 1998 ............ 913.37
November 15, 1998 ...... 933.17
May 15, 1999 ............ 954.17
November 15, 1999 ...... 976.42
May 15, 2000 ............ 1,000.00
(ii) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of (a) the original issue price
for each $1,000 principal amount of Senior Subordinated Notes and (b) an
amount equal to the product of (1) the Accreted Value for the first
Semi-Annual Accrual Date less such original issue price, multiplied by (2) a
fraction, the numerator of which is the number of days from the Issue Date to
the Specified Date, using a 360-day year of 12 30-day months, and the
denominator of which is the number of days elapsed from the Issue Date to the
first Semi-Annual Accrual Date, using a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the Accreted Value will equal the sum of (a) the Accreted Value for the
Semi-Annual Accrual Date immediately preceding such Specified Date and (b) an
amount equal to the product of (1) the Accreted Value for the immediately
following Semi-Annual Accrual Date less the Accreted Value for the
immediately preceding Semi-Annual Accrual Date multiplied by (2) a fraction,
the numerator of which is the number of days from the immediately preceding
Semi-Annual Accrual Date to the Specified Date, using a 360-day year of 12
30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Debt" means, with respect to any specified Person, Indebtedness
of any other Person existing at the time such other Person merges with or into,
or becomes a Subsidiary of, such specified Person, including Indebtedness
incurred in connection with, or in contemplation of, such other Person merging
with or into, or becoming a Subsidiary of, such specified Person.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control of" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Asset Swap" means the execution of a definitive agreement, subject only to
FCC approval and other customary closing conditions, that the Company in good
faith believes will be satisfied, for a substantially concurrent purchase and
sale, or exchange, of Broadcast Assets between the Company or any of its Wholly
Owned Restricted Subsidiaries and another Person or group of Affiliated Persons;
provided that any amendment to or waiver of any closing condition which
individually or in the aggregate is material to the Asset Swap shall be deemed
to be a new Asset Swap.
"Broadcast Assets" means assets used or useful in the ownership or
operation of an AM or FM radio station.
"Broadcast License" means an authorization issued by the FCC for the
operation of an AM or FM radio station.
"Capital Lease Obligation" means, at any time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on the balance sheet in accordance
with GAAP.
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"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of less than one year
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of less than one year from the date of acquisition,
bankers' acceptances with maturities of less than one year and overnight bank
deposits, in each case with any lender party to the Credit Agreement or with any
domestic commercial bank having capital and surplus in excess of $500,000,000
and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) entered into with any financial institution
meeting the qualifications specified in clause (iii) immediately above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Ratings Services and in each case maturing
within nine months after the date of acquisition and (vi) interests in money
market mutual funds which invest solely in assets or securities of the type
described in clauses (i)-(v) immediately above.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the Company's assets to any
Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act) (other than any or all of the Principal Shareholders or their Related
Parties);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(iii) prior to the first Public Equity Offering of the Company, either
(x) the Principal Shareholders and their Related Parties cease to be the
beneficial owner of at least 35% of the voting power of the voting stock of
the Company or (y) any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Warrantholders acquires,
directly or indirectly, 35% or more of the voting power of the voting stock
of the Company by way of merger, consolidation or otherwise;
(iv) following the first Public Equity Offering of the Company, any
Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act) (other than one or more of the Principal Shareholders and their Related
Parties) acquires, directly or indirectly, 35% or more of the voting power of
the voting stock of the Company by way of merger or consolidation or
otherwise; provided that such acquisition will not constitute a "Change of
Control" (x) in the case of a Person or group consisting of the
Warrantholders, if and for so long as the Principal Shareholders and Related
Parties, individually or collectively, own at least 30% of the voting power
of the voting stock of the Company and have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority of
the board of directors of the Company, or (y) in the case of any Person or
group not including any Warrantholder, unless or until such Person or group
owns, directly or indirectly, more of the voting power of the voting stock of
the Company than the Principal Shareholders and their Related Parties; or
(v) the Continuing Directors cease for any reason (other than as a result
and during the continuance of a default under the Warrant Agreement entitling
the Warrantholders to appoint directors) to constitute a majority of the
directors of the Company then in office.
For purposes of this definition, any transfer of an Equity Interest of an
entity that was formed for the purpose of acquiring voting stock of the Company
shall be deemed to be a transfer of such portion of such voting stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"Consolidated Cash Interest Expense" means, with respect to any period, the
amount of Consolidated Interest Expense for such period to the extent it
represents cash disbursements for such purpose by the Company and its Restricted
Subsidiaries during such period.
"Consolidated Interest Expense" means, without duplication, with respect to
any period, the sum of (a) the interest expense and all capitalized interest of
the Company and its Restricted Subsidiaries for such period, on a consolidated
basis, including, without limitation, (i) amortization of debt discount, (ii)
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the net cost under interest rate contracts (including amortization of debt
discount), (iii) the interest portion of any deferred payment obligation and
(iv) accrued interest, plus (b) the interest component of any Capital Lease
Obligation paid or accrued or scheduled to be paid or accrued by the Company
during such period, determined on a consolidated basis in accordance with GAAP
provided, however, that any dividends with respect to the Senior Preferred Stock
shall not be considered for purposes of this definition.
"Continuing Director" means any member of the Board of Directors of the
Company who (i) is a member of that Board of Directors on the Issue Date or (ii)
was nominated for election by either (a) one or more of the Principal
Shareholders (or a Related Party thereof) or (b) the Board of Directors a
majority of whom were directors at the Issue Date or whose election or
nomination for election was previously approved by one or more of the Principal
Shareholders or such directors.
"Credit Agreement" means the credit agreement to be entered into by the
Company as described in this Prospectus, as such agreement may be amended from
time to time.
"Debt to EBITDA Ratio" means, with respect to any date, the ratio of (a)
the aggregate principal amount of all outstanding Indebtedness of the Company
(excluding Hedging Obligations, including interest rate swap obligations, that
are incurred in the ordinary course of business for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness which
Indebtedness is permitted by the terms of the Indenture to be outstanding) and
its Restricted Subsidiaries as of such date on a consolidated basis, plus the
aggregate liquidation preference or redemption amount of all outstanding
Disqualified Stock of the Company and its Restricted Subsidiaries as of such
date (excluding any such Disqualified Stock held by the Company of a Wholly
Owned Restricted Subsidiary), to (b) EBITDA of the Company and its Restricted
Subsidiaries on a consolidated basis for the four most recent full fiscal
quarters ending immediately prior to such date, determined on a pro forma basis
after giving effect to each acquisition or disposition of assets made by the
Company and its Restricted Subsidiaries from the beginning of such four-quarter
period through such date as if such acquisition or disposition had occurred at
the beginning of such four-quarter period.
"Default" means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"Designated Senior Debt" means (i) the Senior Bank Debt and (ii) any Senior
Debt of the Company and the Subsidiary Guarantors permitted under the Indenture,
the principal amount (or accreted value in the case of Indebtedness issued at a
discount) of which is $10 million or more at the time of designation by the
Company (or otherwise available under a committed facility) or a Subsidiary
Guarantor, as the case may be, in a written instrument delivered to the Trustee.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Stock" means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof (other than upon a Change of Control of the
Company in circumstances where the holders of the Senior Subordinated Notes
would have similar rights), in whole or in part on or prior to one year after
the stated maturity of the Senior Subordinated Notes. The amount of Disqualified
Stock shall be the greater of the liquidation preference or mandatory or
optional redemption price thereof.
"EBITDA" of a specified Person means, for any period, the consolidated net
income of such specified Person and its Restricted Subsidiaries for such period:
(i) plus (without duplication and to the extent involved in computing
such consolidated net income) (a) interest expense, (b) provision for taxes
on income or profits and (c) depreciation and amortization and other non-cash
items (including amortization of goodwill and other intangibles and barter
expenses); and
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(ii) minus (without duplication and to the extent involved in computing
such consolidated net income) (a) any gains (or plus losses), together with
any related provision for taxes on such gains or losses, realized in
connection with any sale of assets (including, without limitation,
dispositions pursuant to sale and leaseback transactions), (b) any non-cash
or extraordinary gains (or plus losses), together with any related provision
for taxes on such extraordinary gains or losses, (c) the amount of any cash
payments related to non-cash charges that were added back in determining
EBITDA in any prior period and (d) barter revenues;
provided, however, that:
(i) the net income of any other Person that is accounted for by the
equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to such specified Person
whose EBITDA is being determined or a Wholly Owned Restricted Subsidiary
thereof;
(ii) the net income of any other Person that is a Restricted Subsidiary
(other than a Wholly Owned Restricted Subsidiary) or is an Unrestricted
Subsidiary shall be included only to the extent of the amount of dividends or
distributions paid in cash to such specified Person whose EBITDA is being
determined or a Wholly Owned Restricted Subsidiary thereof; provided, that
for purposes of the covenant described under "Certain Covenants-Limitation on
Restricted Payments" only, any such dividend or distribution shall be
excluded to the extent it has already been included under clause (a)(3)(D)
thereof;
(iii) the net income (loss) of any other Person acquired after the Issue
Date in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded (to the extent otherwise included); and
(iv) gains or losses from sales of assets other than sales of assets
acquired and held for resale in the ordinary course of business shall be
excluded (to the extent otherwise included).
All of the foregoing will be determined in accordance with GAAP.
"Equity Interests" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any preferred
stock, but excluding any debt securities convertible into such equity, and
including, in the case of a partnership, partnership interests (whether general
or limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
"Existing Indebtedness" means any outstanding Indebtedness of the Company
and its Restricted Subsidiaries as of the Issue Date, including the Senior
Subordinated Notes.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy. All determinations in the covenants of Fair Market
Value shall be made by the Board of Directors of the Company and shall be
evidenced by a resolution of such Board set forth in an Officers' Certificate
delivered to the Trustee, upon which the Trustee may conclusively rely.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
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"Hedging Obligations" means, with respect to any Person, the Obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, and (ii) other agreements or
arrangements designed to protect such Persons against fluctuations in interest
rates.
"Immediate Family Member" means, with respect to any individual, such
individual's spouse (past or current), descendants (natural or adoptive, of the
whole or half blood) of the parents of such individual, such individual's
grandparents and parents (natural or adoptive), and the grandparents, parents
and descendants of parents (natural or adoptive, of the whole or half blood) of
such individual's spouse (past or current).
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, that any Indebtedness or Equity Interests of a Person existing at
the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary. The term "Incurrence" when used as a noun
shall have a correlative meaning. The accretion of principal of a non-interest
bearing or other discount security shall not be deemed the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person, whether or not
contingent, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices) or which is evidenced by a note, bond,
debenture or similar instrument, (ii) all Capital Lease Obligations of such
Person, (iii) all obligations of such Person in respect of letters of credit or
bankers' acceptances issued or created for the account of such Person, (iv) all
Hedging Obligations of such Person, (v) all liabilities of the type referred to
in clause (i), (ii) or (iii) immediately above which are secured by any Lien on
any property owned by such Person even if such Person has not assumed or
otherwise become liable for the payment thereof to the extent of the value of
the property subject to such Lien, and (vi) to the extent not otherwise
included, any guarantee by such Person of any other Person's indebtedness or
other obligations described in clauses (i) through (v) above; provided, however,
in no event shall Senior Preferred Stock (including any and all accrued
dividends thereon) be considered "Indebtedness."
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Equity Interests, Indebtedness or
other similar instruments issued by such Person. For purposes of the definition
of "Unrestricted Subsidiary", the definition of "Restricted Payment" and the
covenant described under "-Certain Covenants-Limitation on Restricted Payments",
(i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means the date of initial issuance of the Senior Subordinated
Notes pursuant to the Indenture.
"License Subsidiary" means Radio One Licenses, Inc., a Delaware corporation
and a wholly owned subsidiary of the Company.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the
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nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Cash Proceeds," with respect to any issuance or sale of Equity
Interests, means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Proceeds" means, with respect to any Asset Sale by any Person, the
aggregate cash proceeds received by such Person in respect of such Asset Sale,
which amount is equal to the excess, if any, of:
(i) the cash received by such Person (including any cash payments
received by way of deferred payment pursuant to, or monetization of, a note
or installment receivable or otherwise, but only as and when received) in
connection with such Asset Sale, over
(ii) the sum of
(a) the amount of any Indebtedness including any premium thereon and
fees and expenses associated therewith which is required to be repaid by
such Person in connection with such Asset Sale, plus
(b) the out-of-pocket expenses (1) incurred by such Person in
connection with such Asset Sale, and (2) if such Person is a Restricted
Subsidiary, incurred in connection with the transfer of such amount to
the parent company or entity of such Person, plus
(c) provision for taxes, including income taxes, attributable to the
Asset Sale or attributable to required prepayments or repayments of
Indebtedness with the proceeds of such Asset Sale, plus
(d) a reasonable reserve for the after-tax costs of any
indemnification payments (fixed or contingent) attributable to the
seller's indemnities to the purchaser in respect of such Asset Sale
undertaken by the Company or any of its Restricted Subsidiaries in
connection with such Asset Sale.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer to Purchase" means a written offer (an "Offer") sent by the Company
to each Holder at his address appearing in the Note Register on the date of the
Offer offering to purchase in cash up to the principal amount of Senior
Subordinated Notes specified in such Offer at a purchase price equal to 101% of
the Accreted Value of the Senior Subordinated Notes plus accrued and unpaid
interest, if any. Unless otherwise required by applicable law, the Offer shall
specify an expiration date ("Expiration Date") of the Offer to Purchase which
shall be, subject to any contrary requirements of applicable law, not less than
30 days nor more than 60 days after the date of such Offer and a settlement date
("Purchase Date") for purchase of Senior Subordinated Notes within five Business
Days after the Expiration Date. The Company shall notify the Trustee at least 15
Business Days (or such shorter period as is acceptable to the Trustee) prior to
the mailing of the Offer of the Company's obligation to make an Offer to
Purchase, and the Offer shall be sent by first class mail by the Company or, at
the Company's request and expense, by the Trustee in the name and at the expense
of the Company. The Offer shall contain information concerning the business of
the Company and its Subsidiaries which the Company in good faith believes will
enable such Holders to make an informed decision with respect to the Offer to
Purchase (which at a minimum will include (i) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the documents
required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the
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Offer to Purchase and the events requiring the Company to make the Offer to
Purchase and (iv) any other information required by applicable law to be
included therein. The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Senior Subordinated Notes pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate Accreted Value of the outstanding Senior
Subordinated Notes offered to be purchased by the Company (the
"Purchase Amount") and the aggregate principal amount of the
outstanding Senior Subordinated Notes offered to be purchased by the
Company pursuant to the Offer to Purchase (including, if less than
100% of the principal amount, the manner by which such has been
determined pursuant to the Section hereof requiring the Offer to
Purchase);
(4) the purchase price to be paid by the Company (the "Purchase
Price") for each $1,000 aggregate principal amount of Senior
Subordinated Notes accepted for payment (as specified pursuant to the
Indenture);
(5) that the Holder may tender all or any portion of the Senior
Subordinated Notes registered in the name of such Holder and that any
portion of a Senior Subordinated Note tendered must be tendered in an
integral multiple of $1,000 principal amount;
(6) the place or places where Senior Subordinated Notes are to be
surrendered for tender pursuant to the Offer to Purchase;
(7) that interest on any Senior Subordinated Note not tendered or
tendered but not purchased by the Company pursuant to the Offer to
Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due
and payable upon each Senior Subordinated Note being accepted for
payment pursuant to the Offer to Purchase and that interest thereon
shall cease to accrue on and after the Purchase Date;
(9) that each Holder electing to tender a Senior Subordinated Note
pursuant to the Offer to Purchase will be required to surrender such
Senior Subordinated Note at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Senior
Subordinated Note being, if the Company or the Trustee so requires,
duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion
of Senior Subordinated Notes tendered if the Company (or the Paying
Agent) receives, not later than the close of business on the
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Senior Subordinated Note that the Holder tendered, the certificate
number of the Senior Subordinated Note that the Holder tendered and a
statement that such Holder is withdrawing all or a portion of his
tender;
(11) that (a) if Senior Subordinated Notes in an aggregate
Accreted Value less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase all such Senior Subordinated Notes and (b) if
Senior Subordinated Notes in an aggregate Accreted Value in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase Senior Subordinated
Notes having an aggregate Accreted Value equal to the Purchase Amount
on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Senior Subordinated Notes in denominations of
$1,000 principal amount or integral multiples thereof shall be
purchased); and
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(12) that in the case of any Holder whose Senior Subordinated Note
is purchased only in part, the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Senior
Subordinated Note without service charge, a new Senior Subordinated
Note or Senior Subordinated Notes, of any authorized denomination as
requested by such Holder, in an aggregate amount equal to and in
exchange for the unpurchased portion of the Senior Subordinated Note
so tendered.
Any Offer to Purchase will be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"Permitted Investment" means:
(i) any Investment in the Company or any Wholly Owned Restricted
Subsidiary;
(ii) any Investment in Cash Equivalents;
(iii) any Investment in a Person if, as a result of such Investment, (a)
such Person becomes a Wholly Owned Restricted Subsidiary of the Company, or
(b) such Person either (1) is merged, consolidated or amalgamated with or
into the Company or one of its Wholly Owned Restricted Subsidiaries and the
Company or such Wholly Owned Restricted Subsidiary is the Surviving Person or
the Surviving Person becomes a Wholly Owned Restricted Subsidiary, or (2)
transfers or conveys all or substantially all of its assets to, or is
liquidated into, the Company or one of its Wholly Owned Restricted
Subsidiaries;
(iv) any Investment in accounts and notes receivable acquired in the
ordinary course of business;
(v) notes from employees issued to the Company representing payment of
the exercise price of options to purchase capital stock of the Company; and
(vi) Investments in Unrestricted Subsidiaries represented by Equity
Interests (other than Disqualified Stock) or assets and property acquired in
exchange for Equity Interests (other than Disqualified Stock) of the Company.
Any Investment in an Unrestricted Subsidiary shall not be a Permitted
Investment unless permitted pursuant to any of clauses (i) through (vi) above.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof or any
other entity.
"Principal Shareholders" means Catherine L. Hughes and Alfred C. Liggins,
III and their respective estates, executors and heirs.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in connection with the purchase of property or
assets for the business of the Company and its Restricted Subsidiaries.
"Purchase Money Lien" means any Lien securing solely Purchase Money
Indebtedness.
"Refinancing Indebtedness" means (i) Indebtedness of the Company or any
Restricted Subsidiary incurred or given in exchange for, or the proceeds of
which are used to extend, refinance, renew, replace, substitute, defease or
refund, any other Indebtedness or Disqualified Stock permitted by the terms of
the Indenture, and (ii) Indebtedness of any Restricted Subsidiary incurred or
given in exchange for, or the proceeds of which are used to extend, refinance,
renew, replace, substitute, defease or refund, any other Indebtedness or
Disqualified Stock of the Company or any Restricted Subsidiary in accordance
with the terms of the Indenture.
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"Related Party" with respect to any Principal Shareholder means (i) any 80%
(or more) owned Subsidiary or Immediate Family Member (in the case of an
individual) of such Principal Shareholder or (ii) any Person, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal Shareholder or an
Immediate Family Member, or (iii) any Person employed by the Company in a
management capacity as of the Issue Date.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Equity Interests (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Equity Interests (other than distributions payable
solely in its Equity Interests (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Restricted Subsidiary to minority stockholders (or owners
of an equivalent interest in the case of a Subsidiary that is an entity other
than a corporation)), (ii) the purchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company held by any Person
or of any Equity Interests of a Restricted Subsidiary held by any Affiliate of
the Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Equity Interests (other than its Equity Interests of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Debt (other than the purchase, repurchase or other acquisition of
Subordinated Debt purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) the making of any Investment in any
Person (other than a Permitted Investment).
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Secured Debt" means any Indebtedness of the Company secured by a Lien.
"Senior Bank Debt" means the Indebtedness Incurred pursuant to the Credit
Agreement and any other agreement that replaces the Credit Agreement or
otherwise refunds or refinances any or all of the indebtedness thereunder.
"Senior Debt" means:
(i) with respect to the Company, the principal of and interest (including
post-petition interest whether or not allowed as a claim) on, and all other
amounts owing in respect of Indebtedness permitted to be incurred by the
Company under the terms of the Indenture, including the Credit Agreement,
(including but not limited to reasonable fees and expenses of counsel and all
other charges, fees and expenses incurred in connection with such
Indebtedness), whether presently outstanding or hereafter created, incurred
or assumed, unless the instrument creating or evidencing such Indebtedness or
pursuant to which such Indebtedness is outstanding expressly provides that
such Indebtedness is on a parity with or subordinated in right of payment to
the Senior Subordinated Notes; and
(ii) with respect to any Subsidiary Guarantor, the principal of and
interest (including post- petition interest whether or not allowed as a
claim) on, and all other amounts owing in respect of Indebtedness permitted
to be incurred by such Subsidiary Guarantor under the terms of the Indenture,
including the Credit Agreement, (including but not limited to reasonable fees
and expenses of counsel and all other charges, fees and expenses incurred in
connection with such Indebtedness), whether presently outstanding or
hereafter created, incurred or assumed, unless the instrument creating or
evidencing such Indebtedness or pursuant to which such Indebtedness is
outstanding expressly provides that such Indebtedness is on a parity with or
subordinated in right of payment to the Subsidiary Guarantee of such
Subsidiary Guarantor.
Notwithstanding the foregoing, Senior Debt shall not include (A) any
Indebtedness consisting of Disqualified Stock, (B) any liability for federal,
state, local, or other taxes, (C) any Indebtedness among or between the Company,
any Restricted Subsidiary or any of their Affiliates, (D) any trade payables
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and any Indebtedness to trade creditors (other than amounts accrued thereon)
incurred for the purchase of goods or materials, or for services obtained, in
the ordinary course of business or any Obligations to trade creditors in respect
of any such Indebtedness, or (E) any Indebtedness that is incurred in violation
of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Subordinated Debt" means any Indebtedness of the Company or a Subsidiary
Guarantor if the instrument creating or evidencing such Indebtedness or pursuant
to which such Indebtedness is outstanding expressly provides that such
Indebtedness is (i) if incurred by the Company, subordinated in right of payment
to the Senior Subordinated Notes, or (ii) if incurred by a Subsidiary Guarantor,
subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary
Guarantor.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of all Voting Equity Interests entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
or other governing body thereof is at the time owned or controlled by such
Person (regardless of whether such Equity Interests are owned directly or
through one or more other Subsidiaries of such Person or a combination thereof).
"Subsidiary Guarantees" means the guarantees of the Senior Subordinated
Notes by the Subsidiary Guarantors.
"Subsidiary Guarantors" means License Subsidiary and each other Subsidiary
of the Company that executes and delivers the Indenture as contemplated by the
covenant described under "-Certain Covenants-Future Subsidiary Guarantors."
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any direct or
indirect Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if all of
the following conditions apply: (a) neither the Company nor any of its
Restricted Subsidiaries provides credit support for any Indebtedness of such
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness) other than capital contributions or other Restricted Payments
permitted under the covenant "Limitation on Restricted Payments," (b) such
Subsidiary is not liable, directly or indirectly, with respect to any
Indebtedness other than Unrestricted Subsidiary Indebtedness, (c) such
Unrestricted Subsidiary is not a party to any agreement, contract, arrangement
or understanding at such time with the Company or any Restricted Subsidiary of
the Company except for transactions with affiliates permitted by the terms of
the Indenture unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company (the "Third Party Value") or, in the event such
condition is not satisfied, an amount equal to the value of the portion of such
agreement, contract, arrangement or understanding to such Subsidiary in excess
of the Third Party Value shall be deemed a Restricted Payment, and (d) such
Unrestricted Subsidiary does not own any Equity Interest in or Indebtedness of
any Subsidiary of the Company that has not theretofore been and is not
simultaneously being designated an Unrestricted Subsidiary. Any such designation
by the Board of Directors of the Company shall be evidenced to the Trustee by
filing with the Trustee of a board resolution giving effect to such designation
and an Officers' Certificate certifying that such designation complies with the
foregoing conditions. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary; provided, however, that (i)
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness pursuant to the restrictions under the "-
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Certain Covenants-Limitation on Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant and (ii) all Indebtedness of such Unrestricted
Subsidiary shall be deemed to be incurred on the date such Subsidiary is
designated a Restricted Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (other than a guarantee of
Indebtedness of the Company or any Restricted Subsidiary which is non-recourse
to the Company and its Restricted Subsidiaries) (i) as to which neither the
Company nor any Restricted Subsidiary is directly or indirectly liable (by
virtue of the Company or any such Restricted Subsidiary being the primary
obligor on, guarantor of, or otherwise liable in any respect to, such
Indebtedness) and (ii) which, upon the occurrence of a default with respect
thereto, does not result in, or permit any holder of any Indebtedness of the
Company or any Restricted Subsidiary to declare, a default on such Indebtedness
of the Company or any Restricted Subsidiary or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Equity Interest" of a Person means all classes of Equity Interest
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Warrant Agreement" means the Warrantholders' Agreement dated as of June 6,
1995, as amended from time to time, among the Company, the Principal
Shareholders, Jerry Moore and the Warrantholders.
"Warrantholders" means the holders of warrants issued pursuant to the
Warrant Agreement and, in the case of any such holders, shares of Common Stock
issued in exchange therefor.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company or a
Surviving Person of any Disposition involving the Company, as the case may be.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay (whether or not prohibited by the subordination provisions of the Indenture)
principal of (or premium, if any, on) any Senior Subordinated Note when due; (b)
failure to pay (whether or not prohibited by the subordination provisions of the
Indenture) any interest on any Senior Subordinated Note when due, continued for
30 days; (c) failure to redeem or purchase (whether or not prohibited by the
subordination provisions of the Indenture) any Senior Subordinated Note when
required pursuant to the Indenture, including in connection with any Offer to
Purchase as described under "-Certain Covenants-Change of Control" and
"-Limitation on Certain Asset Sales;" (d) failure to comply with the provisions
described under "-Limitation on Merger, Consolidation and Sale of Assets;" (e)
failure to perform any other covenant or agreement of the Company or the
Subsidiary Guarantors under the Indenture, the Senior Subordinated Notes or the
Subsidiary Guarantees continued for 30 days after written notice to the Company
by the Trustee or Holders of at least 25% in aggregate principal amount of
Senior Subordinated Notes then outstanding; (f) default under the terms of any
instrument evidencing or securing Indebtedness for money borrowed by the Company
or any Restricted Subsidiary having an outstanding principal amount of $5.0
million individually or in the aggregate which default results in the
acceleration of the payment
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of such Indebtedness or constitutes the failure to pay such Indebtedness when
due at final maturity and such non-payment shall have continued for 30 days; (g)
the rendering of a final judgment or judgments (not subject to appeal) against
the Company or any Restricted Subsidiary in an amount in excess of $5.0 million
which remains undischarged or unstayed for a period of 60 days after the later
of (A) entry of such final judgment or decree and (B) the date on which the
right to appeal has expired; (h) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any Restricted Subsidiary and (i) a
Subsidiary Guarantee of a significant Subsidiary of the Company ceases to be in
full force and effect (other than in accordance with the terms of such
Subsidiary Guarantee) or a Subsidiary Guarantor denies or disaffirms its
obligation under its Subsidiary Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Senior Subordinated Notes
may declare the Accreted Value of and accrued but unpaid interest, if any, on
all the Senior Subordinated Notes to be due and payable (collectively, the
"Default Amount"). Upon such a declaration, the Default Amount shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the Default Amount on all the Senior Subordinated Notes will ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any holders of the Senior Subordinated Notes.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Senior Subordinated Notes may rescind any such acceleration with
respect to the Senior Subordinated Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Senior
Subordinated Notes unless such holders have offered to the Trustee reasonable
indemnity or security against any loss, liability or expense. Except to enforce
the right to receive payment of principal, premium (if any) or interest when
due, no holder of a Senior Subordinated Note may pursue any remedy with respect
to the Indenture or the Senior Subordinated Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Senior
Subordinated Notes have requested the Trustee to pursue the remedy, (iii) such
holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such request
within 60 days after the receipt thereof and the offer of security or indemnity
and (v) the holders of a majority in principal amount of the outstanding Senior
Subordinated Notes have not given the Trustee a direction inconsistent with such
request within such 60-day period. Subject to certain restrictions, the holders
of a majority in principal amount of the outstanding Senior Subordinated Notes
are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder of a Senior
Subordinated Note or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Senior
Subordinated Notes notice of the Default within 90 days after it occurs. Except
in the case of a Default in the payment of principal or interest on any Senior
Subordinated Note, the Trustee may withhold notice if and so long as a committee
of its trust officers determines that withholding notice is not opposed to the
interest of the holders of the Senior Subordinated Notes. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. The Company also is required
to deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any event which would constitute certain Defaults, their status and
what action the Company is taking or proposes to take in respect thereof.
GOVERNING LAW
The Indenture, the Senior Subordinated Notes and the Subsidiary Guarantees
are governed by the laws of the State of New York.
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DEFEASANCE
The Company at any time may terminate all its obligations under the Senior
Subordinated Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Senior Subordinated Notes, to replace
mutilated, destroyed, lost or stolen Senior Subordinated Notes and to maintain a
registrar and paying agent in respect of the Senior Subordinated Notes. The
Company at any time may terminate its obligations under the covenants described
under "-Certain Covenants", the operation of the cross acceleration provision,
the bankruptcy provisions with respect to Restricted Subsidiaries, the judgment
default provision and the Subsidiary Guarantee provisions described under Events
of Default and the limitations contained in clause (a) (iv) and (c) under
"Limitation on Merger, Consolidation and Sale of Assets" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Senior Subordinated Notes may not be
accelerated because of an Event of Default with respect thereto. If the Company
exercises its covenant defeasance option, payment of the Senior Subordinated
Notes may not be accelerated because of an Event of Default specified in clause
(c), (f), (g), (h) (with respect only to Restricted Subsidiaries) or (i) under
"Events of Default" above or because of the failure of the Company to comply
with clause (a) (iv) or (c) under "Limitation on Merger, Consolidation and Sale
of Assets" above. If the Company exercises its legal defeasance option or its
covenant defeasance option, each Subsidiary Guarantor will be released from all
of its obligations with respect to its Subsidiary Guaranty and the Security
Agreements.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Senior
Subordinated Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Senior Subordinated Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income tax
on the same amounts and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred (and, in the case
of legal defeasance only, such Opinion of Counsel must be based on a ruling of
the Internal Revenue Service or other change in applicable Federal income tax
law).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the Senior Subordinated Notes then outstanding; provided,
however, that no such modification or amendment may, without the consent of the
holder of each Senior Subordinated Note then outstanding affected thereby, (a)
change the Stated Maturity of the principal of, or any installment of interest
on, any Senior Subordinated Note, (b) reduce the principal amount of (or the
premium), or interest on, any Senior Subordinated Note, (c) change the place or
currency of payment of principal of (or premium), or interest on, any Senior
Subordinated Note, (d) impair the right to institute suit for the enforcement of
any payment on or with respect to any Senior Subordinated Note, (e) reduce the
above-stated percentage of Senior Subordinated Notes then outstanding necessary
to modify or amend the Indenture, (f) reduce the percentage of aggregate
principal amount of Senior Subordinated Notes then outstanding necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults, (g) modify any provisions of the Indenture relating to the
modification and amendment of the Indenture or the waiver of past defaults or
covenants, except as otherwise specified, (h) modify any of the provisions of
the Indenture relating to the subordination of the Senior Subordinated Notes or
the Subsidiary Guarantees in a manner materially adverse to the holders, (i)
modify any provisions of the Indenture relating to the guarantee by the Company
or any Subsidiary Guarantor of the Indebtedness of any Unrestricted Subsidiaries
or (j) following the mailing of any Offer to Purchase, modify any Offer to
Purchase for the
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Senior Subordinated Notes required under covenants described under "Certain
Covenants-Limitation on Certain Asset Sales" and "-Change of Control" in a
manner materially adverse to the holders thereof.
The holders of a majority in aggregate principal amount of the outstanding
Senior Subordinated Notes, on behalf of all holders of Senior Subordinated
Notes, may waive compliance by the Company with certain restrictive provisions
of the Indenture. Subject to certain rights of the Trustee, as provided in the
Indenture, the holders of a majority in aggregate principal amount of the Senior
Subordinated Notes then outstanding, on behalf of all holders of Senior
Subordinated Notes, may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest, a default arising from
failure to purchase any Senior Subordinated Note tendered pursuant to an Offer
to Purchase or a default in respect of a provision that cannot be amended
without the consent of each Noteholder affected.
THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with the Company or any Affiliate; provided, that if it acquires any conflicting
interest (as defined in the Indenture or in the Trust Indenture Act), it must
eliminate such conflict or resign.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were originally sold by the Company on May 19, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Notes to qualified institutional buyers in reliance on
Rule 144A under the Securities Act and to a limited number of institutional
accredited investors that agreed to comply with certain transfer restrictions
and other conditions. As a condition to the Purchase Agreement, the Company
entered into the Registration Rights Agreement with the Initial Purchasers (the
"Registration Rights Agreement") pursuant to which the Company has agreed, for
the benefit of the holders of the Notes, at the Company's cost, to use its best
efforts to (i) file the Exchange Offer Registration Statement within 45 days
after the date of the original issue of the Notes with the Commission with
respect to the Exchange Offer for the Exchange Notes, and (ii) cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the date of original issuance of the Notes.
Upon the Exchange Offer Registration Statement being declared effective, the
Company will offer the Exchange Notes in exchange for surrender of the Notes.
The Company will keep the Exchange Offer open for not less than 30 calendar days
(or longer if required by applicable law) after the date on which notice of the
Exchange Offer is mailed to the holders of the Notes. For each Note surrendered
to the Company pursuant to the Exchange Offer, the holder of such Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Note. Interest on each Exchange Note will accrue from the date of
its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes would in general
be freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Notes in the Exchange Offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the Notes, unless such sale or transfer is made pursuant to
an exemption from such requirements.
Each holder of the Notes (other than certain specified holders) who wishes
to exchange the Notes for Exchange Notes in the Exchange Offer will be required
to represent in the Letter of Transmittal that (i) it is not an affiliate of the
Company, (ii) the Exchange Notes to be received by it were acquired in the
ordinary course of its business and (iii) at the time of commencement of the
Exchange Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
In addition, each Participating Broker-Dealer that receives Exchange Notes for
its own account in exchange for Notes, where such Notes were acquired by such
Participating BrokerDealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
The Commission has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to the Exchange
Notes (other than a resale of an unsold allotment from the original sale of the
Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, the Company is required to
allow Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use the prospectus contained in the Exchange
Offer Registration Statement in connection with the resale of such Exchange
Notes.
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
180 days after the original issue date of the Notes, or if any holder of the
Notes (other than an "affiliate" of the Company or the Initial Purchaser) is not
eligible to participate in the Exchange Offer, or upon the request of the
Initial Purchaser under certain circumstances, the Company will, at its cost,
(a) as promptly as practicable, file the Shelf Registration Statement covering
resales of the Notes, (b) use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act and (c) use its best
efforts to keep effective the Shelf Registration
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Statement until the earlier of three years after its effective date and such
time as all of the applicable Notes have been sold thereunder. The Company will,
in the event of the filing of the Shelf Registration Statement, provide to each
applicable holder of the Notes copies of the prospectus which is a part of the
Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes. A holder of Notes that
sells such Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Notes will be required to deliver information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the Shelf
Registration Statement and to benefit from the provisions set forth in the
following paragraph.
If (i) by July 3, 1997, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed with the SEC; (ii) by
November 17, 1997, neither the Exchange Offer is consummated nor the Shelf
Registration Statement is declared effective; or (iii) after either the Exchange
Offer Registration Statement or the Shelf Registration Statement is declared
effective, such Registration Statement thereafter ceases to be effective or
usable (subject to certain exceptions) in connection with resales of Notes or
Exchange Notes in accordance with and during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (iii), a "Registration Default"), additional cash interest will accrue
on the Notes and the Exchange Notes, in each case at the rate of 0.50% per annum
from and including the date on which any such Registration Default shall occur
to but excluding the date on which all Registration Defaults have been cured.
Such interest is payable in addition to any other interest payable from time to
time with respect to the Notes and the Exchange Notes.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Notes who
were eligible to participate in the Exchange Offer but who did not tender their
Notes will not have any further registration rights and such Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for such Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Notes accepted
in the Exchange Offer. Holders may tender some or all of their Notes pursuant to
the Exchange Offer. However, Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that (i) the Exchange Notes bear a Series B designation and
a different CUSIP Number from the Notes, (ii) the Exchange Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for an increase in the interest rate on the Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The Exchange Notes
will evidence the same debt as the Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $85,478,000 aggregate principal amount
of Notes were outstanding. The Company has fixed the close of business on
, 1997 as the record date for the
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Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially.
Holders of Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the Exchange Notes from the Company.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Notes pursuant to
the Exchange Offer. The Company will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "-Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "-Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the Exchange Notes. Such
interest will be paid with the first interest payment on the Exchange Notes on
November 15, 1997. Interest on the Notes accepted for exchange will cease to
accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each May 15 and
November 15, commencing on November 15, 1997.
PROCEDURES FOR TENDERING
For a holder of Notes to tender Notes validly pursuant to the Exchange
Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer), an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents, must be received by the Exchange Agent at the
address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition,
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prior to 5:00 p.m., New York City time, on the Expiration Date, either (a)
certificates for tendered Notes must be received by the Exchange Agent at such
address or (b) such Notes must be transferred pursuant to the procedures for
book-entry transfer described below (and a confirmation of such tender received
by the Exchange Agent, including an Agent's Message if the tendering holder has
not delivered a Letter of Transmittal).
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgment from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant. In the case of an Agent's Message relating
to guaranteed delivery, the term means a message transmitted by DTC and received
by the Exchange Agent, which states that DTC has received an express
acknowledgment from the participant in DTC tendering Notes that such participant
has received and agrees to be bound by the Notice of Guaranteed Delivery.
By tendering Notes pursuant to the procedures set forth above, each holder
will make to the Company the representations set forth above in the third
paragraph under the heading "- Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE
HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. See "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Notes listed therein, such Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
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The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Notes at the book-entry transfer facility, The Depository Trust Company (the
"Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Notes by causing such Book-Entry Transfer Facility to
transfer such Notes into the Exchange Agent's account with respect to the Notes
in accordance with the Book-Entry Transfer Facility's procedures for such
transfer. Although delivery of the Notes may be effected through book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility,
an appropriate Letter of Transmittal properly completed and duly executed with
any required signature guarantee, or (in the case of a book-entry transfer) an
Agent's Message in lieu of the Letter of Transmittal, and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Notes to the Exchange Agent in accordance with DTC's
ATOP procedures for transfer. DTC will then send an Agent's Message to the
Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right in its sole discretion to waive any defects, irregularities
or conditions of tender as to particular Notes. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Notes must
be cured within such time as the Company shall determine. Although the Company
intends, to notify holders of defects or irregularities with respect to tenders
of Notes, neither the Company, the Exchange Agent nor any other person shall
incur any liability for failure to give such notification. Tenders of Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Notes and the principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility),
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
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(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal are
received by the Exchange Agent upon five New York Stock Exchange trading days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Notes to be withdrawn (the "Depositor"),
(ii) identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Notes register the transfer of such Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Notes are to
be registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Notes so withdrawn are validly retendered. Any
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Notes may be retendered by following one of the
procedures described above under "Procedures for Tendering" at any time prior to
the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Notes for, any Exchange Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Company, might materially impair the ability of the Company to proceed
with the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Notes and return all
tendered Notes to the tendering holders, (ii) extend the Exchange Offer and
retain all Notes tendered prior to the expiration of the Exchange Offer,
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subject, however, to the rights of holders to withdraw such Notes (see
"-Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Delivery to an address other than as set forth above will not constitute a
valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, which is face value, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Company), (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
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"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Notes, where such Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives an Exchange Note
for its own account in exchange for Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
The Company will either (i) amend and restate the Existing Credit Facility
pursuant to a commitment letter with the Bank that expires on July 31, 1997, or
(ii) terminate the Existing Credit Facility. The Company is currently exploring
alternative financing sources from other senior lenders that may be willing to
provide the Company with a revolving credit facility on terms more favorable to
the Company.
If the Company enters into the New Credit Facility, the New Credit Facility
would provide a revolving credit facility in a combined amount of $7.5 million
consisting of a $5.0 million tranche (the "Tranche A Facility") which would be
available until a maturity date three years from the closing under the New
Credit Facility and a $2.5 million tranche (the "Tranche B Facility") which
would be available at such time the Tranche A Facility has been fully funded and
the Company is making an escrow deposit for an acquisition to be made pursuant
to an acquisition agreement previously approved by the Bank. The proceeds of the
Tranche A Facility and, once funded, the Tranche B Facility may be borrowed,
prepaid and reborrowed and letters of credit may be issued thereunder, subject
to a limit of $1.0 million with respect to the Tranche A Facility and $2.5
million with respect to the Tranche B Facility, provided that borrowings under
the Tranche B Facility must be repaid at such time as the related acquisition is
consummated. The New Credit Facility would terminate on the third anniversary of
its closing, at which time any outstanding principal balance together with all
accrued and unpaid interest thereon would become due and payable. All amounts
borrowed under the New Credit Facility would be guaranteed by each of the
Company's direct and indirect Restricted Subsidiaries.
The New Credit Facility would be secured by a first priority perfected
security interest in: (i) all of the Common Stock of the Company and its direct
and indirect Restricted Subsidiaries, including all warrants or options and
other similar securities to purchase such securities and (ii) substantially all
of the assets of the Company and its direct and indirect Restricted Subsidiaries
(except for certain unrestricted subsidiaries) including, without limitation,
any and all FCC licenses to the maximum extent permitted by law.
Generally, the Company would have the option to select the interest rate
and interest payment dates on borrowings under the New Credit Facility as either
(i) 1.375% plus the greater of (a) the Federal Funds Rate (to be defined in the
new credit agreement governing the New Credit Facility) plus 0.5%, and (b) the
prime rate of the Bank, with interest payable on the last day of each calendar
quarter, or (ii) subject to legality and availability, the Eurodollar Rate (to
be defined in the credit agreement) during interest periods of 1, 2, 3 or 6
months, with interest payable on the last day of each such interest period and
at the end of each 3-month period during each such interest period. Following
the occurrence of and during the continuation of an event of default (to be
defined in the credit agreement), interest will accrue at the then applicable
rates, plus 2% to the end of any then existing interest period, and thereafter
at the prime rate of the Bank plus 1.375% plus 2%. The Company will pay the Bank
a facility fee equal to approximately $75,000 at the closing of the New Credit
Facility and $9,375 will be payable on the date of the initial extension of
credit under the Tranche B Facility. Additionally, commencing at the closing,
the Company would pay a commitment fee of (i) 1/2% per annum of the unused
portion of the Tranche A Facility and (ii) 1/4% per annum of the total amount of
the Tranche B Facility until the date borrowings under the Tranche B Facility
are available, then 1/2% per annum of the unused portion of the Tranche B
Facility. In addition, the Company would pay the Bank a letter of credit fee
equal to the greater of $500 and 1% of the face amount of each letter of credit.
The outstanding principal balance of the New Credit Facility would
automatically be reduced in an amount equal to 100% of the net proceeds received
by the Borrower or any of its Restricted Subsidiaries from the sale of (i)
assets the net proceeds of which exceed $50,000 singularly or in the aggregate
in any fiscal year and which are not reinvested in broadcast assets within 270
days of such sale, provided that whenever the aggregate net proceeds realized
since the Issue Date equals or exceeds $4,750,000, then all net proceeds from
such asset sales thereafter which are not reinvested as aforesaid, shall be used
to prepay advances and to permanently reduce the applicable Commitment (as
defined in the New Credit Facility), (ii) the public or private issuance of
indebtedness (other than indebtedness permitted
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under the New Credit Facility) after closing, or (iii) the public or private
issuance of equity securities after closing except to the extent that such
proceeds are used to make permitted investments in Unrestricted Subsidiaries.
Notwithstanding the foregoing, if an event of default under the New Credit
Facility exists, all such net proceeds described above will also reduce the
applicable Commitment.
The New Credit Facility would restrict the incurrence of indebtedness in
excess of that permitted by the Senior Subordinated Notes; certain liens; loans,
investments and certain transactions with affiliates of the Company; certain
restricted payments; dividends, distributions or stock repurchases; redemption
of any Senior Preferred Stock; amendments to certain agreements between
stockholders; the payment of management fees; mergers and acquisitions; sales of
assets; changes in the business of the Company; and changes of control of the
Company. Notwithstanding anything to the contrary, the New Credit Facility would
not restrict the payment of interest payable on the Senior Subordinated Notes.
All of the terms described herein with respect to the New Credit Facility
are based on draft documents existing as of the date hereof, and the commitment
letter with the Bank. If the Company enters into the New Credit Facility,
certain of such terms may change and there can be no assurance that such would
not be material or adverse to the Company.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of (i) 2,000 authorized
shares of Common Stock, $.01 par value per share (the "Common Stock"), which
consist of (a) 1,000 shares of Class A Common Stock (the "Class A Common
Stock"), of which 138.45 shares are issued and outstanding, and (b) 1,000 shares
of Class B Common Stock (the "Class B Common Stock"), of which no shares are
issued and outstanding, and (ii) 250,000 authorized shares of Senior Preferred
Stock, par value $.01 per share, which consist of (a) 100,000 shares of Series A
15% Cumulative Redeemable Preferred Stock (the "Series A Senior Preferred
Stock"), of which 84,843.03 shares are issued and outstanding, and (b) 150,000
shares of Series B 15% Cumulative Redeemable Preferred Stock (the "Series B
Senior Preferred Stock"), of which 124,467.10 shares are issued and outstanding.
There is no established trading market for the Common Stock or the Senior
Preferred Stock.
COMMON STOCK
Dividends. Holders of shares of Common Stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors out of funds
legally available for such purpose. The payment of dividends is currently
restricted by the Indenture governing the Senior Subordinated Notes and the
Preferred Stockholders' Agreement (as defined) and will be restricted by the
New Credit Facility, if it is entered into by the Company. See "Description of
Exchange Notes-Certain Covenants-
Limitation on Restricted Payments" and "Description of Certain Indebtedness-New
Credit Facility."
Voting Rights. Holders of shares of Class A Common Stock vote as a single
class on all matters submitted to a vote of the stockholders except as otherwise
required by law. Except to the extent required by applicable law, holders of
shares of Class B Common Stock have no right to vote on any matter submitted to
a vote of the stockholders. Under Delaware law, the affirmative vote of the
holders of a majority of the outstanding shares of any class of the Common Stock
voting as a separate class is required to approve, among other things, a change
in the designations, preferences and limitations of the shares of such class of
Common Stock. Certain extraordinary transactions (such as a merger or a sale of
substantially all of the assets of the Company) require the affirmative vote of
at least two-thirds of the outstanding shares of Class A Common Stock.
Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
available for distribution after payment in full of all obligations to creditors
of the Company and to the holders of Senior Preferred Stock.
Other Provisions. The holders of Common Stock are not entitled to
preemptive or subscription rights under the Company's Amended and Restated
Certificate of Incorporation. The shares of Common Stock presently outstanding
are validly issued, fully paid and nonassessable.
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Conversion. Holders of shares of either Class A Common Stock or Class B
Common Stock have the right at any time to convert all or a portion of the
shares of the class of Common Stock so held into the same number of shares of
the other class of Common Stock.
Ownership Restrictions. The Amended and Restated Certificate of
Incorporation of the Company restricts the ownership, voting and transfer of the
Company's capital stock in accordance with the Communications Act and the rules
of the FCC, to prohibit ownership of the Company's outstanding capital stock (or
the voting rights it represents) by or for the account of aliens or corporations
otherwise subject to domination or control by aliens.
SENIOR PREFERRED STOCK
Dividends. Dividends on the outstanding shares of Senior Preferred Stock
will accumulate at the rate of 15% per annum and will compound annually. The
Company may, at its option, pay dividends either in cash or by accumulating such
dividends. In the event that the Company breaches one of the covenants contained
in the Preferred Stockholders' Agreement (and fails to cure such breach during
the applicable cure period), the holders of a majority of the outstanding shares
of Senior Preferred Stock may elect, by notifying the Company in writing, to
have the accrual rate for dividends on the Senior Preferred Stock increased to
18% per annum until such breach has been waived or cured; provided, however, in
the event the Company fails to meet certain minimum cash flow, revenue or EBITDA
targets relating exclusively to the operations of WPHI-FM, the dividend rate on
the outstanding shares of Senior Preferred Stock shall be retroactively
increased to 17% per annum from the date of issuance until such time as such
default is cured or waived by the holders of a majority of the outstanding
shares of Senior Preferred Stock. The payment of dividends are restricted by the
Indenture governing the Senior Subordinated Notes and will be restricted by the
New Credit Facility, if it is entered into by the Company. In addition, the
payment of dividends may be restricted by any other agreement governing
indebtedness for borrowed money permitted by the Preferred Stockholders'
Agreement together with the Indenture and the New Credit Facility,, the "Debt
Agreements"). See "Description of Exchange Notes-Certain Covenants-Limitation on
Restricted Payments."
Voting Rights. The Senior Preferred Stock will be non-voting, except with
respect to certain amendments to the Company's Amended and Restated Certificate
of Incorporation and as otherwise required by law. Under Delaware law, the
affirmative vote of the holders of a majority of the outstanding shares of the
Senior Preferred Stock voting as a separate class is required to approve, among
other things, a change in the designations, preferences and limitations of the
shares of Senior Preferred Stock.
Liquidation Rights. Upon the liquidation, winding up or dissolution of the
Company, holders of the Senior Preferred Stock shall be entitled to receive $100
per share, plus accumulated but unpaid dividends thereon, if any, before any
payments shall be made to holders of the Common Stock. The Senior Preferred
Stock shall rank senior to all other outstanding classes of equity securities.
The Company shall not be permitted to authorize any new class of equity security
without the approval of at least a majority of the shares of the Senior
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class.
Redemption Rights. The shares of Senior Preferred Stock shall be redeemed
on May 29, 2005 (the "Mandatory Redemption Date"). The redemption of Senior
Preferred Stock will be restricted by applicable law and by the terms of the
Debt Agreements. See "Description of Exchange Notes-Certain
Covenants-Limitation on Restricted Payments."
Subject to applicable law and the terms of the Debt Agreements, the
Company, at its sole option, may redeem then outstanding shares of Senior
Preferred Stock at a redemption price equal to 100% of the Senior Preferred
Stock's liquidation value (plus any accumulated and accrued but unpaid dividends
thereon) as follows:
- - The Company may redeem all or a portion of the outstanding shares of Series A
Senior Preferred Stock; provided, however, that any holder of Series B Senior
Preferred Stock shall have the right to have its shares redeemed as well
(such redemptions will take place on a pro rata basis so that the Company
will not be required to (although it may elect to) redeem more shares of
Senior Preferred Stock than it originally called for redemption from the
holders of Series A Senior Preferred Stock).
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- - So long as the Company has paid in full all accumulated and accrued but
unpaid dividends on the outstanding shares of Senior Preferred Stock, the
Company may redeem shares of Senior Preferred Stock having an aggregate
liquidation value of $2.0 million, which redemption shall be on a pro rata
basis among all holders of shares of Senior Preferred Stock.
- - At any time and from time to time on or after June 6, 1999, the Company may
redeem all or a portion of the outstanding shares of Senior Preferred Stock
(such redemptions to take place on a pro rata basis).
Subject to applicable law and the terms of the Debt Agreements, the holders
of Senior Preferred Stock may require the Company to redeem the outstanding
shares of Senior Preferred Stock at a redemption price equal to 100% of the
Senior Preferred Stock's liquidation value (plus any accumulated and accrued but
unpaid dividends thereon) as follows:
- - The holders of shares of Series B Senior Preferred Stock shall have the right
to require the Company to redeem their shares of Series B Preferred in the
event that the Company exercises its option to redeem shares of Series A
Senior Preferred Stock (such redemptions will take place on a pro rata basis
so that the Company will not be required to (although it may elect to) redeem
more shares of Senior Preferred Stock than it originally called for
redemption from the holders of Series A Senior Preferred Stock).
- - Upon the occurrence of the Company's initial public offering of Common Stock
(other than an offering made in connection with a business acquisition or
combination or an employee benefit plan), the holders of a majority of the
outstanding shares of Senior Preferred Stock shall have the right to require
the Company to redeem all or a portion of the outstanding shares of Senior
Preferred Stock including any and all accumulated and accrued but unpaid
dividends thereon but only to the extent of the net proceeds to the Company
from the public sale of such Common Stock.
- - Once all of the Company's outstanding indebtedness for money borrowed has
been finally and indefeasibly paid in full in cash (including, without
limitation, the Senior Indebtedness (as defined in the Standstill
Agreement)), and any commitment to fund related thereto shall have been
terminated, if any covenant under the Preferred Stockholders' Agreement
discussed below is then in breach and such breach has not been cured during
the applicable cure period, then, following the expiration of such cure
period and continuing until such time as the breach is cured, the holders of
a majority of the outstanding shares of Senior Preferred Stock shall have the
right to require the Company to redeem all or a portion of the outstanding
shares of Senior Preferred Stock (such redemptions to take place on a pro
rata basis among all holders of shares of Senior Preferred Stock).
Preferred Stockholders' Agreement. The Company is subject to certain
restrictions, and the holders of Senior Preferred Stock are entitled to certain
rights, under the terms of a Preferred Stockholders' Agreement dated as of May
14, 1997 entered into by the Company, Radio One Licenses, Inc., the holders of
the Senior Preferred Stock, Alfred C. Liggins, III, Catherine L. Hughes and
Jerry A. Moore (the "Preferred Stockholders' Agreement"). Under the Preferred
Stockholders' Agreement, for so long as the Senior Preferred Stock is
outstanding, the Company is obligated to satisfy certain financial tests in
respect of broadcast cash flow for the Company as a whole, corporate overhead
expense and capital expenditures. In addition, for so long as any Senior
Preferred Stock or Warrants are outstanding, the Company is required to comply
with certain financial statement delivery requirements as well as covenants that
restrict the Company's ability to incur indebtedness for borrowed money or
liens, sell a material portion of its assets, merge with or acquire additional
businesses, make loans to or investments in others, enter into sale-leaseback
transactions, amend its certificate of incorporation or bylaws, change its
accounting policies, engage in affiliated transactions, or declare or pay
dividends or sell or issue capital stock. Generally, compliance with the terms
of the Preferred Stockholders' Agreement may be waived by the holders of a
majority of the outstanding shares of Senior Preferred Stock. However, any
amendments to the covenants regarding the prohibition on mergers and
acquisitions of additional businesses or the distribution, redemption or
issuance of capital stock will require the consent of the holders of at least
eighty percent of the outstanding shares of Senior Preferred Stock.
Additionally, the Company shall be obligated to indemnify the holders of the
Senior Preferred Stock against certain tax
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obligations which may adversely affect such holders as a result of the Existing
Notes Exchange. The Company's failure to comply with any covenants or financial
tests set forth in the Preferred Stockholders' Agreement shall give rise to the
rights set forth below.
In addition, the Preferred Stockholders' Agreement provides that at the
election of the holders of a majority of the outstanding shares of Senior
Preferred Stock the Company will, subject to the terms of the Standstill
Agreement (as defined), within four months of the occurrence of any of the
following events, enter into a signed agreement for the sale of the Company or
the assets thereof or a signed financing commitment letter with an institutional
lender, providing for sufficient funds to repay all of the outstanding
indebtedness under the Debt Agreements, the liquidation value of the outstanding
shares of the Senior Preferred Stock (including all accrued and unpaid dividends
thereon) and the value of the Warrants, and close such transaction upon FCC
approval but in any event within four months of such signed agreement: (1) the
Company fails to redeem any Senior Preferred Stock and such failure continues
for five days after such redemption is required; (2) the Company, without the
prior written consent of a majority of the outstanding shares of Senior
Preferred Stock, breaches and does not cure within the applicable periods, (x)
the corporate overhead expense covenant or the distributions, redemptions or
issuances of capital stock covenant by more than $250,000, (y) the indebtedness
covenant, the lien covenant, the sale of assets covenant or the guaranties
covenant, in each case by more than a specified amount, or (z) the no merger or
acquisition of additional businesses covenant in any material manner; or (3) the
Company fails to meet certain minimum trailing twelve month broadcast cash flow
hurdles for two consecutive quarter end dates. In connection with the foregoing,
the holders of a majority of the outstanding Senior Preferred Stock have the
right to expand the Company's board of directors to nine members, thereby giving
them the right to control the board, subject to FCC approval. However, the right
to cause a sale or refinancing of the Company pursuant to the foregoing is
subject to the Standstill Agreement which was entered into with the Trustee, on
behalf of the holders of the Senior Subordinated Notes, and the Bank as of May
19, 1997 (the "Standstill Agreement"). Under the Standstill Agreement, if either
the Trustee or, if the Company enters into the New Credit Facility, the Bank, is
actively pursuing its rights under the Indenture or the New Credit Facility, as
the case may be, the holders of Senior Preferred Stock may not cause the sale or
refinancing of the Company.
Forced Sale Rights. Holders of a majority of the outstanding shares of
Senior Preferred Stock have the option to cause the sale or refinancing of the
entire business of, or all of the equity interests in, the Company upon the
first to occur of the following: (1) a breach of the Company's put/call
obligations under the Warrantholders' Agreement which has not been cured within
30 days after written notice thereof; (2) a breach by the Company of the forced
sale or refinancing covenant contained in the Preferred Stockholders' Agreement
(see "Description of Capital Stock-General"); or (3) a breach of the Company's
demand registration obligations under the Warrantholders' Agreement. In
connection with the foregoing, the holders of a majority of the outstanding
Senior Preferred Stock have the right to expand the Company's board of directors
to nine members, thereby giving them the right to control the board, subject to
FCC approval. Prior to or upon the consummation of the sale or refinancing, the
Company must repay in full all outstanding indebtedness for money borrowed
(including without limitation the Senior Indebtedness). However, the right to
cause a sale or refinancing of the Company pursuant to the foregoing is subject
to the Standstill Agreement, which provides that if any or all of the holders of
Senior Indebtedness are actively pursuing their rights under the Debt
Agreements, the holders of Senior Preferred Stock may not cause the sale or
refinancing of the Company.
WARRANTS TO PURCHASE COMMON STOCK
General. The Company has outstanding warrants (the "Warrants") to purchase
an aggregate of 147.04 shares (or approximately 51.5%) of the Company's
outstanding Common Stock on a fully diluted basis, subject to adjustment
pursuant to the provisions of the amended and restated warrant certificates
dated as of May 19, 1997, issued by the Company (the "Warrant Certificates"),
subject to FCC approval. Each registered holder of Warrants is referred to
herein as a "Warrant Holder." The Warrants were originally issued pursuant to
the Securities Purchase Agreement, dated as of June 6, 1995, among Radio One,
the investors named therein and the management stockholders named therein (the
"Securities Purchase Agreement") and were amended and restated in connection
with the Existing Notes Ex-
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change. The Warrants are subject to the Warrantholders' Agreement, dated as of
June 6, 1995, among Radio One, the stockholders named therein and the investors
named therein, as amended by the First Amendment to the Warrantholders'
Agreement dated as of May 19, 1997 (the "Warrantholders' Agreement") and are
entitled to certain benefits under the Preferred Stockholders' Agreement. A copy
of each of the Warrant Certificates, the Preferred Stockholders' Agreement and
the Warrantholders' Agreement (collectively, the "Warrant Documents") can be
obtained, upon request, from the Company. The Securities Purchase Agreement was
substantially terminated upon the consummation of the Existing Notes Exchange.
The following is a summary of certain provisions of the Warrant Documents.
Terms of Exercise. Each Warrant entitles the Warrant Holder, subject to and
upon compliance with the provisions of the Warrant Documents, to purchase one
share of the Company's Common Stock, or such other number of shares of Common
Stock as may be determined in accordance with the adjustment terms of the
Warrant Certificate, at a price per share of $100, subject to adjustment in
accordance with the terms of the Warrant Certificate (the "Warrant Price").
Each Warrant is exercisable (i) by Warrant Holders holding a majority of
the outstanding shares of Senior Preferred Stock or (ii) at any time after the
redemption of all of the outstanding shares of Senior Preferred Stock, by the
Warrant Holder of such Warrant, except that if a Warrant Holder is a Specialized
Small Business Investment Company (as defined in the Warrant Certificate), the
Warrant held by such Warrant Holder may not be exercised after the sixth
anniversary of the redemption in full of all Senior Preferred Stock held by such
Warrant Holder.
Each Warrant is exercisable upon the completion of certain procedures
specified in the Warrant Certificate including surrender to the Company of the
underlying Warrant Certificate together with the payment to the Company of (a)
cash in an amount equal to the then applicable Warrant Price or (b) that number
of shares of Common Stock of the Company having a fair market value (as defined
in the Warrant Certificate) equal to the then applicable Warrant Price. In the
alternative, the Warrant Holder may exercise each of its Warrants, on a net
basis, such that, without the exchange of any funds, the Warrant Holder will
receive that number of shares of Common Stock issuable upon exercise of such
Warrant less that number of shares of Common Stock having an aggregate fair
market value (as defined in the Warrant Certificate) at the time of exercise
equal to the applicable Warrant Price.
Put and Call Rights. Following the consummation of the Existing Notes
Exchange, the holders of Senior Preferred Stock representing a majority of the
outstanding shares of Senior Preferred Stock may, subject to the terms of the
Standstill Agreement, elect to require the Company to purchase all outstanding
Warrants (and other equity securities identified in the Warrantholders'
Agreement) held by all of the holders of the Senior Preferred Stock and all of
the holders of the Warrants (collectively, the "Put/Call Securities") at any
time on or after: (i) the redemption in full of the Senior Preferred Stock, (ii)
the merger or consolidation of the Company (subject to certain exceptions
contained in the Warrantholders' Agreement and the Preferred Stockholders'
Agreement), or (iii) the sale of all or substantially all of the capital stock
or assets of the Company or any subsidiary (subject to certain exceptions
contained in the Warrantholders' Agreement and the Preferred Stockholders'
Agreement); provided, however, that the Company's obligation to repurchase such
Put/Call Securities shall arise only to the extent permitted by the terms of the
Debt Agreements and the Standstill Agreement.
Subject to the terms of the Standstill Agreement, each holder of the
outstanding shares of Senior Preferred Stock may also require the Company to
purchase all outstanding Put/Call Securities held by such holder on the
Mandatory Redemption Date upon 120 days prior written notice to the Company.
At the election of the Company, the Company may repurchase all, but not
less than all, of the Put/Call Securities then outstanding at any time after the
Mandatory Redemption Date, so long as: (i) there is no outstanding request for
demand registration pursuant to the Warrantholders' Agreement, and (ii) all of
the outstanding shares of Senior Preferred Stock have been redeemed in full
(including all accrued but unpaid dividends) on or prior to the closing of such
repurchase.
The purchase price of the Put/Call Securities to be purchased by the
Company (whether at the option of the Company or at the option of one or more
holders of the Put/Call Securities) is the Net Equity Value (as defined in the
Warrantholders' Agreement) of such purchased Put/Call Securities.
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Registration Rights. Subject to certain conditions and exceptions, if at
any time or times, the Company shall determine to, or be required to, register
any shares of its Common Stock for sale under the Securities Act, the Company
shall use its best efforts to effect the registration under the Securities Act
of all of the Registrable Securities (as defined in the Warrantholders'
Agreement) that holders of such Registrable Securities request to be registered.
Generally, if on any two occasions after the earlier of (a) 180 days after the
initial public offering of the Company, and (b) June 6, 1998, holders of at
least 66-% of the outstanding shares of Senior Preferred Stock notify the
Company in writing that they intend to offer or cause to be offered for public
sale all or any portion of their Registrable Securities, the Company shall
notify all holders of Registrable Securities and either (i) elect to make a
primary offering of its Common Stock or (ii) use its best efforts to cause the
registration under the Securities Act of all Registrable Securities requested to
be registered.
Rights to Participate in Sales of Securities. Subject to certain conditions
and exceptions, the Company can not sell or issue any shares of capital stock of
the Company or any subsidiary, or any bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for capital
stock of the Company or any subsidiary, or options, warrants or rights carrying
any rights to purchase capital stock or convertible or exchangeable securities
of the Company or any subsidiary or any other equity interests in the Company or
any subsidiary, other than in connection with an initial public offering of the
Company's Common Stock, unless (i) the Company shall have received a bona fide
arms' length offer to purchase such securities from a third party and (ii) the
Company first submits a written offer to holders of the Senior Preferred Stock
and/or the Warrants identifying such third party and the terms of the offer, and
the Company offers such holders of the Senior Preferred Stock and/or the
Warrants the opportunity to purchase their proportionate share of such
securities on terms and conditions not less favorable than those that the
Company proposes to sell such securities to such third party.
No Rights in Corporate Governance. Warrant Holders are not entitled, by
virtue of being Warrant Holders, to receive dividends, vote, receive notice of
any meetings of the stockholders of the Company or otherwise have any rights of
stockholders of the Company.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law, which
specifies that a director of a company adopting such a provision will not be
personally liable for monetary damages for breach of fiduciary duty as a
director, except for the liability (i) for any breach of the director's duty of
loyalty to the company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law;
or (iv) for any transaction from which the director derived an improper personal
benefit.
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The Company's Amended and Restated Certificate of Incorporation provides
for mandatory indemnification of directors and officers and authorizes
indemnification for employees and agents in such manner, under such
circumstances and to the fullest extent permitted by the Delaware General
Corporation Law, which generally authorizes indemnification as to all expenses
incurred or imposed as a result of actions, suits or proceedings if the
indemnified parties act in good faith and in a manner they reasonably believe to
be in or not opposed to the best interests of the Company. The Company believes
that these provisions are necessary or useful to attract and retain qualified
persons as directors.
There is no pending litigation or proceeding involving a director or
officer as to which indemnification is being sought.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary view,
and no ruling from the Service has been or will be sought. Legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Company recommends that
each holder consult such holder's own tax advisor as to the particular tax
consequences of exchanging such holder's Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
Kirkland & Ellis, special counsel to the Company, has advised the Company
that in its opinion, the exchange of the Notes for Exchange Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the Exchange Notes will not be considered to differ materially
in kind or extent from the Notes. Rather, the Exchange Notes received by a
holder will be treated as a continuation of the Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to holders
exchanging Notes for Exchange Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997, all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer or the purchasers of any
such Exchange Notes. Any Participating Broker-Dealer that resells the Exchange
Notes that were received by it for its own
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account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incidental to the Exchange Offer (including the expenses of one counsel
for the Holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Securities
hereby offered will be passed upon for the Company by Kirkland & Ellis,
Washington, D.C.
EXPERTS
The audited financial statements of the Company as of December 31, 1996,
and 1995 and for each of the years in the three-year period ended December 31,
1996, included in this Prospectus and the Registration Statement, have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report thereon appearing elsewhere herein, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
The audited financial statements of the Jarad Broadcasting Company of
Pennsylvania, Inc. as of December 31, 1996, and 1995 and for each of the years
in the three-year period ended December 31, 1996, included in this Prospectus
and the Registration Statement, have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report with respect thereon
appearing elsewhere herein, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The balance sheet of WKYS-FM, Inc. as of December 31, 1994 and the
statements of operations, changes in stockholders' deficit and cash flows for
the years ended December 31, 1993 and 1994, included in this Prospectus and the
Registration Statement, have been included herein in reliance on the report of
Coopers and Lybrand LLP, independent accountants, given on the authority of that
firm as experts in accounting and auditing.
MARKET AND INDUSTRY DATA
Audience shares and audience share ranks are as reported by the Arbitron
Company ("Arbitron") in its Radio Market Report (the "Arbitron Market Report")
for the period indicated. Audience share data is expressed as the "local"
average quarter hour share for each indicated radio station, which is derived by
comparing the radio station's average quarter hour share to the total average
quarter hour share for all radio stations in a particular Metro Survey Area
("MSA") that are reported in the Arbitron Market Report. Average quarter hour
share is a percentage of the estimated number of persons who listened to a given
radio station for a minimum of five minutes within a quarter hour compared to
the total number of persons who listened to radio within such quarter hour. Data
relating to the number of hours African-Americans and non-African-Americans
spend listening to the radio are derived from the Arbitron Market Report for the
period indicated.
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MSA population, African-American population as a percentage of overall
population in a market and market ranking by MSA population are as reported by
BIA Publications, Inc. ("BIA") in its Investing in Radio 1997 (First Edition)
(the "BIA Market Report, 1997 (First Edition)"), or derived from data contained
therein.
Unless otherwise indicated herein, data relating to radio advertising
revenue by market, revenue shares and revenue ranks for radio stations in the
Washington, D.C. and Baltimore markets are as reported by Hungerford, Aldrin,
Nichols & Carter, P.C., CPAs and Consultants ("Hungerford") in their Radio
Revenue Report (December 1996) (the "Hungerford Report (Dec. 1996)"). All
revenue data included in the Hungerford Report (Dec. 1996) is based on gross
revenues and limited to a compilation of data with respect to radio stations
which report to Hungerford. Radio station WYCB-AM, which the Company intends to
acquire pursuant to the DC Acquisition, does not report to Hungerford.
Unless otherwise indicated herein, radio advertising revenue by market,
revenue shares and revenue ranks for the radio station in the Philadelphia
market are as reported by Miller, Kaplan, Arase & Co., Certified Public
Accountants ("Miller Kaplan") in their market revenue report for Philadelphia
(the "Miller Kaplan Report (Dec. 1996)"). The Miller Kaplan Report (Dec. 1996)
reports net revenues and excludes barter transactions from its reported figure.
Unless otherwise indicated herein, data regarding household income,
population growth rates and population projections are based upon data compiled
by the U.S. Department of Commerce, Bureau of the Census (the "Census Bureau").
The calculation of the percentage of the African-American population located in
the top-30 African-American markets is based upon the total 1995
African-American population in such markets as compiled from the BIA Market
Report, 1997 (First Edition) as a percentage of the total 1995 African-American
population according to the Census Bureau.
The number of viable radio stations in Baltimore is as reported by
Duncan's American Radio, Inc. ("Duncan") in its Duncan's Radio Market Guide
(1996 Edition) ("Duncan's Radio Market Guide").
Each of Arbitron, BIA, Hungerford, Miller Kaplan, the Census Bureau and
Duncan's compile their audience share, revenue share and other statistical data,
as the case may be, under procedures and methodologies which have the
limitations provided in their respective reports or guides. All such information
provided herein is subject to those limitations.
114
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
RADIO ONE, INC.
Report of Independent Public Accountants ................................................ F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996, and March 30, 1997 (unau-
dited) ................................................................................. F-3
Consolidated Statements of Operations for the years ended December 25, 1994, December
31, 1995 and 1996, and for the three months ended March 31, 1996 and March 30, 1997
(unaudited) ........................................................................... F-4
Consolidated Statements of Changes in Stockholders' Deficit for the years ended December
25, 1994, December 31, 1995 and 1996, and for the three months ended March 30, 1997
(unaudited) ........................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 25, 1994, December
31, 1995 and 1996, and for the three months ended March 31, 1996 and March 30, 1997
(unaudited) ........................................................................... F-6
Notes to Consolidated Financial Statements ............................................. F-7
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
Report of Independent Public Accountants ................................................ F-16
Balance Sheets as of December 31, 1995 and 1996, and March 30, 1997 (unaudited) ......... F-17
Statements of Operations for the years ended December 31, 1994, 1995 and 1996, and for
the three months ended March 30, 1996 and 1997 (unaudited) ............................. F-18
Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31,
1994, 1995 and 1996, and for the three months ended March 30, 1997 (unaudited) ......... F-19
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996, and for
the three months ended March 30, 1996 and 1997 (unaudited) ............................. F-20
Notes to Financial Statements ......................................................... F-21
WKYS-FM, INC.
Report of Independent Accountants ...................................................... F-25
Balance Sheet as of December 31, 1994 ................................................ F-26
Statements of Operations for the years ended December 31, 1993 and 1994 ............... F-27
Statements of Changes in Stockholders' Deficit for years ended December 31, 1993 and 1994 F-28
Statements of Cash Flows for the years ended December 31, 1993 and 1994 ............... F-29
Notes to Financial Statements ......................................................... F-30
Unaudited Statement of Operations for the five months ended May 31, 1995 ............... F-37
Unaudited Statement of Changes in Stockholders' Deficit for the five months ended May 31,
1995 ................................................................................. F-38
Unaudited Statement of Cash Flows for the five months ended May 31, 1995 ............... F-39
Notes to Unaudited Financial Statements ................................................ F-40
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Radio One, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of Radio One, Inc.
(a Delaware corporation during 1996) and subsidiary as of December 31, 1995 (as
restated-see Note 1) and 1996, and the related consolidated statements of
operations, changes in stockholders' deficit and cash flows for each of the
years in the three-year period ended December 31, 1996 (December 31, 1995, as
restated). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial position of Radio One, Inc. and
subsidiary as of December 31, 1995 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, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 13, 1997
F-2
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996 AND MARCH 30, 1997
<TABLE>
<CAPTION>
DECEMBER MARCH
----------------------------------- ----------------
1995 1996 1997
---------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 2,702,868 $ 1,708,295 $ 3,293,452
Trade accounts receivable, net of allowance for doubtful
accounts of $669,400, $765,200 and $865,500, respec-
tively .................................................. 5,763,686 6,419,468 5,469,041
Prepaid expenses and other .............................. 230,787 117,025 334,628
------------- ------------- ------------
Total current assets ................................. 8,697,341 8,244,788 9,097,121
PROPERTY AND EQUIPMENT, net .............................. 3,627,431 3,007,004 2,957,143
INTANGIBLE ASSETS, net .................................... 43,454,898 39,358,127 38,401,108
OTHER ASSETS ............................................. 113,902 1,166,861 1,026,054
------------- ------------- ------------
Total assets ....................................... $ 55,893,572 $ 51,776,780 $ 51,481,426
============= ============= ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable ....................................... $ 1,483,428 $ 388,581 $ 1,006,767
Accrued expenses ....................................... 1,218,393 1,452,444 1,837,003
Current portion of long-term debt ........................ 2,103,264 5,633,286 5,633,286
------------- ------------- ------------
Total current liabilities ........................... 4,805,085 7,474,311 8,477,056
LONG-TERM DEBT AND DEFERRED INTEREST, net
of current portion ....................................... 62,482,000 59,305,225 59,967,173
------------- ------------- ------------
Total liabilities .................................... 67,287,085 66,779,536 68,444,229
------------- ------------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock, $9,490 par value, 100 shares authorized,
no shares issued and outstanding for 1996 ............... - - -
Common stock-Class A, $.01 par value, 1,000 shares au-
thorized, 138.45 shares issued, and outstanding ......... 1 1 1
Common stock-Class B, $.01 par value, 1,000 shares au-
thorized, no shares issued and outstanding .............. - - -
Additional paid-in capital .............................. 1,205,189 1,205,189 1,205,189
Accumulated deficit .................................... (12,598,703) (16,207,946) (18,167,993)
------------- ------------- -------------
Total stockholders' deficit ........................ (11,393,513) (15,002,756) (16,962,803)
------------- ------------- -------------
Total liabilities and stockholders' deficit ......... $ 55,893,572 $ 51,776,780 $ 51,481,426
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 25, 1994,
DECEMBER 31, 1995 AND 1996, AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND MARCH 30, 1997
<TABLE>
<CAPTION>
DECEMBER MARCH
-------------------------------------------- -----------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Broadcast revenues, including barter
revenues of $562,832, $920,914, $1,121,559,
$251,392 and $242,637 respectively......... $ 17,856,242 $ 24,625,834 $ 27,026,888 $ 5,274,761 $ 6,298,351
Less: Agency commission .................. 2,314,825 3,171,059 3,325,063 604,802 765,804
------------ ------------- ------------- ------------- -------------
Net broadcast revenues .................. 15,541,417 21,454,775 23,701,825 4,669,959 5,532,547
------------ ------------- ------------- ------------- -------------
OPERATING EXPENSES:
Program and technical ..................... 2,773,187 3,642,081 4,157,554 851,069 1,196,211
Selling, general and administrative ...... 5,733,169 8,093,217 9,770,127 2,423,451 2,778,027
Corporate expenses ........................ 1,128,484 1,995,252 1,792,665 345,957 695,113
Depreciation and amortization ............ 2,026,945 3,911,788 4,261,690 1,183,260 1,079,278
------------ ------------- ------------- ------------- -------------
Total operating expenses .................. 11,661,785 17,642,338 19,982,036 4,803,737 5,748,629
------------ ------------- ------------- ------------- -------------
Operating income (loss) .................. 3,879,632 3,812,437 3,719,789 (133,778) (216,082)
INTEREST EXPENSE, including amortization
of deferred financing costs ............... 2,664,873 5,289,054 7,252,377 1,791,834 1,765,328
OTHER (INCOME) EXPENSE, NET ............... (38,375) (89,247) 76,655 - (21,363)
------------ ------------- ------------- ------------- -------------
Income (loss) before provision for income
taxes and extraordinary item ............ 1,253,134 (1,387,370) (3,609,243) (1,925,612) (1,960,047)
PROVISION FOR INCOME TAXES .................. 30,500 - - - -
------------ ------------- ------------- ------------- -------------
Income (loss) before extraordinary item ... 1,222,634 (1,387,370) (3,609,243) (1,925,612) (1,960,047)
EXTRAORDINARY ITEM:
Loss on early retirement of debt ......... - 468,233 - - -
------------ ------------- ------------- ------------- -------------
Net income (loss) ........................ $ 1,222,634 $ (1,855,603) $ (3,609,243) $ (1,925,612) $ (1,960,047)
============ ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 25, 1994, DECEMBER 31, 1995 AND
1996, AND FOR THE THREE MONTHS ENDED MARCH 30, 1997
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL TOTAL
PREFERRED STOCK STOCK PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
STOCK CLASS A CLASS B CAPITAL DEFICIT STOCK DEFICIT
----------- --------- --------- ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, as of
December 26, 1993 ......... $ 1,100 $ 940 $- $ - $ (5,234,938) $ (264,850) $ (5,497,748)
Net income ............... - - - - 1,222,634 - 1,222,634
Purchase of stock warrants - - - - (91,789) - (91,789)
-------- ------ --- ----------- ------------- ---------- --------------
BALANCE, as of
December 25, 1994 ......... 1,100 940 - - (4,104,093) (264,850) (4,366,903)
Net loss .................. - - - - (1,855,603) - (1,855,603)
Purchase of stock warrants - - - - (6,639,007) - (6,639,007)
Issuance of stock options - - - 778,000 - - 778,000
Allocation of detachable
stock warrants ......... - - - 690,000 - - 690,000
Cancellation and issuance
of stock ............... (1,100) (939) - (262,811) - 264,850 -
-------- ------ --- ----------- ------------- ---------- --------------
BALANCE, as of
December 31, 1995 ......... - 1 - 1,205,189 (12,598,703) - (11,393,513)
Net loss .................. - - - - (3,609,243) - (3,609,243)
-------- ------ --- ----------- ------------- ---------- --------------
BALANCE, as of
December 31, 1996 ......... - 1 - $1,205,189 (16,207,946) - (15,002,756)
======== ====== === =========== ============= ========== ==============
Net Loss .................. - - - - (1,960,047) - (1,960,047)
BALANCE, as of March
30, 1997 (unaudited) ...... $ - $ 1 $- $1,205,189 $ (18,167,993) $ - $ (16,962,803)
======== ====== === =========== ============= ========== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 25, 1994, DECEMBER 31, 1995 AND 1996, AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 30, 1997
<TABLE>
<CAPTION>
DECEMBER MARCH
---------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
-------------- ---------------- -------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIV-
ITIES:
Net income (loss) .............................. $ 1,222,634 $ (1,855,603) $ (3,609,243) $ (1,925,612)$ (1,960,047)
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization ............... 2,026,945 3,911,788 4,261,690 1,183,260 1,079,278
Amortization of debt financing costs and
unamortized discount ........................ - 207,885 366,189 52,339 65,592
Issuance of stock options ..................... - 778,000 - -
Loss on disposals ........................... - - 152,468 -
Deferred interest ........................... - 235,264 2,639,389 656,709 643,191
Effect of change in operating assets and
liabilities-
(Increase) decrease in trade accounts re-
ceivable ................................... (398,441) (2,064,861) (655,782) 1,455,121 950,427
Increase (decrease) in prepaid expenses
and other ................................. (55,334) (84,654) 113,762 7,920 (217,603)
Decrease (increase) in other assets ......... 36,739 (23,880) (71,026) 113,902 28
Increase (decrease) in accounts payable ...... 376,623 604,303 (817,671) 272,692 758,965
Increase in accrued expenses ............... 58,635 213,706 234,051 (206,305) 384,559
Decrease in prepaid loan financing fees ...... 35,160 - - - -
----------- ------------- ------------ ------------ -------------
Net cash flows from operating activities ... 3,302,961 1,921,948 2,613,827 1,610,026 1,704,390
----------- ------------- ------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Purchase of property and equipment ............ (636,444) (224,883) (251,469) (58,669) (119,233)
Proceeds from disposal of property and equip-
ment .......................................... 32,104 61,615 - - -
Deposits and payments for station purchases .... (639,881) (33,769,789) (1,000,000) - -
----------- ------------- ------------ ------------ -------------
Net cash flows from investing activities.... (1,244,221) (33,933,057) (1,251,469) (58,669) (119,233)
----------- ------------- ------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Repayment of debt .............................. (1,659,817) (23,049,114) (2,407,933) - -
Proceeds from new debt ........................ - 65,000,000 51,002 - -
Deferred debt financing cost .................. - (2,014,624) - - -
Purchase of stock and stock warrants ......... (91,789) (6,639,007) - - -
----------- ------------- ------------ ------------ -------------
Net cash flows from financing activities ... (1,751,606) 33,297,255 (2,356,931) - -
----------- ------------- ------------ ------------ -------------
INCREASE (DECREASE) IN CASH AND
CASH
EQUIVALENTS .................................... 307,134 1,286,146 (994,573) 1,551,357 1,585,157
CASH AND CASH EQUIVALENTS, beginning
of year ....................................... 1,109,588 1,416,722 2,702,868 2,702,868 1,708,295
----------- ------------- ------------ ------------ -------------
CASH AND CASH EQUIVALENTS, end of
year .......................................... $ 1,416,722 $ 2,702,868 $ 1,708,295 $ 4,254,225 $ 3,293,452
=========== ============= ============ ============ =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW
INFORMATION:
Cash paid for-
Interest .................................... $ 2,356,069 $ 5,103,337 $ 4,815,486 $ 1,142,197 $ 694,769
=========== ============= ============ ============ =============
Income taxes ................................. $ 15,600 $ 34,800 $ 50,000 $ - $ -
=========== ============= ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
Radio One, Inc. (a Delaware Corporation) and its subsidiary, Radio One
License LLC (a Delaware limited liability Company) (collectively referred to as
the Company) were organized to acquire, operate and maintain radio broadcasting
stations. The Company owns and operates three radio stations in Washington,
D.C.; WOL-AM, WMMJ-FM and WKYS-FM and four radio stations in Maryland; WWIN-AM,
WWIN-FM, WOLB-AM and WERQ-FM. The four Maryland radio stations were formerly
owned by Radio One of Maryland, Inc., a former wholly owned subsidiary of Radio
One, Inc. Effective January 1, 1996, in connection with Radio One, Inc.
converting to an S corporation, Radio One of Maryland, Inc. was dissolved and
its operations were merged into Radio One, Inc. In May 1996, Radio One, Inc.
formed Radio One License LLC, to hold the stations' FCC licenses. Prior to the
reorganization, Radio One, Inc. was a District of Columbia Corporation. In
connection with the Company's reorganization, all of the then existing preferred
and common stock was canceled, and newly authorized shares were issued.
An evaluation of the Company's operations should include consideration of
the "Risk Factors" described in the Registration Statement related to the
Company's contemplated debt offering, including the Company's highly leveraged
financial position, which will require substantial semi-annual interest payments
and may impair the Company's ability to obtain additional working capital
financing.
Interim Financial Statements
The consolidated financial statements for the three months ended March 31,
1996 and March 30, 1997 are unaudited but in the opinion of management, such
financial statements have been presented on the same basis as the audited
consolidated financial statements for the year ended December 31, 1996 and
include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations, and cash flows for these periods.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Radio One, Inc. and its wholly owned subsidiary, Radio One License LLC. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The accompanying consolidated financial statements are presented
on the accrual basis of accounting in accordance with generally accepted
accounting principles. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. While actual results could differ from those
estimates, management believes that actual results will not be materially
different from amounts provided in the accompanying consolidated financial
statements.
Reporting Periods
Prior to the year ended December 31, 1996, the Company's financial
reporting period was based on a fifty-two/fifty-three week period ending on the
last Sunday of the calendar year. During 1996, the Company elected to end its
year on December 31 of each year the effect of which was not material. For 1996,
this included a 52 week financial reporting period.
Acquisition of WKYS-FM
On June 6, 1995, the Company purchased WKYS-FM for approximately
$34,410,000. The Company accounted for the acquisition by allocating the
purchase price paid to the assets acquired based upon the appraised value of the
assets. The excess purchase price over the appraised value of assets acquired of
approximately $3,846,000 was allocated to goodwill. The financial activities of
WKYS-FM for the periods prior to June 6, 1995, are not included in the
accompanying consolidated statements of operations.
F-7
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The unaudited pro forma summary consolidated results of operations for the
years ended December 25, 1994, and December 31, 1995, assuming the acquisition
of WKYS-FM had occurred in the beginning of each of those fiscal years, is as
follows:
<TABLE>
<CAPTION>
1994 1995
-------------- ----------------
<S> <C> <C>
Net broadcast revenues .................................... $ 23,089,000 $ 23,926,000
Operating expenses, excluding depreciation and amortiza-
tion ................................................... 14,647,000 15,524,000
Depreciation and amortization ........................... 4,418,000 5,107,000
Interest expense ....................................... 5,535,000 6,724,000
Other (income) expense, net ........................... (38,000) (89,000)
Provision for income taxes .............................. 30,000 -
Extraordinary loss .................................... - 468,000
------------- -------------
Net (loss) income ....................................... $ (1,503,000) $ (3,808,000)
============= =============
</TABLE>
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and money market accounts at
various commercial banks. All cash equivalents have original maturities of 90
days or less. For cash and cash equivalents, cost approximates market value.
Property and Equipment
Property and equipment are recorded at original cost and are being
depreciated on a straight-line basis over various periods. The components of the
Company's property and equipment as of December 31, 1995 and 1996, and March 30,
1997 are as follows:
<TABLE>
<CAPTION>
PERIOD OF
1995 1996 1997 DEPRECIATION
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
PROPERTY AND EQUIPMENT:
Land .............................. $ 117,105 $ 117,105 $ 117,105 -
Building and improvements ......... 147,677 147,677 147,677 31 years
Transmitter towers .................. 2,100,425 2,141,462 2,141,462 7 or 15 years
Equipment ........................... 2,454,632 2,615,179 2,649,789 5 to 7 years
Leasehold improvements ............ 815,765 626,408 711,031 Life of Lease
------------ ------------ ------------
5,635,604 5,647,831 5,767,064
Less-Accumulated depreciation ...... (2,008,173) (2,640,827) (2,809,921)
------------ ------------ ------------
Property and equipment, net ...... $ 3,627,431 $ 3,007,004 $ 2,957,143
============ ============ ============
</TABLE>
Depreciation expense for the fiscal years ended December 25, 1994, December
31, 1995 and 1996, and for the three months ended March 31, 1996 and March 30,
1997 were $538,135, $741,528, $705,784, $160,380 and $169,094, respectively.
Revenue Recognition
In accordance with industry practice, revenue for broadcast advertising is
recognized when the commercial is broadcast.
Barter Arrangements
Certain program contracts provide for the exchange of advertising air time
in lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the estimated fair value of the
advertising air time given in exchange for the program rights.
F-8
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company broadcasts certain customers' advertising in exchange for
equipment, merchandise and services. The estimated fair value of the equipment,
merchandise or services received is recorded as deferred barter costs and the
corresponding obligation to broadcast advertising is recorded as deferred barter
revenues. The deferred barter costs are expensed or capitalized as they are
used, consumed or received. Deferred barter revenues are recognized as the
related advertising is aired.
Financial Instruments
Financial instruments as of December 31, 1995, and 1996, and March 30, 1997
consist of cash and cash equivalents, trade accounts receivables, accounts
payable, accrued expenses and long-term debt, as to all of which the carrying
amounts approximate fair value.
Stock Warrants
During 1995, the Company purchased outstanding stock warrants for
$6,639,007. The cost of these warrants purchased increased the accumulated
deficit. Also during 1995, the Company issued detachable stock warrants that had
an allocated value of $690,000 with certain subordinated notes (see Note 3).
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 is effective
for financial statements for fiscal years beginning after December 15, 1995. The
adoption of SFAS No. 121 on January 1, 1996, had no impact on the Company's
financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock Based Compensation." With respect to stock options
granted to employees, SFAS No. 123 permits companies to continue using the
accounting method promulgated by the Accounting Principles Board Opinion No. 25
("APB No. 25"), "Accounting for Stock Issued to Employees", to measure
compensation expense or to adopt the fair value based method prescribed by SFAS
No. 123. If APB No. 25's method is continued, pro forma disclosures are
required as if SFAS No. 123 accounting provisions were followed.
Management elected to continue to measure compensation expense under APB
No. 25. The adoption of SFAS No. 123 did not require pro forma disclosures as
all stock options granted in 1995 were granted at a significant discount below
market value and, thus, the Company recorded compensation expense of $778,000 in
accordance with ABP No.25. Compensation expense was equal to the difference
between the fair value of stock that could be purchased with the options as of
the grant date and the exercise price of the options. Additional paid-in capital
was increased by the compensation expense recognized. There were no stock
options granted to employees during 1996 or for the three months ended March 30,
1997.
Reclassifications and 1995 Restatement
Certain reclassifications have been made to the 1994 and 1995 consolidated
financial statements in order to conform with the 1996 presentation.
The 1995 consolidated financial statements have been restated to give
effect to the recognized compensation expense for stock options vested and to
adjust the value allocated to detachable stock warrants issued during 1995 with
certain subordinated notes, as discussed above.
F-9
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. INTANGIBLE ASSETS:
Intangible assets are being amortized on a straight-line basis over various
periods. The intangible asset balances and periods of amortization as of
December 31, 1995, and 1996 and March 30, 1997 are as follows:
<TABLE>
<CAPTION>
PERIOD OF
1995 1996 1997 AMORTIZATION
-------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
FCC broadcast license ............... $ 40,206,783 $ 40,206,783 $ 40,206,783 7-15 Years
Goodwill .............................. 7,812,373 7,553,267 7,553,267 15 Years
Debt financing ........................ 2,014,624 2,014,624 2,014,624 Life of Debt
Favorable transmitter site and other
intangibles ........................ 1,922,378 1,922,378 1,922,378 6-17 Years
Noncompete agreement .................. 900,000 900,000 900,000 3 Years
------------ ------------- ------------- ----------
Total .............................. 52,856,158 52,597,052 52,597,052
Less: Accumulated amortization ...... (9,401,260) (13,238,925) (14,195,944)
------------ ------------- -------------
Net intangible assets ............... $ 43,454,898 $ 39,358,127 $ 38,401,108
============ ============= =============
</TABLE>
Amortization expense for the fiscal years ended December 25, 1994, December
31, 1995 and 1996, and for the three months ended March 31, 1996 and March 30,
1997 was $1,488,810, $3,170,260, $3,555,906, $1,022,880 and $910,184,
respectively. The amortization of the deferred financing cost was charged to
interest expense.
3. LONG-TERM DEBT:
As of December 31, 1995, and 1996, and March 30, 1997, the Company is
obligated under a credit agreement and subordinated notes, as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- ---------------
<S> <C> <C> <C>
NationsBank Credit Agreement .............................. $ 48,000,000 $ 45,596,736 $ 45,596,736
Subordinated Notes (net of $650,000, $579,211 and $560,454
of unamortized discount allocated to detachable stock
warrants, respectively) ................................. 16,350,000 16,420,789 16,439,546
Deferred interest on subordinated notes .................. 235,264 2,874,653 3,517,844
Notes payable ............................................. - 46,333 46,333
------------- ------------ ------------
Total ................................................... 64,585,264 64,938,511 65,600,459
Less: Current portion .................................... (2,103,264) (5,633,286) (5,633,286)
------------- ------------ ------------
Total ................................................... $ 62,482,000 $ 59,305,225 $ 59,967,173
============= ============ ============
</TABLE>
NationsBank Credit Agreement
The purchase of WKYS in June 1995 was financed through a revolving credit
agreement (the NationsBank Credit Agreement) with NationsBank of Texas, N.A. and
the other lenders who are parties thereto of $53,000,000, which matures on March
31, 2002. The terms require scheduled quarterly step-downs in the amount of the
revolving credit commitment and annual principal payments based on a percentage
of excess cash flow, as outlined in the NationsBank Credit Agreement, and
monthly interest payments. The NationsBank Credit Agreement bears interest at
the LIBOR 30-day rate, plus an applicable margin. The margin fluctuates based on
the Company's ratio of senior debt to operating cash flow, as specified in the
credit agreement. The credit agreement is secured by all property of the Company
and interest and proceeds of real estate and Key Man life insurance policies.
The proceeds from the NationsBank Credit Agreement were also used to refund
certain existing debt.
F-10
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company entered into two interest rate swap agreements as a hedge
against interest rate risk. These agreements fix the LIBOR rate on the credit
agreement at 5.95% for $24,000,000 and 5.75% for $19,000,000 of the outstanding
line of credit.
The NationsBank Credit Agreement has certain restrictive covenants of which
several were violated during 1996 and 1995. The Company violated the leverage
and debt service ratios, among other restrictions. The Company received waivers
for not meeting the above terms.
Subordinated Notes
The subordinated notes bear interest at 15%. Outstanding principal and
interest is due on the maturity date, December 31, 2003. The Company made an
interest payment during fiscal year 1995 of 13% on the outstanding principal
balance on all subordinated notes, as permitted by the NationsBank Credit
Agreement. All unpaid interest is deferred and compounds annually. These notes
are subordinate to the NationsBank credit agreement.
The subordinated notes have restrictive covenants of which certain
covenants were violated during 1996 and for which the Company received waivers.
These subordinated notes include detachable stock warrants to purchase
common stock at $100 per share.
The following is a schedule of the subordinated notes, the number of common
shares issuable with the stock warrants and the principal amount due as of March
30, 1997:
<TABLE>
<CAPTION>
NUMBER OF
COMMON
SHARES PRINCIPAL
LENDER ISSUABLE AMOUNT DUE
- ----------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Alta Subordinated Debt Partners III, L.P. .................. 29.52 $ 5,859,118
BancBoston Investments, Inc. ................................. 20.15 4,000,000
Grant Wilson ................................................ 1.26 250,000
Fulcrum Venture Capital Corporation ........................ 15.61 783,773
Opportunity Capital Corporation .............................. 6.20 395,724
Syncom Capital Corporation ................................. 36.12 1,104,231
Greater Philadelphia Venture Capital Corporation, Inc. ...... .97 191,650
Capital Dimensions .......................................... 15.24 3,026,076
TSG Ventures, Inc. .......................................... 3.27 648,177
Alliance Enterprise Corporation .............................. 18.70 741,251
------- ------------
147.04 17,000,000
=======
Less: Unamortized discount allocated to detachable stock
warrants ................................................ (560,454)
------------
16,439,546
Plus: Deferred interest .................................... 3,517,844
------------
$ 19,957,390
============
</TABLE>
During 1995, the Company retired certain subordinated debt with outstanding
detachable warrants. The Company purchased the outstanding detachable warrants,
which allowed the subordinated debt holders to acquire 52.46% of the outstanding
common stock, for $6,639,007. The Company issued new debt with detachable
warrants that allow these same subordinated debt holders to acquire 33.66% of
outstanding common stock. The acquisition of the warrants was accounted for by
charging the $6,639,007 to accumulated deficit, and valued the new detachable
warrants at the same value per share as the old warrants acquired. As part of
the subordinated debt acquired in 1995, $10,109,118 was acquired from new
lenders which received detachable warrants to acquire 17.84% of the outstanding
common stock of
F-11
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
the Company. The Company allocated the proceeds between debt and additional
paid-in capital, based on the pro-rata value of the debt and detachable warrants
issued. As such, $9,419,118 was assigned to debt and $690,000 was assigned to
the value of the warrants. The value assigned to the warrants was recorded as an
increase in additional paid-in capital. The value assigned to debt was
discounted and will be amortized over the life of the related debt using the
effective interest method.
Notes Payable
During 1996, the Company entered into two notes totaling $51,002 with
NationsBank to purchase vehicles. These notes bear interest at 8.74% and 8.49%,
require monthly principal and interest payments of $789 and $471 and mature on
April 30, 2000, and December 2, 2000.
Refinancing of Debt
During 1995, the Company retired $22,987,807 of outstanding debt with the
remaining proceeds from the NationsBank credit agreement and the proceeds from
the $17,000,000 in subordinated debt issued in 1995. Associated with the
retirement of the debt, the Company incurred certain early repayment penalties
and legal fees, and had to write-off certain deferred financing costs associated
with the debt retired. These costs amounted to $468,233 and were recorded as an
extraordinary item in the accompanying statements of operations.
4. COMMITMENTS AND CONTINGENCIES:
Leases
The Company entered into an operating lease for Baltimore office space with
a partnership in which two of the partners are stockholders of the Company (see
Note 7). The lease expires October 2003.
The Company leases Washington, D.C. office space, under an operating lease
which expires in December 2000. Subsequent to year-end, the Company plans to
exit this lease without penalty and enter into a new lease for space to expire
in December 2011.
The Company leases, under operating lease agreements, a broadcast tower and
transmitter facilities in Maryland and Washington, D.C. The lease for the
Maryland facility expires in November 1999, with an option to renew for an
additional five-year period. The lease for the Washington, D.C., broadcast tower
and transmitter facilities expires in November 2001. In addition, the Company
leases equipment under various leases, which expire over the next five years.
The following is a schedule of the future minimum rental payments required
under the operating leases, including the lease entered into subsequent to
year-end, that have an initial or remaining noncancelable lease term in excess
of one year as of March 30, 1997.
FOR THE YEAR
ENDING DECEMBER 31, TOTAL
------------------- -----
1997 (remaining) ................ $ 444,971
1998 ............................. 521,491
1999 ............................. 525,468
2000 ............................. 549,718
2001 ............................. 529,338
Thereafter ...................... 3,485,826
----------
Total ........................... $6,056,812
==========
Total rent expense for the years ended December 25, 1994, December 31, 1995
and 1996, and for the three months ended March 31, 1996 and March 30, 1997, was
$326,607, $570,214, $777,075, $191,203 and $229,608, respectively.
F-12
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
FCC Broadcast Licenses
Each of the Company's radio stations operates pursuant to one or more
licenses issued by the Federal Communications Commission (FCC) that have a
maximum term of eight years prior to renewal. The Company's radio operating
licenses expire at various times from August 1, 1998 to October 1, 2003, except
that the license for WOL-AM expired on October 1, 1995. The Company's timely
filing of a license renewal application has automatically extended the license
term of WOL-AM until the FCC takes action on the Company's renewal application.
Although the Company may apply to renew its FCC licenses, third parties may
challenge the Company's renewal applications. Except for a complaint filed
against WOL-AM, the Company is not aware of any facts or circumstances that
would prevent the Company from having its current licenses renewed. Furthermore,
the Company believes that the complaint filed against WOL-AM will be resolved
satisfactorily and the license of that radio station renewed. However, there can
be no assurance that the licenses will be renewed.
Litigation
The Company has been named as a defendant in several legal actions
occurring in the ordinary course of business. It is management's opinion, after
consultation with its legal counsel, that the outcome of these claims will not
have a material adverse effect on the Company's financial position or results of
operations.
5. STOCK OPTION PLAN:
The Company has an Incentive Stock Option Plan (the Plan) which provides
for the issuance of qualified and nonqualified stock options to all full-time
key employees. The Plan allows the issuance of up to 25% of the authorized
common stock provided certain performance benchmarks are achieved by the
Company.
Exercise prices range from $1.00 for all nonqualified options to 100% of
the fair market value of the common stock for all qualified options. During
1995, options were granted to aquire 63.16 shares of common stock at $1 per
share. Of the options granted in 1995, options to acquire 57.45 shares vested
and were exercised during 1995. As the options were granted significantly below
their market value, the Company recognized compensation expense of $778,000
related to the vested portion of this grant. As of December 31, 1995 and 1996
and March 30, 1997 there were options outstanding to acquire 5.71 shares of
common stock at an exercise price of $1 per share, none of which were vested.
6. INCOME TAXES:
Effective January 1, 1996, the Company converted from a C Corporation to an
S Corporation under Subchapter S of the Internal Revenue Code. As an S
Corporation, the stockholders separately account for their pro-rata share of the
Company's income, deductions, losses and credits.
Prior to January 1, 1996, the Company accounted for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). Under SFAS 109, deferred income taxes reflect
the impact of temporary differences between the assets and liabilities
recognized for financial reporting purposes and amounts recognized for tax
purposes. Deferred taxes are based on tax laws as currently enacted.
As a result of the Company's January 1, 1996, Subchapter S election, the
accompanying statement of operations for the year ended December 31, 1996, and
for the three months ended March 30, 1997, do not include an income tax
provision (benefit) for federal and state income taxes.
F-13
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A reconciliation of the statutory federal income taxes to the recorded
income tax provision for the years ended December 25, 1994, and December 31,
1995 and 1996, is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------ -------------
<S> <C> <C> <C>
Statutory tax (@ 34% rate) ........................... $ 426,000 $ (630,000) $ (1,227,000)
Effect of state income taxes, net of federal ......... 85,000 (111,000) (217,000)
Effect of stock option compensation expense ............ - 275,000 -
Effect of S corporation loss to its stockholders ...... - - 1,444,000
Change in valuation reserve ........................... (480,500) 466,000 -
---------- ----------- -------------
Provision for income taxes ........................... $ 30,500 $ - $ -
========== =========== =============
</TABLE>
The components of the provision for income taxes for the years ended
December 25, 1994 and December 31, 1995, are as follows:
<TABLE>
<CAPTION>
1994 1995
------------ ----------
<S> <C> <C> <C>
Current, includes state provision of $92,000 in
1994 .......................................... $ 517,500 $ -
Deferred, includes state provision of $1,200 and
$88,000, respectively........................... (6,500) (466,000)
Change in valuation reserve ..................... (480,500) 466,000
---------- ----------
Provision for income taxes ..................... $ 30,500 $ -
========== ==========
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the financial statement and tax basis of assets and liabilities. The
significant components of the Company's deferred tax assets and liabilities as
of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
1995
-------------
<S> <C> <C> <C>
Deferred tax assets-
FCC and other intangibles amortization ...... $ 748,000
Reserve for bad debts ........................ 261,000
Goodwill .................................... 246,000
NOL carryforward ........................... 20,000
Other ....................................... 16,000
------------
Total deferred tax assets .................. 1,291,000
------------
Deferred tax liabilities-
Depreciation ................................. (214,000)
Other ....................................... (10,000)
------------
Total deferred tax liabilities ............ (224,000)
------------
Net deferred tax asset ..................... 1,067,000
Less: Valuation reserve ..................... (1,067,000)
------------
Deferred taxes included in the accompanying
consolidated balance sheets ............... $ -
============
</TABLE>
A 100% valuation reserve has been applied against the net deferred tax
asset as its realization was not more likely than not to be realized.
Prior to the Company's conversion from a C Corporation as of December 31,
1995, there was approximately $60,000 of available net operating loss
carryforwards.
F-14
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. RELATED PARTY TRANSACTIONS:
In September 1990, the Company purchased a building in the name of the
majority stockholder for $72,500. All rental income generated from the office
building was received and used by the Company. The building was sold during
fiscal year 1995. This transaction resulted in no gain or loss to the Company.
In addition, the Company leases office space for $8,000 per month from a
partnership in which two of the partners are stockholders of the Company (see
Note 4). Total rent paid to the stockholders for fiscal year 1994, 1995 and
1996, and for the three months ended March 31, 1996 and March 30, 1997 was
$134,091, $133,596, $96,000, $24,000 and $24,000, respectively. The Company also
has a receivable as of December 31, 1995 and 1996, and March 30, 1997 of
$47,043, $78,122 and $60,407, respectively, due from Radio One of Atlanta, Inc.
(ROA), of which an executive officer and stockholder of the Company holds voting
control of the capital stock in ROA. The Company also charges ROA a management
fee of approximately $100,000 per year.
8. PROFIT SHARING:
The Company has a 401K profit sharing plan for its employees. The Company
can contribute to the plan at the discretion of its Board of Directors. The
Company made no contribution to the plan during fiscal year 1994, 1995, 1996 or
for the three months ended March 30, 1997.
9. SUBSEQUENT EVENTS:
In December 1996, the Company signed an agreement to purchase certain
assets of Jarad Broadcasting Company of Pennsylvania, Inc., owner of radio
station WDRE-FM, located in Jenkintown, Pennsylvania, for $16,000,000. The
purchase agreement also includes two-year noncompete agreements totaling
$4,000,000. The Company expects to finalize the purchase in May 1997. The
Company has made a $1,000,000 non-refundable deposit in an escrow account to be
applied to the purchase price of WDRE-FM. This deposit is included in other
assets in the accompanying consolidated balance sheet as of December 31, 1996.
On February 8, 1997, the Company entered into a Local Marketing Agreement
(LMA) with Jarad Broadcasting Company of Pennsylvania, Inc. Under the LMA, the
Company is allowed to program WPHI-FM 24 hours a day, seven days a week, and
continue in effect until the consummation of the acquisition discussed above.
For the three months ended March 30, 1997, revenue and expenses recorded by the
Company relating to the LMA activity were $107,000 and $240,000, respectively.
Subsequent to year end, the Company was negotiating an agreement to
purchase all of the outstanding capital stock of Broadcast Holdings, Inc. owner
of radio station WYCB-AM, located in Washington, D.C., for approximately
$4,000,000.
The Company intends to issue bonds in May 1997 to raise approximately
$75,000,000 in gross proceeds. A portion of the proceeds will be used to acquire
radio stations WPHI-FM and WYCB-AM. The Company also intends to use the proceeds
to repay all indebtedness under the NationsBank Credit Agreement. Concurrent
with the bond offering, the Company intends to convert its subordinated notes
into senior cumulative exchangeable redeemable preferred stock.
In connection with the contemplated debt offering, the Company plans to
either terminate the NationsBank Credit Agreement with its repayment and enter
into a new credit facility with NationsBank or amend and restate the terms of
the NationsBank Credit Agreement pursuant to the terms of a new commitment for a
revolving credit facility with a maximum borrowing capacity of $7,500,000.
F-15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Radio One, Inc. and Subsidiary:
We have audited the accompanying balance sheets of Jarad Broadcasting Company of
Pennsylvania, Inc. (a Pennsylvania Corporation) as of December 31, 1995 and
1996, and the related statements of operations, changes in stockholders' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Jarad Broadcasting Company of
Pennsylvania, Inc. as of December 31, 1995 and 1996 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 24, 1997
F-16
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996 AND MARCH 31, 1997
<TABLE>
<CAPTION>
DECEMBER MARCH
--------------------------
1995 1996 1997
------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ......................................................... $ 47,927 $ 64,842 $ -
Trade accounts receivable, net of allowance for doubtful ac-
counts of $50,442, $48,849 and $20,913, respectively ........ 580,611 533,946 195,434
Prepaid expenses and other ................................. 39,067 18,666 219,522
----------- ---------- -----------
Total current assets ....................................... 667,605 617,454 414,956
----------- ---------- -----------
PROPERTY AND EQUIPMENT:
Equipment ................................................... 107,678 116,811 118,526
Office furniture and equipment .............................. 77,746 111,562 122,380
----------- ---------- -----------
185,424 228,373 240,906
Less: Accumulated depreciation .............................. (67,384) (103,893) (113,452)
----------- ---------- -----------
Property and equipment, net ................................. 118,040 124,480 127,454
----------- ---------- -----------
INTANGIBLE ASSETS, net ....................................... 2,422,607 2,188,871 2,130,173
----------- ---------- -----------
Total assets ................................................ $3,208,252 $ 2,930,805 $2,672,583
=========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Bank overdraft ............................................. $ - $ - $ 29,452
Accounts payable ............................................. 59,711 142,206 71,078
Accrued expenses ............................................. 261,600 311,623 286,954
Current portion of due to affiliate ........................ 308,640 2,552,320 2,434,169
----------- ---------- -----------
Total current liabilities ................................. 629,951 3,006,149 2,821,653
DUE TO AFFILIATE ............................................. 2,561,837 - -
----------- ---------- -----------
Total liabilities .......................................... 3,191,788 3,006,149 2,821,653
----------- ---------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' equity (deficit):
Common stock, $1.00 par value, 1,000 shares authorized, 100
shares issued and outstanding .............................. 100 100 100
Retained earnings (accumulated deficit) ..................... 16,364 (75,444) (149,170)
----------- ---------- -----------
Total stockholders' equity (deficit) ........................ 16,464 (75,344) (149,070)
----------- ---------- -----------
Total liabilities and stockholders' equity .................. $3,208,252 $ 2,930,805 $2,672,583
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-17
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Broadcast revenues, including barter reve-
nues of $334,365, $456,523, $374,291,
$106,839 and $171,319, respectively ...... $4,528,743 $4,405,282 $ 3,131,865 $ 489,930 $ 441,637
Less: Agency commissions .................. 480,893 531,714 276,294 31,095 23,630
----------- ----------- ----------- ----------- ----------
Net broadcast revenues .................. 4,047,850 3,873,568 2,855,571 458,835 418,007
----------- ----------- ----------- ----------- ----------
OPERATING EXPENSES:
Programming and production ............... 278,306 219,142 229,785 69,073 4,889
Selling, general and administrative ...... 1,851,702 1,835,340 2,193,269 470,629 382,127
Parent Company allocations ............... 768,121 926,091 13,500 3,375 -
Depreciation and amortization ............ 310,464 264,010 270,245 66,439 68,257
----------- ----------- ----------- ----------- ----------
Total operating expenses ............... 3,208,593 3,244,583 2,706,799 609,516 455,273
----------- ----------- ----------- ----------- ----------
Operating income (loss) .................. 839,257 628,985 148,772 (150,681) (37,266)
AFFILIATED INTEREST EXPENSE, in-
cluding amortization of deferred financing
costs .................................... 360,677 422,228 339,176 95,022 85,460
----------- ----------- ----------- ----------- ----------
Income (loss) before allocation for in-
come taxes and extraordinary item 478,580 206,757 (190,404) (245,703) (122,726)
ALLOCATION FOR INCOME TAXES ............... 214,829 108,728 (98,596) (123,400) (49,000)
----------- ----------- ----------- ----------- ----------
Income (loss) before extraordinary item . 263,751 98,029 (91,808) (122,303) (73,726)
EXTRAORDINARY ITEM:
Loss on early retirement of debt ......... 57,163 - - - -
----------- ----------- ----------- ----------- ----------
Net income (loss) ........................ $ 206,588 $ 98,029 $ (91,808) $ (122,303) $ (73,726)
=========== =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
RETAINED TOTAL
EARNINGS/ STOCKHOLDERS'
COMMON (ACCUMULATED EQUITY
STOCK DEFICIT) (DEFICIT)
-------- -------------- --------------
<S> <C> <C> <C>
BALANCE, December 31, 1993 ............... $100 $ (288,253) $ (288,153)
Net income .............................. - 206,588 206,588
----- ----------- -----------
BALANCE, December 31, 1994 ............... 100 (81,665) (81,565)
Net income .............................. - 98,029 98,029
----- ----------- -----------
BALANCE, December 31, 1995 ............... 100 16,364 16,464
Net loss ................................. - (91,808) (91,808)
----- ----------- -----------
BALANCE, December 31, 1996 ............... 100 (75,444) (75,344)
===== =========== ===========
Net loss ................................. - (73,726) (73,726)
----- ----------- -----------
BALANCE, March 31, 1997 (unaudited) ...... $100 $ (149,170) $ (149,070)
===== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------- ------------ ------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................. $ 206,588 $ 98,029 $ (91,808) $ (122,303) $ (73,726)
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization .................. 310,464 264,010 270,245 66,439 68,257
Effect of change in operating assets and
liabilities-
(Increase) decrease in trade accounts receivable (309,120) 198,481 25,898 257,501 338,512
Decrease (increase) in prepaid expenses and
other ....................................... 25,613 (32,935) 20,401 11,951 (200,856)
(Decrease) increase in accounts payable ......... (94,909) (34,250) 82,495 29,178 (71,128)
Increase (decrease) in accrued expenses ......... 25,336 (47,522) 50,023 (5,283) (24,669)
Net increase (decrease) in due to affiliate, for
operating activities ........................ 297,098 (150,759) 1,135 (123,400) 124,289
---------- --------- ---------- ---------- ----------
Net cash flows from operating activities ...... 461,070 295,054 358,389 114,083 160,679
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............... (42,596) (42,799) (32,834) (19,475) (12,533)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of affiliate outstanding indebtedness ... (369,728) (279,840) (308,640) (104,245) (242,440)
---------- --------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH .................. 48,746 (27,585) 16,915 (9,637) (94,294)
CASH, beginning of year ........................... 28,766 75,512 47,927 47,927 64,842
---------- --------- ---------- ---------- ----------
CASH, end of year ................................. $ 77,512 $ 47,927 $ 64,842 $ 38,290 $ (29,452)
========== ========= ========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW
INFORMATION:
Cash paid for-
Interest paid (including affiliate) ............ $ 360,677 $ 422,228 $ 339,176 $ 95,022 $ 85,460
========== ========= ========== ========== ==========
Income taxes .................................... $ 18,061 $ 112,540 $ 18,000 $ - $ -
========== ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
Jarad Broadcasting Company of Pennsylvania, Inc. (the Company) was
acquired in March 1993 by the Morey Organization (a New York corporation). The
Company operates one radio station in Jenkintown, Pennsylvania-WDRE-FM.
Interim Financial Statements
The consolidated financial statements for the three months ended March 31,
1996 and March 30, 1997 are unaudited but in the opinion of management, such
financial statements have been presented on the same basis as the audited
consolidated financial statements for the year ended December 31, 1996 and
include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations, and cash flows for these periods.
Basis of Presentation
The accompanying financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. While
actual results could differ from those estimates, management believes that
actual results will not be materially different from amounts provided in the
accompanying financial statements.
Sale of Station
In December 1996, the Company entered into a sale agreement with Radio One,
Inc. to sell all tangible and intangible assets for approximately $16,000,000,
subject to certain closing adjustments. The purchase agreement also includes
two-year noncompete agreements totaling $4,000,000. The sale is expected to be
finalized in April 1997, concurrently with the closing of a debt offering by
Radio One, Inc.
The Company has experienced a significant decline in its revenues, and
subsequent to year-end, in connection with the sale to Radio One, Inc., the
Company changed its programming format. In 1996, the Company incurred a loss of
approximately $92,000 and has an accumulated deficit of approximately $75,000 as
of December 31, 1996. In addition, the Company has significant negative net
worth and debt due to an affiliate. These factors, along with others could
negatively impact future operations of the Company.
Programming
During 1994 and 1995, the Company's programming was simulcast from the
Morey Organization. In 1996, the Company performed its own station programming.
On February 8, 1997, the Company entered into a Local Marketing Agreement
(LMA) which gives Radio One, Inc. the right to program the station 24 hours a
day, seven days a week, and continue in effect until the consummation of the
acquisition discussed above. For the three months ended March 30, 1997, the
Company recognized LMA fee revenues of $107,000.
F-21
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed under the straight-line method over the following
estimated useful lives.
Broadcast equipment .................. 7 years
Automobiles ........................ 5 years
Office furniture and equipment ...... 5 years
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
and for the three months ended March 31, 1996 and 1997, was $22,030, $29,071,
$36,509, $7,741 and $9,559, respectively.
Revenue Recognition
Revenues for advertising is recognized when the commercial is broadcasted.
Barter Arrangements
Certain program contracts provide for the exchange of advertising air time
in lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the estimated fair value of the
advertising air time given in exchange for the program rights.
The Company broadcasts certain customers' advertising in exchange for
equipment, merchandise and services. The estimated fair value of the equipment,
merchandise or services received is recorded as deferred barter costs and the
corresponding obligation to broadcast advertising is recorded as deferred barter
revenues. The deferred barter costs are expensed or capitalized as they are
used, consumed or received. Deferred barter revenues are recognized as the
related advertising is aired.
Financial Instruments
Financial instruments as of December 31, 1995, 1996 and March 31, 1997,
consist of cash, trade accounts receivables, accounts payable, accrued expenses
and amounts due to affiliate, all of which the carrying amounts approximate fair
value.
Income Taxes
The Company is included in the consolidated federal tax return of the Morey
Organization. The Morey Organization allocates a current and deferred tax
provision or benefit to the Company based on the consolidated groups total tax
or benefit for the year and the estimate of the Company's share of the total tax
liability or benefit, based upon a tax-sharing arrangement. The tax-sharing
arrangement utilizes a systematic and rational method that is consistent with
the broad principle established by Statement of Accounting Statements No. 109
(SFAS 109), "Accounting for Income Taxes."
Employee Benefit Plan
The Company participates in the 401(k) profit sharing plan (the Plan) of
the Morey Organization. The Plan covers eligible employees of the Company.
Employees may make voluntary contributions to the Plan, and the Company may make
discretionary matching contributions. For the years ended December 31, 1994,
1995 and 1996 and for the three months ended March 31, 1997, there were no
Company discretionary contributions.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
F-22
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. SFAS No. 121 is
effective for financial statements for fiscal years beginning after December
15, 1995. The adoption of SFAS No. 121 on January 1, 1996, had no impact on the
Company's financial position or results of operations.
2. INTANGIBLE ASSETS:
Organizational costs and the FCC broadcast license are being amortized on a
straight-line basis over various periods. The deferred financing cost is being
amortized over the life of the debt on the effective interest rate method. The
intangible asset balances at cost and periods of amortization as of December 31,
1995 and 1996 and March 31, 1997, are as follows:
<TABLE>
<CAPTION>
PERIOD OF
1995 1996 1997 AMORTIZATION
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
FCC broadcast license ............... $ 2,835,000 $ 2,835,000 $ 2,835,000 15 years
Debt financing ........................ 136,000 136,000 136,000 5 years
Organizational costs .................. 92,982 92,982 92,982 5 years
----------- ----------- -----------
Total .............................. 3,063,982 3,063,982 3,063,982
Less: Accumulated amortization ...... (641,375) (875,111) (933,809)
----------- ----------- -----------
Net Intangible assets ............... $ 2,422,607 $ 2,188,871 2,130,173
=========== =========== ===========
</TABLE>
Amortization expense for the years ended December 31, 1994, 1995, and 1996,
and for the three months ended March 31, 1996 and 1997 was $288,434, $234,939,
$233,736, $58,698 and $58,698, respectively.
3. DUE TO AFFILIATE:
In connection with the purchase of the Company, the Morey Organization
borrowed funds to finance the acquisition. The debt used to finance the
acquisition of the Company was recorded by the Company as affiliate borrowing.
The affiliate borrowing was at an interest rate of 12%. During 1994, the debt
borrowed to purchase the Company was refinanced. In connection with the debt
refinancing, the Company wrote off $57,163 of deferred financing costs related
to the old debt. The $57,163 writeoff was recorded as an extraordinary item. The
portion of the new debt used to refinance the old debt was recorded as an
affiliate loan to the Company. The new debt bears interest at rates ranging from
prime plus 2% to prime plus 2.25%. Also, associated with the new debt, the
Company was allocated $136,000 of deferred financing cost from the Morey
Organization. As the affiliate loan will be repaid with the sale to Radio One,
the debt has been classified as a current liability as of December 31, 1996.
The Company has an arrangement with the Morey Organization whereby the
Morey Organization will provide certain management and other services to the
Company. The services provided include consultation and direct management
assistance with respect to operations and strategic planning. During 1994 and
1995, due to affiliate consisted of allocations from the Morey Organization
related to simulcast broadcasting. In 1996, all broadcasting was done out of
Pennsylvania.
The Company serves as guarantor of all outstanding indebtedness of the
Morey Organization.
F-23
<PAGE>
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
4. COMMITMENTS AND CONTINGENCIES:
Leases
The Company holds operating leases for office space which expire October
1997, a broadcast tower and transmittal facility which expires June 2006 and
certain office equipment which expire over the next five years.
The following is a schedule of the future minimum rental payments required
under the operating leases as of March 31, 1997:
FOR THE YEAR
ENDING DECEMBER 31,
------------------------
1997 (remaining) ............................. $ 44,770
1998 ......................................... 14,803
1999 ......................................... 14,803
2000 ......................................... 14,803
2001 ......................................... 12,346
Thereafter ................................... 5,300
---------
Total ......................................... $106,825
=========
Total rent expense for the years ended December 31, 1994, 1995 and 1996 and
for the three months ended March 31, 1996 and 1997, was $58,721, $68,954,
$60,146, $12,279 and $15,036, respectively.
Litigation
The Company is a party to various litigation arising in the ordinary course
of its business. It is management's opinion, after consultation with its legal
counsel, that none of the outcomes of these claims, whether individually or in
the aggregate, will have a material adverse effect on the Company's financial
position or results of operations.
F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of WKYS-FM, Inc.
We have audited the accompanying balance sheet of WKYS-FM, Inc. (WKYS) as of
December 31, 1994, and the related statements of operations, changes in
stockholders' deficit and cash flows for the years ended December 31, 1993 and
1994. These financial statements are the responsibility of WKYS' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial statements referred to above present fairly, in
all material respects, the financial position of WKYS-FM, Inc. as of December
31, 1994, and the results of its operations and its cash flows for the years
ended December 31, 1993 and 1994 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that WKYS will
continue as a going concern. As discussed in Notes 1 and 4 to the financial
statements, WKYS has incurred recurring losses, has working capital and net
capital deficiencies, and has not met certain debt obligations and covenants.
WKYS has entered into an agreement to sell substantially all of its tangible and
intangible assets, the proceeds from which would differ from the present
carrying values. This agreement is currently pending approval by the Federal
Communications Commission (FCC). Further, WKYS' lenders have agreed to accept
repayment from the proceeds of this sale in amounts which are substantially less
than the outstanding debt in full satisfaction of WKYS' obligations. Should the
FCC not approve the sale of WKYS' assets, WKYS and its lenders have agreed that
a receiver shall be appointed to sell these assets. Management's plans with
regard to these matters are more fully described in Notes 1 and 4. The
accompanying financial statements do not include any adjustments which might
result from these transactions, the outcome of which is currently uncertain.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
February 3, 1995
F-25
<PAGE>
WKYS-FM, INC.
BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994
----------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash .............................................................................. $ 430,652
Accounts receivable, net of allowance for doubtful accounts of $100,000............ 2,287,444
Prepaids and other ............................................................... 96,630
Assets held for sale ............................................................ 27,440,999
Deferred financing costs, net of accumulated amortization of $723,208 ............ 241,034
-------------
Total current assets ............................................................ 30,496,759
-------------
OTHER ASSETS ..................................................................... 114,763
-------------
Total assets ..................................................................... $ 30,611,522
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Long-term debt .................................................................. $ 58,432,840
Accounts payable and accrued expenses ............................................. 1,799,552
Accrued interest payable ......................................................... 338,920
Deferred rent ..................................................................... 159,114
-------------
Total current labilities ......................................................... 60,730,426
-------------
REDEEMABLE PREFERRED STOCK, $1,000 par value ($1,000 per share liquidation
value):
Class A, non-voting, 926 shares authorized, issued and outstanding ............... 926,000
-------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Class B redeemable preferred stock, non-voting, 874 shares authorized, issued and
outstanding, $1,000 par value, $1,000 per share liquidation value ............... 874,000
Common stock, $.01 par value, 1,000 shares authorized:
Class A, 630 shares issued and outstanding ....................................... 6
Class B, non-voting, 370 shares issued and outstanding ........................... 4
Additional paid-in capital ...................................................... 199,990
Accumulated deficit ............................................................... (32,118,904)
-------------
Total stockholders' deficit ...................................................... (31,044,904)
-------------
Total liabilities and stockholders' deficit .................................... $ 30,611,522
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
WKYS-FM, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
1993 1994
--------------- ---------------
Operating revenue:
Broadcasting sales .................. $ 7,699,296 $ 7,080,463
Barter sales ........................ 418,556 379,098
Other sales ........................ 129,536 88,160
-------------- --------------
Total operating revenue ............ 8,247,388 7,547,721
-------------- --------------
Direct expenses:
Programming ........................ 1,904,042 1,506,760
Sales .............................. 1,576,250 1,302,716
Technical ........................... 232,846 245,091
General and administrative ......... 1,829,957 1,958,597
Depreciation ........................ 269,437 161,374
Amortization ........................ 923,801 923,801
Management and consulting fees ...... 275,000 275,000
-------------- --------------
Total direct expenses ............... 7,011,333 6,373,339
-------------- --------------
Operating income .................. 1,236,055 1,174,382
-------------- --------------
Other (income) expense:
Interest expense ..................... 7,943,481 9,536,071
Interest income ..................... (19,714) (5,502)
Other .............................. 530,914 579,396
-------------- --------------
Total other (income) expense ...... 8,454,681 10,109,965
-------------- --------------
Net loss ........................... $ (7,218,626) $ (8,935,583)
============== ==============
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
WKYS-FM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
CLASS B CLASS A CLASS B ADDITIONAL
PREFERRED COMMON COMMON PAID-IN ACCUMULATED
STOCK STOCK STOCK CAPITAL DEFICIT TOTAL
----------- --------- --------- ----------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1993 ......... $874,000 $6 $4 $199,990 $ (15,964,695) $ (14,890,695)
Net loss ............... - - - - (7,218,626) (7,218,626)
--------- --- --- --------- -------------- --------------
Balance as of
December 31, 1993 ...... 874,000 6 4 199,990 (23,183,321) (22,109,321)
Net loss ............... - - - - (8,935,583) (8,935,583)
--------- --- --- --------- -------------- --------------
Balance as of
December 31, 1994 ...... $874,000 $6 $4 $199,990 $ (32,118,904) $ (31,044,904)
========= === === ========= ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
WKYS-FM, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
-------------- -------------
<S> <C> <C>
Operating activities:
Net loss ...................................................... $ (7,218,626) $ (8,935,583)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depreciation and amortization ................................. 1,193,238 1,085,175
Deferral of interest on long-term debt ........................ 5,472,220 6,895,784
Management fees accrued ....................................... 275,000 275,000
Decrease in unamortized discount on long-term debt ............ 246,082 365,711
Loss on disposal of equipment ................................. 10,552 2,160
Deferred rent ................................................ 47,809 27,381
Changes in assets and liabilities:
Accounts receivable .......................................... 202,946 77,972
Prepaids and other .......................................... (325) (24,588)
Non-current assets .......................................... (21,300) (19,068)
Accounts payable and accrued expenses ........................ 14,778 280,185
Accrued interest payable .................................... 830,285 (624,460)
------------- -------------
Net cash provided by (used in) operating activities ...... 1,052,659 (594,331)
------------- -------------
Investing activities:
Purchases of furniture and equipment ........................ (108,072) (22,310)
------------- -------------
Net cash used in investing activities ..................... (108,072) (22,310)
------------- -------------
Financing activities:
Principal payments on long-term debt ........................ (88,119) (37,500)
------------- -------------
Net cash used in financing activities ..................... (88,119) (37,500)
------------- -------------
Net increase (decrease) in cash .............................. 856,468 (654,141)
Cash, beginning of year ....................................... 228,325 1,084,793
------------- -------------
Cash, end of year ............................................. $ 1,084,793 $ 430,652
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
WKYS-FM, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
WKYS-FM, Inc. (WKYS) is a privately-held Delaware corporation which
operates an FM radio station serving the Washington, D.C. metropolitan area.
WKYS was purchased by Albimar Properties Limited Partnership ("Albimar
Properties") in December 1988. Albimar Properties was subsequently merged with
Albimar Communications, Inc. (ACI), and the stock of WKYS is currently owned by
ACI and a group of private investors.
As reflected in the accompanying financial statements, WKYS has incurred
recurring losses, has working capital and net capital deficiencies and has not
met certain debt obligations and covenants. Management of WKYS has entered into
several forbearance agreements with its lenders in an attempt to restructure
WKYS' debt in a manner that would allow WKYS to meet its obligations currently.
The most recent of these forbearance agreements expired on June 30, 1994, at
which time all of WKYS' debt obligations became payable in full.
On August 24, 1994, WKYS executed an Agreement for Judgment and Conditional
Forbearance with its senior lender, and Forbearance Agreements with its
subordinated lenders (the Agreements). Pursuant to the Agreements, each of the
lenders has agreed to forbear from taking action against WKYS in exchange for
WKYS' agreement to sell substantially all of its assets under certain terms and
conditions. The proceeds from such a sale shall be distributed among the
creditors of WKYS and its shareholders in the order of priority set forth in the
Agreements (Note 4). If WKYS is unsuccessful in selling its assets within the
time allotted by the Agreements, or in accordance with the terms provided
therein, WKYS and its lenders have consented to the appointment of a receiver
for the purpose of selling the assets of WKYS and distributing the proceeds. The
Agreements provide for aggregate minimum repayments of approximately $31,000,000
by WKYS to its lenders in full satisfaction of all debt and related obligations.
On October 31, 1994, management of WKYS entered into an asset purchase
agreement (the Asset Purchase Agreement) to sell substantially all of the assets
of WKYS except cash and accounts receivable. The terms of the Asset Purchase
Agreement provide for a cash purchase price of approximately $34,410,000. This
sale is currently pending final approval by the Federal Communications
Commission (FCC). All assets subject to sale, including furniture and equipment
($196,400, net of accumulated depreciation of $1,609,120), the FCC broadcast
license ($11,475,185, net of accumulated amortization of $2,058,215) and
goodwill ($15,769,414, net of accumulated amortization of $2,828,222) have been
classified as assets held for sale at December 31, 1994. Management of WKYS
believes that this sale, if consummated, will yield sufficient proceeds to
satisfy all of WKYS' obligations.
Certain terms of the Asset Purchase Agreement were not consistent with the
requirements of the Agreements. At WKYS' request, all of its lenders agreed to
amend the terms of the Agreements to coincide with the terms of the Asset
Purchase Agreement pursuant to amendments dated October 31, 1994, November 2,
1994 and November 4, 1994, respectively.
The terms of the Asset Purchase Agreement provide that WKYS shall assign to
the buyer, for purposes of collection only, substantially all of its accounts
receivable that are outstanding and unpaid on the date of closing. The buyer is
required to collect all such receivables and remit payment to WKYS for a period
of 180 days, at which time all uncollected amounts become the responsibility of
WKYS. The terms of the Asset Purchase Agreement further provide that to the
extent that WKYS has cash flow, as defined, during the twelve months ending on
the last day of the month immediately preceding the closing of the sale of less
than $2,700,000 (the Cash Flow Deficiency), the buyer shall retain payments
collected with respect to accounts receivable in an amount equal to the Cash
Flow Deficiency.
The accompanying financial statements do not include any adjustments that
might result from the outcome of these transactions.
F-30
<PAGE>
WKYS-FM, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash concentration
As of December 31, 1993 and 1994, WKYS had approximately $884,000 and
$317,000, respectively, on deposit at commercial banks in excess of insured
amounts.
Barter transactions
WKYS has entered into barter transactions with advertisers, whereby WKYS
agrees to provide commercial air time in exchange for goods or services to be
distributed as prizes to its listeners or to be used in the operations of WKYS.
The fair value of advertisements broadcast are recognized as income when aired
and the fair value of merchandise or services received are charged to expense
when received or used. If merchandise or services are received prior to the
broadcast of the advertising, a liability is recorded. If the advertising is
broadcast prior to the receipt of the goods or services, a receivable is
recorded.
Furniture and equipment
Furniture and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets as shown
below.
ESTIMATED
USEFUL LIFE
------------
Equipment and vehicles .............................. 3 years
Furniture and fixtures .............................. 5 years
Antenna, transmitter and production materials ...... 7 years
Leasehold improvements are amortized using the straight-line method over
the shorter of the lease term or the 3-year estimated useful life of such
assets.
When assets are retired or sold, the cost and related accumulated
depreciation and amortization are removed from the accounts and any gain or loss
is reflected in operations. Maintenance and repairs are charged to expense as
incurred; the costs of additions and improvements are capitalized.
As of December 31, 1994, all furniture and equipment is included in assets
held for sale on the accompanying balance sheet (Note 1).
Intangible assets
Intangible assets are stated on the basis of the fair market value assigned
on the date of acquisition and are amortized by the straight-line method. The
costs of WKYS' FCC broadcast license and goodwill are amortized over 40 years.
Deferred financing costs are amortized over the life of the associated debt.
As of December 31, 1994, all intangible assets subject to the sale are
included in assets held for sale on the accompanying balance sheet (Note 1).
Revenue
In accordance with industry practice, revenue for commercial broadcasting
advertisements is recognized when the commercial is broadcast.
Other expenses
Other expenses represent costs incurred in attempting to restructure WKYS'
long-term debt. These amounts have been expensed since recovery is unlikely.
F-31
<PAGE>
WKYS-FM, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Income taxes
WKYS has adopted Statement of Financial Accounting Standards No. 109 (SFAS
109). Under SFAS 109, deferred tax assets and liabilities are recognized for the
future tax consequences of differences between tax bases of assets and
liabilities and financial reporting amounts, as well as the tax effects of
certain carryforward items. Deferred tax assets and liabilities are measured by
applying statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
3. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following at December 31, 1993 and
1994:
<TABLE>
<CAPTION>
1993 1994
--------------- ---------------
<S> <C> <C>
Equipment and vehicles ............................ $ 256,294 $ 275,617
Furniture and fixtures .............................. 748,947 732,841
Antenna, transmitter and production materials ...... 781,049 767,130
Leasehold improvements .............................. 25,463 29,932
------------ ------------
1,811,753 1,805,520
Less: accumulated depreciation and amortization (1,474,129) (1,609,120)
------------ ------------
$ 337,624 $ 196,400
============ ============
</TABLE>
4. LONG-TERM DEBT
LONG-TERM DEBT CONSISTS OF THE FOLLOWING AT DECEMBER 31, 1993 AND 1994:
<TABLE>
<CAPTION>
1993 1994
-------------- ---------------
<S> <C> <C>
Revolving credit facility - Society National Bank. $ 21,165,000 $ 21,127,500
------------ ------------
Subordinated notes payable -
Alta Subordinated Debt Partners II, L.P.:
Original face amount ..................... 5,000,000 5,000,000
Deferred interest ........................ 8,860,482 13,777,998
------------ ------------
13,860,482 18,777,998
------------ ------------
Senior subordinated deferred note - NBC:
Original face amount ........................ 12,000,000 12,000,000
Unamortized discount ........................ (3,482,826) (3,117,115)
Deferred interest ........................... 7,666,189 9,644,457
------------ ------------
16,183,363 18,527,342
------------ ------------
Total long-term debt ........................ $ 51,208,845 $ 58,432,840
============ ============
</TABLE>
The revolving credit facility (the Facility) originally provided for
borrowings of up to $24,000,000. Beginning with the quarter ended March 31,
1990, the commitment reduced each quarter through December 31, 1997. WKYS was
required to pay to Society National Bank (Society) each quarter the excess of
the outstanding balance of the loan over the amount of the commitment. WKYS has
not made certain required repayments under the Facility, and is in violation of
certain restrictive covenants included in the Facility. WKYS and Society have
entered into several forbearance agreements in an attempt to restructure the
debt in a manner that would enable WKYS to meet its obligations currently. The
most recent of these forbearance agreements expired on June 30, 1994, at which
time all amounts owed by WKYS to Society became payable in full. On August 24,
1994, WKYS and Society executed an Agree
F-32
<PAGE>
WKYS-FM, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
ment for Judgment and Conditional Forbearance, pursuant to which Society has
agreed to forbear from taking action against WKYS in exchange for WKYS'
agreement to sell substantially all of its assets under certain terms and
conditions. The terms of this Agreement for Judgment and Conditional Forbearance
are described more fully below.
Interest on the Facility accrues at Society's base lending rate plus 1.75%,
which approximated 7.75% and 10.25% at December 31, 1993 and 1994, respectively.
Interest is payable quarterly in arrears. WKYS is required to pay a commitment
fee of 1|M/2 of 1 percent on the unused portion of the revolving credit
facility. The borrowing is collateralized by all tangible and intangible
property of WKYS, assignment of all leases and a pledge of all capital stock of
WKYS. The loan is also guaranteed by ACI. This guarantee would expire upon
satisfaction of WKYS' obligation to Society as outlined in the Agreement for
Judgment and Conditional Forbearance as described more fully below.
The $5,000,000 subordinated notes (the Subordinated Notes) payable to a
group of investors led by Alta Subordinated Debt Partners II, L.P.
(collectively, the Investors) are due January 2, 1998. Interest of 10 percent is
payable in arrears on a quarterly basis. Additional interest of 15 percent is
accrued, compounded at 25 percent and capitalized annually. Interest payments
are due in arrears on December 22 of each year. WKYS may elect to defer the
payment of this interest until maturity. WKYS has not made any payments to the
Investors and is in default of certain provisions of the Subordinated Note
Agreement. On August 24, 1994, at which time all amounts owed to the Investors
approximated $16,300,000, WKYS and the Investors executed a Forbearance
Agreement, pursuant to which the Investors have agreed to forbear from taking
action against WKYS in exchange for WKYS' agreement to sell substantially all of
its assets under certain terms and conditions. The terms of this Forbearance
Agreement are described more fully below.
The Subordinated Notes are collateralized by the stock and assets of WKYS,
second only to the Facility. The Investors also hold WKYS' Class B common stock
and Class A redeemable preferred stock (see Note 6).
The $12,000,000 senior subordinated deferred note (the Senior Subordinated
Note) payable to NBC bears interest at 10 percent per annum and is due December
9, 1998. A market rate of 14.5% percent was imputed on the note, and the related
discount is being amortized over the life of the note using the effective
interest method. The note required no principal or interest payments through
1993. Commencing January 1, 1994, interest payments of $600,000 are due
semi-annually on January 1 and June 30. At maturity, the remaining principal and
deferred interest, which is estimated to approximate $24,290,000, is due and
payable. WKYS has not made any repayments to NBC and is in default of certain
provisions of the Senior Subordinated Note Agreement. On August 24, 1994, at
which time all amounts owed to NBC approximated $17,700,000 (net of the
unamortized discount), WKYS and NBC executed a Forbearance Agreement, pursuant
to which NBC has agreed to forbear from taking action against WKYS in exchange
for WKYS' agreement to sell substantially all of its assets under certain terms
and conditions. The terms of this Forbearance Agreement are described more fully
below.
Upon repayment of the Facility and the Subordinated Notes, this borrowing
is collateralized by all capital stock of WKYS.
The Agreements as defined in Note 1 set forth the terms and conditions
under which WKYS has agreed to attempt to sell its assets and distribute the
proceeds therefrom. Under the terms of the Agreements, the Lenders have agreed
to forbear from taking any action against WKYS until the earlier of:
i) The failure of WKYS to perform under any of the terms of the
Agreements;
ii)A Qualified Agreement of Sale, as defined in the Agreements, entered
into not later than October 31, 1994, is terminated;
F-33
<PAGE>
WKYS-FM, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
iii) The date on which the FCC denies the assignment of WKYS' FCC license;
iv) Twenty (20) days after FCC approval of a sale; or
v) June 30, 1995 (as amended-Note 1)
Further, certain members of WKYS' management have agreed not to compete
during the period prior to a sale of the assets of WKYS.
The Agreements provide for the distribution of "Net Proceeds" from a sale
of WKYS' assets as follows:
i) to Society in an amount equal to all amounts due less $1,000,000;
ii) to the Investors in an amount equal to at least $8,000,000 plus
certain of the Investors's legal fees;
iii) to NBC in the amount of $1,200,000.
Net proceeds is defined in the Agreements as the sum of all sale proceeds
(exclusive of up to $200,000 which may be paid to certain officers of WKYS in
exchange for agreements not-to-compete) less transaction costs and trade
payables.
Any excess of Net Proceeds over the amounts shown above shall be
distributed as follows:
i) to the Investors to pay certain additional fees;
ii) to WKYS in the amount of $300,000 to pay certain trade payables;
iii) to Society up to a maximum of $1,000,000;
iv) to ACI, the Investors and WKYS in the percentages of 55.1%, 32.4% and
12.5%, respectively.
In the event that WKYS is unsuccessful in selling its assets within the
time allotted or on the terms provided by the Agreements, WKYS and its lenders
have agreed that WKYS will not seek protection under Chapter 11 of the United
States Bankruptcy Code and that a receiver shall be appointed to sell the assets
of WKYS. In such an event, the sale proceeds shall be distributed as follows:
i) to repay Society in full;
ii) to repay the Investors $8,000,000 plus legal fees;
iii) to pay NBC $500,000; and
iv) to reimburse the Investors and NBC for certain legal fees.
Total cash paid for interest during 1993 and 1994 was approximately
$1,400,000 and $2,900,000, respectively.
5. INTEREST RATE SWAP AGREEMENTS
WKYS has entered into an interest rate swap agreement to reduce the impact
of changes in interest rates on the Facility (Note 4). At December 31, 1993, a
total principal amount of $10 million of the revolving credit facility was
subject to this agreement. The interest rate swap agreement effectively changed
WKYS' interest rate on $10 million of the Facility to a fixed 8.9% through April
9, 1994, the date upon which the agreement matured. WKYS was exposed to credit
loss in the event of nonperformance by the other parties to the interest rate
swap agreements. However, WKYS did not experience nonperformance by the
counterparties.
F-34
<PAGE>
WKYS-FM, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
6. PREFERRED AND COMMON STOCK
HOLDERS OF CLASS A AND CLASS B PREFERRED STOCK HAVE NO DIVIDEND OR VOTING
RIGHTS, EXCEPT AS OTHERwise provided by law or in certain limited circumstances.
WKYS may purchase, and the holders shall sell, all or any portion of the Class A
preferred stock at a redemption price of $1,000 per share at any time. The Class
A redeemable preferred stock will be redeemed at a price of $1,000 per share, on
the first to occur of when the holders shall have the right to require the
purchase of the preferred stock pursuant to the shareholders agreement dated
December 22, 1988, the repayment of all indebtedness issued pursuant to the note
and stock purchase agreement dated December 22, 1989, or December 31, 1997. On
or after the purchase by WKYS of all the Class A preferred, WKYS may purchase
all or any portion of the Class B preferred stock at a price of $1,000 per
share. Both Class A and Class B preferred stock have a liquidation price of
$1,000 per share.
Shares of Class A common stock and Class B common stock share identical
rights and privileges except that Class B common stock may only vote on certain
matters specifically identified in the Certificate of Incorporation and
Amendment thereto. All common stock dividends shall be made in shares of Class A
stock if on Class A stock and in shares of Class B stock if on Class B stock.
7. INCOME TAXES
WKYS has unused net operating loss carryforwards for federal and local
income tax reporting purposes of approximately $16,000,000 and $24,000,000 at
December 31, 1993 and 1994, respectively. These carryforwards expire in various
years through 2009. No federal or local income taxes were paid during 1993 and
1994.
As of December 31, 1993 and 1994, WKYS had a deferred tax asset of
approximately $6,100,000 and $9,800,000, respectively. This asset, however, has
been fully reserved due to the uncertainty regarding its ultimate realization.
The Company's deferred tax asset at December 31, 1993 and 1994 is
summarized as follows:
1993 1994
------------- -------------
Net operating loss carryforwards ...... $ 6,100,000 $ 9,600,000
Other ........................... 200,000 200,000
------------- -------------
6,300,000 9,800,000
Valuation allowance ............... (6,300,000) (9,800,000)
------------- -------------
Total deferred taxes ......... $ - $ -
============= =============
WKYS also has charitable contributions carryforwards of approximately
$98,000 and $115,000 at December 31, 1993 and 1994, respectively.
8. COMMITMENTS
Management and consulting fees
WKYS has entered into a long-term management and consulting agreement with
Albimar Management, Inc. (AMI), an affiliate of ACI, for a predetermined annual
fee. This fee amounted to $275,000 in 1993 and 1994. The Facility (Note 4)
imposes certain limitations on payment of fees to AMI, based upon excess cash
flow as defined in the Facility. As a result of these limitations, WKYS did not
make any payments to AMI during the year ended December 31, 1994. WKYS has
accrued a liability relative to this agreement of approximately $550,000 and
$937,000 at December 31, 1993 and 1994, respectively, representing the excess of
fees accrued over fees paid for all years.
F-35
<PAGE>
WKYS-FM, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
Employment contracts
WKYS has entered into certain noncancelable employment contracts. As of
December 31, 1994, minimum payments to be made under these contracts are as
follows:
1995 ................................................. $ 337,069
1996 ................................................ 119,329
----------
$ 456,398
==========
The Asset Purchase Agreement provides that certain amounts payable under
these contracts shall be paid upon closing of the sale of WKYS' assets.
Operating leases
WKYS has entered into various operating leases for the rental of certain
equipment and facilities. Minimum rental payments under these noncancelable
leases at December 31, 1994, are as follows:
1995 ....................................... $ 494,448
1996 ....................................... 483,823
1997 ....................................... 467,712
1998 ....................................... 484,141
1999 ............ .......................... 503,076
Thereafter ................................. 2,397,705
------------
$ 4,830,905
============
Rent expense under all operating leases for 1993 and 1994 was approximately
$454,000 and $450,000, respectively. All rent expense is included in general and
administrative expenses in the accompanying statements of operations, except for
rent relating to WKYS' transmitting tower, which is included in technical
expenses. Rent expense recognized relative to certain operating leases differs
from actual cash payments due to escalation clauses which are being expensed on
a straight-line basis for financial statement purposes. The Asset Purchase
Agreement provides that the buyer shall assume all of these operating leases.
Other
WKYS has entered into an agreement with the Washington Tennis Foundation
for the use of a tennis suite during the annual Washington Tennis Foundation
tennis tournament in exchange for $80,000, paid in equal amounts over 4 years
commencing in 1989. WKYS has the option to retain the right to the use of the
suite for a maximum of 24 years provided that it pays a $5,000 annual license
fee as specified in the agreement. The unamortized portion of payments made
pursuant to this agreement as of December 31, 1993 and 1994 of $63,334 and
$60,000, respectively, are included in other assets in the accompanying balance
sheet.
9. EMPLOYEE BENEFIT PLAN
Effective June 1, 1993, WKYS initiated a defined contribution (401-K) plan
(the Plan) covering substantially all employees. Employees may contribute
between 2% and 15% of eligible compensation to the Plan.
WKYS has the option to make matching contributions to the Plan. No such
matching contributions were made during the years ended December 31, 1993 and
1994.
10. RELATED-PARTY TRANSACTIONS
In addition to related party transactions disclosed in Note 7, WKYS
incurred approximately $131,000 and $204,000 during 1993 and 1994, respectively,
in legal expenses which were paid to a law firm in which one of the partners is
also a shareholder of ACI.
11. SUBSEQUENT EVENT (UNAUDITED)
During 1995, the Asset Purchase Agreement was finalized substantially in
accordance with the terms disclosed in Note 1.
F-36
<PAGE>
WKYS-FM, INC.
UNAUDITED STATEMENT OF OPERATIONS
FOR THE FIVE MONTHS ENDED MAY 31, 1995
<TABLE>
<S> <C>
OPERATING REVENUE:
Broadcasting sales, net of agency commissions of $390,199 ...... $ 2,347,105
Barter sales ................................................... 123,477
-------------
Total operating revenue ....................................... 2,470,582
-------------
OPERATING EXPENSES:
Programming ................................................... 513,653
Sales ......................................................... 449,345
Technical ...................................................... 87,434
General and administrative .................................... 742,495
Depreciation and amortization ................................. 444,508
Management and consulting fees ................................. 125,000
-------------
Total Operating expenses ....................................... 2,362,435
-------------
Operating income ............................................. 108,147
INTEREST EXPENSE ................................................ 4,830,484
-------------
Net loss ...................................................... $ (4,722,337)
=============
</TABLE>
The accompanying notes are an integral part of this statement.
F-37
<PAGE>
WKYS-FM, INC.
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE FIVE MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
CLASS B CLASS A CLASS B ADDITIONAL
PREFERRED COMMON COMMON PAID-IN ACCUMULATED
STOCK STOCK STOCK CAPITAL DEFICIT TOTAL
----------- --------- --------- ----------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994 ............... $874,000 $6 $4 $199,990 $ (32,118,904) $ (31,044,904)
Net loss ............ - - - - (4,722,337) (4,722,337)
--------- -- -- --------- -------------- --------------
BALANCE, May 31, 1995 $874,000 $6 $4 $199,990 $ (36,841,241) $ (35,767,241)
========= == == ========= ============== ==============
</TABLE>
The accompanying notes are an integral part of this statement.
F-38
<PAGE>
WKYS-FM, INC.
\
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MAY 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................. $ (4,722,337)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ............................................. 444,508
Management fees accrued ................................................... 125,000
Deferred rent ............................................................ 20,083
Effect of changes in operating assets and liabilities-
Accounts receivable, net ................................................ 502,244
Prepaids and other ...................................................... 89,217
Noncurrent assets ......................................................... 27,381
Accounts payable and accrued expenses .................................... (933,346)
Accrued interest payable ................................................ 194,101
-------------
Net cash flows used in operating activities .............................. (4,253,149)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment ....................................... (333,725)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt, net ........................ 4,580,291
-------------
DECREASE IN CASH ............................................................ (6,583)
CASH, beginning of period ................................................... 430,652
-------------
CASH, end of period ......................................................... $ 424,069
=============
</TABLE>
The accompanying notes are an integral part of this statement.
F-39
<PAGE>
WKYS-FM, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MAY 31, 1995
1. BASIS OF PRESENTATION:
WKYS-FM, Inc. (WKYS) is a privately held Delaware corporation which
operates an FM radio station serving the Washington, D.C., metropolitan area.
WKYS was purchased by Albimar Properties Limited Partnership (Albimar
Properties) in December 1988. Albimar Properties was subsequently merged with
Albimar Communications, Inc. (ACI), and the stock of WKYS is currently owned by
ACI and a group of private investors. The accompanying unaudited financial
statements present the results of operations and cash flows of the Company for
the five months ended May 31, 1995.
These statements are unaudited and certain information and footnote
disclosures normally included in the Company's annual financial statements have
been omitted, as permitted under the applicable rules and regulations. Readers
of these statements should refer to the financial statements and notes thereto
as of December 31, 1994, and for the year then ended included elsewhere in this
filing. The results of operations presented in the accompanying financial
statements are not necessarily representative of operations for an entire year.
2. SUBSEQUENT EVENT:
On June 6, 1995, the assets of the radio station WKYS-FM were acquired by
Radio One, Inc. for a total consideration of approximately $34.4 million.
F-40
<PAGE>
[INSIDE BACK COVER]
<PAGE>
- -------------------------------------- --------------------------------------
No dealer, salesperson or other
person has been authorized to give any
information or to make any
representation not contained in this
Prospectus and, if given or made, such
information or representation must not
be relied upon as having been
authorized by the Company. This
Prospectus does not constitute an
offer to sell or a solicitation of an
offer to buy any of the securities
offered hereby in any jurisdiction to
any person to whom it is unlawful to
make such offer in such jurisdiction. [GRAPHIC OMITTED]
Neither the delivery of this
Prospectus nor any sale made hereunder
shall, under any circumstances, create
any implication that the information
herein is correct as of any time
subsequent to the date hereof or that
there has been no change in the
affairs of the Company since such
date.
--------------------------
TABLE OF CONTENTS
PAGE
------ -
Available Information ........... 3
Prospectus Summary .............. 6
Risk Factors .................... 18
The Transactions .............. 25
Use of Proceeds ................. 26 Offer to Exchange its
Capitalization ................. 27 Series B
Pro Forma Consolidated 12% Senior Subordinated Notes
Financial Data ............... 28 Due 2004
Selected Historical for
Consolidated Financial Data .... 36 any and all of its outstanding
Management's Discussion and 12% Senior Subordinated Notes
Analysis of Results of Due 2004
Operations and Financial
Condition ..................... 38 PROSPECTUS
Business ....................... 45
Management .................... 64
Principal Stockholders ........ 67
Certain Transactions ........... 69
Description of the Exchange
Notes .......................... 71
The Exchange Offer .............. 98
Description of Certain
Indebtedness .................. 106
Description of Capital Stock .. 107
Certain United States Federal
Income Tax Considerations .... 113
Plan of Distribution ........... 113
Legal Matters ................. 114
Experts ....................... 114
Market and Industry Data ........ 114
Index to Financial Statements .. F-1
UNTIL , ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, , 1997
MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------- ---------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware, inter alia,
("Section 145") provides that a Delaware corporation may indemnify any persons
who were, are or are threatened to be made, parties to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation),
by reason of the fact that such person is or was an officer, director, employee
or agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Company's Certificate of Incorporation provides for the indemnification
of directors and officers of the Company to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as it currently exists or may
hereafter be amended.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
3.1 Amended and Restated Certificate of Incorporation of Radio
One, Inc.
3.2 Amended and Restated By-laws of Radio One, Inc.
4.1 Indenture dated as of May 15, 1997 among Radio One, Inc.,
Radio One Licenses, Inc. and United States Trust Company of
New York.
4.2 Purchase Agreement dated as of May 14, 1997 among Radio One,
Inc., Radio One Licenses, Inc., Credit Suisse First Boston
Corporation and NationsBanc Capital Mar- kets, Inc.
4.3 Registration Rights Agreement dated as of May 14, 1997 among
Radio One, Inc., Radio One Licenses, Inc., Credit Suisse
First Boston Corporation and NationsBanc Capital Markets,
Inc.
4.4 Standstill Agreement dated as of May 19, 1997 among Radio
One, Inc., Radio One Licenses, Inc., NationsBank of Texas,
N.A., United States Trust Company of New York and the other
parties thereto.
5.1 Opinion and consent of Kirkland & Ellis.
10.1 Office Lease dated February 3, 1997 between National Life
Insurance Company and Radio One, Inc. for premises located
at 5900 Princess Garden Parkway, Lanham, Mary- land, as
amended on February 24, 1997.
10.2 Purchase Option Agreement dated February 3, 1997 between
National Life Insurance Company and Radio One, Inc. for the
premises located at 5900 Princess Garden Park- way, Lanham,
Maryland.
10.3 Asset Purchase Agreement dated December 6, 1996 by and
between Jarad Broadcast- ing Company of Pennsylvania, Inc.
and Radio One, Inc.
10.4 Office Lease commencing November 1, 1993 between Chalrep
Limited Partnership and Radio One, Inc., with respect to the
property located at 100 St. Paul Street, Baltimore,
Maryland.
10.5 Preferred Stockholders' Agreement dated as of May 14, 1997
among Radio One, Inc., Radio One Licenses, Inc. and the
other parties thereto.
10.6 Warrantholders' Agreement dated as of June 6, 1995, as
amended by the First Amendment to Warrantholders' Agreement
dated as of May 19, 1997, among Radio One, Inc., Radio One
Licenses, Inc. and the other parties thereto.
10.7 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Syncom Capital Corporation.
10.8 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Alliance Enterprise Corporation.
10.9 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Greater Philadelphia Venture Capital
Corporation, Inc.
10.10 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Opportunity Capital Corporation.
10.11 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Capital Dimensions Venture Fund,
Inc.
10.12 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to TSG Ventures Inc.
10.13 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Fulcrum Venture Capital Corporation.
10.14 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Alta Subordinated Debt Partners III,
L.P.
10.15 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to BancBoston Investments, Inc.
10.16 Amended and Restated Warrant of Radio One, Inc. dated as of
May 19, 1997, issued to Grant M. Wilson.
II-2
<PAGE>
10.17 Management Agreement dated as of August 1, 1996 by and
between Radio One, Inc. and Radio One of Atlanta, Inc.
10.18 Letter of Intent dated March 12, 1997 by and between Radio
One, Inc. and Allied Capital Financial Corporation, as
amended by that certain First Amendment dated as of May 6,
1997, that certain Second Amendment dated as of May 30,
1997, that certain Third Amendment dated as of June 5, 1997
and that certain Letter Agreement dated as of July 1, 1997.
12.1 Statement of Computation of Ratios.
21.1 Subsidiaries of Radio One, Inc.
23.1 Consent of Arthur Andersen, L.L.P.
23.2 Consent of Coopers & Lybrand, L.L.P.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
(b) Financial Statement Schedules.
Not Applicable.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering; and
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of the chapter at the start of any
delayed offering or throughout a continuous offering. Financial statements
and information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by means
of a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
II-3
<PAGE>
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements
and information are contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
Form F-3.
(5) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(6) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Lanham, State of
Maryland, on July 3, 1997.
RADIO ONE, INC.
By: /s/ Alfred C. Liggins, III
----------------------------------
Name: Alfred C. Liggins, III
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alfred C. Liggins, III, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of Radio One, Inc.), to sign any or
all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------- --------------------------------------- --------------
<S> <C> <C>
/s/ Alfred C. Liggins, III Chief Executive Officer, President and July 3, 1997
--------------------------- Director (principal executive officer)
Alfred C. Liggins, III
/s/ Scott R. Royster Executive Vice President and Chief July 3, 1997
--------------------------- Financial Officer (principal financial
Scott R. Royster officer and accounting officer)
/s/ Michael A. Covington Corporate Controller July 3, 1997
---------------------------
Michael A. Covington
/s/ Catherine L. Hughes Chairperson and Director July 3, 1997
---------------------------
Catherine L. Hughes
/s/ Terry L. Jones Director July 3, 1997
---------------------------
Terry L. Jones
/s/ Brian W. McNeill Director July 3, 1997
---------------------------
Brian W. McNeill
/s/ P. Richard Zitelman Director July 3, 1997
---------------------------
P. Richard Zitelman
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Lanham, State of
Maryland, on July 3, 1997.
RADIO ONE LICENSES, INC.
By: /s/ Alfred C. Liggins, III
----------------------------------
Name: Alfred C. Liggins, III
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alfred C. Liggins, III, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of Radio One Licenses, Inc.), to sign
any or all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------- --------------------------------------- --------------
<S> <C> <C>
/s/ Alfred C. Liggins, III Chief Executive Officer, President and July 3, 1997
--------------------------- Director (principal executive officer)
Alfred C. Liggins, III
/s/ Scott R. Royster Executive Vice President and Chief July 3, 1997
--------------------------- Financial Officer (principal financial
Scott R. Royster officer and accounting officer)
/s/ Michael A. Covington Corporate Controller July 3, 1997
---------------------------
Michael A. Covington
/s/ Catherine L. Hughes Chairperson and Director July 3, 1997
---------------------------
Catherine L. Hughes
/s/ Terry L. Jones Director July 3, 1997
---------------------------
Terry L. Jones
/s/ Brian W. McNeill Director July 3, 1997
---------------------------
Brian W. McNeill
/s/ P. Richard Zitelman Director July 3, 1997
---------------------------
P. Richard Zitelman
</TABLE>
<PAGE>
INDEX TO SUPPLEMENTAL SCHEDULES
PAGE
-----
Report of Independent Public Accountants ............ S-2
Schedule II - Valuation and Qualifying Accounts ...... S-3
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Radio One, Inc. and Subsidiary:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Radio One, Inc. (a Delaware corporation during 1996) and
subsidiary included in this Prospectus and the Registration Statement and have
issued our report thereon dated February 13, 1997. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedules listed in the accompanying index are presented for purposes
of complying with the Securities and Exchange Commission's rules and are not
part of the basic financial statements. These schedules have been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 13, 1997
S-2
<PAGE>
RADIO ONE, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 25, 1994, DECEMBER 31, 1995 AND 1996
AND FOR THE THREE MONTHS ENDED MARCH 30, 1997
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END OF
OF YEAR EXPENSE DEDUCTIONS YEAR
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 25, 1994 ............ $ 472,600 $610,200 $ 614,800 $ 468,000
Year ended December 31, 1995 ............ $ 468,000 $298,300 $ 96,900 $ 669,400
Year ended December 31, 1996 ............ $ 669,400 $627,800 $ 532,000 $ 765,200
Three months ended March 30, 1997 ...... $ 765,200 $184,800 $ 84,500 $ 865,500
Tax valuation reserve:
Year ended December 25, 1994 ............ $ - $ - $ - $ -
Year ended December 31, 1995 ............ $ 739,000 $328,000 $ - $1,067,000
Year ended December 31, 1996 ............ $1,067,000 $ - $1,067,000 $ -
Three months ended March 30, 1997 ...... $ - $ - $ - $ -
</TABLE>
S-3
<PAGE>
EXHIBIT INDEX
EXHIBITS.
3.1 Amended and Restated Certificate of Incorporation of Radio One, Inc.
3.2 Amended and Restated By-laws of Radio One, Inc.
4.1 Indenture dated as of May 15, 1997 among Radio One, Inc., Radio One
Licenses, Inc. and United States Trust Company of New York.
4.2 Purchase Agreement dated as of May 14, 1997 among Radio One, Inc.,
Radio One Licenses, Inc., Credit Suisse First Boston Corporation and
NationsBanc Capital Markets, Inc.
4.3 Registration Rights Agreement dated as of May 14, 1997 among Radio
One, Inc., Radio One licenses, Inc., Credit Suisse First Boston
Corporation and Natonsbanc Capital Markets, Inc.
4.4 Standstill Agreement dated as of May 19, 1997 among Radio One, Inc.,
Radio One Licenses, Inc., NationsBank of Texas, N.A., United States
Trust Company of New York and the other parties thereto.
5.1 Opinion and consent of Kirkland & Ellis.
10.1 Office Lease dated February 3, 1997 between National Life Insurance
Company and Radio One, Inc. for premises located at 5900 Princess
Garden Parkway, Lanham, Maryland, as amended on February 24, 1997.
10.2 Purchase Option Agreement dated February 3, 1997 between National Life
Insurance Company and Radio One, Inc. for the premises located at 5900
Princess Garden Parkway, Lanham, Maryland.
10.3 Asset Purchase Agreement dated December 6, 1996 by and between Jarad
Broadcasting Company of Pennsylvania, Inc. and Radio One, Inc.
10.4 Office Lease commencing November 1, 1993 between Chalrep Limited
Partnership and Radio One, Inc., with respect to the property located
at 100 St. Paul Street, Baltimore, Maryland.
10.5 Preferred Stockholders' Agreement dated as of May 14, 1997 among Radio
One, Inc., Radio One Licenses, Inc .and the other parties thereto.
10.6 Warrantholders' Agreement dated as of June 6, 1995, as amended by the
First Amendment to Warrantholders' Agreement dated as of May 19, 1997,
among Radio One, Inc., Radio One Licenses, Inc. and the other parties
thereto.
10.7 Amended and Restated Warrant of Radio One., Inc. dated as of May 19,
1997, issued to Syncom Capital Corporation.
<PAGE>
10.8 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to Alliance Enterprise Corporation.
10.9 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to Greater Philadelphia Venture Capital Corporation, Inc.
10.10 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to Opportunity Capital Corporation
10.11 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to Capital Dimensions Venture Fund, Inc.
10.12 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to TGS Venture Inc.
10.13 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to Fulcrum Venture Capital Corporation.
10.14 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to Alta Subordinated Debt Partners III, L.P.
10.15 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to BancBoston Investments, Inc.
10.16 Amended and Restated Warrant of Radio One, Inc. dated as of May 19,
1997, issued to Grant M. Wilson.
10.17 Management Agreement dated as of August 1, 1996 by and between Radio
One, Inc. and Radio One of Atlanta, Inc.
12.1 Statement of Computations of Ratios.
21.1 Subsidiaries of Radio One, Inc.
23.1 Consent of Arthur Andersen, L.L.P.
23.2 Consent of Coopers & Lybrand, L.L.P.
23.3 consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
CERTIFICATE OF AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF
RADIO ONE, INC.
The undersigned, being the duly elected President and Chief
Executive Officer of Radio One, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware ("DGCL"), hereby declares and certifies the following:
1. That the Corporation filed its original Certificate of
Incorporation with the Secretary of State of the State of Delaware on July 15,
1996 (the "Certificate of Incorporation").
2. That the present name of the Corporation is Radio One, Inc.
3. That the Board of Directors of the Corporation, pursuant to
Sections 141, 242 and 245 of the DGCL, adopted resolutions authorizing the
Corporation to amend, integrate and restate the Certificate of Incorporation of
the Corporation in its entirety to read as set forth in Exhibit A attached
hereto and made a part hereof (the "Amended and Restated Certificate").
4. That the stockholders of the Corporation approved and
adopted the Amended and Restated Certificate in accordance with Sections 228,
242 and 245 of the DGCL.
IN WITNESS WHEREOF, the undersigned has executed this certificate in
the name and on behalf of the Corporation as of this 16th day of May, 1997.
By:
----------------------------------------------
Name: Alfred C. Liggins
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RADIO ONE, INC.
ARTICLE I - Name
The name of the corporation is Radio One, Inc. (hereinafter referred to
as the "Corporation").
ARTICLE II - Registered Office
The post office address of the registered office of the Corporation in
the State of Delaware is 9 East Loockerman Street, Dover, Kent County, Delaware
19901. The name of the registered agent of the Corporation at that address is
National Registered Agents, Inc.
ARTICLE III - Purpose
The purpose of the Corporation is to acquire, operate, and maintain
radio stations and television stations and to engage in any other lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "DGCL").
ARTICLE IV - Capital Stock
Section 4.1. General. The total number of shares of capital stock which
the Corporation has authority to issue is 252,000 shares, consisting of: (i)
100,000 shares of 15% Series A Cumulative Redeemable Preferred Stock, par value
$.01 per share (the "Series A Preferred"), (ii) 150,000 shares of 15% Series B
Cumulative Redeemable Preferred Stock, par value $.01 per share (the "Series B
Preferred," and together with the Series A Preferred, the "Preferred Stock"),
(iii) 1,000 shares of Class A Common Stock, par value $.01 per share (the "Class
A Common"), and (iv) 1,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common," and together with the Class A Common, the "Common
Stock"). The Preferred Stock and Common Stock are hereinafter sometimes
collectively referred to as "Capital Stock." Certain capitalized terms used
herein are defined in Section 4.4(c) of this ARTICLE IV below.
Section 4.2. Preferred Stock. Except as otherwise provided in this
Section 4.2 of this ARTICLE IV or as otherwise required by applicable law, all
shares of Series A Preferred and Series B Preferred shall be identical in all
respects and shall entitle the holders thereof to the same rights and privileges
and shall be subject to the same qualifications, limitations and restrictions.
<PAGE>
(a) Dividends.
(i) General Obligation. To the extent permitted under
the DGCL, the Corporation shall pay preferential cumulative dividends to the
holders of the Preferred Stock as provided in this Section 4.2(a)(i) of this
ARTICLE IV. Except as otherwise provided herein, dividends on each share of
Preferred Stock (a "Preferred Share") shall accrue on a daily basis at the rate
of 15% per annum (the "Dividend Rate") on the sum of (A) the Liquidation Value
thereof plus (B) all unpaid accumulated dividends thereon, if any, from and
including the date of issuance of such Preferred Share to and including the date
on which the Liquidation Preference Amount of such Preferred Share is paid.
Notwithstanding the foregoing, if the Corporation does not redeem all of the
issued and outstanding Preferred Shares on the Mandatory Redemption Date (as
defined in Section 4.2(d)(i) of this ARTICLE IV) or, upon the occurrence of an
Event of Noncompliance (as defined in the Preferred Stockholders' Agreement)
(such failure to redeem or occurrence of an Event of Noncompliance, a
"Noncompliance Event"), the Majority Holders may elect, by written notice to the
Corporation, to have the Dividend Rate increase to 18% per annum (the
"Noncompliance Dividend Rate") and dividends shall accrue on each Preferred
Share on a daily basis at the Noncompliance Dividend Rate on the sum of (x) the
Liquidation Value thereof plus (y) all unpaid accumulated dividends thereon, if
any, commencing on the date of the occurrence of such Noncompliance Event (after
the expiration of all applicable cure periods) and continuing until (I) such
Default is cured pursuant to the terms of the Preferred Stockholders' Agreement
or waived by the Majority Holders or (II) the date on which the Liquidation
Preference Amount of such Preferred Share is paid. Dividends on Preferred Shares
shall accrue whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends. The date on which the Corporation initially issues any
Preferred Share shall be deemed to be its "date of issuance" regardless of the
number of times transfer of such Preferred Share is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such Preferred Share.
(ii) Special WPHI-FM Dividend. Notwithstanding the
provisions of Section 4.2(a)(i) of this ARTICLE IV, in the event the Corporation
does not meet any performance target listed below relating exclusively to the
operation of WPHI-FM, the Dividend Rate for each Preferred Share shall be
increased to 17% per annum (the "Retroactive Dividend Rate") and dividends shall
accrue on each Preferred Share on a daily basis at the Retroactive Dividend Rate
on the sum of (A) the Liquidation Value thereof plus (B) all unpaid accumulated
dividends thereon, if any, for the period commencing on the date of issuance of
such Preferred Share until (x) such time as the Corporation first meets a
performance target at a subsequent date or such noncompliance is waived by the
Majority Holders or (y) the date on which the Liquidation Preference Amount of
such Preferred Share is paid:
2
<PAGE>
AS OF THE TWELVE-MONTH PERIOD ENDING BROADCAST CASH FLOW ($)
12/31/98 1,517
3/31/99 1,669
6/30/99 1,878
9/30/99 2,097
12/31/99 2,346
3/31/00 2,446
6/30/00 2,583
9/30/00 2,727
12/31/00 2,891
3/31/01 2,987
6/30/01 3,121
9/30/01 3,261
12/31/01 3,419
3/31/02 3,451
6/30/02 3,494
9/30/02 3,539
12/31/02 3,590
3/31/03 3,623
6/30/03 3,669
9/30/03 3,716
12/31/03 3,770
and in each calendar quarter thereafter
for the immediately prior twelve-month
period through the Mandatory Redemption
Any right to receive dividends on a Preferred Share at the Retroactive Dividend
Rate shall transfer with each such Preferred Share.
(iii) Dividend Reference Date. To the extent not paid
on December 31 of each year, beginning December 31, 1997 (the "Dividend
Reference Date"), all dividends which have accrued on each Preferred Share
issued and outstanding during the one-year period (or other period in the case
of the initial Dividend Reference Date) ending upon each such Dividend Reference
Date shall be accumulated and shall remain accumulated dividends with respect to
such Preferred Share until paid. All dividends paid on a Preferred Share shall
be applied first to, and to the extent of, unpaid dividends that have accrued
(but which have not been accumulated) and then to, and to the extent of,
accumulated dividends, if any.
(iv) Distribution of Partial Dividend Payments.
Except as otherwise provided herein, if at any time the Corporation pays less
than the total amount of unpaid dividends accrued on the Preferred Shares then
outstanding, such payment shall be distributed ratably among
3
<PAGE>
the holders thereof based upon the aggregate amount of accumulated and accrued
but unpaid dividends on the Preferred Shares held by each such holder.
(b) Liquidation. Upon any Liquidation of the Corporation,
provided all indebtedness for money borrowed of the Corporation (including,
without limitation, the Senior Indebtedness) has been finally and indefeasibly
paid in full in cash, each holder of Preferred Shares shall be entitled to be
paid in cash, before and in preference to any distribution or payment of any
asset, capital, surplus or earnings of the Corporation is made to the holders of
other Capital Stock, an amount equal to the aggregate Liquidation Preference
Amount of the Preferred Shares held by such holder, and the holders of Preferred
Shares shall not be entitled to any other payment in respect of their Preferred
Shares. If upon any such Liquidation of the Corporation, the funds to be
distributed among the holders of the Preferred Shares are insufficient to permit
payment to such holders of the aggregate Liquidation Preference Amount for such
Preferred Shares in cash, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders based on the aggregate Liquidation Preference Amount of the Preferred
Shares held by each such holder. The Corporation shall provide written notice of
any such Liquidation, not less than 60 days prior to the payment date stated
therein, to each record holder of Preferred Shares.
(c) Priority of Preferred Stock. So long as any Preferred
Share remains outstanding, neither the Corporation nor any Subsidiary of the
Corporation shall redeem, purchase or otherwise acquire directly or indirectly,
or set apart funds for the redemption, purchase or acquisition of, any other
Capital Stock, nor shall the Corporation directly or indirectly pay or declare
any dividend or make any distribution upon any other Capital Stock (other than a
dividend payable solely in Junior Securities); provided, however,
notwithstanding the foregoing, the Corporation may purchase Junior Securities in
accordance with the provisions of the Warrantholders' Agreement.
(d) Redemptions.
(i) Mandatory Redemption. On May 29, 2005 (the
"Mandatory Redemption Date"), the Company will be required, subject to
applicable law, to redeem all issued and outstanding Preferred Shares, together
with any and all accumulated and accrued but unpaid dividends thereon.
(ii) Redemptions at the Option of the Corporation.
The Corporation shall have the right (but not the obligation) to redeem issued
and outstanding Preferred Shares, subject to applicable law, as follows:
(A) the Corporation may at any time, and from
time to time, redeem all or a portion of the issued and outstanding shares of
Series A Preferred; provided, however, that upon the timely delivery of a
Participation Notice as set forth in clause (v) of this Section 4.2(d), any
holder of shares of Series B Preferred shall have the right to participate in
such redemption and the number of Preferred Shares to be redeemed from each
holder of Series A Preferred and each holder of Series B Preferred that has
delivered a timely Participation Notice shall be the number of Preferred Shares
determined by multiplying the total number of Preferred Shares the Corporation
has elected to redeem as specified in the Final Redemption Notice by a fraction,
the
4
<PAGE>
numerator of which shall be the total number of shares of Series A Preferred
held by such holder or the total number of shares of Series B Preferred
specified in such holder's timely delivered Participation Notice, as the case
may be, and the denominator of which shall be the sum of the total number of
outstanding shares of Series A Preferred and the number of shares of Series B
Preferred that are the subject of timely delivered Participation Notices;
(B) the Corporation may at any time, and from
time to time, redeem issued and outstanding Preferred Shares having an aggregate
Liquidation Value of up to $2,000,000, provided that the Corporation has paid
all accumulated and accrued but unpaid dividends on all of the outstanding
Preferred Shares in full simultaneously with or prior to such redemption; and
(C) on or after June 6, 1999, the Corporation
may at any time, and from time to time, redeem all or any portion of the issued
and outstanding Preferred Shares.
(iii) Redemption at the Option of the Holders of
Preferred Shares. The Majority Holders shall have the right (but not the
obligation) to require the Corporation (and if the Majority Holders exercise
such right, the Corporation shall be obligated) to redeem issued and outstanding
Preferred Shares, subject to applicable law, as follows:
(A) if permitted by the terms of the Debt
Agreements, upon the consummation of an Initial Public Offering, the Majority
Holders may require the Company to apply an amount not to exceed the Net Cash
Proceeds received by the Corporation from the Initial Public Offering to redeem
the maximum number of Shares of Preferred Stock that may be redeemed given the
amount elected by the Majority Holders to be so applied; and
(B) after all outstanding indebtedness for
money borrowed of the Corporation (including, without limitation, the Senior
Indebtedness) has been finally and indefeasibly paid in full in cash and any
commitment to fund related thereto shall have been terminated, if a Redemption
Event (as defined in the Preferred Stockholders' Agreement) is existing, the
Majority Holders may require the Company to redeem all or any portion of the
outstanding Preferred Shares.
(iv) Redemption Payment. For each Preferred Share
which is to be redeemed, the Corporation shall pay to the holder thereof on the
Redemption Date (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Preferred Share) an amount in
immediately available funds equal to the Liquidation Preference Amount. If the
funds of the Corporation legally available for redemption of Preferred Shares on
any Redemption Date are insufficient to redeem the total number of Preferred
Shares to be redeemed on such date, those funds which are legally available
shall be used to redeem the maximum possible number of Preferred Shares ratably
among the holders of the Preferred Shares to be redeemed based upon the
aggregate Liquidation Preference Amount held by each such holder. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of Preferred Shares, such funds shall immediately be used to
redeem the balance of the Preferred Shares which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed.
<PAGE>
(v) Notice of Redemption on the Mandatory Redemption
Date. After September 1, 2004, and on or prior to November 29, 2004, the
Corporation shall give written notice (a "Mandatory Redemption Notice") by mail,
postage prepaid, overnight courier or facsimile to the holders of the then
outstanding Preferred Shares at the address of each such holder appearing on the
books of the Corporation or given by such holder to the Corporation, which
notice shall set forth the Mandatory Redemption Date and the Liquidation
Preference Amount for each Preferred Share. The Mandatory Redemption Notice
shall further call upon such holders to surrender to the Corporation on or
before the Mandatory Redemption Date at the place designated in the notice such
holder's certificate or certificates representing the Preferred Shares to be
redeemed on the Mandatory Redemption Date or an indemnification and loss
certificate therefor. On or before the Mandatory Redemption Date, each holder of
Preferred Shares to be redeemed shall surrender the certificate evidencing such
shares, or such indemnification and loss certificate, to the Corporation.
(vi) Notice of Redemption at the Election of the
Corporation. The Corporation shall provide prior written notice (the "Redemption
Notice") of any redemption of Preferred Shares to each record holder of
Preferred Shares not more than 60 nor less than 30 days prior to the date on
which a redemption of Preferred Shares is expected to be made pursuant to
Section 4.2(d)(ii), and which shall set forth the series and number of Preferred
Shares to be redeemed, the date on which such redemption is to take place and
the Liquidation Preference Amount for each Preferred Share on such date. Such
Redemption Notice shall be sent by mail, postage prepaid, overnight courier or
facsimile to the address of each such holder appearing on the books of the
Corporation or given by such holder to the Corporation for the purpose of
notice. The Redemption Notice shall further call upon such holders to surrender
to the Corporation or before the applicable Redemption Date at the place
designated in the Redemption Notice such holder's certificate or certificates
representing the shares to be redeemed on the applicable Redemption Date or an
indemnification and loss certificate therefor. On or before the applicable
Redemption Date, each holder of Preferred Shares called for redemption shall
surrender the certificate evidencing such Preferred Shares, or such
indemnification and loss certificate, to the Corporation. With respect to any
election by the Corporation to redeem all or any portion of the Series A
Preferred pursuant to Section 4.2(d)(ii)(A) of this ARTICLE IV, (A) any holders
of Series B Preferred that intend to participate in such redemption shall
provide written notice of such intention to the Corporation (the "Participation
Notice") within five days of receipt of a Redemption Notice, and such
Participation Notice shall set forth the number of shares of Series B Preferred
that such holder desires to have redeemed by the Corporation, and (B) if the
Corporation receives any timely Participation Notices, the Corporation may elect
either (a) to redeem the number of Preferred Shares originally set forth in its
Redemption Notice or (b) to redeem a greater number of Preferred Shares. Upon
making such election, the Corporation shall provide written notice to each
holder of Preferred Shares setting forth the total number of Preferred Shares
the Corporation has so elected to redeem and the Series and number of Preferred
Shares that shall be redeemed from each holder of Series A Preferred and each
holder of Series B Preferred that has delivered a timely Participation Notice no
later than two days prior to the applicable Redemption Date (the "Final
Redemption Notice").
(vii) Notice of Redemption at the Election of the
Holders. With respect to any election by the Majority Holders to cause the
Corporation to redeem all or any portion of the issued and outstanding Preferred
Shares pursuant to Section 4.2(d)(iii) of this ARTICLE IV, the Majority Holders
shall provide written notice of such election to the Corporation not more than
60
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nor less than 30 days prior to the date on which such redemption is to be made
and such notice shall set forth the number of Preferred Shares to be redeemed
and the date on which such redemption is to take place (the "Put Notice"). The
Corporation shall notify the record holders of Preferred Shares promptly of (A)
the commencement of the Initial Public Offering (and the amount of Net Cash
Proceeds received therefrom) and (B) the first date on which all outstanding
indebtedness for money borrowed of the Corporation (including, without
limitation, the Senior Indebtedness) has been finally and indefeasibly paid in
full in cash and any commitment to fund related thereto shall have been
terminated.
(viii) Determination of the Number of Each Holder's
Preferred Shares to be Redeemed. Except in redemptions pursuant to Section
4.2(d)(ii)(A) of this ARTICLE IV, the number of Preferred Shares to be redeemed
from each holder thereof in redemptions hereunder shall be the number of
Preferred Shares determined by multiplying the total number of Preferred Shares
to be redeemed by a fraction, the numerator of which shall be the total number
of Preferred Shares then held by such holder and the denominator of which shall
be the total number of Preferred Shares then issued and outstanding. In case
fewer than the total number of Preferred Shares represented by any certificate
are redeemed, a new certificate representing the number of unredeemed Preferred
Shares shall be issued to the holder thereof without cost to such holder within
three business days after surrender of the certificate representing the redeemed
Preferred Shares.
(ix) Dividends After Redemption Date. No Preferred
Share is entitled to any dividends that accrue after the date on which the
Liquidation Preference Amount of such Preferred Share is paid to the holder
thereof. On such date all rights of the holder of such Preferred Share shall
cease, and such Preferred Share shall not be deemed to be issued and
outstanding.
(x) Redeemed or Otherwise Acquired Preferred Shares.
Any Preferred Shares which are redeemed or otherwise acquired by the Corporation
shall be canceled and shall not be reissued, sold or transferred.
(xi) Other Redemptions or Acquisitions. Neither the
Corporation nor any Subsidiary shall redeem or otherwise acquire any Preferred
Stock, except as expressly authorized herein or pursuant to a purchase offer
made pro rata to all holders of Preferred Stock on the basis of the number of
Preferred Shares owned by each such holder.
(e) Voting Rights. Except as provided in ARTICLE VII of this
Amended and Restated Certificate of Incorporation or as otherwise required by
applicable law, the holders of Preferred Shares shall have no right to vote on
any matters to be voted on by the Corporation's stockholders.
(f) Restrictions and Limitations. For so long as any Preferred
Share is outstanding, without the written consent of the Majority Holders, the
Corporation shall not fail to comply with Sections 6.1, 6.3, 6.4, 6.7 and 6.11
of the Preferred Stockholders' Agreement.
4.3. Section Common Stock. Except as otherwise provided in
Section 4.3 of this ARTICLE IV or as otherwise required by applicable law, all
shares of Class A Common and Class B Common
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shall be identical in all respects and shall entitle the holders thereof to the
same rights and privileges and shall be subject to the same qualifications,
limitations and restrictions.
(a) Voting Rights. At every meeting of the stockholders, except as
specifically otherwise required by law, the holders of Class A Common shall be
entitled to one vote per share on all matters presented for a vote of the
stockholders of the Corporation. Except to the extent provided in ARTICLE VII of
this Amended and Restated Certificate of Incorporation or as required by
applicable law, the holders of Class B Common shall have no right to vote on any
matter presented for a vote of the stockholders of the Corporation (including,
without limitation, the election or removal of directors of the Corporation),
and Class B Common shall not be included in determining the number of shares
voting or entitled to vote on such matters. The Board of Directors of the
Corporation shall have concurrent power with the holders of Class A Common to
adopt, amend or repeal the Bylaws of the Corporation. A consolidation or merger,
or the sale, lease, exchange, mortgage, pledge, or other disposition of all, or
substantially all, of the property or assets of the Corporation, if not made in
the usual and regular course of its business, shall require a resolution adopted
by a majority of the Board of Directors of the Corporation and the authorization
of an affirmative vote of at least two-thirds of the outstanding shares of Class
A Common.
(b) Dividends. As and when dividends are declared or paid with respect
to shares of Common Stock, whether in cash, property or securities of the
Corporation, the holders of Class A Common and the holders of Class B Common
shall be entitled to receive such dividends pro rata at the same rate per share
for each such class of Common Stock; provided that (i) if dividends are declared
or paid in shares of Common Stock, the dividends payable to the holders of Class
A Common shall be payable in shares of Class A Common and the dividends payable
to the holders of Class B Common shall be payable in shares of Class B Common
and (ii) if the dividends consist of other voting securities of the Corporation,
the Corporation shall make available to each holder of Class B Common, at such
holder's request, dividends consisting of non-voting securities (except as
otherwise required by law) of the Corporation which are otherwise identical to
the voting securities and which are convertible into such voting securities on
the same terms as the Class B Common is convertible into the Class A Common. The
rights of the holders of Common Stock to receive dividends are subject to the
provisions of the Preferred Stock.
(c) Reservation. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock Class A
Common and Class B Common in a quantity sufficient to provide for the conversion
of all outstanding shares of the Class A Common and Class B Common into Class B
Common and Class A Common, respectively.
(d) Conversion of Common Stock.
(i) General Provisions. Subject to the terms and conditions
stated herein, the holder of any shares of either Class A Common or Class B
Common shall have the right at any time, at such holder's option, to convert all
or a portion of the shares of the class of Common Stock so held into the same
number of shares of the other class of Common Stock. Such right of conversion
shall be exercised (A) by giving written notice (the "Notice") to the
Corporation at least ten (10) days prior to the Conversion Date (as defined
below) specified therein that the holder elects to convert a stated number of
shares of Class A Common or Class B Common into shares of the
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other class of Common Stock on the date specified in such Notice or on such
later date following any Deferral Period (as defined below) on which conversion
may occur (the "Conversion Date") and (B) by surrendering the certificate or
certificates representing at least the number of shares of Class A Common or
Class B Common to be converted to the Corporation at its principal office at any
time during the usual business hours on or before the Conversion Date, duly
endorsed in blank by the owner of the certificate so surrendered, together with
a statement of the name or names (with addresses) of the Person or Persons in
whose name or names the certificate or certificates for shares issued on
conversion shall be registered. Promptly after receipt of the Notice, the
Corporation shall send written notice of such holder's intent to convert to each
other registered holder of any shares of Class A Common or Class B Common at
such other holder's address as shown on the stock transfer records of the
Corporation. The Corporation shall not convert or directly or indirectly redeem,
purchase or otherwise acquire any share of Class A Common or take any other
action affecting the voting rights of such share if such action will increase
the percentage of outstanding voting securities owned or controlled by any
Regulated Stockholder (other than any Regulated Stockholder which requested that
the Corporation take such action) and the effect thereof would cause such
Regulated Stockholder and its Affiliates to hold in the aggregate 5% or more of
the outstanding shares of Class A Common unless the Corporation gives written
notice (the "Deferral Notice") of such action to each such Regulated
Stockholder. The Corporation will defer making any such conversion, redemption,
purchase or other acquisition, or taking any such other action, for a period of
30 days (the "Deferral Period") after giving the Deferral Notice in order to
allow each such Regulated Stockholder to determine whether it wishes to convert
or take any other action with respect to the Common Stock it owns, controls or
has the power to vote. If any such Regulated Stockholder then elects to convert
any shares of Class A Common into shares of Class B Common, it shall notify the
Corporation in writing within 20 days of the issuance of the Deferral Notice, in
which case the Corporation shall promptly notify from time to time each other
Regulated Stockholder holding shares of Common Stock of each proposed conversion
and the proposed transaction and each Regulated Stockholder may notify the
Corporation in writing of its election to convert shares of Class A Common into
Class B Common at any time prior to the end of the Deferral Period. The
Corporation shall effect the conversions requested by all Regulated Stockholders
in response to the Deferral Notice and the notices issued pursuant to the
immediately proceeding sentence at the end of the Deferral Period.
(ii) Regulated Stockholders. No Regulated Stockholder shall
exercise its rights as a holder of shares of Class B Common to convert such
shares into shares of Class A Common, or otherwise acquire shares of Class A
Common, if, after giving effect to such exercise, such Regulated Stockholder and
its Affiliates would own 5% or more of the outstanding Class A Common; provided,
however, that the foregoing restrictions shall cease and terminate as to any
shares of Class B Common or any Regulated Stockholder, when, in the opinion of
counsel reasonably satisfactory to the Corporation, such restrictions are no
longer required in order to assure compliance with Regulation Y or when
Regulation Y shall cease to be in effect. The Corporation shall rely
conclusively on a certificate of a Regulated Stockholder as to whether or not a
conversion of shares of Class B Common into, or an acquisition of, shares of
Class A Common will be in compliance with the provisions of the immediately
preceding sentence, and, notwithstanding the immediately preceding sentence, to
the extent not inconsistent with Regulation Y, such conversion rights may be
exercised or shares of Class A Common may be so acquired in the event that: (A)
the Corporation shall vote to merge or consolidate with or into any other Person
and, after giving effect
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to such merger or consolidation, such Regulated Stockholder and its Affiliates
would not own 5% or more of the outstanding voting securities of the surviving
Person; (B) such Regulated Stockholder desires to sell shares of Class A Common
into which all or part of its shares of Class B Common are to be converted in
connection with any proposed purchase of Class A Common by another Person (other
than a Regulated Stockholder or an Affiliate thereof); or (C) such Regulated
Stockholder intends to sell shares of Class A Common into which all or part of
its shares of Class B Common are to be converted pursuant to a registration
statement under the Securities Act of 1933, as amended (the "1933 Act"), which
has been declared effective.
(iii) Surrender of Certificates. Subject to the other
provisions of this Section 4.3 of this ARTICLE IV and of ARTICLE IX of this
Amended and Restated Certificate of Incorporation, promptly after (A) the
Conversion Date and (B) the surrender of such certificate or certificates
representing the share or shares of Class A Common or Class B Common to be
converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder requesting conversion, registered in such name or names
as such holder may direct, a certificate or certificates for the number of
shares of the class of Common Stock issuable upon the conversion of such share
or shares, together with a certificate or certificates evidencing any balance of
the shares of the class surrendered to the Corporation but not then being
converted. To the extent permitted by law, such conversion shall be deemed to
have been effected as of the close of business on the later of the Conversion
Date or the date upon which the Corporation shall have received the certificate
or certificates representing the shares to be converted, and at such time the
rights of the holder of such share or shares as such holder shall cease, and the
person or person in whose name or names any certificate or certificates for
shares shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of such shares of Class A Common or Class B Common,
as the case may be.
(e) Listing. If the shares of Class A Common required to be reserved
for the purpose of conversion hereunder require listing on any national
securities exchange, before such shares are issued upon conversion, the
Corporation will, at its expense and as expeditiously as possible, use its
commercially reasonable best efforts to cause such shares to be listed or duly
approved for listing on such national securities exchange.
(f) No Charge. The issuance of certificates representing Common Stock
upon conversion of Class A Common or Class B Common as hereinabove set forth
shall be made without charge or any expense or issuance tax in respect thereof;
provided, however, that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
shares converted.
(g) No Interference. Except as otherwise provided in ARTICLE IX of this
Amended and Restated Certificate of Incorporation, the Corporation will not
close its books against the transfer of any share of Common Stock or of any of
the shares of Common Stock issued or issuable upon the conversion of such shares
of Common Stock in any manner which interferes with the timely conversion of any
of such shares.
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(h) Mergers, Consolidations. In the case of a merger or consolidation
which reclassifies or changes the shares of Common Stock, or in the case of the
consolidation or merger of the Corporation with or into another corporation or
corporations or the transfer of all or substantially all of the assets of the
Corporation to another corporation or corporations, each share of Class B Common
shall thereafter be convertible into the number of shares of stock or other
securities or property to which a holder of shares of Class A Common would have
been entitled upon such reclassification, change, consolidation, merger or
transfer, and, in any such case, appropriate adjustment (as determined in good
faith by the Corporation's Board of Directors) shall be made in the application
of the provisions herein set forth with respect to the rights and interests
thereafter of the holders of the Class B Common to the end that the provisions
set forth herein shall thereafter be applicable, as nearly as reasonably may be
practicable, in relation to any shares of stock or other securities on property
thereafter deliverable upon the conversion of shares of Class B Common. In case
of any such merger or consolidation, the resulting or surviving corporation (if
not the Corporation) shall expressly assume the obligation to deliver, upon
conversion of the Class B Common, such stock or other securities or property as
the holders of the Class B Common remaining outstanding shall be entitled to
receive pursuant to the provisions hereof, and to make provisions for the
protection of the conversion rights provided for in this ARTICLE IV. The
Corporation shall not be party to any merger, consolidation or recapitalization
pursuant to which any Regulated Stockholder would be required to take (A) any
voting securities which would cause such holder to violate any law, regulation
or other requirement of any governmental body applicable to such Regulated
Stockholder, or (B) any securities convertible into voting securities which if
such conversion took place would cause such Regulated Stockholder to violate any
law, regulation or other requirement of any governmental body applicable to such
Regulated Stockholder other than securities which are specifically provided to
be convertible only in the event that such conversion may occur without any such
violation.
(i) Liquidation, Dissolution or Winding Up. Subject to the provisions
of the Preferred Stock, in the event of any Liquidation of the Corporation, all
remaining assets of the Corporation shall be distributed to holders of the
Common Stock pro rata at the same rate per share of each class of Common Stock
according to their respective holdings of shares of the Common Stock.
Section 4.4. Miscellaneous. Subject to the provisions of ARTICLE IX of this
Amended and Restated Certificate of Incorporation:
(a) Registration of Transfer. The Corporation shall keep at its
principal office a register for the registration of Capital Stock. Upon the
surrender of any certificate representing Capital Stock at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Capital Stock represented by such new certificate from the
date to which dividends have been fully paid on such Capital Stock represented
by the surrendered certificate. The issuance of new certificates shall be made
without charge to the original holders of the surrendered certificates for
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any issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such issuance.
(b) Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of any class or series of Capital Stock, and in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class or series represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate, and dividends shall accrue on the Capital Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
(c) Definitions. The following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person (it being understood that for purposes of this definition, the term
"control" (including with correlative meaning the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise).
"Broadcash Cash Flow" has the meaning given to such term in the
Preferred Stockholders' Agreement.
"Debt Agreements" means, collectively, the Indenture, the Senior Loan
Agreement, and any other agreement governing indebtedness for borrowed money of
the Corporation permitted by the Preferred Stockholders' Agreement.
"Indenture" means that certain Indenture, dated as of May 15, 1997,
pursuant to which the Corporation issued 12% Senior Subordinated Notes due 2004.
"Initial Public Offering" means the first sale by the Corporation of
Common Stock of the Corporation to the public in an offering pursuant to an
effective registration statement filed with the Securities and Exchange
Commission pursuant to the 1933 Act, as then in effect; provided that an Initial
Public Offering shall not include an offering made in connection with a business
acquisition or combination or an employee benefit plan.
"Investors" means the New Investors and the Original Investors.
"Junior Securities" means (i) any class or series of Capital Stock of
the Corporation, whether now existing or hereafter authorized, that is junior to
any of the Series A Preferred or the
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Series B Preferred in priority with respect to dividends or distributions or
upon Liquidation, and (ii) any rights, warrants, options, convertible or
exchangeable securities, exercisable for or convertible or exchangeable into,
directly or indirectly, any class or series of capital stock described in clause
(i) of this definition, whether at the time of issuance or upon the passage of
time or the occurrence of some future event.
"Liquidation" with respect to the Corporation, means the liquidation,
dissolution or winding up of the Corporation. Except as permitted under the
Preferred Stockholders' Agreement, a consolidation, merger or capital
reorganization of the Corporation (except (i) into or with a wholly-owned
subsidiary of the Corporation with requisite stockholder approval or (ii) a
merger in which the beneficial owners of the Corporation's outstanding Capital
Stock immediately prior to such transaction (assuming for this purpose that all
outstanding warrants, options and other securities convertible into Capital
Stock that are outstanding at such time have been exercised or converted, as
applicable) hold no less than fifty-one percent (51%) of the voting power of the
resulting entity) or a sale, transfer or other disposition of all or
substantially all of the assets of the Corporation shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Corporation, and
shall constitute a Liquidation.
"Liquidation Preference Amount" means, with respect to a Preferred
Share, the Liquidation Value for such Preferred Share plus all accumulated and
accrued but unpaid dividends on such Preferred Share.
"Liquidation Value" of any Preferred Share shall be equal to $100.00.
"Majority Holders" means, collectively, the holders of a majority of
the issued and outstanding Preferred Shares as of the date of determination.
"Management Investors" means, collectively, Alfred C. Liggins,
Catherine L. Hughes, and Jerry A. Moore III.
"Net Cash Proceeds" means the gross cash proceeds actually received by
the Corporation from an Initial Public Offering, net of attorneys' fees,
accountants' fees, all discounts, underwriters' commissions, brokerage,
consultant or other customary fees and commissions, and all other reasonable
fees and expenses actually incurred by the Corporation in connection with such
Initial Public Offering.
"New Investors" means, collectively, Alta Subordinated Debt Partners
III, L.P., BancBoston Investments Inc. and Grant Wilson.
"Original Investors" means, collectively, Syncom Capital Corporation,
Alliance Enterprise Corporation, Greater Philadelphia Venture Capital
Corporation, Inc., Opportunity Capital Corporation, Capital Dimensions Venture
Fund, Inc., TSG Ventures Inc. and Fulcrum Venture Capital Corporation.
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"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated association and any other entity or organization.
"Preferred Stockholders' Agreement" means that certain Preferred
Stockholders' Agreement, dated as of May 14, 1997, by and among the Corporation,
the Original Investors, the New Investors and the Management Investors, as the
same may be amended from time to time.
"Redemption Date" as to any Preferred Share means the date specified in
any Redemption Notice or Put Notice, as applicable; provided, that no such date
shall be a Redemption Date unless the Liquidation Preference Amount is actually
paid in full on such date, and if not so paid in full, the Redemption Date shall
be the date on which such amount is fully paid.
"Regulated Stockholder" means any stockholder that is subject to the
provisions of Regulation Y and which holds shares of Common Stock of the
Corporation, so long as such stockholder shall hold, and only with respect to,
such shares of Common Stock or shares issued upon conversion of such shares.
"Regulation Y" means Regulation Y of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 225) or any successor to such regulation.
"Senior Indebtness" has the meaning given to such term in that certain
Standstill Agreement, effective as of May 19, 1997, among the Companies,
Liggins, Hughes, Moore, Syncom Capital Corporation, Alliance Enterprise
Corporation, Greater Philadelphia Venture Capital Corporation, Inc., Opportunity
Capital Corporation, Capital Dimensions Venture Fund, Inc., TSG Ventures Inc.,
Fulcrum Venture Capital Corporation, Alta Subordinated Debt Partners III, L.P.,
BancBoston Investments Inc., Grant M. Wilson, NationsBank of Texas, N.A., and
United States Trust Company of New York.
"Senior Loan Agreement" has the meaning given to such term in the
Preferred Stockholders' Agreement.
"Subsidiary" means any corporation with respect to which another
specified corporation has the power to vote or direct the voting of sufficient
securities to elect directors having a majority of the voting power of the board
of directors of such corporation.
"Warrantholders' Agreement" means that certain Warrantholders'
Agreement, dated as of June 6, 1995, by and among the Corporation, the
Subsidiaries of the Corporation party thereto, the Original Investors, the New
Investors and the Management Investors, as amended by the First Amendment to
Warrantholders' Agreement dated as of May 19, 1997, and as thereafter amended
from time to time.
ARTICLE V - Existence
The Corporation is to have a perpetual existence.
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ARTICLE VI - General Provisions
Section 6.1. Dividends. The Board of Directors of the Corporation shall
have authority from time to time to set apart out of any assets of the
Corporation otherwise available for dividends a reserve or reserves as working
capital or for any other purpose or purposes, and to abolish or add to any such
reserve or reserves from time to time as said Board may deem to be in the
interest of the Corporation; and said Board shall likewise have power to
determine in its discretion, except as herein otherwise provided, what part of
the assets of the Corporation available for dividends in excess of such reserve
or reserves shall be declared in dividends and paid to the stockholders of the
Corporation.
Section 6.2. Issuance of Stock. The shares of all classes and series of
Capital Stock of the Corporation may be issued by the Corporation from time to
time for such consideration as from time to time may be fixed by the Board of
Directors of the Corporation, provided that shares having a par value shall not
be issued for a consideration less than such par value, as determined by the
Board. At any time, or from time to time, the Corporation may grant rights or
options to purchase from the Corporation any shares of its Capital Stock of any
class or series to run for such period of time, for such consideration, upon
such terms and conditions, and in such form as the Board of Directors of the
Corporation may determine. The Board of Directors of the Corporation shall have
authority, as provided by law, to determine that only a part of the
consideration which shall be received by the Corporation for the shares of its
Capital Stock having a par value be capital provided that the amount of the part
of such consideration so determined to be capital shall at least be equal to the
aggregate par value of such shares. The excess, if any, at any time, of the
total net assets of the Corporation over the amount so determined to be capital,
as aforesaid, shall be surplus. All classes and series of Capital Stock of the
Corporation shall be and remain at all times nonassessable.
The Board of Directors of the Corporation is hereby expressly authorized,
in its discretion, in connection with the issuance of any obligations or Capital
Stock of the Corporation (but without intending hereby to limit its general
power so to do in other cases), to grant rights or options to purchase Capital
Stock of the Corporation of any class or series upon such terms and during such
period as the Board of Directors of the Corporation shall determine, and to
cause such rights to be evidenced by such warrants or other instruments as it
may deem advisable.
Section 6.3. Inspection of Books and Records. The Board of Directors of the
Corporation shall have power from time to time to determine to what extent and
at what times and places and under what conditions and regulations the accounts
and books of the Corporation, or any of them, shall be open to the inspection of
the stockholders; and no stockholder shall have any right to inspect any account
or book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or the stockholders of the Corporation.
Section 6.4. Location of Meetings, Books and Records. Except as otherwise
provided in the Bylaws, the stockholders of the Corporation and the Board of
Directors of the Corporation may hold their meetings and have an office or
offices outside of the State of Delaware, and, subject to the provisions of the
laws of said State, may keep the books of the Corporation outside of said State
at such places as may, from time to time, be designated by the Board of
Directors.
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Section 6.5. Board of Directors Meeting. The Board of Directors shall be
comprised of the number of directors specified in the Corporation's Bylaws, and
such directors shall be elected in the manner contemplated by such Bylaws.
ARTICLE VII - Amendments
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner now or hereinafter prescribed herein and by the laws of the State of
Delaware, and all rights conferred upon stockholders herein are granted subject
to this reservation. Notwithstanding the foregoing or anything contained in this
Amended and Restated Certificate of Incorporation to the contrary, no amendment,
modification or waiver shall be binding or effective with respect to any
provision of (i) Section 4.2 of ARTICLE IV (or any definitions used therein) or
clause (i) of this ARTICLE VII without the prior written consent of the Majority
Holders at the time such action is taken, (ii) Section 4.3 of ARTICLE IV (or any
definitions used therein) or clause (ii) of this ARTICLE VII without the prior
written consent of the Majority Holders and holders of a majority of the Common
Stock outstanding at the time such action is taken, or (iii) ARTICLE VIII or
clause (iii) of this ARTICLE VII without the affirmative vote of the holders of
at least two-thirds of the outstanding shares of Class A Common of the
Corporation and the prior written consent of the Majority Holders; provided,
that no such action under clause (iii) of this ARTICLE VII shall change (A) the
redemption, conversion, voting or other rights of any class or series of
Preferred Stock without the prior written consent of the holders of a majority
of each such class or series of Preferred Stock then outstanding, (B) the
conversion or voting rights of any class of Common Stock without the prior
written consent of the holders of a majority of each class of Common Stock then
outstanding, and (C) the percentage required to approve any amendment,
modification or waiver described herein, without the prior written consent of
holders of that percentage of the class or series of Capital Stock then required
to approve such amendment, modification or waiver.
ARTICLE VIII - Liability
Section 8.1. Limitation of Liability.
(a) To the fullest extent permitted by the DGCL as it now exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted as of the date this Amended and Restated Certificate of
Incorporation is filed with the State of Delaware), and except as otherwise
provided in the Corporation's Bylaws, no director of the Corporation shall be
liable to the Corporation or its stockholders for monetary damages arising from
a breach of fiduciary duty owed to the Corporation or its stockholders.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
Section 8.2. Right to Indemnification. Each person who was or is made party
or is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in
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any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter, an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide for broader indemnification rights than permitted as
of the date this Amended and Restated Certificate of Incorporation is filed with
the State of Delaware), against all expense, liability and loss (including
attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that except as provided in Section 8.3 of this ARTICLE VIII with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 8.2 of this ARTICLE VIII shall be a
contract right and shall include the obligation of the Corporation to pay the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advance of expenses"); provided, however, that if
and to the extent that the Board of Directors of the Corporation requires, an
advance of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Section 8.2 or otherwise. The Corporation may, by
action of its Board of Directors, provide indemnification to employees and
agents of the Corporation with the same or lesser scope and effect as the
foregoing indemnification of directors and officers.
Section 8.3. Procedure for Indemnification. Any indemnification of a
director or officer of the Corporation or advance of expenses under Section 8.2
of this ARTICLE VIII shall be made promptly, and in any event within forty-five
days (or, in the case of an advance of expenses, twenty days) upon the written
request of the director or officer. If a determination by the Corporation that
the director or officer is entitled to indemnification pursuant to this ARTICLE
VIII is required, and the Corporation fails to respond within sixty days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advance of expenses, in whole or in part, or if payment in full pursuant to such
request is not made within forty-five days (or, in the case of an advance of
expenses, twenty days), the right to indemnification or advances as granted by
this ARTICLE VIII shall be enforceable by the director or officer in any court
of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his or her right to indemnification,
in whole
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or in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of expenses where the undertaking required pursuant to
Section 8.2 of this ARTICLE VIII, if any, has been tendered to the Corporation)
that the claimant has not met the standards of conduct which make it permissible
under the DGCL for the Corporation to indemnify the claimant for the amount
claimed, but the burden of such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the DGCL, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct. The procedure for indemnification of other employees and
agents for whom indemnification is provided pursuant to Section 8.2 of this
ARTICLE VIII shall be the same procedure set forth in this Section 8.3 for
directors or officers, unless otherwise set forth in the action of the Board of
Directors of the Corporation providing for indemnification for such employee or
agent.
Section 8.4. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or was serving at the request of the
Corporation as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss asserted against him or her and incurred by him or her in any
such capacity, whether or not the Corporation would have the power to indemnify
such person against such expenses, liability or loss under the DGCL.
Section 8.5. Service for Subsidiaries. Any person serving as a director,
officer, employee or agent of another Corporation, partnership, limited
liability company, joint venture or other enterprise, at least 50% of whose
equity interests are owned by the Corporation (hereinafter a "subsidiary" for
this ARTICLE VIII) shall be conclusively presumed to be serving in such capacity
at the request of the Corporation.
Section 8.6. Reliance. Persons who after the date of the adoption of this
provision become or remain directors or officers of the Corporation or who,
while a director or officer of the Corporation, become or remain a director,
officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, advance of expenses and other rights
contained in this ARTICLE VIII in entering into or continuing such service. The
rights to indemnification and to the advance of expenses conferred in this
ARTICLE VIII shall apply to claims made against an indemnitee arising out of
acts or omissions which occurred or occur both prior and subsequent to the
adoption hereof.
Section 8.7. Non-Exclusivity of Rights. The rights to indemnification and
to the advance of expenses conferred in this ARTICLE VIII shall not be exclusive
of any other right which any person may have or hereafter acquire under this
Amended and Restated Certificate of Incorporation or under any statute, Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
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Section 8.8. Merger or Consolidation. For purposes of this ARTICLE VIII,
references to "the Corporation" shall include any constituent corporation
(including any constituent of a constituent) absorbed into the Corporation in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this ARTICLE VIII with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
ARTICLE IX - Alien Ownership of Stock
Section 9.1. Applicability. This ARTICLE IX shall be applicable to the
Corporation so long as the provisions of Section 310 of the Communications Act
of 1934, as the same may be amended from time to time (the "Communications Act")
(or any successor, provisions thereto) are applicable to the Corporation. As
used herein, the term "alien" shall have the meaning ascribed thereto by the
Federal Communications Commission ("FCC") on the date hereof and in the future
as Congress or the FCC may change such meaning form time to time. If the
provisions of Section 310 of the Communications Act (or any successor provisions
thereto) are amended, the restrictions in this ARTICLE IX shall be amended in
the same way, and as so amended, shall apply to the Corporation. The Board of
Directors of the Corporation may make such rules and regulations as it shall
deem necessary or appropriate to enforce the provisions of this ARTICLE IX.
Section 9.2 Voting. Except as otherwise provided by law, not more than
twenty percent of the aggregate number of shares of Capital Stock of the
Corporation outstanding in any class or series entitled to vote on any matter
before a meeting of stockholders of the Corporation shall at any time be for the
account of aliens or their representatives or for the account of a foreign
government or representative thereof, or for the account of any corporation
organized under the laws of a foreign country.
Section 9.3. Stock Certificates. Shares of Capital Stock issued to or held
by or for the account of aliens and their representatives, foreign governments
and representatives thereof, and corporations organized under the laws of
foreign countries shall be represented by Foreign Share Certificates. All other
shares of Capital Stock shall be represented by Domestic Share Certificates. All
of such certificates shall be in such form not inconsistent with this Amended
and Restated Certificate of Incorporation as shall be prepared or approved by
the Board of Directors of the Corporation.
Section 9.4. Limitation on Foreign Ownership. Except as otherwise provided
by law, not more than twenty percent of the aggregate number of shares of
Capital Stock of the Corporation outstanding shall at any time be owned of
record by or for the account of aliens or their representatives or by or for the
account of a foreign government or representatives thereof, or by or for the
account of any corporation organized under the laws of a foreign country. Shares
of Capital Stock shall not be transferable on the books of the Corporation to
aliens or their representatives, foreign governments or representatives thereof,
or corporations organized under the laws of foreign
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countries if, as a result of such transfer, the aggregate number of shares of
Capital Stock owned by or for the account of aliens and their representatives,
foreign governments and representatives thereof, and corporations organized
under the laws of foreign countries shall be more than twenty percent of the
number of shares of Capital Stock then outstanding. If it shall be found by the
Corporation that Capital Stock represented by a Domestic Share Certificate is,
in fact, held by or for the account of aliens or their representative, foreign
governments or representatives thereof, or corporations organized under the laws
of foreign countries, then such Domestic Share Certificate shall be canceled and
a new certificate representing such Capital Stock marked "Foreign Share
Certificate" shall be issued in lieu thereof, but only to the extent that after
such issuance the Corporation shall be in compliance with this ARTICLE IX;
provided, however, that if, and to the extent, such issuance would violate this
ARTICLE IX, then, the holder of such Capital Stock shall not be entitled to
vote, to receive dividends, or to have any other rights with regard to such
Capital Stock to such extent, except the right to transfer such Capital Stock to
a citizen of the United States.
Section 9.5. Transfer of Foreign Share Certificates. Any Capital Stock
represented by Foreign Share Certificates may be transferred either to aliens or
non-aliens. In the event that any Capital Stock represented by a certificate
marked "Foreign Share Certificate" is sold or transferred to a non-alien, then
such non-alien shall be required to exchange such certificate for a certificate
marked "Domestic Share Certificate." If the Board of Directors of the
Corporation reasonably determines that a Domestic Share Certificate has been or
is to be transferred to or for the account of aliens or their representatives,
foreign governments or representatives thereof, or corporations organized under
the laws of foreign countries, the Corporation shall issue a new certificate for
the shares of Capital Stock transferred to the transferee marked "Foreign Shares
Certificate", cancel the old Domestic Share Certificate, and record the
transaction upon its books, but only to the extent that after such transfer is
complete, the Corporation shall be in compliance with this ARTICLE IX.
Notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation, the transfer or conversion of the Corporation's
Capital Stock, whether voluntary or involuntary, shall not be permitted, and
shall be ineffective, if such transfer or conversion would (i) violate (or would
result in violation of) the Communications Act or any of the rules or regulation
promulgated thereunder or (ii) require the prior approval of the FCC, unless
such prior approval has been obtained.
20
AMENDED AND RESTATED
BYLAWS
OF
RADIO ONE, INC.
(AS OF MAY 16, 1997)
ARTICLE I - OFFICES
Section 1. Registered Office. The registered office in the
State of Delaware shall be at 9 East Loockerman Street, in the City of Dover,
County of Kent. The name of the corporation's registered agent at such address
shall be National Registered Agents, Inc. The registered office or registered
agent of the corporation may be changed from time to time by action of the board
of directors on the filing of a certificate or certificates as required by law.
Section 2. Other Offices. The corporation may also have
offices at such other places, both within and without the State of Delaware, as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of
the stockholders shall be held each year, beginning in the year 1998, prior to
the last day of April. At such meeting, the stockholders shall elect the
directors of the corporation and conduct such other business as may come before
the meeting. The time and place of the annual meeting shall be determined by the
board of directors. Special meetings of the stockholders for any other purpose
may be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof. Special meetings of the stockholders may be called by the
president or the chairman of the board for any purpose and shall be called by
the secretary if directed by the board of directors.
Section 2. Notice. Whenever stockholders are required or
permitted to take action at a meeting, written or printed notice of every annual
or special meeting of the stockholders, stating the place, date, time, and, in
the case of special meetings, the purpose or purposes, of such meeting, shall be
given to each stockholder entitled to vote at such meeting not less than l0 nor
more than 60 days before the date of the meeting. All such notices shall be
delivered, either personally or by mail, by or at the direction of the board of
directors, the chairman of the board, the chief executive officer, the president
or the secretary, and if mailed, such notice shall be deemed to be delivered
when deposited in the United States mail with postage prepaid and addressed to
the stockholder at his or her address as it appears on the records of the
corporation.
<PAGE>
Section 3. Stockholders List. The officer having charge of the
stock ledger of the corporation shall make, at least l0 days before every
meeting of the stockholders, a complete list arranged in alphabetical order of
the stockholders entitled to vote at such meeting, specifying the address of and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least l0 days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 4. Quorum. The holders of a majority of the
outstanding shares of capital stock entitled to vote thereat, whether present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by statute or by the certificate of
incorporation. If a quorum is not present, the holders of the shares present in
person or represented by proxy at the meeting and entitled to vote thereat shall
have the power, by the affirmative vote of the holders of a majority of such
shares, to adjourn the meeting to another time or place. Unless the adjournment
is for more than thirty days or unless a new record date is set for the
adjourned meeting, no notice of the adjourned meeting need be given to any
stockholder, provided that the time and place of the adjourned meeting were
announced at the meeting at which the adjournment was taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting.
Section 5. Vote Required. When a quorum is present or
represented by proxy at any meeting, the vote of the holders of a majority of
the shares of capital stock present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable statute or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 6. Voting Rights. Except as otherwise provided by the
Delaware General Corporation Law or by the certificate of incorporation of the
corporation or any amendments thereto and subject to Section 3 of ARTICLE VI
hereof, each stockholder shall at every meeting of the stockholders be entitled
to one vote in person or by proxy for each share of capital stock held by such
stockholder.
Section 7. Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for him
or her by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 8. Action by Written Consent. Any action required to
be taken at any annual or special meeting of stockholders of the corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of capital stock entitled
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to vote thereon were present and voted, and shall be delivered to the
corporation by delivery to its registered office in the State of Delaware or the
corporation's principal place of business or an officer or agent of the
corporation having custody of the books in which proceedings of meetings are
recorded. All consents delivered in accordance with this section shall be deemed
to be recorded when so delivered. No written consent shall be effective to take
the corporate action referred to therein unless, within 60 days of the earliest
date on which any consent is delivered to the corporation as required by this
section, written consents signed by the holders of a sufficient number of shares
to take such corporate action are recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing. Any action
taken pursuant to such written consent of the stockholders shall have the same
force and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III - DIRECTORS
Section 1. Number, Election and Term of Office. The board of
directors shall be five (5) in number; provided, however, the number of members
of the board of directors shall be increased to nine (9) at the election of
Investors (as defined in the Preferred Stockholders' Agreement (the "PSA") dated
as of May __, 1997 among Radio One, Inc., Radio One Licenses, Inc., and the
other parties thereto and the Warrantholders' Agreement (the "WA") dated as of
June 6, 1995 among Radio One, Inc., Radio One Licenses, Inc. and the other
parties thereto, as amended by the First Amendment to Warrantholders' Agreement
dated as of May __, 1997, as applicable) in accordance with, and subject to the
terms and conditions of, Section 10 of the PSA or Article VI of the WA, as
applicable (an election to increase the size of the board of directors is
referred to herein as the "Special Election"). The directors shall be elected at
the annual meeting of stockholders, except as provided in Section 3 of this
ARTICLE III, and each director elected shall hold office until the next annual
meeting of stockholders and until a successor is duly elected and qualified or
until his or her death, resignation or removal as hereinafter provided.
Section 2. Removal and Resignation. Any director or the entire
board of directors may be removed at any time, with or without cause, by the
holders of a majority of the shares of stock of the corporation then entitled to
vote at an election of directors, except as otherwise provided by statute. Any
director may resign at any time upon written notice to the corporation.
Section 3. Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled only by the holders of a majority of the shares of stock of the
corporation then entitled to vote at an election of directors at an annual or
special meeting of stockholders, and each director so chosen shall hold office
until the next annual meeting of stockholders and until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided; provided, however, that any vacancy created as a result
of the Special Election shall be filled in the manner provided for in Section 10
of the PSA or Article VI of the WA, as applicable, and a director so elected
shall continue to serve as a director until the date on which the Special
Election is no longer in effect, at which time the number of directors
constituting the board of directors of the corporation shall decrease to such
number as constituted the whole board of directors of the corporation
immediately prior to the exercise of the Special Election.
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Section 4. Annual Meetings. The annual meeting of each newly
elected board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
Section 5. Other Meetings and Notice. Regular meetings, other
than the annual meeting, of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by
resolution of the board. Special meetings of the board of directors may be
called by or at the request of the chairman, the chief executive officer or the
president on at least 24 hours notice to each director, either personally, by
telephone, by mail, or by telegraph; in like manner and on like notice the
secretary must call a special meeting on the written request of a majority of
directors; in like manner on like notice, the secretary must call a special
meeting on the written request of Investors holding a majority of the
outstanding Preferred Shares (as defined in the PSA); provided that any such
request made by such Investors must be called in good faith for a reasonable
business purpose.
Section 6. Quorum. A majority of the total number of directors
shall constitute a quorum for the transaction of business. The vote of a
majority of directors present at a meeting at which a quorum is present shall be
the act of the board of directors. If a quorum shall not be present at any
meeting of the board of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 7. Committees. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees. Each committee shall consist of one or more of the directors of the
corporation, which, to the extent provided in such resolution and not otherwise
limited by statute, shall have and may exercise the powers of the board of
directors in the management and affairs of the corporation including without
limitation the power to declare a dividend and to authorize the issuance of
stock. The board of directors may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors. Each committee shall keep regular minutes of its meetings
and report the same to the directors when required.
Section 8. Committee Rules. Each committee of the board of
directors may fix its own rules of procedure and shall hold its meetings as
provided by such rules, except as may otherwise be provided by the resolution of
the board of directors designating such committee, but in all cases the presence
of at least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that member's alternate, if
alternates are designated by the board of directors as provided in Section 7 of
this ARTICLE III, of such committee is/are absent or disqualified, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Section 9. Communications Equipment. Members of the board of
directors or any committee thereof may participate in and act at any meeting of
such board or committee through the use of a conference telephone or other
communications equipment by means of which all persons
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participating in the meeting can hear each other, and participation in the
meeting pursuant to this section shall constitute presence in person at the
meeting.
Section 10. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee.
ARTICLE IV - OFFICERS
Section 1. Number. The officers of the corporation shall be
elected by the board of directors and shall consist of a chairman of the board
(if the board of directors so deems advisable and elects), a president (who
shall perform the functions of the chairman of the board if none be elected),
one or more vice-presidents, a secretary, a treasurer, and such other officers
and assistant officers as may be deemed necessary or desirable by the board of
directors. Any number of offices may be held by the same person. In its
discretion, the board of directors may choose not to fill any office for any
period as it may deem advisable, except the offices of president and secretary.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at the meeting
of the board of directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each
officer shall hold office until the next annual meeting of the board of
directors and until a successor is duly elected and qualified or until his or
her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board
of directors may be removed by the board of directors whenever in its judgment
the best interest of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be
fixed by the board of directors, and no officer shall be prevented from
receiving such compensation by virtue of the fact that he or she is also a
director of the corporation.
Section 6. Chairman of the Board. The chairman shall preside
at all meetings of the board of directors and all meetings of the stockholders
and shall have such other powers and perform such duties as may from time to
time be assigned to him by the board of directors.
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Section 7. The Chief Executive Officer. The chief executive
officer of the corporation shall have such powers and perform such duties as are
specified in these bylaws and as may from time to time be assigned to him by the
board of directors.
The chief executive officer shall have overall management of
the business of the corporation and its subsidiaries and shall see that all
orders and resolutions of the boards of directors of the corporation and its
subsidiaries are carried into effect. The chief executive officer shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation. The chief executive officer shall have general powers of
supervision and shall be the final arbitrator of all differences among officers
of the corporation and its subsidiaries, and such decision as to any matter
affecting the corporation and its subsidiaries subject only to the boards of
directors.
Section 8. The President. The president shall have such powers
and perform such duties as are specified in these bylaws and as may from time to
time be assigned to him by the board of directors.
The president shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of the
board of directors are carried into effect. The president shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation. The president shall have general powers of supervision and
shall be the final arbitrator of all differences between officers of the
corporation, and such decision as to any matter affecting the corporation
subject only to the board of directors.
Section 9. Vice Presidents. The vice-president, or if there
shall be more than one, the vice-presidents in the order determined by the board
of directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the board of directors may, from time to
time, determine or these bylaws may prescribe.
Section 10. The Secretary and Assistant Secretaries. The
secretary shall attend all meetings of the board of directors and all meetings
of the stockholders and record all the proceedings of the meetings of the
corporation and the board of directors in a book to be kept for that purpose and
shall perform like duties for the standing committees when required. The
secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors; perform such other
duties as may be prescribed by the board of directors or president, under whose
supervision he or she shall be; shall have custody of the corporate seal of the
corporation and the secretary, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and
6
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exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
Section 11. The Treasurer and Assistant Treasurer. The
treasurer shall have the custody of the corporate funds and securities; shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the corporation; shall deposit all monies and other valuable effects in the
name and to the credit of the corporation as may be ordered by the board of
directors, taking proper vouchers for such disbursements; and shall render to
the president and the board of directors, at its regular meeting or when the
board of directors so requires, an account of the corporation. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six years) in such sums and with such surety or sureties
as shall be satisfactory to the board of directors for the faithful performance
of the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
Section 12. Other Officers, Assistant Officers and Agents.
Officers, assistant officers and agents, if any, other than those whose duties
are provided for in these bylaws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the board of
directors.
ARTICLE V - INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Right to Indemnification. Each person who was or is
made party or is threatened to be made a party to or is otherwise involved
(including involvement as a witness) in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or officer of the
corporation or, while a director or officer of the corporation, is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter, an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer, shall be indemnified and held harmless
by the corporation to the fullest extent authorized by the Delaware General
Corporation Law ("DGCL"), as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the corporation to provide for broader indemnification rights than
permitted as of the date of these bylaws), against all expense, liability and
loss (including attorneys' fees, judgments, fines, excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the indemnitee's heirs, executors and administrators;
provided, however, that except as provided in Section 2 of this ARTICLE V with
respect to proceedings to enforce rights to indemnification, the corporation
shall indemnify any such
7
<PAGE>
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the board
of directors of the corporation. The right to indemnification conferred in this
Section 1 of this ARTICLE V shall be a contract right and shall include the
obligation of the corporation to pay the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an "advance of
expenses"); provided, however, that if and to the extent that the board of
directors of the corporation requires, an advance of expenses incurred by an
indemnitee in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such indemnitee, including,
without limitation, service to an employee benefit plan) shall be made only upon
delivery to the corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 1 or otherwise. The corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same or lesser scope and effect as the foregoing indemnification of
directors and officers.
Section 2. Procedure for Indemnification. Any indemnification
of a director or officer of the corporation or advance of expenses under Section
1 of this ARTICLE V shall be made promptly, and in any event within forty-five
days (or, in the case of an advance of expenses, twenty days) upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this ARTICLE
V is required, and the corporation fails to respond within sixty days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advance of expenses, in whole or in part, or if payment in full pursuant to such
request is not made within forty-five days (or, in the case of an advance of
expenses, twenty days), the right to indemnification or advances as granted by
this ARTICLE V shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of expenses where the undertaking required pursuant to
Section 1 of this ARTICLE V, if any, has been tendered to the corporation) that
the claimant has not met the standards of conduct which make it permissible
under the DGCL for the corporation to indemnify the claimant for the amount
claimed, but the burden of such defense shall be on the corporation. Neither the
failure of the corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the DGCL, nor an actual determination by the corporation (including
its board of directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct. The procedure for indemnification of other employees and
agents for whom indemnification is provided pursuant to Section 1 of this
ARTICLE V shall be the same procedure set forth in this Section 2 for directors
or officers, unless otherwise set forth in the action of the board of directors
of the corporation providing for indemnification for such employee or agent.
Section 3. Insurance. The corporation may purchase and
maintain insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee or agent of the
8
<PAGE>
corporation or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss asserted
against him or her and incurred by him or her in any such capacity, whether or
not the corporation would have the power to indemnify such person against such
expenses, liability or loss under the DGCL.
Section 4. Service for Subsidiaries. Any person serving as a
director, officer, employee or agent of another corporation, partnership,
limited liability company, joint venture or other enterprise, at least 50% of
whose equity interests are owned by the corporation (hereinafter a "subsidiary"
for purposes of this ARTICLE V) shall be conclusively presumed to be serving in
such capacity at the request of the corporation.
Section 5. Reliance. Persons who after the date of the
adoption of these bylaws become or remain directors or officers of the
corporation or who, while a director or officer of the corporation, become or
remain a director, officer, employee or agent of a subsidiary, shall be
conclusively presumed to have relied on the rights to indemnity, advance of
expenses and other rights contained in this ARTICLE V in entering into or
continuing such service. The rights to indemnification and to the advance of
expenses conferred in this ARTICLE V shall apply to claims made against an
indemnitee arising out of acts or omissions which occurred or occur both prior
and subsequent to the adoption hereof.
Section 6. Non-Exclusivity of Rights. The rights to
indemnification and to the advance of expenses conferred in this ARTICLE V shall
not be exclusive of any other right which any person may have or hereafter
acquire under these bylaws or the corporation's certificate of incorporation or
under any statute, agreement, vote of stockholders or disinterested directors or
otherwise.
Section 7. Merger or Consolidation. For purposes of this
ARTICLE V, references to "the corporation" shall include any constituent
corporation (including any constituent of a constituent) absorbed into the
corporation in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this ARTICLE V with respect
to the resulting or surviving corporation as he or she would have with respect
to such constituent corporation if its separate existence had continued.
ARTICLE VI - CERTIFICATES OF STOCK
Section 1. Form. Subject to ARTICLE X of the certificate of
incorporation, every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by the
president or a vice-president, and the secretary or an assistant secretary of
the corporation, certifying the number of shares owned by him or her in the
corporation. Where a certificate is signed (l) by a transfer agent or an
assistant transfer agent other than the corporation or its employee or (2) by a
registrar, other than the corporation or its employee, the signature of any
9
<PAGE>
such president, vice-president, secretary, or assistant secretary may be
facsimile. In case any officer or officers have signed a certificate or
certificates, or whose facsimile signature or signatures have been used on
certificate or certificates, shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used on such certificate or
certificates had not ceased to be such officer or officers of the corporation.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
books of the corporation. All certificates surrendered to the corporation for
transfer shall be cancelled, and no new certificate shall be issued in
replacement until the former certificate for a like number of shares shall have
been surrendered or cancelled, except as otherwise provided in Section 2 with
respect to lost, stolen or destroyed certificates.
Section 2. Lost Certificates. Subject to ARTICLE X of the
certificate of incorporation, the board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 3. Fixing a Record Date. The board of directors may
fix in advance a record date for the determination of stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof; stockholders entitled to consent to corporate action in writing without
a meeting; stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or entitled to exercise any rights in
respect to any change, conversion or exchange of stock; or, for the purpose of
any other lawful action, which record date may not precede the date on which the
resolution fixing such record date is adopted by the board of directors. The
record date for the determination of stockholders entitled to notice of, and to
vote at, a meeting of stockholders shall not be more than 60 days nor less than
10 days before the date of such meeting. The record date for the determination
of stockholders entitled to consent to corporate action in writing without a
meeting shall not be more than 10 days after the date upon which the resolution
fixing the record date is adopted by the board of directors. The record date for
the determination of stockholders with respect to any other action shall not be
more than 60 days before the date of such action. If no record date is fixed:
the record date for determining stockholders entitled to notice of, and to vote
at, a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held; the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting when no prior action by the board of directors is
required by the Delaware General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal
10
<PAGE>
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded; and, the
record date for determining stockholders with respect to any other action shall
be the close of business on the day on which the board of directors adopts the
resolution relating thereto.
ARTICLE VII - GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, equalize dividends, repair or
maintain any property of the corporation, or for any other purpose, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or
other orders for the payment of money by or to the corporation and all notes and
other evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents of the corporation, and in
such manner, as shall be determined by resolution of the board of directors or a
duly authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any
officer or officers, or any agent or agents, of the corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the corporation, and such authority may be general or confined to
specific instances.
Section 4. Loans. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiary, including any officer or employee who
is a director of the corporation or its subsidiary, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation
shall be fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall
provide a corporate seal which shall be in the form of a circle and shall have
inscribed thereon the name of the corporation and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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Section 7. Voting Securities Owned by Corporation. Voting
securities in any other corporation held by the corporation shall be voted by
the president or the vice president, unless the board of directors specifically
confers authority to vote with respect thereto upon some other person or
officer. Any person authorized to vote securities shall have the power to
appoint proxies, with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of
record, in person or by attorney or other agent, shall, upon written demand upon
oath stating the purpose thereof, have the right during the usual hours of
business to inspect for any proper purpose the corporation's stock ledger, a
list of its stockholders, and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean any purpose reasonably related
to such person's interest as a stockholder. In every instance where an attorney
or other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these bylaws
are for convenience of reference only and shall not be given any substantive
effect in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any
provision of these bylaws is or becomes inconsistent with any provision of the
certificate of incorporation, the Delaware General Corporation Law or any other
applicable law, the provision of these bylaws shall not be given any effect to
the extent of such inconsistency but shall otherwise be given full force and
effect.
ARTICLE VIII - AMENDMENTS
These bylaws may be amended, altered or repealed and new
bylaws adopted at any meeting of the board of directors by a majority vote,
provided that the affirmative vote of the holders of a majority of the shares of
common stock of the corporation then entitled to vote and of any series or class
of preferred stock of the Corporation then outstanding shall be required to
adopt any provision inconsistent with, or to amend or repeal any provision of,
Section 1 or 3 of ARTICLE III or this ARTICLE VIII. The fact that the power to
adopt, amend, alter or repeal the bylaws has been conferred upon the board of
directors shall not divest the stockholders of the same powers.
================================================================================
RADIO ONE, INC.,
Issuer
12% Senior Subordinated Notes Due 2004
------------
INDENTURE
Dated as of May 15, 1997
------------
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.08; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.05
(b) .............................. 13.03
(c) .............................. 13.03
313(a) .............................. 7.06
(b)(1) .............................. N.A.
(b)(2) .............................. 7.06
(c) .............................. 13.02
(d) .............................. 7.06
314(a) .............................. 4.02;
4.14; 13.02
(b) .............................. N.A.
(c)(1) .............................. 13.04
(c)(2) .............................. 13.04
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 13.05
(f) .............................. 4.14
315(a) .............................. 7.01
(b) .............................. 7.05; 13.02
(c) .............................. 7.01
(d) .............................. 7.01
(e) .............................. 6.11
316(a)(last sentence) .............................. 13.06
(a)(1)(A) .............................. 6.05
(a)(1)(B) .............................. 6.04
(a)(2) .............................. N.A.
(b) .............................. 6.07
317(a)(1) .............................. 6.08
(a)(2) .............................. 6.09
(b) .............................. 2.04
318(a) .............................. 13.01
N.A. means Not Applicable.
- ----------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 Page Page
----
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions ..................................... 1
SECTION 1.02. Other Definitions ............................... 23
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ........................ 23
SECTION 1.04. Rules of Construction ........................... 24
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating ................................ 24
SECTION 2.02. Execution and Authentication ................... 25
SECTION 2.03. Registrar and Paying Agent ..................... 25
SECTION 2.04. Paying Agent To Hold Money in Trust............. 26
SECTION 2.05. Securityholder Lists ........................... 27
SECTION 2.06. Transfer and Exchange .......................... 27
SECTION 2.07. Replacement Securities ......................... 28
SECTION 2.08. Outstanding Securities ......................... 28
SECTION 2.09. Temporary Securities ........................... 29
SECTION 2.10. Cancellation ................................... 29
SECTION 2.11. Defaulted Interest ............................. 29
SECTION 2.12. CUSIP Number ................................... 29
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee ............................. 30
SECTION 3.02. Selection of Securities To Be
Redeemed ............................ 30
SECTION 3.03. Notice of Redemption ........................... 31
SECTION 3.04. Effect of Notice of Redemption ................. 32
SECTION 3.05. Deposit of Redemption Price .................... 32
SECTION 3.06. Securities Redeemed in Part .................... 32
<PAGE>
2
ARTICLE 4
Covenants
----------
SECTION 4.01. Payment of Securities .......................... 32
SECTION 4.02. SEC Reports .................................... 33
SECTION 4.03. Limitation on Incurrence of Indebtedness
and Issuance of Preferred Stock ..... 33
SECTION 4.04. Limitation on Senior Subordinated
Debt ................................ 35
SECTION 4.05. Limitation on Restricted Payments............... 35
SECTION 4.06. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted
Subsidiaries ....................... 38
SECTION 4.07. Limitation on Certain Asset Sales .............. 40
SECTION 4.08. Transactions with Affiliates ................... 41
SECTION 4.09. Limitation on Restricted Subsidiary Equity
Interests ................................. 42
SECTION 4.10. Change of Control .............................. 43
SECTION 4.11. Limitation on Asset Swaps ...................... 43
SECTION 4.12. Future Subsidiary Guarantors ................... 44
SECTION 4.13. Compliance Certificate ......................... 44
SECTION 4.14. Further Instruments and Acts ................... 44
SECTION 4.15. Ratings for Notes .............................. 44
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company May Merge or Transfer
Assets ............................... 45
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default .............................. 47
SECTION 6.02. Acceleration ................................... 49
SECTION 6.03. Other Remedies ................................. 50
SECTION 6.04. Waiver of Past Defaults ........................ 50
SECTION 6.05. Control by Majority ............................ 50
SECTION 6.06. Limitation on Suits ............................ 50
SECTION 6.07. Rights of Holders to Receive Payment ........... 51
SECTION 6.08. Collection Suit by Trustee ..................... 51
SECTION 6.09. Trustee May File Proofs of Claim ............... 51
<PAGE>
3
SECTION 6.10. Priorities ..................................... 52
SECTION 6.11. Undertaking for Costs .......................... 52
SECTION 6.12. Waiver of Stay or Extension Laws ............... 53
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee .............................. 53
SECTION 7.02. Rights of Trustee .............................. 54
SECTION 7.03. Individual Rights of Trustee ................... 55
SECTION 7.04. Trustee's Disclaimer ........................... 56
SECTION 7.05. Notice of Defaults ............................. 56
SECTION 7.06. Reports by Trustee to Holders .................. 56
SECTION 7.07. Compensation and Indemnity ..................... 56
SECTION 7.08. Replacement of Trustee ......................... 57
SECTION 7.09. Successor Trustee by Merger .................... 58
SECTION 7.10. Eligibility; Disqualification .................. 59
SECTION 7.11. Preferential Collection of Claims
Against Company ..................... 59
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities;
Defeasance .......................... 59
SECTION 8.02. Conditions to Defeasance ....................... 61
SECTION 8.03. Application of Trust Money ..................... 62
SECTION 8.04. Repayment to Company ........................... 62
SECTION 8.05. Indemnity for Government
Obligations ......................... 62
SECTION 8.06. Reinstatement .................................. 62
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders ..................... 63
SECTION 9.02. With Consent of Holders ........................ 64
SECTION 9.03. Compliance with Trust Indenture ................ 65
SECTION 9.04. Revocation and Effect of Consents
and Waivers ......................... 65
SECTION 9.05. Notation on or Exchange of
Securities .......................... 66
SECTION 9.06. Trustee To Sign Amendments ..................... 66
<PAGE>
4
SECTION 9.07. Payment for Consent ............................ 66
ARTILCE 10
Subordination
-------------
SECTION 10.01. Agreement to Subordinate ....................... 67
SECTION 10.02. Liquidation, Dissolution, Bankruptcy ........... 67
SECTION 10.03. Default on Senior Indebtedeness ................ 67
SECTION 10.04. Acceleration of Payment of Securites ........... 69
SECTION 10.05. When Distribution Must Be Paid Over ............ 69
SECTION 10.06. Subrogation .................................... 69
SECTION 10.07. Relative Rights ................................ 70
SECTION 10.08. Subordination May Not Be Impared By
Company ............................ 70
SECTION 10.09. Rights of Trustee and Paying
Agent .............................. 70
SECTION 10.10. Distribution or Notice to
Representative ..................... 71
SECTION 10.11. Article 10 Not to Prevent Events
of Defaults or Limit Right
To Accelerate ...................... 71
SECTION 10.12. Trust Moneys Not Subordinate ................... 71
SECTION 10.13. Trustee Entitled to Rely ....................... 72
SECTION 10.14. Trustee to Effectuate Subordination ............ 72
SECTION 10.15. Trustee Not Fiduciary for Holders
of Senior Debt ..................... 72
SECTION 10.16. Reliance by Holders of Senior Debt
on Subordination Provisions ........ 73
ARTICLE 11
Subsidiary Guaranties
---------------------
SECTION 11.01. Guaranties ..................................... 73
SECTION 11.02. Limitation on Liability ........................ 75
SECTION 11.03. Successors and Assigns ......................... 76
SECTION 11.04. No Waiver ...................................... 76
SECTION 11.05. Modification ................................... 76
SECTION 11.06. Release of Subsidiary Guarantor ................ 76
<PAGE>
5
ARTICLE 12
Subordination of Subsidiary Guranties
-------------------------------------
SECTION 12.01. Agreement to Subordinate ....................... 77
SECTION 12.02. Liquidation, Dissolution, Bankruptcy ........... 77
SECTION 12.03. Default on Senior Debt of
Subsidiary Guarantor .............. 78
SECTION 12.04. Demand for Payment ............................. 78
SECTION 12.05. When Distribution Must Be Paid Over ............ 79
SECTION 12.06. Subrogation .................................... 79
SECTION 12.07. Relative Rights ................................ 79
SECTION 12.08. Subordination May Not Be Impaired
by Company ........................ 79
SECTION 12.09. Rights of Trustee and Paying Agent ............. 80
SECTION 12.10. Distribution or Notice to
Representation .................... 81
SECTION 12.11. Article 12 Not To Prevent Defaults
Under a Subsidiary Guarantee or
Limit Right to Demand Payment ..... 81
SECTION 12.12. Trustee Entitled to Rely ....................... 81
SECTION 12.13. Trustee To Effectuate Subordination ............ 82
SECTION 12.14. Trustee Not Fiduciary for Holders
of Senior Debt of Subsidiary
Guarantor ......................... 82
SECTION 12.15. Reliance by Holders of Senior Debt
on Subordination Provisions ........ 82
ARTICLE 13
Miscellaneous
-------------
SECTION 13.01. Trust Indenture Act Controls ................... 82
SECTION 13.02. Notices ........................................ 83
SECTION 13.03. Communication by Holders with Other
Holders ............................ 83
SECTION 13.04. Certificate and Opinion as to
Conditions Precedent ............... 83
SECTION 13.05. Statements Required in Certificate
or Opinion ......................... 84
SECTION 13.06. When Securities Disregarded .................... 84
SECTION 13.07. Rules by Trustee, Paying Agent and
Registrar .......................... 85
SECTION 13.08. Legal Holidays ................................. 85
SECTION 13.09. Governing Law .................................. 85
SECTION 13.10. No Recourse Against Others ..................... 85
<PAGE>
6
SECTION 13.11. Successors ..................................... 85
SECTION 13.12. Multiple Originals ............................. 85
SECTION 13.13. Table of Contents; Headings .................... 85
Exhibit A - Form of Security
Rule 144A/Regulation S Appendix
<PAGE>
INDENTURE dated as of May 15, 1997, among
RADIO ONE, INC., a Delaware corporation (the
"Company"), RADIO ONE LICENSES, INC., as guarantor
("License Sub"), and UNITED STATES TRUST COMPANY OF
NEW YORK, a New York trust company (the "Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's 12%
Senior Subordinated Notes Due 2004 (the "Initial Securities") and, if and when
issued pursuant to a registered exchange for Initial Securities, the Company's
12% Senior Subordinated Notes Due 2004 (the "Exchange Securities") and, if and
when issued pursuant to a private exchange for Initial Securities, the Company's
12% Senior Subordinated Notes Due 2004 (the "Private Exchange Securities",
together with the Exchange Securities and the Initial Securities, the
"Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Accreted Value" means, as of any date (the "Specified Date"),
the amount provided below for each $1,000 principal amount of the Securities:
(i) if the Specified Date occurs on one of the following dates
(each, a "Semi-Annual Accrual Date"), the Accreted Value will equal the
amount set forth below for such Semi-Annual Accrual Date:
Semi-Annual Accrual Date Accreted Value
------------------------ --------------
November 15, 1997 $894.69
May 15, 1998 913.37
November 15, 1998 933.17
May 15, 1999 954.17
November 15, 1999 976.42
May 15, 2000 1,000.00
(ii) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of (a) the original issue
price for each $1,000 principal amount of the Securities and (b) an
amount equal to the product of (1) the Accreted Value for the first
Semi-Annual Accrual Date less such original issue price, multiplied by
(2) a fraction, the numerator of which is the number of days from the
Issue Date to the Specified Date, using a 360-day year of 12 30-day
<PAGE>
2
months, and the denominator of which is the number of days elapsed from
the Issue Date to the first Semi-Annual Accrual Date, using a 360-day
year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value
for the Semi-Annual Accrual Date immediately preceding such Specified
Date and (b) an amount equal to the product of (1) the Accreted Value
for the immediately following Semi-Annual Accrual Date less the Accreted
Value for the immediately preceding Semi-Annual Accrual Date multiplied
by (2) a fraction, the numerator of which is the number of days from the
immediately preceding Semi-Annual Accrual Date to the Specified Date,
using a 360-day year of 12 30-day months, and the denominator of which
is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Debt" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merges
with or into, or becomes a Subsidiary of, such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into, or becoming a Subsidiary of, such specified Person.
"Affiliate" means, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For purposes of this
definition, "control of" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") any Person means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agent" means NationsBank of Texas, N.A., in its capacity as
agent for the lenders under the Credit Agreement.
"Asset Swap" means the execution of a definitive agreement,
subject only to FCC approval and other customary
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3
closing conditions, that the Company in good faith believes will be satisfied,
for a substantially concurrent purchase and sale, or exchange, of Broadcast
Assets between the Company or any of its Wholly Owned Restricted Subsidiaries
and another Person or group of Affiliated Persons; provided that any amendment
to or waiver of any closing condition which individually or in the aggregate is
material to the Asset Swap shall be deemed to be a new Asset Swap.
"Broadcast Assets" means assets used or useful in the
ownership or operation of an AM or FM radio station.
"Broadcast License" means an authorization issued by the FCC
for the operation of an AM or FM radio station.
"Capital Lease Obligation" means, at any time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on the
balance sheet in accordance with GAAP.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
less than one year from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of less than one year from the date
of acquisition, bankers' acceptances with maturities of less than one year and
overnight bank deposits, in each case with any lender party to the Credit
Agreement or with any domestic commercial bank having capital and surplus in
excess of $500,000,000 and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) entered into with
any financial institution meeting the qualifications specified in clause (iii)
immediately above, (v) commercial paper having the highest rating obtainable for
Moody's Investors Service, Inc. or Standard & Poor's Ratings Services and in
each case maturing within nine months after the date of acquisition and (vi)
interests in money market mutual funds which invest solely in assets or
securities of the type described in clauses (i)-(v) immediately above.
"Change of Control" means the occurrence of any of the
following:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the Company's assets to any
Person or group (as
<PAGE>
4
such term is used in Section 13(d)(3) of the Exchange Act) (other than
any or all of the Principal Shareholders or their Related Parties);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(iii) prior to the first Public Equity Offering of the Company, either
(x) the Principal Shareholders and their Related Parties cease to be the
beneficial owner of at least 35% of the voting power of the voting stock
of the Company or (y) any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act) other than the Warrantholders
acquires, directly or indirectly, 35% or more of the voting power of the
voting stock of the Company by way of merger, consolidation or
otherwise;
(iv) following the first Public Equity Offering of the Company, any
Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act) (other than one or more of the Principal Shareholders and
their Related Parties) acquires, directly or indirectly, 35% or more of
the voting power of the voting stock of the Company by way of merger or
consolidation or otherwise; provided, however, that such acquisition
will not constitute a "Change of Control" (x) in the case of a Person or
group consisting of the Warrantholders, if and for so long as the
Principal Shareholders and Related Parties, individually or
collectively, own at least 30% of the voting power of the voting stock
of the Company and have the right or ability by voting power, contract
or otherwise to elect or designate for electing a majority of the board
of directors of the Company, or (y) in the case of any Person or group
not including any Warrantholder, unless or until such Person or group
owns, directly or indirectly, more of the voting power of the voting
stock of the Company than the Principal Shareholders and their Related
Parties; or
(v) the Continuing Directors cease for any reason (other than as a
result and during the continuance of a default under the Warrant
Agreement entitling the Warrantholders to appoint directors) to
constitute a majority of the directors of the Company then in office.
For purposes of this definition, any transfer of an Equity
Interest of an entity that was formed for the purpose of acquiring voting stock
of the Company shall be
<PAGE>
5
deemed to be a transfer of such portion of such voting stock as corresponds to
the portion of the equity of such entity that has been so transferred.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Consolidated Cash Interest Expense" means, with respect to
any period, the amount of Consolidated Interest Expense for such period to the
extent it represents cash disbursements for such purpose by the Company and its
Restricted Subsidiaries during such period.
"Consolidated Interest Expense" means, without duplication,
with respect to any period, the sum of (a) the interest expense and all
capitalized interest of the Company and its Restricted Subsidiaries for such
period, on a consolidated basis, including, without limitation, (i) amortization
of debt discount, (ii) the net cost under interest rate contracts (including
amortization of debt discount), (iii) the interest portion of any deferred
payment obligation and (iv) accrued interest, plus (b) the interest component of
any Capital Lease Obligation paid or accrued or scheduled to be paid or accrued
by the Company during such period, determined on a consolidated basis in
accordance with GAAP; provided, however, that any dividends with respect to the
Senior Preferred Stock shall not be considered for purposes of this definition.
"Continuing Director" means any member of the Board of
Directors of the Company who (i) is a member of that Board of Directors on the
Issue Date or (ii) was nominated for election by either (a) one or more of the
Principal Shareholders (or a Related Party thereof) or (b) the Board of
Directors a majority of whom were directors at the Issue Date or whose election
or nomination for election was previously approved by one or more of the
Principal Shareholders or such directors.
"Credit Agreement" means the credit agreement to be entered
into between the Company and NationsBank of Texas, N.A. individually, as a
lender, and as agent for the lenders from time to time party thereto.
<PAGE>
6
"Debt to EBITDA Ratio" means, with respect to any date, the
ratio of (a) the aggregate principal amount of all outstanding Indebtedness of
the Company (excluding Hedging Obligations, including interest rate swap
obligations, that are incurred in the ordinary course of business for the
purpose of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness which Indebtedness is permitted by the terms of the Indenture
to be outstanding) and its Restricted Subsidiaries as of such date on a
consolidated basis, plus the aggregate liquidation preference or redemption
amount of all outstanding Disqualified Stock of the Company and its Restricted
Subsidiaries as of such date (excluding any such Disqualified Stock held by the
Company of a Wholly Owned Restricted Subsidiary), to (b) EBITDA of the Company
and its Restricted Subsidiaries on a consolidated basis for the four most recent
full fiscal quarters ending immediately prior to such date, determined on a pro
forma basis after giving effect to each acquisition or disposition of assets
made by the Company and its Restricted Subsidiaries from the beginning of such
four-quarter period through such date as if such acquisition or disposition had
occurred at the beginning of such four-quarter period.
"Default" means any event that is, or after the giving of
notice or passage of time or both would be, an Event of Default.
"Designated Senior Debt" means (i) the Senior Bank Debt and
(ii) any Senior Debt of the Company and the Subsidiary Guarantors permitted
under the Indenture, the principal amount (or accreted value in the case of
Indebtedness issued at a discount) of which is $10 million or more at the time
of designation by the Company (or otherwise available under a committed
facility) or a Subsidiary Guarantor, as the case may be, in a written instrument
delivered to the Trustee.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Stock" means any Equity Interest that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder
<PAGE>
7
thereof (other than upon a Change of Control of the Company in circumstances
where the holders of the Securities would have similar rights), in whole or in
part on or prior to one year after the stated maturity of the Securities. The
amount of Disqualified Stock shall be the greater of the liquidation preference
or mandatory or optional redemption price thereof.
"EBITDA" of a specified Person means, for any period, the
consolidated net income of such specified Person and its Restricted Subsidiaries
for such period:
(a) plus (without duplication and to the extent involved in computing
such consolidated net income) (i) interest expense, (ii) provision for
taxes on income or profits and (iii) depreciation and amortization and
other non-cash items (including amortization of goodwill and other
intangibles and barter expenses); and
(b) minus (without duplication and to the extent involved in computing
such consolidated net income) (i) any gains (or plus losses), together
with any related provision for taxes on such gains (or losses), realized
in connection with any sale of assets (including, without limitation,
dispositions pursuant to sale and leaseback transactions), (ii) any
non-cash or extraordinary gains (or plus losses), together with any
related provision for taxes on such extraordinary gains (or losses),
(iii) the amount of any cash payments related to non-cash charges that
were added back in determining EBITDA in any prior period and (iv)
barter revenues,
provided, however, that
(1) the net income of any other Person that is accounted for by the
equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to such specified
Person whose EBITDA is being determined or a Wholly Owned Restricted
Subsidiary thereof;
(2) the net income of any other Person that is a Restricted Subsidiary
(other than a Wholly Owned Restricted Subsidiary) or is an Unrestricted
Subsidiary shall be included only to the extent of the amount of
dividends or distributions paid in cash to such specified Person whose
EBITDA is being determined or a Wholly Owned Restricted Subsidiary
thereof; provided that for purposes of Section 4.05 only, any such
<PAGE>
8
dividend or distribution shall be excluded to the extent it has already
been included under clause (a)(3)(D) thereof;
(3) the net income (loss) of any other Person acquired after the Issue
Date in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded (to the extent otherwise
included); and
(4) gains or losses from sales of assets other than sales of assets
acquired and held for resale in the ordinary course of business shall be
excluded (to the extent otherwise included).
All of the foregoing will determined in accordance with GAAP.
"Equity Interests" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity, and including, in the case of a partnership, partnership
interests (whether general or limited) and any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" means any outstanding Indebtedness of
the Company and its Restricted Subsidiaries as of the Issue Date, including the
Securities.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy. All determinations in the
covenants of Fair Market Value shall be made by the Board of Directors of the
Company and shall be evidenced by a resolution of such Board set forth in an
Officers' Certificate delivered to the Trustee, upon which the Trustee may
conclusively rely.
"FCC" means the Federal Communications Commission and any
successor agency.
<PAGE>
9
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth in (i) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Persons against fluctuations
in interest rates.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Immediate Family Member" means, with respect to any
individual, such individual's spouse (past or current), descendants (natural or
adoptive, of the whole or half blood) of the parents of such individual, such
individual's grandparents and parents (natural or adoptive), and the
grandparents, parents and descendants of parents (natural or adoptive, of the
whole or half blood) of such individual's spouse (past or current).
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Equity Interests
of a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of principal
of a non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person, whether or
not contingent, (i) all indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services (other than current trade
<PAGE>
10
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices) or which is evidenced by a note, bond,
debenture or similar instrument, (ii) all Capital Lease Obligations of such
Person, (iii) all obligations of such Person in respect of letters of credit or
bankers' acceptances issued or created for the account of such Person, (iv) all
Hedging Obligations of such Person, (v) all liabilities of the type referred to
in clause (i), (ii) or (iii) immediately above which are secured by any Lien on
any property owned by such Person even if such Person has not assumed or
otherwise become liable for the payment thereof to the extent of the value of
the property subject to such Lien, and (vi) to the extent not otherwise
included, any guarantee by such Person of any other Person's indebtedness or
other obligations described in clauses (i) through (v) above; provided, however,
in no event shall Senior Preferred Stock (including any and all accrued
dividends thereon) be considered "Indebtedness."
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of the
lender) or other extension of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person. For purposes of the
definition of "Unrestricted Subsidiary", the definition of "Restricted Payment"
and Section 4.05, (i) "Investment" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of any Subsidiary of the Company at the time that such Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the
<PAGE>
11
time of such transfer, in each case as determined in good faith by the Board of
Directors.
"Issue Date" means the date on which the Securities are
originally issued.
"License Subsidiary" means Radio One Licenses, Inc., a
Delaware corporation and a wholly owned subsidiary of the Company.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in any asset and any filing of, or agreement to give, any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Net Cash Proceeds", with respect to any issuance or sale of
Equity Interests, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Net Proceeds" means, with respect to any Asset Sale by any
Person, the aggregate cash proceeds received by such Person in respect of such
Asset Sale, which amount is equal to the excess, if any, of:
(i) the cash received by such Person (including any cash payments
received by way of deferred payment pursuant to, or monetization of, a
note or installment receivable or otherwise, but only as and when
received) in connection with such Asset Sale, over
(ii) the sum of
(a) the amount of any Indebtedness including any premium
thereon and fees and expenses associated therewith which is
required to be repaid by such Person in connection with such
Asset Sale, plus
(b) the out-of-pocket expenses (1) incurred by such Person in
connection with such Asset Sale, and (2) if such Person is a
Restricted Subsidiary,
<PAGE>
12
incurred in connection with the transfer of such amount to the
parent company or entity of such Person, plus
(c) provision for taxes, including income taxes, attributable
to the Asset Sale or attributable to required prepayments or
repayments of Indebtedness with the proceeds of such Asset
Sale, plus
(d) a reasonable reserve for the after-tax costs of any
indemnification payments (fixed or contingent) attributable to
the seller's indemnities to the purchaser in respect of such
Asset Sale undertaken by the Company or any of its Restricted
Subsidiaries in connection with such Asset Sale.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer to Purchase" means a written offer (an "Offer") sent by
the Company to each Holder at his address appearing in the Note Register on the
date of the Offer offering to purchase in cash up to the principal amount of the
Securities specified in such Offer at a purchase price equal to 101% of the
Accreted Value of the Securities plus accrued and unpaid interest, if any.
Unless otherwise required by applicable law, the Offer shall specify an
expiration date ("Expiration Date") of the Offer to Purchase which shall be,
subject to any contrary requirements of applicable law, not less than 30 days
nor more than 60 days after the date of such Offer and a settlement date
("Purchase Date") for purchase of Securities within five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be sent by first class mail by the Company or, at the Company's
request and expense, by the Trustee in the name and at the expense of the
Company. The Offer shall contain information concerning the business of the
Company and its Subsidiaries which the Company in good faith believes will
enable such Holders to make an informed decision with respect to the Offer to
Purchase (which at a minimum will include (i) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the documents
<PAGE>
13
required to be filed with the Trustee pursuant to Section 4.02 (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate Accreted Value of the outstanding Securities offered
to be purchased by the Company (the "Purchase Amount") and the aggregate
principal amount of the outstanding Securities offered to be purchased
by the Company pursuant to the Offer to Purchase (including, if less
than 100% of the principal amount, the manner by which such has been
determined pursuant to the Section hereof requiring the Offer to
Purchase);
(4) the purchase price to be paid by the Company (the "Purchase Price")
for each $1,000 aggregate principal amount of Securities accepted for
payment (as specified pursuant to the Indenture);
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue
to accrue;
<PAGE>
14
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on and
after the Purchase Date;
(9) that each Holder electing to tender a Note pursuant to the Offer to
Purchase will be required to surrender such Security at the place or
places specified in the Offer prior to the close of business on the
Expiration Date (such Security being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in
writing);
(10) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or the Paying Agent) receives, not
later than the close of business on the Expiration Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security that the Holder tendered,
the certificate number of the Security that the Holder tendered and a
statement that such Holder is withdrawing all or a portion of his
tender;
(11) that (a) if Securities in an aggregate Accreted Value less than or
equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate Accreted Value in
excess of the Purchase Amount are tendered and not withdrawn pursuant to
the Offer to Purchase, the Company shall purchase Securities having an
aggregate Accreted Value equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only
Securities in denominations of $1,000 principal amount or integral
multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Security is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by
such Holder, in an aggregate principal amount equal to and in exchange
for the unpurchased portion of the Security so tendered.
<PAGE>
15
Any Offer to Purchase will be governed by and effected in
accordance with the Offer for such Offer to Purchase.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers, one of whom shall be the principal executive financial or accounting
officer of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Investment" means:
(i) any Investment in the Company or any Wholly Owned Restricted
Subsidiary:
(ii) any Investment in Cash Equivalents;
(iii) any Investment in a Person if, as a result of such Investment,
(a) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company, or (b) such Person either (1) is merged, consolidated or
amalgamated with or into the Company or one of its Wholly Owned
Restricted Subsidiaries and the Company or such Wholly Owned Restricted
Subsidiary is the Surviving Person or the Surviving Person becomes a
Wholly Owned Restricted Subsidiary, or (2) transfers or conveys all or
substantially all of its assets to, or is liquidated into, the Company
or one of its Wholly Owned Restricted Subsidiaries;
(iv) any Investment in accounts and notes receivable acquired in the
ordinary course of business;
(v) notes from employees issued to the Company representing payment of
the exercise price of options to purchase capital stock of the Company;
and
(vi) Investments in Unrestricted Subsidiaries represented by Equity
Interests (other than Disqualified Stock) or assets and property
acquired in exchange for Equity Interests (other than Disqualified
Stock) of the Company.
<PAGE>
16
Any Investment in an Unrestricted Subsidiary shall not be a
Permitted Investment unless permitted pursuant to any of clauses (i) through
(vi) above.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Equity Interests of any
Person, means Equity Interests of any class or classes (however designated) that
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Equity Interests of any other class of such
Person.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Principal Shareholders" means Catherine L. Hughes and Alfred
C. Liggins, III and their respective estates, executors and heirs.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness of the
Company and its Restricted Subsidiaries incurred in connection with the purchase
of property or assets for the business of the Company and its Restricted
Subsidiaries.
"Purchase Money Lien" means any Lien securing solely Purchase
Money Indebtedness.
"Refinancing Indebtedness" means (i) Indebtedness of the
Company or any Restricted Subsidiary incurred or given in exchange for, or the
proceeds of which are used to extend, refinance, renew, replace, substitute,
defease or refund, any other Indebtedness or Disqualified Stock incurred by the
Company in accordance with the terms of this Indenture, and (ii) Indebtedness of
any Restricted Subsidiary incurred or given in exchange for, or the proceeds of
which are used to extend, refinance, renew, replace, substitute, defease or
refund, any other Indebtedness or Disqualified Stock of the Company or any
<PAGE>
17
Restricted Subsidiary in accordance with the terms of this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement dated May 14, 1997, among the Company, License Subsidiary, Credit
Suisse First Boston and NationsBank Capital Markets, Inc.
"Related Party" with respect to any Principal Shareholder
means (i) any 80% (or more) owned Subsidiary or Immediate Family Member (in the
case of an individual) of such Principal Shareholder or (ii) any Person, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal Shareholder
or an Immediate Family Member, or (iii) any Person employed by the Company in a
management capacity as of the Issue Date.
"Representative" means any Vice President or other more senior
officer of the Agent in respect of the Senior Bank Debt, or any trustee, agent
or representative (if any) for any other issue of Senior Indebtedness of the
Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Equity Interests (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Equity Interests (other than distributions payable
solely in its Equity Interests (other than Disqualified Stock) and dividends or
distributions payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Restricted Subsidiary to minority stockholders (or owners
of an equivalent interest in the case of a Subsidiary that is an entity other
than a corporation)), (ii) the purchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company held by any Person
or of any Equity Interests of a Restricted Subsidiary held by any Affiliate of
the Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Equity Interests (other than its Equity Interests of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Debt (other than the purchase, repurchase or other acquisition of
Subordinated Debt purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final
<PAGE>
18
maturity, in each case due within one year of the date acquisition) or (iv) the
making of any Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Debt" means any Indebtedness of the Company secured
by a Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Bank Debt" means the Indebtedness Incurred pursuant to
the Credit Agreement and any other agreement that replaces the Credit Agreement
or otherwise refunds or refinances any or all of the indebtedness thereunder.
"Senior Debt":
(i) with respect to the Company, the principal of and interest
(including post-petition interest whether or not allowed as a claim) on,
and all other amounts owing in respect of Indebtedness permitted to be
incurred by the Company under the terms of this Indenture, including the
Credit Agreement, (including but not limited to reasonable fees and
expenses of counsel and all other charges, fees and expenses incurred in
connection with such Indebtedness), whether presently outstanding or
hereafter created, incurred or assumed, unless the instrument creating
or evidencing such Indebtedness or pursuant to which such Indebtedness
is outstanding expressly provides that such Indebtedness is on a parity
with or subordinated in right of payment to the Securities; and
(ii) with respect to any Subsidiary Guarantor, the principal of and
interest (including postpetition interest whether or not allowed as a
claim) on, and all other amounts owing in respect of Indebtedness
permitted to be incurred by such Subsidiary Guarantor under the terms of
this Indenture, including the Credit Agreement, (including but not
limited to reasonable fees and expenses of counsel and all other
charges, fees and expenses incurred in connection with such
Indebtedness), whether presently outstanding or hereafter created,
incurred or assumed, unless the instrument created or evidencing such
Indebtedness or
<PAGE>
19
pursuant to which such Indebtedness is outstanding expressly provides
that such Indebtedness is on a parity with or subordinated in right of
payment to the Subsidiary Guarantee of such Subsidiary Guarantor.
Notwithstanding the foregoing, Senior Debt shall not include
(A) any Indebtedness consisting of Disqualified Stock, (B) any liability for
federal, state, local, or other taxes, (C) any Indebtedness among or between the
Company, any Restricted Subsidiary or any of their Affiliates, (D) any trade
payables and any Indebtedness to trade creditors (other than amounts accrued
thereon) incurred for the purchase of goods or materials, or for services
obtained, in the ordinary course of business or any Obligations to trade
creditors in respect of any such Indebtedness, or (E) any Indebtedness that is
incurred in violation of this Indenture.
"Senior Preferred Stock" means the Company's Series A 15%
Cumulative Redeemable Preferred Stock issued on the Issue Date.
"Senior Subordinated Indebtedness" means (i) with respect to
the Company, the Securities and any other Indebtedness of the Company that
specifically provides that such Indebtedness is to rank pari passu with the
Securities in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Debt of the Company and (ii) with respect to a Subsidiary Guarantor, its
Guarantee of the Securities and any other Indebtedness of such Subsidiary
Guarantor that specifically provides that such Indebtedness is to rank pari
passu with such Guarantee in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other obligations of such
Subsidiary Guarantor which is not Senior Debt of such Subsidiary Guarantor.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"Subordinated Debt" means any Indebtedness of the Company or a
Subsidiary Guarantor if the instrument creating or evidencing such Indebtedness
or pursuant to which such Indebtedness is outstanding expressly provides that
such Indebtedness is (i) if incurred by the Company, subordinated in right of
payment to the Securities, or (ii) if incurred by a Subsidiary Guarantor,
subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary
Guarantor.
<PAGE>
20
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
total voting power of all Voting Equity Interests entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees or other governing body thereof is at the time owned or
controlled by such Person (regardless of whether such Equity Interests are owned
directly or through one or more other Subsidiaries of such Person or a
combination thereof).
"Subsidiary Guarantee" means the guarantee by a Subsidiary
Guarantor of the Company's obligations with respect to the Securities contained
in Article 11 hereof.
"Subsidiary Guarantors" means License Subsidiary and each
other Subsidiary of the Company that, pursuant to the terms hereof, executes a
supplemental indenture in a form reasonably satisfactory to the Trustee and
thereby becomes bound under Article 11 hereof.
"Surviving Person" means, with respect to any Person involved
in or that makes any Disposition, the Person formed by or surviving such
Disposition or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture, except as otherwise
provided in Section 9.03.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters and with respect to the Senior Bank
Debt as notified to the Agent in writing from time to time by the Trustee.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be an Unrestricted Subsidiary
(as designated by the Board of Directors of the Company, as provided below) and
(ii) any direct or indirect Subsidiary of an Unrestricted Subsidiary. The Board
of Directors of the Company may designate any Subsidiary of the Company
(including any newly acquired or
<PAGE>
21
newly formed Subsidiary) to be an Unrestricted Subsidiary if all of the
following conditions apply: (a) neither the Company nor any of its Restricted
Subsidiaries provides credit support for any Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) other than capital contributions or other Restricted Payments
permitted under Section 4.05, (b) such Subsidiary is not liable, directly or
indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness, (c) such Unrestricted Subsidiary is not a party to any agreement,
contract, arrangement or understanding at such time with the Company or any
Restricted Subsidiary of the Company except for transactions with affiliates
permitted by the terms of this Indenture unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company (the "Third Party Value") or, in
the event such condition is not satisfied, an amount equal to the value of the
portion of such agreement, contract, arrangement or understanding to such
Subsidiary in excess of the Third Party Value shall be deemed a Restricted
Payment, and (d) such Unrestricted Subsidiary does not own any Equity Interest
in or Indebtedness of any Subsidiary of the Company that has not theretofore
been and is not simultaneously being designated an Unrestricted Subsidiary. Any
such designation by the Board of Directors of the Company shall be evidenced to
the Trustee by filing with the Trustee of a board resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complies with the foregoing conditions. The Board of Directors of the Company
may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided,
however, that (i) immediately after giving effect to such designation, the
Company could incur $1.00 of additional Indebtedness pursuant to Section 4.03(a)
and (ii) all Indebtedness of such Unrestricted Subsidiary shall be deemed to be
incurred on the date such Subsidiary is designated a Restricted Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted
Subsidiary means Indebtedness of such Unrestricted Subsidiary (other than a
guarantee of Indebtedness of the Company or any Restricted Subsidiary which is
non-recourse to the Company and its Restricted Subsidiaries) (i) as to which
neither the Company nor any Restricted Subsidiary is directly or indirectly
liable (by virtue of the Company or any such Restricted Subsidiary being the
primary obligor on, guarantor of, or otherwise liable in any respect to, such
Indebtedness) and (ii) which,
<PAGE>
22
upon the occurrence of a default with respect thereto, does not result in, or
permit any holder of any Indebtedness of the Company or any Restricted
Subsidiary to declare, a default on such Indebtedness of the Company or any
Restricted Subsidiary or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Equity Interest" of a Person means all classes of
Equity Interest or other interests (including partnership interests) of such
Person then outstanding and normally entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof.
"Warrant Agreement" means the Warrantholders' Agreement dated
as of June 6, 1995, as amended from time to time, among the Company, the
Principal Shareholders, Jerry Moore and the Warrantholders.
"Warrantholders" means the holders of warrants issued pursuant
to the Warrant Agreement and, in the case of any such holders, shares of Common
Stock issued in exchange therefor.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary all of the outstanding Voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company or
a Surviving Person of any Disposition involving the Company, as the case may be.
<PAGE>
23
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction"........................ 4.08
"Asset Sale"....................................4.07
"Bankruptcy Law"............................... 6.01
"Blockage Notice"............................. 10.03
"covenant defeasance option".................8.01(b)
"Custodian".................................... 6.01
"Event of Default"............................. 6.01
"legal defeasance option"....................8.01(b)
"Legal Holiday"............................... 13.08
"pay the Securities".......................... 10.03
"Paying Agent"................................. 2.03
"Payment Blockage Period"..................... 10.03
"Registrar".................................... 2.03
"Successor Company"............................ 5.01
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
<PAGE>
24
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Debt merely by virtue of its nature as
unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect
to such Preferred Stock, whichever is greater; and
(9) all references to the date the Securities were originally
issued shall refer to the date the Initial Securities were originally
issued.
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities, the Private Exchange Securities and the Exchange Securities
are set forth in the Rule 144A/Regulation S Appendix attached hereto (the
"Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to the Appendix
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange
<PAGE>
25
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). Each Security
shall be dated the date of its authentication. The terms of the Securities set
forth in the Appendix and Exhibit A are part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and deliver Securities for
original issue in an aggregate principal amount of $85,478,000, upon a written
order of the Company signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of the Company. Such order shall
specify the amount of the Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for
<PAGE>
26
exchange (the "Registrar") and an office or agency where Securities may be
presented for payment (the "Paying Agent"). The Registrar shall keep a register
of the Securities and of their transfer and exchange. The Company may have one
or more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
Any money deposited with any Paying Agent, or then held by the
Company or a Subsidiary in trust for the payment of principal or interest on any
Security and remaining unclaimed for two years after such principal and interest
has become due and payable shall be paid to the Company at its request, or, if
then held by the Company or a Subsidiary, shall be discharged from such trust;
and the
<PAGE>
27
Securityholders shall thereafter, as unsecured general creditors, look only to
the Company for payment thereof, and all liability of the Paying Agent with
respect to such money, and all liability of the Company or such Subsidiary as
trustee thereof, shall thereupon cease.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code are met. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-registrar's
request. The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section. The Company shall not be required to make and
the Registrar need not register transfers or exchanges of Securities selected
for redemption (except, in the case of Securities to be redeemed in part, the
portion thereof not to be redeemed) or any Securities for a period of 15 days
before a selection of Securities to be redeemed or 15 days before an interest
payment date.
Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the
<PAGE>
28
Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected
by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture will evidence the same debt and will be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security. In the event any such
mutilated, lost, destroyed or wrongfully taken Security has become or is about
to become due and payable, the Company in its discretion may pay such Security
instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancelation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser; provided,
however, that the rights of the Company under Section 8-405 of the Uniform
Commercial Code shall not be diminished in any way.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and
<PAGE>
29
interest payable on that date with respect to the Securities (or portions
thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is
not prohibited from paying such money to the Securityholders on that date
pursuant to the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
and deliver them in exchange for temporary Securities.
SECTION 2.10 Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancelation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state
<PAGE>
30
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for
in this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not less than 15 days after the
date of notice to the Trustee (unless a shorter period shall be acceptable to
the Trustee). Any such notice may be canceled by notice in writing to the
Trustee at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion shall deem to be fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
Securities not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them the Trustee selects shall be
in amounts of
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31
$1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail, or cause to be mailed, a notice of redemption by first-class mail to each
Holder of Securities to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Securities
(or portion thereof) called for redemption ceases to accrue on and
after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; provided, however, that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such
notice or printed on the Securities; and
(8) that if a Security is to be redeemed in part, only the
portion of the principal amount (equal to $1,000 or an integral
multiple thereof) of such Security is to be redeemed and that a new
Security in the aggregate principal amount equal to the unredeemed
portion thereof will be issued without charge to the holder.
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32
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date that is on or prior to
the redemption date). Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due and the Trustee or the Paying Agent, as the
case may be, is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture.
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33
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company
may not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, commencing the first fiscal quarter ended June 30, 1997, the
Company shall file with the SEC and provide the Trustee and Securityholders with
such annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and reports to
be so filed and provided at the times specified for the filing of such
information, documents and reports under such Sections. The Company also shall
comply with the other provisions of TIA ss. 314(a).
SECTION 4.03. Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock. (a) The Company shall not, and shall not permit any
of its Restricted Subsidiaries to, Incur any Indebtedness (including Acquired
Debt) or issue any Preferred Stock, except that the Company may (i) issue
Preferred Stock that is not Disqualified Stock at any time and (ii) Incur
Indebtedness or issue Disqualified Stock if the Debt to EBITDA Ratio of the
Company and its Restricted Subsidiaries at the time of Incurrence of such
Indebtedness or issuance of such Disqualified Stock, after giving pro forma
effect thereto, does not exceed 7.0 to 1.0; provided, however, that any such
Indebtedness (other than Senior Debt) Incurred by the Company shall, at the time
of Incurrence, have a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of the Securities.
(b) The limitations set forth in paragraph (a) above shall not
apply to the Incurrence of any of the following:
(i) Indebtedness consisting of Senior Bank Debt; provided,
however, that the aggregate principal amount outstanding at any time
under this clause (i) does not exceed $10,000,000;
(ii) Existing Indebtedness;
(iii) Indebtedness represented by the Securities and the
Subsidiary Guarantees;
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34
(iv) Refinancing Indebtedness; provided, however, that
(A) the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of
Indebtedness or the amount of Disqualified Stock so extended,
refinanced, renewed, replaced, substituted, defeased or
refunded (plus the amount of expenses incurred and premiums
paid in connection therewith),
(B) with respect to Refinancing Indebtedness of any
Indebtedness other than Senior Debt or Disqualified Stock, the
Refinancing Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced,
renewed, replaced, substituted, defeased or refunded, and
(C) with respect to Refinancing Indebtedness of any
Indebtedness other than Senior Debt or Disqualified Stock
incurred by (1) the Company, such Refinancing Indebtedness
ranks no more senior, and at least as subordinated, in right
of payment to the Securities as the Indebtedness being
extended, refinanced, renewed, replaced, substituted, defeased
or refunded and (2) a Subsidiary Guarantor, such Refinancing
Indebtedness ranks no more senior, and at least as
subordinated, in right of payment to the Subsidiary Guarantee
of such Subsidiary Guarantor as the Indebtedness being
extended, refinanced, renewed, replaced, substituted, defeased
or refunded;
(v) intercompany Indebtedness between the Company and any of
its Wholly Owned Restricted Subsidiaries;
(vi) Hedging Obligations, including interest rate swap
obligations, that are incurred in the ordinary course of business for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of this
Indenture to be outstanding;
(vii) guarantees by the Company and the Subsidiary Guarantors
of any Indebtedness of the Company or any Restricted Subsidiary
permitted under this Section 4.03;
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35
(viii) Indebtedness of the Company or any Restricted
Subsidiary consisting of indemnification, adjustment of purchase price
or similar obligations, in each case incurred in connection with the
disposition of any assets of the Company or any Restricted Subsidiary;
and
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries (in addition to Indebtedness permitted by clauses (ii)
through (viii) of this Section) in an aggregate principal amount at any
time outstanding that, together with any Indebtedness incurred pursuant
to clause (i) of this Section, does not exceed $5,000,000.
(c) For purposes of determining compliance with this Section
4.03, (i) in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described herein, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described herein.
SECTION 4.04. Limitation on Senior Subordinated Debt. (a) The
Company shall not Incur (i) any Indebtedness that is subordinate or junior in
ranking in right of payment by its terms to any Senior Debt of the Company and
senior in right of payment by its terms to the Securities or (ii) any Secured
Debt that is not Senior Debt unless contemporaneously therewith effective
provision is made to secure the Securities equally and ratably with such Secured
Debt for so long as such Secured Debt is secured by a Lien.
(b) The Company shall not permit any Subsidiary Guarantor to
Incur (i) any Indebtedness that is subordinated or junior in ranking in right of
payment by its terms to any Senior Debt and senior in right of payment to its
Subsidiary Guarantee or (ii) any Secured Debt that is not Senior Debt unless
contemporaneously therewith effective provision is made to secure its Subsidiary
Guarantee equally and ratably with such Secured Debt for so long as such Secured
Debt is secured by a Lien.
SECTION 4.05. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a
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36
Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, the Company would
not be permitted to Incur at least $1.00 of additional Indebtedness
under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum of:
(A) an amount equal to the Company's EBITDA cumulated
from April 1, 1997, to the end of the Company's most recently
ended full fiscal quarter, taken as a single accounting
period, minus 1.4 times the sum of (i) the Company's
Consolidated Interest Expense from April 1, 1997, to the end
of the Company's most recently ended full fiscal quarter,
taken as a single accounting period, plus (ii) all dividends
or other distributions paid or made by the Company or any
Restricted Subsidiary on any Disqualified Stock of the Company
or any of its Subsidiaries during such period;
(B) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Equity Interests
(other than Disqualified Stock) subsequent to the Issue Date
(other than an issuance or sale to a Subsidiary of the Company
and other than an issuance or sale to an employee stock
ownership plan or to a trust established by the Company or any
of its Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of the Company
is reduced on the Company's balance sheet upon the conversion
or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the
Company convertible or exchangeable for Equity Interests
(other than Disqualified Stock) of the Company (less the
amount of any cash, or the fair value of any other property,
distributed by the Company upon such conversion or exchange
other than Equity
<PAGE>
37
Interests not constituting Disqualified Stock); and
(D) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances or
other transfers of assets, in each case to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, and (ii)
the portion (proportionate to the Company's equity interest in
such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the case
of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the
Company or any Restricted Subsidiary in such Unrestricted
Subsidiary.
(b) The provisions of paragraph (a) above shall not prohibit:
(i) any Restricted Payment made out of the proceeds of the
substantially concurrent sale of, and any acquisition of any Equity
Interest of the Company made by exchange for, Equity Interests of the
Company (other than Disqualified Stock and Capital Stock issued or sold
to a Subsidiary of the Company or to an employee stock ownership plan
or a trust established by the Company or any of its Subsidiaries for
the benefit of their employees); provided, however, that (A) such
Restricted Payment shall be excluded in the calculation of the amount
of Restricted Payments and (B) the Net Cash Proceeds from such sale
shall be excluded from the calculation of amounts under clause (3)(B)
of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Debt made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of the Company that is permitted to be Incurred
pursuant to Section 4.03; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement
for value shall be excluded in the calculation of the amount of
Restricted Payments;
<PAGE>
38
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with paragraph (a) above; provided, however, that (A) at
the time of payment of such dividend, no Default shall have occurred
and be continuing (or result therefrom) and (B) such dividend shall be
included in the calculation of the amount of Restricted Payments from
and after such time;
(iv) loans to members of management of the Company or any
Restricted Subsidiary the proceeds of which are used for a concurrent
purchase of Equity Interests of the Company or a capital contribution
to the Company (provided that the proceeds from such purchase of Equity
Interests or capital contribution shall be excluded from the
calculation of amounts under clause (3)(B) of paragraph (a) above);
provided, however, that such loans shall be included in the calculation
of the amount of Restricted Payments from and after such time;
(v) any principal payment on, or purchase, redemption,
defeasance or other acquisition or retirement for value of, any
Indebtedness that is subordinated by its terms to the Securities out of
Excess Proceeds available for general corporate purposes after the
purchase of all Securities properly tendered pursuant to an Offer to
Purchase required by Section 4.07; provided, however, that the amount
of such payments shall be excluded in the calculation of the amount of
Restricted Payments; and
(vi) repurchases of Equity Interests of the Company from any
employee of the Company (other than a Principal Shareholder) whose
employment with the Company has ceased; provided, however, that the
aggregate amount of such repurchases shall not exceed $500,000 in any
year; provided further, however, that the amount of such payments shall
be included in the calculation of the amount of Restricted Payments
from and after such time.
SECTION 4.06. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) (i) pay dividends
or make any other distributions to the Company or any other Restricted
Subsidiary (A) on its
<PAGE>
39
Equity Interests or (B) with respect to any other interest or participation in,
or measured by, its profits or (ii) pay any Indebtedness owed to the Company or
any other Restricted Subsidiary, (b) make any loans or advances to the Company
or any other Restricted Subsidiary or (c) transfer any of its property or assets
to the Company or any other Restricted Subsidiary, except any encumbrance or
restriction existing under or by reason of:
(i) any Existing Indebtedness;
(ii) applicable law;
(iii) any instrument governing Indebtedness or Equity
Interests of a Person acquired by the Company or any Restricted
Subsidiary as in effect at the time of such acquisition (except to the
extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition); provided, however, that (A) such
restriction is not applicable to any other Person or the properties or
assets of any other Person, and (B) the consolidated net income (loss)
of such acquired Person for any period prior to such acquisition shall
not be taken into account in determining whether such acquisition was
permitted by the terms of the Indenture;
(iv) by reason of customary nonassignment provisions in leases
entered into in the ordinary course of business and consistent with
past practices;
(v) Purchase Money Indebtedness for property acquired in the
ordinary course of business that only impose restrictions on the
property so acquired;
(vi) Refinancing Indebtedness permitted under Section 4.03;
provided, however, that the restrictions contained in the agreements
governing such Refinancing Indebtedness are no more restrictive in the
aggregate than those contained in the agreements governing the
Indebtedness being refinanced immediately prior to such refinancing;
(vii) the Credit Agreement;
(viii) agreements relating to the financing of the acquisition
of real or tangible personal property acquired after the date of the
Indenture, provided that such encumbrance or restriction relates only
to the property that is acquired and, in the case of any
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40
encumbrance or restriction that constitutes a Lien, such Lien
constitutes a Purchase Money Lien; or
(ix) any restriction or encumbrance contained in contracts for
sale of assets in respect of the assets being sold pursuant to such
contract.
SECTION 4.07. Limitation on Certain Asset Sales. The Company
shall not, and shall not permit any Restricted Subsidiary to:
(i) sell, lease, convey or otherwise dispose of any assets
(including by way of a sale-and-leaseback) other than in the ordinary
course of business, or
(ii) issue or sell Equity Interests of any of its Restricted
Subsidiaries,
in each case, whether in a single transaction or a series of related
transactions, to any Person (other than (x) an issuance, sale, lease, conveyance
or disposal by a Restricted Subsidiary to the Company or one of its Wholly Owned
Restricted Subsidiaries, (y) an Asset Swap permitted by Section 4.11 or (z) the
sale of the stock of any Unrestricted Subsidiary) (each of the foregoing, an
"Asset Sale"), unless: (x) the Company or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets or Equity Interests sold or
otherwise disposed of, (y) at least 80% of such consideration is in the form of
cash or Cash Equivalents and (z) if such Asset Sale includes Equity Interests of
any Restricted Subsidiary, 100% of the Equity Interests of such Restricted
Subsidiary owned by the Company or any other Restricted Subsidiary are sold or
otherwise disposed of in such Asset Sale. Following any Asset Sale, the Company
may at its option apply all or any portion of the Net Proceeds from such Asset
Sale, within 360 days of such Asset Sale, (A) to permanently reduce or satisfy
any Senior Debt (and, in the event that such Senior Debt is extended under a
revolving credit or similar facility, to permanently reduce or satisfy the
aggregate commitments thereunder as then in effect) or (B) to acquire Broadcast
Assets. Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Senior Debt or invest such Net Proceeds in Permitted
Investments or to reduce loans outstanding under any revolving credit facility
of the Company or any Restricted Subsidiary. Any Net Proceeds from an Asset Sale
not applied to the payment of Senior Debt or the acquisition of Broadcast Assets
as provided in the immediately preceding sentence, upon expiration such 360-day
period, will be
<PAGE>
41
deemed to constitute "Excess Proceeds". Whenever aggregate Excess Proceeds
realized since the Issue Date minus the aggregate purchase price of the
Securities that have been the subject of any previous Offer to Purchase ("Net
Excess Proceeds") exceeds $5,000,000, the Company will commence an Offer to
Purchase within 30 days after the date on which the Net Excess Proceeds exceeded
$5,000,000. Such Offer to Purchase shall be for a principal amount of Notes then
outstanding having an aggregate purchase price equal to such Net Excess
Proceeds. Notwithstanding the foregoing provisions of this Section 4.07, the
Company and the Restricted Subsidiaries shall not be required to apply any Net
Proceeds in accordance with this Section 4.07 except to the extent that the
aggregate Net Proceeds from all Asset Sales which are not applied in accordance
with this Section 4.07 exceeds $1,000,000.
For the purposes of this Section 4.07, the following are
deemed to be cash: (x) the assumption of Senior Debt of the Company or any
Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Senior Debt in connection with such Asset
Sale (other than customary indemnification provisions relating thereto that do
not involve the repayment of funded indebtedness) and (y) securities received by
the Company or any Restricted Subsidiary from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash.
SECTION 4.08. Transactions with Affiliates. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, sell, lease, transfer or otherwise dispose of any of its properties
or assets to, or purchase any property or assets from, or enter into any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of the Company or any Restricted Subsidiary (each of
the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with a
non-Affiliated Person, (ii) such Affiliate Transaction is approved by a majority
of the disinterested members of the Company's Board of Directors and (iii) the
Company delivers to the Trustee (A) with respect to any Affiliate Transaction
involving aggregate payments in excess of $1,000,000, an Officers' Certificate
certifying that such Affiliate Transaction complies with clauses (i) and (ii)
above and (B) with respect to any Affiliate Transaction (or series of related
transactions) with an aggregate value in
<PAGE>
42
excess of $5,000,000, an opinion from a nationally recognized investment bank to
the effect that the transaction is fair to the Company or the Restricted
Subsidiary, as the case may be, from a financial point of view.
(b) The provisions of paragraph (a) above shall not prohibit:
(i) employment arrangements (including customary benefits
thereunder) entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or such Restricted Subsidiary;
(ii) transactions solely between or among the Company and its
Wholly Owned Restricted Subsidiaries or solely between or among wholly
Owned Restricted Subsidiaries;
(iii) transactions permitted under Section 4.05;
(iv) any agreement as in effect on the Issue Date or any
amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) and any replacement agreement
thereto so long as any such amendment or replacement agreement is not
more disadvantageous to the holders of the Securities in any material
respect than the original agreement as in effect on the Issue Date;
(v) the existence of, or the performance by the Company or any
of its Restricted Subsidiaries of its obligations under the terms of,
any stockholders agreement (including any registration rights agreement
or purchase agreement related thereto) to which it is a party on the
Issue Date;
(vi) services provided to any Unrestricted Subsidiary of the
Company for fees approved by the Board of Directors; and
(vii) the issuance, sale or other disposition of any Equity
Interest (other than Disqualified Stock) of the Company, including any
equity-related agreements relating thereto such as registration rights
and voting agreements so long as such agreements do not result in such
Equity Interests being Disqualified Stock.
SECTION 4.09. Limitation on Restricted Subsidiary Equity
Interests. The Company shall not permit any
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43
Restricted Subsidiary to issue any Equity Interests, except (a) Equity Interests
issued to and held by the Company or a Wholly Owned Restricted Subsidiary, and
(b) Equity Interests issued by a Person prior to the time (i) such Person
becomes a Restricted Subsidiary, (ii) such Person merges with or into a
Restricted Subsidiary or (iii) a Restricted Subsidiary mergers with or into such
Person; provided, however, that such Equity Interests were not issued or
incurred by such Person in anticipation of the type of transaction contemplated
by subclause (i), (ii) or (iii).
SECTION 4.10. Change of Control. Upon the occurrence of a
Change of Control, the Company shall commence an Offer to Purchase all the
outstanding Securities. The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with an Offer to Purchase Notes pursuant to
this Section 4.10. To the extent the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.10, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.10 by virtue
thereof.
SECTION 4.11. Limitation on Asset Swaps. The Company shall
not, and shall not permit any Restricted Subsidiary to, engage in any Asset
Swaps, unless:
(i) at the time of entering into the agreement relating to the
proposed Asset Swap and immediately after such Asset Swap, no Default
or Event of Default shall have occurred and be continuing;
(ii) at the time of entering into the agreement relating to
the proposed Asset Swap and after giving pro forma effect to such Asset
Swap as if it had occurred at the beginning of the applicable
four-quarter period, the Company would be permitted to incur at least
$1.00 of additional Indebtedness under Section 4.03(a);
(iii) after giving pro forma effect to the proposed Asset Swap
as if such Asset Swap had occurred at the beginning of the four most
recent full fiscal quarters ending immediately prior to the date of the
proposed Asset Swap, the ratio of (A) EBITDA of the Company and its
Restricted Subsidiaries on a consolidated basis for such four-quarter
period to (B) the Consolidated Cash Interest Expense of the Company and
its Restricted
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44
Subsidiaries for such four-quarter period exceeds 1.2 to 1.0; and
(iv) the respective Fair Market Values of the assets being
purchased and sold by the Company or any of its Restricted Subsidiaries
are substantially the same at the time of entering into such agreement.
SECTION 4.12. Future Subsidiary Guarantors. The Company shall
(a) cause each Person that, after the Issue Date, becomes a Wholly Owned
Restricted Subsidiary of the Company to execute and deliver a supplemental
indenture and thereby become a Subsidiary Guarantor bound by the Subsidiary
Guarantee of the Securities set forth in Article 11 hereof (without such
Subsidiary Guarantor being required to execute and deliver its Subsidiary
Guarantee endorsed on the Securities) and (b) deliver to the Trustee an Opinion
of Counsel, in form and substance reasonably satisfactory to the Trustee, that
the Subsidiary Guarantee of such Subsidiary Guarantor is a valid and legally
binding obligation of such Subsidiary Guarantor.
SECTION 4.13. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such fiscal year. If they do, the certificate shall describe the
Default or Event of Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall comply with TIA
ss. 314(a)(4).
SECTION 4.14. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.15. Ratings for Notes. Following the filing with the
SEC of the Company's first Annual Report on Form 10-K after the Issue Date, the
Company shall use its reasonable best efforts to obtain, by June 30, 1998, the
publication of ratings for the Securities from Moody's Investors Service, Inc.
and from Standard and Poor's Ratings Group (or any successor to either of them)
or, in the event that either of such entities at such time no longer publishes
ratings for long-term debt securities, then any other nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act).
<PAGE>
45
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company May Merge or Transfer Assets. (a)
The Company shall not consolidate or merge with or into (whether or not the
Company is the Surviving Person), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person, unless:
(i) the Surviving Person shall be a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(ii) the Surviving Person (if other than the Company) shall
expressly assume all the obligations of the Company under the
Securities and this Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee;
(iii) at the time of and immediately after such Disposition,
no Default shall have occurred and be continuing;
(iv) the Surviving Person shall, at the time of such
Disposition and after giving pro forma effect thereto, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to Section
4.03(a); and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Surviving Person (if other than the Company) shall be the
successor to the Company and shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a sale, assignment, transfer, lease or
conveyance shall not be released from the obligation to pay the principal of and
interest on the Securities.
(b) In the event of a sale of all or substantially all of the
assets of any Subsidiary Guarantor or all of the Equity Interests of any
Subsidiary Guarantor, by way of
<PAGE>
46
merger, consolidation or otherwise, then the Surviving Person of any such merger
or consolidation, or such Subsidiary Guarantor, if all of its Equity Interests
are sold, shall be released and relieved of any and all obligations under the
Subsidiary Guarantee of such Subsidiary Guarantor if:
(i) the Person surviving such merger or consolidation or
acquiring the Equity Interest of such Subsidiary Guarantor is not a
Restricted Subsidiary of the Company;
(ii) the Net Proceeds from such sale are applied as described
under Section 4.07; and
(iii) such Subsidiary Guarantor is released from its
guarantees of other Indebtedness of the Company or any Restricted
Subsidiary.
(c) Except as provided in clause (b), no Subsidiary Guarantor
may consolidate or merge with or into (whether or not such Person is Affiliated
with such Subsidiary Guarantor and whether or not the Guarantor is the Surviving
Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets in one or more related transactions, to another
Person, unless:
(i) the Surviving Person shall be the Company or one of its
Wholly Owned Restricted Subsidiaries;
(ii) the Surviving Person shall be a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(iii) the Surviving Person (if other than the Subsidiary
Guarantor) shall expressly assume all the obligations of the Subsidiary
Guarantor under the Securities and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the
Trustee; and
(iv) at the time of and immediately after such Disposition, no
Default shall have occurred an be continuing.
<PAGE>
47
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of principal of (or
premium if any, on) any Security when the same becomes due and payable,
whether or not such payment shall be prohibited by Article 10;
(2) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;
(3) the Company fails to redeem or purchase any Security when
required pursuant to this Indenture or the Securities, including, in
connection with an Offer to Purchase, whether or not such redemption or
purchase shall be prohibited by Article 10;
(4) the Company fails to comply with Sections 4.15 or 5.01;
(5) the Company or any Subsidiary Guarantor fails to comply
with any of their respective agreements in the Securities or this
Indenture (other than those referred to in clause (1), (2), (3) or (4)
above) and such failure continues for 30 days after the notice
specified below;
(6) the Company or any Restricted Subsidiary fails to comply
with terms of any instrument evidencing or securing Indebtedness for
money borrowed by the Company or any Restricted Subsidiary having an
outstanding principal amount of $5,000,000 individually or in the
aggregate, which failure results in the acceleration of the payment of
such Indebtedness or constitutes the failure to pay such Indebtedness
when due at final maturity, and such non-payment continues for a period
of 30 days;
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48
(7) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Restricted Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Restricted Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Company or any Restricted Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(9) any final judgment or decree for the payment of money in
excess of $5,000,000 (not subject to appeal) is entered against the
Company or any Restricted Subsidiary and remains undischarged or
unstayed for a period of 60 days after the later of (A) entry of such
final judgment or decree and (B) the date on which the right to appeal
has expired; or
(10) a Subsidiary Guarantee of a significant Subsidiary ceases
to be in full force and effect (other than in accordance with the terms
of such Subsidiary Guarantee) or a Subsidiary Guarantor denies or
disaffirms its obligations under its Subsidiary Guarantee.
<PAGE>
49
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (5) is not an Event of Default until
the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6), (9) or (10) and any event which with
the giving of notice or the lapse of time would become an Event of Default under
clause (5), its status and what action the Company is taking or proposes to take
with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the Accreted Value of and accrued but
unpaid interest on all the Securities (the "Default Amount") to be due and
payable. Upon such a declaration, the Default Amount shall be due and payable
immediately. If an Event of Default specified in Section 6.01(7) or (8) with
respect to the Company occurs, the Default Amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such
<PAGE>
50
rescission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of, or premium or interest on, a Security, (ii) a
Default arising from the failure to repurchase any Security tendered for
repurchase in connection with an Offer to Purchase or (iii) a Default in respect
of a provision that under Section 9.02 cannot be amended without the consent of
each Securityholder affected. When a Default is waived, it is deemed cured, but
no such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to receive from the
Securityholders indemnification or security satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits. Except to enforce the right
to receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue
<PAGE>
51
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in aggregate principal amount of
the Securities do not give the Trustee a direction inconsistent with
the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1), (2) or (3) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders
<PAGE>
52
in any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
Nothing herein shall be deemed to empower the Trustee to
authorize or consent to, or accept or adopt on behalf of any Securityholder, any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Securityholder, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Company to
the extent required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable
<PAGE>
53
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 or a suit by Holders of more than 10% in principal
amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificate or
opinions which, by any provision hereof, are required to be furnished
to the Trustee, the Trustee shall examine the certificates and opinions
<PAGE>
54
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter stated
in the document.
<PAGE>
55
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers created in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction.
(g) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit.
(h) The Trustee may enter into and perform its obligations
under the Standstill Agreement dated May 19, 1997, among the Company, the
Subsidiary Guarantors, the Investors and Management Stockholders (as those terms
are defined in the Standstill Agreement), and the Agent and the Trustee.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same
<PAGE>
56
with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security,
the Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with May 15, 1998, and in any event
prior to June 15 in each year, the Trustee shall mail to each Securityholder a
brief report dated as of such date that complies with TIA ss. 313(a). The
Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee promptly upon request from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration
<PAGE>
57
of this trust, the enforcement of this Indenture (including this Section 7.07)
against the Company and the performance of its duties hereunder, including the
costs and expenses of defending itself against any claim (whether asserted by
any Securityholder or any other Person) or liability in connection with the
acceptance, exercise or performance of any of its powers or duties hereunder.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee so to notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Trustee may have separate counsel and the Company shall pay the fees and
expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee through
the Trustee's own wilful misconduct, negligence or bad faith. The Company need
not pay for any settlement made by the Trustee without the Company's consent,
such consent not to be unreasonably withheld.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.07 shall not be
subordinate to any other liability or Indebtedness of the Company.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs expenses
or render services after the occurrence of a Default specified in Section
6.01(7) or (8) with respect to the Company, the expenses and the compensation
for the services (including the fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
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58
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided that the
amounts owing to the Trustee hereunder have been paid and subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in aggregate principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
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59
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancelation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.07), and if in either case
the Company pays all
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other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12 and the
operation of Sections 6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10) (but, in
the case of Sections 6.01(7) and (8), with respect only to Restricted
Subsidiaries) and the limitations contained in Sections 5.01(a)(iv) and 5.01(c)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
specified in Sections 6.01(3), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and
6.01(10)(but, in the case of Sections 6.01(7) and (8), with respect only to
Restricted Subsidiaries which constitute Significant Subsidiaries) or because of
the failure of the Company to comply with Section 5.01(a)(iv) or 5.01(c). If the
Company exercises its legal defeasance option or its covenant defeasance option,
each Subsidiary Guarantor, if any, shall be released from all its obligations
with respect to its Subsidiary Guarantee.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
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SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of
and interest on the Securities to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as the case
may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Sections 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;
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(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of
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any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that, if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Company, the
Subsidiary Guarantor and the Trustee may amend this Indenture or the Securities
without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 or Article 12 that would
limit or terminate the benefits available to any holder of Senior
Indebtedness (or Representatives therefor) under Article 10 or Article
12, respectively;
(5) to add guarantees with respect to the Securities or to
release Guarantors when permitted by the terms hereof or to secure the
Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
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64
(7) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA; or
(8) to make any change that does not adversely affect the
rights of any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Debt then outstanding unless the holders of such Senior Debt (or any
group or representative thereof authorized to give a consent) consent in writing
to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.02. With Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
without notice to any Securityholder but with the written consent of the Holders
of at least a majority in aggregate principal amount of the Securities then
outstanding. However, without the consent of each Securityholder affected
thereby, an amendment may not:
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security;
(2) reduce the principal amount of, or the premium or interest
on, any Security;
(3) change the place or currency of payment of principal of,
or premium or interest on, any Security;
(4) reduce the amount of Securities whose Holders must consent
to an amendment or modification of this Indenture;
(5) reduce the amount of Securities whose Holders must consent
to any waiver of compliance with the provisions of this Indenture;
(6) modify Section 6.04 or 6.07 or the second sentence of this
Section;
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(7) modify any of the provisions of Article 10 or Article 12
in a manner materially adverse to the Securityholders;
(8) modify any provisions of the Indenture relating to the
guarantee by the Company or any Subsidiary Guarantor of the
Indebtedness of any Unrestricted Subsidiaries; or
(9) following the mailing of any Offer to Purchase, modify
such Offer to Purchase required under Section 4.07 and Section 4.10 in
a manner materially adverse to the Securityholders.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Debt then outstanding unless the holders of such Senior Debt (or any
group or representative thereof authorized to give a consent) consent in writing
to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
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66
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
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ARTICLE 10
Subordination
-------------
SECTION 10.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment in full in
cash or Cash Equivalents of all Senior Debt of the Company and that the
subordination is for the benefit of and enforceable by the holders of such
Senior Debt. The Securities shall rank pari passu in right of payment with all
other Senior Subordinated Indebtedness of the Company and only Indebtedness of
the Company that is Senior Debt shall rank senior to the Securities in
accordance with the provisions set forth herein. All provisions of this Article
10 shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceeding relating to the Company or its property:
(1) holders of Senior Debt of the Company shall be entitled to
receive payment in full of such Senior Debt in cash or Cash Equivalents
before Securityholders shall be entitled to receive any payment of
principal of, or premium, if any, or interest on, the Securities; and
(2) until the Senior Debt of the Company is paid in full in
cash or Cash Equivalents, any payment or distribution to which
Securityholders would be entitled but for this Article 10 shall be made
to holders of such Senior Debt as their interests may appear, except
that Securityholders may receive shares of stock and any debt
securities that are subordinated to such Senior Debt to at least the
same extent as the Securities.
SECTION 10.03. Default on Senior Indebtedness. The Company may
not pay the principal of or interest on the Securities or make any deposit
pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) any Senior Debt is not
paid in full in cash or Cash Equivalents
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following the maturity (on the due date, upon acceleration or otherwise) of such
Senior Debt or (ii) there shall have occurred and be continuing a default in the
payment of Senior Debt unless, in either case, (x) the default has been
expressly cured or waived or (y) such Senior Debt has been paid in full in cash
or Cash Equivalents; provided, however, that the Company may pay the Securities
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of such Senior Debt.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Designated Senior
Debt that permits one or more holders thereof (or a trustee on behalf of the
holders thereof) to accelerate the maturity thereof, the Company may not pay the
Securities for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice (a "Blockage Notice")
of such default from the Representative of such Designated Senior Debt
specifying an election to effect a Payment Blockage Period and ending on the
earlier of (x) 179 days thereafter and (y) the date on which the Designated
Senior Debt to which such default relates is paid in full in cash or Cash
Equivalents or such default is expressly waived or otherwise cured.
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section),
unless the holders of such Designated Senior Debt or the Representative of such
holders shall have accelerated the maturity of such Designated Senior Debt, the
Company may resume payments on the Securities after termination of such Payment
Blockage Period, subject to the provisions of the Senior Debt. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Debt during such
period, and there shall be a period of at least 181 consecutive days in each
period of 360 consecutive days during which no Payment Blockage Period is in
effect. For purposes of this Section, no default or event of default (other than
a default described in clause (i) or (ii) of the first sentence of this
paragraph) that existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Debt initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Debt, whether or not within a period of 360 consecutive days, unless such
default or event of default shall have been expressly cured or waived for a
period of not less than 180 consecutive days.
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69
SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
holders of Senior Debt shall be entitled to receive payment in full in cash or
Cash Equivalents of all Senior Debt before the holders of the Securities shall
be entitled to receive any payment on account of the principal of (or premium,
if any) or interest on the Securities or on account of the purchase or
redemption or other acquisition of the Securities.
If an Event of Default shall have occurred and be continuing
(other than an Event of Default pursuant to Section 6.01(7) or 6.01(8)), the
Trustee or the Holders of the Securities electing to accelerate the Securities
pursuant to Section 6.02 shall give the holders of all Designated Senior Debt
(or their Representatives) five Business Days' prior written notice before
accelerating the Securities, which notice shall state that it is a "Notice of
Intent to Accelerate"; provided, however, that the Trustee shall have received
prior written notice from the Company specifying the names and addresses of such
holders of Designated Senior Debt; provided further, however, that the Trustee
or such holders may so accelerate the Securities immediately without such notice
if at such time payment of any Designated Senior Debt shall have been
accelerated. If payment of the Securities is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the holders of the
Designated Senior Debt (or their Representatives) of the acceleration.
Notwithstanding anything to the contrary in this Section
10.04, the Trustee's obligations under this Section 10.04 shall only extend to
those holders of Designated Senior Debt whose identity or addresses have been
accurately disclosed in writing by the Company to the Trustee prior to the
occurrence of an Event of Default.
SECTION 10.05. When Distribution Must Be Paid Over. If a
payment or other distribution is made to the Trustee or any Securityholders that
because of this Article 10 should not have been made to them, the Trustee or
Securityholders, as the case may be, who receive the payment or other
distribution shall hold it in trust for holders of Senior Debt of the Company
and pay it over to them as their interests may appear, to the extent necessary
to pay in full in cash or Cash Equivalents all the Senior Debt.
SECTION 10.06. Subrogation. After all Senior Debt of the
Company is paid in full in cash or Cash Equivalents and until the Securities are
paid in full, Securityholders shall be subrogated to the rights of holders
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70
of such Senior Debt to receive distributions applicable to such Senior Debt. A
distribution made under this Article 10 to holders of such Senior Debt which
otherwise would have been made to Securityholders is not, as between the Company
and Securityholders, a payment by the Company on such Senior Debt.
SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Debt of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Debt of the Company to receive payments and other
distributions otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture. The holders of Senior Debt may extend, renew, modify, amend,
compromise, supplement or waive the terms of the Senior Debt or any security
therefor and release, sell or exchange such and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
the Indenture or the Securityholders. Each Securityholder by its acceptance of
the Securities, waives any and all notice of renewal, extension, modification,
amendment or compromise, supplement or waiver (including granting right of
accrual) of the Designated Senior Debt, present or future, and agrees and
consents to the foregoing.
SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
prior to such payment, a Trust Officer of the Trustee receives notice
satisfactory to it that payments may not be made under this Article 10;
provided, however, that if on a date not less than two Business Days prior to
the
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71
date on which by the terms of this Indenture moneys deposited by the Company
with the Trustee for the payment of the Securities shall have become payable for
any purpose, the Trustee or the Paying Agent shall not have received with
respect to such moneys the notice provided for in this Article 10, then the
Trustee or such Payment Agent will have full power and authority to apply the
same to the purpose for which they were received. Nothing herein will be
construed to relieve any Securityholder from duties imposed upon it under
Section 10.05 with respect to moneys received in violation of the provisions of
this Article. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Debt may give the notice; provided,
however, that, if an issue of Senior Debt of the Company has a Representative,
only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Debt of the Company with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article 10 with respect to any Senior Debt of the Company which may at any
time be held by it, to the same extent as any other holder of such Senior Debt;
and nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Debt of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Except as specifically provided in
Section 10.04, nothing in this Article 10 shall have any effect on the right of
the Securityholders or the Trustee to accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior
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72
Debt or subject to the restrictions set forth in this Article 10, and none of
the Securityholders shall be obligated to pay over any such amount to the
Company or any holder of Senior Debt of the Company or any other creditor of the
Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior Debt
of the Company for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of such Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Debt of the Company to participate in any payment or
distribution pursuant to this Article 10, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of such Senior Debt held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 10, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Debt of the Company as provided in this Article 10 and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Debt. The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt and shall not be liable to any such holders if it shall
mistakenly pay
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73
over or distribute to Securityholders or the Company or any other Person, money
or assets to which any holders of Senior Debt of the Company shall be entitled
by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Debt on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Debt of the Company, whether such Senior Debt was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Debt and such holder of such Senior Debt shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Debt.
ARTICLE 11
Subsidiary Guaranties
---------------------
SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest on the Securities when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under this Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
this Article 11 notwithstanding any extension or renewal of any Obligation.
Each Subsidiary Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice
of any default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or
<PAGE>
74
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Obligations; or (f) any change in the
ownership of such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
Each Subsidiary Guarantee is, to the extent and in the manner
set forth in Article 12, subordinated and subject in right of payment to the
prior payment in full of all Senior Debt of the Subsidiary Guarantor giving such
Subsidiary Guarantee and each Subsidiary Guarantee is made subject to such
provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.02 and
11.06, the obligations of each Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of such Subsidiary Guarantor or would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law
or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time payment, or any part thereof, of principal of or interest on any
<PAGE>
75
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right that any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor, subject
to the provisions of Article 12, hereby promises to and will, upon receipt of
written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to
the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount
of such Obligations, (ii) accrued and unpaid interest on such Obligations (but
only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that it shall not be entitled
to any right of subrogation in respect of any Obligations guaranteed hereby
until payment in full of all Obligations and all obligations to which the
Obligations are subordinated as provided in Article 12. Each Subsidiary
Guarantor further agrees that, as between it, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the Obligations
Guaranteed hereby may be accelerated as provided in Article 6 for the purposes
of such Subsidiary Guarantor's Subsidiary Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Subsidiary Guarantor for the purposes of this Section, subject to the provisions
of Article 12.
Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section.
SECTION 11.02. Limitation on Liability. Any term or provision
of this Indenture to the contrary notwithstanding, the maximum, aggregate amount
of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates
<PAGE>
76
to such Subsidiary Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally. In addition, for purposes of any applicable
fraudulent transfer or similar laws, Indebtedness under the Senior Debt will be
deemed to have been incurred prior to the incurrence by any Subsidiary Guarantor
of its liabilities under this Article.
SECTION 11.03. Successors and Assigns. This Article 11 shall
be binding upon each Subsidiary Guarantor and its successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 11
at law, in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or
waiver of any provision of this Article 11, nor the consent to any departure by
any Subsidiary Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Subsidiary Guarantor in any case
shall entitle such Subsidiary Guarantor to any other or further notice or demand
in the same, similar or other circumstances.
SECTION 11.06. Release of Subsidiary Guarantor. Under the
circumstances provided for in Section 5.01(b), a Subsidiary Guarantor shall be
deemed released from all obligations under this Article 11 without any further
action required on the part of the Trustee or any Holder. At the request of the
Company, the Trustee shall execute and deliver an appropriate instrument
evidencing such release.
<PAGE>
77
ARTICLE 12
Subordination of Subsidiary Guaranties
--------------------------------------
SECTION 12.01. Agreement To Subordinate. Each Subsidiary
Guarantor agrees, and each Securityholder by accepting a Security agrees, that
the Obligations of such Subsidiary Guarantor are subordinated in right of
payment, to the extent and in the manner provided in this Article 12, to the
prior payment of all Senior Debt of such Subsidiary Guarantor and that the
subordination is for the benefit of and enforceable by the holders of such
Senior Debt. The Obligations of a Subsidiary Guarantor shall rank pari passu in
right of payment with all other Senior Subordinated Indebtedness of such
Subsidiary Guarantor and only Senior Debt of such Subsidiary Guarantor
(including such Subsidiary Guarantor's Guarantee of Senior Debt of the Company)
shall rank senior to the Obligations of such Subsidiary Guarantor in accordance
with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of any Subsidiary Guarantor to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or
similar proceeding relating to such Subsidiary Guarantor or its property:
(1) holders of Senior Debt of such Subsidiary Guarantor shall
be entitled to receive payment in full of such Senior Debt in cash or
Cash Equivalents before Securityholders shall be entitled to receive
any payment pursuant to any Obligations of such Subsidiary Guarantor;
and
(2) until the Senior Debt of such Subsidiary Guarantor is paid
in full in cash or Cash Equivalents, any payment or distribution to
which Securityholders would be entitled but for this Article 12 shall
be made to holders of such Senior Debt as their interests may appear,
except that Securityholders may receive shares of stock and any debt
securities of such Subsidiary Guarantor that are subordinated to Senior
Debt, and to any debt securities received by holders of Senior Debt, of
such Subsidiary Guarantor to at least the same extent as the
Obligations of such Subsidiary Guarantor are subordinated to Senior
Debt of such Subsidiary Guarantor.
<PAGE>
78
SECTION 12.03. Default on Senior Debt of Subsidiary Guarantor.
No Subsidiary Guarantor may make any payment pursuant to any of its Obligations
or repurchase, redeem or otherwise retire or defease any Securities or other
Obligations (collectively, "pay its Subsidiary Guaranty") if (i) any Senior Debt
of the Company is not paid in full in cash or Cash Equivalents following the
maturity (on the due date, upon acceleration or otherwise) of such Senior Debt
or (ii) there shall have occurred and be continuing a default in the payment of
Senior Debt of the Company unless, in either case, (x) the default has been
expressly cured or waived or (y) such Senior Debt has been paid in full in cash
or Cash Equivalents; provided, however, that any Subsidiary Guarantor may pay
its Subsidiary Guarantee without regard to the foregoing if such Subsidiary
Guarantor and the Trustee receive written notice approving such payment from the
Representatives of the Senior Debt. No Subsidiary Guarantor may pay its
Subsidiary Guarantee during the continuance of any Payment Blockage Period after
receipt by the Company and the Trustee of a Blockage Notice under Section 10.03.
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section),
unless the holders of Designated Senior Debt giving such Blockage Notice or the
Representative of such holders shall have accelerated the maturity of such
Designated Senior Debt, any Subsidiary Guarantor may resume payments pursuant to
its Subsidiary Guarantee after termination of such Payment Blockage Period,
subject to the provisions of any Senior Debt.
SECTION 12.04. Demand for Payment. If a demand for payment is
made on a Subsidiary Guarantor pursuant to Article 11, the Trustee or the
Holders of the Securities electing to demand such payment from the Subsidiary
Guarantor pursuant to Article 11 shall give the holders of the Designated Senior
Debt (or their Representatives) five Business Days' prior written notice before
making such demand, which notice shall state that it is a "Notice of Intent to
Demand for Payment"; provided, however, that the Trustee shall have received
prior written notice from the Company specifying the names and addresses of such
holders of Designated Senior Debt; provided further, however, that the Trustee
or such Holders may make such demand immediately without such notice if at such
time payment of any Designated Senior Debt shall have been demanded. If payment
of the Securities is demanded because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Debt (or
their Representatives) of such demand.
<PAGE>
79
Notwithstanding anything to the contrary in this Section
12.04, the Trustee's obligations under this Section 12.04 shall only extend to
those holders of Designated Senior Debt whose identity or addresses have been
accurately disclosed in writing by the Company to the Trustee prior to the
occurrence of an Event of Default.
SECTION 12.05. When Distribution Must Be Paid Over. If a
payment or other distribution is made to the Trustee or any Securityholders that
because of this Article 12 should not have been made to them, the Trustee or
Securityholders who receive the payment or other distribution shall hold it in
trust for holders of the relevant Senior Debt and pay it over to them or their
Representatives as their interests may appear to the extent necessary to pay in
full in cash or Cash Equivalents all the Senior Debt of such Subsidiary
Guarantor.
SECTION 12.06. Subrogation. After all Senior Debt of a
Subsidiary Guarantor is paid in full in cash or Cash Equivalents and until the
Securities are paid in full, Securityholders shall be subrogated to the rights
of holders of such Senior Debt to receive distributions applicable to Senior
Debt. A distribution made under this Article 12 to holders of such Senior Debt
which otherwise would have been made to Securityholders is not, as between the
relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary
Guarantor on such Senior Debt.
SECTION 12.07. Relative Rights. This Article 12 defines the
relative rights of Securityholders and holders of Senior Debt of a Subsidiary
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Subsidiary Guarantor and
Securityholders, the obligation of such Subsidiary Guarantor, which is
absolute and unconditional, to pay the Obligations to the extent set
forth in Article 11 or the relevant Subsidiary Guaranty; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a default by such Subsidiary Guarantor
under the Obligations, subject to the rights of holders of Senior Debt
of such Subsidiary Guarantor to receive payments and other
distributions otherwise payable to Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt of any Subsidiary Guarantor to enforce the
subordination of the Obligations of such Subsidiary Guarantor shall be impaired
<PAGE>
80
by any act or failure to act by such Subsidiary Guarantor or by its failure to
comply with this Indenture. The holders of Senior Debt may extend, renew,
modify, amend, compromise, supplement or waive the terms of the Senior Debt or
any security therefor and release, sell or exchange such and otherwise deal
freely with the Company, all without affecting the liabilities and obligations
of the parties to the Indenture or the Securityholders. Each Securityholder by
its acceptance of the Securities, waives any and all notice of renewal,
extension, modification, amendment or compromise, supplement or waiver
(including granting right of accrual) of the Designated Senior Debt, present or
future, and agrees and consents to the foregoing.
SECTION 12.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 12.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
prior to such payment, a Trust Officer of the Trustee receives written notice
satisfactory to it that payments may not be made under this Article 12;
provided, however, that if on a date not less than two Business Days prior to
the date on which by the terms of this Indenture moneys deposited by the Company
with the Trustee for the payment of the Securities shall have become payable for
any purpose, the Trustee or the Paying Agent shall not have received with
respect to such moneys the notice provided for in this Article 12, then the
Trustee or such Payment Agent will have full power and authority to apply the
same to the purpose for which they were received. Nothing herein will be
construed to relieve any Securityholder from duties imposed upon it under
Section 12.05 with respect to moneys received in violation of the provisions of
this Article. The Company, the relevant Subsidiary Guarantor, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior Debt of
any Subsidiary Guarantor may give the notice; provided, however, that, if an
issue of Senior Debt of any Subsidiary Guarantor has a Representative, only the
Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not the Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 12 with respect to any Senior Debt of any Subsidiary Guarantor which may
at any time be held by it, to the same extent as any other holder of Senior
Debt; and nothing in Article 7 shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article 12 shall
<PAGE>
81
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07.
SECTION 12.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Debt of any Subsidiary Guarantor, the distribution may be made and the notice
given to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Defaults Under a
Subsidiary Guarantee or Limit Right To Demand Payment. The failure to make a
payment pursuant to a Subsidiary Guarantee by reason of any provision in this
Article 12 shall not be construed as preventing the occurrence of a default
under such Subsidiary Guaranty. Nothing in this Article 12 shall have any effect
on the right of the Securityholders or the Trustee to make a demand for payment
on any Subsidiary Guarantor pursuant to Article 11 or the relevant Subsidiary
Guaranty.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior Debt
of any Subsidiary Guarantor for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior Debt
and other indebtedness of such Subsidiary Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 12. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Debt of any Subsidiary Guarantor to
participate in any payment or distribution pursuant to this Article 12, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt of such Subsidiary
Guarantor held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 12, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be
<PAGE>
82
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Debt of any Subsidiary Guarantor as provided in this Article 12 and
appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Debt of Subsidiary Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of any Subsidiary Guarantor and
shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of such Senior Debt shall be entitled by virtue of
this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Debt on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Debt of any Subsidiary Guarantor, whether such Senior Debt was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Debt and such holder of Senior Debt
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior Debt.
ARTICLE 13
Miscellaneous
-------------
SECTION 13.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
<PAGE>
83
SECTION 13.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or any Subsidiary Guarantor:
Radio One, Inc.
5900 Princess Garden Parkway
Lanham, MD 20706
Attention of: Alfred C. Liggins, III
Chief Executive Officer
if to the Trustee:
United States Trust Company of New York
114 West 47th Street, 25th floor
New York, NY 10036
Attention of : Corporate Trust Division
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking
<PAGE>
84
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
<PAGE>
85
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 13.09. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 13.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
RADIO ONE, INC.,
by /s/ Alfred Liggins
------------------------
Name: Alfred Liggins
Title: President
RADIO ONE LICENSES, INC., as
Guarantor,
by /s/ Alfred Liggins
------------------------
Name: Alfred Liggins
Title: President
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee,
by /s/ Patricia Stermer
------------------------
Name: Patricia Stermer
Title: Assitant Vice President
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
*/
**/
No. $
12% Senior Subordinated Notes Due 2004
RADIO ONE, INC., a Delaware corporation, promises to pay to ,
or registered assigns, the principal sum of Dollars on May 15, 2004.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
RADIO ONE INC.,
by
-----------------------
President
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee, certifies
that this is one of [Seal]
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE>
2
- ----------
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
**/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit A with the Assignment Form included in
such Exhibit 1.
<PAGE>
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
12% Senior Subordinated Note Due 2004
1. Interest
Radio One, Inc., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security from May 19, 1997 to and including May 15, 2000 at a rate of 7%
per annum and after May 15, 2000 until maturity at a rate of 12% per annum;
provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Security at a rate of 0.50% per annum from and including the date on which any
such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. The Company will pay interest
semiannually on May 15 and November 15 of each year, commencing on November 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from May 19, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 2% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on May 1 or November 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of Securities (including
principal, premium and interest) will be made by wire transfer of immediately
<PAGE>
4
available funds to the accounts specified by the holders thereof or, if no U.S.
dollar account maintained by the payee with a bank in the United States is
designated by any holder to the Trustee or the Paying Agent at least 30 days
prior to the relevant due date for payment (or such other date as the Trustee
may accept in its discretion), by mailing a check to the registered address of
such holder.
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York
trust company ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of May 15, 1997 (the "Indenture"), among the Company, Radio One Licenses, Inc.,
as a Subsidiary Guarantor, and the Trustee. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect
on the date of the Indenture (the "Act"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Act for a statement of those terms.
The Securities are general unsecured obligations of the
Company limited to $85,478,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture contains certain restrictive covenants
with respect to the Company and certain of its subsidiaries, including
limitations on (a) the sale of assets, including the equity interests of such
subsidiaries, (b) asset swaps, (c) the payment of Restricted Payments (as
defined), (d) the incurrence of indebtedness and issuance of preferred stock by
the Company or such subsidiaries, (e) the issuance of Equity Interests (as
defined) by such subsidiaries, (f) certain transactions with affiliates, (g) the
incurrence of senior subordinated debt and (h) certain consolidations and
mergers. The Indenture also will prohibit certain
<PAGE>
5
restrictions on distributions from such subsidiaries. All of these limitations
and prohibitions, however, are subject to a number of important qualifications.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may
not be redeemed prior to May 15, 2001. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date) if redeemed during the 12-month period beginning on May
15 of each of the years indicated below.
Period Percentage
2001 106.000%
2002 104.000%
2003 100.000%
In addition, at any time prior to May 15, 2000, the Company
may redeem up to 25% of the original principal amount of the Securities with the
net proceeds of a Public Equity Offering, at any time or from time to time, at a
redemption price (expressed as a percentage of Accreted Value) of 112%, plus
accrued interest to redemption date (subject to the right of Holders of record
on the relevant record date to receive interest due on the related interest
payment date); provided, however, that (a) such redemptions shall occur within
180 days following the closing of such Public Equity Offering and (b) after
giving effect to such redemption, at least $64,109,000 aggregate Accreted Value
of the Securities shall remain outstanding.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the
<PAGE>
6
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Offers to Purchase
The Company shall be required (a) upon a Change of Control,
subject to certain conditions, to commence an Offer to Purchase all the
Securities and (b) upon the realization of Excess Proceeds in an amount greater
than $5,000,000, to commence an Offer to Purchase Securities in a principal
amount equal to such Excess Proceeds, in each case at a repurchase price equal
to 101% of the Accreted Value of the Securities to be repurchased plus accrued
interest to the date of repurchase (subject to the right of holders of record on
the relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Debt, as defined in
the Indenture. To the extent provided in the Indenture, Senior Debt must be paid
before the Securities may be paid. The Company agrees, and each Securityholder
by accepting a Security agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give it effect and appoints the Trustee
as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
<PAGE>
7
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal amount
outstanding of the Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company and the
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add guarantees with respect to the Securities or
to secure the Securities, or to add additional covenants or surrender rights and
powers conferred on the Company, or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make certain
changes in the subordination provisions, or to make any change that does not
adversely affect the rights of any Securityholder.
<PAGE>
8
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default in
payment of principal on the Securities when due; (ii) default for 30 days in
payment of interest on the Securities; (iii) failure to purchase the Securities
required to be purchased pursuant to paragraph 7; (iv) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (v) certain accelerations (including
failure to pay within 30 days after final maturity) of other Indebtedness of the
Company or any Restricted Subsidiary if the amount accelerated (or so unpaid)
exceeds $5,000,000; (vi) certain events of bankruptcy or insolvency with respect
to the Company or any Restricted Subsidiary; and (vii) certain judgments or
decrees for the payment of money in excess of $5,000,000. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Securities may declare all the Securities to
be due and payable immediately. Certain events of bankruptcy or insolvency are
Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
<PAGE>
9
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
<PAGE>
10
registration and the indemnification of the Company to the extent provided
therein.
21. Governing Law.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE.
REQUESTS MAY BE MADE TO:
ATTENTION OF
<PAGE>
11
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
______________
Date: ________________ Your Signature: _____________________
________________________________________________________________________________
______________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
12
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE
COMPANY PURSUANT TO SECTION 4.07 OR 4.10 OF THE INDENTURE, CHECK THE BOX: / /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY
PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.07 OR 4.10 OF THE INDENTURE,
STATE THE AMOUNT: $
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
(SIGNATURE MUST BE GUARANTEED BY A
MEMBER FIRM OF THE NEW YORK STOCK
EXCHANGE OR A COMMERCIAL BANK OR TRUST
COMPANY)
<PAGE>
RULE 144A/REGULATION S APPENDIX
[FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7)) AND TO CERTAIN PERSONS
IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.]
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security
bearing the restricted securities legend set forth in Section 2.3(d) and which
is held by an IAI in accordance with Section 2.1(c).
"Depository" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 12% Senior Subordinated Notes
Due 2004 to be issued pursuant to this Indenture in connection with a Registered
Exchange Offer pursuant to the Registration Rights Agreement.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Credit Suisse First Boston
Corporation and Nationsbanc Capital Markets, Inc.
"Initial Securities" means the 12% Senior Subordinated Notes
Due 2004, issued under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to
the Registration Rights Agreement, to the Initial Purchasers to issue and
deliver to each Initial Purchaser, in exchange for the Initial Securities held
by such Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Purchase Agreement" means the Purchase Agreement dated May
14, 1997, between the Company and the Initial Purchasers.
<PAGE>
2
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated May 14, 1997, among the Company and the Initial Purchasers.
"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository), or any successor person
thereto and shall initially be the Trustee.
"Shelf Registration Statement" means the registration
statement issued by the Company, in connection with the offer and sale of
Initial Securities or Private Exchange Securities, pursuant to the Registration
Rights Agreement.
"Transfer Restricted Securities" means Definitive Securities
and Securities that bear or are required to bear the legend set forth in Section
2.3(d)hereto.
1.2 Other Definitions
Defined in
Term Section:
"Agent Members" ............................. 2.1(b)
"Global Security" ............................. 2.1(a)
"Regulation S" ............................. 2.1(a)
"Rule 144A" ............................. 2.1(a)
<PAGE>
3
2. The Securities.
2.1 Form and Dating.
The Initial Securities are being offered and sold by the
Company pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to
a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, shall be issued initially in the form of
one or more permanent global Securities in definitive, fully registered form
without interest coupons with the global securities legend and restricted
securities legend set forth in Exhibit 1 hereto (each, a Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its New York office, as custodian for
the Depository (or with such other custodian as the Depository may direct), and
registered in the name of Cede & Co., a nominee of the Depository, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depository or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as the
custodian of the Depository or under such Global Security, and the Depository
may be treated by the Company, the Trustee and any agent of
<PAGE>
4
the Company or the Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities. Purchasers of Initial Securities who are IAI's and are not QIBs and
did not purchase Initial Securities sold in reliance on Regulation S will
receive Definitive Securities; provided, however, that upon transfer of such
Definitive Securities to a QIB, such Definitive Securities will, unless the
Global Security has previously been exchanged, be exchanged for an interest in a
Global Security pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$85,478,000 and (2) Exchange Securities or Private Exchange Securities for issue
only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order of the Company signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed $85,478,000 except
as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
<PAGE>
5
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar or co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act, pursuant to
Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are
accompanied by the following additional information and documents, as
applicable:
(A) if such Definitive Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in the form set forth on the reverse of
the Security); or
(B) if such Definitive Securities are being
transferred to the Company, a certification to that effect (in
the form set forth on the reverse of the Security); or
(C) if such Definitive Securities are being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144; or (x) in reliance on another
exemption from the registration requirements of the Securities
Act: (i) a certification to that effect (in the form set forth
on the reverse of the Security) and (ii) if the Company or
Registrar so requests, an opinion of counsel or other evidence
reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in Section
2.3(d)(i).
<PAGE>
6
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a
QIB in accordance with Rule 144A, or (B) outside the United States in
an offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any)
<PAGE>
7
and the procedures of the Depository therefor. A transferor of a beneficial
interest in a Global Security shall deliver to the Registrar a written order
given in accordance with the Depositary's procedures containing information
regarding the participant account of the Depositary to credited with a
beneficial interest in the Global Security. The Registrar shall, in accordance
with such instructions instruct the Depositary to credit to the account of the
Person specified in such instructions a beneficial interest in the Global
Security and to debit the account of the Person making the transfer the
beneficial interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global Security
may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 or
Section 2.09 of the Indenture, prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may be
exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial
Securities intended to ensure that such transfers comply with Rule 144A
or Regulation S, as the case may be) and such other procedures as may
from time to time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form:
<PAGE>
8
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
"THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II)
OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
(V) TO THE COMPANY, IN EACH OF CASES (I) THROUGH (V) IN
ACCORDANCE WITHIN ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE. "THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."
Each Definitive Security will also bear the following
additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted
<PAGE>
9
Security represented by a Global Security) pursuant to Rule 144 under
the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
that is represented by a Global Security, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security, if the Holder
certifies in writing to the Registrar that its request for
such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of
the Security).
(iii) After a transfer of any Initial Securities or Private
Exchange Securities during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Securities or
Private Exchange Securities, as the case may be, all requirements
pertaining to legends on such Initial Security or such Private Exchange
Security will cease to apply, the requirements requiring any such
Initial Security or such Private Exchange Security issued to certain
Holders be issued in global form will cease to apply, and a
certificated Initial Security or Private Exchange Security without
legends will be available to the transferee of the Holder of such
Initial Securities or Private Exchange Securities upon exchange of such
transferring Holder's certificated Initial Security or Private Exchange
Security or directions to transfer such Holder's interest in the Global
Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such
Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain
<PAGE>
10
Holders be issued in global form will cease to apply and certificated
Initial Securities with the restricted securities legend set forth in
Exhibit 1 hereto will be available to Holders of such Initial
Securities that do not exchange their Initial Securities, and Exchange
Securities in certificated or global form will be available to Holders
that exchange such Initial Securities in such Registered Exchange
Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Private Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will still apply, and Private Exchange Securities in
global form with the Restricted Securities Legend set forth in Exhibit
1 hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
(e) Cancelation or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancelation or retained
and canceled by the Trustee. At any time prior to such cancelation, if any
beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities, Definitive Securities and Global Securities at the
Registrar's or co-registrar's request.
<PAGE>
11
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.06, 4.10 and 9.05.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated or
Definitive Security selected for redemption in whole or in part
pursuant to Article 3 of this Indenture, except the unredeemed portion
of any certificated or Definitive Security being redeemed in part, or
(b) any Security for a period beginning 15 Business Days before the
mailing of a notice of an offer to repurchase or redeem Securities or
15 Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in
whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and
interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a
participant in the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest
in the Securities or with respect to the delivery to any
<PAGE>
12
participant, member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given or made only
to or upon the order of the registered Holders (which shall be the
Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only
through the Depository subject to the applicable rules and procedures
of the Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to
its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depository participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
2.4 Certificated Securities.
(a) A Global Security deposited with the Depository or with
the Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the
<PAGE>
13
Trustee in writing that it elects to cause the issuance of certificated
Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depository
to the Trustee located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depository shall direct. Any certificated
Initial Security delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.3(d), bear the restricted
securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE>
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (iv) PURSUANT TO AN EFFECTIVE REGISTRATION
<PAGE>
2
STATEMENT UNDER THE SECURITIES ACT OR (v) TO THE COMPANY, IN EACH OF CASES (i)
THROUGH (v) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.]1
- --------
1. Include if a Definitive Security to be held by an institutional "accredited
investor" (as defined in Rule 501(a),(1),(2),(3) or (7) under the Securities
Act).
<PAGE>
3
No. $
12% Senior Subordinated Notes Due 2004
RADIO ONE, INC., a Delaware corporation, promises to pay to ,
or registered assigns, the principal sum of Dollars on May 15, 2004.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
RADIO ONE, INC.,
by
-----------------------
President
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred [Seal]
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE>
4
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
12% Senior Subordinated Note Due 2004
1. Interest
Radio One, Inc., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security from May 19, 1997 to and including May 15, 2000 at a rate of 7%
per annum and after May 15, 2000 until maturity at a rate of 12% per annum;
provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Security at a rate of 0.50% per annum from and including the date on which any
such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. The Company will pay interest
semiannually on May 15 and November 15 of each year, commencing on November 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from May 19, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 2% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on May 1 or November 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities represented by a
Global Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts
<PAGE>
5
specified by The Depository Trust Company. The Company will make all payments in
respect of a certificated Security (including principal, premium and interest)
by mailing a check to the registered address of each Holder thereof; provided,
however, that payments on a certificated Security in an aggregate principal
amount of $1,000,000 or more will be made by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such later date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York
trust company ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of May 15, 1997 (the "Indenture"), among the Company, Radio One Licenses, Inc.,
as a Subsidiary Guarantor, and the Trustee. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect
on the date of the Indenture (the "Act"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Act for a statement of those terms.
The Securities are general unsecured obligations of the
Company limited to $85,478,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture contains certain restrictive covenants
with respect to the Company and certain of its subsidiaries, including
limitations on (a) the sale of assets, including the equity interests of such
subsidiaries, (b) asset swaps, (c) the payment of Restricted Payments (as
defined), (d) the incurrence of indebtedness and issuance of preferred stock by
the Company or such subsidiaries, (e) the issuance of
<PAGE>
6
Equity Interests (as defined) by such subsidiaries, (f) certain transactions
with affiliates, (g) the incurrence of senior subordinated debt and (h) certain
consolidations and mergers. The Indenture also will prohibit certain
restrictions on distributions from such subsidiaries. All of these limitations
and prohibitions, however, are subject to a number of important qualifications.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may
not be redeemed prior to May 15, 2001. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of Accreted Value), plus
accrued interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date), if redeemed during the 12-month period beginning on May
15 of each of the years indicated below:
Period Percentage
2001 .............................. 106.000%
2002 .............................. 104.000%
2003 .............................. 100.000%
In addition, at any time prior to May 15, 2000, the Company
may redeem up to 25% of the original principal amount of the Securities with the
net proceeds of a Public Equity Offering, at any time or from time to time, at a
redemption price (expressed as a percentage of Accreted Value) of 112%, plus
accrued interest to redemption date (subject to the right of Holders of record
on the relevant record date to receive interest due on the related interest
payment date); provided, however, that (a) such redemption shall occur within
180 days following the closing of such Public Equity Offering and (b) after
giving effect to such redemption, at least $64,109,000 aggregate Accreted Value
of the Securities shall remain outstanding.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000.
<PAGE>
7
If money sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
7. Offers to Purchase
The Company shall be required (a) upon a Change of Control,
subject to certain conditions, to commence an Offer to Purchase all the
Securities and (b) upon the realization of Excess Proceeds in an amount greater
than $5,000,00, to commence an Offer to Purchase Securities in a principal
amount equal to such Excess Proceeds, in each case at a repurchase price equal
to 101% of the Accreted Value of the Securities to be repurchased plus accrued
interest to the date of repurchase (subject to the right of holders of record on
the relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Debt, as defined in
the Indenture. To the extent provided in the Indenture, Senior Debt must be paid
before the Securities may be paid. The Company agrees, and each Securityholder
by accepting a Security agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give it effect and appoints the Trustee
as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 (or in the case of Definitive Securities sold to
institutional accredited investors as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, minimum denominations of $200,000) and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
<PAGE>
8
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal amount
outstanding of the Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company and the
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add guarantees with respect to the Securities or
to secure the Securities, or to add additional covenants or surrender rights and
<PAGE>
9
powers conferred on the Company, or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make certain
changes in the subordination provisions, or to make any change that does not
adversely affect the rights of any Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default in
payment of principal on the Securities when due; (ii) default for 30 days in
payment of interest on the Securities; (iii) failure to purchase the Securities
required to be purchased pursuant to paragraph 7; (iv) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (v) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company or any Restricted Subsidiary if the amount
accelerated (or so unpaid) exceeds $5,000,000; (vi) certain events of bankruptcy
or insolvency with respect to the Company or any Restricted Subsidiary; and
(vii) certain judgments or decrees for the payment of money in excess of
$5,000,000. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of the Securities may
declare all the Securities to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations
<PAGE>
10
owed to it by the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the
<PAGE>
11
Registration Rights Agreement, including, without limitation, the obligations of
the Holders with respect to a registration and the indemnification of the
Company to the extent provided therein.
21. Governing Law.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE.
REQUESTS MAY BE MADE TO:
ATTENTION OF
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: ________________ Your Signature: _____________________
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
<PAGE>
12
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration
statement under the Securities Act of 1933;
or
(3) [ ] inside the United States to a "qualified
institutional buyer" (as defined in Rule
144A under the Securities Act of 1933) that
purchases for its own account or for the
account of a qualified institutional buyer
to whom notice is given that such transfer
is being made in reliance on Rule 144A, in
each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933;
or
(4) [ ] outside the United States in an offshore
transaction within the meaning of Regulation
S under the Securities Act in compliance
with Rule 904 under the Securities Act of
1933; or
(5) [ ] pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate
in the name of any person other than the registered holder
thereof; provided, however, that if box (4) or (5) is checked,
the Trustee may require, prior to registering any such
transfer of the Securities, such legal opinions,
certifications and other information as the Company has
reasonably requested to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not
<PAGE>
13
subject to, the registration requirements of the Securities
Act of 1933, such as the exemption provided by Rule 144 under
such Act.
------------------------
Signature
Signature Guarantee:
- --------------------- --------------------------
Signature must be guaranteed Signature
- --------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
14
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security
have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount of Signature of
Exchange in Principal Amount in Principal Amount this Global Security authorized officer
of this Global of this Global following such of Trustee or
Security Security decrease or increase) Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.07 or 4.10 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.07 or 4.10 of the Indenture,
state the amount in principal amount: $
Date: _______________ Your Signature: ______________________
(Sign exactly as your name appears
on the other side of this Security.)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
EXECUTION COPY
$85,478,000
RADIO ONE, INC.
12% Senior Subordinated Notes Due 2004
PURCHASE AGREEMENT
May 14, 1997
Credit Suisse First Boston Corporation
NationsBanc Capital Markets, Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Dear Sirs:
1. Introductory. Radio One, Inc., a Delaware corporation (the
"Issuer"), proposes, subject to the terms and conditions stated herein, to issue
and sell to the several initial purchasers named in Schedule A hereto (the
"Initial Purchasers") U.S.$85,478,000 principal amount at maturity of its 12%
Senior Subordinated Notes due 2004 (the "Offered Securities") to be
unconditionally guaranteed on a senior subordinated basis (the "Guarantees") by
Radio One Licenses, Inc., a Delaware corporation and a wholly owned subsidiary
of the Issuer, and all future Subsidiary Guarantors (as defined in the Indenture
referred to below) (collectively, the "Guarantors"). The Offered Securities will
be issued under an indenture dated as of May 15, 1997 (the "Indenture"), among
the Issuer, the Guarantors named therein and United States Trust Company of New
York, as Trustee.
This Agreement, the Indenture, the Registration Rights
Agreement referred to below and each Guarantee are referred to herein
collectively as the "Operative Documents". The Issuer, each Guarantor and each
other subsidiary of the Issuer are referred to herein individually as a
"Relevant Party" and collectively as the "Relevant Parties".
<PAGE>
2
The Issuer and the Guarantors hereby agree with the several
Initial Purchasers as follows:
2. Representations and Warranties of the Issuer. The Issuer
and the Guarantors represent and warrant to, and agree with, the several Initial
Purchasers that:
(a) A confidential preliminary offering circular dated March
26, 1997 (the "Preliminary Offering Circular") and a confidential offering
circular dated May 14, 1997 (the "Final Offering Circular") relating to the
Offered Securities have been prepared by the Issuer. The Preliminary Offering
Circular and the Final Offering Circular are hereinafter collectively referred
to as the "Offering Document". The Preliminary Offering Circular and the Final
Offering Circular, as of their respective dates, do not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written
information furnished to the Issuer by any Initial Purchaser through Credit
Suisse First Boston Corporation ("CSFBC") specifically for use therein, it being
understood and agreed that the only such information is that described as such
in Section 7(b). The information (the "Additional Issuer Information") required
to be delivered to holders and prospective purchasers of the Offered Securities
pursuant to Section 4.02 of the Indenture and in accordance with Rule 144A(d)(4)
under the Securities Act of 1933, as amended (the "Securities Act"), does not
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The Issuer has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Offering Document; and the Issuer is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to so qualify and
be in good standing could not reasonably be expected to have a material adverse
effect on the condition (financial or other), business, properties or results of
operations of the Relevant Parties taken as a whole (a "Material Adverse
Effect").
<PAGE>
3
(c) The Issuer has an authorized capitalization as set forth
in the Offering Document and all the issued shares of capital stock of the
Issuer have been duly authorized and validly issued and are fully paid and
non-assessable. The capital stock of the Issuer conforms in all material
respects to the description thereof contained in the Offering Document.
(d) Each subsidiary of the Issuer has been duly organized and
is validly existing in good standing under the laws of the jurisdiction of its
organization, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document; and
each subsidiary of the Issuer is duly qualified to do business in good standing
in all other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification except where the failure to
so qualify and be in good standing could not reasonably be expected to have a
Material Adverse Effect; all of the issued and outstanding capital stock of each
subsidiary of the Issuer that is a corporation has been duly authorized and
validly issued and is fully paid and nonassessable; and the capital stock or
equity interests of each subsidiary owned by the Issuer, directly or through
subsidiaries, is owned free from liens, encumbrances and defects, except as
otherwise described in the Offering Document.
(e) The Indenture has been duly authorized by the Issuer and
the Guarantors; the Offered Securities have been duly authorized by the Issuer;
each Guarantee has been duly authorized by each Guarantor party to it; and when
the Offered Securities are delivered and paid for pursuant to this Agreement on
the Closing Date (as defined below), the Indenture will have been duly executed
and delivered by the Issuer and the Guarantors, such Offered Securities will
have been duly executed, authenticated, issued and delivered and will conform to
the description thereof contained in the Offering Document, each Guarantee will
have been duly executed and delivered by each Guarantor party thereto, and the
Indenture, each Guarantee and such Offered Securities will constitute valid and
legally binding obligations of the Issuer and the Guarantors, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(f) The Registration Rights Agreement dated May 14, 1997 (the
"Registration Rights Agreement"), among the Issuer, the Guarantors and the
Initial Purchasers, has
<PAGE>
4
been duly authorized, executed and delivered by each of the Issuer and the
Guarantors and conforms in all material respects to the description thereof
contained in the Offering Document. The Registration Rights Agreement
constitutes a valid and legally binding obligation of the Issuer and each
Guarantor and is enforceable in accordance with its terms.
(g) This Agreement has been duly authorized, executed and
delivered by the Issuer and the Guarantors.
(h) There are no contracts, agreements or understandings
between the Issuer and any person that would give rise to a valid claim against
the Issuer or any Initial Purchaser for a brokerage commission, finder's fee or
other like payment in connection with the issuance and sale of the Offered
Securities other than the Initial Purchasers.
(i) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by the Operative Documents or in
connection with the issuance and sale of the Offered Securities by the Issuer,
except such as have been obtained or made or as may be required under the
Securities Act and the rules and regulations of the Commission thereunder with
respect to the Registration Rights Agreement and the transactions contemplated
thereunder and such as may be required by securities or blue sky laws of the
various states of the United States.
(j) The execution, delivery and performance by each of the
Issuer and the Guarantors of the Operative Documents to which it is a party and
the issuance and sale of the Offered Securities and compliance with the terms
and provisions of the Operative Documents and the Offered Securities, will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over any Relevant Party or any of their respective properties, or
any agreement or instrument to which any Relevant Party is a party or by which
any Relevant Party is bound or to which any of the properties of any Relevant
Party is subject except for any breaches or violations that could not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect, or the charter or by-laws of any Relevant Party. The Issuer and each
Guarantor has full power and authority to authorize, issue and sell the Offered
<PAGE>
5
Securities and the Guarantees, respectively, as contemplated by this Agreement.
(k) The Preferred Stockholders' Agreement dated as of May 14,
1997 (the "Preferred Stockholders' Agreement") has been executed and delivered
by the Issuer, each Guarantor and each holder of the Issuer's outstanding 15%
Subordinated Promissory Notes due 2003 (together with all accrued interest
thereon, the "Existing Notes").
(l) No consent, approval, authorization, or order of, or
filing with, any governmental agency or any court is required under United
States federal or state laws for the consummation of the Existing Notes Exchange
(as defined below) or the Philadelphia Acquisition (as defined below).
(m) Except as disclosed in the Offering Document, the Relevant
Parties have good and marketable title to all material real properties and good
and valid title to all other material properties and assets owned by them, in
each case free from liens, encumbrances and defects that would materially affect
the value thereof or materially interfere with the use made or to be made
thereof by them; and the Relevant Parties hold any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by them.
(n) The Relevant Parties possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies,
other than the Federal Communications Commission (the "FCC"), necessary to
conduct the business now operated by them and have not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to any Relevant Party, would
individually or in the aggregate have a Material Adverse Effect.
(o) Schedule B hereto contains a true and complete list of all
the licenses, permits and authorizations (the "Licenses") obtained from the FCC
which the Issuer directly, or indirectly through its subsidiaries, holds with
respect to the radio stations (the "Stations") owned or operated by the Issuer,
directly or indirectly through its subsidiaries. The Issuer, directly or
indirectly through its subsidiaries, is the authorized legal holder of the
Licenses listed in Schedule B, none of which is subject to any restrictions or
conditions other than on the face of the Licenses or those generally applicable
to the operations of the Stations that would limit in any
<PAGE>
6
material respect the full operation of the Stations as currently operated. There
are no applications, complaints, or proceedings pending or, to the Issuer's best
knowledge, threatened as of the date hereof and the Closing Date before the FCC
relating to the business or operations of the Stations, except as disclosed in
Schedule C hereto. No proceedings, other than those affecting the broadcast
industry generally, are pending or, to the Issuer's best knowledge, threatened
which may result in the revocation, modification, non-renewal or suspension of
any of the Licenses listed in Schedule B, the denial of any pending application,
the issuance of any cease and desist order, the imposition of any administrative
action by the FCC or any other governmental or regulatory authority with respect
to the Licenses listed in Schedule B, except as disclosed in Schedule C. The
Issuer has no reason to believe that the Licenses listed in Schedule B will not
be renewed in their ordinary course, and all material reports, forms and
statements required to be filed with the FCC with respect to the Stations since
the grant of the last renewal of the Stations' Licenses issued by the FCC have
been filed and were complete and accurate in all material respects when filed.
The Licenses listed in Schedule B, or extensions or renewals thereof, are in
full force and effect and are unimpaired by any acts or omissions of any
Relevant Party.
(p) As of the date hereof and the Closing Date, the Stations
are operating in material compliance with all applicable requirements of the FCC
and the Stations are not under any special or temporary authority with respect
to their operations.
(q) Each Relevant Party is in material compliance with the
Communications Act of 1934 as amended (the "Communications Act") and all written
rules, regulations and policies of the FCC applicable to the conduct of the
business and operations of the Stations. As of the date hereof and the Closing
Date, the use of the assets of the Stations does not violate the Communications
Act and any written rules, regulations or policies of the FCC, except where such
violation could not reasonably be expected to have a Material Adverse Effect.
(r) As of the date hereof and the Closing Date, no labor
dispute with the employees of any Relevant Party exists or, to the knowledge of
any Relevant Party, is imminent that might have a Material Adverse Effect.
(s) The Relevant Parties own, possess or can acquire on
reasonable terms adequate trademarks, trade names and other rights to
inventions, know-how, patents,
<PAGE>
7
copyrights, confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct the business
now operated by them, or presently employed by them, and have not received any
notice of infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that, if determined adversely to any
Relevant Party, would individually or in the aggregate have a Material Adverse
Effect.
(t) No Relevant Party is in violation of any statute, any
rule, regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws, is
liable for any off-site disposal or contamination pursuant to any environmental
laws, or is subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and no Relevant Party is aware of any
pending investigation which might lead to such a claim.
(u) There are no pending actions, suits or proceedings against
or affecting any Relevant Party or any of their respective properties that, if
determined adversely to any Relevant Party, would individually or in the
aggregate have a Material Adverse Effect, or would materially and adversely
affect the ability of any Relevant Party to perform its obligations under any
Operative Document to which it is a party, or which are otherwise material in
the context of the sale of the Offered Securities; and no such actions, suits or
proceedings are threatened or contemplated.
(v) The financial statements included in the Offering Document
present fairly in all material respects the financial position of the Issuer and
its consolidated subsidiaries and, to the best knowledge of the Issuer, Jarad
Broadcasting Company of Pennsylvania Inc. ("Jarad") as of the dates shown and
their results of operations and cash flows for the periods shown, and such
financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis; and the assumptions used in preparing the pro forma financial statements
included in the Offering Document provide a reasonable basis for presenting the
<PAGE>
8
significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate effect to
those assumptions and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical financial
statement amounts. To the best knowledge of the Issuer, the Statement of
Operations relating to WYCB-AM included in the Offering Document presents fairly
in all material respects the information contained therein.
(w) Since the date of the latest audited financial statements
included in the Offering Document there has been no material adverse change, nor
any development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of operations of
the Relevant Parties taken as a whole, or Jarad and there has been no dividend
or distribution of any kind declared, paid or made by the Issuer on any class of
its capital stock.
(x) The Issuer is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to be
registered under Section 8 of the United States Investment Company Act of 1940
(the "Investment Company Act"), nor is it a closed-end investment company
required to be registered, but not registered, thereunder; and the Issuer is not
and, after giving effect to the offering and sale of the Offered Securities and
the application of the proceeds thereof as described in the Offering Document,
will not be an "investment company" as defined in the Investment Company Act.
(y) No securities of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed
on any national securities exchange registered under Section 6 of the United
States Securities Exchange Act of 1934 (the "Exchange Act") or quoted in a U.S.
automated inter-dealer quotation system.
(z) Assuming that the representations and warranties set forth
in Section 4 hereof are true and correct, the offer and sale of the Offered
Securities in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof and Regulation S thereunder; and it is not necessary to qualify an
indenture in respect of the Offered Securities under the United States Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
<PAGE>
9
(aa) Assuming that the representations and warranties set
forth in Section 4 hereof are true and correct, neither the Issuer, nor any of
its affiliates, nor any person acting on its or their behalf (i) has, within the
six-month period prior to the date hereof, offered or sold in the United States
or to any U.S. person (as such terms are defined in Regulation S under the
Securities Act) the Offered Securities or any security of the same class or
series as the Offered Securities or (ii) has offered or will offer or sell the
Offered Securities (A) in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
Securities Act or (B) with respect to any such securities sold in reliance on
Rule 903 of Regulation S ("Regulation S") under the Securities Act, by means of
any directed selling efforts within the meaning of Rule 902(b) of Regulation S.
Assuming that the representations and warranties set forth in Section 4 hereof
are true and correct, the Issuer, its affiliates and any person acting on its or
their behalf have complied and will comply with the offering restrictions
requirement of Regulation S. The Issuer has not entered and will not enter into
any contractual arrangement with respect to the distribution of the Offered
Securities except for this Agreement.
3. Purchase, Sale and Delivery of Offered Securities. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Issuer agrees to sell
to the Initial Purchasers, and the Initial Purchasers agree, severally and not
jointly, to purchase from the Issuer, at a purchase price of 97% of the gross
proceeds thereof plus accrued interest and any increase in accreted value from
May 19, 1997 to the Closing Date (as hereinafter defined), the respective
principal amounts at maturity of the Offered Securities set forth opposite the
names of the several Initial Purchasers in Schedule A hereto. The Issuer will
deliver against payment of the purchase price the Offered Securities in the form
of one or more permanent global securities in definitive form (the "Global
Securities") deposited with the Trustee as custodian for The Depository Trust
Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC,
and such other securities in definitive, fully registered form as CSFBC shall
request for delivery to institutional "accredited investors" (the "AI
Securities"). Interests in any permanent Global Securities will be held only in
book-entry form through DTC, except in the limited circumstances described in
the Offering Document. Payment for the Offered Securities shall be made by the
Initial Purchasers in Federal (same-day) funds by
<PAGE>
9
wire transfer to an account in New York previously designated to CSFBC by the
Issuer at a bank acceptable to CSFBC at the office of Kirkland & Ellis, Citicorp
Center, 153 East 53rd Street, New York, New York, at 10:00 a.m. (New York time),
on May 19, 1997, or at such other time not later than seven full business days
thereafter as CSFBC and the Issuer determine, such time being herein referred to
as the "Closing Date", against delivery to the Trustee as custodian for DTC of
the Global Securities and delivery to CSFBC of the AI Securities. The Global
Securities and AI Securities will be made available for checking at the above
office at least 24 hours prior to the Closing Date.
4. Representations by Initial Purchasers; Resale by Initial
Purchasers. (a) Each Initial Purchaser severally represents and warrants to the
Issuer that it is an "accredited investor" within the meaning of Regulation D
under the Securities Act.
(b) Each Initial Purchaser severally acknowledges that the
Offered Securities have not been registered under the Securities Act and, unless
so registered, may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with Regulation S
or pursuant to an exemption from the registration requirements of the Securities
Act. Each Initial Purchaser severally represents and agrees that it has offered
and sold the Offered Securities, and will offer and sell the Offered Securities
only in accordance with Rule 903 or Rule 144A under the Securities Act ("Rule
144A"). Accordingly, neither such Initial Purchaser nor its affiliates, nor any
persons acting on its or their behalf, have engaged or will engage in any
directed selling efforts with respect to the Offered Securities, and such
Initial Purchaser, its affiliates and all persons acting on its or their behalf
have complied and will comply with the offering restrictions requirement of
Regulation S. Unless otherwise defined herein, terms used in this subsection (b)
have the meanings given to them by Regulation S.
(c) Each Initial Purchaser may offer and sell Offered
Securities in definitive, fully registered form to a limited number of
institutions, each of which is reasonably believed by such Initial Purchaser to
be an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or
(7) under the Securities Act or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act (each, an "Institutional Accredited Investor"); provided,
however, that each such Institutional Accredited Investor executes and delivers
to the Initial
<PAGE>
11
Purchasers and the Company, prior to the consummation of any sale of Offered
Securities to such Institutional Accredited Investor, an Accredited Investor's
Letter in substantially the form attached as Annex A to the Offering Document.
(d) Each Initial Purchaser severally agrees that it and each
of its affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities except
for any such arrangements with the other Initial Purchasers or affiliates of the
other Initial Purchasers or with the prior written consent of the Issuer.
(e) Each Initial Purchaser severally agrees that it and each
of its affiliates will not offer or sell the Offered Securities purchased hereby
in the United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising. Each Initial
Purchaser severally agrees, with respect to resales made in reliance on Rule
144A of any of the Offered Securities, to deliver either with the confirmation
of such resale or otherwise prior to settlement of such resale a notice to the
effect that the resale of such Offered Securities has been made in reliance upon
the exemption from the registration requirements of the Securities Act provided
by Rule 144A.
(f) Each Initial Purchaser severally represents and agrees
that (i) it has not offered or sold and prior to the date six months after the
date of issue of the Offered Securities will not offer or sell any Offered
Securities to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Offered Securities in, from or otherwise
involving the United Kingdom and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Offered Securities to a person who is of a kind
described in Article 11(3) of the
<PAGE>
12
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom the document may otherwise lawfully be issued or passed
on.
(g) Each Initial Purchaser severally represents and agrees
that (i) it has not solicited, and will not solicit, offers to purchase any of
the Offered Securities from, (ii) it has not sold, and will not sell, any of the
Offered Securities to, and (iii) it has not distributed, and will not
distribute, the Offering Document to, any person or entity in any jurisdiction
outside of the United States except, in each case, in compliance in all material
respects with all applicable laws. For the purpose of this Agreement, "United
States" means the United States of America, its territories, its possessions and
other areas subject to its jurisdiction.
5. Certain Agreements of the Issuer. The Issuer agrees with
the several Initial Purchasers that:
(a) The Issuer will advise CSFBC promptly of any proposal to
amend or supplement the Offering Document and will not effect such amendment or
supplementation without CSFBC's consent. If, at any time prior to the completion
of the resale of the Offered Securities by the Initial Purchasers, any event
occurs as a result of which the Offering Document as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any such time to amend or supplement the Offering Document to
comply with any applicable law, the Issuer promptly will notify CSFBC of such
event and promptly will prepare, at its own expense, an amendment or supplement
that will correct such statement or omission or effect such compliance. Neither
CSFBC's consent to, nor the Initial Purchasers' delivery to offerees or
investors of, any such amendment or supplement shall constitute a waiver of any
of the conditions set forth in Section 6.
(b) The Issuer will furnish to CSFBC copies of any preliminary
offering circular, the Offering Document and all amendments and supplements to
such documents, in each case as soon as available and in such quantities as
CSFBC reasonably requests, and the Issuer will furnish to CSFBC on the date
hereof three copies of the Offering Document signed by a duly authorized officer
of the Issuer, one of which will include the independent accountants' reports
therein manually signed by such independent accountants. At any time when the
Issuer is not subject to Section 13 or 15(d)
<PAGE>
13
of the Exchange Act, the Issuer will promptly furnish or cause to be furnished
to CSFBC (and, upon request, to each of the other Initial Purchasers) and, upon
request of holders and prospective purchasers of the Offered Securities, to such
holders and purchasers, copies of the information required to be delivered to
holders and prospective purchasers of the Offered Securities pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto) in
order to permit compliance with Rule 144A in connection with resales by such
holders of the Offered Securities. The Issuer will pay the expenses of printing
and distributing to the Initial Purchasers all such documents.
(c) The Issuer will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions in the United
States and Canada as CSFBC reasonably designates and will continue such
qualifications in effect so long as required for the resale of the Offered
Securities by the Initial Purchasers; provided, however, that the Issuer will
not be required to qualify as a foreign corporation, subject itself to taxation
or to file a general consent to service of process in any such jurisdiction.
(d) For so long as any Offered Securities remain outstanding,
the Issuer will furnish to CSFBC and, upon request, to the other Initial
Purchaser, as soon as practicable after the end of each fiscal year, a copy of
its annual report to stockholders for such year; and the Issuer will furnish to
CSFBC and, upon request, to the other Initial Purchaser (i) as soon as
available, a copy of each report, notice or communication sent to security
holders or, if applicable, filed with any securities exchange and (ii) from time
to time, such other information concerning the Issuer as CSFBC may reasonably
request.
(e) During the period of two years after the Closing Date, the
Issuer will, upon request, furnish to CSFBC and the other Initial Purchaser and
any holder of Offered Securities a copy of the restrictions on transfer
applicable to the Offered Securities.
(f) During the period of two years after the Closing Date, the
Issuer will not, and will not permit any of its affiliates (as defined in Rule
144 under the Securities Act) to, resell any of the Offered Securities that have
been reacquired by them.
(g) During the period of two years after the Closing Date, the
Issuer will not be or become an open-end investment company, unit investment
trust or face-amount
<PAGE>
14
certificate company that is or is required to be registered under Section 8 of
the Investment Company Act and is not, and will not be or become, a closed-end
investment company required to be registered, but not registered, under the
Investment Company Act.
(h) The Issuer will pay all expenses incidental to the
performance of the Issuer's and each Guarantor's obligations (as applicable)
under the Operative Documents, including (i) the fees and expenses of the
Trustee and its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the Offered
Securities, the preparation and printing of this Agreement, the Registration
Rights Agreement, the Offered Securities, the Indenture, the Guarantees, the
Offering Document and amendments and supplements thereto, and any other document
relating to the issuance, offer, sale and delivery of the Offered Securities;
(iii) the cost of qualifying the Offered Securities for trading in the Private
Offerings, Resale and Trading through Automated Linkages (PORTAL) market and any
expenses incidental thereto; and (iv) the cost of any advertising approved by
the Issuer in connection with the issue of the Offered Securities. The Issuer
will also pay or reimburse the Initial Purchasers (to the extent incurred by
them) for any expenses (including reasonable fees and disbursements of counsel)
incurred in connection with qualification of the Offered Securities for sale
under the laws of such jurisdictions in the United States and Canada as CSFBC
reasonably designates and the printing of memoranda relating thereto, for any
fees charged by investment rating agencies for the rating of the Offered
Securities, for all travel expenses of the Issuer's officers and employees and
any other expenses of the Issuer in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities from the Initial
Purchasers and for expenses incurred in distributing preliminary offering
circulars and the Offering Document (including any amendments and supplements
thereto) to the Initial Purchasers.
(i) For a period of 90 days after the date hereof, neither the
Issuer nor any of its affiliates has or will, either alone or with one or more
other persons, bid for or purchase for any account in which it or any of its
affiliates has a beneficial interest any Offered Securities or attempt to induce
any person to purchase any Offered Securities; and neither it nor any of its
affiliates will make bids or purchases for the purpose of creating actual, or
apparent, active trading in, or of raising the price of, the Offered Securities.
<PAGE>
15
(j) For a period of 180 days after the date hereof, the Issuer
will not offer, sell, contract to sell, pledge or otherwise dispose of any
United States dollar-denominated debt securities issued or guaranteed by the
Issuer (other than any commercial loans or other debt incurred in the ordinary
course of the Issuer's business) and having a maturity of more than one year
from the date of issue without the prior written consent of CSFBC, which consent
shall not be reasonably withheld. The Issuer will not at any time offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, pledge, contract or
disposition would cause the exemption afforded by Section 4(2) of the Securities
Act or the safe harbor of Regulation S thereunder to cease to be applicable to
the offer and sale of the Offered Securities.
6. Conditions of the Obligations of the Initial Purchasers.
The obligations of the several Initial Purchasers to purchase and pay for the
Offered Securities will be subject to the accuracy of the representations and
warranties on the part of the Issuer and the Guarantors herein, to the accuracy
of the statements of officers of the Issuer made pursuant to the provisions
hereof, to the performance by the Issuer of its obligations hereunder and to the
following additional conditions precedent:
(a) The Purchasers shall have received a letter,
dated the date of this Agreement, of Arthur Andersen LLP in
form and substance satisfactory to the Initial Purchasers
concerning the financial information with respect to the
Issuer and its consolidated subsidiaries, Jarad and WYCB-AM
set forth in the Offering Document and the Additional Issuer
Information.
(b) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) a change in U.S.
or international financial, political or economic conditions
or currency exchange rates or exchange controls as would, in
the judgment of CSFBC, be likely to prejudice materially the
success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in
respect of dealings in the secondary market, or (ii)(A) any
change, or any development or event involving a prospective
change, in the condition (financial or other), business,
properties or results of operations of the Issuer or its
subsidiaries which, in the judgment of a majority in interest
of the Initial Purchasers including CSFBC, is material and
adverse and
<PAGE>
16
makes it impractical or inadvisable to proceed with completion
of the offering or the sale of and payment for the Offered
Securities; (B) any downgrading in the rating of any debt
securities of the Issuer by any "nationally recognized
statistical rating organization" (as defined for purposes of
Rule 436(g) under the Securities Act), or any public
announcement that any such organization has under surveillance
or review its rating of any debt securities of the Issuer
(other than an announcement with positive implications of a
possible upgrading, and no implication of a possible
downgrading, of such rating); (C) any suspension or limitation
of trading in securities generally on the New York Stock
Exchange, or any setting of minimum prices for trading on such
exchange, or any suspension of trading of any securities of
the Issuer on any exchange or in the over-the-counter market;
(D) any banking moratorium declared by U.S. Federal or New
York authorities; or (E) any outbreak or escalation of major
hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the
judgment of a majority in interest of the Initial Purchasers
including CSFBC, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the offering or sale
of and payment for the Offered Securities.
(c) The Initial Purchasers shall have received such
opinion or opinions, dated the Closing Date, of Kirkland &
Ellis, counsel for the Issuer to the effect that:
(i) Each of the Relevant Parties is validly
existing and in good standing under the laws of the
jurisdiction of its incorporation, with corporate
power and authority to own its properties and conduct
its business as described in the Offering Document;
and each of the Relevant Parties is duly qualified to
do business as a foreign corporation in good standing
in all the jurisdictions set forth in Schedule A
thereto;
(ii) Each Operative Document has been duly
authorized, executed and delivered by each Relevant
Party thereto; the Offered Securities have been duly
authorized, executed, authenticated, issued and
delivered and conform as to legal matters in all
material respects to the description thereof
contained in the Offering
<PAGE>
17
Document; and each Operative Document and the Offered
Securities constitute valid and legally binding
obligations of the Relevant Party thereto and the
Issuer, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting
creditors' rights and to general equity principles;
(iii) No Relevant Party is and, after giving
effect to the offering and sale of the Offered
Securities and the application of the proceeds
thereof as described in the Offering Document, will
be an "investment company" as defined in the
Investment Company Act;
(iv) To the best knowledge of such counsel,
no consent, approval, authorization or order of, or
filing with, any governmental agency or body or any
court is required for the consummation of the
transactions contemplated by the Operative Documents,
or in connection with the issuance or sale of the
Offered Securities by the Issuer, except such as have
been obtained or made or as may be required under the
Securities Act and the rules and regulations of the
Commission thereunder with respect to the
Registration Rights Agreement and the transactions
contemplated thereunder and such as may be required
by securities or blue sky laws of the various states
of the United States;
(v) The execution, delivery and performance
of the Operative Documents, and the issuance and sale
of the Offered Securities and compliance with the
terms and provisions thereof, will not result in a
breach or violation of (A) any of the terms and
provisions of, or constitute a default under, any
United States Federal or State of New York statute,
rule or regulation which, in the opinion of such
counsel is normally applicable to transactions
similar to the transactions contemplated hereby, (B)
any order of any governmental agency or body or court
having jurisdiction over the Relevant Parties and
which order is known to such counsel, (C) any
agreement or instrument identified to such counsel by
any Relevant Party as being a material agreement or
instrument, which are set forth in Schedule B
thereto, to which any Relevant Party is a party or by
which any Relevant Party is bound or to which
<PAGE>
18
any of the properties of any Relevant Party is
subject or (D) the charter or by-laws of any Relevant
Party, and the Issuer and the Guarantors have full
corporate power and authority to authorize the
Offered Securities and the Guarantees, respectively,
and to issue and sell the Offered Securities, in each
case, as contemplated by this Agreement;
(vi) The descriptions in the Offering
Document of contracts and other documents under the
captions "Risk Factors--Restrictions Imposed by the
Preferred Stockholders' Agreement; --Restrictions
Imposed by the New Credit Facility; Pledge of
Assets", "Description of the Notes", "Description of
Certain Indebtedness", "Description of Capital
Stock", and "Plan of Distribution" (with respect to
this Agreement) are accurate in all material respects
and fairly present the information called for; it
being understood that such counsel need express no
opinion as to the financial statements or other
financial data contained in the Offering Document;
(vii) Assuming that the representations and
warranties set forth in Section 4 hereof are true and
correct, it is not necessary in connection with (A)
the offer, sale and delivery of the Offered
Securities or the Guarantees by the Issuer and each
of the Guarantors, respectively, to the several
Initial Purchasers pursuant to this Agreement or (B)
the resales of the Offered Securities by the several
Initial Purchasers in the manner contemplated by this
Agreement, to register the Offered Securities under
the Securities Act or to qualify an indenture in
respect thereof under the Trust Indenture Act; and
(viii) To the best of such counsel's
knowledge, no consent, approval, authorization, or
order of, or filing with, any governmental agency or
body (other than the FCC) or any court is required
under United States Federal or state laws for the
consummation of the Existing Notes Exchange.
At the time the foregoing opinion is delivered, such
counsel shall additionally state that it has participated in
conferences with officers and other representatives of the
Relevant Parties, representatives of the independent public
accountants for the Relevant
<PAGE>
19
Parties, representatives of the Initial Purchasers and counsel
for the Initial Purchasers, at which conferences the contents
of the Offering Document and related matters were discussed,
and, although it has not independently verified and is not
passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the
Offering Document (except to the extent specified in clause
(ii) under Section 6(c)), no facts have come to its attention
which lead it to believe that the Offering Document on the
date thereof or at the Closing Date, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements contained therein, in the light of the
circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion
with respect to the financial statements and related notes
thereto and the other financial, statistical and accounting
data included in the Offering Document).
(d) The Initial Purchasers shall have received an
opinion, dated the Closing Date of Roberts & Eckard, P.C.,
counsel to the Issuer on certain regulatory matters, that:
(i) Schedule B hereto contains a true and
complete list of all the Licenses obtained from the
FCC which the Issuer directly, or indirectly through
its subsidiaries, holds with respect to the Stations
owned or operated by the Issuer, directly or
indirectly through its subsidiaries. The Issuer,
directly or indirectly through its subsidiaries, is
the authorized legal holder of the Licenses listed in
Schedule B, none of which is subject to any
restrictions or conditions other than on the face of
the Licenses or those generally applicable to the
operations of the Stations that would limit in any
material respect the full operation of the Stations
as currently operated. There are no applications,
complaints, or proceedings pending or, to the best of
such counsel's knowledge and belief after due
inquiry, threatened as of the date hereof and the
Closing Date before the FCC relating to the business
or operations of the Stations, except as disclosed in
Schedule C hereto. No proceedings, other than those
affecting the broadcast industry generally, are
pending or, to the best of such counsel's knowledge
and belief after due inquiry, threatened which may
result in the revocation, modification,
<PAGE>
20
non-renewal or suspension of any of the Licenses
listed in Schedule B, the denial of any pending
applications, the issuance of any cease and desist
order, the imposition of any administrative actions
by the FCC with respect to the Licenses listed in
Schedule B, except as disclosed in Schedule C. Such
counsel has no reason to believe that the Licenses
listed in Schedule B will not be renewed in their
ordinary course, and all material reports, forms and
statements required to be filed with the FCC with
respect to the Stations since the grant of the last
renewal of the Stations' Licenses issued by the FCC
have been filed and, to the best of such counsel's
knowledge, were complete and accurate in all material
respects when filed. The Licenses listed in Schedule
B, or extensions or renewals thereof, are in full
force and effect and are unimpaired by any acts or
omissions of any Relevant Party;
(ii) To the best of such counsel's knowledge
based upon a certificate from the responsible
officers of the Relevant Parties, as of the date
hereof and the Closing Date, the Stations are
operating in material compliance with all applicable
requirements of the FCC and the Stations are not
under any special or temporary authority with respect
to their operations;
(iii) To the best of such counsel's
knowledge based upon a certificate from the
responsible officers of the Relevant Parties, each
Relevant Party is in material compliance with the
Communications Act and all written rules, regulations
and policies of the FCC applicable to the conduct of
the business and operations of the Stations. To the
best of such counsel's knowledge, as of the date
hereof and the Closing Date, the use of the assets of
the Stations does not violate the Communications Act
or any written rules, regulations or policies of the
FCC;
(iv) No license, permit, consent, approval,
order or authorization of, or filing with, the FCC is
required in connection with the issuance of the
Offered Securities, the Philadelphia Acquisition, the
Existing Notes Exchange and the consummation of the
transactions contemplated by that certain Amended and
Restated Credit Agreement to be entered into by the
Issuer, NationsBank of Texas, N.A., as Agent and a
Lender, and the other Lenders to be
<PAGE>
21
named therein (the "Credit Agreement") described in
the Offering Document, except such as have been
obtained and except that the filing of certain
documents with the FCC may be required after the
issuance of the Offered Securities or the
consummation of the Philadelphia Acquisition, the
Existing Notes Exchange or the transactions
contemplated by the Credit Agreement;
(v) Neither the issuance and sale of the
Offered Securities nor the performance by the Issuer
and the Guarantors of their respective obligations
under Operative Documents will result in a violation
of the Communications Act, or any applicable
policies, rules or regulations promulgated under the
Communications Act binding on the Issuer or any of
its subsidiaries or, to the best of such counsel's
knowledge and belief after due inquiry, any order,
writ, judgment, injunction, decree or award of the
FCC binding on the Issuer or any of its subsidiaries
except that in pursuing any remedies that the Trustee
may have upon a default by the Issuer pursuant to the
Operative Documents and applicable law, if the
exercise of such remedies would result in a change of
control of any Relevant Party, or an assignment of
the Licenses, then such exercise will be subject to
prior FCC approval; and
(vi) To the extent they constitute a summary
of the legal matters, documents or proceedings
referred to therein, the statements in the Offering
Document under the captions "Risk Factors
--Government Regulation; --Antitrust Matters",
"Business--Competition; --Federal Regulation of Radio
Broadcasting" and "The Transactions--Pending
Acquisitions" fairly present the information called
for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred
to therein in all material respects; it being
understood that, except with respect to the
statements in the Offering Document under the caption
"The Transactions--Pending Acquisitions", such
counsel's opinion with regard to the foregoing is
limited to its knowledge of the Communications Act
and the written rules, regulations or policies of the
FCC.
(e) The Initial Purchasers shall have received from
Cravath, Swaine & Moore, counsel for the Initial Purchasers,
such opinion or opinions, dated the Closing
<PAGE>
22
Date with respect to the incorporation of the Issuer, the
validity of the Offered Securities, the Offering Document, the
exemption from registration for the offer and sale of the
Offered Securities by the Issuer to the several Initial
Purchasers and the resales by the several Initial Purchasers
as contemplated hereby and other related matters as CSFBC may
require, and the Issuer shall have furnished to such counsel
such documents as they request for the purpose of enabling
them to pass upon such matters.
(f) The Initial Purchasers shall have received a
certificate, dated the Closing Date, of the President or any
Vice President and a principal financial or accounting officer
of:
(i) the Issuer in which such officers, to
the best of their knowledge after reasonable
investigation, shall state that the representations
and warranties of the Issuer in this Agreement are
true and correct, that the Issuer has complied with
all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or
prior to the Closing Date and that, subsequent to the
respective dates of the most recent financial
statements in the Offering Document there has been no
material adverse change, nor any development or event
involving a prospective material adverse change, in
the condition (financial or other), business,
properties or results of operations of the Relevant
Parties taken as a whole, Jarad and WYCB-AM, except
as described in such certificate; and
(ii) each Guarantor in which such officers,
to the best of their knowledge after reasonable
investigation, shall state that the representations
and warranties of such Guarantor in this Agreement
are true and correct and that such Guarantor has
complied with all agreements and satisfied all
conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date.
(g) The Initial Purchasers shall have received a
letter, dated the Closing Date, of Arthur Andersen LLP that
meets the requirements of subsection (a) of this Section
except that the specified date referred to in such subsection
will be a date not more than three business days prior to the
Closing Date for the purposes of this subsection.
<PAGE>
23
(h) Concurrently with or prior to the issuance and
sale of the Offered Securities by the Issuer, (i) all the
Existing Notes shall have been exchanged (the "Existing Notes
Exchange") for shares of the Issuer's 15% Senior Cumulative
Redeemable Preferred Stock, par value $.01 per share, pursuant
to the terms of the Preferred Stockholders' Agreement and (ii)
the Initial Purchasers shall have received true and correct
copies of the Preferred Stockholders' Agreement and evidence
reasonably satisfactory to the Initial Purchasers of the
consummation thereof.
(i) Concurrently with or prior to the issuance and
sale of the Offered Securities by the Issuer, (i) the Issuer
shall have acquired substantially all the assets of WPHI-FM
(the "Philadelphia Acquisition") pursuant to the terms of the
Asset Purchase Agreement dated as of December 6, 1996, between
Jarad and the Issuer, as amended by the First Amendment
thereto dated as of March 21, 1997, and the Second Amendment
thereto dated as of April 16, 1997, and (ii) the Initial
Purchasers shall have received evidence reasonably
satisfactory to the Initial Purchasers of the consummation
thereof.
(j) Concurrently with or prior to the issuance and
sale of the Offered Securities by the Issuer, (i) that certain
First Amendment to be entered into by the Issuer and the other
parties thereto, to the Warrantholders' Agreement dated as of
June 6, 1995, and that certain Standstill Agreement to be
entered into by the Issuer, and the other parties thereto,
each of which including such terms as those described in the
Offering Document, shall have been duly executed and delivered
by the respective parties thereto and (ii) the Initial
Purchasers shall have received true and correct copies
thereof.
(k) On the Closing Date and concurrently with the
issuance and sale of the Offered Securities, (i) the
provisions of the Letter of Intent dated March 12, 1997,
between the Issuer and Allied Capital Financial Corporation
relating to the acquisition by the Issuer of WYCB-AM, shall
constitute valid and legally binding obligations of the
parties thereto and (ii) the Initial Purchasers shall have
received evidence reasonably satisfactory to the Initial
Purchasers of the foregoing.
The Issuer will furnish the Initial Purchasers with such
conformed copies of such opinions, certificates, letters and documents as the
Initial Purchasers reasonably request. CSFBC may in its sole discretion waive on
behalf of the
<PAGE>
24
Initial Purchasers compliance with any conditions to the obligations of the
Initial Purchasers hereunder.
7. Indemnification and Contribution. (a) The Issuer and each
Guarantor will, jointly and severally, indemnify and hold harmless each Initial
Purchaser against any losses, claims, damages or liabilities, joint or several,
to which such Initial Purchaser may become subject, under the Securities Act or
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse each Initial Purchaser for any legal or
other expenses reasonably incurred by such Initial Purchaser in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Issuer and the
Guarantors will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Issuer by any Initial Purchaser through CSFBC specifically for use
therein, it being understood and agreed that the only such information consists
of the information described as such in subsection (b) below.
(b) Each Initial Purchaser will severally and not jointly
indemnify and hold harmless the Issuer and the Guarantors against any losses,
claims, damages or liabilities to which the Issuer or the Guarantors may become
subject, under the Securities Act or the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Offering Document, or any amendment or
supplement thereto, or any related preliminary offering circular, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuer
<PAGE>
25
by such Initial Purchaser through CSFBC specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Issuer or the
Guarantors in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Initial Purchaser
consists of the following information in the Offering Document furnished on
behalf of each Initial Purchaser: the last paragraph at the bottom of the cover
page concerning the terms of the offering by the Initial Purchasers, the legend
concerning over-allotments, stabilizing transactions, short covering
transactions and penalty bids on the bottom of page 4 and, under the caption
"Plan of Distribution", (i) the third sentence of the second paragraph
thereunder, (ii) the fourth paragraph thereunder, (iii) the third sentence in
the sixth paragraph thereunder and (iv) the eighth paragraph thereunder.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability that it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
<PAGE>
26
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuer and the Guarantors on the one hand and the Initial Purchasers on the
other from the offering of the Offered Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Issuer and the
Guarantors on the one hand and the Initial Purchasers on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Issuer and the Guarantors on the one hand and
the Initial Purchasers on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Issuer and the Guarantors bear to the total discounts and commissions
received by the Initial Purchasers under this Agreement. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Issuer or the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim that is the subject of this subsection (d). Notwithstanding
the provisions of this subsection (d), no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Offered Securities purchased by it were resold exceeds the amount of any
damages that such Initial Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. The
Initial Purchasers' obligations in this subsection (d) to contribute are several
in proportion to their respective purchase obligations and not joint.
(e) The obligations of the Issuer and the Guarantors under
this Section shall be in addition to any
<PAGE>
27
liability which the Issuer may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any Initial Purchaser
within the meaning of the Securities Act or the Exchange Act; and the
obligations of the Initial Purchasers under this Section shall be in addition to
any liability that the respective Initial Purchasers may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Issuer within the meaning of the Securities Act or the Exchange
Act.
8. Default of Purchasers. If any Initial Purchaser or Initial
Purchasers default in their obligations to purchase Offered Securities hereunder
and the aggregate principal amount of Offered Securities that such defaulting
Initial Purchaser agreed but failed to purchase does not exceed 10% of the total
principal amount of Offered Securities, CSFBC may make arrangements satisfactory
to the Issuer for the purchase of such Offered Securities by other persons,
including any of the other Initial Purchasers, but if no such arrangements are
made by the Closing Date, the non-defaulting Initial Purchasers shall be
obligated severally, in proportion to the respective commitments hereunder, to
purchase the Offered Securities that such defaulting Initial Purchasers agreed
but failed to purchase. If any Initial Purchaser or Initial Purchasers so
default and the aggregate principal amount of Offered Securities with respect to
which such default or defaults occur exceeds 10% of the total principal amount
of Offered Securities and arrangements satisfactory to CSFBC and the Issuer for
the purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Initial Purchaser or the Issuer, except as provided
in Section 9. As used in this Agreement, the term "Initial Purchaser" includes
any person substituted for an Initial Purchaser under this Section. Nothing
herein will relieve a defaulting Initial Purchaser from liability for its
default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Issuer or its officers and of the several Initial Purchasers
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Initial Purchaser, the Issuer or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Offered Securities. If this
Agreement is terminated pursuant to Section 8 or if for any reason the purchase
of the Offered Securities by the Initial Purchasers is not consummated, the
<PAGE>
28
Issuer shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5 and the respective obligations of the Issuer and the
Initial Purchasers pursuant to Section 7 shall remain in effect. If the purchase
of the Offered Securities by the Initial Purchasers is not consummated for any
reason other than solely because of the termination of this Agreement pursuant
to Section 8 or the occurrence of any event specified in clause (C), (D) or (E)
of Section 6(b)(ii), the Issuer will reimburse the Initial Purchasers for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing
and, if sent to the Initial Purchasers, will be mailed, delivered or telegraphed
and confirmed to the Initial Purchasers c/o Credit Suisse First Boston
Corporation, Eleven Madison Avenue, New York, NY 10010, Attention: Investment
Banking Department--Transactions Advisory Group, or, if sent to the Issuer, will
be mailed, delivered or telegraphed and confirmed to it at Radio One, Inc., 5900
Princess Garden Parkway, Lanham, MD, Attention: Alfred C. Liggins, III;
provided, however, that any notice to an Initial Purchaser pursuant to Section 7
will be mailed, delivered or telegraphed and confirmed to such Initial
Purchaser.
11. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder, except that holders of Offered Securities shall
be entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Issuer as if such holders
were parties thereto.
12. Representation of Initial Purchasers. You will act for the
several Initial Purchasers in connection with this purchase, and any action
under this Agreement taken by you jointly or by CSFBC will be binding upon all
the Initial Purchasers.
13. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
<PAGE>
29
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
The Issuer, the Guarantors and the Initial Purchasers hereby
submit to the non-exclusive jurisdiction of the Federal and state courts in the
Borough of Manhattan in The City of New York in any suit or proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby.
<PAGE>
30
If the foregoing is in accordance with the Initial Purchasers'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement among the
Issuer, the Guarantors and the several Initial Purchasers in accordance with its
terms.
Very truly yours,
RADIO ONE, INC., as the Issuer
by /s/ Alfred Liggins
--------------------------
Name: Alfred Liggins
Title: President
RADIO ONE LICENSES, INC., as a
Guarantor
by /s/ Alfred Liggins
--------------------------
Name: Alfred Liggins
Title: President
The foregoing Purchase
Agreement is hereby
confirmed and accepted
as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
NATIONSBANC CAPITAL MARKETS, INC.
Acting on behalf of
themselves and as the
representatives of the
several Initial
Purchasers
by CREDIT SUISSE FIRST BOSTON CORPORATION
by /s/ Wiliam Ettelson
---------------------------
Name: William Ettelson
Title: Associate
<PAGE>
SCHEDULE A
Principal Amount at
Maturity of Offered
Initial Purchasers Securities
- ------------------
Credit Suisse First Boston
Corporation $43,594,000
NationsBanc Capital Markets, Inc. $41,884,000
------------------
Total $85,478,000
==================
<PAGE>
SCHEDULE B
FCC Licenses
- --------------------------------------------------------------------------------
1. FCC LICENSES
- ----------------- ------------------- ------------------------ -----------------
Call Sign City of License File Number Expiration Date
- ----------------- ------------------- ------------------------ -----------------
WKYS-FM Washington, DC BALH-941103GE
BALH-950427GG
BRH-950601YR October 1, 2003
BLH-900130KB October 1, 2003
BMLH-920l30KC October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WOL(AM) Washington, DC BAL-950427GE
BR-950601B3 October 1, 1995*
BZ-921119AA October 1, 1995*
- ----------------- ------------------- ------------------------ -----------------
WMMJ(FM) Bethesda, MD BALH-950427GF
BR-950601ZG October 1, 2003
BLH-910830KA October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WOLB(AM) Baltimore, MD BAL-930401GG
BAL-950427GH
BR-950601VG October 1, 2003
BL-860207AJ October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WERQ-FM Baltimore, MD BALH-950427GJ
BAL-930401GH
BRH-950601ZF October 1, 2003
BLH-891228KA October 1, 2003
BLH-891228KB October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WWIN(AM) Baltimore, MD BAL-910828HN
BAL-950427GI
BR-950601VE October 1, 2003
BZ-900430AH October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WWIN-FM Glen Burnie, MD BALH-910828HO
BALH-950427GK
BRH-95060IVF October 1, 2003
BMLH-920325KC October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WPHI-FM Jenkintown, PA BRH-910319YG August 1, 1998
BLH-870408KA August 1, 1998
BALH-961213GK
- ----------------- ------------------- ------------------------ -----------------
* Radio One's timely filing of a license renewal application for the license for
WOL(AM) has automatically extended the license term for the main station license
and the associated auxiliary licenses until the FCC takes action on the renewal
application.
<PAGE>
- --------------------------------------------------------------------------------
2. BROADCAST AUXILIARY FACILITIES
- ----------------- ------------------- ------------------------ -----------------
Primary Sation Auxiliary Call
Signs File Number Expiration Date
- ----------------- ------------------- ------------------------ -----------------
WKYS-FM KPH-709 BPLRE-860822MG October 1, 2003
KPJ-713 BPLRE-880421MB October 1, 2003
WHM-976 BMLST-830307MC October 1, 2003
KPH-735 BPLRE-860823MY October 1, 2003
KGL-356 BALRE-880406MF October 1, 2003
KGL-357 BALRE-880406ME October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WOL(AM) WLP-796 BLST-900202ME October 1, 1995*
- ----------------- ------------------- ------------------------ -----------------
WMMJ(FM) WLP-729 BPLST-900126MH October 1, 2003
WLP-724 BLST-851009MK October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WERQ-FM WLE-939 BPLST-900220MA October 1, 2003
KPK-392 BPLRE-900220ME October 1, 2003
KPK-262 BPLRE-900313MG October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WWIN(AM) WLP-458 BPLST-890321MD October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WWIN-FM WHS-275 BPLST-890321MC October 1, 2003
- ----------------- ------------------- ------------------------ -----------------
WPHI-FM WLJ-410 BMLST-861125MH August 1, 1998
KB-97399 BMLRE-871016MB August 1, 1998
- ----------------- ------------------- ------------------------ -----------------
* Radio One's timely filing of a license renewal application for the license for
WOL(AM) has automatically extended the license term for the main station license
and the associated auxiliary licenses until the FCC takes action on the renewal
application.
<PAGE>
SCHEDULE C
Complaints
1. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION COMPLAINTS:
Charge #120950174: Stewart E. Broady v. Radio One of Maryland, Inc. Mr.
------------------------------------------------
Broady was terminated from part-time employment as an on-air personality, due to
poor ratings performance and in an effort to control costs by eliminating
excessive staffing levels. He claims he was fired on age discrimination grounds.
John Leva-Day v. Radio One, Inc. Race Discrimination, Wrongful
------------------------------------
Termination for Race.
Robert Paris v. Radio One, Inc. Race Discrimination, Wrongful
------------------------------------
Termination for Race.
2. FCC LICENSE RENEWAL APPLICATIONS:
A license renewal application for Station WOL(AM), Washington, DC,
remains pending. On June 1, 1995, Radio One, Inc., filed with the FCC an
application for renewal of the license for Station WOL(AM) (FCC File No.
BR950601B3). The application was accepted for filing by the FCC pursuant to a
Public Notice dated June 19, 1995. No petitions to deny the applications and no
competing applications for the broadcast frequency were filed. However, action
on the renewal application has apparently been delayed due to the processing by
the FCC of a pending complaint against WOL(AM) alleging that programming
material broadcast on the station was indecent and obscene.
3. LISTENER COMPLAINTS:
Other unresolved complaints have been filed against Station WOL(AM),
all of which, except for two, were filed prior to the expiration of the October
1, 1995, license term. The complaints are as follows:
June 20, 1996, from Tanya Chutkan, Counsel for Loretta Smith, alleging
that WOL(AM) violated Section 73.1206 of the FCC's rules which requires consent
before recording a telephone conversation for broadcast and a D.C. statute that
prohibits disclosure of the names of juveniles in criminal proceedings. The
messages allegedly broadcast were left on a telephone answering machine. This
may involve the same facts as a complaint filed by Loretta Smith on May 1, 1993,
alleging that WOL(AM) broadcast messages left on a telephone answering machine.
That complaint was resolved in favor of WOL(AM) by a letter dated September 30,
1993, from Roger Holberg, Acting Chief of the Complaints and Investigations
Branch of the FCC.
<PAGE>
2
October 3, 1995, from Mrs. P. Buckland, alleging that broadcasts have
contained slurs directed at her.
March 27, 1994, from Stephen Johnson, alleging that racial slurs and
indecent language have been broadcast.
March 14, 1994, from Pamela and Joseph Buckland, alleging that they are
experiencing the effects of high voltage.
February 23, 1994, from Robin D. Grove, alleging that racially biased
comments have been broadcast. Note that this complaint alleges that WMMJ also
broadcast such comments.
October 26, 1993, from Faith Dane, alleging that her First Amendment
rights were violated and that she was escorted from the studio against her will.
In addition to the complaints described above filed against Station
WOL(AM), a complaint was filed against Station WERQ-FM on March 20, 1997,
alleging that lyrics of a song played on the radio contained profanity.
EXECUTION COPY
$85,478,000
RADIO ONE, INC.
12% Senior Subordinated Notes Due 2004
REGISTRATION RIGHTS AGREEMENT
May 14, 1997
Credit Suisse First Boston Corporation
NationsBanc Capital Markets, Inc.
c/o Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Dear Sirs:
Radio One, Inc., a Delaware corporation (the "Issuer"), proposes to
issue and sell to Credit Suisse First Boston Corporation and NationsBanc Capital
Markets, Inc. (collectively, the "Initial Purchasers"), upon the terms set forth
in a purchase agreement of even date herewith (the "Purchase Agreement"),
$85,478,000 aggregate principal amount of its 12% Senior Subordinated Notes Due
2004 (the "Securities") to be unconditionally guaranteed on a senior
subordinated basis (the "Guarantees") by Radio One Licenses, Inc., a Delaware
corporation and a wholly owned subsidiary of the Issuer, and all future
Subsidiary Guarantors (as defined in the Indenture described below)
(collectively, the "Guarantors"). The Securities will be issued pursuant to an
Indenture, dated as of May 15, 1997, (the "Indenture") among the Issuer, the
Guarantors named therein and United States Trust Company of New York (the
"Trustee"). As an inducement to the Initial Purchasers, the Issuer and the
Guarantors agree with the Initial Purchasers, for the benefit of the holders of
the Securities (including, without limitation, the Initial Purchasers), the
Exchange Securities (as defined below) and the Private Exchange Securities (as
defined below) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Issuer shall, at its cost, prepare
and, not later than 45 days after (or if the 45th day is not a business day, the
first business day thereafter) the date of original issue of the Securities (the
"Issue Date"), file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a proposed offer (the "Registered
Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in
Section 6 hereof), who are not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer, to issue and deliver to
such Holders, in exchange for the Securities, a like aggregate principal amount
of debt securities (the "Exchange Securities") of the Issuer issued under the
Indenture and identical in all material respects to the Securities (except for
the transfer restrictions relating to the Securities) that would be registered
under the Securities Act. The Issuer shall use its best efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act within 150 days (or if the 150th day is not a business day, the first
business day thereafter) after the Issue Date of the Securities and shall keep
the Exchange Offer Registration Statement effective for not less than 30 days
(or longer, if required by applicable law) after the date notice of the
Registered Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Registration Period").
If the Issuer effects the Registered Exchange Offer, the Issuer will be
entitled to close the Registered Exchange Offer 30 days after the commencement
thereof provided that the Issuer has accepted all the Securities theretofore
validly tendered in accordance with the terms of the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Issuer shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities (as defined in Section 6
hereof) electing to exchange the Securities for Exchange Securities (assuming
that such Holder is not an affiliate of the Issuer within the meaning of the
Securities Act, acquires the Exchange Securities in the ordinary course of such
Holder's business and has no arrangements with any person to participate in the
distribution of the Exchange Securities and is not prohibited by any law or
policy of the Commission from participating in the Registered Exchange Offer) to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
<PAGE>
2
The Issuer acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Securities, acquired for its own account as a result of
market-making activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities received by
such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an
Initial Purchaser that elects to sell Exchange Securities acquired in exchange
for Securities constituting any portion of an unsold allotment is required to
deliver a prospectus containing the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in connection with such
sale.
The Issuer shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) such
period shall be the lesser of 180 days and the date on which all Exchanging
Dealers and the Initial Purchasers have sold all Exchange Securities held by
them (unless such period is extended pursuant to Section 3(j) below) and (ii)
the Issuer shall make such prospectus and any amendment or supplement thereto,
available to any broker-dealer for use in connection with any resale of any
Exchange Securities for a period not less than 90 days after the consummation of
the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Securities acquired by it as part of its initial distribution,
the Issuer, simultaneously with the delivery of the Exchange Securities pursuant
to the Registered Exchange Offer, shall issue and deliver to such Initial
Purchaser upon the written request of such Initial Purchaser, in exchange (the
"Private Exchange") for the Securities held by such Initial Purchaser, a like
principal amount of debt securities of the Issuer issued under the Indenture and
identical in all material respects (including the existence of restrictions on
transfer under the Securities Act and the securities laws of the several states
of the United States) to the Securities (the "Private Exchange Securities"). The
Securities, the Exchange Securities and the Private Exchange Securities are
herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Issuer shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York, which
may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time prior to
the close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange, as the case may be, the Issuer shall:
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;
(y) deliver to the Trustee for cancelation all the Securities so
accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Securities, Exchange Securities or Private Exchange Securities, as
the case may be, equal in principal amount to the Securities of such Holder so
accepted for exchange.
The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and
<PAGE>
3
that none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Note and Private Exchange Note issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Securities surrendered in exchange therefor or, if no interest has been paid on
the Securities, from the date of original issue of the Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuer that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Issuer or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.
Notwithstanding any other provisions hereof, the Issuer will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Issuer is
not permitted to effect a Registered Exchange Offer, as contemplated by Section
1 hereof, (ii) the Registered Exchange Offer is not consummated within 180 days
of the Issue Date or (iii) any Holder notifies the Issuer that (A) it is
prohibited by law or Commission policy from participating in the Registered
Exchange Offer, (B) it may not resell the Exchange Securities acquired by it in
the Registered Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) it is an Exchanging Dealer and
owns Securities acquired directly from the Issuer or an "affiliate" of the
Issuer as defined in Rule 405 of the Securities Act, the Issuer shall take the
following actions:
(a) The Issuer shall, at its cost, as promptly as practicable (but in
no event more than 30 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use its best efforts to
cause to be declared effective a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, a
"Registration Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities (as defined
in Section 6 hereof) by the Holders thereof from time to time in accordance with
the methods of distribution set forth in the Shelf Registration Statement and
Rule 415 under the Securities Act (hereinafter, the "Shelf Registration");
provided, however, that no Holder (other than an Initial Purchaser) shall be
entitled to have the Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(b) The Issuer shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the relevant
Securities, until the earlier of (i) the time when the Securities covered by the
Shelf Registration Statement can be sold pursuant to Rule 144 of the Securities
Act without any limitations under clauses (c), (e), (f) or (h) of Rule 144 and
(ii) three years (or such longer period if extended pursuant to Section 3(j)
below) from the Issue Date or such shorter period that will terminate when all
the Securities covered by the Shelf Registration Statement have been sold
pursuant thereto. The Issuer shall be deemed not to have used its best efforts
to keep the Shelf Registration Statement effective during the requisite period
if it voluntarily takes any action that would result in Holders of Securities
covered thereby not being able to offer and sell such Securities during that
period, unless such action is required by applicable law; provided, however,
that the Issuer shall not be deemed to have
<PAGE>
4
voluntarily taken any such action if it enters, in good faith, into negotiations
concerning, or executes and delivers any agreement or other document relating
to, any business combination, acquisition or disposition; provided further,
however, that the Shelf Registration Statement shall not remain ineffective for
more than 30 consecutive days, twice in any calendar year, as a result of the
entry into of such negotiations concerning, or the execution and delivery of any
agreement or other document relating to, any business combination, acquisition
or disposition.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Issuer shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (i) to comply
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (ii) not to contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Issuer shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that an Initial Purchaser (with respect to any portion
of an unsold allotment from the original offering) is participating in the
Registered Exchange Offer or the Shelf Registration Statement, shall use its
best efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may propose; (ii)
include the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer Registration
Statement and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if
requested by an Initial Purchaser, include the information required by Items 507
or 508 of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement; (iv)
include within the prospectus contained in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," reasonably acceptable to
the Initial Purchasers, which shall contain a summary statement of the positions
taken or policies made by the staff of the Commission with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of Exchange Securities received by such broker-dealer in
the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such
positions or policies have been publicly disseminated by the staff of the
Commission or such positions or policies, in the reasonable judgment of the
Initial Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in the
case of a Shelf Registration Statement, include the names of the Holders, who
propose to sell Securities pursuant to the Shelf Registration Statement, as
selling securityholders.
(b) The Issuer shall give written notice to the Initial Purchasers, the
Holders of the Securities and any Participating Broker-Dealer from whom the
Issuer has received prior written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has been
filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Issuer or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the Issuer to make
changes in the Registration Statement or the prospectus in order that the
Registration Statement or the prospectus do not contain an untrue statement
<PAGE>
5
of a material fact nor omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus, in light of the circumstances under which they were made) not
misleading.
(c) The Issuer shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Issuer shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Issuer shall deliver to each Exchanging Dealer and each Initial
Purchaser, and to any other Holder who so requests, without charge, at least one
copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if any
Initial Purchaser or any such Holder requests, all exhibits thereto (including
those incorporated by reference).
(f) The Issuer shall, during the Shelf Registration Period, deliver to
each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request. The
Issuer consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.
(g) The Issuer shall deliver to each Initial Purchaser, any Exchanging
Dealer, any Participating Broker-Dealer and such other persons required to
deliver a prospectus following the Registered Exchange Offer, without charge, as
many copies of the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as such persons may reasonably
request. The Issuer consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by any Initial
Purchaser, if necessary, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities covered by the
prospectus, or any amendment or supplement thereto, included in such Exchange
Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Issuer shall register or qualify or cooperate with
the Holders of the Securities included therein and their respective counsel in
connection with the registration or qualification of the Securities for offer
and sale under the securities or "blue sky" laws of such states of the United
States as any Holder of the Securities reasonably requests in writing and do any
and all other acts or things necessary or advisable to enable the offer and sale
in such jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Issuer shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so qualified
or (ii) take any action which would subject it to general service of process or
to taxation in any jurisdiction where it is not then so subject.
(i) The Issuer shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing the
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request a reasonable period of time prior to sales of the
Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Issuer is
required to maintain an effective Registration Statement, the Issuer shall
promptly prepare and file a post-effective amendment to the Registration
Statement or a supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Securities or
purchasers of Securities, the prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. If the Issuer notifies the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b)
above to suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Initial Purchasers, the Holders of the
Securities and any such Participating Broker-Dealers shall suspend use of such
prospectus, and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration Statement
provided for in Section 1 above shall each be extended by the number of days
from and including the date of the giving of such notice to and including
<PAGE>
6
the date when the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Issuer will provide a CUSIP number for the Securities, the
Exchange Securities or the Private Exchange Securities, as the case may be, and
provide the applicable trustee with printed certificates for the Securities, the
Exchange Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Issuer will comply in all material respects with all rules and
regulations of the Commission to the extent and so long as they are applicable
to the Registered Exchange Offer or the Shelf Registration and will make
generally available to its security holders (or otherwise provide in accordance
with Section 11(a) of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days after
the end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of the Issuer's first fiscal quarter commencing
after the effective date of the Registration Statement, which statement shall
cover such 12-month period.
(m) The Issuer shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in a timely
manner and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Issuer shall appoint a new
trustee thereunder pursuant to the applicable provisions of the Indenture.
(n) The Issuer may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Issuer such
information regarding the Holder and the distribution of the Securities as the
Issuer may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Issuer may exclude from such registration the
Securities of any Holder that unreasonably fails to furnish such information
within a reasonable time after receiving such request.
(o) The Issuer and the Guarantors shall enter into such customary
agreements (including if requested an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Issuer and each
Guarantor shall (i) make reasonably available for inspection by the Holders of
the Securities, any underwriter participating in any disposition pursuant to the
Shelf Registration Statement and any attorney, accountant or other agent
retained by the Holders of the Securities or any such underwriter all their
respective relevant financial and other records, pertinent corporate documents
and properties and (ii) cause the Issuer's officers, directors, employees,
accountants and auditors to supply all relevant information reasonably requested
by the Holders of the Securities or any such underwriter, attorney, accountant
or agent in connection with the Shelf Registration Statement, in each case, as
shall be reasonably necessary to enable such persons, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act; provided,
however, that the foregoing inspection and information gathering shall be
coordinated on behalf of the Initial Purchasers by you and on behalf of the
other parties, by one counsel designated by and on behalf of such other parties
as described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Issuer and the
Guarantors, if requested by any Holder of Securities covered thereby, shall
cause (i) their counsel to deliver an opinion and updates thereof relating to
the Securities and the Guarantees in customary form addressed to such Holders
and the managing underwriters, if any, thereof and dated, in the case of the
initial opinion, the effective date of such Shelf Registration Statement; (ii)
their officers to execute and deliver all customary documents and certificates
and updates thereof requested by any underwriters of the applicable Securities;
and (iii) their independent public accountants and the independent public
accountants with respect to any other entity for which financial information is
provided in the Shelf Registration Statement to provide to the selling Holders
of the applicable Securities and any underwriter therefor a comfort letter in
customary form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Issuer shall
cause (i) its counsel to deliver to such Initial Purchaser or such Participating
Broker-Dealer a signed opinion in the form set forth in Schedule A of the
Purchase Agreement with such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its independent public
accountants and the independent public accountants with respect to any other
entity for which
<PAGE>
7
financial information is provided in the Registration Statement to deliver to
such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as set
forth in Section 6(a) and (b) of the Purchase Agreement, with appropriate date
changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Securities by Holders to the Issuer (or to
such other Person as directed by the Issuer) in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, the Issuer
shall mark, or caused to be marked, on the Securities so exchanged that such
Securities are being canceled in exchange for the Exchange Securities or the
Private Exchange Securities, as the case may be; in no event shall the
Securities be marked as paid or otherwise satisfied.
(t) The Issuer will use its best efforts to (a) if the Securities have
been rated prior to the initial sale of such Securities, confirm such ratings
will apply to the Securities covered by a Registration Statement, or (b) if the
Securities were not previously rated, cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if so
requested by Holders of a majority in aggregate principal amount of Securities
covered by such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution" (within
the meaning of the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Issuer shall cooperate with such broker-dealer in
complying with the requirements of such Conduct Rules, including, without
limitation, by (i) if Rule 2720 of such Conduct Rules shall so require, engaging
a "qualified independent underwriter" (as defined in Rule 2720 of such Conduct
Rules) to participate in the preparation of the Registration Statement relating
to such Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such Registration
Statement is an underwritten offering or is made through a placement or sales
agent, to recommend the yield of such Securities, (ii) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof and (iii) providing such information
to such broker-dealer as may be required in order for such broker-dealer to
comply with the requirements of such Conduct Rules.
(v) The Issuer shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a Registration
Statement contemplated hereby.
4. Registration Expenses. The Issuer shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of
Cravath, Swaine & Moore, counsel for the Initial Purchasers, incurred in
connection with the Registered Exchange Offer), whether or not the Registered
Exchange Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear or reimburse the Holders of the
Securities covered thereby for the reasonable fees and disbursements of one firm
of counsel designated by the Holders of a majority in principal amount of the
Securities covered thereby to act as counsel for the Holders of the Securities
in connection therewith provided such fees and expenses do not exceed $25,000.
5. Indemnification. (a) The Issuer and each Guarantor will, jointly and
severally, indemnify and hold harmless each Holder of the Securities, any
Participating Broker-Dealer and each person, if any, who controls such Holder or
such Participating Broker-Dealer within the meaning of the Securities Act or the
Exchange Act (each Holder, any Participating Broker-Dealer and such controlling
persons are referred to collectively as the "Indemnified Parties") from and
against any losses, claims, damages or liabilities, joint or several, or any
actions in respect thereof (including, but not limited to, any losses, claims,
damages, liabilities or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the Issuer
and the Guarantors shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in
<PAGE>
8
conformity with written information pertaining to such Holder and furnished to
the Issuer by or on behalf of such Holder specifically for inclusion therein and
(ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus relating to a Shelf
Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Holder or Participating Broker-Dealer from
whom the person asserting any such losses, claims, damages or liabilities
purchased the Securities concerned, to the extent that a prospectus relating to
such Securities was required to be delivered by such Holder or Participating
Broker-Dealer under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder or Participating
Broker-Dealer results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Securities
to such person, a copy of the final prospectus if the Issuer had previously
furnished copies thereof to such Holder or Participating Broker-Dealer; provided
further, however, that this indemnity agreement will be in addition to any
liability which the Issuer or any Guarantor may otherwise have to such
Indemnified Party. The Issuer and each Guarantor shall also, jointly and
severally, indemnify underwriters, their officers and directors and each person
who controls such underwriters within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Issuer, each Guarantor and each person, if any,
who controls the Issuer or such Guarantor within the meaning of the Securities
Act or the Exchange Act from and against any losses, claims, damages or
liabilities or any actions in respect thereof, to which the Issuer, such
Guarantor or any such controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or omission or alleged untrue statement
or omission was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Issuer by or on behalf of such
Holder specifically for inclusion therein; and, subject to the limitation set
forth immediately preceding this clause, shall reimburse, as incurred, the
Issuer for any legal or other expenses reasonably incurred by the Issuer, such
Guarantor or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Issuer, such Guarantor or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Securities,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the
<PAGE>
9
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuer on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each person, if any, who controls such indemnified party
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such indemnified party and each person, if any, who
controls the Issuer or any Guarantor within the meaning of the Securities Act or
the Exchange Act shall have the same rights to contribution as the Issuer or
such Guarantor.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancelation of this Agreement
or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iii) below a "Registration Default"):
(i) If by 45 days after the closing date neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been filed with
the Commission;
(ii) If by 180 days after the closing date neither the Registered
Exchange Offer is consummated nor, if required in lieu thereof, the Shelf
Registration Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement or the
Shelf Registration Statement is declared effective (A) such Registration
Statement thereafter ceases to be effective; or (B) such Registration Statement
or the related prospectus ceases to be usable (except as permitted in paragraph
(b)) in connection with resales of Transfer Restricted Securities during the
periods specified herein because either (1) any event occurs as a result of
which the related prospectus forming part of such Registration Statement would
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply with
the Securities Act or the Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Securities over and above the interest
set forth in the title of the Securities from and including the date on which
any such Registration Default shall occur to but excluding the date on which all
such Registration Defaults have been cured, at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) shall be
deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Issuer where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) the occurrence of other material
events with respect to the Issuer that would need to be described in such Shelf
Registration Statement or the related prospectus and (ii) in the case of clause
(y), the Issuer is proceeding promptly and in good faith to amend or supplement
such Shelf Registration Statement and related prospectus to describe such
events; provided, however, that in any case if such Registration Default occurs
for a continuous period in excess of 30 days, Additional Interest shall be
payable in accordance with the above paragraph from the day such Registration
Default occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (a)(i),
(a)(ii) or (a)(iii) of Section 6 above
<PAGE>
10
will be payable in cash on the regular interest payment dates with respect to
the Securities. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Securities, multiplied by a fraction, the numerator of which is the number
of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferrable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of such Security for an Exchange Security, the date on which such
Exchange Security is sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Issuer shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Issuer is not required to file
such reports, it will, upon the request of any Holder of Transfer Restricted
Securities, make publicly available other information so long as necessary to
permit sales of their securities pursuant to Rules 144 and 144A. The Issuer
covenants that it will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). The Issuer will provide a copy of this Agreement to prospective
purchasers of Securities identified to the Issuer by the Initial Purchasers upon
request. Upon the request of any Holder of Transfer Restricted Securities, the
Issuer shall deliver to such Holder a written statement as to whether it has
complied in all material respects with such requirements. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Issuer to
register any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Issuer, each Guarantor and
the written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address given
by such Holder to the Issuer in accordance with the provisions of this Section
9(b).
(2) if to the Initial Purchasers, at the following address:
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, NY 10010
Fax No.: (212) 318-0532
Attention: Transactions Advisory Group
<PAGE>
11
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Kris F. Heinzelman
(3) if to the Issuer or any Guarantor, at the Issuer's address as
follows:
Radio One, Inc.
5900 Princess Garden Parkway
Lanham, Maryland
Attention: Alfred C. Liggins, III
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, Suite 1200
Washington, DC 20005
Attention: Richard L. Perkal
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. Each of the Issuer and the Guarantors
has not, as of the date hereof, entered into, nor shall it, on or after the date
hereof, enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Issuer and each Guarantor, and their respective successors and assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Securities Held by the Issuer. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Issuer or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
<PAGE>
12
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers, the Issuer and the Guarantors in
accordance with its terms.
Very truly yours,
RADIO ONE, INC., as the Issuer
By: /s/ Alfred Liggins
------------------------------
Name: Alfred Liggins
Title: President
RADIO ONE LICENSES, INC., as a Guarantor
By: /s/ Alfred Liggins
------------------------------
Name: Alfred Liggins
Title: President
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
NATIONSBANC CAPITAL MARKETS, INC.
by: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ William Ettelson
-----------------------------
Name: William Ettelson
Title: Associate
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Securities where
such Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuer has agreed that, for a period
of 180 days after the Expiration Date (as defined herein), it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
A-1
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
B-1
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Existing Securities where such Existing Securities were acquired as
a result of market-making activities or other trading activities. The Issuer has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 199 , all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.1/
The Issuer will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. For a period of 180 days after the Expiration
Date the Issuer will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Issuer has agreed to pay all
expenses incidental to the Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or of the Securities
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
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1/In addition, the legend required by Item 502(e) of Regulation S-K will appear
on the back cover page of the Exchange Offer prospectus.
<PAGE>
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ____________________________________________
Address: __________________________________________
__________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
D-1
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT (this "Agreement") effective as of May
19, 1997, by and among Radio One, Inc., a Delaware corporation ("Radio One");
the subsidiaries of Radio One from time to time party hereto and who are
guarantors of the Senior Indebtedness (as defined below) (herein referred to as
the "Subsidiaries" and collectively, with Radio One hereinafter referred to as
the "Companies," and individually as a "Company"); ALTA Subordinated Debt
Partners III, L.P., BancBoston Investments, Inc., Grant M. Wilson, Syncom
Capital Corporation, Alliance Enterprise Corporation, Greater Philadelphia
Venture Capital Corporation, Inc., Opportunity Capital Corporation, Capital
Dimensions Venture Fund, Inc., TSG Ventures Inc. and Fulcrum Venture Capital
Corporation (together with their respective successors and assigns, each an
"Investor" and collectively the "Investors"); Alfred C. Liggins, Catherine L.
Hughes and Jerry A. Moore, III (each, a "Management Stockholder" and
collectively, the "Management Stockholders"); and NationsBank of Texas, N.A., as
Agent ("Agent") for itself and the other Senior Lenders (hereinafter defined),
and United States Trust Company of New York, as trustee (the "Trustee") for the
holders of the Senior Subordinated Notes under the Indenture (as those terms are
hereinafter defined).
WITNESSETH:
WHEREAS, Radio One, the Investors, certain Subsidiaries of
Radio One then existing, and the Management Stockholders entered into a
Securities Purchase Agreement, dated June 6, 1995 (the "Securities Purchase
Agreement"), pursuant to which: (i) Radio One sold and the Investors purchased
from Radio One subordinated promissory notes due in the year 2003 in the
aggregate principal amount of $17,000,000 (the "Subordinated Notes"); and (ii)
Radio One sold and the Series B Preferred Investors (as defined below) purchased
from Radio One warrants (the "New Warrants") for an aggregate of 50.93 shares of
the Common Equity of Radio One on a fully-diluted basis;
WHEREAS, simultaneously with the execution of the Securities
Purchase Agreement, Radio One and the Series A Preferred Investors (as defined
below) entered into an Exchange Agreement (the "Exchange Agreement") dated as of
June 6, 1995, pursuant to which the Series A Preferred Investors exchanged all
of their then existing warrants for $6,251,094 in cash and new warrants (the
"Exchange Warrants", together with the New Warrants, the "Warrants") to purchase
an aggregate of 96.11 shares of the common stock of Radio One on a fully-diluted
basis;
WHEREAS, simultaneously with the execution of the Securities
Purchase Agreement, Radio One, the Investors, certain subsidiaries of Radio One
then existing, and the Management Stockholders entered into a Warrantholders'
Agreement dated as of June 6, 1995 (referred to herein as the "Existing Warrant
Agreement"), to govern the rights of each under the Warrants;
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<PAGE>
WHEREAS, Radio One has heretofore entered into: (i) an asset
purchase agreement with Jarad Broadcasting Company of Pennsylvania, Inc., dated
December 6, 1996, as amended (the WPHI-FM Purchase Agreement"), which provides
for the purchase of certain assets used or held for use in the operation of
Radio Station WPHI-FM, licensed to Jenkintown, Pennsylvania ("WPHI-FM"), and
(ii) a binding letter of intent (the "WYCB-AM Letter of Intent") to acquire the
stock of the corporation holding Radio Station WYCB-AM, Washington, D.C.
("WYCB-AM," and together with WPHI-FM, the "New Stations");
WHEREAS, simultaneously with the execution hereof, Radio One
will issue its 12% Senior Subordinated Notes due 2004 (the "Senior Subordinated
Notes") to certain investors (the "Senior Subordinated Noteholders") pursuant to
an offering under Rule 144A of the Securities Act of 1933, as amended, with
respect to which Radio One shall receive gross proceeds in an amount equal to
$75,000,000 (the "Senior Subordinated Debt Financing") for the purpose of: (i)
funding the balance of the purchase price for WPHI-FM (the "WPHI-FM
Acquisition") and WYCB-AM (the "WYCB-AM Acquisition," and together with the
WPHI-FM Acquisition, the "Acquisitions"), (ii) repaying all of the outstanding
indebtedness due under the Amended and Restated Senior Credit Agreement dated as
of June 6, 1995, among Radio One, certain Subsidiaries of Radio One then
existing, NationsBank of Texas, N.A., as agent and lender, and the other Senior
Lenders named therein (as amended, the "Existing Senior Credit Agreement");
(iii) paying for the leasehold improvements, new equipment and other amounts
associated with moving Radio One's Washington, D.C. offices and studios in the
second quarter of 1997 to an office building located in Lanham, Maryland; (iv)
providing funding for other general purposes, including working capital; and (v)
paying the related fees and expenses of the offering of the Senior Subordinated
Notes, the exchange of Preferred Stock (as defined herein) for the Subordinated
Notes and the Acquisitions;
WHEREAS, Radio One, Radio One Licenses, Inc., a Delaware
corporation (the "Subsidiary"), and NationsBank of Texas, N.A. (together with
any other lender thereunder, and its successors and assigns, a "Senior Lender"),
intend to enter into that certain Amended and Restated Senior Credit Agreement
with Radio One, dated as of May 19, 1997, amending and restating the Existing
Senior Credit Agreement (as amended, modified, restated, supplemented, renewed,
extended, increased, rearranged or substituted from time to time, the "Senior
Credit Agreement"), pursuant to which the Senior Lender will loan up to
$7,500,000 of secured senior debt to Radio One in the form of a line of credit
for working capital needs and general corporate purposes, and including a letter
of credit facility for good faith escrow deposits in connection with Permitted
Acquisitions and to secure certain Capital Lease Obligations; and
WHEREAS, pursuant to the terms of a Preferred Stockholders'
Agreement, dated as of May 14, 1997 by and among the Investors, including
without limitation the Investors listed as Series A Preferred Investors on
Schedule A thereto (the "Series A Investors") and the Investors listed as Series
B Preferred Investors on Schedule A thereto (the "Series B Investors"), Radio
One, the Subsidiary, and each Management Stockholder (the "Preferred
Stockholders' Agreement"), and as a necessary condition to the Senior
Subordinated Debt Financing, (i) the Series A Preferred Investors will exchange
all of their Subordinated Notes (including all accrued
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<PAGE>
but unpaid interest thereon) for the number of shares of Series A 15% Senior
Cumulative Redeemable Preferred Stock of Radio One (the "Series A Preferred
Stock") listed on Schedule A to the Preferred Stockholders' Agreement, and (ii)
the Series B Preferred Investors will exchange all of their Subordinated Notes
(including all accrued but unpaid interest thereon) for the number of shares of
Series B 15% Senior Cumulative Redeemable Preferred Stock of Radio One (the
"Series B Preferred Stock," and together with the Series A Preferred Stock, the
"Preferred Stock") listed on Schedule A of the Preferred Stockholders'
Agreement; and
WHEREAS, on or about the date hereof, the Companies, the Management
Shareholders and the Investors will enter into a First Amendment to the Existing
Warrant Agreement (as so amended, the "Warrant Agreement"), pursuant to which
replacement certificates (entitled "Amended and Restated Warrants") will be
issued in replacement of the outstanding warrant certificates reflecting changes
in Radio One's debt and capital structure. The term "Warrants" as used herein
shall include such replacement certificates.
In order to induce the Senior Lenders to make financial
accommodations to the Companies and to enter into the Senior Credit Agreement,
and to induce the Senior Subordinated Noteholders to purchase the Senior
Subordinated Notes, and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Companies, the Investors and
the Management Stockholders hereby agree with the Agent on behalf of the Senior
Lenders, and the Trustee, on behalf of the Senior Subordinated Noteholders that,
so long as any Senior Indebtedness (as hereinafter defined) is outstanding or
committed to be advanced, each such party will comply with such of the following
provisions as are applicable to it:
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Certain Definitions.
1.1 Capitalized Terms. Except as otherwise defined herein,
all capitalized terms used in this Agreement shall have the meanings specified
for such terms in Appendix A.
1.2 Senior Indebtedness. The term "Senior Indebtedness"
shall mean any and all loans, advances, extensions of credit and any other
indebtedness, obligations and/or liabilities, now existing or hereafter arising,
direct or indirect, absolute or contingent, of the Companies, or any of them to
(i) the Senior Lenders outstanding from time to time, whether pursuant to the
Senior Credit Agreement, any guaranty or guaranties thereof, the notes issued
pursuant thereto any security agreement or any other agreement or document
entered into by any of the Companies in connection therewith (collectively, the
"Loan Documents") (including, without limitation, any and all indebtedness to
the Senior Lenders in respect of any and all future loans or advances or
extensions of credit made to the Companies, or any of them, by the Senior
Lenders prior to, during or following any proceeding in respect of any
"Reorganization", as defined in Section 3.2 hereof, together with interest
thereon and all fees, expenses and other amounts (including costs of collection
and reasonable attorneys' fees) at any time owing to the Senior Lenders, whether
arising in connection
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<PAGE>
with the Senior Credit Agreement, or any other Loan Documents, or such other
indebtedness (all of the foregoing sometimes referred to herein as the "Primary
Senior Indebtedness"), and (ii) the Senior Subordinated Noteholders from time to
time, pursuant to that certain Indenture, by and between the Company and the
Trustee, dated May 15, 1997 (as amended, modified, restated, supplemented,
renewed, extended, increased, rearranged or substituted from time to time, the
"Indenture"), the Senior Subordinated Notes issued pursuant thereto, the
guaranties of the Subsidiaries with respect thereto (the "Subordinated
Guaranties"), or otherwise, together with interest thereon and all fees,
expenses and other amounts (including costs of collection and reasonable
attorneys' fees) at any time owing to the Senior Subordinated Noteholders,
whether arising in connection with the Indenture, the Senior Subordinated Notes,
the Subordinated Guaranties or any other document executed in connection
therewith, (regardless of the extent to which the Senior Credit Agreement, or
any other Loan Document, or such other indebtedness, or the Indenture, the
Senior Subordinated Notes or the Subordinated Guaranties is enforceable against
the Companies and regardless of the extent to which such amounts are allowed as
claims against the Companies in any Reorganization, and including any interest
thereon accruing after the commencement of any Reorganization and any other
interest that would have accrued thereon but for the commencement of such
Reorganization); provided, that without the prior consent of Investors holding a
majority in interest of the Preferred Stock, the Senior Lenders shall not
increase the greater of (i) the aggregate committed amount of $7,500,000 under
the Senior Credit Agreement or (ii) the principal amount of loans under the
Senior Credit Agreement permitted to be outstanding to the Companies, by an
amount in excess of $2,500,000, and the Senior Subordinated Noteholders will not
increase the principal amount outstanding under the Senior Subordinated Notes.
All holders of Senior Indebtedness shall be entitled to the benefits of this
Agreement without notice thereof being given to the Investors.
1.3 Subordinated Obligations. The term "Subordinated
Obligations" shall mean any and all existing and hereafter arising obligations
and/or liabilities whatsoever of the Companies, or any of them, to (i) the
Investors in connection with the Preferred Stock, whether payments made in
respect of Liquidation Value or dividends of the Preferred Stock, indemnities or
otherwise in respect of such Preferred Stock, whether direct or indirect,
absolute or contingent, and all claims, rights, causes of action, judgments and
decrees in respect of the foregoing, including, without limitation: all
indebtedness, obligations and/or liabilities arising under, resulting from,
relating to or in connection with such Preferred Stock, and further including
without limitation any amounts paid at any time to the Investors under or in
connection with provisions of the Securities Purchase Agreement and (ii) the
Investors in connection with or under the, the Warrant Agreement, the Warrants,
any and all proxies granted in connection therewith, and (iii) any indebtedness
of the Company or any Subsidiary issued to the Investors, if any and at any
time, in any transaction related to or in connection with the Preferred Stock or
the Warrants, and in each case any and all agreements or instruments securing
any of the obligations, indebtedness and/or liabilities evidenced by, arising
under, resulting from or related to the foregoing (all of the foregoing,
together with any other agreement, document, instrument, certificate or proxy
evidencing or relating to any of the foregoing, the transactions contemplated
therein or the Subordinated Obligations being hereinafter collectively referred
to as the "Subordinated Agreements").
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<PAGE>
2. Representations and Warranties.
(a) The Company and each Management Shareholder hereby represents and warrants
to the Agent, the Senior Lenders, the Trustee and each Senior Subordinated
Noteholder that:
(i) At the date hereof (i) the total number of shares of 15% Series A
Preferred Stock authorized by Radio One, held by the Series A Investors, is
100,000 shares, par value $.01 per share; with an aggregate Liquidation Value
for all such Series A Preferred Stock equal to $8,484,303; and (ii) the total
number of shares of 15% Series B Preferred Stock authorized by the Company, held
by the Series B Investors, is 150,000 shares, par value $.01 per share, with an
aggregate Liquidation Value for all such Series B Preferred Stock equal to
$12,446,710. At the date hereof, no dividends have been declared or have accrued
with respect to the Preferred Stock. All of the Investors holding Series A
Preferred Stock are listed on Exhibit A, under the caption "Series A Preferred
Investors"; all of the Investors holding Series B Preferred Stock are listed on
Exhibit A, under the caption "Series B Preferred Investors". All of the
Investors holding warrants are listed on Exhibit A, under the caption
"Warrantholders".
(ii) True, accurate and complete copies of the Subordinated Agreements
are attached hereto as Exhibit B; and
(b) Each Investor hereby represents and warrants to the Agent, the Senior
Lenders, the Trustee and each Senior Subordinated Noteholder that:
(i) Each Investor is the holder of the Preferred Stock held by it, and
in the case of Investors owning Warrants, the Warrants, free and clear of all
liens, claims and encumbrances, and such Investor is not subject to any
contractual limitation or restriction which would impair in any way its ability
to execute or perform its obligations under this Agreement.
(ii) Each Investor hereby consents to the Companies incurring the
Senior Indebtedness, including, without limitation, all future loans and
extensions of credit by the Senior Lenders and the Senior Subordinated
Noteholders to the Companies (to the extent permitted hereunder), or any of
them, for all purposes for which such consent may be required under the
Subordinated Agreements or otherwise;
(iii) Such Investor has no liens on, security interests in, or other
rights to any of the assets of the Companies.
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<PAGE>
3. Terms of Subordination.
3.1 No Transfer. The Investors will not sell or otherwise
dispose of any of the Subordinated Obligations, including, without limitation,
the Preferred Stock or the Warrants, except with the consent of the Senior
Lenders (which consent shall not be unreasonably withheld); provided, however,
that the Investors may sell or transfer the Preferred Stock or the Warrants to
an Affiliate, or any partner of any Investor existing on the date hereof or as
required by law or regulation. In all cases, prior to any transfer of the
Preferred Stock or the Warrants, or any other Subordinated Obligation, each
transferee thereof must (a) agree in advance in writing, pursuant to an
agreement in form acceptable to the Senior Lenders, to become a party hereto and
(b) pledge to Agent and the Senior Lenders, in advance, any Warrants so
transferred pursuant to a pledge agreement in form acceptable to Senior Lenders.
The Investors shall give the Senior Lenders at least thirty (30) days prior
written notice of any such proposed transfer stating the identity of the
transferee and providing such other information as the Senior Lenders shall
reasonably require.
3.2 Payment Subordinated. (a) Anything in the Subordinated
Agreements to the contrary notwithstanding, each Investor hereby subordinates
and defers the payment of the Subordinated Obligations, and the Subordinated
Obligations are and shall be hereby made expressly subordinate and junior in
right of payment to the prior indefeasible payment in full in cash of the Senior
Indebtedness and termination of the Senior Credit Agreement and the Indenture,
and the Subordinated Obligations are hereby subordinated as a claim against the
Companies and the Management Stockholders (relating to the Senior Indebtedness)
or any of the assets of, or ownership interests in, the Companies whether such
claim be (i) in the event of any distribution of the assets of a Company upon
any voluntary or involuntary dissolution, winding-up, total or partial
liquidation or reorganization, or bankruptcy, insolvency, receivership or other
statutory or common law proceedings or arrangements involving a Company or the
readjustment of the liabilities of a Company or any assignment for the benefit
of creditors or any marshaling of the assets or liabilities of a Company (any of
the foregoing being hereinafter referred to as a "Reorganization"), (ii) in
connection with a sale of the Companies pursuant to the Subordinated Agreements
or otherwise or (iii) other than in connection with any Reorganization or any
such sale, to the prior indefeasible payment in full in cash of the Senior
Indebtedness and termination of the Senior Credit Agreement and the Indenture.
In furtherance of the foregoing, except as provided in Section 3.6 hereof, the
Companies will not make, and no holder of Subordinated Obligations will accept
or receive, any payment of Subordinated Obligations until all the Senior
Indebtedness has been indefeasibly paid in full in cash and the Senior Credit
Agreement and the Indenture have been terminated.
(b) Further, so long as any Claim (as defined in Section 5
hereof) of Agent or any of the Senior Lenders or the Trustee or any Senior
Subordinated Noteholder against any of the Companies, the Management
Stockholders (relating to the Senior Indebtedness) or any portion of the Senior
Indebtedness remains outstanding or unsatisfied, and until the Senior Credit
Agreement and the Indenture have been terminated, each Investor agrees that it
shall not (i) exercise any of its rights under the Warrants or any other option,
warrant, call or other Right (other than, subject to Section 8 hereof, the
Investors' rights under Section 10 of the Preferred Stockholders' Agreement and
Articles VI and VIII of the Warrant Agreement and under any irrevocable proxy
granted to
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<PAGE>
effectuate the Investors' rights under Articles VI and VIII of the Warrant
Agreement) it may now have or hereafter acquire with respect to any portion of
the capital stock of any of the Companies (collectively, "Equity Rights"),
whether acquired pursuant to the Subordinated Agreements or otherwise (A) unless
after the exercise of such Warrants or other Equity Rights, the Investors will
not own, directly or indirectly, 65% or more of Radio One or any other Company
nor be entitled to elect or designate for election a majority of the Board of
Directors of any Company, (B) if as a result of such exercise of the Warrants or
other Equity Rights, Hughes and Liggins shall not continue to directly own of
record and beneficially and to control 35% or more of Radio One and the
Companies or would not be entitled to elect or designate for election a majority
of the Board of Directors of any Company and (C) unless such Investor shall have
first (x) notified the Senior Lenders and the Trustee of its desire to exercise
its Warrant, (y) instructed and notified Radio One that any capital stock to be
issued in connection with the exercise of any Warrant of any Investor shall be
delivered directly to Agent as security for the Primary Senior Indebtedness and
(z) such Investor shall simultaneously pledge such capital stock to the Agent
for the benefit of the Senior Lenders pursuant to a pledge agreement in form and
substance satisfactory to the Senior Lenders and deliver to Agent stock powers
(executed in blank) covering such capital stock, (ii) exercise any rights it now
has or hereafter acquires to require a Company to repurchase any of the Warrants
pursuant to the Subordinated Agreements or otherwise, or (iii) accept any sums
in consideration of repurchase of any of the Warrants.
3.3 Distributions in Reorganization. (a) In the event of
any Reorganization relative to a Company or property of a Company, all of the
Senior Indebtedness shall first have been indefeasibly paid in full in cash and
the Senior Credit Agreement and the Indenture shall have been terminated before
any payment whatsoever is made upon or in respect of the Subordinated
Obligations (including but not limited to payments on account of redemption,
liquidation, dividends, or principal, premium, interest or otherwise), and in
any such proceedings any payment or distribution of any kind or character
whatsoever, whether in cash or property or securities which may be payable or
deliverable in respect of the Subordinated Obligations shall be paid or
delivered directly to the (i) Agent for the benefit of the Senior Lenders for
application in payment of the Primary Senior Indebtedness, unless and until the
Investors shall have received notice in writing from the Agent that all such
Primary Senior Indebtedness shall have been indefeasibly paid and satisfied in
full in cash and the Senior Credit Agreement shall have been terminated, and
(ii) thereafter to the Trustee, for the benefit of the Senior Subordinated
Noteholders, for application in payment of the Senior Subordinated Notes and all
monetary obligations of any Company under the Indenture, unless and until the
Investors shall have received notice in writing from the Trustee that all such
Senior Subordinated Notes and all monetary obligations under the Indenture of
any Company shall have been indefeasibly paid and satisfied in full in cash and
the Indenture shall have been terminated. In the event that, notwithstanding the
foregoing, upon any such Reorganization, any payment or distribution of assets
of a Company of any kind or character whatsoever, whether in cash, property or
securities, shall be received by any holder of the Subordinated Obligations
before all of the Senior Indebtedness is indefeasibly paid in full in cash and
the Senior Credit Agreement and the Indenture have been terminated, the
Investors agree hereby to cause all such payments and distributions to be
immediately paid over, first, to the Agent for the benefit of the Senior
Lenders, for application to the payment of all Primary Senior Indebtedness
remaining unpaid
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<PAGE>
until the Investors shall have received notice in writing from the Agent that
all such Primary Senior Indebtedness shall have been indefeasibly paid in full
in cash and the Senior Credit Agreement has been terminated, and second, to the
Trustee for the benefit of the Senior Subordinated Noteholders, for application
to the payment of all Senior Subordinated Notes and all other monetary
obligations of any Company under the Indenture, until the Investors shall have
received notice in writing from the Trustee that all such Senior Subordinated
Notes and such other monetary obligations shall have been indefeasibly paid in
full in cash and the Indenture has been terminated.
(b) Until such time as the Senior Indebtedness has been
indefeasibly paid and satisfied in full in cash and the Senior Credit Agreement
and the Indenture shall have been terminated, each of the Investors irrevocably
authorizes and empowers the Agent, on behalf of the Senior Lenders, and at such
time as the Primary Senior Indebtedness shall have been indefeasibly paid in
full, the Trustee, on behalf of the Senior Subordinated Noteholders, in any
proceedings under any Reorganization (i) to file a proof of claim on behalf of
any or all of the Investors with respect to the Subordinated Obligations if any
such Investor fails to file proof of its claims prior to 30 days before the
expiration of the time period during which such claims must be submitted, (ii)
to accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of such Subordinated Obligations,
provided that at such time as the Primary Senior Indebtedness shall have been
indefeasibly paid in full, amounts received thereafter by the Agent, if any,
shall be delivered by the Agent to the Trustee for the benefit of the Senior
Subordinated Noteholders, (iii) to prove any and all claims, or seek enforcement
thereof, of each of the Investors in any Reorganization proceeding and (iv) to
take such other action as may be reasonably necessary to effectuate any of the
foregoing. Upon the Agent's or the Trustee's reasonable request, each Investor
agrees severally and not jointly to provide to the Agent and the Trustee, all
information and documents necessary to present claims or prove claims or seek
enforcement thereof as aforesaid. The Investors shall retain the exclusive right
to vote their claims in any Reorganization; provided, that no Investor shall be
entitled to take any action or vote in any way and each such Investor hereby
agrees severally and not jointly to not take any action or vote in any way, so
as to contest (i) the validity or the enforceability of the Senior Credit
Agreement, any of the other Loan Documents or any of the liens or security
interests which secure the payment or performance of the Primary Senior
Indebtedness, (ii) the validity or the enforceability of the Indenture, the
Senior Subordinated Notes, the Subordinated Guaranties or any other document
executed in connection therewith, or (iii) the validity or enforceability of
this Agreement or any agreement or instrument to the extent evidencing or
relating to the Senior Indebtedness. Neither the Agent and the Senior Lenders,
nor the Trustee and the Senior Subordinated Noteholders, shall in any event be
liable for any failure to prove the Subordinated Obligations; for failure to
exercise any rights with respect thereto; or for failure to collect any sums
payable thereon or for failure to take any affirmative action in connection
therewith.
3.4 Effect of Provisions. The provisions hereof as to
subordination are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the holders of the
Subordinated Obligations on the other hand, and, except as otherwise expressly
provided herein, none of such provisions shall impair, as between the Companies
and the holders of the Subordinated Obligations, the obligations of the
Companies, which are unconditional and
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<PAGE>
absolute to pay to such holders all of the Subordinated Obligations in
accordance with the terms thereof.
3.5 Subrogation, etc. The holders of the Subordinated
Obligations shall not be subrogated to the rights of the holders of the Senior
Indebtedness in respect of payments or distributions of assets of, or ownership
interests in, the Companies made on the Senior Indebtedness, if at all under
applicable law, until the Senior Indebtedness shall have been indefeasibly paid
in full in cash and the Senior Credit Agreement and the Indenture have been
terminated.
3.6 Permitted Payments of Subordinated Obligations. Radio
One may, from time to time, pay or cause to be paid to any holder of
Subordinated Obligations, and any such holder may accept and retain, payments or
other distributions, including without limitation in respect of any redemption
or other payment in respect of the Preferred Stock, to the extent, and solely to
the extent, permitted (i) under the Senior Credit Agreement, so long as any
Primary Senior Indebtedness thereunder remains unpaid and the Senior Credit
Agreement has not been terminated, and (ii) under the Indenture, so long as the
Senior Subordinated Notes, and all monetary obligations in connection therewith,
remain unpaid, and the Indenture has not been terminated.
4. Agreement to Hold in Trust. If any holder of Subordinated
Obligations shall receive any payment with respect to the Subordinated
Obligations in any form and from any source whatsoever (including, without
limitation, any payment or distribution of collateral security, if any, or the
proceeds of any collateral security) in violation of this Agreement, it shall
hold such payment in trust first, for the benefit of the Senior Lenders and,
promptly upon discovery or notice of such violation, pay it over to Agent for
the benefit of the Senior Lenders for application to payment of the Primary
Senior Indebtedness; and upon receipt of notice from the Agent that the Primary
Senior Indebtedness has been paid in full and the Senior Credit Agreement has
been terminated, shall thereafter, pay it over to the Trustee for the benefit of
the Senior Subordinated Noteholders for application in payment of the Senior
Subordinated Notes and other monetary obligations under the Indenture; provided,
however, that if any holder of Subordinated Obligations receives the Permitted
Prepayment or any interest payment permitted to be made under Section 8.6 of the
Senior Credit Agreement or the Indenture, and such holder is not aware that such
payment was made in violation of the Senior Credit Agreement or the Indenture,
or that a default or event of default exists under the Senior Credit Agreement
or the other Loan Documents or the Indenture or the Subordinated Guaranties, and
the Agent or the Trustee does not notify such holder of Subordinated Obligations
that such payment was made in violation of the Senior Credit Agreement or the
Indenture, as the case may be, within 90 days of the date of payment thereof,
then the Investors shall be entitled to retain such interest payments or
Permitted Prepayment.
5. Amendments to Subordinated Agreements/Additional Liens on
Collateral. Each Investor covenants and agrees that, unless the Senior Lenders
otherwise consent thereto in writing, it will not amend or modify any provision
of any of the (a) Warrant Agreement, (b) the Amended and Restated Certificate of
Incorporation of the Company, or the Preferred Stockholders' Agreement, or (c)
the other Subordinated Agreements, in each such case, so as to effect (i) any
obligation to pay any fees or any increase in the rate of interest or dividends
charged, declared or
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<PAGE>
accrued thereunder, (ii) any increase in the principal amount or liquidation
value of the Subordinated Obligations or any installment due thereunder, or to
create any obligation to make a principal payment or payment in respect of
redemption, (iii) any additional payment or prepayment or redemption
requirements, or requirements in respect of dividends or voting rights, (iv) any
acceleration of the maturity date of any payment for principal, redemptions,
dividends or interest, (v) amendment of the form or method of payment, (vi) the
granting or obtaining of any collateral security or obtaining any lien on any
collateral, (vii) providing for any additional covenants (financial or
otherwise) or events of default (however defined), Redemption Events or
remedies, or making more restrictive any existing covenants or events of default
or provisions governing the Preferred Stock or Warrants, (viii) any rights to
control the board of directors of any of the Companies, (ix) any changes to
Section 10 of the Preferred Stockholders' Agreement or Articles VI or VIII of
the Warrant Agreement or (x) any other amendment which would result in a breach
or violation of the Senior Credit Agreement or which could have an adverse
effect on the operations of the Companies, the Agent's or the Senior Lenders'
security interest in the Collateral or the Agent's or the Senior Lenders'
Claims. As used herein, the term "Claims" shall mean the Senior Indebtedness and
any and all now existing and future indebtedness, obligations or liabilities,
including without limitation any post petition interest, of the Companies to
Agent and the Senior Lenders, or the Trustee and the Senior Subordinated
Noteholders, whether direct or indirect, absolute or contingent, secured or
unsecured, arising under the Senior Credit Agreement, the Notes, or any other
Loan Documents, or the Indenture or the Senior Subordinated Notes, or the
Subordinated Guaranties, as now written or as amended, modified, restated,
supplemented, renewed, extended, increased, rearranged or substituted hereafter
or by operation of law or otherwise, including any and all expenses (including
reasonable attorneys' fees) incurred in connection therewith and any interest
thereon. Claims shall also include all such Claims arising as a result of any
refinancing of the Claims by another Person in accordance with the terms of this
Agreement or (c) obtain any liens on or security interests in any of the assets
or Property of the Companies as security for the Subordinated Obligations or
otherwise.
6. Requirement of Notice. (a)The Investors agree to notify Agent
and the Senior Lenders and the Trustee, on behalf of the Senior Subordinated
Noteholders immediately upon the happening of any of the following:
(i) the Investors declare an event of default,
elect to exercise rights of any mandatory redemption or put in respect
of the Preferred Stock, or elect to exercise any rights to convert the
Preferred Stock or Warrants into common stock or indebtedness of the
Company or any Subsidiary, under any of the Subordinated Agreements;
(ii) the waiver by the Investors of any material
default or redemption event under any of the Subordinated Agreements;
(iii) the acceleration or occurrence of any event
requiring redemption of the Subordinated Obligations, or event which
provides increased voting rights to the Investors, or creates an event
of default under the Senior Credit Agreement or the Indenture as a
result of any change of control provision therein;
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<PAGE>
(iv) actual knowledge of the occurrence of a
breach by the Company or any Subsidiary of any event under Section 10
of the Preferred Stockholders Agreement or under the Warrant Agreement
which permits the Investors to require the Company to seek a sale of
the Company or its assets, or a refinancing of its indebtedness and
obligations in respect of the Preferred Stock, in each case, subject to
the terms hereof; or
(v) actual knowledge of any breach by an Investor
under this Agreement, or any Loan Document to which an Investor is a
party executed in connection with the Senior Credit Agreement, or the
Indenture.
(b) Prior to the commencement of any foreclosure action
against a Company or acceleration of the Senior Indebtedness by reason of an
event of default under the Senior Credit Agreement, or acceleration under the
Indenture, each of the Agent and the Trustee, as the case may be, agree to
notify the Investors of such event of default (although the failure to give such
notice shall not affect the validity of such acceleration or foreclosure
action).
7. Legend. The Companies and each Investor, for itself and its
successors and assigns as holders of Subordinated Obligations, covenant to cause
each agreement and instrument representing or evidencing any of the Subordinated
Obligations issued or executed by the Companies and either of them and held by
the Investors or any agreement securing the Subordinated Obligations including,
without limitation, the Preferred Stockholders Agreement, the Warrants, the
Warrant Agreement, the Preferred Stock and any other documents or instruments
evidencing Subordinated Obligations or Liens or security interests in favor of
the Investor in connection with the Subordinated Obligations from time to time,
if any, to have affixed upon it a legend which reads substantially as follows:
"This instrument/agreement is subject to a Standstill Agreement dated
as of May 19, 1997 among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
8. Limit on Right of Action. Each Investor, for itself and its
successors and assigns, agrees for the benefit of the holders of the Senior
Indebtedness that until indefeasible payment in full in cash of the Senior
Indebtedness and termination of the Senior Credit Agreement and the Indenture,
such Investor will not take any action to accelerate or demand payment by a
Company of the Subordinated Obligations, or exercise a right of redemption or a
put (to the Company) in respect of the Subordinated Obligations, or exercise any
of its remedies in respect of the Subordinated Obligations, to initiate any
Reorganization of, or litigation against, a Company, or to
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<PAGE>
foreclose or otherwise realize on any Lien, if any, given by a Company or any
other Person to secure the Subordinated Obligations; provided, however, that the
Investors may accelerate or exercise a right of redemption of the Subordinated
Obligations upon the earlier to occur of (i) a Reorganization of the Company
(provided that the Investors agree to rescind any acceleration or notice of
mandatory redemption resulting from a Reorganization which is an involuntary
proceeding dismissed or discharged within 60 days thereof), (ii) the
acceleration of the Primary Senior Indebtedness by the holders thereof, (iii)
the date which is 180 days after the date the Investors notify the Agent that
one of the events under subsections (a), (b) or (c) of Section 10 of the
Preferred Stockholders Agreement has occurred so long as such event is
continuing at the time of acceleration or exercise of the right of redemption or
a put (to the Company); provided further, however, after prior written notice to
Agent, the Investors may also initiate litigation against the Companies and the
Management Stockholders after either one of the events set forth in the
foregoing subsections (i) or (ii) have occurred. Notwithstanding the foregoing,
the Investors may (x) sue for specific performance of any of the covenants in
the Subordinated Agreements pursuant to their Rights thereunder so long as such
action is not in conflict with this Agreement, does not involve an acceleration
or an exercise of the right of mandatory redemption or a put (to the Company) of
the Subordinated Obligations, the creation of any liens, the payment of, or
determination of, any obligation for money damages or the payment of any sums
whatsoever to the Investors, and (y) take the actions contemplated by Section 10
of the Preferred Stockholders Agreement and Article VI or Article VIII of the
Warrant Agreement pursuant to their rights thereunder as in effect on the date
hereof; provided, however, that at such time as the Agent and/or the Senior
Lenders have commenced to actively pursue the exercise of their Rights under the
Loan Documents to conduct a sale of the Collateral securing the Primary Senior
Indebtedness, either pursuant to the exercise of foreclosure Rights, an
agreed-upon-sale, or deed-in-lieu of foreclosure, or otherwise, or the Trustee
on behalf of the Senior Subordinated Noteholders has commenced to actively
pursue the exercise of their Rights under the Senior Subordinated Notes or the
Indenture, then the Investors shall no longer have the right to take any of the
actions permitted to be taken by the Investors hereunder (other than
acceleration or exercise of a right to require the Company to redeem any or all
shares of Preferred Stock under Section 8.1 of the Preferred Stockholders
Agreement, as applicable, the actions permitted under Section 3.3 hereof, or
actions to perfect the Investors' rights to payment from any excess proceeds
arising from the Pledged Shares after payment in full of the Senior Indebtedness
and the termination of the Senior Credit Agreement and the Indenture) until such
date as the Agent and/or the Senior Lenders and/or the Trustee on behalf of the
Senior Subordinated Noteholders cease such efforts. If at any ti8. me the Agent,
the Senior Lenders or the Trustee, on behalf of the Senior Subordinated
Noteholder should begin or resume to actively pursue the exercise of their
Rights under the Loan Documents or the Indenture or the Subordinated Guaranties,
including the conducting of a sale of any of the Collateral by the Agent or any
Senior Lender, then the Investors shall again cease taking any actions permitted
hereunder. In the event of a dispute with respect to this provision, it shall be
the Investors' burden of proof that the Agent or the Senior Lenders or the
Trustee on behalf of the Senior Subordinated Noteholders have failed or ceased
to actively pursue the exercise of the Rights as described herein.
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<PAGE>
9. Intentionally Deleted.
10. Intentionally Deleted.
11. Additional Rights of Senior Lenders and the Senior
Subordinated Noteholders. If any Investor, in violation of this Agreement, shall
commence, prosecute or participate in any suit, action or proceeding against a
Management Stockholder or a Company, a Management Stockholder (relating to the
Senior Indebtedness) or a Company may interpose as a defense or plea the making
of this Agreement, the Agent may intervene on behalf of the Senior Lenders and
interpose a defense or plea in the Agent's name and/or the Senior Lenders' names
or in the name of a Management Stockholder or a Company, and the Trustee may
intervene on behalf of the Senior Subordinated Noteholders and interpose a
defense or plea in the Trustee's name and/or the Senior Subordinated
Noteholders' names or in the name of a Management Stockholder or a Company. If
any Investor shall attempt to enforce any security agreement, real estate
mortgage, deed of trust or any lien instrument or other encumbrance in violation
of the terms of this Agreement, the Agent and/or the Senior Lenders may by
virtue of this Agreement restrain the enforcement thereof in their name or in
the name of the Management Stockholders or the Companies. If any Investor
obtains any assets of a Company as a result of any administrative, legal or
equitable action, or otherwise, each such Investor agrees forthwith to pay,
deliver and assign to the Agent for the benefit of the Senior Lenders any such
assets for application to the Senior Indebtedness.
12. Companies' Additional Agreement. Each Company agrees with
Agent, the Senior Lenders, the Trustee and the Senior Subordinated Noteholders
that it will not, without the prior written consent of Agent and the Senior
Lenders', and the Trustee on behalf of the Senior Subordinated Noteholders,
execute or deliver any negotiable instrument as evidence of the Subordinated
Obligations or any part thereof, except as otherwise permitted by this
Agreement.
13. Rights to Amend Loan Documents and Discontinue Senior
Indebtedness. Agent and the Senior Lenders hereby reserve the right, in their
sole discretion, to modify, amend, waive or release any of the terms of the
Senior Credit Agreement, the Note, or any of its other Loan Documents, and the
Trustee on behalf of the Senior Subordinated Noteholders hereby reserves the
right, in its sole discretion, to modify, amend, waive or release any of the
terms of the Senior Subordinated Notes, or the Indenture or the Subordinated
Guaranties, in each case, at any time executed by the Management Stockholders or
the Companies or any other Person in connection with the Senior Indebtedness or
of any other document relative thereto and to exercise or refrain from
exercising any powers or rights which the Senior Lenders or the Senior
Subordinated Noteholders may have thereunder, and such modification, amendment,
waiver, release, exercise or failure to exercise shall not affect any of
Agent's, the Senior Lenders' the Trustee's or any Senior Subordinated
Noteholder's rights under this Agreement. Each Investor hereby agrees that Agent
and the Senior Lenders, and the Trustee, on behalf of the Senior Subordinated
Noteholders, may from time to time, in their sole discretion, amend the
instrument and agreements evidencing the Senior Indebtedness, grant extensions
of time of payment or performance and make compromises and grant waivers or make
settlements with the Companies and each of them or other creditors of the
Companies, without
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<PAGE>
affecting the agreements of the Investors, the Management Stockholders or the
Companies hereunder. If at any time hereafter, Agent and the Senior Lenders
shall, in their own judgment, determine to discontinue the extension of credit
to the Companies, they may do so. This Agreement shall continue in full force
and effect until the Senior Indebtedness shall have been indefeasibly paid in
full in cash and the Senior Credit Agreement and the Indenture have been
terminated. Notwithstanding the foregoing, Agent and the Senior Lenders agree
that they shall not modify any of its Loan Documents (a) to increase the rates
of interest payable thereunder above the Default Rate; provided that this clause
shall not restrict or prohibit the Agent or the Senior Lenders from charging
fees in connection with such Loan Documents, amendments or waivers relating
thereto and/or in connection with any over-advance facility that may be extended
from time to time in the Senior Lenders' discretion, (b) amend or modify the
Senior Credit Agreement so as to further restrict Radio One's ability to make
interest or dividend payments on the Subordinated Obligations, (c) to increase
the Senior Indebtedness in violation of Section 1.2 hereof or (d) extend the
maturity date past the maturity date of the Subordinated Obligations.
14. Compensation and Indemnity. Radio One shall reimburse the Trustee
promptly upon request for all reasonable out-of-pocket expenses incurred or made
by it, in connection with this Agreement. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. Radio One shall indemnify
the Trustee against any and all loss, liability or expense (including attorneys'
fees) incurred by it in connection with the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the acceptance, exercise or performance of any of
its powers or duties hereunder. The Trustee shall notify Radio One promptly of
any claim for which it may seek indemnity. Failure by the Trustee so to notify
Radio One shall not relieve Radio One of its obligations hereunder. Radio One
shall defend the claim and the Trustee may have separate counsel and Radio One
shall pay the fees and expenses of such counsel. Radio One need not reimburse
any expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.
15. Further Assurances. Each Company, Management Stockholder and
Investor, for itself and its successors and assigns as holders of Subordinated
Obligations, covenant to execute and deliver to Agent, the Senior Lenders and
the Trustee for the benefit of the Senior Subordinated Noteholders such further
instruments and documents and take such further actions as Agent, on behalf of
the Senior Lenders and the Trustee, on behalf of the Senior Subordinated
Noteholders may from time to time reasonably request. Without limiting the
foregoing, in the event that all or part of the Senior Indebtedness is hereafter
refinanced, refunded or replaced through the Senior Lenders, the Senior
Subordinated Noteholders and/or any other lender(s) in accordance with this
Agreement, the Investors agree to enter into one or more new agreements with the
Senior Lenders, the Senior Subordinated Noteholders and/or such lender providing
for the subordination of the Subordinated Obligations to at least the same
extent, and upon substantially similar terms, as provided in this Agreement.
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<PAGE>
16. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, telecopy or by any
form of delivery (including but not limited to United States Registered or
Certified Mail or Federal Express or other overnight delivery service) requiring
or providing for a signed receipt, and addressed as set forth on Schedule 15
hereto, or to such other address or addresses as the party to whom such notices
directed may have designated in writing to the other parties hereto. Notices
shall be deemed given upon the earlier to occur of (i) actual receipt by or
delivery to the addressee, or (ii) the third day following deposit thereof with
the U.S. Postal Service for delivery via certified or registered mail, postage
prepaid.
17. Successors; Continuing Effect, Etc. This Agreement is being entered
into for the benefit of the holders of the Senior Indebtedness and the
Subordinated Obligations, and their respective successors and assigns. This
Agreement shall be a continuing agreement and shall be irrevocable and shall
remain in full force and effect so long as there are both Senior Indebtedness
and Subordinated Obligations outstanding or committed to be advanced. The
liability of the Investors hereunder shall be reinstated and revived, and the
rights of the holders of the Senior Indebtedness shall continue, with respect to
any amount at any time paid on account of the Senior Indebtedness which shall
thereafter be required to be restored or returned by the holders of the Senior
Indebtedness in any Reorganization (including without limitation, any repayment
made pursuant to any provision of Chapter 5 of Title 11, United States Code),
all as though such amount had not been paid.
18. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and no
modification or waiver of any provision of this Agreement shall in any event be
effective unless the same shall be in writing signed by Agent, on behalf of the
Senior Lenders, the Trustee, on behalf of the Senior Subordinated Noteholders,
and the Investors (unless such amendment or modification shall impose any
additional obligations upon the Companies, in which case such amendment or
modification shall also require execution by the Companies).
19. Applicable Law; Jurisdiction and Venue; Waiver of Jury Trial.
(a) APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF TEXAS.
FOR PURPOSES OF THIS SUBSECTION 18(a), THIS AGREEMENT SHALL BE DEEMED TO BE
PERFORMED AND MADE IN THE STATE OF TEXAS.
(b) JURISDICTION AND VENUE. EACH OF THE COMPANIES AND EACH
INVESTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY SUCH PERSON
AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN
DALLAS COUNTY, TEXAS OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS OR, IF THE AGENT OR THE SENIOR LENDERS INITIATE SUCH ACTION,
IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH THE AGENT OR THE SENIOR
LENDERS, THE TRUSTEE ON BEHALF OF THE SENIOR SUBORDINATED NOTEHOLDERS SHALL
INITIATE SUCH ACTION, TO
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<PAGE>
THE EXTENT SUCH COURT HAS JURISDICTION. EACH OF THE COMPANIES AND EACH INVESTOR
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED BY THE AGENT OR THE SENIOR LENDERS, OR THE
TRUSTEE ON BEHALF OF THE SENIOR SUBORDINATED NOTEHOLDERS IN ANY OF SUCH COURTS,
AND HEREBY AGREES THAT PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS ISSUED THEREIN MAY BE SERVED IN THE MANNER PROVIDED FOR
NOTICES HEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
PERSON AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO SECTION 15.
EACH OF THE COMPANIES AND THE INVESTORS WAIVES ANY CLAIM THAT DALLAS COUNTY,
TEXAS OR THE NORTHERN DISTRICT OF TEXAS IS AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED ON LACK OF VENUE. TO THE EXTENT PROVIDED BY LAW, SHOULD ANY OF THE
COMPANIES OR ANY INVESTOR, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO
ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS
PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH PERSON SHALL BE DEEMED IN
DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE COURT AGAINST SUCH
PERSON AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
THE EXCLUSIVE CHOICE OF FORUM FOR EACH OF THE COMPANIES AND EACH INVESTOR SET
FORTH IN THIS SUBSECTION 18(B) SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT,
BY AGENT AND/OR THE SENIOR LENDERS OR THE TRUSTEE ON BEHALF OF THE SENIOR
SUBORDINATED NOTEHOLDERS OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY THE AGENT AND/OR THE SENIOR LENDERS OR THE TRUSTEE ON BEHALF OF THE
SENIOR SUBORDINATED NOTEHOLDERS OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER
APPROPRIATE JURISDICTION, AND EACH OF THE COMPANIES AND THE INVESTORS HEREBY
WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
(c) WAIVER OF RIGHT TO JURY TRIAL. EACH OF AGENT, THE SENIOR
LENDERS, THE TRUSTEE ON BEHALF OF THE SENIOR SUBORDINATED NOTEHOLDERS, THE
COMPANIES AND EACH INVESTOR ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
THEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE
PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED
IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
20. Miscellaneous. This Agreement may be signed in any number of
counterparts which, when taken together, shall constitute one and the same
document. The headings in this Agreement are for convenience of reference only
and shall not alter or otherwise affect the meaning hereof. In the event of any
conflict between the provisions of the Agreement and the provisions of any of
the
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<PAGE>
Loan Documents, the Senior Subordinated Notes, the Indenture, the Subordinated
Guaranties, or any of the Subordinated Agreements, the provisions of this
Agreement shall control. The Companies shall reimburse the holders of the Senior
Indebtedness upon demand for all reasonable costs and expenses (including
reasonable attorney's fees and disbursements) paid or incurred by the holders of
the Senior Indebtedness in connection with any enforcement of this Agreement in
favor of the holders of the Senior Indebtedness.
21. 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.
22. No Personal Liability of Management Stockholders. Notwithstanding
anything herein to the contrary, neither Jerry A. Moore, III, Alfred C. Liggins,
nor Catherine L. Hughes shall have personal liability under this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
NATIONSBANK OF TEXAS, N.A., as
Agent
By: /s/ Whitney Busse
--------------------------
Name: Whitney Busse
------------------------
Title: Vice President
-----------------------
/s/ Alfred Liggins
--------------------------------
Alfred C. Liggins, individually
/s/ Catherine L Hughes
--------------------------------
Catherine L. Hughes, individually
/s/ Jerry A Moore
--------------------------------
Jerry A. Moore, III, individually
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
By: /s/ Patricia Stermer
--------------------------
Name: Patricia Stermer
------------------------
Title: Assistant Vice President
-----------------------
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be executed by its duly authorized representative as of the day and
year first above written.
RADIO ONE, INC., a Delaware corporation
By: /s/ Alfred Liggins
--------------------------------
Alfred C. Liggins
President
RADIO ONE LICENSES, INC., a Delaware
corporation
By: /s/ Alfred Liggins
--------------------------------
Alfred C. Liggins
President
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt Management III,
L.P., its General Partner
By: /s/ Brian W. McNeill
--------------------------
Name: Brian W. McNeill
------------------------
Title: General Partner
-----------------------
<PAGE>
BANCBOSTON INVESTMENTS, INC.
By: /s/ Lars A Swanson
--------------------------
Name: Lars A Swanson
------------------------
Title: Vice President
-----------------------
/s/ Grant Wilson
-------------------------------
Grant M. Wilson
SYNCOM CAPITAL CORPORATION
By: /s/ Terry L Jones
--------------------------
Name: Terry L Jones
------------------------
Title: President
-----------------------
ALLIANCE ENTERPRISE
CORPORATION
By: /s/ Divakar Kamath
--------------------------
Name: Divakar Kamath
------------------------
Title: Executive Vice President
------------------------
GREATER PHILADELPHIA VENTURE
CAPITAL CORPORATION, INC.
By: /s/ Fred G. Choate
--------------------------
Name: Fred G. Choate
------------------------
Title: Manager
-----------------------
<PAGE>
OPPORTUNITY CAPITAL
CORPORATION
By: /s/ J.P. Thompson
--------------------------
Name: J. Peter Thompson
------------------------
Title: President
-----------------------
CAPITAL DIMENSIONS VENTURE
FUND, INC.
By: /s/ Dean Pickerell
--------------------------
Name: Dean Pickerell
------------------------
Title: Vice President
-----------------------
TSG VENTURES INC.
By: /s/ Duane E. Hill
--------------------------
Name: Duane E. Hill
------------------------
Title: Principal
-----------------------
FULCRUM VENTURE CAPITAL
CORPORATION
By: /s/ Brian Argrett
--------------------------
Name: Brian Argrett
------------------------
Title: President
-----------------------
<PAGE>
EXHIBIT A
I. Series A Preferred Stock
- --------------------------------- ----------------------------------------------
Investor Principal Amount (or Liquidation Value) of
Preferred Stock
- --------------------------------- ----------------------------------------------
$_______________
- --------------------------------- ----------------------------------------------
$_______________
- --------------------------------- ----------------------------------------------
II. Series B Preferred Stock
- --------------------------------- ----------------------------------------------
Investor Principal Amount (or Liquidation Value) of
Preferred Stock
- --------------------------------- ----------------------------------------------
$_______________
- --------------------------------- ----------------------------------------------
$_______________
- --------------------------------- ----------------------------------------------
III. Warrantholders
- --------------------------------- ----------------------------------------------
Name of Holder Number of Warrants Held
- --------------------------------- ----------------------------------------------
_______________
- --------------------------------- ----------------------------------------------
_______________
- --------------------------------- ----------------------------------------------
<PAGE>
Schedule 15
Notice Addresses
if to the Companies, to the following address:
c/o Radio One, Inc.
5900 Princess Garden Parkway
Lanham, Maryland 20706
Attention: Mr. Alfred C. Liggins, President
if to the Senior Lenders, to the following address:
NationsBank of Texas, N.A.
901 Main Street, 64th Floor
Dallas, Texas 75202
Attention: Ms. Whitney L. Busse
and to:
Baker & Botts, L.L.P.
2001 Ross Avenue
800 Trammell Crow Center
Dallas, Texas 75201
Attention: Alison C. Courtwright, Esq.
If to the Senior Subordinated Noteholders, to the following address:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Division
and to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Jeffrey R. Poss, Esq.
<PAGE>
if to the Investors, to the following addresses:
Alta Subordinated Debt Partners III, L.P.
c/o Alta Subordinated Debt Management III, L.P.
Attention: Brian W. McNeill
Burr, Egan, Deleage & Co.
One Post Office Square
Boston, Massachusetts 02109
BancBoston Investments, Inc.
Attention: Sanford Anstey
100 Federal Street, 32nd Floor
Boston, Massachusetts 02110
Grant M. Wilson
201 Concord Street
Carlisle, Massachusetts 01741
Syncom Capital Corporation
Attention: Terry L. Jones, President
8401 Colesville Road
Suite 300
Silver Spring, Maryland 20910
Alliance Enterprise Corporation
Attention: Tom Gerron
12655 North Central Expressway
Dallas, Texas 75243
Greater Philadelphia Venture Capital Corporation, Inc.
Attention: Fred Choate, General Manager
351 East Conestoga Road
Wayne, Pennsylvania 19087
Opportunity Capital Corporation
Attention: J. Peter Thompson, President
2201 Walnut Avenue, Suite 210
Freemont, California 94538
Capital Dimensions Venture Fund, Inc.
Attention: Dean Pickerell, President
Two Applegate Square
Suite 335-T
Minneapolis, Minnesota 55425-1637
<PAGE>
TSG Ventures Inc. (formerly Equico Capital Corporation)
Attention: Duane Hill
1055 Washington Boulevard, 10th Floor
Stamford, Connecticut 06901
Fulcrum Venture Capital Corporation
Attention: Brian E. Argrette
300 Corporate Point, Suite 380
Culver City, California 90230
<PAGE>
APPENDIX A
----------
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control of" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Collateral" means all assets of Radio One and the Restricted Subsidiaries and
all Equity Interests of Radio One and of each of the Restricted Subsidiaries,
whether now owned or hereinafter acquired.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).
"Liquidation Value" has the meaning specified for such term in Radio One's
Certificate of Amended and Restated Certificate of Incorporation.
"Permitted Acquisitions" means acquisitions by Radio One and/or the Restricted
Subsidiaries made with the consent of the Lenders and made pursuant to
acquisition agreements previously approved in writing by the Lenders.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
"Redemption Events" meaning of which is specified in the Preferred Stockholders
Agreement.
"Rights" means rights, remedies, powers and privileges.
i
[LETTERHEAD OF KIRKLAND & ELLIS]
To Call Writer Direct:
202 879-5000
[DATE]
Radio One, Inc.
5900 Princess Garden Parkway
Lanham, Maryland 20706
Re: Series B 12% Senior Subordinated Notes due 2004
Ladies and Gentlemen:
We are acting as special counsel to Radio One, Inc., a Delaware
corporation (the "Company"), in connection with the proposed registration by the
Company of up to $85,478,000 in aggregate principal amount of the Company's
Series B 12% Senior Subordinated Notes due 2004 (the "Exchange Notes"), pursuant
to a Registration Statement on Form S-4 filed with the Securities and Exchange
Commission (the "Commission") on June [__], 1997 under the Securities Act of
1933, as amended (the "Securities Act") (such Registration Statement, as amended
or supplemented, is hereinafter referred to as the "Registration Statement"),
for the purpose of effecting an exchange offer (the "Exchange Offer") for the
Company's 12% Senior Subordinated Notes due 2004 (the "Old Notes"). We are also
acting as special counsel to Radio One Licenses, Inc. (the "Subsidiary
Guarantor") as issuer of a guarantee (the "Guarantee") of the obligations of the
Company under the Exchange Notes. The Exchange Notes and the Guarantee are to be
issued pursuant to the Indenture (the "Indenture"), dated as of May 15, 1997,
among the Company, the Subsidiary Guarantor and United States Trust Company of
New York, as Trustee, in exchange for and in replacement of the Company's
outstanding Old Notes, of which $85,478,000 in aggregate principal amount is
outstanding.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the Company
and the Subsidiary Guarantor, (ii) minutes and records of the corporate
proceedings of the Company and the Subsidiary Guarantor with respect to the
issuance of the Exchange Notes and the Guarantee, respectively, (iii) the
Registration Statement and exhibits thereto and (iv) the Registration Rights
Agreement, dated as of May 14, 1997, among the Company, Credit Suisse First
Boston Corporation and NationsBanc Capital Markets, Inc.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of persons signing all documents in connection with which this
<PAGE>
Radio One, Inc.
[DATE]
Page 2
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company and the Subsidiary Guarantor, and the due
authorization, execution and delivery of all documents by the parties thereto
other than the Company and the Subsidiary Guarantor. As to any facts material to
the opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Company and the Subsidiary Guarantor and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) Each of the Company and the Subsidiary Guarantor is a corporation
existing and in good standing under the General Corporation Law of the State of
Delaware.
(2) The sale and issuance of the Exchange Notes has been validly
authorized by the Company and the issuance of the Guarantee has been validly
authorized by the Subsidiary Guarantor.
(3) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the Indenture
shall have been qualified pursuant to the provisions of the Trust Indenture Act
of 1939, as amended, (iii) the Old Notes shall have been validly tendered to the
Company (iv) the Exchange Notes shall have been duly executed and authenticated
in accordance with the provisions of the Indenture and duly delivered to the
purchasers thereof in exchange for the Old Notes, (v) the Board of Directors and
the appropriate officers of the Company and the Subsidiary Guarantor have taken
all necessary action to fix and approve the terms of the Exchange Notes and the
Guarantee, respectively, and (vi) any legally required consents, approvals,
authorizations or other order of the Commission or any other regulatory
authorities have been obtained, the Exchange Notes when issued pursuant to the
Exchange Offer will be legally issued, fully paid and nonassessable and will
constitute valid and binding obligations of the Company and the Guarantee will
constitute a valid and binding obligation of the Subsidiary Guarantor.
Our opinions expressed above are subject to the qualifications
that we express no opinion as to the applicability of, compliance with, or
effect of (i) any bankruptcy, insolvency, reorganization, fraudulent transfer,
fraudulent conveyance, moratorium or other similar law affecting the enforcement
of creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York and
the General Corporation Law of the State of Delaware. We advise you that issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions
<PAGE>
Radio One, Inc.
[DATE]
Page 3
are based and any other laws which may actually govern. For purposes of the
opinion in paragraph 1, we have relied exclusively upon recent certificates
issued by the Delaware Secretary of State and such opinion is not intended to
provide any conclusion or assurance beyond that conveyed by such certificates.
We have assumed without investigation that there has been no relevant change or
development between the respective dates of such certificates and the date of
this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement. We also consent to the reference to our firm
under the heading "Legal Matters" in the Registration Statement. In giving this
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of the rules and
regulations of the Commission.
We do not find it necessary for the purposes of this opinion,
and accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the issuance of the
Exchange Notes.
This opinion is limited to the specific issues addressed
herein, and no opinion may be inferred or implied beyond that expressly stated
herein. We assume no obligation to revise or supplement this opinion should the
present laws of the States of Delaware or New York be changed by legislative
action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing
of the Registration Statement, and is not to be used, circulated, quoted or
otherwise relied upon for any other purposes.
Yours very truly,
KIRKLAND & ELLIS
STANDARD OFFICE LEASE
1. BASIC LEASE PROVISIONS ("BASIC LEASE PROVISIONS")
1.1 PARTIES: This Lease, dated, for reference purposes only,
February 3, 1997, is between National Life Insurance Company,
a Vermont corporation ("Landlord"), and Radio One, Inc., a
Delaware corporation ("Tenant"), doing business under the same
name ("Tenant").
1.2 PREMISES: Suite Number(s) Suite 100, 720 and 800, on the
first, seventh and eighth floors, consisting of 17,175
rentable square feet, more or less, as shown on Exhibit A
hereto (the "Premises").
1.3 BUILDING: The building is located at 5930 Princess Garden
Parkway in the City of Lanham, County of Prince George's,
State of Maryland, as defined in paragraph 2.
1.4 USE: Radio broadcasting and general office, subject to
paragraph 6.
1.5 TERM: The Term shall commence on February 3, 1997
("Commencement Date") and end on December 31, 2011.
1.6 BASE RENT: Annual base rent is payable in twelve equal
installments on the 1st day of each month, per paragraph 4.1,
but subject to increase upon the following dates after the
Rent Commencement Date (as defined in Section 3.3), and shall
be calculated by multiplying the number of square feet
comprising the Premises by the following numbers:
Year l:
Months 1 through 6 $11.00 per square foot
Months 7 through 12 $12.00 per square foot
Year 2: $13.50 per square foot
Years 3 through 15: 4% annual increases on
January 1, 1999 and on
each January 1st thereafter.
1.7 ADDITIONAL RENT: All monetary obligations of Tenant to
Landlord under the terms of this Lease, including but not
limited to any expenses payable by Tenant hereunder, shall be
deemed to be rent.
1.8 BASE YEAR: For purposes of calculating real estate tax
escalations the base year represents the period July 1, 1997
to June 30, 1998.
1.9 BASE RENT PAID UPON EXECUTION: Fifteen thousand Seven Hundred
Forty Three and 75/100 dollars ($15,743.75) for the first
month of rent.
1.10 SECURITY DEPOSIT: Fifteen thousand Seven Hundred Forty Three
and 75/100 dollars ($15,743.75).
1.11 TENANT'S SHARE OF REAL ESTATE TAX ESCALATION: 22.2% as defined
in paragraph 4.2.
1.12 PARKING: Tenant shall be entitled to parking for 3.5
automobiles per 1,000 square feet leased, subject to paragraph
2.2.
1.13 PROCURING BROKER: None
1.14: COOPERATING BROKER: None. A "cooperating broker" is defined as
any broker other than the Listing Broker entitled to a share
of any commission arising under this Lease.
1.15 LANDLORD ALTERATIONS, IMPROVEMENTS OR ADDITIONS: Landlord will
not be making any alterations, improvements or additions to
the Premises in conjunction with this Lease.
1.16 STORAGE SPACE LICENSE. Landlord shall provide Tenant a
revocable license to use storage space in the Building, in a
location to be determined by Landlord and reasonably
acceptable to Tenant, and subject to availability, of
approximately 500 square feet of space, and at a storage
rental rate equal to $0.00 per square foot. Landlord shall
have the unilateral right to terminate Tenant's license to use
such storage space, at any time, or from time to time by
providing Tenant with fifteen (15) days' prior written notice.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES: The Premises are a portion of the Building, as more
particularly identified in paragraph 1.2 of the Basic Lease Provisions (the
"Premises"). The Premises, the Building, the Common Areas, as defined in
paragraph 2.3, the land upon which the same are located, along with all other
non-tenanted, non-occupied buildings and improvements thereon or thereunder, are
herein collectively referred to as the "Office Building Project". Landlord
hereby leases the Premises to Tenant and Tenant leases the Premises from
Landlord for the term, at the rental, and upon all of the conditions set forth
herein, including non-exclusive rights to the Common Areas as herein specified.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 1 53181002.441
<PAGE>
2.2 VEHICLE PARKING. So long as Tenant is not in default, and subject
to the rules and regulations attached hereto, and as established by Landlord
from time to time. Tenant shall be entitled to (1) ten (10) reserved spaces in
the front of the Building, substantially as set forth in exhibit B hereto, (2)
ten (10) reserved spaces in the rear of the Building, substantially as set forth
in Exhibit B hereto, and (3) additional non-exclusive, unreserved parking in the
Office Building Project, on a first-come, first served basis, provided that the
number of unreserved parking spaces, when added to the number of reserved spaces
provided herein, do not exceed in the aggregate the number of parking spaces
permitted by the parking ratio specified in paragraph 1.12 of the Basic Lease
Provisions at the monthly rate applicable from time to time, consistent with
market parameters, for monthly parking as set by Landlord and or its licensee.
2.2.1 If Tenant commits, permits or allows any of the
prohibited activities described in the Lease or the rules then in effect, then
Landlord shall have the right, without notice, in addition to such other rights
and remedies that it may have, to remove or tow away the vehicle involved and
charge the cost to Tenant, which cost shall be immediately payable upon demand
by Landlord.
2.3 COMMON AREAS - DEFINITION. The term "Common areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Office Building Project that are provided and designated by the
Landlord from time to time for the general non-exclusive use of Landlord, Tenant
its permitted subtenants and other lessees of the Office Building Project and
their invitees. As used in this Lease, the term "invitees" means the employees,
visitors, suppliers, shippers and customers of Landlord, Tenant and other
lessees of the Office Building Project. The Common Areas include, but are not
limited to, common entrances, lobbies, corridors, stairways and stairwells,
public rest rooms, elevators, escalators, parking areas to the extent not
otherwise prohibited by this Lease, loading and unloading areas, trash areas,
roadways, sidewalks, parkways, ramps, driveways, landscaped areas and decorative
walls.
2.4 COMMON AREAS - RULES AND REGULATIONS. Tenant agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit C with respect
to the Office Building Project, and to cause its invitees to so abide and
conform. Landlord or such other person(s) as Landlord may appoint shall have the
exclusive control and management of the Common Areas and shall have the right,
from time to time, to modify, amend and enforce said rules and regulations.
Landlord shall not be responsible to Tenant for the noncompliance with said
rules and regulations by other lessees of the Office Building Project or their
invitees. Landlord shall not discriminate against the Tenant in the enforcement
of the rules and regulations. In the event of any inconsistency between the
Lease and the rules, the Lease shall govern.
2.5 COMMON AREAS - CHANGES. Landlord shall have the right, in
Landlord's sole discretion, from time to time:
(a) To make changes to the Building interior and exterior and
the Common areas, including, without limitation, changes in the location, size,
shape, number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Landlord shall at all times provide the parking facilities
required by applicable law, and so long as such changes cause no material and
permanent adverse effect on access or amenities; provided, however, Tenant shall
be provide reasonable access to the Premises at all times.
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land and improvements outside the
present or future boundaries of the Office Building Project to be a part of the
Common Areas, provided that such other land and improvements have a reasonable
and functional relationship to the Office Building Project;
(d) To add additional buildings and improvements to the Common
areas, subject to the provisions of paragraph 40.2 of this Lease;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project or any
portion thereof;
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and the other portions of the
Office Building Project as Landlord may, in the exercise of sound business
judgment, deem to be appropriate.
3. TERM.
3.1 TERM. The Term and the Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 POSSESSION TENDERED; DELAY IN POSSESSION. Possession of the
Premises (other than Suite 110) shall be tendered to Tenant by Landlord on or
before February 1, 1997 ("Tender of Possession"); and possession of Suite 110
shall be tendered on or before March 20, 1997. After Tender of Possession,
Tenant shall perform, at Tenant's sole cost and expense, all tenant improvements
to the Premises, subject to the provisions of Paragraph 7.3. Notwithstanding
said tender of possession, if for any reason Landlord connot deliver possession
of the Premises to Tenant on said dates and subject to paragraph 3.3. Landlord
shall not be subject to any liability therefor, nor
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 2 53181002.441
<PAGE>
shall such failure affect the validity of this Lease or the obligations of
Tenant hereunder or extend the term hereof. There shall be no abatement of Rent,
to the extent of any delays caused by acts or omissions of Tenant, Tenant's
agents, employees and contractors.
3.3 RENT COMMENCEMENT DATE - DEFINED. Tenant shall be obligated to
commence payment of Rent to Landlord, without abatement, offset or deduction, on
the date which is ten (10) days after the date of Substantial Completion (as
hereafter defined), which date of Substantial Completion shall be separately
calculated (as provided below) for (a) suites 720 and 800, consisting of 13,124
rentable square feet (the "Office Suite"), and (b) suite 100, consisting of
4,051 rentable square feet (the "Broadcast Suite"). "Substantial Completion" of
the Office Suite shall be defined as the date the improvements to the Office
Suite are substantially complete and are available for occupancy by Tenant;
provided, however, if Tenant occupies the Office Suite for the conduct of
Tenant's business prior to substantial completion, then notwithstanding such
partial completion the Office Suite shall be deemed substantially complete,
provided further, that in no event shall the date of Substantial Completion of
the Office Suite be later than the earlier of May 1, 1997 plus the number of
days that work on the Office Suite was stopped as a result of an action
described in the second sentence of Paragraph 19 hereof or July 1, 1997.
"Substantial Completion" of the Broadcast Suite shall be defined as the date the
improvements to the Broadcast Suite are substantially complete, and are
available for occupancy by Tenant; provided, however, if Tenant occupies the
Broadcast Suite for the conduct of Tenant's business prior to substantial
completion, then notwithstanding such partial completion the Broadcast Suite
shall be deemed substantially complete. Notwithstanding anything herein to the
contrary, if Tenant has not achieved Substantial Completion of the Broadcast
Suite not later than July 31, 1997, Substantial Completion of the Broadcast
Suite shall be deemed to have occurred on July 31, 1997. The "Rent Commencement
Date" shall be deemed for the purposes of this Lease, and the increases in Rent
provided in Paragraph 1.6 to be the first day of the first month after
Substantial Completion of the Office Suite or the Broadcast Suite, whichever is
first to occur, but in no event later than August 1, 1997. Notwithstanding the
foregoing, the termination date will not be amended and will remain December 31,
2011.
4. RENT.
4.1 BASE RENT. Subject to the future increases contemplated in
Paragraph 4.3, and except as may be otherwise expressly provided in this Lease,
Tenant shall pay Landlord the Base Rent set forth in Paragraph 1.6 of the Basic
lease Provision, without abatement, offset or deduction. Tenant shall pay
Landlord upon execution of this Lease the advance Base Rent described in
Paragraph 1.9 of the Basic Lease Provisions. Rent for any period during the term
which is for less than one month shall be prorated based upon the actual number
of days of the calendar month involved. Rent shall be payable in lawful money of
the United States to Landlord at the address stated herein or to such other
persons or/at such other places as Landlord may designate in writing.
4.2 REAL ESTATE TAX ESCALATION.
(a) For the purposes of this Lease.
(i) The term "real estate taxes" means all taxes, rates and
assessments, general and special levied or imposed with respect to the land,
Building and improvements constructed thereon of which the Premises are a part,
including all taxes, rates and assessments, general and special levied or
imposed for school, public betterment, general or local improvements and taxes
imposed in connection with any special taxing district. If the system of real
estate taxation shall be altered or varied and any new tax or levy shall be
levied or imposed on said land, Building and improvements, and/or on Landlord,
in substitution for real estate taxes presently levied or imposed on immovables
in the jurisdiction where the property is located, then any such new tax or levy
shall be included within the term "real estate taxes".
(ii) The term "base real estate taxes" means the assessed
value of the land, Building and improvements, multiplied by the then current
rate, for the tax year commencing July 1, 1997. The current real estate tax year
is for the twelve (12) month period from July 1, 1997 to June 30, 1998.
(iii) The term "real estate tax year" means each successive
twelve-month (12) period following and corresponding to the period for which the
base real estate taxes are established, irrespective of the period or periods
which may from time to time in the future be established by competent authority
for the purposes of levying or imposing real estate taxes.
(b) Each year Tenant shall pay to Landlord with thirty (30) days after
demand in writing therefor (accompanied by a statement showing computation of
Tenant's share of such increase), as additional rent, Tenant's pro rata share,
of any increase in real estate taxes for the then current real estate tax year
over the base real estate taxes (all as defined above). Tenant's share, as
aforesaid, shall be as defined in Section 1.11.
(c) Real estate taxes which are being contested by Landlord shall
nevertheless be included for purposes of the computation of the liability of
Tenant under this Section, provided, however, that in the event that Tenant
shall have paid any amount of increased rent pursuant to this Section and
Landlord obtains a refund, then Landlord shall pay to Tenant the appropriate
portion of such refund. Landlord's obligation to refund shall survive expiration
of the term of this Lease. Landlord shall have no obligation to contest, object
or litigate the levying or imposition of any real estate taxes and may settle,
compromise, consent to, waiver or otherwise determine in its discretion any real
estate taxes without consent approval of Tenant. Real estate taxes shall also
include all costs, including attorney's fees, incurred in a challenge or
application for reassessment.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 3 53181002.441
<PAGE>
(d) Nothing contained in thsi Section shall be construed at any tinme
to reduce the monthly installments of rent payable hereunder below the amounts
stipulated in Section 4.1 of this Lease.
(e) If the termination date of the Lease shall not coincide with the
end of a real estate tax year, then in computing the amount payable under this
Section for the period between the commencement of the applicable real estate
tax year in question and the termination date of this Lease, the base real
estate taxes shall be deducted from the real estate taxes for the applicable
real estate tax year and, if there shall be a difference, such difference
prorated on a monthly basis shall be payable by Tenant. Tenant's obligation to
pay increased real estate taxes under this Section for the final period of the
Lease shall survive the expiration of the term of this Lease.
4.3 DEFINITION OF RENT. The capitalized term "Rent", as used in this
Lease, shall mean the Base Rent (as the same shall be increased in accordance
with this Lease, including the increases contemplated in Paragraph 1.6) plus
Tenant's Share of Real Estate Tax Escalation.
4.4 RENT TAX. If any governmental agency imposes any tax measured by
the amount of rent paid, Tenant will pay such tax at the time of each payment of
Fixed Minimum Rent or Additional Rent.
5. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon execution hereof,
to be held in an interest bearing account with interest to thereafter accrue and
become a part of the security deposit, the security deposit set forth in
paragraph 1.10 of the Basic Lease Provisions as security for Tenant's faithful
performance of Tenant's obligations hereunder. If Tenant fails to pay Rent or
other charges due hereunder, or otherwise defaults with respect to any provision
of this Lease, which default continues beyond any applicable notice or right to
cure provided herein, Landlord may use, apply or retain all or any portion of
said deposit for the payment of any Rent or other charge in default for the
payment of any other sum to which Landlord may become obligated by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may suffer thereby. If Landlord so uses or applies all or any portion
of said deposit, Tenant shall within ten (10) days after written demand deposit
cash with Landlord in an amount sufficient to restore said deposit to the full
amount then required of Tenant. Landlord shall not be required to keep said
security deposit separate from its general accounts. Tenant will be required to
return all keys to Premises and provide Landlord with Tenant's forwarding
address. If Tenant performs all of Tenant's obligations hereunder, said deposit,
or so much thereof as had not been applied by Landlord, shall be returned,
without payment of interest or other increment for its use, to Tenant (or, at
Landlord's option, to the last assignee, if any, of Tenant's interest hereunder)
within thirty (30) days after the term expires and Tenant vacates the Premises.
No trust relationship is created herein between Landlord and Tenant with respect
to said Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for the purpose
set forth in paragraph 1.4 of the Basic Lease Provisions and for no other
purpose.
6.2 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS. Tenant shall, at
Tenant's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, existing covenants and restrictions of record,
including requirements of the American Disabilities Act and reasonable
requirements of any insurance underwriters or rating bureaus, now in effect or
which may hereafter come into effect, whether or not they reflect a change in
policy from that now existing, during the term or any part of the term hereof,
relating in any manner to the Premises and the occupation and use by Tenant of
the Premises. Tenant shall conduct its business in a lawful manner and shall not
cause waste or a nuisance or disturb other occupants of the Building. Tenant
shall not be required to construct alterations outside of the Premises, and
Landlord shall remain responsible to ensure compliance with the Act outside of
the Premises and outside of other tenant spaces.
6.3 CONDITION OF PREMISES.
(a) Upon delivery of possession to Tenant the Premises shall
be clean and the plumbing, lighting, air conditioning, and heating system in the
Premises shall be in a good operating condition. Tenant shall promptly notify
Landlord in writing of any claimed violation of the foregoing warranty, setting
forth with specificity the nature of the violation. If it is determined that
there has been a violation, Landlord shall promptly after receipt of such notice
from Tenant, at Landlord's sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Tenant hereby
accepts the Premises and the Office Building Project in their "as is" condition
as of the date of delivery of possession of the Premises to Tenant, subject to
all applicable municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any easements, covenants
or restrictions of record (so long as same do not adversely impact the permitted
use, which analysis shall be determined by Tenant prior to the date hereof), and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Tenant acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Landlord nor any agent of Landlord has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Tenant's
business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
7.1 MAINTENANCE AND REPAIR - LANDLORD'S OBLIGATIONS. Landlord shall
maintain the Common Areas of the Office Building Project and the plumbing,
heating, ventilating, air conditioning, elevator, electrical and other
mechanical systems of the Building in good
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 4 53181002.441
<PAGE>
working order. Except as provided in paragraph 9.5 or paragraph 11.5, there
shall be no abatement of Rent or liability of Landlord on account of any injury
or interference with Tenant's business with respect to any improvements,
alterations or repairs made by Landlord to the Office Building Project or any
part thereof.
7.2 MAINTENANCE AND REPAIR - TENANT'S OBLIGATIONS. During the term of
this Lease, Tenant shall take good care of the Premises and fixtures therein and
maintain them in good order, condition and repair equal to the original work,
ordinary and reasonable wear excepted. During the term of this Lease, Tenant
shall maintain at its own expense any plumbing facilities located within the
Premises serving only the Premises, except the rest rooms located in the core of
the Building, in good order, condition and repair to the reasonable satisfaction
of Landlord. Upon surrender of the Premises to Landlord, Tenant shall deliver
the Premises to Landlord, broom clean, in as good order, condition and repair as
they were upon delivery of possession to Tenant, ordinary and reasonable wear
excepted. Without limiting the foregoing, Landlord may require after a default
by Tenant of its obligations under this Section 7.2 and the expiration of any
applicable notice and cure, that any such maintenance and repairs be performed
by Landord at Tenant's expense.
7.3 ALTERATIONS AND ADDITIONS.
(a) Tenant shall not, without Landlord's prior written consent
(not to be unreasonably withheld, conditioned or delayed), make any alterations,
improvements or additions in, on or about the Premises or that portion of the
Office Building Project for which a license is granted under Paragraph 38
hereof. Tenant acknowledges and agrees that for purposes of determining whether
Landlord unreasonably withheld its consent, Landlord may apply more stringent
criteria, such as the requirement that Tenant procure, at Tenant's sole cost and
expense, engineering certifications from engineers acceptable to Landlord, if
the alteration, improvement or addition affects the structure of the Office
Building Project, or any part thereof. At the expiration of the Term, Landlord
may require the removal of any or all alterations (other than walls, partitions
and doors) which are non-general office space alterations, at Tenant's expense,
and Tenant shall in all events leave the Premises in a clean and safe condition
at the expiration of the term. Should Landlord permit Tenant to make any
alterations, improvements or additions, Tenant shall use only contractors
reasonably approved by Landlord. Such contractors shall carry liability
insurance of a type and in such reasonable amounts as Landlord shall reasonably
require, naming Landlord and Tenant as additional insureds, Before commencing
the work, such contractors shall furnish Landlord with certificates of insurance
evidencing such coverage. Tenant shall also maintain a policy of Builder's Risk
for such work. Should Tenant make any alterations, improvements or additions
without the prior approval of Landlord, or use a contractor not expressly
approved by Landlord, Landlord may, at any time during the term of this Lease,
require that Tenant remove any part or all of such work.
(b) Tenant shall present any alteration, improvement or
addition in or about the Premises or the Office Building Project that Tenant
desires to make to Landlord in written form, with proposed detailed plans. If
landlord consents to such alteration, improvement or addition, the consent shall
be deemed conditioned upon Tenant, at its expense, acquiring a permit to do so
from the applicable government agencies (at Tenant's sole cost), furnishing a
copy thereof to Landlord prior to the commencement of the work and compliance by
Tenant with all conditions of said permit in a prompt and expeditious manner.
Landlord agrees to cooperate with Tenant in obtaining such permits.
(c) Tenant shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Tenant at or for
use in the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Tenant shall give Landlord not less than ten (10) days'
notice prior to the commencement of any work in the Premises by Tenant. Landlord
shall have the right to post notices of non-responsibility in or on the Premises
or the Building. If Tenant, in good faith, contests the validity of any lien,
claim or demand regarding the work, then Tenant shall, at its sole expense,
defend itself and Landlord and Landlord's agents against the same and shall pay
and satisfy any adverse judgment that may be rendered thereon before the
enforcement thereof against Landlord or Landlord's agents or the Premises or the
Building or the Office Building Project, upon the condition that if Landlord
shall require, Tenant shall furnish to Landlord a surety bond satisfactory to
Landlord in an amount equal to such contested lien claim or demand indemnifying
Landlord and Landlord's agents against liability for the same and holding the
Premises, the Building and Office Building Project free from the effect of such
lien or claim. If such lien is not bonded by a creditworthy company to the full
amount of such claim, Landlord may require Tenant to pay Landlord's reasonable
attorneys' fees and costs in participating in such action if Landlord decides it
is in Landlord's best interest to participate. Such expenses incurred by
Landlord shall be considered Additional Rent.
(e) All alterations, improvements and additions made by Tenant
shall be done in a good, workmanlike, manner with good quality materials and
shall become (upon Lease expiration or termination) the property of Landlord and
remain upon and be surrendered with the Premises at the expiration of the Lease
term, unless Landlord requires their removal pursuant to paragraph 7.3(a). Any
trade fixtures installed and paid for by Tenant may be removed by Tenant during
the term of this Lease and shall upon demand by Landlord be removed upon
expiration of the term. Tenant shall in all events promptly repair any damage
caused by removal of trade fixtures.
(f) Tenant shall provide Landlord with as-built plans and
specifications for any alterations, improvements or additions, for Landlord's
prior written approval.
7.4 UTILITY ADDITIONS. Landlord reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Landlord or Tenant, or any other lessee of the Office Building
Project, including, but not by way of limitation,
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 5 53181002.441
<PAGE>
such utilities as plumbing, electrical systems, communication systems, and fire
protection and detection systems, so long as such installations do not
unreasonably interfere with Tenant's use of the Premises.
7.5 AMERICANS WITH DISABILITIES ACT. Tenant acknowledges that Landlord
will not be making any alterations, improvements or additions to the Premises
under this Lease. In establishing the Rent under this Lease the Landlord has
relied on the agreement between Tenant and Landlord that Landlord will not be
required to make any alterations, improvements or additions to the Premises.
Landlord has made no representation to Tenant that the Premises comply with or
will comply with the Americans with Disabilities Act (the "Act"). Tenant agrees
to and shall be responsible for all cost and expense incurred in connection with
any alterations, improvements and changes necessary to ensure compliance with
the Act. It is the intent of this paragraph that any alterations, improvements
or additions required by the Act with regard to the Premises, whether resulting
from amendments to the Act or otherwise shall be the sole responsibility of
Tenant. Tenant covenants and agrees to and does hereby indemnify, defend and
hold Landlord harmless from and against all liability (including, without
limitation, attorney's fees and court costs) that Landlord may actually sustain
by reason of Tenant's breach of its obligations under this paragraph. In the
event that Tenant fails to comply with its obligations under this paragraph for
a period of ten (10) days after written notice from Landlord to Tenant
specifying the action required to be taken, Landlord shall have the right, but
not the obligation, to enter into the Premises and perform such action on behalf
of Tenant. In such event, Landlord shall not be liable for and Tenant hereby
waives any and all claims against Landlord arising out of any damage or injury
to the Premises or any property situated therein and Landlord shall have no
liability to Tenantt for any interruption of Tenant's operations conducted in or
about the Premises. Any and all costs and expenses incurred by Landlord in
performing such action on behalf of Tenant shall be reimbursed by Tenant to
Landlord upon demand and the failure to do so shall, at the option of the
Landlord, constitute an event of default under this Lease.
7.6 TENANT REQUIREMENTS FOR IMPROVEMENTS. Tenant shall furnish to
Landlord its completed space plan drawings no later than ten (10) days after the
full execution of this Lease. The space plan shall be attached as Exhibit D
hereto. At least ten (10) days prior to the start of construction, Tenant shall
furnish to Landlord completed construction drawings and/or a scope of work (and
a final price for such construction) reflecting the details as shown in the
space plan. Prior to the start of construction, Tenant shall obtain and furnish
to Landlord copies of all permits required to complete the work. Landlord shall
have ten (10) days to approve construction drawings and/or scope of work, which
when approved shall be attached as Exhibit E hereto. Such approval shall not be
unreasonably withheld. Upon completion of construction, the Tenant shall provide
certified As-Built drawings and the original certificate of occupancy to the
Landlord.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE - TENANT. Tenant shall obtain General Public
Liability Insurance covering the Premises and Tenant's use thereof against
claims for personal injury of death and property damage occurring upon, in or
about the Premises, such insurance to afford protection to the limit of not less
than $2,000,000 arising out any one occurrence, and any property damage to
afford protection to the limit of not less than $2,000,000; or such insurance
may be for a combined single limit of $2,000,000 per occurrence. The insurance
coverage required under this Section 8.1 shall, in addition, extend to any
liability of Tenant arising out of Tenant's indemnities provided in this Lease,
as well as Independent Contractors' Liability, Product/Completed Operations
Liability, Personal Injury Liability and Contractual Liability.
8.2 LIABILITY INSURANCE - LANDLORD. Landlord shall obtain and keep in
force during the term of this Lease a policy of Commercial General Liability
Insurance, plus coverage against such other risks as Landlord deems dvisable
from time to time, in such amounts as Landlord deems advisable from time to
time, insuring Landlord, but not Tenant, against liability arising out of the
ownership, use, occupancy or maintenance of the Office Building Project.
8.3 PROPERTY INSURANCE - TENANT. Tenant shall, at Tenant's expense,
obtain and keep in force during the term of this Lease for the benefit of
Tenant, fire and extended coverage insurance, with vandalism and malicious
mischief, sprinkler leakage and earthquake sprinkler leakage endorsements, in an
amount sufficient to cover the full replacement cost, as the same may exist from
time to time, of all of Tenant's personal property, fixture, equipment and
tenant improvements. Any policy proceeds from such insurance, so long as this
Lease shall remain in effect, shall be held in trust by Tenant's insurance
company first for the repair, reconstruction, restoration or replacement of the
property damaged or destroyed. This provision shall survive the termination of
this Lease.
8.4 PROPERTY INSURANCE - LANDLORD. Landlord shall obtain and keep in
force during the term of this Lease a policy or policies of "all risk" coverage
insurance covering loss or damage to the Office Building Project improvements,
on a replacement cost basis (excluding foundations and footings), but not
Tenant's personal property, fixtures, equipment or tenant improvements, in such
amounts as Landlord deems appropriate from time to time providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, plate glass, and such other perils as
Landlord deems advisable from time to time or may be required by a lender having
a lien on the Office Building. Such insurance may include earthquake, flood and
boiler and machinery insurance. In addition, Landlord may obtain and keep in
force, during the term of this Lease, rental value insurance, with loss payable
to Landlord, which insurance may also cover Operating expenses. Tenant will not
be named in any such policies carried by Landlord and shall have no right to any
proceeds therefrom. The policies required by paragraphs 8.2 and 8.4 shall
contain such deductibles as Landlord or the aforesaid lender may determine. In
the event that the Premises shall suffer an Insured Loss as defined in paragraph
9.1(e), the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense. Tenant shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Landlord. Tenant shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 6 53181002.441
<PAGE>
Lease if the increase is specified by Landlord's insurance carrier as being
caused by the nature of Tenant's occupancy or any act or omission of Tenant.
8.5 INSURANCE POLICIES. Tenant shall deliver to Landlord copies of the
insurance policies required under paragraphs 8.1 and 8.3 or, if permitted by
Landlord, certificates evidencing the existence and amounts of such insurance
within seven (7) days after the Commencement Date of this Lease. The policies or
certificates must include a copy of the endorsement naming the additional
insureds required under Section 8.1. Tenant shall, at least thirty (30) days
prior to the expiration of each policy, furnish Landlord with a copy of the
policy or a certificate evidencing the renewal thereof. If Tenant provides a
certificate Landlord may at any time thereafter require Tenant to provide
Landlord with a copy of the policy. The policies shall be issued by insurers
having a rating of A-10 or better in Best's Key Rating Guide, who are admitted
carriers in the state where the Office Building Project is located. No such
policy shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days prior written notice to Landlord.
8.6 WAIVER OF SUBROGATION. Tenant and Landlord each hereby release and
relieve the other and their agents and employees (and Landlord's asset manager
and property manager) and waive their entire right of recovery against the other
(and Landlord's asset manager and property manager), for direct or consequential
loss or damage arising out of or incident to the perils covered by property
insurance carried (without regard to any deductible; i.e., deemed "no
deductible") or required to be carried by such party, whether due to the
negligence of Landlord or Tenant or their agents, employees, contractors or
invitees. All property insurance policies required under this Lease shall be
endorsed to so provide.
8.7 INDEMNITY. Except for personal injury or death caused solely by the
gross negligence or willful misconduct of Landlord, Tenant shall indemnify and
hold harmless Landlord and its agents, master or ground lessor, partners and
lenders, if any, from and against any and all claims for damage to the person or
property of anyone or any entity arising from Tenant's use of the Office
Building Project, or from the conduct of Tenant's business or from any activity,
work or things done, permitted or suffered by Tenant in or about the Premises or
elsewhere and shall further indemnify and hold harmless Landlord from and
against any and all claims, costs and expenses arising from any breach or
default in the performance of any obligation on Tenant's part to be performed
under the terms of this Lease, or arising from any act or omission of Tenant, or
any of Tenant's agents, contractors, employees, or invitees, and from and
against all costs, attorneys' fees, expenses and liabilities incurred by
Landlord as the result of any such use, conduct, activity, work, things done,
permitted or suffered, breach, default or negligence, and in dealing reasonably
therewith, including but not limited to the defense or pursuit of any claim or
any action or proceeding involved therein; and in case any action or proceedings
be brought against Landlord by reason of any such matter, Tenant upon notice
from Landlord shall defend the same at Tenant's expense by counsel reasonably
satisfactory to Landlord and Landlord shall cooperate with Tenant in such
defense. Landlord need not have first paid any such claim in order to be so
indemnified. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property of Tenant or injury to persons, in, upon
or about the Office Building Project arising from any cause and Tenant hereby
waives all claims in respect thereof against Landlord. The provisions of this
paragraph 8.7 shall survive the expiration or termination of this Lease.
8.8 EXEMPTION OF LANDLORD FROM LIABILITY. Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for loss of or damage to the goods, wares, merchandise or
other property of Tenant, Tenant's employees, invitees, customers, or any other
person in or about the Premises or the Office Building Project, nor shall
Landlord be liable for injury to the person of Tenant, Tenant's employees,
agents or contractors, whether such damage or injury is caused by or results
from theft, fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether said damage or injury results from conditions arising upon the Premises
or upon other portions of the Office Building Project, or from other source or
place, or from hew construction or the repair, alteration or improvement of any
part of the Office Building Project, or of the equipment, fixtures or
appurtenances applicable thereto, and regardless of whether the cause of such
damage or injury or the means of repairing the same is inaccessible. Landlord
shall not be liable for any damages arising from any act or neglect of any other
tenant, occupant or user of the Office Building Project, nor from the failure of
Landlord to enforce the provisions of any other lease of any other tenant of the
Office Building Project.
8.9 NO REPRESENTATION OF ADEQUATE COVERAGE. Landlord makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Tenant's property or obligations under
this Lease.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Damage" shall mean damage or destruction of the
Premises to any extent.
(b) "Premises Building Partial Damage" shall mean damage or
destruction of the Building of which the Premises are a part to the extent that
the cost to repair is less than fifty percent (50%) of the then Replacement Cost
of the Building.
(c) "Premises Building Total Destruction" shall mean damage or
destruction of the Building of which the Premises are a part to the extent that
the cost to repair is fifty percent (50%) or more of the then Replacement Cost
of the Building.
(d) "Office Building Project Total Destruction" shall mean
damage or destruction of the buildings in the Office Building Project to the
extent that the cost of repair is fifty percent (50%) or more of the then
Replacement Cost of all of the buildings in the Office Building Project.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 7 53181002.441
<PAGE>
(e) "Insured Loss" shall mean damage or destruction caused by an event
required to be covered by the insurance described in paragraph 8. The fact that
an insured Loss has a deductible amount shall not make the loss an uninsured
loss.
(f) "Replacement Cost" shall mean the amount of money necessary to be
spent to repair or rebuild the damaged area to the condition that existed
immediately prior to the damage occurring, excluding all improvements made by
tenants of the Office Building Project.
9.2 PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and 9.5,
if at any time during the term of this Lease there is Insured Loss and that
falls into the classification of either Premises Damage or Premises Building
Partial Damage and that does not fall into the classification of Premises
Building Total Destruction or Office Building Project Total Destruction then
Landlord shall, as soon as reasonably possible and to the extent the required
materials and labor are readily available through usual commercial channels, at
Landlord's expense, repair such damage (but not Tenant's fixtures, equipment or
tenant improvements originally paid for by Tenant) to its condition existing at
the time of the damage, and this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraph 9.5, if at
any time during the term of this Lease there is damage that is not an Insured
Loss and that falls into the classification of Premises Damage or Premises
Building Partial Damage, and that does not fall into the classification of
Premises Building Total Destruction or Office Building Project Total
Destruction, which damage prevents Tenant from making substantial use of the
Premises, Landlord may at Landlord's option either (i) repair such damage as
soon as reasonably possible at Landlord's expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Tenant
within thirty (30) days after the date of the occurrence of such damage of
Landlord's intention to cancel and terminate this Lease as of the date of the
occurrence of such damage, in which event this Lease shall terminate as of the
date of the occurrence of such damage.
9.3 PREMISES BUILDING TOTAL DESTRUCTION: OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraph 9.5, if at any time during
the term of Lease there is damage , whether or not it is an Insured Loss, that
falls into the classification of either (i) Premises Building Total Destruction,
or (ii) Office Building Project Total Destruction, then Landlord may at
Landlord's option either (a) repair such damage or destruction as soon as
reasonably possible at Landlord's expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Tenant's fixtures, equipment or
tenant improvements, and this Lease shall continue in full force and effect, or
(b) give written notice to Tenant within thirty (30) days after the date of
occurrence of such damage of Landlord's intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.
9.4 INTENTIONALLY OMITTED.
9.5 ABATEMENT OF RENT; TENANT'S REMEDIES.
(a) In the event Landlord repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises are
not usable (including loss of use due to loss of access or essential services),
the Rent payable hereunder (including Tenant's Share of Operating Expense
Increase) for the period during which such damage, repair or restoration
continues shall be abated, on a PRO RATA basis upon the extent Tenant is unable
to use the Premises, provided, however, if the Broadcast Suite is not fully
operable Tenant shall be entitled to an abatement for the entire Broadcast Suite
and if at least fifty percent (50%) of any Office Suite floor is not usable.
Tenant shall be entitled to an abatement of such entire floor, as applicable,
until the repair or restoration is completed or Tenant recommences use of the
Premises, whichever occurs first, provided the damage was not the result of the
negligence or willful misconduct of Tenant. Except for aid abatement of Rent, if
any, Tenant shall have no claim against Landlord for any damage suffered by
reason of any such damage, destruction, repair or restoration.
(b) If Landlord shall be obligated to repair or restore the Premises or
the Building under the provisions of this paragraph 9 and shall not commence
such repair or restoration within ninety (90) days after such occurrence, or if
Landlord shall not complete the restoration and repair within six (6) months
after such occurrence, Tenant may at Tenant's option cancel and terminate this
Lease by giving Landlord written notice of Tenant's election to do so at any
time prior to the commencement or completion, respectively, of such repair or
restoration. In such event this Lease shall terminate as of the date of such
notice.
(c) Tenant agrees to cooperate with Landlord in connection with any
such restoration and repair, including but not limited to the approval or
execution of plans and specifications if required.
(d) If any time during the term of this Lease there is damage, whether
or not it is an Insured Loss, that falls into the classification of either (i)
Premises Damage, or (ii) Office Building Project Total Destruction, and Landlord
elects to repair such damage, and only in the event that after the expiration of
a twelve (12) month period from the date of such loss Landlord has not completed
such restoration, then Tenant shall thereafter have the right to terminate this
Lease by giving written notice to Landlord at any time prior to completion of
such improvements, of Tenant's intention to cancel and terminate this Lease, in
which case this Lease shall terminate as of the date of such notice.
9.6 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease pursuant
to this paragraph 9, an equitable adjustment shall be made concerning advance
Rent and any advance payments made by Tenant to Landlord. Landlord shall, in
addition, return to Tenant so much of Tenant's security deposit as has not
theretofore been applied by Landlord.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc. Tenant
Execution Copy
Page 8 53181002.441
<PAGE>
9.7 WAIVER. Landlord and Tenant waive the provisions of any statute
relating to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Landlord shall pay the real property tax, as
defined in paragraph 4.2, applicable to the Office Building Project subject to
reimbursement by Tenant of Tenant's Share of the amount by which such taxes
exceed base real estate taxes in accordance with the provisions of paragraph 4.2
except as otherwise provided in paragraph 10.2.
10.2 ADDITIONAL IMPROVEMENTS. Tenant shall not be responsible for
paying any increase in real property tax specified in the tax assessor's records
and work sheets as being caused by additional improvements placed upon the
Office Building Project by other lessees or by Landlord for the exclusive
enjoyment of any other lessee. Tenant shall, however, pay to Landlord at the
time that Operating Expenses are payable under paragraph 4.2 the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Tenant or at Tenant's request.
10.3 JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Tenant under paragraph 10.2 are not
separately assessed, Tenant's portion of that tax shall be equitably determined
by Landlord from the respective valuations assigned in the assessor's work
sheets or such other information (which may include the cost of construction) as
may be reasonably available. Landlord's reasonable determination thereof, in
good faith, shall be conclusive.
11. UTILITIES.
11.1 SERVICES PROVIDED BY LANDLORD. Landlord shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
elevator service, electricity for reasonable and normal lighting and office
machines, water for reasonable and normal drinking and lavatory use, replacement
light bulbs and/or fluorescent tubes and ballasts for standard overhead
fixtures, but the specifications for the HVAC and janitorial services shall at
all times be substantially in accordance with the specifications attached hereto
as Exhibit F.
11.2 SERVICES EXCLUSIVE TO TENANT. Tenant shall be obligated to
separately meter the Broadcast Suite and the antennas located on the roof by
Tenant pursuant to the license granted to Tenant in Paragraph 38 of the Lease.
Tenant shall be responsible for all electricity costs related to the Broadcast
Suite and the rooftop antennas in excess of $25,000 per year. Tenant shall pay
for all water, gas, heat, light, power, telephone and other utilities and
services specially or exclusively supplied or metered exclusively to the
Premises. If any such exclusive services are not separately metered to the
Premises. Tenant shall pay a reasonable proportion determined by Landlord of all
charges jointly metered with other areas in the Office Building Project.
11.3 HOURS OF SERVICE. The services and utilities provided to the
common areas shall be provided during generally accepted business days and hours
8:00 a.m. - 7:00 p.m. Monday - Friday, 9:00 a.m. - 1:00 p.m. Saturday; provided,
electricity and HVAC shall be provided twenty-four (24 hours a day, seven (7)
days a week to the Premises. Utilities and services required at other times
shall be subject to advance request and reimbursement by Tenant to Landlord of
the cost thereof. Tenant shall have access to the Premises twenty-four (24)
hours a day, seven (7) days a week.
11.4 EXCESS USAGE BY TENANT. Tenant shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses abnormal amounts
(assuming general office use) of water, lighting or power, or suffer or permit
any act that causes an abnormal burden upon the utilities or services, including
but not limited to security services, standard office usage for the Office
Building Project. Tenant shall reimburse Landlord for any such abnormal expenses
or costs that may arise out of a breach of this paragraph 11.4 Tenant. Landlord
may, in its sole discretion, install at Tenant's expense supplemental equipment
and/or separate metering applicable to Tenant's excess usage or loading. If
Tenant consistently uses in excess of objective specifications. Landlord may
separately meter, at Tenant's sole cost and expense.]
11.5 INTERRUPTIONS. There shall be no abatement of Rent and Landlord
shall not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Landlord's
reasonable control or due to cooperation with governmental request or
directions; provided, however, solely in the event of an interruption of service
which is within Landlord's reasonable control to fix, and such interruption
continues for more than three (3) business days, then Tenant shall thereafter be
entitled to a rental abatement, on a PRO RATA basis, for portions of Tenant's
Premises wich are not reasonably usable as a result of such interruption, until
such interruption ceases. Nothing herein shall in any way limit Tenant's rights
and remedies at law or in equity.
12. ASSIGNMENT AND SUBLETTING.
12.1 LANDLORD'S CONSENT REQUIRED. Without Landlord's prior written
consent, not to be unreasonably withheld, conditioned or delayed, Tenant shall
not sell, assign, mortgage, pledge, hypothecate, encumber or otherwise transfer
this Lease or any interest therein (each of which actions is hereafter referred
to as a "transfer"), and shall not sublet the Premises or any part thereof.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc. Tenant
Execution Copy
Page 9 53181002.441
<PAGE>
12.2 TENANT'S APPLICATION. If Tenant desires at any time to transfer
this Lease (which transfer shall in no event be for less than its entire
interest in this Lease) or to sublet the Premises or any portion thereof. Tenant
shall submit to Landlord at least sixty (60) days prior to the proposed
effective date of the transfer or sublease ("Proposed Effective Date"), in
writing:
(a) A notice of intent to transfer or sublease, setting forth the
Proposed Effective Date, which shall be no less than sixty (60) days nor more
than ninety (90) days after the sending of such notice;
(b) The name of the proposed transferee or subtenant;
(c) The nature of the proposed transferee's or subtenant's business to
be carried on in the Premises;
(d) The terms and provisions of the proposed transfer or sublease;
(e) Such information as Landlord may request concerning the proposed
transferee or subtenant, including recent financial statements and bank
references; and
(f) Evidence satisfactory to Landlord that the proposed transferee (if
the transfer involves a transfer of possession) or subtenant will immediately
occupy and thereafter use the affected portion of the Premises for the entire
term of the transfer or sublease agreement.
12.3 LANDLORD'S OPTION TO TERMINATE. Landlord shall have the right, to
be exercised by giving notice to Tenant within thirty (30) days after receipt of
Tenant's above-described notice and such further financial information as may be
requested by Landlord together with the fees required under paragraph 12.7, to
terminate this Lease and recapture the portion of the Premises described in
Tenant's notice, but only for such period, including renewals and extensions, as
is set forth in Tenant's Application. If such notice of termination is given by
Landlord, it shall serve to cancel and terminate this Lease with respect to such
portion of the Premises for the period provided above; provided, however, that
such termination shall be subject to the written consent of any mortgagee of
Landlord. The effective date of such cancellation shall be as specified in
Landlord's notice of termination. If this Lease is canceled pursuant to the
foregoing with respect to only a portion of the Premises, the Rent required
under this Lease, and including Tenant's Share, shall be adjusted
proportionately based on the square footage retained by Tenant and the square
footage leased by Tenant hereunder immediately prior to such recapture and
cancellation, and Landlord and Tenant shall thereupon execute an amendment of
this Lease in accordance therewith. If Landlord so recaptures a portion of the
Premises, it shall construct and erect as its sole cost such partitions as may
be required to sever the space retained by Tenant from the space recaptured by
Landlord. Landlord may, without limitation, lease the recaptured portion of the
Premises to the proposed subtenant or transferee without liability to Tenant.
12.4 APPROVAL PROCEDURE. If Landlord approves a transfer or sublease.
Tenant shall, prior to the Proposed Effective Date, submit to Landlord an
executed original of the transfer or sublease agreement for execution by
Landlord on the signature page after the words "the foregoing is hereby
consented to." No purported transfer or sublease shall be deemed effective as
against Landlord and no proposed transferee or subtenant shall take occupancy
unless such document is so executed by Landlord.
12.5 REQUIRED PROVISIONS. Any and all transfer or sublease agreements
shall:
(a) Contain such terms as are described in Tenant's notice under
Paragraph 12.2 or as otherwise agreed by Landlord;
(b) Prohibit further transfers or subleases without Landlord's consent
under this paragraph 12;
(c) Impose the same obligations and conditions on the transferee or
subtenant as are imposed on Tenant by this Lease (except as to Rent and term or
as otherwise agreed by Landlord);
(d) Be expressly subject and subordinate to each and every provision of
this Lease;
(e) Have a term that expires on or before the expiration of the term of
this Lease;
(f) Provide that the Tenant and/or transferee or subtenant shall pay
Landlord the amount of any additional costs or expenses incurred by Landlord for
repairs, maintenance or otherwise as a result of any change in the nature of
occupancy caused by the transfer or sublease; and
(g) Contain Tenant's acknowledgment that Tenant remains liable under
this lease notwithstanding the transfer or sublease.
12.6 TRANSFER OF SUBLEASE PROFIT. Fifty percent (50%) of any sums or
other economic consideration received by Tenant directly or indirectly in
connection with any transfer or sublease (except to the extent of commissions
paid by Tenant to a licensed real estate broker at prevailing rates and
leasehold improvement costs incurred by Tenant) which exceed in the aggregate
the sums which Tenant is obligated to pay Landlord hereunder (prorated to
reflect obligations allocable to the portion of the Premises transferred or
sublet) shall be payable to Landlord as additional Rent under this Lease. Within
fifteen (15) days after written request by Landlord. Tenant shall at any time,
and from time to time, certify to Landlord the amount of all such sums or other
economic consideration received.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc. Tenant
Execution Copy
Page 10 53181002.441
<PAGE>
12.7 FEES FOR REVIEW. Tenant shall pay to Landlord or Landlord's
designee, as Additional Rent, together with the notice described in Paragraph
12.2, a non refundable fee as reimbursement for expenses incurred by Landlord in
connection with reviewing each such transaction(including any administrative
expenses for Landlord's property manger), in the amount of Three Hundred Dollars
($300.00). In addition to such reimbursement, if Landlord retains the services
of an attorney to review the transaction. Tenant shall pay to Landlord all
attorneys' fees incurred by Landlord in connection therewith, not to exceed
$2,000.00. Tenant shall pay such attorney's fees to Landlord within thirty (30)
days after written request.
12.8 NO RELEASE OF TENANT. No consent by Landlord to any transfer or
subletting by Tenant shall relieve Tenant of any obligation to be performed by
Tenant under this Lease, whether occurring before or after such consent,
transfer or subletting. Landlord's consent to any transfer or subletting shall
not relieve Tenant from the obligation to obtain Landlord's express prior
written consent to any other transfer or subletting. The acceptance by Landlord
of payment from any other person shall not be deemed to be a waiver by Landlord
of any provision of this Lease or to be a consent to any subsequent transfer or
sublease, or be a release of Tenant from any obligation under this Lease.
12.9 ASSUMPTION OF OBLIGATIONS. Each transferee of this Lease shall
assume all obligations of Tenant under this Lease and shall be and remain liable
jointly and severally with Tenant for the payment of the Rent and the
performance of all the terms, covenants, conditions, and agreements herein
contained on Tenant's part to be performed for the term of this Lease. No
transfer shall be binding on Landlord unless the transferee or Tenant delivers
to Landlord a counterpart of the instrument of transfer which contains a
covenant of assumption by the transferee satisfactory in substance and form to
Landlord, consistent with the above requirements . The failure or refusal of the
transferee to execute such instrument of assumption shall not release or
discharge the transferee from its liability to Landlord hereunder. Landlord
shall have no obligation whatsoever to perform any duty to or respond to any
request from any subtenant, it being the obligation of Tenant to administer the
terms of its sublease.
12.10 DEEMED TRANSFERS. If the Tenant is a nonpublicly traded
corporation, or is an unincorporated association or partnership, the transfer,
assignment or hypothecation, whether effected voluntarily, of by operation of
law, of any stock or interest in such corporation, association or partnership in
the aggregate in excess of fifty percent (50%) shall be deemed to be a transfer
of this Lease and shall be subject to the provisions of this paragraph 12.
12.11 ASSIGNMENT BY OPERATION OF LAW. No interest of Tenant in this
Lease shall be assignable by operation of law.
12.12 ASSIGNMENT OF SUBLEASE RENTS. Tenant immediately and irrevocably
assigns to Landlord, as security for Tenant's obligations under this Lease, all
rent from any subletting of all or any part of the Premises, and Landlord, as
assignee and as attorney-in-fact for Tenant for purposes hereof, or a receiver
for Tenant appointed on Landlord's application, may collect such rents and apply
same toward Tenant's obligations under this Lease, except that, until the
occurrence of an act of default by Tenant (after the expiration of any
applicable notice and cure). Tenant shall have the right and license to collect
such rents.
13. DEFAULT; REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Tenant:
(a) Intentionally Omitted.
(b) The failure by Tenant to pay Rent or make any other payment
required to be made by Tenant hereunder, as and when due, which failure shall
continue for five (5) days after written notice of such non-payment is sent to
Tenant (provided, however, Landlord shall only be obligated to send one notice
of non-payment within any twelve-month period, and only three (3) notices during
the Term, with any non-payment thereafter being deemed an automatic Default
without further notice or cure rights required by this Lease).
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Tenant
other than those referenced in subparagraphs 13.1 (a) and (b) where such failure
shall continue for a period of fifteen (15) days after written notice thereof
from Landlord to Tenant, provided, however, that if the nature of Tenant's
noncompliance is such that more than fifteen (15) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant
commences such cure within said fifteen (15) days and thereafter diligently
pursues such cure to completion, but in no event more than sixty (60) days after
such original notice. To the extent permitted by law, such fifteen (15) day
notice shall constitute the sole notice required to be given to Tenant under any
applicable summary eviction statute.
(d) (i) The making by Tenant of any arrangement or assignment for the
benefit of creditors; (ii) Tenant becoming a "debtor" as defined in the
Bankruptcy Code or any successor statute, (unless, in the case of a petition
filed against Tenant, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where possession is not restored to Tenant within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within thirty (30) days, all of which are hereby
deemed to be non-curable defaults without the necessity of any notice by
Landlord to Tenant thereof.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc. Tenant
Execution Copy
Page 11 53181002.441
<PAGE>
(e) The existence of materially false information in any financial
statement given to Landlord by Tenant or its successor in interest, all of which
are hereby deemed to be non-durable defaults without the necessity of any notice
by Landlord to Tenant thereof.
(f) The default by Tenant under any other lease with Landlord.
13.2 REMEDIES. In the event of any material default of this Lease by
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have by reason of such default:
(i) No act by Landlord (including without limitation the acts set forth
in the succeeding sentence) shall be deemed to be a release of Tenant or a
waiver of Tenant's obligation to pay rent or to be an acceptance of abandonment
of the Premises, unless clearly and affirmatively stated in writing. As long as
Landlord does not in writing release Tenant, waive Tenant's obligation to pay
rent, or accept abandonment of the Premises, Landlord may (1) continued this
Lease in effect, (b) continue to collect Rental when due and enforce all the
other provisions of this Lease, (c) enter the Premises and relet them, or any
part of them, to third parties for Tenant's account, for a period shorter or
longer than the remaining term of this Lease, and (d) have a receiver appointed
to collect rental and conduct Tenant's business. Tenant shall immediately pay to
Landlord all costs Landlord incurs in such reletting, including , without
limitation, brokers' commissions, attorneys' fees, advertising costs and
expenses of remodeling the Premises for such reletting.
(ii) If Landlord elects to relet all or any portion of the Premises as
permitted above, rent that Landlord receives from such reletting shall be
applied to the payment of, in the following order and priority, (a) any
indebtedness from Tenant to Landlord other than Rent due from Tenant, (b) all
costs incurred by Landlord in such reletting, to the extent outstanding after
application of any payment pursuant to 13.2(i) above, and (c) Rent due and
unpaid under this Lease. After applying such payments as referred to above, any
sum remaining from the rent Landlord receives from such reletting shall be held
by Landlord and applied in payment of future Base Rent or other items of
additional rent as becomes due under this lease. In no event shall Tenant be
entitled to any excess rent received by Landlord.
(iii) If the rental agreed to be paid under this Lease, including,
without limitation, all other sums of money which under the provisions of this
Lease may be considered as additional rent, shall be in arrears in whole or in
part, Landlord, after five (5) days' notice and an opportunity to cure may
destrain therefore, but only by judicial process. If Tenant shall violate any
covenant, including without limitation the covenant to pay rental, made by it in
this Lease and shall fail to comply with such covenant within any notice period
provided for in this Lease, then Landlord may, at its option, but only by
judicial process, re-enter the Premises or notify Tenant in writing and thereby
declare this Lease and the tenancy hereby created terminated. Notwithstanding
any such termination, Landlord shall be entitled to the benefit of all
provisions of law respecting the speedy recovery of lands and tenements held
over by tenants or proceedings in forcible entry and detainer. Tenant further
agrees that, notwithstanding such re-entry, Tenant shall remain liable for any
rent or damages which may be due or sustained prior thereto, and Tenant shall
further be liable, at the option and sole discretion of Landlord, for sums of
money as liquidated damages for the breach of any covenant to be calculated one
of the following three methods which may be designated by Landlord, in
Landlord's sole, absolute and non-reviewable discretion, in or after such notice
of termination: (a) Tenant shall pay to Landlord the amount which, at the time
of such termination, is equal to the installments of Rent and the aggregate of
all sums payable hereunder as additional rental (for such purpose the annual
amount of such additional rental to be equal to the amount thereof paid in the
Lease Year or annualized portion thereof immediately preceding such default)
reserved hereunder, for the period which would otherwise have constituted the
unexpired portion of the then current term of this Lease, discounting all such
amounts to present worth at a discount rate equal to the Wall Street Journal
Prime Rate; (b) Tenant shall pay to Landlord the difference between (i) the rent
and additional rent reserved under this Lease for the balance of the Term and
(ii) the fair rental value of the Premises for the balance of the Term, to be
reasonably determined by Landlord as of the date of reentry (the initial rental
rate set forth in any new lease executed by Landlord shall be conclusive as to
the "fair rental value"); or (c) Tenant shall pay the amount of the rent and
additional rent reserved under this Lease at the times herein stipulated for
payment of such rent and additional rent for the balance of the Term, less any
amount received by Landlord during such period from others to whom the Premises
may be rented on such terms and conditions and at such rental as Landlord shall
be permitted to recover damages in accordance with Subsection (iii)(c) for the
amount of rent due from Tenant to Landlord from the date of default until the
date of the filing of any lawsuit by Landlord for the recovery of rent and
additional rent, and the Landlord shall also be permitted to recover all other
sums due thereafter in the same lawsuit pursuant to the terms of Subsection
(iii)(a) hereof. By way of example, if Tenant shall have abandoned the Premises
on January 1, and Landlord files suit for unpaid rent and additional rent on
June 1 of the same year, then, although the Lease does not terminate until
December 31 of the same year, the Landlord shall be permitted to recover all
rent and additional rent due for the period January-June pursuant to
Subsection(iii)(c) hereof, and, in the same lawsuit, to recover all rent and
additional rent due for the period July-December pursuant to the terms of
Subsection (iii)(a) hereof.
(iv) Tenant further agrees that if it shall default in the performance
of any covenant on its part to be performed under this Lease, and if, in
connection with Landlord's enforcement of its rights or remedies, Landlord shall
incur fees and expenses for services rendered (including without limitation
reasonable attorney's fees and brokerage commissions), then such fees and
expenses shall be immediately reimbursed by Tenant on demand as additional rent,
collectible in any summary ejectment action or in any other proceeding whereby
Landlord is entitled to collect additional rent from Tenant. Notwithstanding the
foregoing, if Landlord shall file any legal action for the collection of rent or
any eviction proceeding for the non-payment of rent, and Tenant shall make
payment of such sum due and payable prior to the rendering of any judgment, then
Landlord shall be entitled to collect and Tenant shall be
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc. Tenant
Execution Copy
Page 12 53181002.441
<PAGE>
obligated to pay all court filing fees, service fees, related costs and the
reasonable fees of Landlord's attorneys. Such fees and costs shall be
collectible by Landlord as additional rent.
(v) Landlord, at any time after Tenant commits a default or breach
under this Lease, may after any applicable notice and cure as provided above,
cure such default or breach at Tenant's sole costs. If Landlord at any time, by
reason of Tenant's default or breach, pays any sum or does any act that requires
the payment of any sum, such sum shall be due immediately from Tenant to
Landlord at the time such sum is paid, and shall be deemed additional rent under
this Lease.
13.3 DEFAULT BY LANDLORD. In the event Landlord fails to cure (or
promptly commence and diligently pursue the cure of) any breach or failure by
Landlord to comply with any of Landlord's obligations under this Lease within a
reasonable period (not to exceed thirty (30) days from receipt of written notice
from Tenant unless such performance shall require a longer period, in which case
Landlord shall not be deemed in default if Landlord commences such cure and
diligently pursues such cure to completion (not to exceed sixty (60) days) after
Tenant furnishes Landlord and Landlord's mortgagee with written notice of such
failure, then Tenant shall have the right to pursue all remedies available to
Tenant at law and in equity, together with reasonable attorneys' fees and costs
of collection if Tenant is successful in such action.
13.4 LATE CHARGES. If any installment of Base Rent or any other sum due
from Tenant shall not be received by Landlord or Landlord's designee within five
(5) days of when due, then Tenant shall pay to Landlord a late charge equal to
five percent (5%) of such overdue amount. Tenant shall pay Landlord the late
charge within ten (10) days of notice by Landlord. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reasons of late payments by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, nor prevent Landlord from exercising any of the
other rights and remedies granted hereunder.
13.5 INTEREST ON PAST-DUE OBLIGATIONS. Any amount not paid by Tenant to
Landlord when due shall bear interest from that date due at the rate of the
prime rate as charged by NationsBank plus two percent (2%), except that interest
shall not be payable on any late charge and interest on any amount upon which a
late charge is payable shall not commence to accrue until thirty (30) days after
the date due. Payment of interest shall not excuse or cure any default by
Tenant.
14. CONDEMNATION. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs,
provided that if so much of the Premises or the Office Building Project is taken
by such condemnation as would substantially and adversely affect the operation
and profitability of Tenant's business conducted from the Premises, in
Landlord's reasonable opinion. Tenant shall have the option, to be exercised
only in writing within thirty (30) days after the condemning authority shall
have taken possession, to terminate this Lease as of the date the condemning
authority takes such possession. If Tenant does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Rent and Tenant's
Share of Real Estate Tax Escalation shall be reduced in the proportion that the
floor area of the Premises taken bears to the total floor area of the Premises.
Common Areas taken shall be excluded from the Common Areas usable by Tenant and
no reduction of Rent shall occur with respect thereto or by reason thereof. In
the event more than fifty percent (50%) of the Building is condemned, Landlord
shall have the option in its sole discretion to terminate this Lease as of the
taking of possession by the condemning authority, by giving written notice to
Tenant of such election within thirty (30) days after receipt of notice of a
taking by condemnation of any part of the Premises or the Office Building
Project. Any award for the taking of all or any part of the Premises or the
Office Building Project under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Landlord,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Tenant shall be entitled to any separate award for loss of or
damage to Tenant's trade fixtures, removable personal property and unamortized
tenant improvements that have been paid for by Tenant. For that purpose, the
cost of such improvements shall be amortized over the original term of the lease
excluding any options. In the event that this Lease is not terminated by reason
of such condemnation, Landlord shall, to the extent of severance damages
received by Landlord in connection with such condemnation, repair any damage to
the Premises caused by such condemnation except to the extent that Tenant has
been reimbursed therefor by the condemning authority. Tenant shall pay any
amount in excess of such severance damages required to complete such repair.
15. BROKER'S FEE. Tenant and Landlord each represent and warrant to the
other that neither has had any dealing with any person, firm, broker or finder
(other than the person(s), if any, whose name is set forth in paragraph 1.13) in
connection with the negotiation of this Lease or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction and Tenant and Landlord do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party.
16. ESTOPPEL CERTIFICATES.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) days prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect, (or, if modified, stating the nature of such modification and certifying
that this Lease,
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc. Tenant
Execution Copy
Page 13 53181002.441
<PAGE>
as so modified, is in full force and effect) and the date to which the rent and
other charges are paid in advance, if any, and (ii) acknowledging that there are
not, to the responding party's knowledge, any uncured defaults on the part of
the requesting party, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Office Building Project or of the business of Tenant.
(b) At the requesting party's option, the responding party's failure to
deliver such statement within such time shall be a material default of this
Lease, without any further notice to such party, or after second notice and
failure to respond within three (3) business days, it shall be conclusive upon
such party that (i) this Lease is in full force and effect, without modification
except as may be represented by the requesting party, (ii) there are no uncured
defaults in the requesting party's performance, and (iii) if Landlord is the
requesting party, not more than one month's rent has been paid in advance.
(c) If Landlord desires to finance, refinance or sell the Office
Building Project, or any part thereof, Tenant hereby agrees to deliver to any
lender or purchaser designated by Landlord such financial statements of Tenant
as may be reasonably required by such lender or purchaser. Such statements shall
include the past three (3) years' financial statements of Tenant. All such
financial statements shall be received by Landlord and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.
17. LANDLORD'S LIABILITY. The term "Landlord" as used herein shall mean
only the owner or owners, at the time in question, of the fee title or the
leasehold interest under a ground lease of the Office Building Project. In the
event of any transfer of such title or interest. Landlord herein named (and in
case of any subsequent transfers then the grantor) shall be relieved from and
after the date of such transfer of all liability as respects Landlord's
obligations thereafter to be performed, provided that any funds in the hands of
Landlord or the then grantor at the time of such transfer, in which Tenant has
an interest, shall be delivered to the grantee, and so long as such transferee
assumes in writing such obligation. The obligations contained in this Lease to
be performed by Landlord shall be binding on Landlord's successors and assigns,
only to the extent accruing during their respective periods of ownership. It is
understood and agreed that the liability of Landlord hereunder shall be limited
solely to the assets and property of the Building or Office Building Project;
then no general or limited partner or stockholder of Landlord shall be
personally liable with respect to any claim arising out of or related to this
Lease; and that a deficit capital account of a partner of Landlord shall not be
deemed an asset or property of the Building or Office Building Project.
18. SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
19. FORCE MAJEURE. Any obligation of Landlord which is delayed or not
performed due to an act of God, strike, riot, shortage of labor or materials,
war (whether declared or undeclared), laws, governmental regulations or
restrictions or any other governmental action or inaction, or any other cause of
any kind whatsoever which is beyond Landlord's reasonable control, shall not
constitute a default hereunder and shall be performed within a reasonable time
after the end of the cause for delay or non-performance. Any obligation of
Tenant which is delayed or not performed (other than the obligation to pay Rent
which shall not be covered by this provision) due to an act of God, strike,
riot, shortage of labor or materials, war (whether declared or undeclared),
laws, governmental regulations or restrictions or any other governmental action
or inaction, or any other cause of any kind whatsoever which is beyond Tenant's
reasonable control, shall not constitute a default hereunder and shall be
performed within a reasonable time after the end of the cause for delay or
non-performance.
20. TIME IS OF ESSENCE. Time is of the essence with respect to the
obligations to be performed under this Lease.
21. NOT APPLICABLE.
22. INCORPORATION OF PRIOR AGREEMENT: AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective . This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Tenant hereby acknowledges that neither the Listing Broker nor
the Cooperating Broker, if any, designated in paragraphs 1.13 and 1.14 nor the
Landlord or any employee or agent of any of said persons has made any oral or
written warranties or representations to Tenant relative to the condition or use
by Tenant of the Premises or the Office Building Project and Tenant acknowledges
that Tenant assumes all responsibility regarding any of the following , as such
applies to the Premises (but does not take responsibility to the extent work may
be required outside the Premises): the Occupational Safety Health Act, the
Americans with Disabilities Act, the legal use and adaptability of the Premises
and the compliance thereof with all applicable laws and regulations in effect
during the term of this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall
be in writing and may be given by personal delivery or by certified or
registered mail (provided that notice of exercise of any option must in all
events be given by certified or registered mail) addressed to a party at the
address herein or such other address for notice purposes as may be later
specified by notice to the other party, except that upon Tenant's taking
possession of the Premises, the Premises shall constitute Tenant's address for
notice purposes. Mailed notices shall be deemed given upon actual receipt at the
address required, or forty-eight hours following deposit in the mail, postage
prepaid, whichever first occurs unless otherwise specifically provided in this
Lease. A copy of all notices required or permitted to be given to Landlord
hereunder shall be concurrently transmitted to such other party or parties at
such addresses as Landlord may from to time hereafter designate by notice to
Tenant.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc. Tenant
Execution Copy
Page 14 53181002.441
<PAGE>
Notice addresses are as follows:
LANDLORD: National Life Insurance Company, a Vermont Corporation
c/o Koll Investment Management
1101 17th Street, N.W. Suite 610
Washington, D.C. 20036
Attention: Barbara E. Gloeckner
Prior to Rent Commencement Date:
TENANT: Radio One, Inc.
4001 Nebraska Avenue, N.W.
Washington, D.C. 20016
Attention: Alfred Liggins, President
With a copy to : Jerry Moore, III, Esq.
Arter & Hadden
1801 K Street, N.W. Suite 400K
Washington, D.C. 20006-1301
After Rent Commencement Date:
TENANT: Radio One, Inc.
5900 Princess Garden Parkway
Suite 800
Lanham, Maryland
Attention: Alfred Liggins, President
With a copy to : Jerry Moore, III, Esq.
Arter & Hadden
1801 K Street, N.W. Suite 400K
Washington, D.C. 20006-1301
24. WAIVERS. No waiver by Landlord of any provision hereof shall be deemed
a waiver of any other provision or of any subsequent breach by Tenant of the
same or any other provision. Landlord's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Landlord's consent to
or approval of any subsequent act by Tenant. The acceptance of rent by Landlord
shall not be a waiver of any preceding breach of this Lease by Tenant, other
than Tenant's failure to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
25. HOLDING OVER. If Tenant, with Landlord's consent, remains in possession
of all or any part of the Premises after the expiration of the term of this
Lease, such occupancy shall be a tenancy from month-to-month upon all of the
provisions of this Lease pertaining to the obligations of Tenant, except that
the Base Rent payable shall be one hundred fifty percent (150%) of the Base Rent
payable immediately preceding the expiration of the term.
26. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
27. COVENANTS AND CONDITIONS. Each provision of this Lease to be performed
by Tenant shall be deemed both a covenant and a condition.
28. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Tenant and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State of
Maryland, excluding principles of conflicts of law, and nay litigation
concerning this Lease between the parties hereto shall be initiated in the
county in which the Office Building Project is located.
29. SUBORDINATION AND ATTORNMENT.
(a) Landlord represents that there are no existing mortgages on
the Property. This Lease shall be subordinate to any mortgages or deeds of trust
which may hereafter be placed upon the Building or Project and to any and all
advances to be made thereunder, and to the interest thereon, and all renewals,
replacements, and extensions thereof. This Section shall be self-operative and
no further instrument or subordination shall be required. Tenant agrees that at
any time and from time to time, within five (5) days after written request of
Landlord, Tenant shall promptly execute, acknowledge and deliver to Landlord any
written statement confirming such subordination reasonably required by Landlord
or any of its lenders. As a condition of such subordination, Tenant shall obtain
a commercially reasonable form of non-disturbance agreement from any such
lenders. In the event of any mortgagee
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 15 53181002.441
<PAGE>
or trustee electing to have this Lease be a prior lien to its mortgage or deed
of trust, then and in such an event, upon such mortgagee or trustee notifying
Tenant to that effect, this Lease shall be deemed prior in lien to the said
mortgage or trust deed, whether or not this Lease is dated prior to or
subsequent to the date of said mortgage or deed of trust.
(b) If Landlord assigns this Lease of the rents hereunder to a
creditor as security for a debt. Tenant shall, after notice of such assignment
and upon demand by Landlord or the assignee, pay all sums thereafter becoming
due Landlord hereunder both jointly to Landlord and such assignee. Tenant shall
also, upon receipt of such notice, have all policies of insurance required
hereunder endorsed so as to protect the assignee's interest as it may appear and
shall deliver such policies, or certificates thereof, to the assignee. In the
event the Premises are sold at any foreclosure sale or sales by virtue of any
judicial proceedings or otherwise, this Lease shall continue in full force and
effect and Tenant agrees, upon request, to attorn to and acknowledge the
foreclosure purchaser or purchasers at such sale as the Landlord hereunder. As a
condition to Tenant's agreement to attorn as set forth herein, Tenant shall
obtain a commercially reasonable form of non-disturbance agreement on behalf of
Tenant from Landlord's mortgagee.
30. ATTORNEYS' FEES. If either party brings any lawsuit to enforce or declare
rights under this Lease, the prevailing party in the action, including any
appeal, shall be entitled to reasonable attorneys' fees paid by the losing party
as fixed by the court in the same or a separate proceeding, whether or not such
action is pursued to decision or judgement. The attorneys' fee award shall not
be computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred in good faith. Any
attorney's fees due Landlord by Tenant shall be Additional Rent.
31. LANDLORD'S ACCESS
31.1 Landlord and Landlord's agents shall have the right to enter the
Premises at reasonable times upon twenty-four (24) hours prior notice by
telephone (except in an emergency where a shorter period of time shall be
permitted) for the purpose of inspecting the same, performing any services
required of Landlord, showing the same to prospective purchasers, lenders, or
lessees, taking such measures, erecting such scaffolding or other necessary
structures, making such alterations, repairs, improvements or additions to the
Premises or to the Office Building Project as Landlord may reasonably deem
necessary or desirable and the erecting, using and maintaining of utilities,
services, pipes and conduits through the Premises and/or other premises as long
as there is no material adverse effect on Tenant's use of the Premises. Landlord
shall make reasonable efforts to minimize disruption to Tenant's use of the
Premises, and Landlord shall restore the Premises to the existing condition
prior to such access. Landlord may at any time place on or about the Building or
the Office Building Project "For Sale" signs and Landlord may at any time during
the last 120 days of the term place on or about the Premises "For Lease" signs.
31.2 All activities of Landlord pursuant to paragraph 31 shall be
without abatement of Rent and Landlord shall not have any liability to Tenant
for the same, other than as provided in Section 9.5(a) or paragraph 11.5.
31.3. Landlord shall have the right to retain keys to the Premises and
to unlock all doors in or upon the Premises other than files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forcible or unlawful entry or
detainer of the Premises or an eviction. Tenant waives any charges for damages
or injuries or interference with Tenant's property or business in connection
therewith.
32. AUCTIONS, OTHER SALES AND CESSATION OF BUSINESS. Tenant shall not
conduct, nor permit to be conducted, either voluntarily or involuntarily, any
auction upon the Premises or the Common Areas without Landlord's prior written
consent which shall be given at Landlord's sole discretion and judgment.
Notwithstanding anything to the contrary in this Lease, Landlord shall not be
obligated to exercise any standard of reasonableness in determining whether to
grant such consent. Tenant shall not make a bulk sale of its goods or move, or
attempt to or threaten to move its goods and equipment out of the Premises
(other than in the ordinary course of business) or cease to conduct business
from the Premises.
33. SIGNS. Tenant shall not place any sign upon the Premises or the Office
Building Project without Landlord's prior written consent which shall be given
in the Landlord's sole discretion and judgment. For this purpose, but subject to
the rights of RCI as an existing Tenant, if any, Landlord hereby approves the
signage rights (including design, size, location, materials, etc.) described on
Exhibit G attached hereto (or to be attached hereto and submitted by Tenant and
signed by Landlord). Under no circumstances shall Tenant place a sign on any
roof of the Office Building Project, other than with Landlord's prior written
approval, and subject to the rights of existing tenants. Tenant shall be
responsible for obtaining all necessary approvals for any permitted sign, at
Tenant's sole cost and expense. If any sign is displayed without Landlord's
prior consent, Landlord shall have the right to remove such sign or item at
Tenant's expense, or require Tenant to do same. Landlord hereby agrees not to
(a) grant any signage rights for tenant signs to be located on the exterior of
the Building after the date hereof, or (b) name the Building, without the
consent of Tenant, which consent shall not be unreasonably withheld, conditioned
or delayed.
34. MERGER. The voluntary or other surrender or mutual cancellation or
termination by Landlord of this Lease shall not work a merger, but shall, at the
option of Landlord, terminate all or any subtenancies or may , at the option of
Landlord, operate as an assignment to Landlord of any or all subtenancies.
35. CONSENTS. Except for paragraphs 7.3 (Alterations and Additions), 12
(Assignment and Subletting) as it relates to any mortgage, pledge, hypothecation
or encumbrance of this Lease or any interest therein, 32 (Auctions, Other Sales
and Cessation of Business) 33 (Signs), and 48 (Hazardous Material) as it relates
to causing or permitting any Hazardous Material to be brought upon.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy
Page 16 53181002.441
<PAGE>
kept or used in or about the Premises, wherever in this Lease the consent of one
party is required to an act of the other party such consent shall not be
unreasonably withheld or delayed.
36. GUARANTOR. In the event that there is a guarantor of this Lease, the
guarantor shall have the same obligations as Tenant under this Lease.
37. QUIET POSSESSION. Upon Tenant paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder. Tenant shall have quiet
possession of the Premises for the entire term subject to all the provisions of
this Lease.
38. LICENSE FOR ANTENNA. (a) Subject to the rights of other tenants in the
Building as of the date of this Lease and to the satisfaction of all the
conditions in this Section 38, provided Tenant is not in default hereunder after
applicable notice and cure, Tenant shall have the revocable license to install
in any area reasonably designated by Landlord on the roof of the Building a
satellite dish antenna, together with the cables extending form such antenna to
the Premises, without rental or charge, provided however, all attennas located
on the roof by Tenant shall be separately metered at Tenant's expense, and
Tenant shall be responsible for such portion of utility costs related thereto,
if any as may be required by Paragraph 11.2 hereof. Tenant shall not be entitled
to install such an antenna (I) which is greater than one (1) meter in diameter,
(ii) which is more than five (5) feet in height, (iii) if such installation
would adversely affect (or in a manner that would adversely affect) any warranty
with respect to the roof, (iv)(A) if such installation would adversely affect
(or in a manner that would adversely affect) the structure or any of the
building systems of the Building in which the Premises is located, or (B)
without Landlord's prior written consent (which consent shall not be
unreasonably withheld, conditioned or delayed), if such installation would
require (or in a manner that would require) any structural alteration to the
Building, (v) if such installation would violate (or in a manner that would
violate) any applicable federal, state or local law, rule or regulation, (vi)
unless Tenant has obtained at Tenant's expense and has submitted to Landlord
copies of all permits and approvals relating to such antenna and such
installation,(vii) unless such antenna is white or of a beige or lighter color
and is screened in accordance with Landlord's reasonable specifications,
(viii) unless such antenna is installed, at Tenant's sole cost and expense, by a
qualified contractor chosen by Tenant and approved in advance by Landlord, which
approvals shall not be unreasonably withheld, conditioned or delayed, and (ix)
unless Tenant obtains Landlord's prior consent (not to be unreasonably withheld,
conditioned or delayed) to the location of the antenna and to the manner in
which such installation work is to be done. All plans and specifications
concerning such installation (including any structural alterations required for
such installation) shall be subject to Landlord's prior written approval, which
approval shall not be unreasonably withheld, conditioned or delayed. In
addition, Landlord shall engage, at Tenant's sole but reasonable cost and
expense, a structural engineer to review Tenant's plans and specifications, and
if requested by Landlord, Tenant's construction. Tenant shall provide Landlord a
copy of the As-Built drawings for the antenna within five (5) days of the
installation of the antenna by Tenant in accordance with this Section. Tenant
shall not interfere with or otherwise disturb any existing antenna, satellite
dish or other communications device located on the roof of the Building, and
Landlord shall include and use commercially reasonable efforts to enforce a
similar provision in all future antenna leases.
(b) Tenant shall not have access to any such antenna without Landlord's
prior written consent (except in an emergency), which consent shall be granted
to the extent necessary for Tenant to perform its maintenance obligations
hereunder and only if Tenant is accompanied by Landlord's representative (if
Landlord so requests).
(c) At all times during the Term. Tenant shall maintain said antenna in
good condition and in a manner that avoids interference with or disruption to
Landlord and other tenants of the Building. At the expiration or earlier
termination of the Term (or if Tenant discontinues use of such antenna), Tenant
shall remove such antenna and related equipment from the Building.
(d) Upon ten (10) days' prior written notice to Tenant, Landlord shall
have the right to require Tenant to relocate the antenna to another location on
the roof reasonably acceptable to Tenant, if in Landlord's opinion such
relocation is necessary or desirable. Any such relocation shall be performed by
Tenant at Landlord's expense, and in accordance with all of the requirements of
this Paragraph. Nothing in this Paragraph shall be construed as granting Tenant
any line of sight easement with respect to such satellite dish antenna;
provided, however, that if Landlord requires that such antenna be relocated in
accordance with the preceding two (2) sentences, then Landlord shall use
reasonable efforts to provide either (a) the same line of sight for such antenna
as was available prior to such relocation, or (b) a line of sight for such
antenna which is functionally equivalent to that available prior to such
relocation.
(e) In granting Tenant the right hereunder, Landlord makes no
representation as to the legality of such antenna or its installation. If any
federal, state, county, regulatory or other authority request the removal of or
relocation of such antenna, Tenant shall remove or relocate such antenna at
Tenant's sole cost and expense, and Landlord shall under no circumstances be
liable to Tenant therefor.
(f) Tenant shall be responsible for and Tenant shall indemnify and hold
Landlord harmless from and against, all costs, damages, claims, liabilities and
expenses (including reasonable attorneys' fees) suffered by or claimed against
Landlord, directly or indirectly, based on, arising out of or resulting from any
act or omission with respect to the installation, use, operation, maintenance,
repair or disassembly of such antenna and related equipment, including, without
limitation, any damage that is caused to the roof, except to the extent caused
by the gross negligence or willing misconduct of Landlord, agents, employees or
contractors.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy 53181002.441
Page 17
<PAGE>
(g) Tenant shall have no right to transfer, assign, mortgage, encumber
or otherwise alienate or rent any such antenna and/or equipment appurtenant
thereto, and such rights granted in this Section 38 shall be personal to Tenant.
(h) Tenant acknowledges that Landlord may, without any liability to
Tenant, at any time allow other tenants of the Building or other persons the
right to use the roof for any purpose, subject to non-interference covenants set
forth herein.
(i) Landlord hereby agrees that Landlord shall not revoke the license
provided herein, except upon termination of this Lease or upon default of
Tenant's obligations under this Section 38.
39. SECURITY MEASURES-LANDLORD'S RESERVATIONS.
39.1 Tenant hereby acknowledges that Landlord shall have no obligation
whatsoever to provide guard service or other security measure for the benefit of
the Premises or the Office Building Project, other than the existing electronic
security system, maintained in good working order, and replaced as necessary.
Tenant assumes all responsibility for the protection of Tenant and its agents
and invitees and the property of Tenant and its agents and invitees from acts of
third parties. Nothing herein contained shall prevent Landlord, at Landlord's
sole option, from providing security protection for the Office Building Project
or any part thereof.
39.2 LANDLORD SHALL HAVE THE FOLLOWING RIGHTS:
(a) To change the name, address or title of the Office
Building Project or the Building upon not less than 90 days prior written
notice;
(b) To, at Tenant's expense, provide and install Building
standard graphics (i.e., name of Tenant only) on the door of the Premises and
such portions of the Common Areas as Landlord shall reasonably deem appropriate;
(c) To grant any lessee of the Office Building Project
the exclusive right to conduct any business as long as such exclusive right does
not conflict with any rights expressly given herein:
(d) To place such signs, notices or displays as Landlord
reasonably deems necessary or advisable upon the roof and exterior of the Office
Building Project or on pole signs in the Common Areas.
39.3 TENANT SHALL NOT: Suffer or permit anyone, except in emergency, to
go upon the roof of the Building, other than pursuant to Section 38(a).
40. EASEMENTS.
40.1 Landlord reserves the right, from time to time, to grant easements
and rights, make dedications, agree to restrictions and record maps affecting
the Office Building Project as Landlord may deem necessary or desirable, so long
as such easements, rights, dedications, restrictions and maps do not
unreasonably interfere with the use of the Premises by Tenant. Tenant shall sign
any of the aforementioned documents upon request of Landlord and failure to do
so shall constitute a material default of this Lease by Tenant without the need
for further notice to Tenant.
40.2 Landlord shall not erect another building which will obstruct the
view from the seventh and eighth Floors of the Premises. The obstruction of
Tenant's view, air, or light by any structure erected in the vicinity of the
Building by third parties not affiliated with Landlord, shall in no way affect
this Lease or impose any liability upon Landlord.
41. PERFORMANCE. If at any time a dispute shall arise as to any amount or
sum of money to be paid by one party to the other under the provisions hereof,
the party against whom the obligation to pay the money is asserted shall have
the right to make payment "under protest" and such payment shall not be regarded
as a voluntary payment, and there shall survive the right on the part of said
party to institute suit for recovery of such sum. If it shall be adjudged that
there was no legal obligation on the part of said party to pay such sum or any
part thereof, said party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
42. AUTHORITY. If Tenant is a corporation, trust, or general or limited
partnership, Tenant, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. Landlord, and each individual
executing this Lease on behalf of such entity, represent and warrant that such
individual is duly authorized to execute and deliver this Lease on behalf of
said entity.
43. CONFLICT. Any conflict between the printed provisions, Exhibits or
Addenda of this Lease and the typewritten or handwritten provisions, if any,
shall be controlled by the typewritten or handwritten provisions.
44. NO OFFER. Preparation of this Lease by Landlord or Landlord's agent and
submission of same to Tenant shall not be deemed an offer to Tenant to lease.
This Lease shall become binding upon Landlord and Tenant only when fully
executed by both parties.
45. MISCELLANEOUS. (a) Landlord shall provide Tenant and its agents
reasonable access to the office Building Project for the purpose of preparing an
ALTA survey, at Tenant's sole cost and expense.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy 53181002.441
Page 18
<PAGE>
(b) If Landlord enters into any lease for space on the second floor of
the Building, such lease shall (I) provide that the tenant therein may only use
such space for general office purposes and (ii) shall provide such space is to
be carpeted with building grade carpeting, except for such areas as kitchens,
bathrooms and pantries, which are not ordinarily carpeted. Landlord shall use
reasonably commercial efforts to enforce such restrictions and requirements.
46. MULTIPLE PARTIES. If more than one person or entity is named as either
Landlord or Tenant herein, except as otherwise expressly provided herein, the
obligations of the Landlord or Tenant herein shall be the joint and several
responsibility of all persons or entities named herein as such Landlord or
Tenant, respectively.
47. APPLICABLE LAW; WAIVER OF JURY TRIAL.
(a) The covenants, conditions and provisions of this Lease shall be
construed under the laws of the State of Maryland. If any provisions of this
Lease should be held invalid or unenforceable, the validity and enforceability
of the remaining provisions of this lease shall not be affected thereby.
(b) THE LANDLORD AND THE TENANT WAIVE ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION, COUNTERCLAIM, OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THIS LEASE. THIS WAIVER APPLIES TO ALL CLAIMS AGAINST ALL PARTIES TO
SUCH ACTIONS AND PROCEEDINGS, INCLUDING PARTIES WHO ARE NOT PARTIES TO THIS
LEASE. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY THE
TENANT AND THE TENANT ACKNOWLEDGES THAT NEITHER THE LANDLORD, NOR ANY PERSON
ACTING ON BEHALF OF THE LANDLORD, HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE
TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, IN THAT
IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE TENANT
FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND
RAMIFICATIONS OF THIS WAIVER PROVISION AND AS EVIDENCE OF THIS FACT SIGNS ITS
INITIALS.
------------------
Initials of Tenant
48. HAZARDOUS MATERIAL. Tenant shall not cause or permit any Hazardous
Material (as hereinafter defined) to be brought upon, kept or used in or about
the Premises by Tenant, its agents, employees, contractors or invitees (other
than customary office products in customary amounts for office use in compliance
with all laws) without the prior written consent of Landlord, which consent may
be granted or withheld in Landlord's sole discretion. For the purpose of this
Lease, "Hazardous Material" shall include oil, flammable explosives, asbestos,
urea formaldehyde, radioactive materials or waste, or other hazardous, toxic,
contaminated or polluting materials, substances or wastes, including, without
limitation, any "hazardous substances," "hazardous wastes,""hazardous materials"
or "toxic substances" as such terms are defined in the Resource Conservation and
Recovery Act and the Comprehensive Environmental Response, Compensation and
Liability Act, and in any other law, ordinance, rule, regulation or order
promulgated by the federal or state government, or any other governmental entity
having jurisdiction over the Office Building Project or the parties to this
Lease. If Tenant breaches the obligations set forth in this paragraph, or if the
presence of Hazardous Material in the Premises or at the Office Building Project
caused or permitted by Tenant (whether or not Landlord has given its consent to
the presence of such Hazardous Material in the Premises) results in
contamination of the Premises or any other part of the Office Building Project,
or if contamination of the Office Building Project by Hazardous Material
otherwise occurs for which Tenant is legally liable, then Tenant shall
indemnify, defend and hold Landlord harmless from any and all claims, judgments,
damages, penalties, fines costs, liabilities or losses, including, without
limitation, diminution in value of the Office Building Project, damages for the
loss, or restriction on use of rentable or usable space or floor area in or of
any amenity of the Office Building Project, damages arising from any adverse
impact on leasing space in the Office Building Project, sums paid in settlement
of claims, and any attorneys' fees, consultant fees and expert fees which arise
during or after the term of this Lease as a result of such contamination. This
indemnification of Landlord by Tenant shall survive expiration or termination of
this Lease includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental agency or
polictical subdivision because of Hazardous Material present in, on or under the
Premises. Without limiting the foregoing, if the presence of any Hazardous
Material caused or permitted by Tenant or its agents, employees, contractors or
invitees, results in any contamination of the Office Building Project, Tenant
shall promptly take all actions, at its sole expense, as are necessary to return
the Office Building Project to the condition existing prior to the introduction
of any such Hazardous Material; provided that Landlord's approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material adverse
long-term or short-term effects on the Office Building Project. Tenant shall
promptly notify Landlord of any such contamination.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy 53181002.441
Page 19
<PAGE>
49. ATTACHMENTS. Attached hereto are the following documents which
constitute a part of this Lease.
Exhibit A. Floor Plan
Exhibit B. Reserved Parking Spaces
Exhibit C. Rules and Regulations
Exhibit D. Tenant's Space Plan
Exhibit E. Tenant Improvement Construction Drawings
Exhibit F. Cleaning and HVAC Specifications
Exhibit G. Signage Exhibit
LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
PROVISION IN IT AND BY EXECUTING IT, SHOW THEIR INFORMED AND VOLUNTARY CONSENT.
THE PARTIES AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, ITS TERMS ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND
TENANT WITH RESPECT TO THE PREMISES.
This Lease has been prepared for submission to your attorney for approval; no
representations or recommendation is made as to the legal sufficiency, legal
effect, or tax consequences of this Lease or the transaction relating thereto,
the parties shall rely solely upon the advice of their own legal counsel as to
the legal and tax consequences of this issue.
LANDLORD TENANT
NATIONAL LIFE INSURANCE COMPANY RADIO ONE, INC.
By: Koll Investment Management
its Authorized Agent
By: By: /s/ Alfred Liggins
--------------------------------- -----------------------------
Barbara E. Gloeckner Alfred Liggins
Its: Vice President Its: President
On On
------------------------------- -------------------------
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy 53181002.441
Page 20
<PAGE>
EXHIBIT A - P.1
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
EXHIBIT A - P.2
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
EXHIBIT A - P.3
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
EXHIBIT B
RESERVED PARKING SPACES
[IMAGE OMITTED]
<PAGE>
EXHIBIT C
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Dated : __________________, 1997
By and Between: National Life Insurance Company, Landlord, and Radio One, Inc.,
Tenant
GENERAL RULES
1. Tenant shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Landlord reserves the right to refuse access to any persons Landlord in
good faith judges to be a threat to the safety, reputation, or property of
the Office Building Project and its occupants.
3. Tenant shall not make or permit any noise or odors to emanate from the
Premises that annoy or interfere with other lessees or persons having
business within the Office Building Project.
4. Tenant shall not keep animals or birds, with the exception of seeing eye
dogs, within the Office Building Project, and shall not bring bicycles,
motorcycles or other vehicles into areas not designated as authorized for
same.
5. Tenant shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Tenant shall not alter any lock or install new or additional locks or
bolts.
7. Tenant shall be responsible for the inappropriate use of any toilet rooms,
plumbing or other utilities by Tenant, its agents or employees. No foreign
substances of any kind are to be inserted therein.
8. Tenant shall not deface the walls, partitions or other surfaces of the
premises or Office Building Project.
9. Tenant shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of
the Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or out of
the building only with the Landlord's knowledge and consent, and subject to
such reasonable limitations, techniques and timing as may be designated by
Landlord. Tenant shall be responsible for any damage to the Office Building
Project arising from any such activity, subject to waiver of subrogation.
11. Tenant shall not employ any service or contractor for services or work to
be performed in the Building, except as reasonably approved by Landlord.
12. Landlord reserves the right to close and lock the Building on Saturdays,
Sundays and legal holidays so long as Tenant has access at all times, and
on other days between the hours of 6:00 P.M. and 6:00 A.M. of the following
day. If Tenant uses the Premises during such periods, Tenant shall be
responsible for securely locking any doors it may have opened for entry.
13. Tenant shall return all keys at the termination of its tenancy and shall be
responsible for the cost of replacing any keys that are lost.
14. Neither Tenant or any employee or invitee of Tenant shall go upon the roof
of the Building, except in an emergency as provided in Section 38.
15. Tenant shall not suffer or permit smoking or carrying of lighted cigar or
cigarettes in areas reasonably designated by Landlord or by applicable
governmental agencies as non-smoking areas.
16. Tenant shall not use any method of heating or air conditioning other than
for a supplemental HVAC as shown on Tenant's Plans and Specifications, or
as otherwise approved by Landlord.
17. The Premises shall not be used for lodging or manufacturing, cooking or
food preparation other than normal office kitchen pantry.
18. Tenant shall comply with all safety, fire protection and evacuation
regulations established by Landlord or any applicable governmental agency.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy 53181002.441
Page 23
<PAGE>
19. Landlord reserves the right to waive any one of these rules or regulations,
and or as to any particular lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Tenant provided Landlord shall not unfairly
discriminate against Tenant.
20. Tenant assumes all risks from theft or vandalism to Tenant's property and
agrees to keep its Premises locked as may be required.
21. Landlord reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants.
Tenant agrees to abide by such rules and regulations as well as these rules
and regulations.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy 53181002.441
Page 24
<PAGE>
PARKING RULES
1. Other than Tenant's right to park up to ten (10) vans in the rear of the
Building as provided in Section 2.2 of the Lease all parking areas shall be
used only for parking vehicles no longer than full size passenger
automobiles herein called "Permitted Size Vehicles" Vehicles other than
Permitted Size Vehicles are herein referred to as "Oversized Vehicles"
2. Tenant shall not permit or allow any vehicles that belong to or are
controlled by Tenant or Tenant's employees, suppliers, shippers, customers,
or invitees to be loaded, unloaded, or parked in areas other than those
designated by Landlord for such activities.
3. Users of the parking area will obey all posted signs and park only in the
areas designated for vehicle parking.
4. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Landlord will not be responsible
for any damage to vehicles, injury to persons or loss of property, all of
which risks are assumed by the party using the parking area, except to the
extent caused by gross negligence or willful misconduct of Landlord
5. The maintenance, washing, waxing or cleaning of vehicles on the parking
surface or Common Areas is prohibited
6. Tenant shall be responsible for seeing that all its employees, agents and
invitees comply with the applicable parking rules, regulations, laws and
agreements
7. Landlord reserves the right to reasonably modify these rules and/or adopt
such other reasonable and non-discriminatory rules and regulations as it
may deem necessary for the proper operation of the parking area.
8. Such parking use as is herein provided is intended merely as a license only
and no bailment is intended or shall be created hereby.
Standard Office Lease between Initials: _________
National Life Insurance Company, Landlord, and Initials: _________
Radio One, Inc., Tenant
Execution Copy 53181002.441
Page 25
<PAGE>
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
EXHIBIT E
ENUMERATION OF CONTRACT DOCUMENTS
RADIO ONE
7TH AND 8TH FLOORS
5900 PRINCESS GARDEN PARKWAY
LANHAM, MARYLAND
DRAWING DATE DRAWN BY
- ------- ---- --------
A-0 12/12/96 INTERPLAN, INC
A-1 12/12/96 INTERPLAN, INC
A-2 12/12/96 INTERPLAN, INC
A-3 12/12/96 INTERPLAN, INC
A-4 12/12/96 INTERPLAN, INC
A-5 12/12/96 INTERPLAN, INC
A-6 12/12/96 INTERPLAN, INC
A-7 12/12/96 INTERPLAN, INC
A-8 12/12/96 INTERPLAN, INC
A-9 12/12/96 INTERPLAN, INC
A-10 12/12/96 INTERPLAN, INC
A-11 12/12/96 INTERPLAN, INC
A-12 12/12/96 INTERPLAN, INC
A-13 12/12/96 INTERPLAN, INC
A-14 12/12/96 INTERPLAN, INC
A-15 12/12/96 INTERPLAN, INC
TMC-1 12/12/96 INTERPLAN, INC
TM7-1 12/12/96 INTERPLAN, INC
TM8-1 12/12/96 INTERPLAN, INC
TP7-1 12/12/96 INTERPLAN, INC
TP8-1 12/12/96 INTERPLAN, INC
TEC-1 12/12/96 INTERPLAN, INC
TE7-1 12/12/96 INTERPLAN, INC
TE7-2 12/12/96 INTERPLAN, INC
TE8-1 12/12/96 INTERPLAN, INC
TE8-2 12/12/96 INTERPLAN, INC
ADDENDEM DATE BY
- -------- ---- --
ADD#1 12/17/96 INTERPLAN, INC.
ADD#2 12/19/96 INTERPLAN, INC.
<PAGE>
CLEANING SPECIFICATIONS
Base Cleaning by Landlord
Cleaning is to be performed between 6:00 p.m. and 10:00 p.m.
Nightly:
Empty wastebaskets Ashtrays emptied and wiped clean Surfaces up to 60"
dusted All public and traffic areas vacuumed Tile floors dry mopped
All bathrooms cleaned, disinfected, and stocked
Any accidental carpet spots, spillage, or unsightly conditions remedied
Weekly:
All carpeted areas vacuumed, including beneath desks and conference
tables Office dusted with cloth, including tops of files, ledges and
window sills All telephones damp-wiped
Monthly:
All resilient floor tile surfaces spray-buffed
All restroom floors machine scrubbed
As Needed:
Carpet spot cleaned
Walls spot cleaned, if possible without damaging finish Interior glass
(sidelights, etc.) cleaned All resilient floor surfaces stripped and
refinished
Kitchens and Lunchrooms:
Floor swept and damp-mopped nightly
All cleared horizontal surfaces to be dusted or damp-wiped nightly
Chairs dusted; chairs and tables arranged neatly
Exclusions:
Base specifications do not include specialty cleaning of wood floor or
paneling or other floor or furniture finishes.
<PAGE>
EXHIBIT F
HVAC SPECIFICATIONS
Summer outdoor = 95' dry bulb/78' wet bulb
Indoor = 76' dry bulb max tolerence
Winter outdoor = 14' dry bulb
Indoor = 74' bulb min tolerence
Relative humidity shall not exceed 50%-55% and shall be in a range to provide
reasonable comfort throughout the premises.
The HVAC performance specifications are only applicable to standard office
space; and in any event (1) the performance of Landlord's HVAC system may be
adversely impacted by Tenant's construction and (2) no performance
specifications are provided with respect to the portion of the Broadcast Suite
that is not devoted exclusively to office uses.
<PAGE>
EXHIBIT G
SIGNAGE EXHIBIT
[IMAGE OMITTED]
<PAGE>
Fcbruary 24, 1997
Mr. Alfred Liggins
President
Radio One
4001 Nebraska Avenue N.W.
Washington, D.C. 20016
RE: MODIFICATIONS TO STANDARD OFFICE LEASE ("LEASE") DATED FEBRUARY 3, 1997
BETWEEN NATIONAL LIFE INSURANCE COMPANY ("LANDLORD") AND RADIO ONE, INC.
("TENANT"); AND PURCHASE OPTION AGREEMENT ("OPTION AGREEMENT") DATED
FEBRUARY 3, 1997 BETWEEN LANDLORD AND TENANT
Dear Alfred:
This letter will confirm the Landlord's and Tenant's agreement with respect to
certain modifications of the Lease and Purchase Option described above:
1. Section 3.2 of the Lease is hereby modified to reflect that possession of the
Office Suite will be tendered on the day after the date of your consent below,
and that possession of the Broadcast Suite will be tendered on April 25, 1997.
2. Pursuant to the second sentence of Section 38 of the Lease. Landlord hereby
consents to the installation of the rooftop antennas in accordance with the
plans previously submitted to Landlord by Tenant, and further consents to the
installation of any replacements thereof if such replacements are substantially
the same size.
3. Landlord hereby agrees that Tenant's pro rata share of the operating expenses
of the Property for purpose of Section 4(a)(ii) of the Purchase Option, shall be
calculated separately for the Office Suite and the Broadcast Suite, commencing
in each case on the applicable Rent Commencement Date.
If you agree to these modifications to the Lease and Purchase Option, please
sign and date the Consent below.
NATIONAL LIFE INSURANCE COMPANY
By: Koll Investment Management
Its: Authorized Agent
/s/ Barbara E. Gloeckner
--------------------------------
By: Barbara E. Gloeckner
Its: Vice President
CONSENT:
RADIO ONE, INC.
/s/ Alfred Liggins Dated 2/25/97
- ----------------------------------- -------
By: Alfred Liggins
Its: President
PURCHASE OPTION AGREEMENT
THIS PURCHASE OPTION AGREEMENT (this "Agreement") is made and entered into
this 3rd day of February, 1997, by and between NATIONAL LIFE INSURANCE COMPANY,
a Vermont corporation ("Seller") and RADIO ONE, INC., a Delaware corporation
("Purchaser").
RECITALS
WHEREAS, on this date, Purchaser, as Tenant, and Seller, as Landlord, have
entered into that certain Standard Office Lease dated of even date herewith (the
"Lease") for certain premises located in the building known by street address as
5900 Princess Avenue, Lanham, Maryland;
WHEREAS, as a condition of entering into the Lease, Purchaser has requested
that Landlord grant to Purchaser an option to purchase the improved real
property described on Exhibit A attached hereto (the "Property");
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 1
<PAGE>
1. GRANT OF PURCHASE OPTION. Seller hereby grants to Purchaser the exclusive
right and option (the "Purchase Option") to purchase the Property, which
Property includes the interest of Seller (presently or to be acquired) in and to
(i) any easements, covenants, licenses and other rights appurtenant to said
Property, (ii) any land lying in the bed of any street or alley (opened or
closed) in front of or adjoining said Property, (iii) any and all feasibility,
engineering, architectural or other studies, reports or drawings, including soil
borings and test drillings, which Seller has in its possession with respect to
said Property, and (iv) any improvements located on said Property. Purchaser's
right to exercise the Purchase Option and Seller's obligation to sell the
Property are subject to the terms and conditions as set forth in this Agreement.
2. TERM OF PURCHASE OPTION. The term of the Purchase Option granted herein
during which Purchaser shall have the right to exercise said right to purchase
the Property shall begin on the date hereof and shall expire at 5:00 p.m. on
June 30, 1997, unless sooner terminated in accordance with the terms of this
Agreement ("Option Expiration Date").
3. EXERCISE OF PURCHASE OPTION. Provided Tenant is not in default under the
terms of the Lease (beyond any applicable notice and cure period), Purchaser may
exercise its right to purchase the Property at any time prior to the Option
Expiration Date, by delivering to Seller an unconditional written notice of its
exercise of the
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 2
<PAGE>
Purchase Option. Upon delivery of such notice (the "Option Exercise Date"),
Purchaser shall be deemed to have exercised the Purchase Option and Purchaser
shall be unconditionally and irrevocably obligated to purchase, and Seller shall
be unconditionally and irrevocably obligated to sell, the Property, subject to
and in accordance with the terms and conditions set forth herein.
4. TERMS OF SALE. The terms of the sale and purchase of the Property shall be
as follows:
(a) PURCHASE PRICE. The aggregate consideration to be paid by Purchaser to
Seller for the Property shall be Three Million Seven Hundred Fifty Thousand and
00/100 Dollars ($3,750,000.00), subject to the adjustments set forth in
subsections (i), (ii) and (iii) below and the adjustments required by Section
13, and said sum (as so adjusted) shall be defined for all purposes hereof as
the "Purchase Price". The Purchase Price shall be payable to Seller on the date
of Closing (as hereafter defined) by wire transfer of immediately available
funds.
(i) The Purchase Price shall be reduced by an amount equal to the documented
expenditures of Tenant for Tenant's Improvements to the Premises (as such term
is defined in the Lease) in accordance with Section 7.3 of the Lease, up to $15
per square foot of rentable area in the Premises (computed in accordance with
the Lease), but in no event shall said adjustment exceed the sum of Two Hundred
Forty Thousand and no/100 Dollars ($240,000.00).
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 3
<PAGE>
(ii) The Purchase Price shall be reduced further by an amount equal to the
actual amount of rents collected by Seller from Tenant prior to the date of
Closing after subtracting therefrom Tenant's pro rata share (as calculated on a
square foot basis) of all of the operating expenses of the Property allocable to
the period after the date hereof and prior to Closing (the "Option Period"),
provided that in no event shall said reduction exceed the sum of Forty-Eight
Thousand and no/100 Dollars ($48,000.00). For all purposes hereof, the
"operating expenses of the Property" shall be equal to all of the costs and
expenses of any kind or nature relating to the Property, and allocable to the
Option Period, in managing, operating, equipping, policing, protecting,
lighting, repairing, replacing and maintaining the Property, and any personal
property therein or thereon, including, but not limited to, any and all real
estate taxes, insurance premiums (whether elective or required), maintenance and
repairs to the common area utilities, water and sewer, management fees,
landscaping, irrigations systems, cleaning, snow removal, lighting, pest
control, security costs, supplies, trash removal, parking lot sweeping, personal
property taxes, maintenance of and replacement of equipment, exterior painting,
roof repairs, parking lot repairs, seal coating, striping, plumbing repairs, and
compensation and benefits of employees of Seller or its agents involved in such
work. Excluded from such operating expenses are net income or franchise taxes,
financing costs (including interest, principal, late payment or other fees),
ground rent, if any, capital expenditures (including rentals in lieu of capital
expenditures), leasing commissions and other costs of leasing space,
depreciation, advertising expenses,
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 4
<PAGE>
compensation of officers and directors of Seller not directly relating to the
operation, management or repair of the Property, renovation of space for new
tenants (including painting and decorating), payments to affiliates of Seller in
excess of arms-length fees, base management fees in excess of three percent (3%)
of the gross rents, and renovation costs as a result of casualty from causes
against which Seller carries insurance.
(iii) The Purchase Price shall be increased by an amount which is determined
by computing Purchaser's pro rata share of all costs paid by Seller subsequent
to the date hereof, in connection with the entering into of each lease for a
portion of the Property (or the renewal or extension of any existing lease for a
portion of the Property), as approved by Purchaser, which approval shall not be
unreasonably withheld or delayed. The allowable "costs for each lease" shall
include but not be limited to broker commissions and any tenant improvement or
procurement costs incurred in renovating or improving leasehold space for a
tenant, and in the case of the new lease for TenSalon, a two percent (2%)
construction management fee. Purchaser's pro rata share of such costs for each
lease, or the renewal or extension of any existing lease, for a portion of the
Property shall be computed by multiplying said costs of a lease by a fraction,
the numerator of which is the aggregate Base Rent due under the Leases to
Purchaser (as the new owner of the Property) after the date of Closing, and the
denominator of which is the aggregate Base Rent due during the entire initial
term of
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 5
<PAGE>
said tenant's lease. FOR EXAMPLE ONLY: If (i) a new tenant's lease provides for
$1,000,000.00 of Base Rent in the aggregate, during the initial term, (ii)
$800,000.00 of such Base Rent is due after the date of Closing, and (iii) the
total costs incurred by Seller in connection with said lease is $50,000.00, then
the Purchase Price shall be increased by $40,000.00 [$50,000.00 x
($800,000.00/$1,000,000.00)].
(b) CLOSING. The date upon which the closing of the transaction contemplated
by this Agreement shall be referred to herein as the "Closing". For all purposes
of this Agreement, the "date of Closing" shall mean the date and time for
Closing selected by Purchaser, but not later than 5:00 pm on September 30, 1997,
unless extended pursuant to Section 5 below; provided that Purchaser shall give
Seller not less than five (5) business days prior written notice of the time and
place of Closing. The Closing shall be held at the office of Purchaser's
attorneys or, at Purchaser's option, at the offices of Purchaser's lending
institution. As of the date of Closing, Seller shall convey title to the
Property to Purchaser or its designee by delivery of a special warranty deed (in
proper statutory form for recording, duly executed and acknowledged), and
Purchaser shall deliver the Purchase Price to Seller. Seller also shall assign
to Purchaser its interest in all of the leases set forth on Exhibit B, and any
amendments or new leases entered into by Seller pursuant to Section 6 (the
"Leases"), and all security deposits relating thereto, and Purchaser shall
assume the obligations of Seller thereunder, all as of the date of Closing. No
later than thirty (30) days after the Option
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 6
<PAGE>
Exercise Date, Purchaser may deliver written notice to Seller (the "Rejection
Notice") identifying which of the contracts (other than Leases), set forth on
Exhibit C, including any amendments or extensions to such contracts, and any new
contracts entered into by Seller after the date hereof (the "Contracts"),
Purchaser desires not to assume as of the Closing Date (the "Rejected
Contracts"). Purchaser shall assume Seller's obligations accruing under all
Contracts, other than the Rejected Contracts (the "Assumed Contracts"), from and
after Closing (including obligations to be performed after Closing). Seller
shall indemnify and hold Purchaser harmless for any liability or obligation
under the Rejected Contracts. If Purchaser fails to timely deliver the Rejection
Notice to Seller, all Contracts shall be deemed to be Rejected Contracts. The
delivery to the Settlement Agent of the Purchase Price, the special warranty
deed, assignments of Seller's interest in the Leases (and all security deposits)
and Assumed Contracts, a bill of sale with respect to the personal property of
Seller used in connection with the Property, the Seller's Certificate (as
hereinafter defined), such documents and instruments as may be reasonably and
customarily required by Purchaser's title company or Purchaser's lender to
consummate the purchase of the Property and insure title to the Property in the
condition required by the terms hereof, and all other documents and instruments
required to be delivered by either party to the other by the terms hereof, shall
be deemed to be a good and sufficient tender of performance of the terms hereof.
5. EXTENSION OF CLOSING.
Nationai Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 7
<PAGE>
(a) Not later than the tenth (10th) business day of each full calendar month
following the date hereof, Seller shall provide Purchaser with a rent roll of
the Property showing the "Building Rents" (as defined below) collected by Seller
for the preceding month. Not later than September 8, 1997, Seller shall deliver
written notice to Purchaser (the "Notice of Rent Sufficiency"), which notice
shall certify whether or not the average monthly "Building Rents" collected by
Seller for the prior two (2) month period (i.e., July and August, 1997) is equal
to or exceeds the sum of $47,500 [subject to adjustment pursuant to subsection
(c) below] (the "Minimum Gross Rent Amount"). If the Notice of Rent Sufficiency
certifies (a) that the Minimum Gross Rent Amount has been achieved, then the
Closing shall not be extended and the parties shall consummate Closing on
September 30, 1997, or (b) that the Minimum Gross Rent Amount has not been
achieved, then the Closing shall be postponed as provided in this Section 5. For
all purposes hereof, the term "Building Rents" shall mean the total rents
collected (but not interest, penalties or late fees) from all tenants of the
Building (other than Tenant, except as hereafter provided) with respect to a
particular calendar month; provided, however, if Tenant leases more than 16,000
square feet of space in the Building during any calendar month of the term, then
the Building Rents shall be increased for said month by an amount which is
calculated by taking (a) the total rents payable by Tenant during said month,
and (b) deducting therefrom the amount calculated by taking the total rents
payable by Tenant during said month and multiplying such amount by a fraction,
the numerator of which is 16,000 and the denominator of which is the number of
square
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 8
<PAGE>
feet leased to Tenant. For example, if Tenant leases 18,000 square feet and the
total rents payable by Tenant during said month are $16,500.00, then the
Building Rents shall be increased by $1,833.33 [$16,500 - $16,500 x (16,000 -
18,000)].
(b) If the Notice of Rent Sufficiency issued by Seller (the "Pre-Closing
Notice") does not show that the average Building Rents collected during the
applicable months are equal to or greater than the Minimum Gross Rent Amount,
then Purchaser shall have the right to postpone Closing, on a month-by-month
basis, by sending written notice to Seller, until Purchaser has received from
Seller a Notice of Rent Sufficiency showing that Building Rents collected during
a two (2) month period subsequent to the Pre-Closing Notice equals or exceeds
the Minimum Gross Rent Amount (a "Favorable Notice"), in which case Closing
shall be rescheduled by Seller for any date that is at least three (3) business
days after the Favorable Notice is delivered to Purchaser, but before the end of
the month that the Favorable Notice is delivered to Purchaser. Notwithstanding
anything to the contrary contained herein, Purchaser shall have the right, but
not the obligation, to irrevocably waive the receipt of a Favorable Notice as a
condition precedent to Closing and to proceed to Closing in the manner set forth
in this Agreement on or before thirty (30) days from the date of such waiver,
but in no case shall Closing occur after July 31, 1998. If Closing has not
occurred by July 31, 1998, or if Purchaser affirmatively gives written notice to
Seller that it shall not proceed to Closing on or before said date, then (i) the
Purchase Option shall expire and terminate
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 9
<PAGE>
on said date, without further act being required of either party, in the same
manner as if Purchaser had not exercised its Purchase Option prior to the Option
Expiration Date, and (ii) Seller shall promptly pay Purchaser an amount equal to
Tenant's actual, documented expenditures for Tenant Improvements, up to $15 per
square foot of rentable area in the Premises, but in no event shall said payment
from Seller to Purchaser exceed the sum of Two Hundred and Forty Thousand and
No/100 Dollars ($240,000.00), which amount may be reduced by Landlord by any
damages of Landlord resulting from the default by Tenant under the Lease.
(c) If, at any time prior to the date on which Seller delivers to Purchaser a
Notice of Rent Sufficiency stating that the average Building Rents collected
during the applicable two (2) month period are equal to or exceed the Minimum
Gross Rent Amount, Tenant or any other affiliate of Tenant shall execute a lease
for space in the Building, or renew an existing lease for space in the Building
(other than Tenant's entering into a new lease for space, which space has come
available only as a result of the expiration of the term of an existing lease to
the Building) which reduces the Building Rents collected by Seller for said
office space to an amount which is less than the Building Rents collected for
said office space on the date of execution of this Lease (calculated on an
accrual basis), then there shall be a dollar for dollar reduction (but never an
increase) in the Minimum Gross Rent Amount based upon the amount of reduction in
Seller's collection of Building Rents resulting from Tenant's affiliate's
execution of a lease for said space.
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 10
<PAGE>
6. Seller's Leasing of Property. From the date hereof until the Closing Date,
Seller shall control the marketing and leasing of space in the Building,
provided, however, that Seller shall not enter into or terminate any Leases,
without Purchaser's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. Seller shall pay all costs
associated with the leasing of the Property [subject to reimbursement if a
Closing occurs as more fully described in subsection 4(a)(iii) above]. Upon
receipt from Seller of a bona fide proposal to lease space in the Property to a
prospect (a "Prospect"), which proposal shall set forth a description of said
Prospect's intended use of the premises, Purchaser will have a period of five
(5) business days from receipt of said proposal in which to deliver written
notice to Seller stating either its acceptance or rejection of the Prospect. If
Purchaser's written notice to accept/reject the Prospect is not received by
Seller within said five (5) business day period, or Purchaser fails to elect
either option (i) or (ii) below in said notice, then Purchaser shall be deemed
to have accepted the lease of space on the Property to the Prospect in the same
manner as if Purchaser had delivered a written notice of acceptance to Seller
within the aforesaid five (5) business day period. If Purchaser rejects the
Prospect, then concurrently with said rejection, Purchaser shall either (i)
effectively exercise the Purchase Option to purchase the Property, and the
Purchaser's receipt of the Notice of Rent Sufficiency shall be deemed waived by
Purchaser, and the Closing shall occur within sixty (60) days after Purchaser's
exercise of the Purchase Option (but in no event sooner than fifteen (15)
business days from said date); or (ii)
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lease the space in the Property which Seller proposed to lease to the Prospect,
under the same terms and conditions as Seller was offering to the Prospect, or
(iii) elect neither (i) nor (ii), in which event Seller shall have the right to
enter into such lease with such Prospect, and Purchaser shall be deemed to have
accepted to such lease.
7. TITLE. Attached hereto as Exhibit D is a copy of Seller's existing owner's
title insurance policy. At Closing, title to the Property shall be good of
record and in fact, marketable, insurable at regular rates by a reputable title
insurance company of Purchaser's choice, subject to restrictions of record on
the date of execution of this Agreement, as shown on Exhibit D, except that
title to the Property shall be (i) free and clear of the lien of any deed of
trust, mortgage or other lien or instrument securing the repayment of money, and
(ii) subject to any new leases executed by Seller in the manner set forth in
Section 6 above. The status of title at the time of Closing shall be the same as
that shown in Seller's title, except as provided below. In the event any new
title matters arise prior to Closing, Purchaser shall notify Seller of such new
title defect within five (5) days of Purchaser becoming aware of such new title
defect. For purposes of this Section, if any title defect directly results from
Purchaser's action, such as the placing of a mechanic's lien, then such title
defect shall not be deemed to be a new title defect. Within ten (10) days after
receipt of the Purchaser's letter of new title defects (and supporting
documentation), Seller shall notify Purchaser in writing as to which, if any, of
the new title matters objected to by Purchaser Seller is willing to correct,
with the
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correcting of all such matters which Seller agrees to correct being a covenant
of Seller and a condition to Purchaser's obligation to settle hereunder. If
Seller does not notify Purchaser as above, it shall be deemed that Seller has
elected not to correct all such new title matters to which Purchaser has
objected. Seller agrees that to the extent the new title matters objected to by
Purchaser are of a character that they may be remedied by the payment of sums of
money or by legal action, both of which shall not exceed $25,000 (in the
aggregate), Seller shall be obligated to pay such sums of money or undertake in
good faith and diligently prosecute such legal action, at Seller's sole expense,
subject to the $25,000 cap. Purchaser shall have until ten (10) days after
receipt of Seller's response as to which, if any, new title matters Seller is
willing to correct, to terminate this Purchase Option if Purchaser remains
unsatisfied with the new title defects and in such event neither party shall
have any further rights or obligations under this Purchase Option, except for
those obligations which survive termination hereunder. If any new title defects
to be cured by Seller by Closing have not been cured as of Closing, Purchaser
shall have the right upon written notice to Seller to elect either (i) to
proceed to Closing and waive such new title defect, without abatement of the
Purchase Price, (ii) to terminate this Purchase Option, in which event neither
party shall have any further rights of obligations under the Purchase Option
with respect to the Property, except for those obligations which survive
termination hereunder, or (iii) to postpone Closing to the extent necessary to
enable the new title matters to be remedied, but in no event shall Closing be
extended for such cure for more than two (2) months;
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provided, however, that if the time needed to correct the new title matter is
more than two (2) months, Purchaser shall have the right, at its option, to
elect by written notice to Seller prior to the date of Closing, either (a)
proceed to Closing and waive such new title defect, without abatement of the
Purchase Price or (b) terminate this Purchase Option, whereupon Purchaser and
Seller shall be relieved of all further liability or obligation under the
Purchase Option, except as otherwise provided herein. Notwithstanding the
foregoing, between the date hereof and the date of Closing, Seller shall have
the right to execute and deliver such easements and rights of way which are
required of it by local governmental entities or public utilities (provided
Seller does not seek rezoning or subdivision of the Property). Seller shall
notify Purchaser promptly upon the demand of any such governmental entity or
public utility for such rights in and to the Property, and Purchaser shall have
the right to participate in the negotiation of the form of rights given to any
such third party in the Property. In the event that such rights given to a third
party in the Property shall be reasonably determined to cause a material adverse
effect on Purchaser's ability to use the Property after the date of Closing,
then Purchaser's sole remedy shall be to deliver written notice to Seller
stating that it is unilaterally terminating this Purchase Option, in which event
the Purchase Option shall be deemed terminated, except for those obligations
which survive termination.
8. STUDY PERIOD/DISCLAIMERS. Purchaser may perform (subject to the rights of
other tenants of the Property) reasonable studies and tests of the Property and
review
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materials to determine the condition thereof. By its exercise of the Purchase
Option, Purchaser shall be deemed to have certified to Seller that it has
familiarized itself fully with the Property, and that it has had the opportunity
to perform, and has performed, such inspections, examinations, investigations
and studies thereof as it deemed appropriate in order to determine whether to
purchase the Property in its then current condition. Purchaser agrees that it is
relying solely upon its inspections, examinations, investigations and studies in
electing whether or not to purchase the Property. Notwithstanding anything
herein to the contrary, it is expressly understood and agreed that Purchaser, by
exercising its option, is purchasing the Property "as is" and "where is", and
with all faults and defects, latent or otherwise, and that, except as expressly
provided herein, Seller is making no representations or warranties, either
express or implied, by operation of law or otherwise, with respect to the
quality, physical condition or value of the property, the presence or absence of
hazardous substances in, on, under or about the Property, the zoning
classification of the Property, the compliance of the Property with applicable
law, or the income or expenses from or of the Property. Without limiting the
foregoing, it is understood and agreed that Seller makes no warranty to
Purchaser regarding the Property or its habitability, suitability,
merchantability, fitness for a particular purpose or fitness for any purpose.
With regard to the studies to be performed by Purchaser as set forth in the
first sentence of this subsection, (i) Purchaser shall conduct its studies in a
manner so as not to unreasonably interfere with the business operations of any
of the other tenants of the Property, (ii) Purchaser shall repair
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all damage to the Property caused by the studies and related activities of
Purchaser, its agents or employees associated with such studies, promptly after
the occurrence of such damage, and (iii) Purchaser shall indemnify and hold
harmless Seller from and against any claims, liabilities, reasonable costs
(including, without 1imitation, reasonable attorneys fees) resulting from
physical damage to the Property, or from injury to persons or property caused by
the activities of Purchaser, its agents or employees as described above.
9. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
the following, each of which shall be true on the date hereof.
(a) Due Authorization. This Purchase Option is duly authorized, executed and
delivered by, and upon delivery hereof shall be binding upon and enforceable
against Seller in accordance with its respective terms. Seller has the legal
right, power and authority to enter into this Purchase Option and to perform all
of its obligations hereunder, and the execution and delivery of this Purchase
Option and performance by Seller of its obligations hereunder shall not conflict
with or result in a breach of any law or regulation, order, judgment, writ,
injunction or decree of any court or governmental instrumentality or any
agreement or instrument to which Seller is a part or by which Seller is bound or
to which Seller or any portion of the Property is subject.
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(b) Moratoria; Litigation. To Seller's actual knowledge, without any duty to
investigate, the Property and the use thereof are free of (i) any sewer, water,
building or other moratoria, municipal violations, and (ii) existing, or to the
Seller's actual knowledge, threatened, litigation or condemnation proceedings
applicable to the Property. Seller has received no written notice of any liens
or special assessments to be made against the Property by any governmental
authority.
(c) Parties in Possession. The Schedule of Leases is set forth as Exhibit B
hereto. Except as set forth on the Schedule of Leases, there are no parties in
possession of the Property or any portion thereof, whether as tenants under
leases or licensees under license agreements or under any other agreement or
arrangement.
(d) Hazardous Waste. To Seller's actual knowledge, except as disclosed in any
environmental reports provided to Purchaser, during Seller's ownership of the
Property, none of the Property has been excavated, no landfill was deposited on
or taken from the Property, no construction debris or other debris (including
without limitation rocks, stumps or concrete) was buried upon any of the
Property, and no hazardous materials, toxic chemicals or similar substances, as
defined in 42 U.S.C. Section 9601(14) or 33 U.S.C. Section 1317(1) or 15 U.S.C.
Section 2606(f), or any similar provision of applicable state or federal law, or
otherwise, or gasoline or oil storage tanks, were stored on or under or
otherwise were in existence on or under the Property.
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10. SELLERS COVENANTS.
(a) Seller's Documents. Within five (5) business days after the date hereof,
Seller shall provide (or already has provided) Purchaser, at no cost to
Purchaser, copies of all plans and specifications, engineering reports, soil
tests, wetlands studies, market studies, surveys, title reports and other tests
and studies pertaining to the Property which are in Seller's possession or
control.
(b) Seller's Actions. From and after the date hereof until Closing or the
termination of this Purchase Option, Seller shall not take any action to rezone
or resubdivide the Property, other than with Purchaser's prior written approval,
which approval shall not be unreasonably withheld, conditioned or delayed.
(c) Landlord's Actions. From and after the Effective Date, Landlord shall (i)
refrain from performing any material grading or excavation, construction or
removal of any improvement, or making any other structural or capital
improvement upon the Property, except as may be reasonably approved by
Purchaser, (ii) refrain from committing any material waste upon the Property,
(iii) not take any action to Rezone or resubdivide the Property, except as
approved by Tenant in its sole discretion, and (iv) maintain appropriate
comprehensive hazard and liability insurance.
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(d) Payment of Charges. Landlord shall, prior to Closing, (i) pay all taxes
and other public charges which are properly due and payable against the
Property, (ii) pay all bills for labor or services for work performed on or with
respect to the Property which are properly due and payable, except those
requested by or on behalf of Tenant, (iii) not breach or violate in any material
respect the terms of any covenants, restrictions, easements or agreements
affecting the Property, or (iv) in any way change the state or condition of
title to the Property, except as otherwise provided herein.
11. CONDITIONS TO SETTLEMENT. It is an express condition to Purchaser's
obligation to proceed to settlement hereunder that all of the following are true
and correct (or waived in writing by Purchaser) on and as of the date of
Closing.
(a) All of the representations and warranties set forth in Section 9 are true
and correct in all material respects, or as to any or all, waived by Purchaser
in its sole discretion, and Seller has performed in all material respects all of
Seller's covenants and obligations hereunder.
(b) There exists with respect to the Property no pending, existing or
threatened (i) condemnation, or (ii) sewer and water or other moratoria which
affects the ability to develop the Property, or (iii) change in the zoning
classification of the Property, other than as applied for in accordance with the
provisions of this Purchase Option.
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(c) Title to the Property shall be in the condition required by Section 7.
From and after the date hereof, Seller shall not, without in each instance
obtaining the prior written consent of Purchaser, which may be given or withheld
in Purchaser's reasonable discretion, (i) sell or transfer the Property, unless
such sale is expressly made subject to this Agreement, (ii) encumber or pledge
the Property or any portion thereof, or (iii) grant a lien or security interest
in the Property or any portion thereof.
(d) Seller will provide reasonable assurances to Purchaser that Seller is not
a "foreign person" as defined by Section 1445 of the Internal Revenue Code and
sign such affidavits to that effect as shall be reasonably required by Purchaser
and the title company insuring title for Purchaser.
(e) There will not be in existence on the Closing Date any contracts,
agreements, or understandings binding on Purchaser with respect to the Property
or the ownership, development or operation thereof which shall survive
settlement thereon, other than the Leases, the Assumed Contracts and such other
matters of record which Purchaser has accepted pursuant to this Agreement.
In the event of a failure of any of the above conditions to settlement which
Purchaser declines to waive, Purchaser may at Purchaser's sole discretion,
terminate this Purchase Option, and this Agreement shall thereby terminate, and
the parties shall
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thereafter not have any obligations hereunder, except for those obligations
which by their terms survive termination.
12. CLOSING COSTS. At Closing, Seller and Purchaser shall each pay one-half
(1/2) of all state, county and local transfer and recordation taxes due in
connection with the transfer of the Property from Seller to Purchaser (and
Purchaser shall solely pay any transfer and recordation taxes due in excess
thereof which are a result of any financing acquired by Purchaser in connection
with its acquisition of the Property). Seller shall pay all costs pertaining to
the payoff and release of existing liens, and the cost of preparation of the
Deed. All other costs and expenses attendant to Closing (including, without
limitation, title company charges, title insurance premiums, survey costs, and
notary fees) shall be at the cost of Purchaser, except that Seller shall pay the
fees and expenses of its own counsel which are incurred in connection with said
transaction.
13. CLOSING ADJUSTMENTS.
(a) The following items of income and expense shall be adjusted as of midnight
of the day immediately preceding the date of Closing:
(i) Real estate taxes with respect to the Property. Assessments, if any, for
improvements to the Property completed prior to the date of Closing, whether
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assessment therefor has been levied or not, shall be adjusted as of the date of
Closing and thereafter assumed by Purchaser.
(ii) Fuel, water and sewer service charges and charges for oil, electricity,
telephone and all other public utilities.
(iii) Rental and all other income (including common area charges and other
"pass-throughs") received from tenants.
(vi) All charges payable pursuant to Assumed Contracts for the provision of
services to the Property.
(b) If meters measure the consumption of water, gas and/or electric current at
the Property by Seller (as opposed to by tenants thereof), Seller shall use
reasonable efforts to cause such meters to be read on the day immediately
preceding the date of Closing and shall pay all utility bills resulting
therefrom promptly upon receipt thereof. Purchaser shall have the right to
escrow a reasonable sum to insure payment in full of Seller's obligation to pay
the water bill described above. In making the adjustments required by this
subsection, Seller shall receive credit for all prepaid expenses and similar
items that are due on or after the date of Closing, and Seller shall be charged
with any unpaid charges for the period prior to the date of Closing. No
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adjustment shall be made for rents, including all items of additional rent such
as common area maintenance charges, real estate taxes and other charges
(collectively and individually, the "Charges"), that are past due as of the date
of Closing, but Purchaser shall exercise reasonable efforts following the date
of Closing to collect any such unpaid rents and charges. In the event that
amounts are collected by Purchaser (after the date of Closing) from any tenant
of the Property whose lease obligations are past due as of the date of Closing,
Purchaser shall first apply such sum(s) against the amount then currently due
Purchaser, and then pay to Seller, from such collected funds, the balance owed
Seller for the period prior to the date of Closing, if any. The obligation of
the Purchaser set forth above to pay any balance of collected funds to Seller
for the period prior to the date of Closing shall survive Closing. Seller shall
have the right after the date of Closing to commence an action against any
tenant of the Property to collect amounts due Seller from any such tenant with
respect to periods prior to Closing, provided that Seller shall not be entitled
to dispossess any such tenant as a result of such action.
(c) Seller shall use all reasonable efforts to deliver to Purchaser, at least
five (5) business days prior to the date of Closing, a schedule depicting the
adjustments required by this subsection (including a draft settlement statement
to be executed by the parties at Closing), and Purchaser and Seller shall
attempt to confirm to their mutual
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satisfaction all such amounts no later than two (2) business days prior to the
date of Closing.
(d) Within sixty (60) days following the Closing, the Seller and Purchaser
will cooperate in preparing (including allowing Seller or its agent access to
the Property and its records related thereto) a final report to Purchaser
setting forth the final determination of all items included on the Settlement
Statement. In the event that, at any time within said sixty (60) day period,
either party discovers any items which should have been included in the
Settlement Statement but were omitted therefrom, such items shall be adjusted in
the same manner as if their existence had been known at the time of the
preparation of the Settlement Statement. The foregoing limitation shall not
apply to any item which, by its nature, cannot be finally determined within the
period specified. However, no further adjustments shall be made in any event
beyond one (1) year after Closing.
14. ADDITIONAL ESCROW INSTRUCTIONS. Purchaser and Seller shall each comply
with all ordinary and customary requirements of the Settlement Agent in
connection with the transaction contemplated hereby which are consistent with a
transaction of this size and type in Prince George's County, Maryland; provided,
however, that in the event that any portion of such additional requirements
shall be inconsistent with the provisions of
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this Agreement, the provisions of this Agreement shall prevail to the extent of
any inconsistency.
15. DEFAULT; TERMINATION OF PURCHASE OPTION.
(a) By Purchaser. If Purchaser shall fail to discharge any of its obligations
hereunder and shall fail to cure the same within fifteen (15) days after written
notice of default from Seller (but no notice and cure shall be given for
Purchaser's obligation to consummate Closing on the scheduled Closing date),
then, Seller shall have the right by written notice to Purchaser to terminate
this Agreement. Thereafter neither Purchaser nor Seller shall have any liability
under this Purchase Option, except for those provisions which by their terms
survive termination.
(b) By Seller. If Seller shall default in its obligations hereunder, or shall
breach a warranty or representation made herein, or shall fail to perform any
covenant provided herein, and such default, breach or failure is not cured
within fifteen (15) days after written notice of the same from Purchaser (except
that no notice shall be required in connection with a failure to timely close
the transaction contemplated herein), then Purchaser shall, at Purchaser's
option, as Purchaser's sole and exclusive remedy, (a) waive such default or
breach and proceed to Closing, (b) pursue against Seller the right to specific
performance of any and all of Seller's obligations hereunder (including
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obtaining reimbursement of Purchaser's expenses and attorneys' fees in such
action), or (c) terminate this Purchase Option, and the parties shall have no
further liability under this Purchase Option, except those provisions which by
their terms survive termination.
(c) By Tenant. In the event that tenant is in default under the Lease, and as
a result thereof Seller terminates the Lease, then at Seller's election in its
sole discretion, Seller's obligation to sell the Property shall terminate and be
of no further force and effect (whether or not Purchaser has exercised the
Purchase Option).
16. NON-ASSIGNABILITY. The Purchase Option is personal to Purchaser and shall
not be assignable to any other party, provided, however, Purchaser shall have
the right to assign this Purchase Option to any other entity provided, however,
that (1) the assignee assumes in writing all of Tenant's obligations under this
Purchase Option and (2) Tenant confirms in writing that it remains liable for
all of its obligations under this Purchase Option notwithstanding such
assignment and assumption.
17. FURTHER ASSURANCES. Seller and Purchaser each agree that it will, at any
time and from time-to-time after the date of Closing, upon request of the other
party hereto, (i) do, execute, acknowledge or deliver, all such further acts,
deeds, assignments, conveyances and assurances as may reasonably be required to
consummate the transactions contemplated hereby, and (ii) adjust any
mathematical or
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monetary error in the settlement sheet(s) executed by the parties in connection
with the Closing, and make any necessary payment resulting from such adjustment.
This obligation shall survive Closing.
18. MUTUAL INDEMNIFICATION.
(a) By Purchaser. Purchaser hereby agrees to indemnify and hold Seller
harmless from and against (i) any and all debts, liabilities, obligations,
claims and expenses arising from business done, transactions entered into,
conditions existing after or events occurring after settlement with respect to
the ownership, management or operation of the Property by Purchaser, and (ii)
all reasonable costs and expenses (including court costs and reasonable
attorneys' fees) incurred by Seller in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters for
which Purchaser is indemnifying Seller pursuant to the terms of this paragraph
(a).
(b) By Seller. Seller hereby agrees to indemnify and hold Purchaser harmless
from and against (i) any and all debts, liabilities, obligations, claims and
expenses arising from business done or transactions entered into prior to
settlement with respect to the ownership, management or operation of the
Property by Seller or arising from a breach of any representation, warranty or
covenant of Seller contained in this Purchase Option, and (ii) all reasonable
costs and expenses (including court costs and
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reasonable attorneys' fees) incurred by Purchaser in connection with any action,
suit, proceeding, demand, assessment or judgement incident to any of the matters
for which Seller in indemnifying Purchaser pursuant to the terms of this
paragraph (b).
19. RIGHT OF FIRST OFFER.
(a) If Closing has not occurred by July 31, 1998, Purchaser hereby agrees that
it shall, prior to making an offer to sell the Property, give written notice to
Purchaser setting forth the minimum gross cash price that it will offer to sell
the Property (the "Minimum Price"). The Seller shall have the option (the "First
Offer Option") to purchase the Property at the Minimum Price, which First Offer
Option may be exercised by delivering an irrevocable and unqualified written
notice of acceptance to Seller within thirty (30) days of Purchaser's receipt of
the First Offer Option (the "Acceptance Notice").
(b) In the event that Purchaser timely exercises the First Offer Option,
settlement on the Property shall be made in cash within sixty (60) days of the
date that the Acceptance Notice is sent, with such closing to occur in a manner
and subject to the conditions that is similar to the manner and conditions
relating to a Closing under the Purchase Option.
(c) in the event that Purchaser does not send a timely Acceptance Notice
following receipt of a First Offer Option, Seller shall have the right (but not
the obligation) to offer the Property for sale and to sell the Property, so long
as the gross sale price is
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greater than or equal to the Minimum Price. Upon such sale, this Agreement shall
terminate without any further obligation of either party hereto. In the event
that the Property is not sold during the one (1) year period following the last
day that the Acceptance can be sent (i.e., thirty (30) days from the date of
Purchaser's notice of the Minimum Price), the provisions of Section 19(a) shall
apply to any offer to sell the Property made after the end of such one (1) year
period.
20. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or registered
mail (provided that notice of exercise of any option must in all events be given
by certified or registered mail) addressed to a party at the address herein or
such other address for notice purposes as may be later specified by notice to
the other party. Mailed notices shall be deemed given upon actual receipt at the
address required, or forty-eight hours following deposit in the mail, postage
prepaid, whichever first occurs unless otherwise specifically provided in this
Lease. A copy of all notices required or permitted to be given to Seller
hereunder shall be concurrently transmitted to such other party or parties at
such addresses as Seller may from time to time hereafter designate by notice to
Purchaser.
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Notice addresses are as follows:
Seller National Life Insurance Company, a Vermont corporation
c/o Koll Investment Management
1101 17th Street, N.W., Suite 610
Washington, D.C. 20036
Attention: Barbara E. Gloeckner
with a copy to: Shulman, Rogers, Gandal, Pordy & Ecker, P.A.
11921 Rockville Pike, Third Floor
Rockville, Maryland 20852-2743
Attn: Richard J. Melnick, Esquire
Purchaser: Prior to April 1, 1997:
Radio One, Inc.
4001 Nebraska Avenue, N.W.
Washington, D.C. 20016
Attn: Alfred Liggins, President
After April 1, 1997:
Radio One, Inc.
5900 Princess Garden Parkway
Suite 800
Lanham, Maryland
Attn: Alfred Liggins, President
with a copy to: Jerry Moore, III, Esq.
Arter & Hadden
1801 K Street, N.W., Suite 400K
Washington, D.C. 20006-1301
21. PERFORMANCE. Time is of the essence in the performance and satisfaction of
each and every obligation and condition of this Agreement and the Purchase
Option, including but not limited to, the date by which Purchaser is obligated
to exercise the
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Purchase Option, and the date by which the parties are to close the purchase and
sale of the Property in accordance with the terms and conditions hereof.
22. BINDING EFFECT This Agreement shall be binding upon and shall inure to the
benefit of each of the parties hereto, their respective successors, and
permitted assigns.
23. ENTIRE AGREEMENT. This Agreement and the Exhibits constitute the sole and
entire agreement between Purchaser and Seller and no modification hereof shall
be binding unless signed by both Purchaser and Seller.
24. GOVERNING LAW. The validity, construction, interpretation and performance
of this Agreement shall in all ways be governed and determined in accordance
with the laws of the State of Maryland. The parties hereby consent to the
non-exclusive jurisdiction of any state or federal court for the geographical
area which includes Prince George's County, Maryland, in any proceedings
hereunder and waive any objection to any such proceedings based on improper
venue or forum non conveniens.
25. CAPTIONS. The captions used in this Agreement have been inserted only for
purposes of convenience and the same shall not be construed or interpreted so as
to limit or define the intent or the scope of any part of this Agreement.
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 31
<PAGE>
26. COUNTERPARTS. This Agreement may be executed in counterparts by the
parties hereto and each shall be considered an original.
27. INTERPRETATION. For purposes of construing the provisions of this
Agreement, the singular shall be deemed to include the plural and vice versa and
the use of any gender shall include the use of any other gender, as the context
may require. Any reference to a number of "days" herein shall be a reference to
"calendar days" unless an express reference in said provision is made to
"business days". If the date on which either Seller or Purchaser is required to
take action hereunder is not a business day (as defined below), the action shall
be taken on the next succeeding business day. For purposes hereof, "business
day" means any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the State
of Maryland.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
SELLER:
NATIONAL LIFE INSURANCE COMPANY
By: /s/ Thomas E. Murphy
---------------------------------
Name: Thomas E. Murphy
-------------------------------
Title: Director of Equity Real Estate
------------------------------
On: February 10, 1997
------------------------------
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 32
<PAGE>
PURCHASER:
RADIO ONE, INC., a Delaware corporation
By: /s/ Alfred Liggins
-----------------------------------
Alfred Liggins
Its: President
On:
----------------------------------
List of Exhibits
Exhibit A - Legal Description
Exhibit B - List of Leases
Exhibit C - List of Contracts
Exhibit D - Existing Title Policy
National Life Insurance Company
Radio One, Inc.
Purchase Option Agreement
Execution Copy
Page 33
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
ALL that parcel or parcels of real property located in Prince George's County,
Maryland known as Parcels C & E in a subdivision known as Lanham Associates
Property, as shown on a Plat recorded among the Plat Records of Prince George's
County, Maryland in Plat Book NLP No. 99, plat 13, the land and improvements
thereon being also known as the Lanham Office Building.
TOGETHER WITH the rights described in a Declaration of Easement dated June 7,
1973 and recorded among the Land Records of Prince George's County in Liber
4366, folio 813 and the rights described in Declaration of Covenants dated
November 8, 1977 and recorded among the aforesaid Land Records in Liber 4845,
folio 792.
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
by and between
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
and
RADIO ONE, INC.
for the sale and purchase of
Station WDRE(FM)
Dated as of December 6, 1996
.
<PAGE>
1. RULES OF CONSTRUCTION ............................................ 1
1.1 Defined Terms ............................................... 1
1.2 Other Definitions ........................................... 5
1.3 Number and Gender ........................................... 5
1.4 Headings and Cross-References ............................... 5
1.5 Computation of Time ......................................... 5
2. ASSETS TO BE CONVEYED ............................................ 5
2.1 Purchased Assets ............................................ 5
(a) Licenses................................................. 5
(b) Equipment ............................................... 5
(c) Contracts and Agreements ................................ 5
(d) Programming Materials ................................... 7
(e) Intellectual Property ................................... 7
(f) Intangible Property ..................................... 7
(g) Business Records ........................................ 7
(h) Station Records ......................................... 7
2.2 Excluded Assets ............................................. 7
(a) Receivables ............................................. 7
(b) Cash and Investments ................................... 7
(c) Disposed Personal Property .............................. 7
(d) Insurance ............................................... 7
(e) Employee Benefit Assets ................................. 7
(f) Contracts ............................................... 8
(g) Tax items ............................................... 8
(h) Corporate Records ....................................... 8
(i) Call Letters ............................................ 8
3. ESCROW DEPOSIT ................................................... 8
4. PURCHASE PRICE AND METHOD OF PAYMENT ............................. 8
4.1 Consideration ............................................. 8
4.2 Payment at Closing ........................................ 8
i
<PAGE>
4.3 Allocation ............................................... 9
4.4 Seller's Liabilities ...................................... 9
5. HART-SCOTT-RODINO ................................................ 9
6. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS ............... 9
6.1 Existence, Power and Identity ............................. 9
6.2 Binding Effect ............................................ 10
6.3 No Violation .............................................. 10
6.4 Conveyance of Assets ...................................... 10
6.5 Governmental Authorizations................................ 10
6.6 Equipment ................................................. 11
6.7 Contracts ................................................. 11
6.8 Promotional Rights ........................................ 12
6.9 Insurance ................................................. 12
6.10 Financial Statements ...................................... 12
6.11 Employees ................................................. 13
6.12 Employee Benefit Plans .................................... 13
6.13 Environmental Protection .................................. 14
6.14 Compliance with Law ....................................... 15
6.15 Litigation ................................................ 15
6.16 Insolvency Proceedings .................................... 16
6.17 Sales Agreements .......................................... 16
6.18 Sufficiency of Assets ..................................... 16
6.19 Related Parties ........................................... 16
6.20 Taxes ..................................................... 16
6.21 No Misleading Statements .................................. 16
7. BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS ................ 17
7.1. Existence and Power ....................................... 17
7.2. Binding Effect ............................................ 17
7.3. No Violation .............................................. 17
7.4. Litigation ................................................ 17
7.5. Licensee Qualifications ................................... 18
7.6. Financial Qualifications .................................. 18
7.7. No Misleading Statements .................................. 18
8. PRE-CLOSING OBLIGATIONS .......................................... 18
8.1. Application for Commission Consent ........................ 18
8.2. Access .................................................... 18
8.3. Operations Prior to Closing ............................... 19
ii
<PAGE>
8.4. Damage .................................................... 20
(a) Risk of Loss .......................................... 20
(b) Failure of Broadcast Transmissions .................... 21
(c) Resolution of Disagreements ........................... 21
8.5. Administrative Violations ................................. 21
8.6. Bulk Sales Act ............................................ 21
8.7. Control of Station ........................................ 22
8.8. Audit ..................................................... 22
8.9. Time Brokerage and Operating Agreement .................... 22
8.10. Closing Obligations ....................................... 22
9. STATUS OF EMPLOYEES .............................................. 22
9.1. Employment Relationship ................................... 22
9.2. Buyer's Right to Employ ................................... 22
10. CONDITIONS PRECEDENT ............................................. 23
10.1. Mutual Conditions ......................................... 23
(a) Approval of Assignment Application .................... 23
(b) Absence of Litigation ................................. 23
(c) Hart-Scott-Rodino ..................................... 23
(d) Noncompetition Agreement .............................. 23
10.2. Additional Conditions to Buyer's Obligation ............... 23
(a) Representations and Warranties ........................ 23
(b) Compliance with Conditions ............................ 23
(c) Discharge of Liens .................................... 24
(d) Third-Party Consents .................................. 24
(e) Estoppel Certificates ................................. 24
(f) Opinion of Seller's Counsel ........................... 24
(g) Final Order .......................................... 25
(h) Closing Documents ..................................... 25
10.3. Additional Conditions to Seller's Obligation .............. 26
(a) Representations and Warranties ........................ 26
(b) Compliance with Conditions ............................ 26
(c) Opinion of Buyer's Counsel ............................ 26
(d) Assumption of Liabilities ............................. 27
iii
<PAGE>
(e) Payment ............................................... 27
(f) Closing Documents ..................................... 27
11. CLOSING .......................................................... 27
12. PRORATIONS ....................................................... 27
12.1. Apportionment of Expenses ................................. 27
12.2. Determination and Payment ................................. 27
13. POST-CLOSING OBLIGATIONS ......................................... 28
13.1. Collection of Accounts Receivable ......................... 28
13.2. Indemnification ........................................... 28
(a) Buyer's Right to Indemnification ...................... 28
(b) Seller's Right to Indemnification ..................... 29
(c) Procedure for Indemnification ......................... 29
(d) Assignment of Claims .................................. 30
(e) Indemnification Sole Remedy ........................... 30
(f) De minimis Amount ..................................... 30
13.3. Liabilities ............................................... 30
14. DEFAULT AND REMEDIES ............................................. 30
14.1. Opportunity to Cure ....................................... 30
14.2. Seller's Remedies ......................................... 31
14.3. Buyer's Remedies .......................................... 31
15. TERMINATION OF AGREEMENT ......................................... 31
15.1. Failure to Close .......................................... 31
15.2. Designation for Hearing ................................... 32
16. GENERAL PROVISIONS ............................................... 32
16.1. Brokerage ................................................. 32
16.2. Fees ...................................................... 32
16.3. Notices ................................................... 32
16.4. Assignment ................................................ 33
16.5. Exclusive Dealings ........................................ 34
16.6. Third Parties ............................................. 34
16.7. Indulgences ............................................... 34
iv
<PAGE>
16.8. Survival of Representations and Warranties ................ 34
16.9. Prior Negotiations ........................................ 34
16.10. Exhibits and Appendices ................................... 34
16.11. Entire Agreement; Amendment ............................... 35
16.12. Counsel ................................................... 35
16.13. Governing Law, Jurisdiction ............................... 35
16.14. Severability .............................................. 35
16.15. Counterparts .............................................. 35
16.16. Further Assurances ........................................ 35
16.17. Tax Free Exchange ......................................... 36
16.18. No Disclosure ............................................. 36
v
<PAGE>
TABLE OF EXHIBITS
EXHIBIT 1 -- Form of Escrow Agreement
EXHIBIT 2 -- Form of Noncompetition Agreement
vi
<PAGE>
TABLE OF APPENDICES
APPENDIX A FCC Licenses
APPENDIX B Equipment
APPENDIX C Contracts
APPENDIX D Intellectual Property
APPENDIX E Seller's Places of Business
APPENDIX F Permitted Encumbrances
APPENDIX G Insurance
APPENDIX H Employees
APPENDIX I Employment and Benefits Agreements
APPENDIX J Environmental
APPENDIX K Litigation
vii
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement, made and entered into as of this 6th day of December, 1996,
by and between Jarad Broadcasting Company of Pennsylvania, Inc., a Pennsylvania
corporation ("Seller"), and Radio One, Inc., a Delaware corporation ("Buyer").
WITNESSETH THAT:
WHEREAS, Seller is the licensee of Station WDRE(FM), 103.9 MHz, Jenkintown,
Pennsylvania (the "Station"); and
WHEREAS, the parties desire that Buyer purchase certain assets used or held
for use in the operation of the Station and acquire the authorizations issued by
the Federal Communications Commission (the "Commission") for the operation of
the Station; and
WHEREAS, the authorizations issued by the Commission may not be assigned to
Buyer without the Commission's prior consent.
NOW THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties, intending to be legally bound, agree as follows:
1. RULES OF CONSTRUCTION.
1.1. DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ACCOUNTS RECEIVABLE" means the cash accounts receivable of Seller arising
from Seller's operation of the Station prior to Closing.
"ADMINISTRATIVE VIOLATION" means those violations described in Section 8.5
hereof.
"ASSIGNMENT APPLICATION" means the application on FCC Form 314 that Seller
and Buyer shall join in and file with the Commission requesting its consent to
the assignment of the FCC Licenses (as hereinafter defined) from Seller to
Buyer.
"BUSINESS RECORDS" means all business records of Seller (including logs,
public file materials and engineering records) relating to or used in the
operation of the Station and not relating solely to Seller's internal corporate
affairs.
"BUYER" means Radio One, Inc., a Delaware corporation.
"BUYER DOCUMENTS" means those documents, agreements and instruments to be
executed and delivered by Buyer in connection with this Agreement as described
in Section 7.2.
"CLOSING" means the consummation of the Transaction (as hereinafter
defined).
<PAGE>
"CLOSING DATE" means the date on which the Closing takes place, as
determined pursuant to Section 11.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COLLECTION PERIOD" means the 180-day period following the Closing Date
during which Buyer shall collect the Accounts Receivable of Seller, subject to
the provisions of Section 13.1.
"COMMISSION" means the Federal Communications Commission.
"COMMUNICATIONS ACT" shall mean the Communications Act of 1934, as amended.
"CONTRACTS" means those contracts, leases and other agreements listed or
described in Appendix C which are in effect on the date hereof and which Buyer
has agreed to assume, but not including Sales Agreements and Trade Agreements
(as hereinafter defined).
"ENVIRONMENTAL LAW" means any law, rule, order, decree or regulation of any
Governmental Authority relating to pollution or protection of the environment,
including any law or regulation relating to emissions, discharges, releases or
threatened releases of Hazardous Substances (as hereinafter defined) into
ambient air, surface water, groundwater, land or other environmental media.
"EQUIPMENT" means all tangible personal property and fixtures used or
useful in the operation of the Station as described in Section 2.1(b).
"EXCLUDED ASSETS" means those assets excluded from the Purchased Assets and
retained by the Seller, to the extent in existence on the Closing Date, as
specifically described in Section 2.2.
"FCC LICENSES" means all licenses, pending applications, permits and other
authorizations issued by the Commission for the operation of the Station listed
on Appendix A.
"FINAL ORDER" means any action that shall have been taken by the Commission
(including action duly taken by the Commission's staff, pursuant to delegated
authority) which shall not have been reversed, stayed, enjoined, set aside,
annulled or suspended; with respect to which no timely request for stay,
petition for rehearing, appeal or certiorari or sua sponte action of the
Commission with comparable effect shall be pending; and as to which the time for
filing any such request, petition, appeal, certiorari or for the taking of any
such sua sponte action by the Commission shall have expired or otherwise
terminated.
"FINANCIAL STATEMENTS" means Seller's unaudited financial statements and
balance sheets as described in Section 6.10.
2
<PAGE>
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, and any agency, court or other entity that
exercises executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"HAZARDOUS SUBSTANCES" means any hazardous or toxic waste, substance or
material, as those or similar terms are defined in or for purposes of any
applicable federal, state or local Environmental Law, and including without
limitation any asbestos or asbestos-related products, oils or petroleum-derived
compounds, CFCS, or PCBS.
"ESCROW AGENT" means Roberts & Eckard, P.C.
"ESCROW AGREEMENT" means the escrow agreement described in Section 3, the
form of which is attached as Exhibit 1.
"ESCROW DEPOSIT" means the monies deposited with the Escrow Agent described
in Section 3.
"INTANGIBLE PROPERTY" means all of Seller's right, title and interest in
and to the goodwill and other intangible assets used or useful in or arising
from the business of the Station as described in Section 2.1(f).
"INTELLECTUAL PROPERTY" means all Seller's right, title and interest in and
to the trademarks, tradenames, service marks, patents, franchises, copyrights,
including registrations and applications for registration of any of them,
slogans, jingles, logos, computer programs and software, trade secrets and
similar materials and rights relating to the Station as listed on Appendix D.
"KNOWLEDGE OF BUYER" means the actual knowledge, after reasonable inquiry
of Buyer's senior management, and the books and records of Buyer.
"KNOWLEDGE OF SELLER" means the actual knowledge, after reasonable inquiry
of Station management, the books and records of the Station, and the actual
knowledge of Ronald J. Morey.
"MATERIAL CONTRACTS" means those leases, contracts and agreements
specifically designated in Appendix C as being "Material Contracts."
"NONCOMPETITION AGREEMENT" means the agreement between Buyer, Ronald Morey
and Jed Morey the form of which is attached hereto as Exhibit 2.
"PERMITTED ENCUMBRANCES" means those liens or encumbrances to the Purchased
Assets described in Section 6.4 and set forth on Appendix F.
3
<PAGE>
"PURCHASE PRICE" shall mean the total consideration for the Purchased
Assets, the Noncompetition Agreements and the Consulting Agreement as described
in Section 4.1.
"PURCHASED ASSETS" means those assets which are the subject matter of this
Agreement that Seller shall sell, assign, transfer, convey and deliver to Buyer
as described in Section 2.1.
"SALES AGREEMENTS" means agreements entered into by Seller for the sale of
time on the Station for cash, as described in Section 2.1(c)(2).
"SELLER" means Jarad Broadcasting Company of Pennsylvania, Inc., a
Pennsylvania corporation.
"SELLER DOCUMENTS" means those documents, agreements and instruments to be
executed and delivered by Seller in connection with this Agreement as described
in Section 6.1.
"SPECIFIED EVENT" means those broadcast transmission failures described in
Section 8.4(b).
"STUDIO SITE" means the real estate located at Jenkintown, Pennsylvania
that is currently used as the Station's studio and office facilities.
"TRADE AGREEMENTS" means agreements entered into by Seller for the sale of
time on the Station in exchange for programming, merchandise or services,
including those listed on Appendix C.
"TRADE BALANCE" means the difference between the aggregate value of time
owed pursuant to the Trade Agreements and the aggregate value of goods and
services to be received pursuant to the Trade Agreements, as computed in
accordance with the Station's customary bookkeeping practices. The Trade Balance
is "negative" if the value of time owed exceeds the value of goods and services
to be received after Closing by more than Twenty Five Thousand Dollars
($25,000). The Trade Balance is "positive" if the value of time owed is less
than the value of goods and services to be received after Closing by more than
Twenty Five Thousand Dollars ($25,000).
"TRANSACTION" means the sale and purchase and assignments and assumptions
contemplated by this Agreement and the respective obligations of Seller and
Buyer set forth herein.
"TRANSMITTER SITE" means the real estate located in Philadelphia,
Pennsylvania that is currently used as the Station's transmitter site.
"TRANSMITTER TOWER" means the broadcast tower used by the Station and
located on the Transmitter Site.
4
<PAGE>
1.2. OTHER DEFINITIONS . Other capitalized terms used in this Agreement
shall have the meanings ascribed to them herein.
1.3. NUMBER AND GENDER. Whenever the context so requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be construed to mean or include any other gender or
genders.
1.4. HEADINGS AND CROSS-REFERENCES. The headings of the Sections and
Paragraphs hereof, the Table of Contents, the Table of Exhibits, and the Table
of Appendices have been included for convenience of reference only, and shall in
no way limit or affect the meaning or interpretation of the specific provisions
of this Agreement. All cross-references to Sections or Paragraphs herein shall
mean the Sections or Paragraphs of this Agreement unless otherwise stated or
clearly required by the context. All references to Appendices herein shall mean
the Appendices to this Agreement. Words such as "herein" and "hereof" shall be
deemed to refer to this Agreement as a whole and not to any particular provision
of this Agreement unless otherwise stated or clearly required by the context.
The term "including" means "including without limitation."
1.5. COMPUTATION OF TIME. Whenever any time period provided for in this
Agreement is measured in "business days" there shall be excluded from such time
period each day that is a Saturday, Sunday, recognized federal legal holiday, or
other day on which the Commission's offices are closed and are not reopened
prior to 5:30 p.m. Washington, D.C. time. In all other cases all days shall be
counted.
2. ASSETS TO BE CONVEYED.
2.1. Purchased Assets. On the Closing Date, Seller shall sell, assign,
transfer, convey and deliver to Buyer free of all liens, encumbrances,
mortgages, security interests of any kind or type whatsoever, all of Seller's
assets used in the conduct of the business and operations of the Station
(collectively referred to as the "Purchased Assets"), including, but not limited
to, the following;
(a) LICENSES. The FCC Licenses, and all other transferrable licenses,
permits and authorizations issued by any Governmental Authority that are used in
or necessary for the lawful operation of the Station as currently operated by
Seller.
(b) EQUIPMENT. All tangible personal property and fixtures used or
held for use in the operation of the Station, including the property and assets
listed or described in Appendix B, together with supplies, inventory, spare
parts and replacements thereof and improvements and additions thereto made
between the date hereof and the Closing Date (the "Equipment").
(c) CONTRACTS AND AGREEMENTS. The Contracts, Sales Agreements and
Trade Agreements, subject to the following:
5
<PAGE>
(1) Buyer shall be obligated to assume only (i) those Contracts
that are listed in Appendix C and (ii) those contracts and other agreements that
have been or will have been entered into in the ordinary course of the Station's
business, between the date hereof and the Closing Date, provided that, unless
otherwise approved in writing by Buyer, the obligations of the Station or Buyer
under those latter contracts and agreements entered into in the ordinary course
of business between the date hereof and the Closing do not exceed Five Thousand
Dollars ($5,000) per annum per Contract or Fifty Thousand Dollars ($50,000) per
annum in the aggregate or are terminable on not more than 30 days' notice.
(2) Buyer shall be obligated to assume only those Sales
Agreements that have been or will have been entered into in the ordinary course
of business at rates consistent with Seller's usual past practices.
(3) Buyer shall be obligated to assume only those Trade
Agreements that have been or will have been entered into in the ordinary course
of business, between the date hereof and the Closing Date, and (i) are
immediately preemptible for cash time sales trade; (ii) require the provision of
air time only on a "run of schedule" basis; and (iii) provide for goods and
services used in the operation of the Station. Notwithstanding the foregoing,
Buyer shall not be obligated to assume Trade Agreements that have an aggregate
negative Trade Balance exceeding Twenty Five Thousand Dollars ($25,000).
(4) Notwithstanding any provision of this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any
Contract or other agreement, undertaking or obligation if (i) an attempted
assignment, without the consent required for such assignment, may constitute a
breach thereof or may in any way have a material adverse effect on Seller's
rights thereunder prior to Closing or Buyer's rights thereunder after Closing
and (ii) such consent is not obtained by Seller prior to Closing, provided,
however, that Seller will use its best efforts at its own expense to obtain all
such consents prior to Closing. If any such required consent is not obtained, or
if an attempted assignment would be ineffective or would adversely affect
Seller's rights thereunder so that Buyer would not receive all such rights and
benefits after Closing, Seller shall arrange to provide Buyer to the fullest
extent possible with Seller's rights and benefits under any such Contract,
agreement, undertaking or obligation including enforcement for the benefit of
Buyer of any rights of Seller against any other party thereto arising out of the
breach or cancellation thereof by such party or otherwise.
(5) With respect to any Contracts, agreements, undertakings or
obligations that require the consent of third parties for assignment, but for
which the consent of such third parties has not been obtained as of the Closing
Date, Buyer shall assume Seller's obligations to be performed under those
Contracts, agreements, undertakings or obligations only for the period after
Closing during which, and only to the extent that, Buyer actually receives the
benefits that Seller was entitled to receive thereunder as of the Closing Date.
6
<PAGE>
(d) PROGRAMMING MATERIALS. All programs, programming material, and
music libraries in whatever form or nature owned by Seller and used or intended
for use in the operation of the Station.
(e) INTELLECTUAL PROPERTY. All Seller's right, title and interest in
and to the Intellectual Property.
(f) INTANGIBLE PROPERTY. All of Seller's right, title and interest in
and to the goodwill and other intangible assets used or useful in or arising
from the business of the Station, including all customer lists, and sales plans
(the "Intangible Property").
(g) BUSINESS RECORDS. All business records of Seller (including logs,
public file materials and engineering records) relating to or used in the
operation of the Station and not relating solely to Seller's internal corporate
affairs.
(h) STATION RECORDS. All of the Station's proprietary information,
technical information and data, machinery and equipment warranties (to the
extent such warranties are assignable), maps, plans, diagrams, blueprints,
schematics, files, records, studies, data, lists, general accounting records,
books of account, in whatever form, used or held for use for the business or
operation of the Station, including filings with the FCC which relate to the
Station.
2.2. EXCLUDED ASSETS. There shall be excluded from the Purchased Assets and
retained by the Seller, to the extent in existence on the Closing Date, the
following assets (the "Excluded Assets"):
(a) RECEIVABLES. All Accounts Receivable.
(b) CASH AND INVESTMENTS. All cash and cash equivalents on hand or in
bank accounts and other cash items and investment securities of Seller on the
Closing Date.
(c) DISPOSED PERSONAL PROPERTY. All tangible personal property
consumed or disposed of in the ordinary course of the Station's business after
the date hereof and prior to the Closing Date.
(d) INSURANCE. All contracts of insurance (including any cash
surrender value thereof) and all insurance proceeds of settlement and insurance
claims made by Seller on or before the Closing Date.
(e) EMPLOYEE BENEFIT ASSETS. All pension, profit sharing and savings
plans and trusts, and any assets thereof, except that any employee account
balances under any plan qualified under Section 401(k) of the Code shall be
promptly transferred to a plan qualified under Section 401(k) and, at Buyer's
request, made available by or on behalf of Buyer if such employee is hired by
Buyer, to the extent allowed under each such plan and applicable law.
7
<PAGE>
(f) CONTRACTS. All contracts that will have terminated or expired
prior to Closing by their terms and all contracts, agreements, instruments,
undertakings and obligations not expressly assumed by Buyer hereunder.
(g) TAX ITEMS. All claims, rights and interest in and to any refunds
for federal, state or local taxes for periods prior to the Closing Date.
(h) CORPORATE RECORDS. Seller's corporate minute books and other books
and records relating to internal corporate minutes and the sales and expenses of
Station and any other books and records not related to the operation of Station.
(i) CALL LETTERS. The call letters WDRE(FM).
3. ESCROW DEPOSIT. Buyer has already deposited Ten Thousand Dollars ($10,000) in
escrow with Seller. Simultaneously with the execution and delivery of this
Agreement, the Seller shall deliver that sum to Roberts & Eckard, P.C. ("Escrow
Agent"). Simultaneously with the execution and delivery of this Agreement by
both parties, Buyer has deposited with Escrow Agent an additional Nine Hundred
Ninety Thousand Dollars ($990,000). The total cash deposit of One Million
Dollars ($1,000,000) shall be referred to as the "Escrow Deposit". The Escrow
Deposit shall be held in an interest-bearing account with a federally insured
financial institution and disbursed by Escrow Agent pursuant to the terms of an
escrow agreement in the form attached hereto as Exhibit 1 (the "Escrow
Agreement"), which Escrow Agreement has been entered into by Seller, Buyer and
Escrow Agent simultaneously herewith.
4. PURCHASE PRICE AND METHOD OF PAYMENT.
4.1. CONSIDERATION. The total consideration for the Purchased Assets
and the Noncompetition Agreement (the "Purchase Price") shall be Twenty Million
Dollars ($20,000,000), payable as set forth in this Section 4.
4.2. PAYMENT AT CLOSING. At Closing, Buyer shall pay:
(a) Fifteen Million Dollars ($15,000,000)(as adjusted pursuant to
Sections 8.4 and 12.1) to Seller by check or wire transfer of same day funds
pursuant to wire transfer instructions which shall be delivered by Seller to
Buyer at least five business days prior to Closing.
(b) One Million Dollars ($1,000,000) to Seller by causing the
Escrow Agent to release the Escrow Deposit to Seller, with all interest earned
on the Escrow Deposit remitted to Buyer.
(c) Three Million Dollars ($3,000,000) to Ronald J. Morey for the
Noncompetition Agreement.
8
<PAGE>
(d) One Million Dollars ($1,000,000) to Jed R. Morey for the
Noncompetition Agreement.
4.3. ALLOCATION. The sum of Sixteen Million Dollars ($16,000,000)
shall be allocated to the Purchased Assets in accordance with an allocation
schedule prepared by Buyer pursuant to Section 1060 of the Code and mutually
agreed to by Seller and Buyer. Seller and Buyer shall use such allocation for
tax accounting (including preparation of IRS Form 8594), and all other purposes.
If Seller and Buyer have not agreed upon the allocation for the Purchased Assets
prior to the Closing Date, Closing shall take place as scheduled and any dispute
shall be resolved by a qualified media appraiser mutually acceptable to Seller
and Buyer, whose decision shall be final and whose fees and expenses shall be
paid one-half by Seller and one-half by Buyer. If the allocation must be
determined by a media appraiser, Seller and Buyer agree to cooperate in good
faith so that such appraisal may be completed expeditiously.
4.4. SELLER'S LIABILITIES. Buyer does not and shall not assume or be
deemed to assume, pursuant to this Agreement or otherwise, any agreements,
liabilities, undertakings, obligations or commitments of Seller or the Station
of any nature whatsoever except: (i) those expressly assumed by Buyer pursuant
to this Agreement, provided, that, Buyer shall not assume liability for any
breaches, violations or defaults under the Contracts, Sales Agreements and Trade
Agreements that occurred prior to Closing; and (ii) prorated items that are to
be paid by Buyer after Closing pursuant to Section 12.l.
5. HART-SCOTT-RODINO As promptly as practicable and no later than ten (10) days
following the execution of this Agreement, Seller and Buyer shall complete any
filing that may be required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, (with Buyer paying any fees required in
conjunction with the filing) or shall mutually agree that no such filing is
required. Seller and Buyer shall diligently take all necessary and proper steps
and provide any additional information reasonably requested in order to comply
with the requirements of such Act.
6. SELLER'S REPRESENTATIONS; WARRANTIES AND COVENANTS. Seller hereby makes to
and for the benefit of Buyer, the following representations, warranties and
covenants:
6.1. EXISTENCE; POWER AND IDENTITY. Seller is a corporation duly
organized and validly existing under the laws of the State of Pennsylvania with
full corporate power and authority (a) to own, lease and use the Purchased
Assets as currently owned, leased and used, (b) to conduct the business and
operation of the Station as currently conducted and (c) to execute and deliver
this Agreement and each other document, agreement and instrument to be executed
and delivered by Seller in connection with this Agreement (collectively, the
"Seller Documents"), and to perform and comply with all of the terms,
obligations and covenants to be performed and complied with by Seller hereunder
and thereunder. The addresses of Seller's chief executive office and all of
Seller's additional places of business, and of all places where any of the
tangible personal property included in the Purchased Assets is now located, or
has
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been located during the past 180 days, are correctly listed in Appendix E.
Except as set forth in Appendix E, during the past five years, Seller has not
been known by or used, any corporate, partnership, fictitious or other name in
the conduct of the Station's business or in connection with the ownership, use
or operation of the Purchased Assets.
6.2. BINDING EFFECT. The execution, delivery and performance by Seller
of this Agreement has been and the Seller Documents will be duly authorized by
all necessary corporate action, and copies of those authorizing resolutions,
certified by Seller's Secretary shall be delivered to Buyer at Closing. No other
corporate action by Seller is required for Seller's execution, delivery and
performance of this Agreement or any of the Seller Documents. This Agreement has
been duly and validly executed and delivered by Seller to Buyer and constitutes
a legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to bankruptcy, reorganization, fraudulent
conveyance, insolvency, moratorium and similar laws relating to or affecting
creditors, and other obligees' rights generally and the exercise of judicial
discretion in accordance with general equitable principles.
6.3. NO VIOLATION. Except as set forth on Exhibit K, none of (i) the
execution, delivery and performance by Seller of this Agreement or any of the
Seller Documents, (ii) the consummation of the Transaction, or (iii) Seller's
compliance with the terms or conditions hereof will, with or without the giving
of notice or the lapse of time or both, conflict with, breach the terms or
conditions of, constitute a default under, or violate (x) Seller's articles of
incorporation or bylaws, (y) any judgment, decree, order, consent, agreement,
lease or other instrument (including any Contract, Sales Agreement or Trade
Agreement) to which Seller is a party or by which Seller or any of its assets
(including the Purchased Assets) or the Station is or may be legally bound or
affected, or (z) any law, rule, regulation or ordinance of any Governmental
Authority applicable to Seller or any of its assets (including the Purchased
Assets) or the operation of the Station.
6.4. CONVEYANCE OF ASSETS. At Closing, Seller shall convey to Buyer
good and marketable title to all the Purchased Assets, free and clear of all
liens, pledges, collateral assignments, security interests, capital or financing
leases, easements, covenants, restrictions and encumbrances or other defects of
title except: (i) the inchoate lien for current taxes or other governmental
charges not yet due and payable and that will be prorated between Seller and
Buyer pursuant to Section 12.1; and (ii) the permitted encumbrances listed in
Appendix F (the "Permitted Encumbrances").
6.5. GOVERNMENTAL AUTHORIZATIONS. Except for the FCC Licenses, no
licenses, permits, or authorizations from any Governmental Authority are
required to own, use or operate the Purchased Assets, to operate the Station or
to conduct Seller's business as currently operated and conducted by Seller. The
FCC Licenses are all the Commission authorizations held by Seller with respect
to the Station, and are all the Commission authorizations used in or necessary
for the lawful operation of the Station as currently operated by Seller. The FCC
Licenses are in full force and effect, are subject to no conditions or
restrictions other than those which appear on their face and are unimpaired by
any acts or omissions of Seller, Seller's officers, employees
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or agents. Seller has delivered true and complete copies of all FCC Licenses to
Buyer. There is not pending or, to the Knowledge of Seller, threatened, any
action by or before the Commission or any other Governmental Authority to
revoke, cancel, rescind or modify any of the FCC Licenses (other than
proceedings to amend Commission rules of general applicability or otherwise
affecting the broadcast industry generally), and there is not now issued,
outstanding or pending or, to the Knowledge of Seller, threatened, by or before
the Commission or any other Governmental Authority, any order to show cause,
notice of violation, notice of apparent liability, or notice of forfeiture or
complaint against Seller or otherwise with respect to the Station. The Station
is operating in material compliance with all FCC Licenses, the Communications
Act of 1934, as amended (the "Communications Act"), and the current published
rules, regulations and policies of the Commission. Seller has no knowledge of
any facts relating to it that, under the Communications Act or the current
published rules, regulations and policies of the Commission may cause the
Commission to deny Commission renewal of the FCC Licenses or deny Commission
consent to the Transaction.
6.6. EQUIPMENT. Seller has good and marketable title, both legal and
equitable, to the Equipment. The Equipment, together with any improvements and
additions thereto and replacements thereof less any retirements or other
dispositions as permitted by this Agreement between the date hereof and the
Closing Date, will, at Closing, be all the tangible personal property used or
useful in the lawful operation of the Station as currently operated by Seller.
Except as specifically indicated to the contrary in Appendix B, all Equipment is
serviceable, in good operating condition (reasonable wear and tear excepted),
and is not in imminent need of repair or replacement. All items of transmitting
and studio equipment included in the Equipment (i) have been maintained in a
manner consistent with generally accepted standards of good engineering practice
and (ii) will permit the Station to operate in accordance with the terms of the
FCC Licenses.
6.7. CONTRACTS. Seller has made available to Buyer or its
representatives complete and correct copies of all Contracts on Appendix C
hereto. Except for Sales Agreements, Trade Agreements and employment agreements
with the Station's employees, Appendix C includes all the contracts, leases, and
agreements to which Seller is a party and which Buyer has agreed to assume,
other than those contracts that will be performed in full prior to the Closing,
or by which Seller or the Station is or may be legally bound or affected which
have been entered into in connection with the ownership or operation of the
Station, other than those contracts that will be performed in full prior to the
Closing. To the Knowledge of Seller, each Contract is in full force and effect
and is unimpaired by any acts or omissions of Seller, Seller's employees or
agents, or Seller's officers. Except as set forth on Appendix C, there has not
occurred as to any Contract any event of default by Seller or any event that,
with notice, the lapse of time or otherwise, could become an event of default by
Seller. To the Knowledge of Seller, there has not occurred as to any Contract
any default by any other party thereto or any event that, with notice, the lapse
of time or otherwise, or at the election of any person other than Seller, could
become an event of default by such party. Those Contracts whose stated duration
extends beyond the Closing Date will, at Closing, to the Knowledge of Seller, be
in full force and effect,
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unimpaired by any acts or omissions of Seller, Seller's employees or agents, or
Seller's officers. If any Contract requires the consent of any third party in
order for Seller to assign that Contract to Buyer, Seller shall use reasonable
efforts to obtain at its own expense such consent prior to Closing.
6.8. PROMOTIONAL RIGHTS. The Intellectual Property set forth on
Appendix D includes all trademarks that Seller is transferring to Buyer, used to
promote or identify the Station, provided that the Intellectual Property does
not include the call sign WDRE. Except as set forth on Appendix D, the
Intellectual Property is in good standing and uncontested by any third party.
Except as set forth on Appendix D, to the Knowledge of Seller there is no
infringement or unlawful or unauthorized use of those promotional rights,
including the use of any slogan or logo by any broadcast or cable station in the
Philadelphia metropolitan area that may be confusingly similar to those
currently used by the Station. Except as set forth on Appendix D, to the
Knowledge of Seller, the operations of the Station do not infringe, and no one
has asserted to Seller that such operations infringe, any copyright, trademark,
tradename, service mark or other similar right of any other party.
6.9. INSURANCE. Appendix G lists all insurance policies held by Seller
with respect to the Purchased Assets and the business and operation of the
Station. Such insurance policies are in full force and effect, all premiums with
respect thereto are currently paid and Seller is in compliance with the terms
thereof. Seller has not received any notice from any issuer of any such policies
of its intention to cancel, terminate, or refuse to renew any policy issued by
it. Seller will maintain the insurance policies listed on Appendix G in full
force and effect through the Closing Date.
6.10. FINANCIAL STATEMENTS.
(a) Seller has furnished Buyer with unaudited Financial
Statements for the calendar years 1993, 1994 and 1995 and the nine (9) month
period ending September 30, 1996. The Financial Statements fairly present
Seller's financial income, expenses, assets, liabilities, and the results of
operations of the Station as of the dates and for the periods indicated. No
event has occurred and, prior to Closing, no event will have occurred that would
make such Financial Statement misleading in any material respect.
(b) Except as reflected in the balance sheets as of September 30,
1996, including the notes thereto and except for the current liabilities
incurred in the ordinary course of business of the Station since September 30,
1996, there exist no material liabilities of Seller, contingent or absolute,
matured or unmatured, known or unknown. Since September 30, 1996, (i) Seller has
not incurred any obligation or liability (contingent or otherwise), except in
the ordinary course of business and consistent with past business practices,
(ii) there has not been any discharge or satisfaction of any obligation or
liability owed to Seller which is not in the ordinary course of business or is
inconsistent with past business practices, or (iii) there has not occurred any
sale of or loss or material injury to the Purchased Assets except those
non-material assets disposed of in the ordinary course of business. The balance
sheets fairly present Seller's
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financial position, assets, liabilities, and the results of operations of the
Station as of the dates and for the periods indicated, subject to year end
adjustments.
6.11. EMPLOYEES. Except as otherwise listed in Appendix H. (i) no
employee of the Station is represented by a union or other collective bargaining
unit, no application for recognition as a collective bargaining unit has been
filed with the National Labor Relations Board, and, to the Knowledge of Seller,
there has been no concerted effort to unionize any of the Station's employees
and (ii) Seller has no other written employment agreement or arrangement with
any Station employee, and no written agreement concerning bonus, termination,
hospitalization or vacation. Included in Appendix H is a list of all persons
currently employed at the Station together with an accurate description of the
compensation for their respective employment as of the date of this Agreement.
Seller will promptly advise Buyer of any changes that occur prior to Closing
with respect to such information.
6.12. EMPLOYEE BENEFIT PLANS.
(a) Except as described in Appendix I, neither Seller nor any
Affiliates (as defined below) have at any time established, sponsored,
maintained, or made any contributions to, or been parties to any contract or
other arrangement or been subject to any statute or rule requiring them to
establish, maintain, sponsor, or make any contribution to, (i) any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended, and regulations thereunder (PERISH))
(pension Plans); (ii) any "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) ("Welfare Plans); or (iii) any deferred compensation, bonus,
stock option, stock purchase, or other employee benefit plan, agreement,
commitment, or arrangement (bother Plans). Seller and the Affiliates have no
obligations or liabilities (whether accrued, absolute, contingent, or
unliquidated, whether or not known, and whether due or to become due) with
respect to any "employee benefit plan" (as defined in Section 3(3) of ERISA), or
Other Plan that is not listed in Appendix I. For purposes of this Section 6.12,
the term "Affiliate" shall include all persons under common control with Seller
within the meaning of Sections 4001(a)(14) or (b)(1) of ERISA or any regulations
promulgated thereunder, or Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended (the Recodes).
(b) Each plan or arrangement listed in Appendix I (and any
related trust or insurance contract pursuant to which benefits under such plans
or arrangements are funded or paid) has been administered in all material
respects in compliance with its terms and in both form and operation is in
compliance with applicable provisions of ERISA, the Code, the Consolidated
Omnibus Budget Reconciliation Act of 1986 and regulations thereunder, and other
applicable law. Each Pension Plan listed in Appendic I has been determined by
the Internal Revenue Service to be qualified under Section 401(a) and, if
applicable, Section 401(k) of the Code, and nothing has occurred or been omitted
since the date of the last such determination that resulted or could result in
the revocation of such determination. Seller and the Affiliates have made all
required contributions or payments to or under each plan or arrangement listed
in Appendix I on a timely basis and have made adequate provision for reserves to
meet
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contributions and payments under such plans or arrangements that have not been
made because they are not yet due.
(c) The consummation of this Agreement (and the employment by
Buyer of former employees of Seller or any employees of an Affiliate) not result
in any carryover liability to Buyer for taxes, penalties, interest or any other
claims resulting from any employee benefit plan (as defined in Section 3(3) of
ERISA) or Other Plan. In addition, Seller and each Affiliate make the following
representations (i) as to all of their Pension Plans: (A) neither Seller nor any
Affiliate has become liable to the PBGC under ERISA under which a lien could
attach to the assets of Seller or an Affiliate; (B) Seller and each Affiliate
has not ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA; and (C) Seller and each Affiliate has
not made a complete or partial withdrawal from a multiemployer plan (as defined
in Section 3(37) of ERISA) so as to incur withdrawal liability as defined in
Section 4201 of ERISA, and (ii) all group health plans maintained by the Seller
and each Affiliate have been operated in material compliance with Section
4980B(f) of the Code.
(d) The parties agree that Buyer does not and will not assume the
sponsorship of, or the responsibility for contributions to, or any liability in
connection with, any Pension Plan, any Welfare Plan, or Other Plan maintained by
Seller or an Affiliate for its employees, former employees, retirees, their
beneficiaries or any other person. In addition and not as a limitation of the
foregoing, the parties agree that Seller and such Affiliate shall be liable for
any continuation coverage (including any penaldes, excise taxes or interest
resulting from the failure to provide continuation coverage) required by Section
4980B of the Code due to qualifying events that occur after the Closing Date
resulting Tom the Transaction contemplated by this Agreement.
6.13. ENVIRONMENTAL PROTECTION. Except as set forth on Appendix J. to
the Knowledge of Seller (i) no Hazardous Substances have been treated, stored,
used, released or disposed of on the Studio Site or Transmitter Site in any
manner that would cause Buyer to incur materiel liability under any
Environmental Laws; (ii) Seller is not liable for cleanup or response costs with
respect to any present or past emission, discharge, or release of any Hazardous
Substances; (iii) no Underground storage table (as that term is defined in
regulations promulgated by the federal Environmental Protection Agency) is used
in the operation of the Station or is located on the Studio Site or the
Transmitter Site; (iv) there are no pending actions, suits, claims, legal
proceedings or any other proceedings based on environmental conditions or
noncompliance at the Studio Site or Transmitter Site, or any part thereof, or
otherwise arising Tom Seller's activities involving Hazardous Substances; (v)
there are no conditions, facilities, procedures or any other facts or
circumstances at the Studio Site or Transmitter Site which constitute
noncompliance with environmental laws or regulations; and (vi) there are no
structures, improvements, equipment, activities, fixtures or facilities at the
Studio Site or Transmitter Site which are constructed with, use or otherwise
contain Hazardous Substances, including, but without limitation, asbestos or
polychlorinated biphenyls.
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6.14. COMPLIANCE WITH LAW. There is no outstanding complaint,
citation, or notice issued by any Governmental Authority asserting that Seller
is in violation of any material law, regulation, rule, ordinance, order, decree
or other material requirement of any Governmental Authority (including any
applicable statutes, ordinances or codes relating to zoning and land use, health
and sanitation, environmental protection, occupational safety and the use of
electric power) affecting the Purchased Assets or the business or operations of
the Station, and Seller is in material compliance with all such laws,
regulations, rules, ordinances, decrees, orders and requirements. Without
limiting the foregoing:
(a) The Station's transmitting and studio equipment is in
material respects operating in accordance with the terms and conditions of the
FCC Licenses, all underlying construction permits, and the published rules,
regulations, and policies of the Commission, including all requirements
concerning equipment authorization and human exposure to radio frequency
radiation.
(b) Seller has, in the conduct of the Station's business,
materially complied with all applicable laws, rules and regulations relating to
the employment of labor, including those concerning wages, hours, equal
employment opportunity, collective bargaining, pension and welfare benefit
plans, and the payment of Social Security and similar taxes, and Seller is not
liable for any arrears of wages or any tax penalties due to any failure to
comply with any of the foregoing.
(c) Seller's affirmative action program for the Station and
Seller's other employment practices materially comply with the Commission's
published rules, regulations and policies.
(d) All ownership reports, employment reports, tax returns and
other material documents required to be filed by Seller with the Commission or
other Governmental Authority have been fled; such reports and filings are
accurate and complete in all material respects; such items as are required to be
placed in the Stadon's local public inspection file have been placed in such
file; all proofs of performance and measurements that are required to be made by
Seller with respect to the Stadon's transmission facilities have been completed
and filed at the Station; and all information contained in the foregoing
documents is true, complete and accurate.
(e) Seller has paid to the Commission the regulatory fees due for
the Station for the years 1994 96.
6.15. LITIGATION. Except for proceedings affecting radio broadcasters
generally and except as set forth on Appendix K, there is no litigation,
complaint, investigation, suit, claim, action or proceeding pending, or to the
Knowledge of Seller, threatened before or by the Commission, any other
Governmental Authority, or any arbitrator or other person or entity relating to
the business or operations of the Station or to the Purchased Assets. Except as
set forth on Appendix K, there is no other litigation, action, suit, complaint,
claim, investigation or proceeding pending, or to the Knowledge of Seller,
threatened that may give rise to any claim
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against any of the Purchased Assets or adversely affect Seller's ability to
consummate the Transaction as provided herein. To the Knowledge of Seller,
Seller has not consulted with counsel concerning any facts that could reasonably
result in any such proceedings.
6.16. INSOLVENCY PROCEEDINGS. No insolvency proceedings of any
character, including bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting Seller, the
Station Assets or the Purchased Assets are pending or, to the Knowledge of
Seller, threatened. Seller has not made an assignment for the benefit of
creditors.
6.17. SALES AGREEMENTS. The Sales Agreements in existence on the date
hereof have been entered into in the ordinary course of the Station's business,
at rates consistent with Seller's usual past practices.
6.18. SUFFICIENCY OF ASSETS. The Purchased Assets are and, on the
Closing Date will be, sufficient to conduct the operation and business of the
Station in the manner in which it is currently being conducted.
6.19. RELATED PARTIES. Except as disclosed in Appendix L neither
Seller nor any shareholder, officer or director of Seller has any interest
whatsoever in any corporation, firm, partnership or other business enterprise
which has had any business transactions with Seller relating to the Purchased
Assets or the Station, and no shareholder of Seller has entered into any
transactions with Seller relating to the Purchased Assets or the Station.
6.20. TAXES. The Seller has timely filed with all appropriate
Governmental Authority all federal, state, commonwealth, local, and other tax or
information returns and tax reports (including, but not limited to, all income
tax, unemployment compensation, social security, payroll, sales and use, profit,
excise, privilege, occupation, property, ad valorem, franchise, license, school
and any other tax under the laws of the United States or of any state or any
commonwealth or any municipal entity or of any political subdivision with valid
taxing authority) due for all periods ended on or before the date hereof. Seller
has paid in full all federal, state, commonwealth, foreign, local and other
governmental taxes, estimated taxes, interest, penalties, assessments and
deficiencies (collectively, Taxes) which have become due pursuant to such
returns or without returns or pursuant to any assessments received by Seller. To
the Knowledge of Seller, such returns and forms are true, correct and complete
in all material respects, and to the Knowledge of Seller, Seller has w liability
for any Taxa in excess of the Taxes shown on such returns. Seller is wit a party
to any pending action or proceeding and, to the Knowledge of Seller, there is w
action or proceeding threatened by any Governmental Authority against Seller for
assessment or collection of any Taxes, and no unresolved claim for assessment or
collection of any Taxes has been asserted against Seller.
6.21. NO MISLEADING STATEMENTS. No provision of this Agreement
relating to Seller, the Station or the Purchased Assets or any other document,
Appendix, Exhibit or other information furnished by Seller to Buyer in
connection with the execution, delivery and
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performance of this Agreement, or the consummation of the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to be stated in
order to make the statement, in light of the circumstances in which it is made,
not misleading. All Exhibits and Appendices attached hereto are materially
accurate and complete as of the date hereof. Seller, prior to Closing, shall
update the Appendices to assure their continued accuracy and shall advise Buyer
upon receipt of any notice, document or occurrence of an event that would make
any representation or warranty contained in this Section 6 untrue.
7. BUYER'S REPRESENTATIONS. WARRANTIES AND COVENANTS. Buyer hereby makes
to and for the benefit of Seller, the following representations, warranties and
covenants:
7.1. EXISTENCE AND POWER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to assume and perform this Agreement.
7.2. BINDING EFFECT. The execution, delivery and performance by Buyer
of this Agreement, and each other document, agreement and instrument to be
executed and delivered by Buyer in connection with this Agreement (collectively,
the "Buyer Documents~) has been or will be duly authorized by all necessary
corporate action, and copies of those authorizing resolutions, certified by
Buyer's Secretary shall be delivered to Seller at Closing. No other corporate
action by Buyer is required for Buyer's execution, delivery and performance of
this Agreement or any of the Buyer Documents. This Agreement has been, and each
of the Buyer Documents will be, duly and validly executed and delivered by Buyer
to Seller and constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, subject to bankruptcy, reorganization,
fraudulent conveyance, insolvency, moratorium and similar laws relating to or
affecting creditors' and other obligees' rights generally and the exercise of
judicial discretion in accordance with general equitable principles.
7.3. NO VIOLATION. None of (i) the execution, delivery and performance
by Buyer of this Agreement or any of the Buyer Documents, (ii) the consummation
of the Transaction, or (iii) Buyer's compliance with the terms and conditions
hereof will, with or without the giving of notice or the lapse of time or both,
conflict with, breach the terms or conditions of, constitute . a default under,
or violate (x) Buyer's articles of incorporation or by-laws or (y) any judgment,
decree, order, consent agreement, lease or other instrument to which Buyer is a
party or by which Buyer is legally bound.
7.4. LITIGATION. There is no litigation, action, suit, complaint,
proceeding or investigation, pending or, to the Knowledge of Buyer, threatened
that may adversely affect Buyer's ability to consummate the Transaction as
provided herein. Buyer is not aware of any facts that could reasonably result in
any such proceedings.
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7.5. LICENSEE QUALIFICATIONS. To the Knowledge of Buyer, after
consultation with counsel familiar with the published rules, regulations and
policies of the Commission, there is no fact that would, under the published
rules, regulations and policies of the Commission, or the Communications Act
disqualify Buyer from being the assignee of the FCC Licenses or the owner and
operator of the Station. Should Buyer become aware of any such fact, it will so
inform Seller, and Buyer will use reasonable efforts to remove any such
disqualification. Buyer will not take any action that Buyer knows, or has reason
to believe, would result in such disqualification.
7.6. FINANCIAL QUALIFICATIONS. At Closing, Buyer will have sufficient
funds on hand or from committed sources to pay the Purchase Price.
7.7. NO MISLEADING STATEMENTS. No provision of this Agreement relating
to Buyer or other information furnished by Buyer to Seller in connection with
the execution, delivery and performance of this Agreement, or the consummation
of the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated in order to make the statement, in light of the
circumstances in which it is made, not misleading.
8. PRE-CLOSING OBLIGATIONS. The parties covenant and agree as follows
with respect to the period prior to Closing:
8.1. APPLICATION FOR COMMISSION CONSENT. Within five (5) business days
from the date of this Agreement, Seller and Buyer shall join in and file the
Assignment Application, and they shall diligently take all steps necessary or
desirable and proper expeditiously to prosecute the Assignment Application and
to obtain the Commission's determination that grant of the Assignment
Application will serve the public interest, convenience and necessity. Each
party shall promptly provide the other with a copy of any pleading, order or
other document sewed on the other relating to the Assignment Application. In the
event that Closing occurs prior to a Final Order, then each party's obligations
hereunder shall survive the Closing.
8.2. ACCESS. Between the date hereof and the Closing Date, Seller
shall give Buyer and representatives of Buyer reasonable access to the Purchased
Assets, the Station, the employees of Seller and the Station and the books and
records of Seller relating to the business and operations of the Station;
provided, that, Buyer shall provide Seller with at least three (3) business days
advance notice of: (i) the names of those employees who Buyer intends to contact
and (ii) the dates-of Buyer's visits to the Station's studio; provided that such
contacts and visits will be made in a manner that is not disruptive to the
Station's operations. During such visits Seller will cooperate with Buyer in
meeting with employees. It is expressly understood that, pursuant to this
Section, Buyer, at its expense, shall be entitled to conduct such engineering
inspections of the Station, such environmental assessments and surveys of the
Studio Site and the Transmitter Site (subject to the landlord's prior approval,
which Seller will cooperate in obtaining, and provided Buyer restores such sites
after such assessments), and such reviews of the Station's financial records as
Buyer may desire, so long as the same do not unreasonably
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interfere with Seller's operation of the Station. No inspection or investigation
made by or on behalf of Buyer, or Buyer's failure to make any inspection or
investigation, shall affect Seller's representations, warranties and covenants
hereunder or be deemed to constitute a waiver of any of those representations,
warranties and covenants.
8.3. OPERATIONS PRIOR TO CLOSING. Between the date of this Agreement
and the Closing Date and subject to any Time Brokerage Agreement entered into by
the parties:
(a) Seller shall operate the Station in a manner consistent with
Seller's and the Station's past practice and in material compliance with all
applicable laws, regulations, rules, decrees, ordinances, orders and
requirements of the Commission and all other Governmental Authority. Seller
shall promptly notify Buyer of any actions or proceedings that from the date
hereof are commenced against Seller or the Station or, to the Knowledge of
Seller, against any officer, director, employee, consultant, agent or other
representative of Seller with respect to the business of the Station or the
Purchased Assets.
(b) Seller shall: (i) use the Purchased Assets only for the
operation of the Station; (ii) maintain the Purchased Assets in substantially
their present condition (reasonable wear and tear in normal use and damage due
to unavoidable casualty excepted); (iii) replace and/or repair the Purchased
Assets as necessary in the ordinary course of business; (iv) maintain all
inventories of supplies, tubes and spare parts at levels at least equivalent to
those existing on the date of this Agreement; and (v) promptly give Buyer
written notice of any materially adverse developments with respect to the
Purchased Assets or the business or operations of the Station.
(c) Seller shall maintain the Station's Business Records in the
usual, regular and ordinary manner, on a basis consistent with prior periods.
(d) Seller shall not: (i) sell, lease, encumber or otherwise
dispose of any Purchased Assets or any interest therein except in the ordinary
course of business and only if any Purchased Asset disposed of is replaced by
property of like or better value, quality and utility prior to Closing; (ii)
cancel, terminate, modify, amend or renew any of the Contracts without Buyer's
express prior written consent except in accordance with the terms of such
Contracts; (iii) increase the compensation payable or to become payable to any
employee of the Station except in the ordinary course of business; or (iv)
except to the extent expressly permitted in Section 2.1(c), enter into any
Contract or other agreement (other than Sales Agreements), undertaking or
obligation or assume any liability that may impose any obligation on Buyer after
Closing and which is not subject to termination upon thirty (30) days notice,
whether Seller is acting within or outside of the ordinary course of the
Station's business, without Buyer's prior written consent.
(e) Seller and the Station will enter into Sales Agreements only
in the ordinary course of the Station's business, at rates consistent with
Seller's usual past practices.
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(f) Seller and the Station will enter into Trade Agreements only
in the ordinary course of the Station's business and only if such Trade
Agreements (i) are immediately preemptible for cash time sales trade; (ii)
require the provision of air time only on a "run of schedule" basis; and (iii)
provide for goods and services used in the operation of the Station.
(g) Seller shall use reasonable efforts to preserve the
operations, organization and reputation of the Station intact, by continuing to
make expenditures and engage in activities designed to promote the Station and
encourage the purchase of advertising time on the Station in a manner consistent
with Seller's past practices. Seller shall use reasonable efforts in accordance
with past practice to preserve the goodwill and business of the Station's
advertisers, suppliers and others having business relations with the Station,
and continue to conduct financial operations of the Station, including credit
and collection policies, with no less effort as in the prior conduct of the
business of the Station.
(h) Seller shall furnish Buyer with monthly financial statements
that are in a form consistent with what has been previously provided to Buyer
within thirty (30) days after the end of each calendar month, and with such
additional data concerning the Station's financial condition as are prepared by
Seller in the ordinary course of business and requested by Buyer.
(i) Seller shall not issue, sell or deliver any shares of stock
of Seller that would result in a transfer of control under the Communications
Act.
8.4. DAMAGE.
(a) RISK OF LOSS . The risk of loss or damage, confiscation or
condemnation of the Purchased Assets shall be borne by Seller at all times prior
to Closing. In the event of material loss or damage, Seller shall promptly
notify Buyer thereof and use its reasonable efforts to repair, replace or
restore the lost or damaged property to its former condition as soon as
possible. If the cost of repairing, replacing or restoring any lost or damaged
property is Twenty Thousand Dollars ($20,000) or less, and Seller has not
repaired, replaced or restored such property prior to the Closing Date, Closing
shall occur as scheduled and Buyer may deduct from the Purchase Price paid at
Closing the amount necessary to restore the lost or damaged property to its
former condition or replace it, whichever is less. If the cost to repair,
replace, or restore the lost or damaged property exceeds Twenty Thousands
Dollars ($20,000), and Seller has not repaired, replaced or restored such
property prior to the Closing Date but is making reasonable and diligent efforts
to complete such repair, replacement or restoration, then, in that event the
Closing, with prior consent of the Commission if necessary, shall be postponed
for such reasonable period of time (not to exceed ninety (90) days) as is
necessary for Seller to repair, replace or restore the lost or damaged property
to its former condition or replace it, whichever is less. In the event that the
repair, replacement or restoration is not completed within that period of
postponement, then the Closing shall proceed and Buyer may deduct from the
Purchase Price paid at Closing the amount necessary to restore the lost or
damaged property to its former condition, in which event Seller shall be
entitled to all proceeds under any applicable insurance policies with respect to
such claim; provided, that, if, after the expiration of the period of
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postponement the lost or damaged property has not been repaired, replaced or
restored in a manner that would permit operation of the Station with at least
eighty percent (80%) of its licensed effective radiated power, Buyer may
terminate this Agreement, in which event the Escrow Deposit and all interest
earned thereon shall be returned to Buyer and the parties shall be released and
discharged from any further obligation hereunder.
(b) FAILURE OF BROADCAST TRANSMISSIONS. Seller shall give prompt
written notice to Buyer if any of the following (a "Specified Event") shall
occur and continue for a period of more than four (4) hours: (i) the
transmission of the regular broadcast programming of the Station in the normal
and usual manner is interrupted or discontinued; or (ii) the Station is operated
at less than its licensed antenna height above average terrain or at less than
eighty percent (80%) of its licensed effective radiated power. If, prior to
Closing, the Station has not operated at its licensed operating parameters for
more than forty-eight (48) hours (or, in the event of force majeure or utility
failure affecting generally the market served by the Station, ninety-six (96)
hours), whether or not consecutive, during any period of thirty (30) consecutive
days, or if there are three (3) or more Specified Events each lasting more than
four (4) consecutive hours, then Buyer may, at its option: (i) terminate this
Agreement, or (ii) proceed in the manner set forth in Paragraph 8.4(a). In the
event of termination of this Agreement by Buyer pursuant to this Section, the
Escrow Deposit together with all interest accrued thereon shall be returned to
Buyer and the parties shall be released and discharged from any further
obligation hereunder.
(c) RESOLUTION OF DISAGREEMENTS. If the parties are unable to
agree upon the extent of any loss or damage, the cost to repair, replace or
restore any lost or damaged property, the adequacy of any repair, replacement,
or restoration of any lost or damaged property, or any other matter arising
under this Section, the disagreement shall be referred promptly to a qualified
consulting communications engineer mutually acceptable to Seller and Buyer who
is a member of the Association of Federal Communications Consulting Engineers,
whose decision shall be final, and whose fees and expenses shall be paid
one-half each by Seller and Buyer.
8.5. ADMINISTRATIVE VIOLATIONS. If Seller receives any finding, order,
complaint, citation or notice prior to Closing which states that any aspect of
the Station's operation violates or may violate any rule, regulation or order of
the Commission or of any other Governmental Authority (an "Administrative
Violation"), including, any rule, regulation or order concerning environmental
protection, the employment of labor or equal employment opportunity, Seller
shall promptly notify Buyer of the Administrative Violation, use reasonable
efforts to remove or correct the Administrative Violation, and be responsible
prior to Closing for the payment of all costs associated therewith, including
any fines or back pay that may be assessed.
8.6. BULK SALES ACT. Seller shall be responsible for compliance with
the provisions of any bulk sales statute applicable to the Transaction, and
shall indemnify and hold Buyer harmless from and against any claims, actions,
liabilities and all costs and expenses, including reasonable legal fees,
incurred or suffered by Buyer as a result of the failure to comply with any such
statute.
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8.7. CONTROL OF STATION. The Transaction shall not be consummated
until after the Commission has given its written consent thereto and between the
date of this Agreement and the Closing Date, Seller shall control, supervise and
direct the operation of the Station.
8.8. AUDIT. Between the date hereof and the Closing Date, Seller, its
shareholders, officers, directors and employees shall cooperate and Seller shall
cause its independent accounting firm to cooperate with Buyer for the purpose of
preparing, at Buyer's sole expense, audited Financial Statements. Such
cooperation shall include, but not be limited to, Buyer's access to and use of
information relied upon by the Seller's independent accounting firm in preparing
the unaudited Financial Statements.
8.9. TIME BROKERAGE AND OPERATING AGREEMENT. After execution of this
Agreement, Seller and Buyer shall cooperate in good faith and use reasonable
efforts to enter into a Time Brokerage Agreement ("TBA") that would be effective
at Buyer's option on or after January 1, 1997, and would permit Buyer to program
up to 24 hours per day, 7 days per week of the Station's programming subject to
Seller's obligation to provide programming responsive to the community's needs.
Such agreement would contain terms and conditions standard in the broadcasting
industry for these types of arrangements including Buyer's obligation to
reimburse Seller for all operating expenses of the Station. Buyer would pay to
Seller the sum of Fifty Thousand Dollars ($50,000) for the months of January and
February, Seventy Five Thousand Dollars ($75,000) for the month of March and One
Hundred Thousand Dollars ($100,000) for each month thereafter. Seller's
obligation to enter into the TBA is subject to Buyer providing evidence
satisfactory to Seller of a financing commitment from a duly qualified
institution agreeing to provide Buyer with sufficient monies to pay the Purchase
Price at Closing.
8.10. CLOSING OBLIGATIONS. Seller and Buyer shall make commercially
reasonable efforts to satisfy the conditions precedent to Closing.
9. STATUS OF EMPLOYEES.
9.1. EMPLOYMENT RELATIONSHIP. All Station employees shall be and
remain Seller's employees, with Seller having full authority and control over
their actions, and Buyer shall not assume the status of an employer or a joint
employer of, or incur or be subject to any liability or obligation of an
employer with respect to, any such employees unless and until actually hired by
Buyer. Seller shall be solely responsible for any and all liabilities and
obligations Seller may have to its employees, including, compensation, severance
pay and accrued vacation time and sick leave. Seller shall be solely responsible
for any and all liabilities, penalties, fines or other sanctions that may be
assessed or otherwise due under such laws on account of the Transaction and the
dismissal or termination of any of Seller's employees.
9.2. BUYER'S RIGHT TO EMPLOY. Seller consents to Buyer discussing with
the Station's employees, at any time after five (5) days from the execution of
this Agreement the possibility of their employment by Buyer; provided, that,
Buyer shall provide three (3) business days' advance notice to Seller of the
names of those employees who Buyer intends to contact. Seller
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agrees and acknowledges, however, that Buyer is under no obligation to offer
employment to any of those employees. Buyer has no obligation to assume the
contract between Seller and the current Program Director. Should Buyer agree to
assume the existing contract of the Station's Program Director, that shall not
preclude Seller from hiring the Program Director as a consultant with respect to
broadcast stations located outside the greater Philadelphia market.
10. CONDITIONS PRECEDENT.
10.1. MUTUAL CONDITIONS. The respective obligations of both Buyer and
Seller to consummate the Transaction are subject to the satisfaction of each of
the following conditions:
(a) APPROVAL OF ASSIGNMENT APPLICATION. The Commission shall have
granted the Assignment Application, and such grant shall be in full force and
effect on the Closing Date.
(b) ABSENCE OF LITIGATION. As of the Closing Date, no litigation,
action, suit or proceeding enjoining, restraining or prohibiting the
consummation of the Transaction shall be pending before any court, the
Commission or any other Governmental Authority or arbitrator; provided, however,
that this Paragraph may not be invoked by a party if any such litigation,
action, suit or proceeding was solicited or encouraged by, or instituted as a
result of any act or omission of, such party.
(c) HART-SCOTT-RODINO. If required by this Transaction, all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, shall have expired.
(d) NONCOMPETITION AGREEMENT. Ronald J. Morey, Jed Morey, and
Buyer shall have executed and delivered a Noncompetition Agreement, dated the
Closing Date, in the form attached hereto as Exhibit 2.
10.2. ADDITIONAL CONDITIONS TO BUYER'S OBLIGATION.
In addition to the satisfaction of the mutual conditions contained in
Section 10.1, the obligation of Buyer to consummate the Transaction is subject,
at Buyer's option, to the satisfaction or waiver by Buyer of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller to Buyer shall be true, complete, and correct in all
material respects as of the Closing Date with the same force and effect as if
then made.
(b) COMPLIANCE WITH CONDITIONS. All of the terms, conditions and
covenants to be complied with or performed by Seller on or before the Closing
Date under this Agreement and the Seller Documents shall have been duly complied
with and performed in all material respects.
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(c) DISCHARGE OF LIENS. Buyer shall have obtained at Buyer's
expense, at least 10 days prior to Closing, a report prepared by C.T.
Corporation System (or similar firm reasonably acceptable to Buyer) showing the
results of searches of lien, tax, judgment and litigation records, demonstrating
that the Purchased Assets are being conveyed to Buyer free and clear of all
liens, security interests and encumbrances except as expressly permitted by this
Agreement, otherwise consented to by Buyer in writing or to be discharged at
Closing. The record searches shall have taken place no more than 15 days prior
to the Closing Date.
(d) THIRD-PARTY CONSENTS. Seller shall have obtained (i) all
required third-party consents to Buyer's assumption of the Material Contracts,
such that Buyer will, after Closing, enjoy all the rights and privileges of
Seller under the Material Contracts subject only to the same obligations as are
binding on Seller pursuant to the Material Contracts' current terms; and (ii)
all other requisite third-party consents and approvals which may be necessary to
consummate the Transaction.
(e) ESTOPPEL CERTIFICATES. At Closing, Seller shall deliver to
Buyer a certificate executed by the other party to each Material Contract,
including the landlord under the leases for the Studio Site and the Transmitter
Site, dated no more than 15 days prior to the Closing Date, stating (i) that
such Contract is in full force and effect and has not been amended or modified;
(ii) the date to which all rent and/or other payments due thereunder have been
paid; and (iii) that Seller is not in breach or default under such Material
Contract. Seller shall use reasonable efforts to include in the Estoppel
Certificate a Statement that no event has occurred that, with notice or the
passage of time or both, would constitute a breach or default thereunder by
Seller.
(f) OPINION OF SELLER'S COUNSEL. At Closing, Seller shall deliver
to Buyer the written opinion or opinions of Seller's counsel, dated the Closing
Date, in scope and form satisfactory to Buyer, to the following effect:
(1) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Pennsylvania, with all
requisite corporate power and authority to enter into and perform this
Agreement.
(2) This Agreement has been duly executed and delivered by
Seller and such action has been duly authorized by all necessary corporate
action. This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms subject to
bankruptcy, reorganization, fraudulent conveyance, insolvency, moratorium and
similar laws relating to or affecting creditors' and other obligees' rights
generally and the exercise of judicial discretion in accordance with general
equitable principles.
(3) None of (i) the execution and delivery of this
Agreement, (ii) the consummation of the Transaction, or (iii) compliance with
the terms and conditions of this Agreement will, with or without the giving of
notice or lapse of time or both, conflict with,
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breach the terms and conditions of, constitute a default under, or violate
Seller's articles of incorporation or bylaws, or to counsel's knowledge, any
judgment, decree, or order, by which Seller, the Station or any of the Seller's
assets, including the Purchased Assets, may be bound or affected, as to which
counsel is representing or advising Seller.
(4) To counsel's knowledge, counsel is not representing or
advising Seller as to any pending or threatened suit, action, claim or
proceeding that questions or may affect the validity of any action to be taken
by Seller pursuant to this Agreement or that seeks to enjoin, restrain or
prohibit Seller from carrying out the Transaction.
(5) To counsel's knowledge, counsel is not representing or
advising Seller as to any outstanding judgment, or any pending or threatened
suit, action, claim or proceeding (other than proceedings affecting radio
broadcasters generally) that could reasonably be expected to have an adverse
effect upon the Purchased Assets or upon the business or operations of the
Station after Closing.
(6) Seller is the authorized legal holder of the FCC
Licenses, the FCC Licenses are in full force and effect, and the FCC Licenses
are not the subject of any pending license renewal application. The FCC Licenses
set forth on Appendix A constitute all FCC licenses and authorizations issued in
connection with the operation of the Station. There are no applications pending
before the Commission with respect to the Station.
(7) The Commission has consented to the assignment of the
FCC Licenses to Buyer and that consent has become a Final Order, unless the
requirement for a Final Order is waived by Buyer.
(8) To the best of such Counsel's knowledge, there is no
Commission investigation, notice of apparent liability or order of forfeiture,
pending or outstanding against the Station, or any complaint, petition to deny
or proceeding against or involving the Station pending before the Commission.
The foregoing opinions shall be for the benefit of and may
be relied on by Buyer and Buyer's lenders (identified at Closing). In rendering
such opinions, Seller's counsel may rely upon such corporate records of Seller,
such certificates of public officials and officers of Seller and such other
documents or assumptions as may be deemed appropriate or necessary. Any opinion
concerning the enforceability of this Agreement may be based on the laws of the
District of Columbia applicable to transactions in that jurisdiction.
(g) FINAL ORDER. The Commission's action granting the Assignment
Application shall have become a Final Order.
(h) CLOSING DOCUMENTS. At the Closing Seller shall deliver to
Buyer (i) such assignments, bills of sale and other instruments of conveyance as
are necessary to vest in Buyer title to the Purchased Assets, all of which
documents shall be dated as of the Closing Date, duly
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executed by Seller and in form reasonably acceptable to Buyer; (ii) a
certificate, dated the Closing Date, executed by Seller's President certifying
as to those matters set forth in Section 10.2(a) and (b); and (iii) copies of
Seller's corporate resolutions authorizing the Transaction, each certified as to
accuracy and completeness by Seller's Secretary.
10.3. ADDITIONAL CONDITIONS TO SELLER'S OBLIGATION. In addition to
satisfaction of the mutual conditions contained in Section 10.1, the obligation
of Seller to consummate the Transaction is subject, at Seller's option, to the
satisfaction or waiver by Seller of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer to Seller shall be true, complete and correct in all
material respects as of the Closing Date with the same force and effect as if
then made.
(b) COMPLIANCE WITH CONDITIONS. All of the terms, conditions and
covenants to be complied with or performed by Buyer on or before the Closing
Date under this Agreement shall have been duly complied with and performed in
all material respects.
(c) OPINION OF BUYER'S COUNSEL. At Closing, Buyer shall deliver
to Seller the written opinion of Buyer's counsel, dated the Closing Date, in
scope and form reasonably satisfactory to Seller, to the following effect:
(1) Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, with all
requisite corporate power and authority to enter into and perform this
Agreement.
(2) This Agreement has been duly executed by Buyer, and such
action has been duly authorized by all necessary corporate action. This
Agreement constitutes the legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to bankruptcy,
reorganization, fraudulent conveyance, insolvency, moratorium, and similar laws
relating to or affecting creditors' and other obligees' rights generally and the
exercise of judicial discretion in accordance with general equitable principles.
(3) None of (i) the execution and delivery of this
Agreement, (ii) the consummation of the Transaction, or (iii) compliance with
the terms and conditions of this Agreement will, with or without the giving of
notice, lapse of time or both, conflict with, breach the terms and conditions
of, constitute a default under or violate Buyer's articles of incorporation or
by-laws, or to counsel's knowledge, any judgment, decree or order to which Buyer
is a party or by which Buyer may be bound and as to which counsel is
representing or advising Buyer.
(4) To the knowledge of counsel, counsel is not representing
or advising Buyer as to any pending or threatened suit, action or proceeding
that questions or may affect the validity of any action to be taken by Buyer
pursuant to this Agreement, or that seeks to enjoin, restrain or prohibit Buyer
from carrying out the Transaction.
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The foregoing opinions shall be for the benefit of and may
be relied on by Seller. In rendering such opinions, Buyer's counsel may rely
upon such corporate records of Buyer, such certificates of public officials and
officers of Buyer and such other documents or assumptions as may be deemed
appropriate or necessary. Any opinion concerning the enforceability of this
Agreement may be based on the laws of the District of Columbia applicable to
transactions in that jurisdiction.
(d) ASSUMPTION OF LIABILITIES. Buyer shall assume and agree to
pay, perform and discharge Seller's obligations under the Contracts, Sales
Agreements and Trade Agreements to the extent Buyer has expressly agreed to
assume such obligations pursuant to Section 4.4.
(e) PAYMENT. Buyer shall pay Seller the portion of the Purchase
Price due at Closing, as provided in Section 4.2.
(f) CLOSING DOCUMENTS. Buyer shall deliver to Seller at the
Closing (i) copies of Buyer's corporate resolutions authorizing the Transaction
certified as to accuracy and completeness by Buyer's Secretary; and (ii) a
certificate, dated the Closing Date, executed by Buyer's President certifying as
to those matters set forth in Section 10.3(a) and (b).
11. CLOSING. The Closing Date shall be the tenth day after the date on
which the Commission grant of the Assignment Application becomes a Final Order,
or, at Buyer's option, if finality is waived, within fifteen (15) days after
grant of the Assignment Application or such other time as Seller and Buyer shall
mutually agree. Closing shall take place at 10:00 a.m. on the Closing Date at
the offices of Buyer's counsel, Roberts & Eckard, P.C., 1150 Connecticut Avenue,
N.W., Suite 1100, Washington D.C. 20036.
12. PRORATIONS.
12.1. APPORTIONMENT OF EXPENSES. Seller shall be responsible for all
expenses arising out of the business of the Station until 11:59 p.m. on the
Closing Date, and Buyer shall be responsible for all expenses arising out of the
business of the Station after 11:59 p.m. on the Closing Date to the extent such
expenses relate to liabilities assumed by Buyer pursuant to Section 4.4. All
overlapping expenses shall be prorated or reimbursed, as the case may be, as of
11:59 p.m. on the Closing Date.
12.2. DETERMINATION AND PAYMENT. Prorations shall be made, insofar as
feasible, at Closing and shall be paid by way of adjustment to the Purchase
Price. As to the prorations that cannot be made at Closing, the parties shall,
within ninety (90) days after the Closing Date, make and pay all such
prorations. If the parties are unable to agree upon all such prorations prior to
the expiration of that 90-day period, then any disputed items shall be referred
to a firm of independent certified public accountants, mutually acceptable to
Seller and Buyer, whose decision shall be final, and whose fees and expenses
shall be allocated between and paid by Seller and Buyer, respectively, to the
extent that such party does not prevail on the disputed matters decided by the
accountants.
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13. POST-CLOSING OBLIGATIONS. The parties covenant and agree as follows
with respect to the period subsequent to Closing:
13.1. COLLECTION OF ACCOUNTS RECEIVABLE. At Closing, Seller shall
assign to Buyer, for purposes of collection only, all of the Accounts Receivable
that are outstanding and unpaid on the Closing Date, except for those Accounts
Receivable which Seller has instituted litigation to collect as of the date of
this Agreement and which are identified on Appendix K. Buyer shall use such
efforts as are reasonable and in the ordinary course of business to those
Accounts Receivable for a period of one hundred eighty (180) days following the
Closing Date (the "Collection Period"). This obligation, however, shall not
extend to the institution of litigation, employment of counsel or any other
extraordinary means of collection. So long as those Accounts Receivable are in
Buyer's possession, neither Seller nor its agents shall make any solicitation of
them for collection purposes or institute litigation for the collection of any
amounts due thereunder. All payments received by Buyer during the Collection
Period from any person obligated with respect to any Accounts Receivable shall
be applied first to Seller's account, and only after full satisfaction thereof,
to Buyer's account; provided, however, that if the customer instructs Buyer to
apply such payment to amounts owed by such customer to Buyer, then that account
shall be deemed a contested account governed by the following sentence. If,
during the Collection Period, any account debtor contests the validity of its
obligation with respect to any Account Receivable, then Buyer shall return that
Account Receivable to Seller after which Seller shall be solely responsible for
the collection thereof. Buyer shall not have the right to compromise, settle, or
adjust the amounts of any of the Accounts Receivable without Seller's prior
written consent. Forty five (45) days after the Closing Date and then on the
fifteenth (l5th) day after the close of each preceding month, Buyer shall
furnish Seller with a list of Accounts Receivable collected during the
applicable period accompanied by a payment equal to the amount of such
collections, less any salesperson's, agency, and representative commissions
applicable thereto that are deducted and paid by Buyer from the proceeds of such
collections. Any Accounts Receivable that are not collected during the
Collection Period shall be reassigned to Seller after which Buyer shall have no
further obligation to Seller with respect to the Accounts Receivable; provided,
however, that all funds subsequently received by Buyer (without time limitation)
that can be specifically identified, whether by accompanying invoice or
otherwise, as a payment on the Accounts Receivable shall be paid over or
forwarded to Seller.
13.2. INDEMNIFICATION.
(a) BUYER'S RIGHT TO INDEMNIFICATION. Seller hereby indemnifies
and holds Buyer and its assigns harmless from and against (i) any breach,
misrepresentation, or violation of any of Seller's representations, warranties,
covenants, or other obligations contained in this Agreement or in any Seller
Document; (ii) all obligations and liabilities of Seller and/or the Station not
expressly assumed by Buyer pursuant to Section 4.4; and (iii) all claims by
third parties against Buyer attributable to the operation of the Station and/or
the use or ownership of the Purchased Assets prior to Closing. This indemnity is
intended by Seller to cover all actions, suits, proceedings, claims, demands,
assessments, adjustments, interest, penalties, costs and
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expenses (including, reasonable fees and expenses of counsel), whether suit is
instituted or not and, if instituted, whether at the trial or appellate level,
with respect to any and all of the specific matters set forth in this indemnity.
(b) SELLER'S RIGHT TO INDEMNIFICATION. Buyer hereby indemnifies
and holds Seller and its assigns harmless from and against (i) any breach,
misrepresentation or violation of any of Buyer's representations, warranties,
covenants or obligations contained in this Agreement; (ii) all obligations and
liabilities expressly assumed by Buyer hereunder pursuant to Section 4.4; and
(iii) all claims by third parties against Seller attributable to Buyer's
operation of the Station after Closing. This indemnity is intended by Buyer to
cover all actions, suits, proceedings, claims, demands, assessments,
adjustments, interest, penalties, costs and expenses (including reasonable fees
and expenses of counsel), whether suit is instituted or not and, if instituted,
whether at the trial or appellate level, with respect to any and all of the
specific matters set forth in this indemnity.
(c) PROCEDURE FOR INDEMNIFICATION. The procedure for
indemnification shall be as follows:
(1) The party claiming indemnification (the "Claimant")
shall give written notice to the party from which indemnification is sought (the
"Indemnitor") promptly after the Claimant learns of any claim or proceeding
covered by the foregoing agreements to indemnify and hold harmless. Failure to
provide prompt notice shall not be deemed to jeopardize Claimant's right to
demand indemnification, provided, that, Indemnitor is not prejudiced by the
delay in receiving notice.
(2) With respect to claims between the parties, following
receipt of notice from the Claimant of a claim, the Indemnitor shall have 15
days to make any investigation of the claim that the Indemnitor deems necessary
or desirable, or such lesser time if a 15-day period would jeopardize any rights
of Claimant to oppose or protest the claim. For the purpose of this
investigation, the Claimant agrees to make available to the Indemnitor and its
authorized representatives the information relied upon by the Claimant to
substantiate the claim. If the Claimant and the Indemnitor cannot agree as to
the validity and amount of the claim within the l5-day period, or lesser period
if required by this Section (or any mutually agreed upon extension hereof) the
Claimant may seek appropriate legal remedies.
(3) The Indemnitor shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense of such claim,
provided, that, Indemnitor acknowledges in writing to Claimant that Indemnitor
would assume responsibility for and demonstrates its financial ability to
satisfy the claim should the party asserting the claim prevail. In the event
that the Indemnitor shall not satisfy the requirements of the preceding sentence
or shall elect not to undertake such defense, or within 15 days after notice of
any such claim from the Claimant shall fail to defend, the Claimant shall have
the right to undertake the defense, compromise or settlement of such claim, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnitor. Anything in this Section 13.2(c)(3)
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<PAGE>
to the contrary notwithstanding, (i) if there is a reasonable probability that a
claim may materially and adversely affect the Claimant other than as a result of
money damages or other money payments, the Claimant shall have the right, at its
own cost and expense, to participate in the defense, compromise or settlement of
the claim, (ii) the Indemnitor shall not, without the Claimant's written
consent, settle or compromise any claim or consent to entry of any judgment
which does not include as an unconditional term thereof the giving by the
plaintiff to the Claimant of a release from all liability in respect of such
claim, and (iii) in the event that the Indemnitor undertakes defense of any
claim consistent with this Section, the Claimant, by counsel or other
representative of its own choosing and at its sole cost and expense, shall have
the right to consult with the Indemnitor and its counsel or other
representatives concerning such claim and the Indemnitor and the Claimant and
their respective counsel or other representatives shall cooperate with respect
to such claim.
(d) ASSIGNMENT OF CLAIMS. If any payment is made pursuant to this
Section 13.2, the Indemnitor shall be subrogated to the extent of such payment
to all of the rights of recovery of Claimant, and Claimant shall assign to
Indemnitor, for its use and benefit, any and all claims, causes of actions, and
demands of whatever kind and nature that Claimant may have against the person,
firm, corporation or entity giving rise to the loss for which payment was made.
Claimant agrees to reasonably cooperate in any efforts by Indemnitor to recover
such loss from any person, firm, corporation or entity.
(e) INDEMNIFICATION SOLE REMEDY. The right to indemnification
provided for in this Section shall be the exclusive remedy of either party after
Closing in connection with any breach by the other party of its representations,
warranties, covenants or other obligations hereunder
(f) DE MINIMS AMOUNT. Neither party shall be liable to the other
for indemnification hereunder, exclusive of indemnification for liabilities
retained by Seller or assumed by Buyer, until such amount claimed exceeds One
Hundred Thousand Dollars ($100,000) in the aggregate and then from the first
dollar thereof.
13.3. LIABILITIES. Following the Closing Date, Seller shall pay
promptly when due all of the debts and liabilities of Seller relating to the
Station, other than liabilities specifically assumed by Buyer hereunder.
Promptly shall be defined as no later than thirty (30) days after the due date.
14. DEFAULT AND REMEDIES.
14.1. OPPORTUNITY TO CURE. Except as provided in Section 8.4(a), if
either party believes the other to be in breach hereunder, the former party
shall provide the other with written notice specifying in reasonable detail the
nature of such breach. If the breach has not been cured by the earlier of: (i)
the Closing Date, or (ii) within 10 days after delivery of that notice (or such
additional reasonable time as the circumstances may warrant provided the party
in breach undertakes diligent, good faith efforts to cure the breach within such
10 day period
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and continues such efforts thereafter), then the party giving such notice may
consider the other party to be in default and exercise the remedies available to
such party pursuant to this Section, subject to the right of the other party to
contest the alleged breach through appropriate proceedings.
14.2. SELLER'S REMEDIES. Buyer recognizes that if the Transaction is
not consummated as a result of Buyer's default, Seller would be entitled to
compensation, the extent of which is extremely difficult and impractical to
ascertain. To avoid this problem, the parties agree that if the Transaction is
not consummated due to the default of Buyer, Seller, provided that Seller is not
in default and has otherwise complied with its obligations under this Agreement,
shall be entitled to the Escrow Deposit, with interest earned thereon. The
parties agree that this sum shall constitute liquidated damages and shall be in
lieu of any other relief to which Seller might otherwise be entitled due to
Buyer's failure to consummate the Transaction as a result of a default by Buyer.
14.3. BUYER'S REMEDIES. Seller agrees that the Purchased Assets
include unique property that cannot be readily obtained on the open market and
that Buyer will be irreparably injured if this Agreement is not specifically
enforced. Therefore, Buyer shall have the right specifically to enforce Seller's
performance under this Agreement, and Seller agrees (i) to waive the defense in
any such suit that Buyer has an adequate remedy at law and (ii) to interpose no
opposition, legal or otherwise, as to the propriety of specific performance as a
remedy. If Buyer elects to terminate this Agreement as a result of Seller's
default instead of seeking specific performance, Buyer shall be entitled to the
return of the Escrow Deposit together with all interest earned thereon and any
other remedies to which Buyer may be entitled under law and equity.
15. TERMINATION OF AGREEMENT.
15.1. FAILURE TO CLOSE. This Agreement may be terminated at the option
of either party upon written notice to the other if (x) the Commission has not
granted the Assignment Application within nine (9) months after the Commission
accepts the Assignment Application for filing or (y) the Commission's action
granting the Assignment Application has not become a Final Order within twelve
(12) months after the Commission accepts the Assignment Application for filing;
provided, however, that a party may not terminate this Agreement if such party
is in default hereunder, or if a delay in any decision or determination by the
Commission respecting the Assignment Application has been caused or materially
contributed to (i) by any failure of such party to furnish, file or make
available to the Commission information within its control; (ii) by the willful
furnishing by such party of incorrect, inaccurate or incomplete information to
the Commission; or (iii) by any other action taken by such party for the purpose
of delaying the Commission's decision or determination respecting the Assignment
Application. This Agreement may also be terminated upon the mutual agreement of
Buyer and Seller. In the event of termination pursuant to this Section, the
Escrow Deposit, together with all interest earned thereon, shall be returned to
Buyer and the parties shall be released and discharged from any further
obligation hereunder unless: (x) the failure to consummate the Transaction is
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attributable to Buyer's default, and Seller is not in default and has otherwise
complied with its obligations under this Agreement, in which case the Escrow
Deposit plus interest earned thereon shall be released to Seller as liquidated
damages pursuant to Section 14.2; or (y)the failure to consummate the
Transaction is attributable to Seller's default, and Buyer is not in default and
has otherwise complied with its obligations under this Agreement, in which case
Buyer shall be entitled to the return of the Escrow Deposit and all interest
earned thereon as contemplated by this Section 15.1, and to such other remedies
as are referred to in Section 14.3.
15.2. DESIGNATION FOR HEARING. The time for approval provided in
Section 15.1 notwithstanding, either party may terminate this Agreement upon
written notice to the other, if, for any reason, the Assignment Application is
designated for hearing by the Commission, provided, however, that written notice
of termination must be given within 10 days after the release date of the
hearing designation order and that the party giving such notice is not in
default and has otherwise complied with its obligations under this Agreement.
Upon termination pursuant to this Section, the Escrow Deposit together with all
interest earned thereon shall be returned to Buyer and the parties shall be
released and discharged from any further obligation hereunder, provided,
however, that if the designation for hearing is predicated upon breach by either
party of a representation, warranty or covenant contained in this Agreement, the
non-breaching party may, in addition to termination, pursue the remedies
available to such non-breaching party under Sections 14.2 and 14.3.
16. GENERAL PROVISIONS.
16.1. BROKERAGE. Seller and Buyer represent to each other that neither
party has dealt with a broker in connection with the Transaction and that no
finders fee is due to any person or entity in connection with the Transaction,
except for a possible fee to be paid by Buyer at Closing or later to The
Zitelman Group, Inc.
16.2. FEES. All Commission filing fees for the Assignment Application,
shall be paid one-half by Seller and one-half by Buyer. Except as otherwise
provided herein, all other expenses incurred in connection with this Agreement
or the Transaction shall be paid by the party incurring those expenses whether
or not the Transaction is consummated.
16.3. NOTICES. All notices, requests, demands and other communications
pertaining to this Agreement shall be in writing and shall be deemed duly given
when (i) delivered personally (which shall include delivery by Federal Express
or other recognized overnight courier service that issues a receipt or other
confirmation of delivery) to the party for whom such communication is intended,
(ii) delivered by facsimile transmission with confirmation of receipt thereof or
(iii) three business days after the date mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
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(a) If to Seller:
Mr. Ronald J. Morey
Jarad Broadcasting Company of Pennsylvania, Inc.
1103 Stewart Avenue
Garden City, New York 11530
Fax: (516) 228-9133
with a copy (which shall not constitute notice) to:
Lewis J. Paper, Esquire
Dickstein Shapiro Morin and Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037
Fax: (202) 887-0689
(b) If to Buyer:
Mr. Alfred C. Liggins, President
Radio One, Inc.
4001 Nebraska Avenue
Washington, D.C. 20016
Fax: (202) 686-2762
with a copy (which shall not constitute notice) to:
Linda J. Eckard, Esquire
Roberts & Eckard, P.C.
ll50 Connecticut Avenue, N.W.
Suite 1100
Washington, D.C. 20036
Fax: (202) 296 0464
Either party may change its address for notices by written notice to the other
given pursuant to this Section. Any notice purportedly given by a means other
than as set forth in this Section shall be deemed ineffective.
16.4. ASSIGNMENT. Neither party may assign its rights and obligations
under this Agreement without the other party's express prior written consent,
provided, however, Buyer may assign its rights and obligations pursuant to this
Agreement without Seller's consent prior to Closing to (i) an entity which is a
subsidiary or parent of Buyer or to an entity owned or controlled by Buyer or
its principals or (ii) to Buyer's lenders as collateral for any indebtedness
33
<PAGE>
incurred by Buyer and only if, such assignment will not require the initiation
of another statutory 30-day public notice period under the Commission's
published rules, regulations or policies; and subsequent to Closing to (x) any
entity which acquires all or substantially all of the Purchased Assets or (y) to
Buyer's lenders as collateral for any indebtedness incurred by Buyer. Subject to
the foregoing, this Agreement shall be binding on, inure to the benefit of, and
be enforceable by the original parties hereto and their respective successors
and permitted assignees.
16.5. EXCLUSIVE DEALINGS. For so long as this Agreement remains in
effect, neither Seller nor any person acting on Seller's behalf shall, directly
or indirectly, solicit or initiate any offer from, or conduct any negotiations
with, any person or entity concerning the acquisition of all or any interest in
any of the Purchased Assets or the Station, other than Buyer or Buyer's
permitted assignees.
16.6. THIRD PARTIES. Nothing in this Agreement, whether express or
implied, is intended to: (i) confer any rights or remedies on any person other
than Seller, Buyer and their respective successors and permitted assignees; (ii)
relieve or discharge the obligations or liability of any third party; or (iii)
give any third party any right of subrogation or action against either Seller or
Buyer.
16.7. INDULGENCES. Unless otherwise specifically agreed in writing to
the contrary: (i) the failure of either party at any time to require performance
by the other of any provision of this Agreement shall not affect such party's
right thereafter to enforce the same; (ii) no waiver by either party of any
default by the other shall be taken or held to be a waiver by such party of any
other preceding or subsequent default; and (iii) no extension of time granted by
either party for the performance of any obligation or act by the other party
shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
16.8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The several
representations, warranties, and indemnification obligations of the parties
contained herein shall survive for fifteen months after the Closing Date except
that claims properly asserted within the fifteen month period shall survive
until finally and fully resolved; provided, however, that Buyer's
indemnification rights with respect to those obligations and liabilities of
Seller and/or the Station not expressly assumed by Buyer shall survive the
Closing until such liabilities and obligations are discharged in full. Likewise,
Seller's indemnification rights with respect to those liabilities and
obligations expressly assumed by Buyer shall survive the Closing until such
liabilities and obligations are discharged in full.
16.9. PRIOR NEGOTIATIONS. This Agreement supersedes in all respects
all prior and contemporaneous oral and written negotiations, understandings and
agreements between the parties with respect to the subject matter hereof. All of
such prior and contemporaneous negotiations, understandings and agreements are
merged herein and superseded hereby.
16.10. EXHIBITS AND APPENDICES. The Exhibits and Appendices attached
hereto or referred to herein are a material part of this Agreement, as if set
forth in full herein.
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<PAGE>
16.11. ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Exhibits and
Appendices to this Agreement set forth the entire understanding between the
parties in connection with the Transaction, and there are no terms, conditions,
warranties or representations other than those contained, referred to or
provided for herein and therein. Neither this Agreement nor any term or
provision hereof may be altered or amended in any manner except by an instrument
in writing signed by each of the parties hereto.
16.12. COUNSEL. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement.
16.13. GOVERNING LAW, JURISDICTION. This Agreement shall be governed
by, and construed and enforced in accordance with the laws of the State of New
York without regard to the choice of law rules utilized in that jurisdiction.
Buyer and Seller each (a) hereby irrevocably submit to the jurisdiction of the
courts of that state and (b)hereby waive, and agree not to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement or
the subject matter hereof may not be enforced in or by such court. Buyer and
Seller each hereby consent to service of process by registered mail at the
address to which notices are to be given. Each of Buyer and Seller agrees that
its submission to jurisdiction and its consent to service of process by mail is
made for the express benefit of the other party hereto. Final judgment against
Buyer or Seller in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction; provided,
however, that any party may at its option bring suit, or institute other
judicial proceedings, in any state or federal court of the United States or of
any country or place where the other party or its assets, may be found.
16.14. SEVERABILITY. If any term of this Agreement is illegal or
unenforceable at law or in equity, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby. Any illegal or unenforceable term shall be deemed to be void
and of no force and effect only to the minimum extent necessary to bring such
term within the provisions of applicable law and such term, as so modified, and
the balance of this Agreement shall then be fully enforceable.
16.15. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were on the same instrument. Each fully executed set of counterparts shall be
deemed to be an original, and all of the signed counterparts together shall be
deemed to be one and the same instrument.
16.16. FURTHER ASSURANCES. Each party shall at any time and from time
to time after the Closing execute and deliver to the other party such further
conveyances, assignments and other written assurances as may be requested to
vest and confirm in Buyer (or its assignee) the
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title and rights to and in all the Purchased Assets to be and intended to be
transferred, assigned and conveyed hereunder and to reflect Buyer's assumption
of the liabilities and obligations pursuant to this Agreement.
16.17. TAX FREE EXCHANGE. Seller has advised Buyer that it may elect
to structure this transaction as a tax-deferred like-kind exchange pursuant to
Internal Revenue Code Section 1031. Buyer will cooperate with such an exchange
provided, that, such tax-deferred, like-kind exchange shall (i) not delay the
Closing of this Transaction by the initiation of another statutory 30-day public
notice period under the Commission's published rules, regulations or policies or
otherwise delay the Closing, (ii) not result in any additional cost or expense
to Buyer, (iii) not result in any tax consequences to Buyer and (iv) not affect
Seller's liability for any of the representations, warranties, covenants and
obligations of Seller pursuant to this Agreement. At Closing Seller shall
execute a document which will provide that Seller indemnifies Buyer for any
claims that the intermediate party participating in the like-kind exchange may
have against Buyer.
16.18. NO DISCLOSURE. The parties agree that no public disclosure of
the contents of this Agreement will be made prior to the date that the
Assignment Application is filed absent prior approval from the non-disclosing
party.
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IN WITNESS WHEREOF, and to evidence their assent to the foregoing,
Seller and Buyer have executed this Asset Purchase Agreement under seal as of
the date first written above.
SELLER:
JARAD BROADCASTING COMPANY OF PENNSYLVANIA, INC.
By: /s/ Ronald J. Morey
-------------------------------------------
Ronald J. Morey,
President
BUYER:
RADIO ONE, INC.
By: /s/ Alfred C. Liggins
----------------------------------------------
Alfred C. Liggins
President
OFFICE LEASE
BETWEEN
CHALREP LIMITED PARTNERSHIP,
Landlord
and
RADIO ONE, INC.,
Tenant
<PAGE>
TABLE OF CONTENTS
Page
1. Reference Data ....................................................... 6
2. Demised Premises ..................................................... 7
3. Term ................................................................. 7
4. Base Rent ............................................................ 8
5. Payment of Share of Real Estate Taxes and Operating Costs............. 8
6. Separate Metering for Electricity .................................... 11
7. Use of Demised Premises .............................................. 11
8. Assignment and Subletting. ........................................... 11
9. Maintenance .......................................................... 12
10. Alterations ......................................................... 12
11. Signs; Furnishings .................................................. 13
12. Inspection .......................................................... 13
13. Insurance Rating .................................................... 13
14. Tenant's Equipment. ................................................. 14
15. Indemnity ........................................................... 14
16. Services and Utilities .............................................. 14
17. Liability of Landlord ............................................... 15
18. Damage by Fire or Casualty .......................................... 16
19. Damage Caused by Tenant ............................................. 17
20. Default of Tenant ................................................... 17
21. Waiver .............................................................. 18
22. Attornment .......................................................... 18
23. Condemnation ........................................................ 19
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24. Rules and Regulations ............................................... 19
25. Covenants of Landlord ............................................... 20
26. No Partnership ...................................................... 20
27. No Representations by Landlord ...................................... 20
28. Brokers ............................................................. 20
29. Notices ............................................................. 20
30. Estoppel Certificates ............................................... 21
31. Holding Over ........................................................ 21
32. Right of Landlord to Cure Tenant's Default........................... 21
33. Benefit and Burden .................................................. 22
34. [Intentionally Omitted.] ............................................ 22
35. Landlord as an Individual or Partnership............................. 22
36. Ground Lease ........................................................ 23
37. Additional Rights ................................................... 23
38. Financial Statements ................................................ 24
39. Insolvency or Bankruptcy of Tenant .................................. 24
40. Mortgagee Protection ................................................ 24
41. Waiver of Jury Trial ................................................ 24
42. Gender and Number ................................................... 24
43. Entire Agreement .................................................... 24
44. Invalidity of Particular Provisions ................................. 25
45. Joint and Several Liability ......................................... 25
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TABLE OF EXHIBITS AND RIDERS
Exhibit A - Floor Plan Showing Demised Premises
Exhibit B - Intentionally Omitted
Exhibit C - Rules and Regulations
Rider 1 - Renewal Option
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<PAGE>
OFFICE LEASE
THIS LEASE is made as of the _____ day of ____________, 1993, by CHALREP
LIMITED PARTNERSHIP (hereinafter referred to as "Landlord") and the Tenant named
in Section 1 (hereinafter referred to as "Tenant").
1. Reference Data. Each reference in this Lease to any of the following
subjects shall incorporate the data stated for that subject in this Section 1:
Landlord: CHALREP LIMITED PARTNERSHIP
c/o WOL Radio
400 H Street, N.E.
Washington, D.C. 20002
Tenant: RADIO ONE, INC., a District of Columbia corporation
Tenant's Address: 400 H Street, N.E.
Washington, D.C. 20002
Demised Premises:
The demised premises located on the third, fourth, fifth and
sixth floors of the Building, as more fully described in
Section 2 of this Lease and shown in the floor plan attached
as Exhibit A to this Lease, known as Suite Numbers 300, 40,
800 and 600.
Tenant's Use of the Demised Premises: General Office Use
Lease Commencement Date: November 1, 1993
Lease Expiration Date: October 31, 2003
Term: 10 years
Option to Renew Term: As set forth in Rider 1
Base Rent:
Lease Years Annual Base Rent Monthly Base Rent
1-5 $ 96,000.00 $ 8,000.00
6-10 120,000.00 10,000.00
11-15* 144,000.00 12,000.00
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* (if renewal option is exercised)
<PAGE>
Rent Commencement Date: December 1, 1993
Tenants Expense Share Percentage: 34.78%
Commencement Date for Tenant's Paying Tenant's Expense Share Share: December 1,
1993
Gross Rentable Area of demised premises: 8,000 square feet (the "Gross Rentable
Area")
Total Gross Rentable Area of the Building: 23,000 square feet
Security Deposit: None.
Brokers: None.
2. Demised Premises. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, for the term and upon the conditions hereafter provided,
the demised premises described in Section 1, in the office building (hereinafter
referred to as the "Building") situated at 100 St. Paul Street, Baltimore,
Maryland. The demised premises are as indicated on Exhibit A attached hereto and
made a part hereof. Tenant shall accept the demised premises on the Lease
Commencement Date in their "as is" condition. Any Alterations which Tenant may
thereafter wish to make in the demised premises shall be governed by Section 10
of this Lease. It is understood and agreed that Landlord will not make, and is
under no obligation to make, any structural or other alterations, decorations,
additions, or improvements in or to the demised premises.
3. Term.
(a) The term of this Lease shall commence on the Lease Commencement Date and
continue for the period indicated in Section 1. In the event the demised
premises are occupied by Tenant prior to the Lease Commencement Date, such
tenancy shall be deemed to be by the day and Tenant shall be responsible for
payment of Base Rent, in advance, at a rate of one-thirtieth (1/30) of the
monthly Base Rent, for each day of such occupancy prior to the Lease
Commencement Date and for all additional rent which arises hereunder with
respect to such period.
(b) For purposes of this Lease, the term "Lease Year" shall mean any period of
twelve (12) consecutive months during the term of the Lease commencing on the
Lease Commencement Date or an anniversary thereof.
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<PAGE>
4. Base Rent.
(a) Beginning with the Rent Commencement Date, Tenant shall pay to Landlord
monthly, in advance, without demand, as base rent (herein referred to as "Base
Rent") for the demised premises the amount as defined in Section 1.
(b) The first monthly payment of Base Rent shall be made on the Rent
Commencement Date, and the second and each subsequent monthly payment shall be
made on the first day of each and every calendar month thereafter during the
term hereof commencing with the first day of the first month following the month
within which the Rent Commencement Date occurs. Such payments shall be made to
Landlord at the address shown in Section 1 or to such other party or to such
other address as Landlord may designate from time to time by written notice to
Tenant. Such payments shall be made when due without demand, notice, or invoice
and without deduction, set-off, or counterclaim; provided, however, that any
payment made by check shall be deemed received subject to collection. If
Landlord shall at any time or times accept said Base Rent or additional rent
after it shall become due and payable, such acceptance shall not excuse delay
upon subsequent occasion, or constitute, or be construed as, a waiver of any or
all of Landlord's rights hereunder. Base Rent and all additional rent shall be
made payable to Landlord, or such other person, firm, or corporation as the
Landlord may designate in writing. If the Rent Commencement Date of this Lease
begins on a date other than on the first day of a calendar month, Base Rent
which arises hereunder from such date until the first day of the following
calendar month shall be prorated at the rate of one-thirtieth (1/30) of monthly
Base Rent for each day, payable in advance, and Tenant shall also pay Landlord
all additional rent which arises hereunder with respect to such period.
5. Payment of Share of Real Estate Taxes and Operating Costs.
(a) Tenant shall, commencing with the calendar year in which the Rent
Commencement Date occurs, for each calendar year (the "Adjustment Year") any
portion of which occurs during the term hereof, pay to Landlord, as additional
rent, an amount (herein referred to as "Tenant's Expense Share") equal to the
percentage specified in Section 1 (being the approximate proportion which the
Gross Rentable Area of the demised premised bears to the total gross rentable
area of the Building) of the total of Real Estate Taxes (as hereinafter defined)
and Operating Costs (as hereinafter defined) for the Adjustment Year.
(b) "Real Estate Taxes" are hereby defined as the total of all taxes and
assessments (including payments "in lieu of" taxes), general and special,
ordinary and extraordinary, foreseen or unforeseen, assessed, levied, or imposed
upon the Building and
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the land known as Lots 7 and 8 Ward 4 Section 1 Block 623 (the "Land") for any
Adjustment Year without regard to whether the same are actually paid or payable
during such year. Real Estate Taxes shall also include legal costs and other
costs and expenses incurred in appeal of the tax assessment upon which such Real
Estate Taxes are based, whether or not such appeal is successful. Such costs
shall be included in Real Estate Taxes for the fiscal year for which appeal is
made without regard to the date such costs are actually incurred. If Real Estate
Taxes are not assessed, levied, or imposed on the basis of an Adjustment Year,
the Real Estate Taxes assessed, levied, or imposed for any Adjustment Year shall
be determined by adding the portions of Real Estate Taxes assessed, levied, or
imposed within a given Adjustment Year.
(c) "Operating Costs" shall mean costs, actual and accrued, incurred in
connection with the management, operation, maintenance, repair, preservation,
and protection of the Building, the Land, and adjacent areas, including, without
limitation, (i) cost of air conditioning, ventilating, heating, mechanical,
security, protection, and elevator systems, and all other utilities (excluding
electricity); (ii) cost of water, supplies, equipment, and maintenance,
security, and service contracts; (iii) cost of repairs, general maintenance, and
cleaning; (iv) cost of fire, extended coverage, boiler, sprinklers, public
liability, property damage, rent, umbrella coverage, and other insurance; (v)
wages, salaries, accident insurance, and retirement, medical, and other employee
benefits and other labor costs; (vi) fees, charges, and other costs including
management fees, consultant fees, legal fees, and accounting fees of all
independent contractors engaged by Landlord or reasonably charged by Landlord to
perform services in connection with the operation of the Building; (vii) cost of
maintaining common areas, public areas, lobbies, parking areas, and similar
areas adjacent to the Building; (viii) amortized costs of improvements to the
Building or the Land which are required by governmental law or regulations; and
(ix) such other items as are customarily included in the cost of managing,
operating, and maintaining the Building, the Land, and adjacent areas in
accordance with accepted accounting or management principles or practice.
(d) At any time or times prior to or during an Adjustment Year, Landlord may
submit to Tenant a statement of Landlord's estimate of Tenant's expense Share
for such Adjustment Year. If such estimate is submitted prior to an Adjustment
Year, Tenant shall pay to Landlord one-twelfth (l/12) of the amount so estimated
on the first day of each month in advance, commencing on January 1 of the
Adjustment Year. In case such estimate is submitted during an Adjustment Year,
Tenant shall, within fifteen (15) days after the delivery of such statement, (i)
make a lump sum payment to Landlord equal to one-twelfth (1/12) of Tenant's
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Expense Share for such Adjustment Year multiplied by the number of months in
such Adjustment Year that will have elapsed prior to the first monthly payment
required by clause (ii) hereof, and (ii) begin paying to Landlord, as additional
monthly rent, due and payable on the first day of each month, an amount equal to
one-twelfth (1/12) of Tenant's Expense Share. After the expiration of each
Adjustment Year and the preparation of the annual statement of Real Estate Taxes
and Operating Costs for such Adjustment Year, Landlord shall submit to Tenant a
statement showing the determination of Tenant's Expense Share. If such statement
shows that the total of Tenant's monthly payments for such Adjustment Year
pursuant to this Section 5 exceed Tenant's Expense Share for such Adjustment
Year, then Tenant may deduct such overpayment from its next payment or payments
of Base Rent. If such statement shows that Tenant's Expense Share for such
Adjustment Year exceeded the aggregate of Tenant's monthly payments for such
Adjustment Year pursuant to this Section 5, then Tenant shall, within thirty
(30) days after receiving the statement, pay such deficiency to Landlord. In the
event that the number of days of the term which occur within the last Adjustment
Year is less than 365, then the amount payable by Tenant pursuant to this
Section 5 for such Adjustment Year shall be determined by multiplying the amount
of Tenant's Expense Share for the full period of such Adjustment Year by a
fraction with the number of days of the term occurring during such Adjustment
Year as the numerator and with 365 as the denominator. For calendar year 1993,
the amount payable by Tenant pursuant to this Section 5 shall be determined by
multiplying the amount Tenant's Expense Share for the full 12 months of 1993 by
1/12 (representing the portion of calendar year 1993 occurring on and after the
Rent Commencement Date).
(e) Notwithstanding the provision of Section 5(c) to the contrary, in the
event Landlord, at any time or times, makes a capital investment in
energy-saving equipment and thereby reduces the consumption of electricity in
the Building while maintaining the level of services required to be provided in
Section 16 hereof, the cost of such energy-saving equipment shall be amortized
over the useful life thereof and such annual amortization (as well as all
payments of interest thereon) shall be included in Operating Costs.
(f) If during all or part of any Adjustment Year, Landlord shall not furnish
any particular item of work or service (that would be included in Operating
Costs) to one hundred percent (100%) of the gross rentable area of the Building
because less than all of the Building is occupied or any tenant is itself
obtaining and providing such item of work or service, then an adjustment shall
be made in the Operating Costs for such Adjustment Year so that the Operating
Costs for such Adjustment Year shall be increased for such Adjustment Year to
the amount that Landlord determines would have been reasonably incurred had
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Landlord provided such item of work or service to one hundred percent (100%) of
the gross rentable area of the Building for the entire Adjustment Year.
6. Separate Metering for Electricity. Landlord shall furnish a separate meter
or submeter for measuring electricity consumption in the demised premises, and,
throughout the term of this Lease, Tenant shall pay directly to the electric
utility all amounts payable to the utility, as measured by the meter.
7. Use of Demised Premises. Tenant will use and occupy the demised premises
solely for general office purposes and in accordance with the use permitted
under applicable zoning regulations. Without the prior written consent of
Landlord, the demised premises will not be used for any other purposes. Tenant
will not use or occupy the demised premises for any unlawful purpose, and will
comply with, and make any alteration to the demised premises as may be necessary
to effect compliance with, all present and future laws applicable to the
jurisdiction in which the Building is located.
8. Assignment and Subletting.
(a) Tenant will not assign, transfer, mortgage, or encumber this Lease or
sublet or rent (or permit occupancy or use of) the demised premises, or any part
thereof, without obtaining the prior written consent of Landlord (which Landlord
shall not unreasonably withhold, delay or condition), nor shall any assignment
or transfer of this Lease be effectuated by operation of law or otherwise,
without the prior written consent of Landlord (which Landlord shall not
unreasonably withhold, delay or condition). Without limitation of the foregoing,
Landlord shall have the right, in its absolute discretion, to withhold its
consent to any assignment, transfer, or sublet to, or to any other transaction
with, any governmental authority or agency, to any tenant having sovereign or
diplomatic immunity, to any medical, dental, or clinical practice, or to any
school or user for classroom purposes. Landlord may require Tenant to obtain and
submit current financial statements of any proposed subtenant or assignee prior
to granting its consent. In the event of any assignment hereunder, Tenant shall
pay to Landlord a fee to cover accounting costs, plus any legal fees incurred by
Landlord as a result of the assignment. The consent by Landlord to any
assignment or subletting shall not be construed as a waiver or release of Tenant
from the terms of any covenant or obligation under this Lease, nor shall the
collection or acceptance of rent from any such assignee, subtenant, or occupant
constitute a waiver or release of Tenant of any covenant or obligation contained
in this Lease, nor shall any such assignment or subletting be construed to
relieve Tenant from obtaining the consent in writing of Landlord to any further
assignment or subletting. In the event that Tenant defaults hereunder, Tenant
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hereby assigns to Landlord the rent due from any subtenant and hereby authorizes
each such subtenant to pay said rent directly to Landlord.
(b) If Landlord consents to an assignment of the Lease or to a sublease of
all or any portion of the demised premises, Tenant shall pay to Landlord, upon
receipt thereof from the assignee or subtenant, as the case may be, fifty
percent (50%) of any "Profit" (as hereinafter defined) collected by Tenant from
the assignee or subtenant, as the case may be. "Profit" means the excess of (i)
all sums payable by the assignee or subtenant as rent or other consideration for
the assignment or sublease over (ii) all sums payable to Landlord as Base Rent
and additional rent hereunder plus costs reasonably incurred by Tenant in
assigning or subleasing the space, including, without limitation, advertising
costs, brokerage commissions, and legal fees and expenses.
9. Maintenance. Tenant will keep the demised premises and fixtures and
equipment therein in clean, safe, and sanitary condition, will take good care
thereof, will suffer no waste or injury thereto, and will, at the expiration or
other termination of the term of this Lease, surrender the same, broom clean, in
the same order and condition in which they are on the Lease Commencement Date,
ordinary wear and tear and damage by the elements excepted.
10. Alterations. Tenant will not make or permit anyone to make any
alterations, decorations, additions, or improvements, structural or otherwise,
in or to the demised premises or the Building ("Alterations") without the prior
written consent of Landlord; provided, however, that Landlord's consent shall
not be required for non-structural Alterations which cost less than $25,000 to
perform. All Alterations permitted by Landlord must conform to all rules,
regulations, and requirements of the federal, state, and municipal governments,
and conform harmoniously with the Building's design and interior decoration.
Tenant shall and does hereby indemnify and hold Landlord harmless from and
against any and all expenses, liens, claims, or damages to person or property
which may or might arise by reason of the making of any Alterations. If any
Alteration is made without the prior written consent of Landlord, Landlord may
correct or remove the same, and Tenant shall be liable for any and all expenses
incurred by Landlord in the performance of this work. All Alterations made by
either party shall, at Landlord's election, immediately become the property of
Landlord and shall remain upon and be surrendered with the demised premises as a
part thereof at the end of the term hereof without disturbance, molestation, or
injury. Should Landlord elect that any Alterations installed by Tenant be
removed upon the expiration or termination of this Lease, Tenant shall remove
the same at Tenant's sole cost and expense and if Tenant fails to remove the
same, Landlord may
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remove the same at Tenant's expense and Tenant shall reimburse Landlord for the
cost of such removal together with any and all damages which Landlord may
sustain by reason of such default by Tenant.
11. Signs: Furnishings. No sign, advertisement, or notice shall be inscribed,
painted, affixed, or displayed by Tenant on any part of the outside or the
inside of the Building, and if any such sign, advertisement, or notice is
nevertheless exhibited by Tenant, Landlord shall have the right to remove the
same and Tenant shall be liable for any and all expenses incurred by Landlord.
At Tenant's sole cost and expense, nameplates identifying Tenant shall be posted
on the Building directory and on the doors of the offices, in such places,
number, size, color, and style as are approved by Landlord. Landlord shall have
the right to prescribe the weight and position of safes and other heavy
equipment or fixtures, which shall, if considered necessary by the Landlord,
stand on plank strips to distribute the weight. Any and all damage or injury to
the demised premises or the Building caused by moving the property of Tenant
into, in, or out of the demised premises, or due to the same being on the
demised premises, shall be repaired by, and at the sole cost of, Tenant. All
moving of furniture, equipment, and other material within the public area shall
be at such times and conducted in such manner as Landlord may reasonably require
in the interest of all tenants within the Building.
12. Inspection. Tenant will permit Landlord, or its representative, to enter
the demised premises at any time and from time to time, without charge therefor
to Landlord and without diminution of the rent payable by Tenant, to examine,
inspect, and protect the same, and to make such alterations and/or repairs as in
the judgment of Landlord may be deemed necessary, or to exhibit the same to
prospective tenants, lenders, or purchasers.
13. Insurance Rating.
(a) Tenant will not conduct or permit to be conducted any activity, or place
any equipment in or about the demised premises, which will, in any way, increase
the rate of fire insurance or other insurance on the Building.
(b) Tenant shall carry comprehensive general liability insurance in a company
or companies licensed to do business in the State of Maryland and approved by
Landlord. Tenant shall carry property damage insurance for all of its equipment,
other personal property and trade fixtures, located or installed in the demised
premises. Landlord shall carry property insurance on all other Alterations in
the demised premises and on the Building, in such amounts as its first Mortgagee
may require (or, if there is no first Mortgage, in commercially reasonable
amounts). All of
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the insurance required under this Subsection shall be in minimum amounts
approved by Landlord from time to time (but, with respect to liability
insurance, in limits of not less than $1,000,000 combined single limit annual
aggregate for bodily injury, death and property damage), and shall name
Landlord, Landlord's managing agent and any Mortgagee, as hereinafter defined,
as additional insureds, as their interests may appear. Landlord and Tenant agree
that in the event the demised premises or the contents thereof are damaged or
destroyed by fire or other casualty, the rights, if any, of either party against
the other with respect to such damage or destruction are waived, and that all
policies of fire and/or extended coverage or other insurance covering the
demised premises or the contents thereof shall contain a waiver of subrogation
clause or endorsement in form acceptable to Landlord. Landlord and Tenant
further agree to provide endorsements for said insurance policies agreeing to
the waiver of subrogation as required. If required by Landlord, receipts
evidencing payment for said insurance shall be delivered to Landlord at least
annually by Tenant and each policy shall contain an endorsement that will
prohibit its cancellation prior to the expiration of thirty (30) days after
notice of such proposed cancellation to Landlord.
14. Tenant's Equipment. Tenant will not install or operate in the demised
premises any electrically operated equipment or other machinery, other than
desk-top computers, electric typewriters, adding machines, radios, televisions,
telex machines, clocks, and table top copying machines, without first obtaining
the prior written consent of Landlord. Tenant shall not install any other
equipment of any kind or nature whatsoever (including, without limitation,
electric space heaters and supplementary air-conditioning units) which will or
may necessitate any changes, replacements, or additions to, or in the use of,
the water system, heating system, plumbing system, air conditioning system, or
electrical system of the demised premises or the Building without first
obtaining the prior written consent of Landlord.
15. Indemnity. Tenant shall, and does hereby, indemnify and hold harmless
Landlord from and against any loss, damage, liability, cost, or expense
occasioned by or in any way related to or connected with the use and occupancy
of the demised premises by Tenant, its agents, employees, invitees, or persons
permitted in the demised premises by Tenant.
16. Services and Utilities. It is agreed that Landlord will furnish air
conditioning and heating to the demised premises between the hours of 8:00 a.m.
and 7:00 p.m., Monday through Friday (except Holidays, as hereinafter defined),
and 9:00 a.m. and 3:00 p.m. on Saturdays (except Holidays) during the
appropriate seasons of the year. Landlord's provision of air conditioning and
heating shall be based upon standard electrical
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energy requirements of not more than an average of five (5) watts per square
foot of the demised premises and a human occupancy of not more than one person
for each one hundred twenty (120) square feet of the demised premises. Landlord
shall have the right to operate the heating, ventilating, and air-conditioning
("HVAC") system in the most energy-efficient manner possible, consistent with
maintenance of temperatures within legally mandated limits or within the limits
established in the building design. Landlord may install a computerized
energy-management system that operates the HVAC system in on-off cycles to
control electrical demand and energy consumption. Extra hours of heating,
ventilating, and air conditioning will be provided to Tenant upon Tenant's
request, and at Landlord's option, upon at least twenty-four (24) hours advance
notice to Landlord. Tenant will be charged Landlord's cost therefor based upon
Landlord's estimate of additional utility consumption and employee overtime and
any other cost whatsoever associated with such extra service. It is further
agreed that Landlord will provide such reasonably adequate electricity, water,
lavatory supplies for public restrooms, exterior window cleaning service, and,
Monday through Friday only (except Holidays), char and janitorial service as is
normal and customary in comparable office buildings in the Baltimore, Maryland
Metropolitan area in office areas finished in building standard materials.
Landlord will also provide elevator service by means of automatically-operated
elevators on all regular elevators between the hours of 8:00 a.m. and 7:00 p.m.,
Monday through Friday (except Holidays), and 9:00 a.m. and 3:00 p.m., on
Saturdays (except Holidays); provided, however, that Landlord shall have the
right to remove elevators from service as the same shall be required for moving
freight or for servicing or maintaining the elevators and/or the Building;
provided, further, that Landlord shall maintain at least one (1) elevator in
service on a twenty-four (24) hour basis at all times. It is understood and
agreed that Landlord shall not be liable for failure to furnish, or for delay or
suspension in furnishing, any of the services required to be performed by
Landlord caused by breakdown, maintenance, repairs, strikes, scarcity of labor
and/or materials, acts of God, or from any other cause. If the Building
equipment should cease to function properly, Landlord shall use reasonable
diligence to repair the same promptly. Building Holidays shall be New Year's
Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas Day,
and any other federally designated holidays which Landlord may choose to
acknowledge.
17. Liability of Landlord. Except for damages arising from Landlord's
negligence, Landlord shall not be liable to Tenant, its employees, agents,
business invitees, licensees, customers, clients, family members, guests, or
trespassers for any damage, compensation, or claim arising from (i) the
necessity of repairing any portion of the Building, (ii) any interruption in the
use of the demised premises, (iii) any accident or damage
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resulting from the use or operation (by Landlord, Tenant, or any other person or
persons whatsoever) of elevators, or heating, cooling, electrical, or plumbing
equipment or apparatus, (iv) the termination of this Lease by reason of the
destruction of the demised premises, (v) any fire, robbery, theft, criminal act,
and/or any other casualty, (vi) any leakage in any part of the demised premises
or the Building, or from water, rain, or snow that may leak into, or flow from,
any part of the demised premises or the Building, or from drains, pipes, or
plumbing work in the Building, or (vii) any other cause whatsoever. Except as
and to the extent set forth in Section 18 hereof, Tenant shall not be entitled
to any abatement or diminution of ease Rent or additional rent as a result of
any of the foregoing occurrences, nor shall the same release Tenant from its
obligation hereunder or constitute an eviction. Any goods, property, or personal
effects stored or placed by Tenant in or about the demised premises or Building
shall be at the sole risk of Tenant. Notwithstanding the foregoing, Landlord
shall not be liable to Tenant for any loss or damage to personal property, or
injury to person, whether or not the result of Landlord's negligence, to the
extent that Tenant is compensated therefor by Tenant's insurance. The employees
of Landlord are prohibited from receiving any packages or other articles
delivered to the Building for Tenant, and if any such employee receives any such
package or articles, such employee shall be the agent of Tenant and not of
Landlord. Landlord shall not be obligated to provide or maintain any security
patrol or security system. However, if Landlord elects to provide such patrol or
system, the cost thereof shall be included in Operating Costa as defined in
Section 5(c) hereof. Landlord shall not be responsible for the quality of any
such patrol or system which may be provided hereunder or for damage or injury to
Tenant, its employees, invitees, or others due to the failure, action, or
inaction of such patrol or system.
18. Damage by Fire or Casualty. In the event of damage to or destruction of
the demised premises by fire or any other casualty, if the demised premises are
not made untenantable this Lease shall not be terminated, but the demised
premises shall, subject to the provisions of this Section, be promptly and fully
repaired and restored as the case may be by Landlord at its own cost and
expense. Due allowance, however, shall be given for reasonable time required for
adjustment and settlement of insurance claims, and for such other delays beyond
Landlord's control. If during the term of this Lease the demised premises shall
be so damaged by fire or other casualty as to be untenantable, and if Landlord
reasonably determines that the demised premises cannot be repaired within two
hundred seventy (270) days after the date of the fire or other casualty,
Landlord shall so certify to Tenant and either party hereto, upon written notice
to the other party given within thirty (30) days after the date of Landlord's
certification, may terminate this Lease, in
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which case the rent shall be apportioned and paid to the date of said fire or
other casualty. In the event the Landlord elects to repair and/or restore the
damaged demised premises, said repairs and restoration shall be pursued
diligently by the Landlord. No compensation, claim, or diminution of rent will
be allowed or paid by Landlord by reason of inconvenience, annoyance, or injury
to business arising from the necessity of repairing the demised premises or any
portion of the Building, however the necessity may occur.
19. Damage Caused by Tenant. All injury or damage to the demised premises or
the Building caused by Tenant or its agents, employees, and invitees shall be
repaired by Tenant at Tenant's sole expense.
20. Default of Tenant. If Tenant shall (a) fail to pay when due in the manner
provided in Section 4(b) hereof any monthly installment of Base Rent or any
other charge or payment required of Tenant hereunder (any such charge or payment
being conclusively deemed to be additional rent payable hereunder), and such
default continues for ten (10) days after Landlord gives Tenant a written notice
specifying the failure, or (b) violate or fail to perform any of the other
conditions, covenants, or agreements herein made by Tenant, and such violation
or failure shall continue for a period of thirty (30) days after written notice
thereof to Tenant by Landlord, plus such additional period of time as may be
reasonably necessary to cure such violation or failure, provided Tenant
commences the cure within the 30-day period and prosecutes the same to
completion with due diligence, or (c) vacate or abandon the demised premises,
then in any of said events this Lease shall, at the option of Landlord, cease
and terminate and shall operate as a notice to quit (any notice to quit or of
Landlord's intention to re-enter being hereby expressly waived) and Landlord may
proceed to recover possession under and by virtue of the provisions of the laws
of the State of Maryland, or by such other proceedings, including re-entry and
possession, as may be applicable. If Landlord elects to terminate this Lease,
the obligations herein contained on the part of Landlord to be performed shall
cease without prejudice; provided, however, that Landlord shall retain the right
to recover from Tenant all rental and other charges accrued up to the time of
such termination, or recovery of possession by Landlord, whichever is later.
Should this Lease be terminated before the expiration of the term of this Lease
by reason of Tenant's default as hereinabove provided, or if Tenant shall
abandon or vacate the demised premises before the expiration or termination of
the term of this Lease, the demised premises may be relet by Landlord, for such
rent and upon such terms as Landlord is able to obtain, and, if the full rental
hereinabove provided shall not be realized by Landlord, Tenant shall be liable
for all damages sustained by Landlord, including, without limitation, deficiency
in rent and all other charges due hereunder, reasonable
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attorneys' fees, other collection costs, and all expenses (including leasing
fees) of placing the demised premises in first-class rentable condition.
Landlord shall have no duty to mitigate damages. Any damage or loss sustained by
Landlord may be recovered by Landlord, at Landlord's option, at the time of the
reletting, or in separate actions, from time to time, as said damage shall have
been made more easily ascertainable by successive relettings, or, at Landlord's
option, may be deferred until the expiration of the term of this Lease, in which
event the cause of action shall not be deemed to have accrued until the date of
expiration of said term. The provisions contained in this Section shall be in
addition to and shall not prevent the enforcement of any claim Landlord may have
against Tenant for anticipatory breach of the unexpired term of this Lease.
Without limitation of the foregoing, in the event that Tenant shall be in
default under this Lease, Tenant shall be liable to Landlord for all court
costs, if any, and for Landlord's reasonable costs and expenses, including
attorneys' fees and expenses, which in any way are connected with Tenant's
default. All rights and remedies of Landlord under this Lease shall be
cumulative and shall not be exclusive of any other rights and remedies provided
to Landlord under applicable law.
21. Waiver. If under the provisions hereof Landlord shall institute
proceedings and a compromise or settlement thereof shall be made, the same shall
not constitute a waiver of any covenant herein contained nor of any of
Landlord's rights hereunder. No waiver by Landlord of any breach of any
covenant, condition, or agreement herein contained shall operate as a waiver of
such covenant, condition, or agreement itself, or nor any subsequent breach
thereof. No payment by Tenant or receipt by Landlord of a lesser amount than the
monthly installment of Base Rent or other charges herein stipulated shall be
deemed to be other than on account of the earliest stipulated Base Rent and
other charges, nor shall any endorsement or statement on any check or letter
accompanying a check for payment of Base Rent or other charge be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Base Rent or other
charge or to pursue any other remedy provided in this Lease. No re-entry by
Landlord, and no acceptance by Landlord of keys from Tenant, shall be considered
an acceptance of a surrender of this Lease.
22. Attornment. This Lease is subject and subordinate to the lien of all and
any first Mortgages ("Mortgages" shall include both construction and permanent
financing and shall include deeds of trust and similar security instruments, and
"Mortgagee" shall include the holder or holders (or, with respect to deeds of
trust, the beneficiary or beneficiaries) of any such Mortgage or Mortgages)
which may now or hereafter encumber or otherwise affect the real estate
(including the Building) of which the demised premises form a part, or
Landlord's interest
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therein, and to all and any renewals, extensions, modifications, recastings, or
refinancings thereof; provided, however, that this Lease shall not be subject or
subordinate to the lien of any future first Mortgage unless the Tenant first
receives a nondisturbance agreement from the Mortgagee in form satisfactory to
Tenant. In confirmation of such subordination, Tenant shall, at Landlord's
request, promptly execute any requisite or appropriate certificates or other
documents. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificates for or on behalf of Tenant.
Tenant agrees that in the event that any proceedings are brought for the
foreclosure of any Mortgage, Tenant shall attorn to the purchaser at such
foreclosure sale if requested to do so by such purchaser, and to recognize such
purchaser as the Landlord under this Lease, and Tenant waives the provision of
any statute or rule of law, now or hereafter in effect, which may give or
purport to give Tenant any right to terminate or otherwise adversely affect this
Lease and the obligations of Tenant hereunder in the event that any such
foreclosure proceeding is prosecuted or completed. Notwithstanding the
foregoing, Tenant agrees that the holder of any first Mortgage shall have the
right to make this Lease superior to the lien of such first Mortgage, by the
filing of subordination statements or otherwise, and Tenant hereby consents to
any such filing.
23. Condemnation. If all or substantially all of the demised premises shall
be taken or condemned by any governmental authority for any public or
quasi-public use or purpose (including sale under threat of such a taking), then
the term of this Lease shall cease and terminate as of the date when title vests
in such governmental authority. If less than substantially all of the demised
premises is taken or condemned by any governmental authority for any public or
quasi-public use or purpose, the rent and other charges due hereunder shall be
equitably adjusted as of the date when the title vests in such governmental
authority. Tenant shall have no claim against Landlord (or otherwise) for any
portion of the amount that may be awarded as damages as a result of any
governmental taking or condemnation (or sale under threat of such taking or
condemnation) or for the value of any unexpired term of the Lease; provided,
however, that Tenant may assert any claim that it may have against the
condemning authority for compensation for any fixtures owned by Tenant and for
any relocation expense compensable by statute, and receive such award therefor
as may be allowed in the condemnation proceedings, if such award shall be made
in addition to and stated separately from the award made for the land and the
Building or the part thereof so taken.
24. Rules and Regulations. Tenant and its agents and employees shall abide by
and observe the rules and regulations attached hereto as Exhibit C, and such
other rules or regulations as may be promulgated from time to time by Landlord,
with a copy
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sent to Tenant, for the operation and maintenance of the Building.
25. Covenants of Landlord. Landlord covenants that it has the right to make
this Lease for the term aforesaid, and that if Tenant shall pay the rental and
perform all of the covenants, terms, and conditions of this Lease to be
performed by Tenant, Tenant shall, during the term hereby created, freely,
peaceably, and quietly occupy and enjoy the full possession of the demised
premises without molestation or hindrance by Landlord or any party claiming
through or under Landlord. In the event of any sale or transfer by the then
Landlord hereunder of the Building, the Landlord whose interest is thus sold or
transferred shall be and hereby is completely released and forever discharged
from and in respect of all covenants, obligations, and liability as Landlord
hereunder accruing after the date of such sale or transfer.
26. No Partnership. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant or to create any other relationship between the parties hereto other than
that of landlord and tenant.
27. No Representations by Landlord. Neither Landlord nor any agent or
employee of Landlord has made any representations or promises with respect to
the demised premises or the Building except as herein expressly set forth, and
no rights, privileges, easements, or licenses are acquired by Tenant except as
herein expressly set forth. The Tenant, by taking possession of the demised
premises, shall accept the same "as is", and such taking of possession shall be
conclusive evidence that the demised premises and the Building are in good and
satisfactory condition at the time of such taking of possession.
28. Brokers. Each party hereto represents and warrants to the other that it
has employed no brokers, finders, or consultants in respect of this Lease, other
than the Broker or Brokers identified in Section 1 hereof, and each such party
shall indemnify and hold harmless the other party hereto from loss, liability or
expense, including reasonable attorneys' fees, arising by reason of a breach of
such representation and warranty. Landlord shall pay to the Brokers any
commission or compensation payable to such Brokers pursuant to a separate
written agreement executed by Landlord and the Brokers.
29. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed duly given if delivered in person, or by certified
or registered mail, return receipt requested, first-class, postage prepaid,
addressed to the parties hereto at their respective addresses set forth in
Section 1,
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<PAGE>
unless notice of a change of address is given pursuant to the provision of this
Section 29.
30. Estoppel Certificates. Tenant agrees, at any time and from time to time,
upon not less than five (5) days' prior written notice by Landlord, to execute,
acknowledge, and deliver to Landlord a statement in writing certifying to such
information relating to Tenant and this Lease as Landlord may request. Any such
statement delivered pursuant hereto may be relied upon by any owner of the
Building, any prospective purchaser of the Building, any Mortgagee or
prospective Mortgagee of the Building or of Landlords interest, or any
prospective assignee of any such Mortgage.
31. Holding Over. In the event that Tenant shall not immediately surrender
the demised premises on the date of expiration of the term hereof, and Tenant
shall hold over with the consent of Landlord, Tenant shall, by virtue of the
provisions hereof, become a tenant by the month at 150% of the monthly rental in
effect during the last month of the term of this Lease (including any increases
in such monthly rental pursuant to the provisions hereof), which said monthly
tenancy shall commence with the first day next after the expiration of the term
of this Lease. Tenant, as a monthly tenant, shall be subject to all of the
conditions and covenants of this Lease, including any additional rent provisions
hereof, and Tenant shall give to Landlord at least thirty (30) days' written
notice of any intention to quit the demised premises, and Tenant shall be
entitled to thirty (30) days' written notice to quit. Notwithstanding the
foregoing provisions of this Section 31, in the event that Tenant shall hold
over after the expiration of the term hereby created, and if Landlord shall
desire to regain possession of the demised premises promptly at the expiration
of the term of this Lease, then at any time prior to Landlord's acceptance of
rent from Tenant as a monthly tenant hereunder, Landlord, at its option, may
forthwith reenter and take possession of the demised premises without process,
or by any legal process in force at such time in the State of Maryland.
Furthermore, in the event Tenant continues to occupy the demised premises after
the date of expiration of the term of this Lease or any extension period, Tenant
hereby agrees to pay to Landlord, upon demand by Landlord, for each month or
part of a month Tenant occupies the demised premises after the date of
expiration of the term of this Lease or any extension period thereof, an amount
determined by multiplying the amount equal to the monthly rental in effect
during the last month of the term of this Lease (including any increases in such
monthly rental pursuant to the provisions hereof) by one and one-half (1 1/2).
32. Right of Landlord to Cure Tenant's Default. If Tenant defaults in the
making of any payment or in the doing of any act herein required to be made or
done by Tenant, then Landlord may,
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<PAGE>
but shall not be required to, make such payment or do such act on behalf of
Tenant, and the amount of the expense thereof, if made or done by Landlord, with
interest thereon at a rate equal to the lower of (i) the prime rate of interest
designated by Maryland National Bank, or any successor bank thereto, as
announced from time to time, plus two percent (2%) per annum, or (ii) the
maximum rate permitted by applicable law from the date any such payment is paid
by Landlord, shall be paid by Tenant to Landlord and shall constitute additional
rent hereunder, due and payable with the next monthly installment of Base Rent;
but the making of such payment or the doing of such act by Landlord shall not
operate to cure such default or to estop Landlord from the pursuit of any remedy
to which Landlord would otherwise be entitled. If Tenant fails to pay in the
manner provided in Section 4(b) hereof any installment of rent or additional
rent on or before the date the same becomes due and payable, such unpaid
installment shall bear interest at a rate equal to the lower of (i) the prime
rate of interest designated by Manufacturer's Hanover Trust Company, or any
successor bank thereto, as announced from time to time, plus five percent (5%)
per annum or (ii) the maximum rate permitted by applicable law from the date
such installment became due and payable to the date of payment thereof by
Tenant. In addition, if Tenant fails to pay any installment of rent or
additional rent within five (5) days after the same becomes due and payable,
Tenant shall pay to Landlord a late charge of five percent (5%) of the amount of
such installment. Any such interest and/or late charge shall constitute
additional rent hereunder, due and payable with the next monthly installment of
Base Rent. A failure by Landlord to bill Tenant for either of such charges at
the time of their accrual shall not be deemed a waiver by Landlord of its right
to accumulate such charges or to collect from Tenant for such accrued charges on
a periodic basis. Tenant shall perform all obligations on its part to be
performed hereunder promptly and in a timely fashion and shall promptly pay all
bills sent by Landlord.
33. Benefit and Burden. Subject to the provisions of Section 8 hereof, the
provisions of this Lease shall be binding upon, and shall inure to the benefit
of, the parties hereto and each of their respective representatives, successors
and assigns. Landlord may freely and fully assign its interest hereunder.
34. [Intentionally Omitted.]
35. Landlord as an Individual or Partnership. If Landlord or any successor in
interest to Landlord shall be an individual, joint venture, firm, corporation,
limited liability company, or partnership, general or limited, there shall be no
personal liability on such individual, the shareholders or directors of the
corporation, the members of the limited liability company, or the partners of
such firm, partnership, or joint venture with
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<PAGE>
respect to any of the provisions of this Lease, any obligation arising therefrom
or in connection therewith. In such event, Tenant shall look solely to the
equity of the then owner in the demised premises and the Building for the
satisfaction of any remedies of Tenant in the event of a breach by the Landlord
of any of its obligations hereunder.
36. Ground Lease. In the event that at any time the Land upon which the
Building is constructed is leased by Landlord pursuant to a lease (hereinafter
referred to as the "Ground Lease") from the owner of such Land, as lessor, to
Landlord, as lessee, then no termination of the Ground Lease nor the institution
of any suit, action, or proceeding by the lessor under the Ground Lease seeking
to terminate the Ground Lease shall result in a cancellation or termination of
this Lease or Tenant's obligations hereunder. Tenant covenants and agrees that
if by reason of a default under the Ground Lease, the Ground Lease and the
leasehold estate in the demised premises are terminated, the Tenant will attorn
to the then holder of the reversionary interest in the demised premises or to
anyone who shall succeed to the interest of Landlord, or to the lessee of a new
underlying lease entered into pursuant to the provisions of such underlying
lease, and will recognize such holder, and/or such successor in interest to
Landlord and/or such lessee, as Tenants Landlord under this Lease. Tenant agrees
to execute and deliver, at any time and from time to time, upon the request of
Landlord or of the lessor under any such underlying lease any instrument which
may be necessary or appropriate to evidence such attornment. Tenant further
waives the provision of any statute or rule of law now or hereafter in effect
which may give or purport to give Tenant any right of election to terminate this
Lease or to surrender possession of the demised premises in the event any
proceeding is brought by the lessor under any underlying lease to terminate the
same, and agrees that this Lease shall not be affected in any way whatsoever by
any such proceeding.
37. Additional Rights. Landlord shall have the right to change, alter or
renovate the Building, without liability to Tenant for damage or injury to
property, person, or business, all claims for damage being hereby released by
Tenant, and without effecting an eviction or disturbance of Tenant's use or
possession or giving rise to any claim for setoffs or abatement of rent. In
performance of the renovation program, Landlord, its agents, contractors, etc.,
shall have the right to enter Tenant's demised premises to perform renovation
work during and after building hours, upon at least one (1) day's notice. Tenant
shall cooperate with Landlord in temporarily relocating furniture, fixtures,
personal property, and personnel as required to complete the renovation work in
the Building.
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<PAGE>
38. Financial Statements. Tenant, upon its execution hereof, and thereafter
upon written request by Landlord, will provide Landlord with a copy of its
financial statements, and may provide copies of the statements to existing
Mortgagees and potential lenders or purchasers.
39. Insolvency or Bankruptcy of Tenant. In the event Tenant makes an
assignment for the benefit of creditors, or a receiver of Tenant's assets is
appointed, or Tenant files a voluntary petition in any bankruptcy or insolvency
proceeding, or an involuntary petition in any bankruptcy or insolvency
proceeding is filed against Tenant and the same is not discharged within sixty
(60) days, or Tenant is adjudicated as bankrupt, Landlord shall have the option
of terminating this Lease by sending written notice to Tenant of such
termination and, upon such written notice being given by Landlord to Tenant, the
term of this Lease shall, at the option of Landlord, end, and Landlord shall be
entitled to immediate possession of the demised premises and to recover damages
from Tenant in accordance with the provisions of Section 20 hereof.
40. Mortgagee Protection. Tenant agrees to give any Mortgagee(s), by
certified or registered mail, a copy of any notice of default served upon the
Landlord by Tenant, provided that prior to such notice Tenant has been notified
in writing (by way of notice of assignment of rents and leases, or otherwise) of
the addresses of such Mortgagee(s). Tenant further agrees that if Landlord shall
have failed to cure such default within a reasonable time, then the Mortgagee(s)
shall have a reasonable time thereafter within which to cure such default
(including such additional time as may be necessary for the Mortgagee to obtain
possession of the Building and to be able to take action to cure such default).
41. Waiver of Jury Trial. Landlord and Tenant hereby waive their right to a
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter whatsoever arising out
of or in any way connected with this Lease, the relationship of Landlord and
Tenant hereunder, Tenant's use of or occupancy of the demised premises, and any
claim or counterclaim of injury, damage or otherwise by Landlord and Tenant
against or with respect to each other.
42. Gender and Number. Feminine or neuter pronouns shall be substituted for
those of the masculine form, and the plural shall be substituted for the
singular number, in any place or places therein in which the context may require
such substitution.
43. Entire Agreement. This Lease, together with the Exhibits and any Addenda
attached hereto, contains and embodies
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<PAGE>
the entire agreement of the parties hereto, and no representations, inducements,
or agreements, oral or otherwise, between the parties not contained in this
Lease, Riders, and Exhibits, shall be of any force or effect. This Lease may not
be modified, changed, or terminated in whole or in part in any manner other than
by an agreement in writing duly signed by both parties hereto.
44. Invalidity of Particular Provisions. If any provision of this Lease or
the application thereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
45. Joint and Several Liability. All persons and entities comprising Tenant
under this Lease shall be jointly and severally liable to Landlord for all of
the obligations of Tenant under this Lease.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have each executed this Lease under
seal as of the day and year hereinabove written
LANDLORD
CHALREP LIMITED PARTNERSHIP
WITNESS:
/s/ David London By: /s/ Alfred Liggins
- --------------------------------- -------------------------------
Name: David London Name: Alfred Liggins
--------------------------- -----------------------------
Title: Title: President of Chalrep, Inc.
-------------------------- General Partner
----------------------------
TENANT
RADIO ONE, INC.
WITNESS/ATTEST
/s/ Catherine L. Hughes By: /s/ Alfred Liggins
- ---------------------------------- -----------------------------
Name: Catherine L. Hughes Name: Alfred Liggins
----------------------------- ---------------------------
Title: Secretary Title: President
---------------------------- --------------------------
<PAGE>
EXHIBIT A
<PAGE>
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
FLOOR PLAN
[IMAGE OMITTED]
<PAGE>
EXHIBIT B
[Intentionally Omitted.]
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<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. No part or the whole of the sidewalks, plaza areas, entrances, passages,
courts, elevators, vestibules, stairways, corridors, or halls of the
Building or the Land shall be obstructed or encumbered by any tenant or
used for any purpose other than ingress and egress to and from the space
demised to such tenant.
2. No awnings or other projections shall be attached to the outside walls or
windows of the Building. No curtains, blinds, shades, or screens (other
than those furnished by Landlord as part of Landlords work) shall be
attached to or hung in, or used in connection with, any window or door of
the space demised to any tenant, without the written consent of Landlord.
3. No sign, advertisement, object, notice, or other lettering shall be
exhibited, inscribed, painted, or affixed on any part of the outside or
inside of the space demised to any tenant or of the Building or the Land.
4. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors,
vestibules, or other public parts of the Building.
5. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances (including, without
limitation, coffee grounds) shall be thrown therein.
6. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable, combustible, or explosive fluid, material, chemical, or
substance in or about the space demised to such tenant.
7. No tenant shall mark, paint, drill into, or in any way deface, any part of
the Building or the space demised to such tenant. No bonding, cutting, or
stringing of wires will be permitted.
8. No cooking shall be done or permitted in the Building by any tenant. No
tenant shall cause or permit any unusual or objectionable odors to emanate
from the space demised to such tenant.
9. Neither the whole nor any part of the space demised to any tenant shall be
used for manufacturing, for the storage of
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<PAGE>
merchandise, or for the sale of merchandise, goods, or property.
10. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with other tenants or occupants of the
Building or neighboring buildings or premises whether by the use of any
musical instrument, radio, television set, or other audio device, unmusical
noise, whistling, singing, or in any other way. Nothing shall be thrown out
of any doors, windows, or skylights or down any passageways.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows in the space demised to any tenant, nor shall any changes
be made in locks or the mechanism thereof. Each tenant must, upon the
termination of its tenancy, return to Landlord all keys to offices and
toilet rooms, either furnished to, or otherwise procured by, such tenant,
and in the event of the loss of any such keys, such tenant shall pay
Landlord the reasonable cost of replacement keys.
12. All removals from the Building, or the carrying in or out of the Building
or the space demised to any tenant of any safes, freight, furniture, or
bulky matter of any description must take place during such hours and in
such manner as Landlord or its agents may determine, from time to time.
Landlord reserves the right to inspect all freight for violation of any of
these rules and regulations or the provisions of such tenant's lease.
13. No tenant shall use or occupy or permit any portion of the space demised to
such tenant to be used or occupied as an employment bureau or for the
storage, manufacture, or sale of liquor, narcotics or drugs. No tenant
shall engage or pay any employees in the Building, except those actually
working for such tenant in the Building, nor advertise for laborers giving
an address at the Building.
14. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon notice
from Landlord, such tenant shall refrain from or discontinue such
advertising.
15. Landlord reserves the right to control and operate the public portions of
the Building and the public facilities, as well as facilities furnished for
the common use of the tenants, in such manner as it deems best for the
benefit of the tenants generally, including, without limitation, the right
to exclude from the Building, between the hours of 6 P.M. and 8 A.M. on
business days and at all hours on
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<PAGE>
Saturdays, except between the hours of 8 A.M. to 1 P.M., Sundays and
Holidays, all persons who do not present a pass to the Building signed by
Landlord or other suitable identification satisfactory to Landlord.
16. Each tenant, before closing and leaving the space demised to such tenant at
any time, shall see that all entrance doors are locked.
17. No space demised to any tenant shall be used, or permitted to be used, for
lodging or sleeping or for any immoral or illegal purpose.
18. The requirements of tenants will be attended to only upon application at
the office of Landlord. Building employees shall not be required to
perform, and shall not be requested by any tenant to perform, any work
outside of their regular duties, unless under specific instructions from
the office of Landlord.
19. Canvassing, soliciting, and peddling in the Building are prohibited, and
each tenant shall cooperate in seeking the prevention of such.
20. There shall not be used in the Building, either by any Tenant or by its
agents or contractors, in the delivery or receipt of merchandise, freight,
or other matter, any hand trucks or other means of conveyance except those
equipped with rubber tires, rubber side guards, and such other safeguards
as Landlord may require.
21. No animals of any kind shall be brought into or kept about the Building by
any tenant.
22. No tenant shall place, or permit to be placed, on any part of the floor or
floors of the space demised to such tenant a load exceeding the floor load
per square foot which such floor was designed to carry and which is allowed
by law.
23. Landlord reserves the right to specify where in the space demised to any
tenant business machines and mechanical equipment shall be placed or
maintained, in order, in Landlord's judgment, to absorb and prevent
vibration, noise, and annoyance to other tenants of the Building.
24. No vending machines shall be permitted to be placed or installed in any
part of the Building by any tenant. Landlord reserves the right to place or
install vending machines in any of the common areas of the Building.
25. Tenant shall not: do or permit anything to be done in or about the demised
premises which will in any way obstruct or
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<PAGE>
interfere with the rights of other tenants of the Building, or injure or
annoy them; use or allow the demised premises to be used for any improper,
immoral, or objectionable purpose; cause, maintain or permit any nuisance
in, on, or about the demised premises or commit or allow to be committed
any waste in, on, or about the demised premises. Tenant shall keep all
doors leading from the demised premises to the rest of the Building closed
at all times; provided, however, that such doors may be opened for ingress
or egress at the time of such ingress or egress.
26. Landlord reserves the right, at any time and from time to time, to rescind,
alter, or waive, in whole or in part, any of the Rules and Regulations when
it is deemed necessary, desirable, or proper, in Landlord's judgment, for
its best interests or for the best interests of the tenants.
The foregoing rules and regulations are hereby agreed to by Landlord and
Tenant.
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<PAGE>
RIDER 1
OPTION TO RENEW
A. Provided that Tenant (i) has not defaulted under the terms of this Lease
and (ii) is in possession and occupancy of at least fifty percent (50%) of the
demised premises, then Tenant shall have one (1) option to renew the term of
this Lease for a period of five (5) consecutive years. Tenant's option to renew
the term of this Lease shall be exercisable as hereinafter set forth.
B. Tenant shall send Landlord written notice of Tenants desire to exercise the
lease option not less than 180 days prior to the expiration of the current Lease
term. The Base Rent for the renewal term (Lease Years 11-15) shall increase to
the amount set forth in Section 1 of the Lease.
C. All of the other terms and conditions of this Lease shall apply during the
renewal term except that there shall be no additional option to renew under this
Rider 1 or otherwise; and there shall be no interruption in the calculation of
Tenant's Expense Share during the renewal term.
D. In the event that Tenant does not fulfill any requirement of notice, or
comply with the schedule requirements as set forth herein, this option to renew
the term of this Lease shall become null and void.
RADIO ONE, INC.
PREFERRED STOCKHOLDERS' AGREEMENT
May 14, 1997
"This instrument/agreement is subject to a Standstill Agreement dated as of the
Closing Date among RADIO ONE, INC., the Subsidiaries of Radio One, Inc. from
time to time, the Investors (as defined therein), the Senior Lenders (as defined
therein) and NationsBank of Texas, N.A., as Agent to the Senior Lenders (as
defined therein) and individually as a Lender, and United States Trust Company
of New York, as Trustee for the Senior Subordinated Noteholders (as defined
therein). By its acceptance of this instrument/agreement, the holder hereof
agrees to be bound by the provisions of such Standstill Agreement to the same
extent that each Investor is bound. In the event of any inconsistency between
the terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
<PAGE>
<TABLE>
<CAPTION>
Radio One, Inc.
Preferred Stockholders' Agreement
INDEX
Page
<S> <C> <C>
SECTION 1. ISSUANCE OF PREFERRED STOCK IN EXCHANGE FOR
SUBORDINATED NOTES............................................................................3
1.1 Issuance of Securities........................................................................3
1.2 Exchange of Subordinated Notes for Preferred Shares...........................................3
1.3 Closing.......................................................................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................4
2.1 Organization and Power........................................................................4
2.2 Authorization and No Contravention............................................................4
2.3 Capitalization; Stockholders; Subsidiaries....................................................5
2.4 Other Investments.............................................................................6
2.5 Financial Statements; Projections.............................................................6
2.6 Licenses, Permits, Copyrights, etc............................................................7
2.7 FCC Licenses..................................................................................7
2.8 Absence of Undisclosed Liabilities............................................................8
2.9 Absence of Certain Developments...............................................................9
2.10 Employee Relations............................................................................9
2.11 Title to Properties..........................................................................10
2.12 Tax Matters..................................................................................10
2.13 Contracts and Commitments....................................................................11
2.14 Litigation and Compliance with Laws..........................................................11
2.15 Securities Law Filings.......................................................................12
2.16 Environmental Matters........................................................................12
2.17 Investment Company...........................................................................14
2.18 Margin Securities............................................................................14
2.19 ERISA Compliance.............................................................................14
2.20 Solvency.....................................................................................14
2.21 No Material Misstatement or Omission.........................................................15
2.22 Broker's Fee.................................................................................15
2.23 Acquisition Compliance and Delivery of Documents.............................................15
SECTION 3. CONDITIONS OF THE EXCHANGE...................................................................16
3.1 Conditions of the Investors..................................................................16
3.2 Conditions of the Company....................................................................19
(i)
<PAGE>
Page
SECTION 4. FINANCIAL COVENANTS OF THE COMPANY...........................................................20
4.1 Minimum Broadcast Cash Flow..................................................................20
4.2 Maximum Corporate Overhead Expense...........................................................21
4.3 Capital Expenditures.........................................................................21
SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY.........................................................21
5.1 Financial Statements.........................................................................21
5.2 Budget and Operating Forecast................................................................23
5.3 Maintenance of Properties....................................................................23
5.4 Inspection...................................................................................23
5.5 Tax Matters..................................................................................23
5.6 Compliance with Laws.........................................................................24
5.7 Insurance....................................................................................24
5.8 Key Man Insurance............................................................................24
5.9 Board of Directors Meetings; Management Rights...............................................24
SECTION 6. NEGATIVE COVENANTS OF THE COMPANY............................................................25
6.1 Indebtedness.................................................................................25
6.2 Liens........................................................................................26
6.3 Sale of Assets...............................................................................27
6.4 Fundamental Changes..........................................................................28
6.5 Guaranties...................................................................................28
6.6 No Sale and Leaseback........................................................................28
6.7 No Amendments to Charter or By-laws..........................................................28
6.8 No Change in Accounting Policies.............................................................28
6.9 Restrictions on Other Agreements.............................................................28
6.10 Affiliated Transactions......................................................................29
6.11 Distributions, Redemptions or Issuances of Capital Stock.....................................29
6.12 Senior Loan Agreement Consent Right..........................................................29
SECTION 7. SPECIAL COVENANTS............................................................................29
SECTION 8. REDEMPTION EVENTS............................................................................31
8.1 Redemption Events............................................................................31
8.2 Remedies on Default, etc.....................................................................33
SECTION 9. STANDSTILL AGREEMENT.........................................................................33
SECTION 10. SALE OR REFINANCING COVENANT.................................................................33
SECTION 11. DEFINITIONS..................................................................................35
(ii)
<PAGE>
Page
SECTION 12. GENERAL......................................................................................41
12.1 Amendments, Waivers and Consents.............................................................41
12.2 Survival of Covenants, Representations and Warranties; Assignability of
Rights.......................................................................................42
12.3 Governing Law; Jurisdiction; Venue...........................................................42
12.4 Section Headings.............................................................................43
12.5 Representations and Covenants of the Investors...............................................43
12.6 Notices and Demands..........................................................................44
12.7 Counterparts.................................................................................46
12.8 Severability.................................................................................46
12.9 Expenses.....................................................................................46
12.10 Confidentiality..............................................................................47
12.11 Regulation and Civil Rights..................................................................47
12.12 Termination..................................................................................48
(iii)
<PAGE>
EXHIBITS
Exhibit A - Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws
Exhibit B - Certificate of Incorporation and Bylaws (as in effect on the date hereof)
Exhibit C - Form of First Amendment to the Warrantholders' Agreement
Exhibit D - Form of Opinion of the Company's Counsel
Exhibit E - Form of Opinion of the Company's FCC Counsel
Exhibit F - Form of Standstill Agreement
APPENDIX A - Additional Permitted Capital Expenditures
(iv)
<PAGE>
SCHEDULES
Schedule A - Investors/Shares of Preferred Stock
Schedule 2.1 - Violations of Corporate Documents, Agreements, Etc.
Schedule 2.2 - Notices, Filings and Consents
Schedule 2.3 - Capitalization; Stockholders
Schedule 2.3(b) - Subsidiaries
Schedule 2.4 - Other Investments
Schedule 2.6 - Licenses, Permits, Etc.
Schedule 2.7 - FCC Licenses
Schedule 2.8 - Liabilities
Schedule 2.9 - Material Changes
Schedule 2.10 - Employee Relations
Schedule 2.11 - Title to Properties
Schedule 2.12 - Tax Matters
Schedule 2.13 - Contracts
Schedule 2.14 - Litigation
Schedule 2.16 - Environmental Matters
Schedule 2.19 - Employee Benefit Plans
Schedule 2.22 - Broker's Fee
Schedule 6.1(c) - Indebtedness
Schedule 6.2 - Liens
Schedule 6.5 - Guaranties
Schedule 6.10 - Affiliated Transactions
(v)
</TABLE>
<PAGE>
PREFERRED STOCKHOLDERS' AGREEMENT
This Preferred Stockholders' Agreement (this "Agreement") is made as of
this 14th day of May, 1997 by and among the investors listed as Series A
Preferred Investors on Schedule A hereto (the "Series A Preferred Investors"),
the investors listed as Series B Preferred Investors on Schedule A hereto (the
"Series B Preferred Investors," and together with the Series A Preferred
Investors, the "Investors," and each individually an "Investor"), RADIO ONE,
INC., a Delaware corporation (the "Company"), Radio One Licenses, Inc., a
Delaware corporation and the surviving corporation of the merger with Radio One
License LLC ("ROL"), and Alfred C. Liggins ("Liggins"), Catherine L. Hughes
("Hughes") and Jerry A. Moore, III ("Moore") (Liggins, Hughes and Moore are
hereinafter collectively referred to as the "Management Stockholders," and
together with the Company and ROL as the "Interested Parties," and each an
"Interested Party").
W I T N E S S E T H :
WHEREAS, the Company, the Investors, certain subsidiaries of the
Company then existing, and the Management Stockholders entered into a Securities
Purchase Agreement, dated as of June 6, 1995 (the "Securities Purchase
Agreement"), pursuant to which: (i) the Company sold and the Investors purchased
from the Company subordinated promissory notes due from the Company in the year
2003 in the aggregate original principal amount of $17,000,000 (the
"Subordinated Notes"); and (ii) the Company sold and the Series B Preferred
Investors purchased from the Company warrants (the "Original Warrants") for an
aggregate of 50.93 shares of the Common Equity of the Company;
WHEREAS, simultaneously with the execution of the Securities Purchase
Agreement, the Company and the Series A Preferred Investors entered into an
Exchange Agreement (the "Exchange Agreement"), pursuant to which the Series A
Preferred Investors exchanged all of their then existing warrants for $6,251,094
in cash and new warrants (the "Exchange Warrants") to purchase an aggregate of
up to 96.11 shares of the Common Equity of the Company;
WHEREAS, simultaneously with the execution of the Securities Purchase
Agreement and the Exchange Agreement, the Company, the Investors, certain
subsidiaries of the Company then existing, and the Management Stockholders
entered into a Warrantholders' Agreement (the "Warrantholders' Agreement"), to
govern the rights of each under the Original Warrants and the Exchange Warrants;
WHEREAS, the Company has heretofore entered into: (i) an asset purchase
agreement with Jarad Broadcasting Company of Pennsylvania, Inc., dated December
6, 1996, as amended through the date hereof (the "WPHI-FM Purchase Agreement"),
which provides for the purchase of certain assets used or held for use in the
operation of Radio Station WPHI-FM, Jenkintown, Pennsylvania ("WPHI-FM"), and
(ii) a binding letter of intent dated March 12, 1997 and accepted March 13,
1997, as amended through the date hereof (the "WYCB-AM Letter of Intent") to
acquire the stock of the corporation holding
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Radio Sation WYCB-AM, Washington, D.C. ("WYCB-AM," and together with WPHI-FM,
the "New Stations");
WHEREAS, simultaneously with the Closing (as defined in Section 1.3
hereof), the Company will issue 12% Senior Subordinated Notes due 2004 (the
"Senior Subordinated Notes") to certain investors pursuant to an offering under
Rule 144A of the Securities Act (as defined in Section 11 below), the gross
proceeds of which will be approximately $75,000,000 (the "Senior Subordinated
Debt Financing") for the purpose of: (i) funding the balance of the purchase
prices for WPHI-FM (the "WPHI-FM Acquisition") and WYCB-AM (the "WYCB-AM
Acquisition," and together with the WPHI-FM Acquisition, the "Acquisitions"),
(ii) repaying all of the outstanding indebtedness due under the Amended and
Restated Credit Agreement, dated as of June 6, 1995, among the Company, certain
subsidiaries of the Company then existing, NationsBank of Texas, N.A., as agent
and lender, and the other lenders named therein, as amended (the "Existing
Senior Credit Facility"); (iii) paying for the leasehold improvements, new
equipment and other amounts associated with moving the Company's Washington,
D.C. offices and studios in April 1997 to an office building located in Lanham,
Maryland; (iv) providing funding for other general purposes, including working
capital; and (v) paying the related fees and expenses of the offering of the
Senior Subordinated Notes, the exchange of Preferred Stock (as defined herein)
for the Subordinated Notes and the Acquisitions;
WHEREAS, on April 29, 1997 NationsBank of Texas, N.A. (together with
any other lender, a "Senior Lender") and the Company agreed to a Commitment
Letter, dated as of April 25, 1997 (the "Commitment Letter"), pursuant to which
the Senior Lender, subject to appropriate documentation and certain conditions,
will enter into an amended and restated credit agreement (the "Senior Loan
Agreement");
WHEREAS, pursuant to the terms of the Senior Loan Agreement, the Senior
Lender will make available to the Company up to $7,500,000 of secured senior
debt together with interest thereon, and all other amounts due and payable
thereunder or under any Loan Document (as defined in the Senior Loan Agreement)
(the "Senior Debt") in the form of a line of credit for working capital and
certain other needs;
WHEREAS, in connection with the Exchange (as defined in Section 1.2
hereof), (i) the Company will replace the certificates held by the Series B
Preferred Investors representing all of their Original Warrants with amended and
restated warrant certificates (the "Series B Amended and Restated Warrants") in
order to conform the Original Warrants to reflect the transactions contemplated
herein, and (ii) the Company will similarly replace the certificates held by the
Series A Preferred Investors representing all of their Exchange Warrants with
amended and restated warrant certificates (the "Series A Amended and Restated
Warrants," and, collectively with the Series B Amended and Restated Warrants,
the "Warrants") in order to conform such Exchange Warrants to reflect the
transactions contemplated herein; and
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WHEREAS, pursuant to the terms of this Agreement, and as a necessary
condition to the Senior Subordinated Debt Financing, (i) the Series A Preferred
Investors will exchange all of their Subordinated Notes (including all accrued
but unpaid interest thereon) for the number of shares of Series A 15% Senior
Cumulative Redeemable Preferred Stock of the Company (the "Series A Preferred
Stock") set forth opposite their names on Schedule A hereto, and (ii) the Series
B Preferred Investors will exchange all of their Subordinated Notes (including
all accrued but unpaid interest thereon) for the number of shares of Series B
15% Senior Cumulative Redeemable Preferred Stock of the Company (the "Series B
Preferred Stock," and together with the Series A Preferred Stock, the "Preferred
Stock") set forth opposite their names on Schedule A hereto.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. ISSUANCE OF PREFERRED STOCK IN EXCHANGE FOR
SUBORDINATED NOTES
1.1 Issuance of Securities. The Company represents and warrants that
prior to or simultaneously with the Closing (as hereinafter defined) it will
have authorized the issuance and delivery of: (i) the aggregate number of shares
of its authorized but unissued Series A Preferred Stock, par value $.01 per
share, listed on Schedule A hereto (the "Series A Preferred Shares") to the
Series A Preferred Investors; and (ii) the aggregate number of shares of its
authorized but unissued Series B Preferred Stock, par value $.01 per share,
listed on Schedule A hereto (the "Series B Preferred Shares," and together with
the Series A Preferred Shares, the "Preferred Shares") to the Series B Preferred
Investors. The Preferred Stock shall have the rights, preferences and other
terms set forth in the Company's Amended and Restated Certificate of
Incorporation attached hereto as Exhibit A (the "Certificate").
1.2 Exchange of Subordinated Notes for Preferred Shares. Subject to the
terms and conditions herein, and in reliance on the representations, warranties
and covenants contained herein, at the Closing (as hereinafter defined) the
Company shall deliver to each of the Investors, and each of the Investors agrees
to accept from the Company, the number and series of Preferred Shares set forth
opposite the name of each such Investor on Schedule A hereto in exchange for the
Subordinated Notes held by each of the Investors (the "Exchange"). Each Investor
shall deliver the Subordinated Note that is held by such Investor to the Company
at the Closing for cancellation, and, upon receipt thereof, the Company will
mark each such Subordinated Note canceled.
1.3 Closing. The Exchange shall take place simultaneously with the
closing of the Senior Subordinated Debt Financing and the WPHI-FM Purchase
Agreement (the "Issuance Date" or the "Closing Date") at the offices of Kirkland
& Ellis, Citicorp Center, 153 East 53rd Street, New York, New York 10022-4675,
or at such other place as shall be mutually agreed upon by the Company and the
Investors (the "Closing").
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Investors to enter into this Agreement and agree
to the transactions contemplated hereby, the Company hereby represents and
warrants as follows:
2.1 Organization and Power. The Company (i) is a corporation duly
organized and validly existing under the laws of the State of Delaware, (ii)
except as provided in Schedule 2.1, is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required except where failure to be so duly qualified and in
good standing could not reasonably be expected to have a material adverse effect
on the assets, business or financial condition of the Company and ROL, taken as
a whole, and (iii) has all required power and authority to own its property and
to carry on its business as presently conducted or contemplated. The Company has
all required power and authority to enter into and perform this Agreement and
the agreements related hereto and contemplated hereby, to issue and deliver the
Preferred Shares and generally to carry out the transactions contemplated
hereby. The copies of the certificate of incorporation and by-laws of the
Company, as amended to date, attached hereto as Exhibit B, are correct and
complete at the date hereof. Except as provided in Schedule 2.1, the Company is
not in violation of any term of its certificate of incorporation or by-laws, or
any material agreement, or any instrument, judgment, decree, order, statute,
rule or government regulation applicable to the Company except where such
violation could not reasonably be expected to have a material adverse effect on
the assets, business or financial condition of the Company and ROL, taken as a
whole.
2.2 Authorization and No Contravention. The execution and delivery of,
and performance by the Company and ROL of their obligations under, this
Agreement and the agreements related hereto and contemplated hereby and the
issuance and delivery of the Preferred Shares have been duly authorized by all
requisite corporate action of the Company and ROL, and except as may otherwise
be specifically provided herein, this Agreement, the agreements related hereto
and contemplated hereby constitute legal, valid and binding obligations of the
Company and ROL, enforceable in accordance with their terms. The Company's and
ROL's execution and delivery of this Agreement and the agreements related hereto
and contemplated hereby and their performance of the transactions contemplated
hereby, including, without limitation, the issuance and delivery of the
Preferred Shares will not: (i) except as set forth in Schedule 2.1, violate,
conflict with or result in a default under any contract, instrument, agreement,
indenture, obligation or commitment to which the Company or ROL is a party or by
which the Company or ROL or their assets are bound, or any charter provision,
by-law or similar governing document of the Company or ROL, or the creation of
any Lien, charge or encumbrance of any nature upon any of the properties or
assets of the Company or ROL, except where such violation, conflict or default
would not have a material adverse effect on (a) the consummation of the
Acquisitions, (b) the consummation of the transactions contemplated by this
Agreement, (c) the assets, business or financial condition of the Company and
ROL, taken as a whole, or (d) the rights and privileges of the Investors
hereunder and under the agreements related hereto; (ii) violate or result in a
violation of, or constitute a default under, any material provision of any law,
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statute, ordinance, regulation or rule, or any decree, judgment or order of, or
any material restriction imposed by, any court or other federal, state or local
governmental agency; or (iii) except as set forth in Schedule 2.2 or as
otherwise expressly provided for in this Agreement, require any notice to,
filing with, or consent or approval of any governmental authority or other third
party which will not, prior to the Closing, have been duly and properly given,
made or obtained, except where failure to provide any such notice or make any
such filing or receive any such consent or approval will not have a material
adverse effect on (a) the consummation of the Acquisitions, (b) the consummation
of the transactions contemplated by this Agreement, (c) the assets, business or
financial condition of the Company and ROL, taken as a whole, or (d) the rights
and privileges of the Investors hereunder and under the agreements related
hereto and contemplated hereby.
2.3 Capitalization; Stockholders; Subsidiaries.
(a) After giving effect to the transactions contemplated
hereby, the duly authorized capital stock of the Company consists of (i) 2,000
authorized shares of Common Stock, $.01 par value per share, which consist of:
(a) 1,000 shares of Class A Common Stock of which 138.45 shares will be
outstanding and fully-paid and non-assessable as of the Closing, and (b) 1,000
shares of Class B Non-Voting Common Stock of which no shares will be outstanding
as of the Closing, and (ii) 250,000 authorized shares of Preferred Stock, $.01
par value per share, which consist of: (a) 100,000 shares of Series A Preferred
Stock of which the aggregate number of shares that will be outstanding and
fully-paid and non-assessable as of the Closing is listed on Schedule A hereto,
and (b) 150,000 shares of Series B Preferred Stock of which the aggregate number
of shares that will be outstanding and fully-paid and non-assessable as of the
Closing is listed on Schedule A hereto. Except for the Warrants, the Exchange
Warrants, as provided in the Warrantholders' Agreement, as amended by the First
Amendment to the Warrantholders Agreement (as defined in Section 3.1(e) herein),
and as provided above or in Schedule 2.3, the Company has not issued any other
shares of its capital stock and there are no outstanding warrants, options or
other rights to purchase or acquire any of such shares, nor are there any
outstanding securities convertible into such shares or outstanding warrants,
options or other rights to acquire any such convertible securities. Except as
provided in the Warrantholders' Agreement, as amended by the First Amendment to
the Warrantholders Agreement, there are no preemptive rights with respect to the
issuance or sale by the Company of the Company's capital stock. Except as
disclosed in Schedule 2.3 or in the Senior Loan Agreement, there are no
restrictions on the transfer of the Company's capital stock other than those
arising from federal and state securities laws, the Communications Act (as
defined in Section 2.7 herein) or the FCC (as defined herein) regulations
promulgated thereunder or under this Agreement or the Warrantholders' Agreement,
as amended. Immediately prior to the Closing, the outstanding shares of capital
stock of the Company are held of record and beneficially by the persons
identified in Schedule 2.3 in the amounts indicated therein.
(b) All the Subsidiaries of the Company are listed on Schedule
2.3(b). The Company or ROL is the owner, free and clear of all Liens and
encumbrances, except for Permitted Liens or those arising under Section 10 of
this Agreement and Article VI of the
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Warrantholders' Agreement, as amended through the Closing Date, of all of the
issued and outstanding stock of each Subsidiary and all shares of such stock
have been validly issued and are fully paid and nonassessable, and no rights to
subscribe to any additional shares have been granted, and no options, warrants
or similar rights are outstanding. ROL is duly organized in its state of
organization, duly qualified, licensed and authorized to do business and is in
good standing as a foreign corporation (or company or otherwise) in each
jurisdiction where its ownership or leasing of properties or the conduct of its
business requires it to be qualified, licensed and authorized except where the
failure to be so qualified, licensed and authorized or in good standing could
not reasonably be expected to have a material adverse effect on its assets,
business or financial condition.
2.4 Other Investments. Except as disclosed in Schedule 2.4 or Schedule
2.3(b) and except for investments, loans or advances made in the ordinary course
of business consistent with past practices, the Company does not own, or have
any direct or indirect investments or interests in, loans or advances to or
control over any corporation, trust, partnership, joint venture or other entity
of any kind.
2.5 Financial Statements; Projections. The Company has heretofore
furnished to each Investor consolidated audited statements of operation and the
related balance sheets for the fiscal years ended December 25, 1994, December
31, 1995 and December 31, 1996 and unaudited consolidated statements of
operation and the related balance sheet for the three months ended March 30,
1997 (the December 31, 1996 balance sheet shall hereinafter be referred to as
the "Base Balance Sheet"), and the Company will, on or prior to the Closing,
furnish to each Investor the pro forma unaudited balance sheet as of December
31, 1996 for the Company and management's five year projections for the Company,
after giving effect to the WPHI-FM Acquisition. The Company has heretofore also
furnished to each Investor audited consolidated statements of operation and the
related balance sheet for the fiscal year ended December 31, 1996 and unaudited
consolidated statements of operation and the related balance sheet for the three
months ended March 31, 1997 for WPHI-FM. To the best knowledge of the Company,
the above referenced financial statements of WPHI-FM (other than projections)
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis, except that interim financial statements
and pro forma statements have been prepared without footnote disclosures and
year-end audit adjustments, which will not, to management's best knowledge, be
material. Such financial statements of the Company (other than projections) have
been prepared in accordance with GAAP applied on a consistent basis, except that
interim financial statements and pro forma statements have been prepared without
footnote disclosures and are subject to year-end audit adjustments, which
adjustments will not, to management's best knowledge, be material. To the best
knowledge of the Company, the above-referenced financial statements of WPHI-FM
contain notations for all significant accruals or contingencies and fairly
present in all material respects the financial condition of WPHI-FM as of the
date thereof. Such financial statements of the Company (other than interim
financial statements, pro forma financial statements and projections) contain
notations for all significant accruals or contingencies and fairly present in
all material respects the financial condition of the Company as of the date
thereof. Nothing has come to the attention of the senior management of the
Company since
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such dates which would indicate that such financial statements do not fairly
present the financial condition of the Company in all material respects as of
the respective dates thereof. Such projections referenced above delivered to the
Investors represent management's good faith estimates of the Company's future
performance based upon assumptions which are set forth therein and which
management in good faith believe were reasonable when made and continue to
believe to be reasonable as of the date hereof.
2.6 Licenses, Permits, Copyrights, etc. Except as set forth in Schedule
2.6, after giving effect to the WPHI-FM Acquisition, each of the Company and ROL
has ownership or license to use all material franchises, permits, licenses
(other than FCC Licenses (as defined in and covered by Section 2.7 herein)) and
all patent, copyright or trademark rights and privileges used or to be used in
its business as presently conducted and as presently proposed to be conducted or
necessary to permit it to own its properties and to conduct its business as
presently conducted and as presently proposed to be conducted and its present
activities do not infringe, to the best knowledge of the Company or ROL, any
patent, copyright, trademark or other proprietary rights of others. Schedule 2.6
provides a list that is accurate in all material respects of all the material
permits and licenses (other than the FCC Licenses which are listed in Schedule
2.7) which are held by the Company and ROL, after giving effect to the WPHI-FM
Acquisition (the "Licenses"), and the issuer and termination date of each
License. Each License was duly and validly issued by the issuer thereof pursuant
to procedures which complied in all material respects with all requirements of
applicable law. After giving effect to the WPHI-FM Acquisition, the Company or
ROL is the licensee of the Licenses and owns all of the assets of WPHI-FM, as
well as stations WMMJ-FM/WOL-AM (Washington), WKYS-FM (Washington), WWIN-AM/FM
(Baltimore), and WERQ-FM/WOLB-AM (Baltimore) (collectively with WPHI-FM, the
"Stations"), free and clear of all Liens except for Permitted Liens (as defined
in Section 6.2). Each License or other right held by the Company or ROL is in
compliance with the terms thereof in all material respects with no known
conflict with the valid rights of others which could affect or impair materially
in any manner the business, assets or condition, financial or otherwise, of the
Company and ROL. No event has occurred which permits, or after notice or lapse
of time or both would permit, the revocation or termination of any License prior
to its stated term or other right so as to adversely affect in any material
respect the business, assets or condition, financial or otherwise, of the
Company and ROL, taken as a whole, except as otherwise set forth in Schedule
2.6. To the best knowledge of the Company and ROL, the Company, ROL and each of
the Stations are in compliance with all state and federal laws relating to
copyright, including the Copyright Revision Act of 1976, 17 U.S.C. Section 101
et. seq., except for such noncompliance as would not be reasonably likely to
have a material adverse effect on the Company and ROL, taken as a whole, and
have all material performing arts licenses which are necessary or appropriate
for the conduct of their business.
2.7 FCC Licenses. After giving effect to the WPHI-FM Acquisition, the
Company and ROL hold all material licenses, permits and authorizations required
for and/or used in the ownership and operation of the Stations as presently
operated or as presently anticipated to be operated (other than licenses,
permits and authorizations covered by Section 2.6), including all material
commercial broadcast station and auxiliary licenses,
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permits, authorizations and other certificates required by (a) the FCC, (b) the
Communications Act of 1934, 47 U.S.C. Section 151 et. seq., as amended (the
"Communications Act"), (c) 47 C.F.R. Part 73 or (d) any other governmental
entity (such material licenses, permits, authorizations, and certificates,
collectively, the "FCC Licenses"). Schedule 2.7 provides a list that is accurate
in all material respects of the FCC Licenses, including the termination date of
such FCC Licenses. Except for the possible need to request the FCC to grant an
extension of time to consummate the WPHI-FM Acquisition, FCC approval has been
granted for the WPHI-FM Acquisition, such approval has not lapsed and the period
for seeking reconsideration, review or appeal of such FCC approval has expired
and no such reconsideration, review or appeal has been sought by any party. The
FCC Licenses are valid and in full force and effect, and are unimpaired by any
act, omission or condition which could have any material adverse effect on the
operation of the Stations. After giving effect to the WPHI-FM Acquisition, to
the extent necessary, the Company or, if applicable, ROL, has timely filed all
applications for renewal or extension of all of its or their FCC Licenses and,
except as otherwise indicated in Schedule 2.7, all such applications have been
granted without conditions. Except as indicated on Schedule 2.7, and except for
actions or proceedings affecting the broadcasting industry generally, no
petition, action, investigation, notice of violation or apparent liability,
notice of forfeiture, orders to show cause, complaint or proceeding is pending
or, to the best knowledge of the Company, threatened before the FCC or any other
forum or agency with respect to the Company or any of the Stations. The Company,
ROL and each of the Stations are in material compliance with the terms of the
FCC Licenses and all applicable filing and operating requirements of 47 C.F.R.
Part 73 and all other applicable regulations and policies of the FCC and the
Communications Act. Except as otherwise expressly contemplated by this
Agreement, no prior FCC consent is required in connection with the execution,
delivery and performance of this Agreement. Except as otherwise expressly
contemplated by this Agreement or as stated in Schedule 2.7 hereto, there are no
applications presently pending before the FCC with respect to any of the
Stations. The Company does not know of any fact that should reasonably be
anticipated to result in the denial of an application for renewal, or the
revocation, modification, nonrenewal or suspension of any of the FCC Licenses,
or the issuance of a cease-and-desist order, or the imposition of any
administrative or judicial sanction with respect to any of the Stations, which
may materially adversely affect the rights under any of the FCC Licenses or
which may have a materially adverse effect on the Stations, the Company and ROL,
taken as a whole.
2.8 Absence of Undisclosed Liabilities. Except as otherwise
specifically disclosed in the Base Balance Sheet (as defined in Section 2.5) or
as set forth in Schedule 2.8 and except for the expenses and costs incurred in
connection with the closing of the transactions contemplated herein, neither the
Company nor ROL has any accrued or contingent liability or liabilities
(including any liability for unpaid Taxes) accrued, to become due, contingent,
known, unknown or otherwise, other than liabilities arising out of the Stations'
ordinary course of business consistent with past practices, or which in the
aggregate do not exceed $150,000.
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2.9 Absence of Certain Developments. Except as specifically disclosed
in Schedule 2.9, since the date of the Base Balance Sheet, there has been (i) no
material adverse change in the assets, liabilities, properties, business or
condition (financial or otherwise) of the Company and ROL, taken as a whole,
(ii) no declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company or ROL, (iii) no waiver
of any valuable right of the Company or ROL without adequate consideration or
the cancellation of any debt or claim held by the Company or ROL without
adequate consideration, (iv) no loan by the Company or ROL to any officer,
director, employee or stockholder thereof, or any of their respective
affiliates, or any agreement or commitment therefor, (v) no increase, direct or
indirect, in the compensation paid or payable to any officer, director, employee
or agent of the Company (other than immaterial increases made in the ordinary
course of business and consistent with past practices), (vi) no uninsured
material loss, destruction or damage to any property of the Company or ROL,
(vii) no strikes, work stoppages, union organizing or recognition efforts
involving the Company or ROL and no material change in the personnel of the
Company or the terms and conditions of any employment contracts to which the
Company or ROL is a party, and (viii) other than in the Acquisitions, no
material acquisition or disposition of any assets (or any contract or
arrangement therefor) nor any other material transaction by the Company or ROL
otherwise than for fair value in the ordinary course of business.
2.10 Employee Relations. Except as set forth in Schedule 2.10, after
giving effect to the WPHI-FM Acquisition:
(a) No labor dispute, strike, work stoppage or organizational
activity which materially affects or could be reasonably likely to materially
and adversely affect the results of operations of the Company and ROL, taken as
a whole, has occurred and is continuing, or, to the best of the Company's
knowledge, is threatened, and no material labor grievance or union
representation questions exist in respect of the employees of the Company or
ROL. None of the Company's employees are represented by a union.
(b) There are no charges of unfair labor practices or of
discrimination (relating to sex, age, race, national origin, handicap or veteran
status) pending or, to the best of the Company's knowledge, threatened before
any government or regulatory agency or authority involving employees of the
Company or ROL which could have a materially adverse effect on the Company and
ROL, taken as a whole. To the best of the Company's knowledge, no customer or
supplier of the Company or ROL is involved in, threatened with, or affected by
any labor dispute or other proceeding or order which would be reasonably likely
to materially and adversely affect the business of the Company and ROL, taken as
a whole.
(c) Neither the Company nor ROL has engaged in any plant
closing, work force reduction, or other action which has resulted or could
result in liability under the Federal Worker Adjustment and Retraining
Notification Act (or any state or other law or
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ordinance of similar import), or issued any notice that any such action is to
occur in the future.
2.11 Title to Properties. Except as specifically disclosed in Schedule
2.11 or as permitted by Section 6.2 hereof and after giving effect to the
WPHI-FM Acquisition, each of the Company and ROL has good title to all of its
respective material owned properties and assets, free and clear of all Liens
other than Permitted Liens. All owned or leased real estate of the Company, ROL
and WPHI-FM is listed on Schedule 2.11. Each material real property lease to
which the Company or ROL is a party or which relates to WPHI-FM is in full force
and effect. No material default or event of default on the part of the Company,
ROL or, to the best knowledge of the Company, the lessee under any material
leases related to WPHI-FM or, to the best knowledge of the Company, on the part
of the lessor, exists under any such lease, and neither the Company nor ROL has
received any notice of default under any such lease or any indication that the
owner of the leased property intends to terminate such lease. To the best of the
Company's knowledge and after giving effect to the WPHI-FM Acquisition, neither
the Company nor ROL is in violation of any material zoning, land-use,
aeronautical or FAA, building or safety law, ordinance, regulation or
requirement or other law or regulation applicable to the operation of its owned
or leased properties, nor has either received any notice of violation with which
it has not complied, in any case in which the consequences of such violation if
asserted by the applicable regulatory authority would have a materially adverse
effect on the business, assets or condition, financial or otherwise, of the
Company and ROL, taken as a whole. After giving effect to the WPHI-FM
Acquisition, all real property occupied (or which will be occupied) by the
Company (including all fixtures related thereto) and substantially all tangible
personal property owned or leased (or which will be owned or leased) by the
Company is in good operating condition and repair (reasonable wear and tear
excepted), has been well maintained, conforms in all material respects with all
applicable ordinances, regulations and other laws and, since the date of the
Base Balance Sheet, no material portion of any such real or personal property
has suffered any damage by fire or other casualty which has not heretofore been
completely repaired and restored to its original condition if and to the extent
necessary in the continued operation of its business.
2.12 Tax Matters. Each of the Company and ROL has filed all Tax Returns
required to be filed by it, and all such Tax Returns were correct and complete
in all material respects. Each of the Company and ROL has paid all Taxes owed by
it (whether or not shown on any Tax Return), except Taxes which have not yet
accrued or otherwise become due or Taxes which are being contested in good faith
by appropriate proceedings to the extent the Company has set aside appropriate
reserves. All Taxes and other assessments and levies which the Company or any
Subsidiary was or is required to withhold or collect have been withheld and
collected and have been paid over when due to the proper governmental
authorities. Except as set forth in Schedule 2.12, (i) neither the Company nor
any of its Subsidiaries has ever received notice of any audit or of any proposed
deficiency from the Internal Revenue Service ("IRS") or any other taxing
authority (other than routine audits undertaken in the ordinary course and which
have been resolved on or prior to the date hereof without a material adverse
effect on the Company or any of its Subsidiaries or their
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respective financial conditions), (ii) there are in effect no waivers of
applicable statutes of limitations with respect to any Taxes owed by the Company
or ROL for any year and (iii) neither the IRS nor any other taxing authority is
now asserting or, to the best knowledge of the Company, threatening to assert
against the Company or ROL any deficiency or claim for additional Taxes or
interest thereon or penalties in connection therewith. Neither the Company nor
ROL is a party to any Tax allocation or sharing arrangement. Neither the Company
nor any of its Subsidiaries has entered into a closing agreement pursuant to
Section 7121 of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations promulgated thereunder. There are no Liens on any of the assets
of the Company or its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Taxes.
2.13 Contracts and Commitments. Except as set forth in Schedule 2.13
and in any other schedule hereto and except for contracts entered into in the
ordinary course of business and consistent with past practices, and after giving
effect to the WPHI-FM Acquisition, neither the Company nor ROL (a) is a party to
any contract, obligation or commitment which involves a potential commitment by
it in excess of $50,000 or which is otherwise material and not entered into in
the ordinary course of business, or (b) has an employment contract, stock
redemption or purchase agreement, financing agreement, local marketing or time
brokerage agreement or any other agreement with any officer, director, employee,
shareholder or Affiliate. Except as disclosed in Schedule 2.13, and after giving
effect to the WPHI-FM Acquisition, neither the Company nor ROL is in default
under any material contract, obligation or commitment, and, to the best
knowledge of the Company, there is no state of facts which upon notice or lapse
of time or both would constitute such a default, the consequences of which
default if asserted by the other contracting party would have a materially
adverse effect on the Company and ROL, taken as a whole. Neither the Company nor
ROL has entered into any single government contract or subcontract, the
recurring monthly revenue of which exceeds $50,000.
2.14 Litigation and Compliance with Laws.
(a) Except as set forth in Schedule 2.14 and after giving
effect to the WPHI-FM Acquisition, there is no investigation, action, suit or
proceeding at law or in equity or by or before any governmental instrumentality
or other agency now pending or, to the best knowledge of the Company, overtly
threatened against the Company, ROL, any of the Stations or any officer or
director of the Company, which has a reasonable possibility of calling into
question the validity, or hindering the enforceability or performance, of this
Agreement or any action taken or to be taken pursuant hereto or by any of the
other agreements and transactions contemplated hereby; nor, to the best
knowledge of the Company, has there occurred any event or does there exist any
condition on the basis of which any such litigation, proceeding or investigation
should reasonably be anticipated to be instituted which would have a material
adverse effect on the business, assets or condition, financial or otherwise, of
the Company, ROL and the Stations, taken as a whole.
(b) Except as set forth in Schedule 2.14 and after giving
effect to the WPHI-FM Acquisition, each of the Company and ROL is in material
compliance with all
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laws and governmental rules and regulations, domestic or foreign (including,
without limitation, the Employee Retirement Income Security Act of 1974
("ERISA")), except where non-compliance therewith, in any individual instance or
any series of related instances, would not have a material adverse effect on the
Company and ROL, taken as a whole. Except as set forth in Schedule 2.14 and
after giving effect to the WPHI-FM Acquisition, neither the Company nor ROL is
in default in any respect with respect to any judgment, order, writ, injunction,
decree, demand or assessment issued by any court or any federal, state,
municipal or other governmental or self-regulatory agency, organization, board,
commission, bureau, instrumentality or department, domestic or foreign, relating
to any aspect of its business, affairs, properties or assets, except where
non-compliance therewith, in any individual instance or any series of related
instances, would not have a material adverse effect on the assets, business or
financial condition of the Company and ROL, taken as a whole. Except as set
forth in Schedule 2.14 and after giving effect to the WPHI-FM Acquisition,
neither the Company nor any Subsidiary is charged or, to the best knowledge of
the Company, threatened with, or under investigation with respect to, any
material violation of material federal, foreign, state, municipal or other law
or any administrative rule or regulation, domestic or foreign (including,
without limitation, ERISA) in any matter directly relating to or affecting its
business, assets or condition, financial or otherwise, of the Company and ROL,
taken as a whole.
2.15 Securities Law Filings. The Company has complied with, in all
material respects, the Securities Act and all applicable state securities laws
in connection with the issuance and sale of its capital stock, and other
securities heretofore issued.
2.16 Environmental Matters.
(a) Except as would not be reasonably likely to have a
material adverse effect on the Company and ROL, taken as a whole, or as set
forth in Schedule 2.16, and after giving effect to the WPHI-FM Acquisition, (i)
neither the Company nor ROL has ever generated, transported, used, stored,
treated, disposed of, or managed a material amount of Hazardous Waste (as
defined in Section 2.16(d) below), nor has the Company or ROL contracted with
any party for the generation, transportation, use, storage, treatment, disposal
or management of any material amount of Hazardous Waste; (ii) no material amount
of Hazardous Material (as defined in Section 2.16(d) below) has ever been or is
threatened to be spilled, released, or disposed of by the Company or ROL or, to
the best knowledge of the Company, any third parties, at any site presently or
formerly owned, operated, leased, or used by the Company or ROL nor, to the best
knowledge of the Company, has any material amount of Hazardous Material ever
come to be located in the soil or groundwater at any such site; (iii) no
material amount of Hazardous Material has ever been transported by the Company
or ROL or, to the best knowledge of the Company, by any third parties, from any
site presently or formerly owned, operated, leased, or used by the Company or
ROL for treatment, storage, or disposal at any other place; (iv) neither the
Company nor ROL presently owns, operates, leases, or uses, nor, to the best
knowledge of the Company, has the Company or ROL previously owned, operated,
leased, or used any site on which underground storage tanks are or were located
or which contain or contained any asbestos or
12
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asbestos-containing material, any polychlorinated byphenyls ("PCBs") or
equipment containing PCBs, or any urea formaldehyde foam insulation; and (v) no
lien has ever been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by the Company or ROL
in connection with, or as a result of, the presence of any Hazardous Material,
which could result in a material liability to the Company or ROL.
(b) Except as would not be reasonably likely to have a
material adverse effect on the Company and ROL, taken as a whole, or as set
forth in Schedule 2.16, and after giving effect to the WPHI-FM Acquisition, (i)
to the best of the Company's actual knowledge, neither the Company nor ROL has
any liability under, nor has it ever violated, any Environmental Law (as defined
in Section 2.16(d) below); (ii) the Company, the operations of its businesses,
and any property owned, operated, leased, or used by the Company or ROL, and any
facilities and operations thereon, to the best of the Company's knowledge, are
presently in compliance in all material respects with all applicable
Environmental Laws and any and all orders or directives of any governmental
authorities having jurisdiction under such Environmental Laws, including,
without limitation, any orders or directives with respect to any clean-up or
remediation of any release or threat of release of any Hazardous Material; (iii)
neither the Company nor ROL has ever entered into or been subject to any
judgment, consent decree, compliance order, or administrative order with respect
to any environmental or health and safety matter or received any request for
information, demand or other letter, administrative inquiry, citation, formal or
informal complaint or claim, notice of any proceeding, claim or lawsuit, or
other communication with respect to any environmental or health and safety
matter or the enforcement of any Environmental Law; and (iv) the Company does
not have knowledge or reason to know that any of the items enumerated in clause
(iii) of this Section 2.16(b) will be forthcoming nor is the Company aware of
any basis therefore which has not been disclosed to the Investors.
(c) The Company has provided to the Investors copies of all
documents, records, and information reasonably available to the Company
concerning any environmental or health and safety matter which could result in
any material liability to the Company or ROL, whether generated by the Company
or ROL or others, including, without limitation, environmental or health and
safety audits, environmental or health and safety risk assessments, site
assessments, documentation regarding off-site treatment, storage or disposal of
Hazardous Materials, spill control plans, discharge monitoring reports,
hazardous waste manifests, community right-to-know filings, insurance policies,
and reports, correspondence, permits, licenses, approvals, consents,
registrations and other authorizations related to or filed with environmental or
health and safety matters issued by or filed with any governmental agency with
respect to such matters.
(d) For purposes of this Section 2.16, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, asbestos, polychlorinated
byphenyls, urea formaldehyde, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii)
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"Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "Environmental Law" shall mean any
environmental or health and safety-related law, regulation, rule, ordinance, or
by-law at the federal, state, or local level existing as of the date hereof or
previously enforced; and (iv) the "Company" shall mean and include the Company
and all other entities for whose conduct the Company is or may be held
responsible under any Environmental Law.
2.17 Investment Company. The Company is not an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), and will not be an "investment company" under the 1940 Act after
giving effect to the use of proceeds from the issuance of the Senior
Subordinated Notes.
2.18 Margin Securities. The Company does not now own, nor does it have
any present intention of acquiring, any "margin security" within the meaning of
Regulation G (12 C.F.R. Part 207), or any "margin stock" within the meaning of
Regulation U (12 C.F.R. Part 221), of the Board of Governors of the Federal
Reserve System (herein respectively referred to as "margin security" and "margin
stock"). None of the proceeds of the issuance of the Senior Subordinated Notes
will be used, directly or indirectly, by the Company for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any margin
security or margin stock or for any other purpose which would be reasonably
likely to cause the transactions contemplated hereby to constitute a "purpose
credit" within the meaning of said Regulation G or Regulation U, or cause this
Agreement to violate any other regulation of the Board of Governors of the
Federal Reserve System or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any rule or regulation promulgated under any of such
statutes.
2.19 ERISA Compliance. Schedule 2.19 sets forth a list of every Pension
Plan (as hereinafter defined) that has been maintained by the Company or, to the
Company's knowledge, WPHI-FM at any time during the twelve-month period ending
on the Closing Date. The Company has not incurred, and as a result of the
WPHI-FM Acquisition will not incur (a) any material accumulated funding
deficiency within the meaning of ERISA, or (b) any material liability to the
Pension Benefit Guaranty Corporation established under ERISA (or any successor
thereto under ERISA) in connection with any Pension Plan established or
maintained by it. The Company has not had, and as a result of the WPHI-FM
Acquisition will not have, any tax assessed against it by the IRS for any
alleged violation under Section 4975 of the Code. The Company does not, and as a
result of the WPHI-FM Acquisition will not be required to or assume any
liability with respect to any obligation of WPHI-FM to contribute to or maintain
any Pension Plan with an unfunded aggregate "amount of benefit liabilities" (as
defined in Section 4001(a)(18) of ERISA) and the Company has never participated
in or contributed to a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
2.20 Solvency. Neither the Company nor ROL has (i) made a general
assignment for the benefit of creditors, (ii) filed any voluntary petition in
bankruptcy or suffered the
14
<PAGE>
filing of any involuntary petition by its creditors, (iii) suffered the
appointment of a receiver to take possession of all, or substantially all, of
its assets, (iv) suffered the attachment or other judicial seizure of all, or
substantially all, of its assets, (v) admitted in writing its inability to pay
its debts as they come due, or (vi) made an offer of settlement, extension or
composition to its creditors generally. After giving effect to the transactions
provided for herein, neither the Company nor ROL will (i) have liabilities which
exceed the present fair saleable value of its assets; (ii) be left with
unreasonably small capital with which to engage in its business for the
foreseeable future; or (iii) have incurred, or anticipate or should reasonably
anticipate incurring, debts beyond its ability to pay such debts as they mature.
2.21 No Material Misstatement or Omission. Neither this Agreement nor
any agreement, financial statement, instrument, document, certificate,
projection, business proposal, acquisition plan or other written information
furnished to the Investors by or on behalf of the Company in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or, when taken together, omits to state a material fact necessary in order
to make the statements contained herein or therein not misleading. There is no
fact known to the Company and not disclosed to the Investors which materially
and adversely affects, or in the future may (insofar as the Company can
reasonably foresee) materially and adversely affect, the business, assets or
liabilities, financial condition or results of operation of the Company or any
Subsidiary other than matters generally affecting the radio broadcast industry.
2.22 Broker's Fee. Except as set forth on Schedule 2.22, neither the
Company nor ROL or any of their Affiliates have incurred or will become liable
for any brokerage commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement, and the Company agrees to
indemnify the Investors against any claims for brokerage fees or commissions
payable to any broker or finder claiming through the Company, ROL or any of
their Affiliates in connection with the transactions contemplated by this
Agreement and to pay all expenses incurred by an Investor in connection with the
defense of any action brought against such Investor to collect any brokerage
fees or commissions by any such broker or finder.
2.23 Acquisition Compliance and Delivery of Documents. The consummation
of the WPHI-FM Acquisition will not (a) violate, conflict with or result in a
material default under any material contract, instrument, agreement, indenture,
obligation or commitment of the Company except where consents or waivers have
been obtained or (b) violate or result in a violation of, or constitute a
default under, any material provision of any law, statute, ordinance, regulation
or rule, or any decree, judgment or order of, or any material restriction
imposed by, any court or other federal, state or local governmental agency which
such violation or default could have a material adverse effect on the Company
and ROL, taken as a whole, or their assets, business or financial condition.
15
<PAGE>
SECTION 3. CONDITIONS OF THE EXCHANGE
3.1 Conditions of the Investors. The Investors' obligations to exchange
their Subordinated Notes for Preferred Stock and consent to the transactions
contemplated hereby shall be subject to compliance by the Company and ROL (and
for the purposes of Section 3.1(f) hereof, the Management Stockholders) with
their agreements herein contained and to the fulfillment, to the Investors'
satisfaction, of the following conditions:
(a) Certificate of the Company. The representations and
warranties of the Company contained in this Agreement, including but not limited
to the representations and warranties made in Section 2, shall be true and
correct in all material respects with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date, each
of the conditions hereafter specified in this Section 3.1 shall have been
satisfied in all material respects, there shall be no Redemption Event (as
defined in Section 8.1 herein) or any event or condition which, after notice or
lapse of time or both, would constitute a Redemption Event, and on the Closing
Date one or more certificates to such effect, executed by the President and the
Chief Financial Officer of the Company, shall be delivered to the Investors.
(b) Issuance of Senior Subordinated Notes. The Company shall
have completed the offering of its Senior Subordinated Notes on substantially
the same terms set forth in the preliminary offering circular, dated March 26,
1997 (the "Offering Memorandum"), distributed in connection with the Senior
Subordinated Debt Financing.
(c) Repayment of Outstanding Indebtedness. Prior to or
concurrently with the Closing, the Company shall have repaid or otherwise
satisfied in full the whole principal amount, together with all accrued but
unpaid interest thereon, of the Existing Senior Credit Facility outstanding
immediately prior to the Closing Date.
(d) Acquisition of WPHI-FM. Concurrently with the Closing, the
Company shall consummate and close the WPHI-FM Acquisition pursuant to the terms
of the WPHI-FM Purchase Agreement without amendment, modification, waiver or
imposition of adverse conditions and pursuant to other terms that are acceptable
to the Investors.
(e) Warrantholders' Agreement. The Company, ROL, the Investors
and the Management Stockholders shall have executed and delivered a First
Amendment to the Warrantholders' Agreement (the "First Amendment to the
Warrantholders' Agreement"), amending the Warrantholders' Agreement as of the
Closing Date, in the form of Exhibit C hereto.
(f) FCC Consents. The Company shall have received all of the
necessary and appropriate FCC consents, if any, for the consummation of the
WPHI-FM Acquisition, any other transactions contemplated by this Agreement, the
First Amendment to the Warrantholders' Agreement and any related agreements or
documents, and the period for
16
<PAGE>
seeking reconsideration, review or appeal of such FCC consents shall have
expired and no such reconsideration, review or appeal shall have been sought by
any party.
(g) Delivery of Documents. Concurrently with the Closing, the
Company or ROL, as the case may be, shall have executed and delivered to the
Investors the following:
(i) Certificates representing the Preferred Shares;
(ii) Certified copies of resolutions of the Board of
Directors (and if necessary, the stockholders) of the Company and ROL,
authorizing the execution and delivery of this Agreement, the Senior Loan
Agreement (on terms consistent with the Commitment Letter), the Standstill
Agreement and the First Amendment to the Warrantholders' Agreement and
authorizing the WPHI-FM Acquisition and the Senior Subordinated Debt Financing;
(iii) A copy of the Company's and ROL's corporate
charter or similar organizational document, as amended, certified as of the
Closing Date by the Secretary of State of Delaware and the secretary of the
Company;
(iv) A copy of the bylaws or similar governing document
of the Company and ROL, as amended through the Closing Date, in each case
certified by its respective secretary, with such bylaws of the Company in
substantially the form of the Amended and Restated Bylaws attached hereto as
Exhibit A;
(v) A certificate issued by the Secretary of State of
Delaware certifying that the Company and ROL are in valid existence in Delaware
and certifying as to the Company's and ROL's payment of all taxes;
(vi) A certificate issued by the Secretary of State of
each state or other equivalent jurisdiction in which the Company and ROL each
does business, certifying that the Company and ROL, as the case may be, is a
foreign corporation or other entity in good standing in such state or other
jurisdiction;
(vii) True and correct copies of the Commitment Letter;
(viii) True and correct copies of the WPHI-FM Purchase
Agreement and all of the documents and instruments evidencing the transactions
consummated in connection therewith;
(ix) A certificate signed by each of the President and
Chief Financial Officer of the Company to the effect that, after the
transactions contemplated hereby have been consummated: (a) the present fair
saleable value of the assets of the Company and ROL on a consolidated basis
exceeds its liabilities on a consolidated basis; (b) the Company and ROL have
not been left with unreasonably small capital with which to engage in their
17
<PAGE>
business for the foreseeable future; and (c) the Company and ROL on a
consolidated basis have not incurred, and do not and should not anticipate
incurring, debts beyond their ability to pay such debts as they mature;
(x) Pro forma annual budgets for the Company's fiscal
years ending December 31, 1997 through December 31, 2002;
(xi) Pro forma monthly budgets for fiscal year 1997;
and
(xii) Such other supporting documents and certificates
as the Investors may reasonably request.
(h) No Violation or Injunction. The consummation of the
transactions contemplated by this Agreement shall not be in violation of any law
or regulation, and shall not be subject to any injunction, stay or restraining
order.
(i) No Litigation. No litigation, suit, action, claim or
investigation shall be pending, or threatened, which might impair or prevent the
performance of any Interested Party hereunder or the transactions contemplated
herein.
(j) No Adverse Change. Between the date of the Base Balance
Sheet and the Closing Date, there shall have been no material adverse change in
the financial conditions, prospects, properties, assets, liabilities, business
or operations of the Company or ROL, whether or not in the ordinary course of
business.
(k) Opinions of Counsel. The Investors shall have received the
favorable written opinion of each of: (i) counsel for the Company, dated as of
the Closing Date, in substantially the form attached hereto as Exhibit D; and
(ii) special FCC counsel for the Company, dated as of the date of the Closing,
in substantially the form attached hereto as Exhibit E.
(l) Compliance with Agreements. The Company, ROL and
Interested Parties shall have performed and complied in all material respects
with all agreements, covenants and conditions contained herein, and in any other
document contemplated hereby, which are required to be performed or complied
with by the Company, ROL and the Interested Parties on or before the Closing
Date.
(m) All Documents Satisfactory. The Investors shall receive
all documents related to the transactions contemplated by this Agreement and
other materials (certified, if requested) as they may reasonably request in
connection therewith. The issuance of the Preferred Shares to the Investors
shall be made in conformity with all applicable state and federal securities
laws.
(n) Standstill Agreement. Concurrently with the Closing, the
Standstill Agreement, in a form substantially similar to Exhibit F, shall have
been executed by all
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<PAGE>
parties thereto; provided, however, such agreement may be executed by the Senior
Lender at a later date upon consummation of the Senior Loan Agreement.
(o) Payment of Investors' Legal Fees. All reasonable legal
fees of the Investors shall, pursuant to Section 12.9 of this Agreement, be paid
prior to or at the Closing; provided that the Company has been provided with a
bill in reasonable detail at least 24 hours prior to the Closing.
3.2 Conditions of the Company. The Company's obligation to exchange the
Subordinated Notes for Preferred Stock shall be subject to the fulfillment, to
the Company's satisfaction, of the following conditions:
(a) Certificate of the Company. The representations and
warranties of the Investors contained in Section 12.5 of this Agreement shall be
true and correct in all material respects with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date, and each of the conditions hereafter specified in this Section 3.2
shall have been satisfied in all material respects.
(b) Issuance of Senior Subordinated Notes. The Company shall
have completed the offering of its Senior Subordinated Notes on substantially
the same terms set forth in the Offering Memorandum.
(c) Repayment of Outstanding Indebtedness. Prior to or
concurrently with the Closing, the Company shall have repaid or otherwise
satisfied in full the whole principal amount, together with all accrued but
unpaid interest thereon, of the Existing Senior Credit Facility outstanding
immediately prior to the Closing Date.
(d) Acquisition of WPHI-FM. Concurrently with the Closing, the
Company shall consummate and close the WPHI-FM Acquisition pursuant to the terms
of the WPHI-FM Purchase Agreement without amendment, modification, waiver or
imposition of adverse conditions and pursuant to terms that are acceptable to
the Company.
(e) Warrantholders' Agreement. The Company, ROL, the Investors
and the Management Stockholders shall have executed and delivered the First
Amendment to the Warrantholders' Agreement as of the Closing Date.
(f) FCC Consents. The Company shall have received all of the
necessary and appropriate FCC consents, if any, for the consummation of the
WPHI-FM Acquisition, any other transactions contemplated by this Agreement, the
First Amendment to the Warrantholders' Agreement and any related agreements or
documents, and the period of seeking reconsideration, review or appeal of such
FCC consents shall have expired and no such reconsideration, review or appeal
shall have been sought by any party.
(g) Delivery of Subordinated Notes. Concurrently with the
Closing, the Investors shall have delivered the Subordinated Notes to the
Company.
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(h) No Violation or Injunction. The consummation of the
transactions contemplated by this Agreement shall not be in violation of any law
or regulation, and shall not be subject to any injunction, stay or restraining
order.
(i) No Litigation. No litigation, suit, claim or investigation
shall be pending, or threatened, which might impair or prevent the performance
of any Interested Party hereunder or the transactions contemplated herein.
(j) Release of Security Interests. All of the Investors'
security interests relating to the Subordinated Notes issued under the
Securities Purchase Agreement shall be released by the Investors.
SECTION 4. FINANCIAL COVENANTS OF THE COMPANY
So long as the Preferred Shares are outstanding, the Company (for
purposes of this Section 4 the term "Company" shall include any and all
Subsidiaries) shall comply with the following covenants:
4.1 Minimum Broadcast Cash Flow. At the end of each fiscal quarter
indicated below, the Company will not permit the Broadcast Cash Flow for the
prior twelve (12) month period to be less than the following:
Minimum Broadcast
Quarter End Date Cash Flow ($000)
6/30/97 10,027
9/30/97 10,245
12/31/97 10,492
------------------------------------------------
3/31/98 10,602
6/30/98 10,755
9/30/98 10,913
12/31/98 12,718
------------------------------------------------
3/31/99 12,981
6/30/99 13,343
9/30/99 13,719
12/31/99 14,150
------------------------------------------------
3/31/2000 14,364
6/30/2000 14,658
9/30/2000 14,964
12/31/2000 15,313
------------------------------------------------
3/31/2001 15,566
6/30/2001 15,914
9/30/2001 16,277
12/31/2001 16,690
------------------------------------------------
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3/31/2002 16,820
6/30/2002 16,998
9/30/2002 17,183
12/31/2002 17,395
-------------------------------------------------
3/31/2003 17,530
6/30/2003 17,715
9/30/2003 17,909
12/31/2003 18,129
-------------------------------------------------
3/31/2004 18,296
6/30/2004 18,525
9/30/2004 18,763
12/31/2004 19,035
-------------------------------------------------
3/31/2005 19,211
6/30/2005 19,451
9/30/2005 19,702
12/31/2005 19,987
-------------------------------------------------
4.2 Maximum Corporate Overhead Expense. The Company will not incur or
pay any Corporate Overhead Expense in excess of $1,800,000 for the fiscal year
ending December 31, 1997 and $1,935,000 for the fiscal year ending December 31,
1998 or any fiscal year thereafter; provided, however, that such amount may be
increased each year thereafter by up to 5% over the maximum permitted amount for
the immediately preceding fiscal year (beginning with the fiscal year ending
December 31, 1999) so long as the Company has not breached any quarterly minimum
Broadcast Cash Flow requirement set forth in Section 4.1 above during such
preceding fiscal year and no other Redemption Events shall have occurred and be
continuing.
4.3 Capital Expenditures. Except for those capital expenditures
described on Appendix A hereto, the Company will not make, incur, assume or
otherwise become liable for Capital Expenditures in excess of $300,000 for any
fiscal year period; provided, however, that if the Company does not incur
Capital Expenditures in an aggregate amount of $300,000 during any fiscal year
period, the Company may add such unused portion of permitted Capital
Expenditures to the amount of the Capital Expenditure allotment for the
following fiscal year period.
SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY
For so long as any of the Preferred Shares or Warrants are outstanding,
the Company shall comply with the following covenants:
5.1 Financial Statements. The Company will maintain a system of
accounts sufficient to produce financial statements in accordance with GAAP,
keep full and complete, in all material respects, financial records and furnish
to each Investor the following reports:
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(a) on or before April 1 of each fiscal year of the Company,
(i) an audited consolidated balance sheet of the Company and its Subsidiaries as
at the end of the preceding fiscal year, together with related audited
consolidated statements of operations (including cash flows) of the Company and
its Subsidiaries for such year, and (ii) an audited consolidating balance sheet
of the Company and its Subsidiaries as at the end of the preceding fiscal year,
together with related audited consolidating statements of operations (including
cash flows) of the Company and its Subsidiaries for such year, in each case
examined and reported upon by Arthur Andersen LLP or another firm of nationally
recognized independent public accountants reasonably satisfactory to the
Investors, prepared in accordance with GAAP and practices consistently applied,
together with a certificate of the Chief Financial Officer of the Company and a
written discussion and analysis by management of such financial statements,
including a comparison of the results versus budget for the preceding fiscal
year and an explanation for any variances therein;
(b) within forty-five (45) days after the end of each fiscal
quarter, (i) unaudited consolidated balance sheets and statements of operations
(including cash flows) of the Company and its Subsidiaries, and (ii) unaudited
consolidating balance sheets and statements of operations (including cash flows)
of the Company and its Subsidiaries, in each case such balance sheets to be as
of the end of such quarter and such statements of operations to be both for the
year-to-date period as of the end of such quarter and for the quarter, certified
by the Chief Financial Officer of the Company, together with comparisons of
actual results versus the budgeted results and the results for the comparable
periods in the preceding fiscal year and a brief written discussion and analysis
by management of such financial statements and an explanation for any variances
therein;
(c) within thirty (30) days after the end of each of the first
two months for each quarter (i) statements of operation comparing such results
to (A) the budget for that period and (B) the results of the statements of
operation for the prior year, and (ii) a balance sheet for such month, and (iii)
a brief written discussion and analysis by management of such statements,
including a comparison of the results versus the budgeted results and results
for comparable periods in the preceding fiscal year and an explanation for any
variances therein;
(d) copies of all other documents, statements and reports as
and when delivered by the Company to any of its lenders or stockholders and
notices of any material adverse changes to the business, financial condition,
prospects or assets of the Company; and
(e) such other financial information as the Investors may
reasonably request.
The certifications required from the Chief Financial Officer of the
Company under Sections 5.1(a) and (b) above shall include a certification that,
to the best of his or her actual knowledge after due inquiry and reasonable
investigation, (i) there does not exist any Event of Noncompliance (as defined
in Section 8.1 hereof) under this Agreement, or any set of facts or
circumstances which, with the giving of notice and/or the passage of time, could
constitute an Event of Noncompliance, or (ii) if any such Event of Noncompliance
or
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circumstances exist, stating the relevant facts and what actions the Company
proposes to remedy them. In connection with the annual financial statements
delivered pursuant to Section 5.1(a) above, the Company's independent public
accountants shall certify to the Investors that in the course of conducting
their audit they have reviewed this Agreement, and either (i) that they are not
aware of any breaches, Events of Noncompliance or facts or circumstances of the
kind described above, or (ii) set forth such breaches, Events of Noncompliance
or facts as they have become aware of such. The Investors or their authorized
representatives shall have the right to meet with the Company's public
accountants from time to time to discuss the financial condition and results of
operation of the Company, its financial controls and the accounting principles
applied in the preparation of its financial statements.
5.2 Budget and Operating Forecast. Not later than thirty (30) days
after the beginning of each fiscal year, senior management will prepare and
submit to the Board of Directors of the Company, with a copy to each of the
Investors, (a) a monthly budget for such fiscal year of the Company, together
with management's written discussion and analysis of such budget and (b) five
(5) year projections in similar form to the projections delivered to each of the
Investors prior to the date hereof. The Company shall review its budget
periodically and shall advise the Investors of all material changes therein and
all material deviations therefrom.
5.3 Maintenance of Properties. The Company will maintain all properties
used in the conduct of its business in good repair, working order and condition
as necessary to permit such business to be conducted as presently conducted.
5.4 Inspection. Upon reasonable notice and during normal business
hours, the Company will permit authorized representatives of the Investors to
visit and inspect any of the properties of the Company, including its books of
account (and to make copies thereof and take extracts therefrom), and to discuss
its affairs, finances and accounts with the principal officers and independent
accountants, all at such reasonable times and as often as may be reasonably
requested so long as such visits, inspections and discussions do not unduly
interfere with the conduct of the Company's business.
5.5 Tax Matters. The Company and each Subsidiary shall pay and
discharge all lawful Taxes, assessments and governmental charges or levies
imposed upon it with respect to its income or property before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if not paid when due, would reasonably be expected to become a
Lien or charge upon its property or any part thereof; provided, however, that
the Company and each Subsidiary shall not be required to pay and discharge any
such Tax, assessment, charge, levy or claim so long as the validity thereof is
being contested by it in good faith by appropriate proceedings and an adequate
reserve therefor has been established. The Company and each Subsidiary will file
all necessary Tax Returns. In addition, the Company and the Investors agree to
file all Tax Returns consistently with the treatment of the Exchange as a
non-reportable non-taxable event.
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5.6 Compliance with Laws. The Company and each Subsidiary will comply
in all material respects with all applicable statutes, rules and regulations of
the United States (including, without limitation, the Communications Act and all
applicable regulations and policies of the FCC), of the states thereof and their
counties, municipalities and other subdivisions and of any other jurisdiction
applicable to the Company or any of its Subsidiaries, except where (i)
compliance therewith shall at the time be contested in good faith by appropriate
proceedings, (ii) compliance is not required or (iii) the failure to comply
would not reasonably be expected to have a material adverse effect on the
assets, business or financial condition of the Company and the Subsidiaries,
taken as a whole. The Company and each Subsidiary shall timely and properly file
all regular and periodic reports and materials which the Company and each
Subsidiary are required to file with any federal or state regulatory agency or
governmental authority (including without limitation the FCC) and shall upon
request provide each Investor with copies of all such reports and materials. In
the event the Company learns of any material petition, action, investigation,
notice of violation or apparent liability, notice of forfeiture, order to show
cause, complaint, proceeding or the threat thereof before the FCC, the Company
shall promptly notify the Investors of the same in writing and shall take all
reasonable measures to contest the same in good faith or seek removal or
rescission thereof.
5.7 Insurance. The Company and the Subsidiaries will keep their
insurable properties insured, upon reasonable business terms, by financially
sound and reputable insurers against liability, and the perils of casualty, fire
and extended coverage in amounts of coverage at least equal to those customarily
maintained by companies in the same or similar business, and of similar size, as
the Company and the Subsidiaries. The Company and the Subsidiaries will also
maintain with such insurers insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies engaged in the same or similar business, and of similar size.
5.8 Key Man Insurance. The Company shall maintain in full force and
effect at all times policies of insurance in such form and issued by such
insurers as shall be reasonably acceptable to the Investors insuring the lives
of Liggins and Hughes, each in the amount of $1,000,000 ("Key Man Life
Insurance"), and shall deliver to the Investors from time to time evidence of
compliance with this Section 5.8.
5.9 Board of Directors Meetings; Management Rights. The Company shall:
(a) ensure that meetings of the Board of Directors of the Company are held at
least four (4) times each year at intervals of not more than four (4) months and
that annual meetings (the "Annual Meetings") of the stockholders of the Company
be held each year within 180 days of the Company's fiscal year end; (b) ensure
that the Board of Directors maintains a Compensation Committee and create and
maintain an Audit Committee within six months of the Closing Date or at the next
Board of Directors meeting, which shall each meet at least once a year and be
comprised of at least two (2) Independent Directors; (c) provide each Investor
with all notices of such meetings; (d) allow a designated representative of each
Investor holding any Preferred Shares to attend as an observer all meetings of
the Board of Directors and all meetings of committees of the Board of Directors,
and allow a designated
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representative of each of the Investors to attend the Annual Meetings; and (e)
provide the representatives of the Investors with all materials delivered to the
Directors or stockholders of the Company, as the case may be, as and when such
materials are delivered to the Directors or stockholders, and prior written
notice of all such meetings, which shall be delivered simultaneously with
delivery of such notice to the Directors or stockholders and at least five (5)
days prior to all such meetings; provided, however, that in extraordinary
circumstances, such Board of Directors may call meetings of Directors on less
than five (5) days' prior written notice (but in no event less than two (2)
business days). The Company shall permit its Board of Directors to act by
meetings only and only if the meetings are held in accordance with Sections (c),
(d) and (e) of this Section 5.9.
SECTION 6. NEGATIVE COVENANTS OF THE COMPANY
The Company covenants and agrees that from the date hereof and for so
long as any of the Preferred Shares or Warrants are outstanding, the Company
shall comply with the following covenants, unless otherwise consented to in
writing by the Investors holding a majority of the outstanding shares of
Preferred Stock in accordance with Section 12.1 (which consent may be withheld
by the Investors in their sole discretion).
6.1 Indebtedness. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any Indebtedness or
liability, except:
(a) Indebtedness under the Senior Subordinated Notes;
(b) Indebtedness outstanding under the Senior Loan Agreement
and any refinancing of the Indebtedness under the Senior Loan Agreement on terms
substantially similar or more favorable to the Company than the terms of the
Senior Loan Agreement, provided that such refinancing shall not (i) increase the
interest rates to a rate greater than the rate provided for under the terms of
the Senior Loan Agreement, (ii) materially change the rate of amortization of
the Senior Loan Agreement, (iii) extend the maturity of the Senior Debt beyond
its current maturity or (iv) increase the principal amount of the Senior Debt in
an amount in excess of $2,500,000;
(c) Indebtedness (including Indebtedness owed to Affiliates of
the Company) as described in Schedule 6.1(c);
(d) Indebtedness with respect to unaffiliated, bona fide trade
and other similar obligations and other normal accruals, including Taxes,
assessments, and other governmental charges, arising in the ordinary course of
business, consistent with past practice and which is either: (i) no more than 60
days past due or (ii) is being contested in good faith by appropriate
proceedings ("Good Faith Contested Trade Debt"), and then only to the extent the
amount thereof has been set aside on the Company's books, so long as such
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Good Faith Contested Trade Debt, in the aggregate, does not exceed $125,000 at
any one time;
(e) Indebtedness incurred for purchase money obligations and
Capital Leases, so long as (i) the pertinent assets are acquired in the ordinary
course of the Company's business, (ii) the Indebtedness secured thereby does not
exceed the fair market value of such assets, and (iii) the aggregate amount of
such Indebtedness does not exceed $1,500,000 at any one time;
(f) Intercompany Indebtedness;
(g) Indebtedness in respect of guaranties by the Company or
any Subsidiary to a third party, to the extent that any such guarantee secures
Indebtedness of the Company or any Subsidiary which is specifically permitted to
be incurred or to remain outstanding under the provisions of this Section 6.1;
and
(h) Other Indebtedness which (i) is not for money borrowed,
(ii) is not related to any Capital Leases or purchase money indebtedness, (iii)
is not owed to any Affiliate of the Company and (iv) is incurred in the ordinary
course of business of the Company or any Subsidiary consistent with past
practices and on reasonable terms, so long as the incurrence of such
Indebtedness would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
6.2 Liens. The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
nature whatsoever on any of its assets (including any leasehold interests in
property used by the Company or any Subsidiary of the Company) or ownership
interests now or hereafter owned, other than (the following are referred to
herein collectively as "Permitted Liens"):
(a) Liens securing the payment of Taxes, and other government
charges, either not yet due or the validity of which is being contested in good
faith before appropriate proceedings, and as to which it shall have set aside on
its books adequate reserves to the extent required by GAAP and provided that, in
any event, payment of any such Tax, assessment, charge, levy or claim shall be
made before any of the Company's property shall be seized and sold in
satisfaction thereof;
(b) Deposits under worker's compensation, unemployment
insurance and social security laws;
(c) Restrictions, easements, and minor irregularities in title
which do not and will not interfere with the occupation, use and enjoyment of
the properties of the Company in the normal course of business as presently
conducted or materially impair the value of such assets for the purpose of such
business;
(d) Liens securing Indebtedness permitted under Section
6.1(a), (b) or (c);
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(e) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than sixty (60) days or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have been
established;
(f) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of Indebtedness),
leases (to the extent permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance or other
similar bonds, or other similar obligations arising in the ordinary course of
business;
(g) Judgments and other similar Liens arising in connection
with court proceedings, provided the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(h) Liens against the fee interest in real property leased by
the Company which are securing obligations of the owner of such property;
(i) Liens on assets acquired with purchase money Indebtedness
or as a result of Capital Leases permitted by Section 6.1(e) and so long as the
obligation secured by a Lien so created, assumed, or existing shall not exceed
one hundred percent (100%) of the lesser of cost or fair market value as of the
time of acquisition of the property covered thereby and each such Lien shall
attach only to the property so acquired and fixed improvements thereon; and
(j) Liens set forth on Schedule 6.2 attached hereto.
6.3 Sale of Assets. The Company will not, and will not permit any
Subsidiary to, sell, lease, transfer or otherwise dispose of any of the Stations
or FCC Licenses or any other material licenses or sell, lease, transfer or
otherwise dispose of any material portion of its properties, assets, rights or
licenses; provided, however, that (a) the Company may sell assets that are
obsolete or are not required for its business, or individual assets without the
Investors' prior written consent so long as the Company replaces if needed the
sold property within a reasonable period of time with property of equal or
greater utility to the conduct of the Company's business and so long as such
sales or other dispositions of assets do not, in the aggregate, amount to a
substantial portion of the assets of the Company, (b) the Company may sell
assets which are not necessary for the operation of the Stations in any single
transaction or series of related transactions involving the same buyer or its
Affiliates so long as the aggregate sales value of such assets does not exceed
$250,000, (c) the Company may sell radio air time and other assets in the normal
course of the Company's business, and (d) the Company and ROL may transfer
assets to and among themselves.
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6.4 Fundamental Changes. The Company will not, and will not permit any
Subsidiary to (a) form any additional direct or indirect Subsidiary, (b)
terminate, liquidate, consolidate, or merge with another Person or otherwise
acquire any additional business unit, except that (i) any Subsidiary (other than
a License Subsidiary) may be merged or consolidated into the Company (provided
that the Company shall be the surviving corporation), and (ii) any Subsidiary
(other than a License Subsidiary) may sell, lease, transfer or otherwise dispose
of any or all of its assets (upon voluntary liquidation or otherwise) to the
Company, (c) make any advance, loan, extension of credit or capital contribution
to, or purchase any stock, bonds, notes, debentures or other securities of or
any assets constituting a business unit of, or make any other investment in, any
Person (including without limitation any employees (except loans to employees in
the aggregate outstanding principal amount of $20,000 at any one time) or
Affiliates of the Company) or entity, except for (i) capital expenditures as and
to the extent specifically permitted hereunder, (ii) cash and cash equivalents,
(iii) Permitted Investments (as defined in the Indenture) and (iv) intercompany
Indebtedness, or (d) enter into any local marketing or time brokerage
arrangements.
6.5 Guaranties. The Company will not, and will not permit any
Subsidiary to, guarantee, endorse or otherwise in any way become or be
responsible for obligations of any other Person, except (a) endorsements of
negotiable instruments for collection in the ordinary course of business; (b)
guaranties to the Senior Lender permitted pursuant to Section 6.1(f) hereof, (c)
guaranties of obligations of any Affiliate to the extent such obligations are
permitted under Section 6.1; or (d) guaranties of obligations as more fully set
forth in Schedule 6.5.
6.6 No Sale and Leaseback. The Company will not, and will not permit
any Subsidiary to, enter into any arrangements, directly or indirectly, with any
person whereby it shall sell or transfer any property, real, personal or mixed,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property.
6.7 No Amendments to Charter or By-laws. The Company and Management
Stockholders will not agree to any amendment to its charter or its by-laws
without the approval of the Investors holding a majority of the outstanding
shares of Preferred Stock.
6.8 No Change in Accounting Policies. Except as required by GAAP, the
Company will not, and it will not permit any Subsidiary to, change or introduce
any new method of accounting which differs in any substantive respect from the
accounting as reflected in the audited financial statements delivered to the
Investors hereunder.
6.9 Restrictions on Other Agreements. The Company will not, and it will
not permit any Subsidiary to, enter into any agreement with any party which
would restrict payments due to the Investors in respect of their Preferred
Shares other than to the extent such payments are specifically restricted by the
provisions of the Standstill Agreement, as in effect on the Closing Date and to
be executed by the Senior Lender upon consummation of the Senior Loan Agreement,
the Indenture, and the Senior Loan Agreement.
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6.10 Affiliated Transactions. Other than those transactions, agreements
or arrangements set forth in Schedule 6.10, all transactions, agreements or
arrangements by and between the Company or any of its Subsidiaries and any
director, officer, key employee or stockholder of the Company or any Subsidiary
of the Company, or persons controlled by or affiliated with such director,
officer, key employee or stockholder, shall require prior approval of the
Investors holding a majority of the outstanding shares of Preferred Stock.
6.11 Distributions, Redemptions or Issuances of Capital Stock. Except
as otherwise expressly provided in this Agreement and Exhibit A hereto, the
Company will not: (a) declare or pay any dividends or make any distributions of
cash, property or securities of the Company with respect to any shares of its
Common Equity, any other class of its stock or warrants or options to purchase
any class of its stock, make any payments to, or for the benefit of, the
Management Stockholders (other than in compliance with Section 4.2) or directly
or indirectly redeem, purchase, or otherwise acquire for any consideration any
shares of its Common Equity, any other class of its stock or warrants or options
to purchase any class of its stock (other than pursuant to a put or call of the
Warrants under Article V of the Warrantholders' Agreement, as amended); or (b)
issue, sell or grant any shares of capital stock of the Company, except on
exercise by any Investor of Warrants or ROFR Warrants (as defined in the
Warrantholders' Agreement, as amended), or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for capital
stock of the Company or options, warrants or rights carrying any rights to
purchase capital stock or convertible or exchangeable securities of the Company,
except for Common Equity issued upon exercise of the Warrants or Exchange
Warrants by the Investors.
6.12 Senior Loan Agreement Consent Right. The Company will not enter
into the Senior Loan Agreement without obtaining the prior written consent of
the holders of a majority of the Preferred Shares.
SECTION 7. SPECIAL COVENANTS
So long as the Preferred Shares are outstanding, but subject in all
cases to the Standstill Agreement: (a) each of the Interested Parties will take
any action which the Investors may reasonably request in order that the
Investors obtain and enjoy the full rights and benefits granted to the Investors
under this Agreement and the agreements contemplated hereby, including, without
limitation, the use of his, her or its best efforts (provided, however, that in
the case of the Management Stockholders, best efforts shall not include or
require the payment of money or the incurrence of any other personal expense),
consistent with the rules, regulations and policies of the FCC and any other
Regulatory Agencies, to obtain any necessary approvals for any action or
transaction contemplated by this Agreement or any agreement contemplated hereby
for which such approval is then required or prudent, including, without
limitation, preparing, signing and filing, with the FCC or any other pertinent
Regulatory Agency or authority, any applications, notices, filings or reports
necessary or prudent for approval of any such actions or transactions; (b) none
of the Interested Parties will: (i) take any action to obstruct, impede or
infringe upon the Investors'
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enforcement of their rights, benefits and remedies under this Agreement and any
agreement contemplated hereby or (ii) enter into any amendments to the Senior
Loan Agreement or any other agreements with the Senior Lender which are not
permitted by the Standstill Agreement or Section 6.1(b) hereof; (c) each of the
Interested Parties agrees to cooperate fully with any and all actions taken by
the Investors, including, without limitation, the full and complete cooperation
and assistance in all proceedings, correspondence and other communications
before or with the FCC, and any other state, local or other authority in
connection with obtaining the approvals referred to above, in each such instance
using its best efforts (provided, however, that in the case of Management
Stockholders, best efforts shall not include or require the payment of money or
the incurrence of any other personal expense); and (d) each of the Interested
Parties agrees to exercise its voting and consent rights with respect to its
shares of capital stock or partnership interests in the Company and the
Subsidiaries, subject to the terms of the Standstill Agreement, to (i) comply
with their respective covenants and other obligations under this Agreement and
any agreement contemplated hereby and to not otherwise take any action that
would or could conflict with or impair the rights and benefits of the Investors
under this Agreement or any agreement contemplated hereby; and (ii) cooperate
with, and use their respective best efforts (provided, however, that in the case
of Management Stockholders, best efforts shall not include or require the
payment of money or the incurrence of any other personal expense), to help
effectuate, any actions taken by the Investors to enforce their rights, benefits
and remedies hereunder and under any agreement contemplated hereby.
The Interested Parties hereto acknowledge that the foregoing provisions
are, inter alia, intended to ensure that, subject to the terms of the Standstill
Agreement, upon the occurrence of a Redemption Event, the Investors shall
receive, to the fullest extent permitted by applicable law and governmental
policy (including, without limitation, the rules, regulations and policies of
the FCC), all rights necessary or desirable to obtain and/or sell the Stations
and all of the Company's and Subsidiaries' properties and assets related thereto
(including, without limitation, the FCC Licenses), and to exercise all remedies
available to them under this Agreement and the other agreements contemplated
hereunder or applicable law. The Interested Parties also acknowledge and agree
that the Investors have the right under Section 10 of this Agreement and Article
VI of the Warrantholders' Agreement, as amended, subject to the terms of the
Standstill Agreement, to seek appointment of a receiver, trustee, transferee or
similar official to effect the transactions contemplated by this Agreement,
including without limitation, to seek from the FCC an involuntary transfer of
control of each FCC License held by the Company or the Subsidiaries for the
purpose of seeking a bona fide purchaser to whom control will ultimately be
transferred, and that the Investors are entitled to seek such relief and the
Interested Parties agree not to object thereto on any grounds. The Interested
Parties further acknowledge and agree that, in the event of changes in law or
governmental policy occurring subsequent to the date hereof that affect in any
manner the Investors' rights of access to, or use or sale of, the Stations or
any of the Company's and Subsidiaries' properties and assets related thereto
(including, without limitation, the FCC Licenses), or the procedures necessary
to enable the Investors to obtain such rights of access, use or sale, the
parties hereto shall amend, subject to the terms of the Standstill Agreement,
this Agreement and the agreements contemplated hereunder, in such manner as the
Investors
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shall reasonably request, in order to provide such rights to the greatest extent
possible, consistent with this Section 7 and then applicable law and
governmental policy.
SECTION 8. REDEMPTION EVENTS
8.1 Redemption Events. Each of the following events is herein referred
to as an "Event of Noncompliance":
(a) if any representation or warranty made herein or in any
agreement executed in connection with, or in any report, certificate, financial
statement or other instrument furnished in connection with, this Agreement shall
prove to have been false or misleading when made in any material respect;
(b) if a breach occurs in the payment of any funds due to
the Investors in connection with the Preferred Shares, and such breach continues
for more than ten (10) days after the due date;
(c) if a breach occurs in the due observance or performance
of any covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to the provisions of Sections 4, 6.1, 6.2, 6.4 or
6.5 of this Agreement and such breach remains uncured for ten (10) days after
the earlier to occur of (i) senior management's actual knowledge of such breach
or (ii) written notice thereof from the Investors to the Company; provided,
however, that if such breach cannot be remedied, then such breach shall be
deemed to be an Event of Noncompliance as of the date of the occurrence thereof
provided further, in the case of an Event of Noncompliance with respect to
Section 4 of this Agreement, such Event of Noncompliance shall be deemed to be
cured upon the Company's first compliance with the applicable financial
performance target for a subsequent period of time;
(d) if a breach occurs in the due observance or performance
of any covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to any of the provisions of this Agreement not
referenced in clauses (b) or (c) above or any other agreement contemplated
hereby and such breach remains uncured for thirty (30) days after written notice
thereof from the Investors to the Company; provided, however, that if such
breach cannot be remedied, then such breach shall be deemed to be an Event of
Noncompliance as of the date of the occurrence thereof;
(e) if the payment of any other Indebtedness of the Company
or any Subsidiary of the Company for borrowed money in amounts greater than
$250,000 in the aggregate (including any Senior Debt) is accelerated prior to
the stated maturity thereof;
(f) if the Company shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) admit in writing its inability to pay its debts as they mature,
(iii) make a general assignment for the benefit of
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creditors, or (iv) file a voluntary petition in bankruptcy, or a petition or an
answer seeking reorganization or an arrangement with creditors, or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation laws or statutes, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such law,
or if corporate action shall be taken for the purpose of effecting any of the
foregoing;
(g) if there shall be filed against the Company an
involuntary petition seeking reorganization of the Company or the appointment of
a receiver, trustee, custodian or liquidator of the Company or a substantial
part of its assets, or an involuntary petition under any bankruptcy,
reorganization or insolvency law of any jurisdiction, whether now or hereafter
in effect (any of the foregoing petitions being hereinafter referred to as an
"Involuntary Petition");
(h) if final judgment(s) for the payment of money in excess
of an aggregate of $250,000 shall be rendered against the Company or any
Subsidiary and the same shall remain undischarged for a period of thirty (30)
consecutive days, during which time execution shall not be effectively stayed;
(i) if there occurs any attachment of any deposits or other
property of the Company or any Subsidiary, or any attachment of any other
property of the Company or any Subsidiary in an amount exceeding $250,000, which
shall not be discharged or effectively stayed within thirty (30) days of the
date of such attachment; provided, however, that if the attachment subsequently
becomes unstayed, the attachment will again become an Event of Noncompliance; or
(j) the Company or any Subsidiary shall lose, fail to keep
in force, suffer the termination, suspension or revocation of or terminate,
forfeit or suffer an amendment to any FCC License or other material license at
any time held by it, the loss, termination, amendment, suspension or revocation
of which would have a material adverse effect on the operations of the Company
and its Subsidiaries taken as a whole or the Company's or any Subsidiary's
ability to perform its obligations under this Agreement or under the
Certificate.
If an Event of Noncompliance shall exist and be continuing and if and only if
all indebtedness for money borrowed, including but not limited to the Senior
Indebtedness (as defined in the Standstill Agreement), has been indefeasibly
repaid in full in cash and all obligations of the Senior Lender under the Senior
Loan Agreement to advance further funds shall have terminated, a "Redemption
Event" shall have occurred, and upon each and every such Redemption Event and at
any time thereafter during the continuance of such Redemption Event, at the
election of the Investors holding a majority of the outstanding shares of
Preferred Stock, the Company shall be required to redeem any or all of the
outstanding shares of Preferred Stock, together with any and all accumulated and
accrued but unpaid dividends thereon (such redemptions to take place on a pro
rata basis among all holders of shares of Preferred Stock), anything contained
herein or in the Certificate to the contrary notwithstanding (except in the case
of an Event of Noncompliance under clauses (i)
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through (iv) of paragraph (f) or paragraph (g) of this Section 8.1, in which
event such Preferred Shares shall automatically become redeemable, provided that
the holders of Preferred Shares shall not be entitled to any distribution of the
Company's assets or funds until such time as the then outstanding Indebtedness
has been paid in full). In the event of a redemption of the Preferred Stock as a
result of the filing of an Involuntary Petition as specified in paragraph (g) of
this Section 8.1, such right of redemption shall be rescinded, and the Company's
rights hereunder reinstated, if, within sixty (60) days following the filing of
such Involuntary Petition, such Involuntary Petition shall have been dismissed,
and there shall exist no other Redemption Event under this Agreement.
8.2 Remedies on Default, etc. In case any one or more Redemption Events
shall occur and be continuing and the Investors' right to redeem the Preferred
Shares shall have been triggered, the Investors, subject to the rights and
preferences of the Senior Debt and Senior Subordinated Notes, may proceed to
protect and enforce their rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained in this Agreement or for an injunction against a violation of any of
the terms hereof or in and of the exercise of any power granted hereby or by
law. No right conferred upon the Investors hereby or by the Preferred Shares
shall be exclusive of any other right referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.
SECTION 9. STANDSTILL AGREEMENT
In the event of any conflict between any term or provision of this
Agreement or any other Loan Document and any term or provision of the Standstill
Agreement, the term or provision of the Standstill Agreement will control and
govern.
SECTION 10. SALE OR REFINANCING COVENANT
Notwithstanding anything in this Agreement to the contrary and without
limiting any rights that the Investors may have under this Agreement, the
Warrantholders' Agreement, as amended, or any other agreements or documents
related hereto or under applicable law, the Company shall, at the election of
Investors holding a majority of the outstanding shares of Preferred Stock,
within four (4) months after the occurrence of any of the events set forth
below, enter into a signed purchase and sale agreement for the sale of the
Company and the Subsidiaries or the assets thereof or a signed financing
commitment letter with an institutional lender, in each case providing for
sufficient funds to repay all indebtedness for money borrowed, including, but
not limited to, the Senior Indebtedness, redeem the outstanding shares of
Preferred Stock, pay the holders of the Warrants the value of the Warrants and
close on such sale or financing and repay all indebtedness for money borrowed,
including, but not limited to, the Senior Indebtedness, the amounts due to the
holders of the Preferred Shares and the value of the Warrants to the holders of
the Warrants promptly after any
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required FCC approval is obtained and, in any event, within four (4) months
after execution of the applicable purchase and sale agreement or financing
commitment:
(a) the Company fails to redeem shares of Preferred Stock as
required pursuant to the terms of the Certificate and such failure to redeem
continues for more than five (5) days;
(b) the Company, directly or indirectly, without the prior
written consent of Investors holding a majority of the outstanding shares of
Preferred Stock, (i) breaches the covenants set forth in Section 4.2 by more
than $250,000 annually or Section 6.11 by more than $250,000, breaches the
covenants set forth in Section 6.1 by more than $2,000,000, breaches any of the
covenants set forth in Sections 6.2, 6.3 or 6.5 hereof and the value or amount
of the assets, transactions or liabilities involved exceeds $2,000,000, or
breaches the covenant set forth in Section 6.4 in any material manner, and (ii)
such breach is not cured within any applicable cure period; or
(c) the Company fails to meet the minimum trailing twelve
month Broadcast Cash Flow amount set forth below for two (2) consecutive quarter
end dates.
Minimum Broadcast
Quarter End Date Cash Flow ($000)
6/30/97 9,397
9/30/97 9,598
12/31/97 9,828
------------------------------------------------
3/31/98 9,931
6/30/98 10,073
9/30/98 10,222
12/31/98 11,908
------------------------------------------------
3/31/99 12,155
6/30/99 12,495
9/30/99 12,851
12/31/99 13,256
------------------------------------------------
3/31/2000 13,456
6/30/2000 13,731
9/30/2000 14,019
12/31/2000 14,347
------------------------------------------------
3/31/2001 14,582
6/30/2001 14,909
9/30/2001 15,250
12/31/2001 15,636
------------------------------------------------
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3/31/2002 15,758
6/30/2002 15,925
9/30/2002 16,099
12/31/2002 16,296
------------------------------------------------
3/31/2003 16,422
6/30/2003 16,597
9/30/2003 16,778
12/31/2003 16,984
------------------------------------------------
3/31/2004 17,147
6/30/2004 17,374
9/30/2004 17,610
12/31/2004 17,845
------------------------------------------------
3/31/2005 18,017
6/30/2005 18,255
9/30/2005 18,503
12/31/2005 18,738
------------------------------------------------
In the event that the Company fails to enter into a signed purchase and
sale agreement or a signed financing commitment letter within four (4) months or
fails to close on such sale or financing and repay all indebtedness for money
borrowed, including but not limited to, the Senior Indebtedness, redeem the
outstanding shares of Preferred Stock and pay the holders of the Warrants the
value of the Warrants within four (4) months after execution of the applicable
purchase and sale agreement or financing commitment letter as required under
this Section 10, the Investors shall have those rights described in Article VI
of the Warrantholders' Agreement, as amended, including, but not limited to, the
right to expand the Board of Directors of the Company and each Subsidiary up to
nine (9) directors to ensure that the Investors control a majority of each such
Board of Directors and appoint individuals to the vacancies created by such
expansions. Any actions by the Investors under the provisions of this Section 10
and any redemption of shares of Preferred Stock as a result of any occurrence of
the events set forth herein shall be subject to the terms of the Standstill
Agreement and shall not be deemed to be a de facto transfer of control for FCC
purposes and shall be subject to the requirements that the Company and each
Subsidiary obtain any necessary FCC approvals for the actions taken hereunder.
SECTION 11. DEFINITIONS
Unless the context specifically requires otherwise, capitalized terms
used in this Agreement shall have the meaning specified below:
"Affiliate" of any Person means (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director or officer (i) of such Person,
(ii) of any subsidiary of such Person or (iii) of any Person described in clause
(a) above. For purposes of this definition, control of a
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Person shall mean the power, direct or indirect, (i) to vote 5% or more of the
securities having ordinary voting power for the election of directors of such
Person, or (ii) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Broadcast Cash Flow" means, with respect to any fiscal period,
Operating Cash Flow for such period increased by Corporate Overhead Expense and
cash Taxes paid; provided however that such Corporate Overhead amount shall not
exceed the maximum permitted under Section 4.2 hereof.
"Business Day" means any day other than a Saturday, Sunday or
Massachusetts or federal holiday.
"Capital Expenditure" means with respect to any Person any liabilities
incurred or expenditures made (net of any casualty insurance proceeds or
condemnation awards used to replace fixed assets following a casualty event or
condemnation with respect thereto) by such Person that, in conformity with GAAP
is required to be accounted for as a capital expenditure on the consolidated
balance sheet of such Person.
"Capital Lease" means with respect to any Person any obligation in
respect of any lease of any property (whether real, personal or mixed) that, in
conformity with GAAP, is required to be capitalized on the consolidated balance
sheet of such Person or for which the amount of the asset and liability
thereunder should be disclosed in a note to such balance sheet as if so
capitalized.
"Cash Flow Period" means, as a separate period, each calendar year
occurring during the term of this Agreement; provided, however, that the first
Cash Flow Period shall commence on December 31, 1996 and end on December 31,
1997.
"Common Equity" means the Common Stock and Non-Voting Common Stock of
the Company, collectively.
"Common Stock" means the voting class A common stock, par value $.01
per share, of the Company.
"Corporate Overhead Expense" means all general and administrative
expenses incurred during any fiscal period which are not associated with, or
attributable to, the particular operations of one or more of the Stations and
which are properly classified as general and administrative expenses on the
Company's financial statements, including compensation paid to senior
management, insurance, rent, professional fees, travel and entertainment;
notwithstanding any GAAP to the contrary, Corporate Overhead Expense shall
include all compensation and distributions paid by the Company or the Subsidiary
to or for the benefit of the Management Stockholders or any of their Affiliates.
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"FCC" means the Federal Communications Commission (or any successor
agency, commission, bureau, department or other political subdivision of the
United States of America).
"Indebtedness" means with respect to any Person, without duplication,
(i) any liability, contingent or otherwise, of such Person (A) for borrowed
money (whether or not recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (B) evidenced by a note, debenture or
similar instrument (including a purchase money obligation) given in connection
with the acquisition of any property or assets, (C) for any letter of credit or
performance bond in favor of such Person, (D) for the payment of money relating
to a capitalized lease obligation, or (E) any liability, contingent or
otherwise, of such Person to any other Person for any purchase price associated
with any acquisition of assets, business or otherwise (including any deferred
purchase price, assumption of Indebtedness, noncompetition payments or other
forms of consideration); (ii) any liability of others of the kind described in
the preceding clause (i), which the Person has guaranteed or which is otherwise
its legal liability, contingent or otherwise; (iii) any obligation secured by a
Lien to which the property or assets of such Person are subject, whether or not
the obligations secured thereby shall have been assumed by or shall otherwise be
such Person's legal liability; (iv) all other items (except items of capital
stock, capital or paid-in surplus or of retaining earnings) which in accordance
with GAAP, would be included as a liability on the balance sheet of such Person
on the date of determination; and (v) any and all deferrals, renewals,
extensions or refinancing of, or amendments, modifications of supplements to,
any liability of the kind described in any of the preceding clauses (i), (ii),
(iii) or (iv).
"Indenture" means the Indenture, to be dated as of May 15, 1997, among
the Company, the Subsidiary Guarantors (as defined therein) and the Trustee, as
amended from time to time in accordance with the terms thereof.
"Independent Director" means any member of the Company's or any
Subsidiary's Board of Directors who is not an employee of the Company or any
Subsidiary, it being understood and agreed that Brian McNeill and Terry Jones
constitute "Independent Directors" hereunder; provided, however, that in no
event shall Liggins or Hughes be considered an Independent Director.
"License Subsidiary" means any Subsidiary of the Company organized by
the Company for the sole purpose of holding FCC Licenses.
"Lien" means any interest in, or claim against, property relating to an
obligation owed to, or claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract, and
including but not limited to any security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes, any rights of first refusal, charges, claims,
liabilities, limitations, conditions, restrictions or other adverse claims.
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"Net Operating Income" means for any fiscal period, the net income (or
loss) for such period, (a) excluding any net extraordinary income (or loss), and
income (or loss) arising from barter or trade transactions for such period, and
(b) after deducting all taxes accrued during such period and reserves for
amounts then due and payable by the Company.
"Net Revenues" means gross revenues less agency commissions, after all
property charges and reserves, as determined in accordance with GAAP.
"Non-Voting Common Stock" means the non-voting class B common stock,
par value $.01 per share, of the Company.
"Operating Cash Flow" means for the Company and its Subsidiaries on a
consolidated basis for the period involved, Net Revenues for such period, minus
(a) operating expenses (including, without limitation, costs and expenses
associated with format changes) for such period as determined in accordance with
GAAP (exclusive of depreciation, amortization and barter expenses) incurred or
paid during such period, (b) cash Taxes paid during such period and (c)
Corporate Overhead Expense. Operating Cash Flow shall not include the effect of
non-cash income or expense (including the effect of any exchange of advertising
time for non-cash consideration such as merchandise, services or program
material), non-cash losses from Subsidiaries and any write-up or write-down of
assets or write-down of liabilities of the Company or its Subsidiaries, as
determined in accordance with GAAP. Expense addbacks relating to the
Acquisitions shall be added to Operating Cash Flow for the purposes of
calculating minimum Broadcast Cash Flow in Sections 4.1 and 10 for the period
following January 1, 1997 through the Closing in an amount not to exceed
$100,000.
For purposes of calculating Operating Cash Flow with respect to assets
not owned at all times during the period involved in determining Operating Cash
Flow, there shall be (a) included the Operating Cash Flow of any assets acquired
during the period involved in such determination and (b) excluded the Operating
Cash Flow of any assets disposed of during the period involved in such
determination, assuming in each such case that such assets are acquired or
disposed of, as the case may be, on the first day of such period.
"Pension Plan" shall mean an employee benefit plan or other plan
maintained for the employees of the Company or WPHI-FM as described in Section
4021(a) of ERISA.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, business trust, joint stock company, trust or
unincorporated organization or any government or any agency or political
subdivision thereof.
"Regulatory Agency" means the FCC or any other federal, state or local
agency which has jurisdiction to regulate the provision of radio broadcast
services by the Company.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, each as amended from time to time.
"Senior Debt" means the $7,500,000 aggregate principal amount available
under the Senior Loan Agreement and renewals, extensions, and refinancings
thereof, in accordance with the terms hereof and of the Standstill Agreement.
"Standstill Agreement" means the Standstill Agreement, to be dated as
of the Closing Date, by and among the Trustee, the Company, ROL and the
Investors, as amended or modified from time to time in accordance with the terms
thereof, which agreement shall be executed by the Senior Lender upon the
consummation of the Senior Loan Agreement.
"Subsidiary" or "Subsidiaries" means, collectively, ROL and any other
corporation or partnership or other entity of whose shares of stock or
partnership interests or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by the Company.
"Tax" means any federal, state, local, or foreign income, gross
receipts, capital stock, franchise, profits, windfall profits, withholding,
payroll, social security (or similar), unemployment, disability, real property,
personal property, stamp, excise, occupation, sales, use, transfer, value added,
alternative minimum, environmental, customs, duties, estimated or other tax,
including any interest, penalty or addition thereto, whether disputed or not.
"Tax Returns" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto and including any amendment thereof.
"Trustee" means United States Trust Company of New York, the trustee
under the Indenture.
The following terms shall have the meanings assigned to them in the
provisions of this Agreement referred to below:
Acquisitions - Preamble Annual Meetings - Section 5.9 Base Balance
Sheet - Section 2.5 Certificate - Section 1.1 Closing - Section 1.3
Closing Date - Section 1.3 Code - Section 2.12 Communications Act -
Section 2.7 Company - Preamble Environmental Law - Section 2.16(d)
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ERISA - Section 2.14(b) Event of Noncompliance - Section 8.1 Exchange -
Section 1.2 Exchange Act - Section 2.18 Exchange Agreement - Preamble
Exchange Warrants - Preamble Existing Senior Credit Facility - Preamble
FCC Licenses - Section 2.7 First Amendment to the Warrantholders'
Agreement - Section 3.1(f) Hazardous Material - Section 2.16(d)
Hazardous Waste - Section 2.16(d) Hughes - Preamble GAAP - Section 2.5
Good Faith Contested Trade Debt - Section 6.1(d) Interested Parties -
Preamble Investors - Preamble Involuntary Petition - Section 8.1(g) IRS
- Section 2.12 Issuance Date - Section 1.3 Key Man Life Insurance -
Section 5.8 Licenses - Section 2.6 Liggins - Preamble Loan Documents -
Preamble Management Stockholders - Preamble Margin Security - Section
2.18 Margin Stock - Section 2.18 Moore - Preamble New Stations -
Preamble Original Warrants - Preamble PCBs - Section 2.16(a) Permitted
Investments - Section 6.4 Permitted Liens - Section 6.2 Preferred
Shares - Section 1.1 Preferred Stock - Preamble Redemption Event -
Section 8.1 SBIA Act - Section 12.11 SBIA Rules - Section 12.11
Securities Purchase Agreement - Preamble Senior Indebtedness - Section
8.1 Senior Lender - Preamble Senior Subordinated Debt Financing -
Preamble Senior Subordinated Notes - Preamble Series A Amended and
Restated Warrants - Preamble Series A Preferred Investors - Preamble
Series A Preferred Shares - Section 1.1
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Series A Preferred Stock - Preamble Series B Amended and Restated
Warrants - Preamble Series B Preferred Investors - Preamble Series B
Preferred Shares - Section 1.1 Series B Preferred Stock - Preamble
Stations - Section 2.6 Subordinated Notes - Preamble Warrantholders'
Agreement - Preamble Warrants - Preamble WPHI-FM - Preamble WPHI-FM
Acquisition - Preamble WPHI-FM Purchase Agreement - Preamble WYCB-AM -
Preamble WYCB-AM Acquisition - Preamble 1940 Act - Section 2.17
SECTION 12. GENERAL
12.1 Amendments, Waivers and Consents. For the purposes of this
Agreement and all agreements, documents and instruments executed pursuant
hereto, except as otherwise specifically set forth herein or therein, no course
of dealing between any Interested Party and the Investors and no delay on the
part of any party hereto in exercising any rights hereunder or thereunder shall
operate as a waiver of the rights hereof and thereof. No covenant or other
provision hereof or thereof may be waived otherwise than by a written instrument
signed by the party so waiving such covenant or other provision; provided,
however, that except as otherwise provided herein or therein, changes in or
additions to, and any consents required by this Agreement may be made, and
compliance with any term, covenant, condition or provision set forth herein may
be omitted or waived (either generally or in a particular instance and either
retroactively or prospectively) only by a consent or consents in writing signed
by Investors holding a majority of the outstanding shares of Preferred Stock and
the Company. Unless otherwise specifically stated herein, any action by the
Investors hereunder shall require the consent of the holders of a majority of
the outstanding shares of Preferred Stock; provided, however, that any action
that would result in any Investor receiving a benefit or payment
disproportionate to their interest in the Preferred Stock or Warrants,
respectively, shall require the consent of the other Investor or Investors, and
any action that would result in any Investor or Investors receiving a burden or
liability disproportionate to their interest in the Preferred Stock or the
Warrants shall require the consent of such disproportionately burdened Investor
or Investors (in each case with such benefits, burdens and liabilities being
determined without regard to the individual tax or financial position of each of
the Investors); and provided further, that any amendment that would change or
alter the mandatory redemption date, the dividend rate, the dividend rate in
event of a breach, or the redemption terms of the Preferred Stock shall require
the unanimous consent of the Investors; and provided further, that any amendment
to Sections 6.4 or 6.11 shall require the consent of Investors holding eighty
percent (80%) of the
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outstanding shares of Preferred Stock; and provided further, that any amendment
requiring the consent of the Senior Lender or the Trustee under the Indenture
under the Standstill Agreement shall not be effective unless such consent has
been obtained. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon the Investors, all other holders of any
securities governed by this Agreement at the time outstanding (including
securities into which such securities have been converted) and each future
holder of all such securities and the Interested Parties.
With respect to any action hereunder requiring the consent or approval
of the Investors, if the Preferred Stock has been redeemed in full for any
reason, such action shall then require the consent or approval of Investors that
held, immediately prior to such redemption, at least that percentage of the
outstanding shares of Preferred Stock that would otherwise have been required to
secure the consent or approval of such action under the terms of this Agreement.
12.2 Survival of Covenants, Representations and Warranties;
Assignability of Rights. All covenants, agreements, representations and
warranties of the Interested Parties made herein and in the certificates,
exhibits or schedules delivered or furnished to the Investors in connection
herewith shall be deemed material and to have been relied upon by the Investors
and, except as provided otherwise in this Agreement, shall survive the delivery
of the Preferred Shares and shall bind the Interested Parties' successors and
assigns, whether so expressed or not, and, except as provided otherwise in this
Agreement, all such covenants, agreements, representations and warranties shall
inure to the benefit of the Investors' successors and assigns, whether so
expressed or not. Any representation or warranty that is qualified by the
knowledge of the Company or ROL shall mean that no member of senior management
of the Company or ROL, as appropriate, has actual knowledge that the
representation or warranty that is so qualified is untrue.
12.3 Governing Law; Jurisdiction; Venue. THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. EACH OF THE INVESTORS AND THE
INTERESTED PARTIES HEREBY REPRESENTS, WARRANTS AND AGREES THAT THE NEGOTIATION
OF THIS AGREEMENT AND THE EXCHANGE OF THE PREFERRED SHARES HEREUNDER AND ALL
OTHER PRINCIPAL TRANSACTIONS BETWEEN THE INVESTORS AND THE INTERESTED PARTIES
HAVE TAKEN PLACE IN THE COMMONWEALTH OF MASSACHUSETTS. EACH OF THE INTERESTED
PARTIES HEREBY ACKNOWLEDGES THAT IT HAS CAREFULLY REVIEWED AND UNDERSTANDS THE
TERMS OF THIS AGREEMENT AND THE PREFERRED SHARES, HAS OBTAINED AND CONSIDERED
THE ADVICE OF COUNSEL WITH RESPECT TO SUCH TERMS AND HAS HAD AN OPPORTUNITY TO
FULLY NEGOTIATE SUCH TERMS. Each Interested Party hereby agrees that the state
and federal courts of the Commonwealth of Massachusetts or, at the option of the
Investors, as appropriate, any other court in which the Investors, as
appropriate, shall initiate legal or equitable proceedings, to the extent such
court
42
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otherwise has jurisdiction, shall have jurisdiction to hear and determine any
claims or disputes between the Investors, as appropriate, and any Interested
Party pertaining directly or indirectly to this agreement and all documents,
instruments and agreements executed pursuant hereto, or to any matter arising
therefrom (unless otherwise expressly provided for therein). To the extent
permitted by law, each Interested Party hereby expressly submits and consents in
advance to such jurisdiction in any action or proceeding commenced by the
Investors in any of such courts, and agrees that service of such summons and
complaint or other process or papers may be made by registered or certified mail
addressed to such Interested Party at the address to which notices are to be
sent pursuant to this Agreement. Each Interested Party waives any claim that
Boston, Massachusetts is an inconvenient forum or an improper forum based on
lack of venue. To the extent permitted by law, should any Interested Party,
after being so served fail to appear or answer to any summons, complaint, or
process or papers so served within 30 days after the mailing thereof, such
Interested Party shall be deemed in default and an order and/or judgment may be
entered by the Investors, as appropriate, against such Interested Party as
demanded or prayed for in such summons, complaint, process or papers. The
exclusive choice of forum set forth in this Section 12.3 shall not be deemed to
preclude the enforcement of any judgment obtained in such forum or the taking of
any action to enforce the same in any other appropriate jurisdiction.
12.4 Section Headings. The descriptive headings in this Agreement have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provision hereof.
12.5 Representations and Covenants of the Investors. The Investors
represent that they are acquiring the Preferred Shares for their own account for
investment only and not with a view to, or the intention of, distributing or
reselling such Preferred Shares or any part thereof other than pursuant to a
registration statement under the Securities Act or an exemption thereunder,
without prejudice, however, to their right (subject to the terms of the
Preferred Stock and this Agreement) at all times to sell or otherwise dispose of
all or any part of the Preferred Shares pursuant to a registration under the
Securities Act, or an exemption from such registration.
The Investors have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of an
investment in the Preferred Shares and making an informed investment decision
with respect thereto.
The Investors have had the opportunity to ask questions and receive
written answers concerning the terms and conditions of the offering of the
Preferred Shares purchased hereunder, as well as the opportunity to obtain any
additional information necessary to verify the accuracy of information furnished
in connection with such offering which the Company possesses or can acquire
without unreasonable effort or expense.
Each Investor is either: (i) a bank as defined in Section 3(a)(2) of
the Securities Act, (ii) a savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act, (iii) a Small Business
Investment Company licensed by the U.S. Small
43
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Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958, (iv) a corporation, Massachusetts or similar business
Trust, or partnership not formed for the specific purpose of acquiring the
Preferred Shares, with total assets in excess of $5,000,000, (v) a natural
person whose individual net worth, or joint net worth with that person's spouse,
at the time of his or her purchase exceeds $1,000,000, or (vi) a natural person
who had an individual income in excess of $200,000 in each of the two most
recent years or joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of reaching the same income
level in the current year.
Each Investor hereby agrees to execute and deliver the Standstill
Agreement substantially in the form of Exhibit F hereto at the Closing.
12.6 Notices and Demands. Any notice or demand which, by any provision
of this Agreement or any agreement, document or instrument executed pursuant
hereto or thereto, except as otherwise provided therein, is required or provided
to be given shall be deemed to have been sufficiently given or served and
received for all purposes three days after being sent by certified or registered
mail, postage and charges prepaid, return receipt requested, or by express
delivery providing receipt of delivery, to the following addresses:
If to the Company or ROL to:
Radio One, Inc.
4001 Nebraska Avenue, N.W.
Washington, D.C. 20016
Attention: Alfred C. Liggins
With a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attention: Richard L. Perkal, Esq.
If to the Series B Preferred Investors to:
Alta Subordinated Debt Partners III, L.P.
c/o Burr, Egan, Deleage & Co.
One Post Office Square
Boston, MA 02109
Attention: Brian W. McNeill
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BancBoston Investments Inc.
175 Federal Street
10th Floor
Boston, MA 02110
Attention: Sanford Anstey
Grant M. Wilson
201 Concord Street
Carlisle, MA 01741
With copies to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: John J. Egan III, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
If to the Series A Preferred Investors:
Syncom Capital Corporation
8401 Colesville Road, Suite 300
Silver Spring, MD 20910
Attention: Terry L. Jones
Alliance Enterprise Corporation
12655 N. Central Expwy.
Suite 700
Dallas, TX 75243
Attention: Davakar Kamath
Greater Philadelphia Venture Capital Corporation, Inc.
351 E. Connestoga Road
Wayne, PA 19087
Attention: Fred Choate
Opportunity Capital Corporation
2201 Walnut Avenue, Suite 210
Freemont, CA 94538
Attention: J. Peter Thompson
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Capital Dimensions Venture Fund, Inc.
2 Appletree Square #335-T
Minneapolis, MN 55425-1637
Attention: Dean Pickerell
TSG Ventures Inc.
177 Broad Street, 12th Floor
Stamford, CT 06901
Attention: Duane Hill
Fulcrum Venture Capital Corporation
300 Corporate Point
Suite 380
Culver City, CA 90230
Attention: Brian E. Argrett
or at any other address designated by any party to this Agreement to each of the
other parties in writing; and if to an assignee of an Investor, to its address
as designated to the Company in writing.
12.7 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
12.8 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions or this Agreement.
12.9 Expenses.
(a) The Company shall pay all costs and expenses, including
without limitation accounting fees, due diligence costs and reasonable legal
fees, expenses, and disbursements of Goodwin, Procter & Hoar LLP (special
counsel for the Investors), Ropes & Gray (special counsel for BancBoston
Investments Inc.) and the special Small Business Investment Company counsel to
the Series A Preferred Investors, if any, that the Investors and the Company
incur in connection with the negotiation, execution, delivery and performance of
this Agreement. The Company and ROL shall indemnify and hold the Investors (on
an after-Tax basis) (including their Affiliates, partners, employees and
controlling persons) harmless from and against any and all claims, liabilities,
losses, damages and expenses which may be or have been incurred by them
(including the fees of counsel) to the extent that such claims, liabilities,
losses, damages and expenses relate to, arise out of, or
46
<PAGE>
result from the negotiations relating to, or transactions contemplated by, this
Agreement, including without limitation the Senior Subordinated Debt Financing.
(b) The Company and the Investors have agreed to treat the
Exchange as a non-reportable, non-taxable transaction. The Company and the
Investors agree that the fair market value of the Preferred Stock on the date of
the Exchange will be equal to the face amount of such Preferred Stock. The
Company and ROL shall indemnify and hold the Investors (on an after-Tax basis)
(including their Affiliates, partners, employees and controlling persons)
harmless from and against any and all Tax liabilities that arise as a result of:
(i) the Exchange or from any other transaction contemplated herein; (ii) an
adverse determination by a taxing authority that the fair market value of the
Preferred Stock on the date of the Exchange was less than the face amount of
such Preferred Stock; or (iii) an adverse determination by a taxing authority
that a redemption of the principal amount of such Preferred Stock was a dividend
for tax purposes. In the event: (i) the Company and ROL are required to make a
payment under the provisions of this Section 12.9(b) (a "Tax Indemnification
Payment"), (ii) such Investor or Affiliate later sells, exchanges or otherwise
disposes of Preferred Stock (or any securities that may be issued in respect of
or in exchange therefor) in a taxable transaction and (iii) the Taxes payable by
such seller with respect to such sale, exchange or disposition are less than the
Taxes that would have been payable had no Tax Indemnification Payment ever been
required (the difference between the Taxes payable and those that would have
been payable in the absence of a previous Tax Indemnification Payment, "Tax
Savings"); then the Investor or Affiliate, as the case may be, shall pay to the
Company and ROL, as the case may be, the amount of such Tax Savings; provided,
however, that the amount of Tax Savings required to be paid by any Investor and
its Affiliates pursuant to this sentence shall not exceed the amount of Tax
Indemnification Payments previously received by such Investor and its
Affiliates.
12.10 Confidentiality. The Investors agree not to disclose to third
parties any confidential or proprietary information furnished to them by the
Company under this Agreement, except for information which (a) is in the public
domain, or enters the public domain other than by such party's breach of this
Agreement, (b) was known to such party prior to its disclosure by the Company,
(c) is required to be disclosed by applicable laws or regulations or by order of
any governmental agency or authority having competent jurisdiction, or (d)
constitutes summary financial or descriptive business information disclosed by
such party which is an investment fund as part of its regular reports to its
partners.
12.11 Regulation and Civil Rights.
(a) The Series A Preferred Investors are Specialized Small
Business Investment Companies and are regulated by the Small Business Investment
Act of 1958, as amended (the "SBIA Act") and the various regulations promulgated
pursuant to the SBIA Act (together with the SBIA Act, the "SBIA Rules"). With
respect to the Series A Preferred Investors, this Agreement and the Preferred
Shares issued hereunder shall be interpreted in conformity with the SBIA Rules
and any provision or term of this Agreement or the
47
<PAGE>
Preferred Shares which may be deemed to conflict with any of the provisions of
the SBIA Rules shall be construed so as to not conflict therewith and shall be
subject to any limitations or requirements of such SBIA Rules.
(b) The Company shall comply with the provisions of the
Civil Rights Act of 1964 and file with or make available to each Investor such
information as may be necessary to enable such Investor to meet its reporting
requirements to the Small Business Administration.
12.12 Termination. As of the Closing Date, the Securities Purchase
Agreement (other than Sections 1.3(b), 12.2 (with respect to representations and
warranties only), 12.3 and 12.9 and for definitional purposes with respect to
the Warrantholders' Agreement and the Amended and Restated Warrant Certificates)
and all related security interests and agreements related thereto (including,
without limitation, the Guaranty, dated as of June 6, 1995, by the subsidiaries
of the Company then existing in favor of the Investors and the Shareholder
Pledge Agreement, dated as of June 6, 1995, by the Management Stockholders in
favor of the Investors) are hereby terminated, and of no further force and
effect, and each of the parties thereto hereby forever releases each of the
other parties from any liability arising thereunder (other than with respect to
Sections 1.3(b), 12.2 (with respect to representations and warranties only),
12.3 and 12.9 of the Securities Purchase Agreement), under the Subordinated
Notes, or under any security interest or agreement related thereto. In addition,
the Investors agree to execute such other instruments and documents and take
such other actions as may be reasonably requested by the Company or the
Management Stockholders to evidence the release of such security interests.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
48
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Preferred
Stockholders' Agreement as a sealed instrument as of the day and year first
above written.
COMPANY:
RADIO ONE, INC.
By: /s/ Alfred C. Liggins
-------------------------------
Name: Alfred C. Liggins
Title: President
SUBSIDIARY:
RADIO ONE LICENSES, INC.
By: /s/ Alfred C. Liggins
------------------------------
Name: Alfred C. Liggins
Title: President
[Signature Page to Preferred Stockholders' Agreement]
[Signature Pages Continue]
S-1
<PAGE>
SERIES B PREFERRED INVESTORS:
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt
Management III, L.P., its
General Partner
By: /s/ Eileen McCarthy
-----------------------------
Name: Eileen McCarthy
Title:
BANCBOSTON INVESTMENTS INC.
By: /s/ Lars A. Swanson
----------------------------
Name: Lars A. Swanson
Title: Vice President
/s/ Grant M. Wilson
--------------------------------
Grant M. Wilson, individually
[Signature Page to Preferred Stockholders' Agreement]
[Signature Pages Continue]
S-2
<PAGE>
SERIES A PREFERRED INVESTORS:
SYNCOM CAPITAL CORPORATION
By: /s/ Terry L. Jones
--------------------------------
Name: Terry L. Jones
Title: President
ALLIANCE ENTERPRISE CORPORATION
By: /s/ Divakar Kamath
-------------------------------
Name: Divakar Kamath
Title: Executive Vice President
GREATER PHILADELPHIA VENTURE
CAPITAL CORPORATION, INC.
By: /s/ Fred G. Choate
-------------------------------
Name: Fred G. Choate
Title: Manager
OPPORTUNITY CAPITAL CORPORATION
By: /s/ J.P. Thompson
-------------------------------
Name: J. Peter Thompson
Title: President
[Signature Page to Preferred Stockholders' Agreement]
[Signature Pages Continue]
S-3
<PAGE>
CAPITAL DIMENSIONS VENTURE
FUND, INC.
By: /s/ Dean Pickerell
---------------------------------
Name: Dean Pickerell
Title: President
TSG VENTURES INC.
By: /s/ Duane E. Hill
---------------------------------
Name: Duane E. Hill
Title: Principal
FULCRUM VENTURE CAPITAL
CORPORATION
By: /s/ Brian Argrett
---------------------------------
Name: Brian Argrett
Title: President
[Signature Page to Preferred Stockholders' Agreement]
[Signature Pages Continue]
S-4
<PAGE>
MANAGEMENT STOCKHOLDERS:
/s/ Alfred C. Liggins
--------------------------------
Alfred C. Liggins, individually
/s/ Catherine L. Hughes
--------------------------------
Catherine L. Hughes, individually
/s/ Jerry A. Moore
--------------------------------
Jerry A. Moore III, individually
[Signature Page to Preferred Stockholders' Agreement]
S-5
<PAGE>
APPENDIX A
ADDITIONAL PERMITTED CAPITAL EXPENDITURES
<PAGE>
<TABLE>
<CAPTION>
Schedule A
Number of Shares
of Series A
Preferred Stock
(if the Closing
Series A Preferred Investors occurs on 5/19/97)
<S> <C>
Syncom Capital Corporation 13,595.69
Alliance Enterprise Corporation 9,126.55
Greater Philadelphia Venture Capital Corporation, Inc. 2,359.67
Opportunity Capital Corporation 4,872.30
Capital Dimensions Venture Fund, Inc. 37,258.14
TSG Ventures Inc. 7,980.59
Fulcrum Venture Capital Corporation 9,650.09
Total: 84,843.03
Number of Shares
of Series B
Preferred Stock
(if the Closing
Series B Preferred Investors occurs on 5/19/97)
Alta Subordinated Debt Partners III, L.P. 72,139.57
BancBoston Investments Inc. 49,249.44
Grant M. Wilson 3,078.09
Total: 124,467.10
Number of Shares of Preferred Stock Per
Diem if the Closing occurs after 5/19/97 77.20
--------------
</TABLE>
B-1
================================================================================
WARRANTHOLDERS' AGREEMENT
By and Among
Radio One, Inc.,
Radio One of Maryland, Inc.,
Radio One License, Inc.,
Radio One of Maryland License, Inc.
Catherine L. Hughes,
Alfred C. Liggins,
Jerry A. Moore, III
and
The New Investors and the
Original Investors as defined and set forth herein
and on the signature pages hereto
Dated as of June 6, 1995
This agreement is subject to an Intercreditor and Subordination Agreement
dated as of the date hereof among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Subordinated Lenders (as defined therein),
the Lenders (as defined therein) and NationsBank of Texas, N.A., as Agent to
the Lenders (as defined therein) and individually as a Lender. By its
acceptance of this agreement, each party hereto agrees to be bound by the
provisions of such Intercreditor and Subordination Agreement to the same
extent that each Subordinated Lender is bound. In the event of any
inconsistency between the terms of this agreement and the terms of such
Intercreditor and Subordination Agreement, the terms of the Intercreditor
and Subordination Agreement shall govern and be controlling.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I. REPRESENTATIONS AND WARRANTIES............................................................. 2
Section 1.01. Representations and Warranties of the Original Investors...............................2
Section 1.02. Representations and Warranties of the Management
Stockholders...........................................................................4
ARTICLE II. REGISTRATION RIGHTS.........................................................................6
Section 2.01. "Piggy-Back" Registration Rights.......................................................6
Section 2.02. Required Registration Rights...........................................................7
Section 2.03. Form S-3...............................................................................8
Section 2.04. Registrable Securities.................................................................9
Section 2.05. Further Obligations of the Company.....................................................9
Section 2.06. Indemnification; Contribution.........................................................10
Section 2.07. Rule 144 Requirements.................................................................12
Section 2.08. Market Stand-Off......................................................................12
Section 2.09. Transfer of Registration Rights.......................................................12
ARTICLE III. MANAGEMENT STOCKHOLDER AND INVESTOR
COVENANTS..................................................................................12
Section 3.01. Prohibited and Permitted Transfers; Definitions.......................................13
Section 3.02. Right of First Refusal................................................................14
Section 3.03. Right of Participation in Sales.......................................................15
ARTICLE IV. RIGHT TO PARTICIPATE IN SALES BY COMPANY OF
ADDITIONAL SECURITIES......................................................................17
Section 4.01. Offer to Investors....................................................................17
Section 4.02. Sale to Offeror.......................................................................18
Section 4.03. Right to Participate Inapplicable.....................................................18
ARTICLE V. PUT AND CALL RIGHTS........................................................................18
Section 5.01. Investors' Put Right..................................................................18
Section 5.02. Company Call Right....................................................................19
Section 5.03. Put/Call Price........................................................................19
Section 5.04. Put/Call Closing......................................................................21
ARTICLE VI. INVESTORS GO-ALONG RIGHT...................................................................21
ARTICLE VII. SPECIAL COVENANTS..........................................................................23
(i)
<PAGE>
ARTICLE VIII. ELECTION OF DIRECTORS OF THE COMPANY.......................................................24
8.01. Election of Directors of the Company and the Subsidiaries.............................24
8.02. Vacancies.............................................................................25
ARTICLE IX. MISCELLANEOUS PROVISIONS...................................................................25
Section 9.01. Survival of Representations and Covenants; No Third Party
Beneficiaries.........................................................................25
Section 9.02. Indemnification.......................................................................25
Section 9.03. Amendment and Waiver..................................................................27
Section 9.04. Intercreditor Matters.................................................................27
Section 9.05. Notices...............................................................................29
Section 9.06. Headings..............................................................................29
Section 9.07. Gender................................................................................29
Section 9.08. Counterparts..........................................................................29
Section 9.09. Remedies; Severability................................................................29
Section 9.10. Entire Agreement......................................................................29
Section 9.11. Government Law; Jurisdiction; Venue...................................................30
Section 9.12. Term..................................................................................30
SCHEDULES
Schedule A New Investors
Schedule B Original Investors
Schedule 1.02(a) Capital Stock Held By Management Stockholders
Schedule 1.02(c) Claims
</TABLE>
EXHIBITS
Exhibit A Form of Promissory Note for ROFR Notes
Exhibit B Form of Irrevocable Proxy
(ii)
<PAGE>
WARRANTHOLDERS' AGREEMENT
-------------------------
This Warrantholders' Agreement is made as of this 6th day of June,
1995, by and among Radio One, Inc., a District of Columbia corporation (the
"Company"), Radio One of Maryland, Inc., a Delaware corporation, Radio One
License, Inc., a District of Columbia corporation, Radio One of Maryland
License, Inc., a District of Columbia corporation (collectively, the
"Subsidiaries"), Catherine L. Hughes, Alfred C. Liggins and Jerry A. Moore,
III (collectively, the "Management Stockholders"), the investors listed on
Schedule A hereto (the "New Investors"), and the additional investors listed
on Schedule B hereto (the "Original Investors") (the New Investors and the
Original Investors being referred to herein collectively as the "Investors"
and individually as an "Investor," and the Investors and the Management
Stockholders being referred to herein collectively as the "Securityholders"
and individually as a "Securityholder").
The capitalized terms used herein which are defined in the Securities
Purchase Agreement and not otherwise defined herein shall have the meanings
set forth in the Securities Purchase Agreement (the "Securities Purchase
Agreement"), dated as of June 6, 1995, by and among the Company, the
Subsidiaries and the Securityholders.
W I T N E S S E T H
-------------------
WHEREAS, reference is made to the Securities Purchase Agreement,
whereby the Investors will, subject to the terms and conditions set forth in
the Securities Purchase Agreement, acquire an aggregate principal amount of
$17,000,000 of Subordinated Promissory Notes of the Company (the "Notes")
and the New Investors will acquire warrants (the "New Warrants") to purchase
an aggregate of up to 17.84% of the fully-diluted Common Equity (as defined
in the Securities Purchase Agreement) of the Company;
WHEREAS, reference is made to the Exchange Agreement, dated as of June
6, 1995, by and among the Company and the Original Investors, pursuant to
which the Original Investors will exchange their outstanding warrants (the
"Old Warrants") to purchase 50.39% of the Common Stock on a fully-diluted
basis for new warrants (the "Exchange Warrants," and together with the New
Warrants, the "Warrants") to purchase an aggregate of up to 33.66% of the
fully diluted Common Equity and $6,251,094 in cash, subject to the terms and
conditions set forth in the Exchange Agreement;
WHEREAS, the effectiveness of this Agreement is a condition to the
consummation of the Securities Purchase Agreement and the Exchange
Agreement; and
WHEREAS, the parties hereto desire to provide for the orderly
management of the Company and the Subsidiaries and the ownership of
outstanding securities of the Company and the Subsidiaries following the
closing of the transactions contemplated hereby.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
<PAGE>
ARTICLE I. REPRESENTATIONS AND WARRANTIES
Section l.01. Representations and Warranties of the Original Investors. Each
Original Investor hereby makes the following representations and warranties
and covenants to the Company and each New Investor:
(a) Such Original Investor, by reason of its business and financial
experience, has such knowledge, sophistication and experience in business
and financial matters as to be capable of evaluating the merits and risks of
its investment in the Notes and Warrants, and is purchasing the Notes and
Warrants being acquired by it for its own account, for investment only and
not with a view to, or any present intention of, distributing or reselling
such securities or any part thereof. Each of the Original Investors
acknowledges that its respective Notes and Warrants have not been registered
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), or the securities laws of any
state or other jurisdiction and cannot be disposed of unless they are
subsequently registered under the Securities Act and any applicable state
laws or an exemption from such registration is available.
(b) Such Original Investor has full authority and power under its governing
charter or comparable document to enter into this Agreement and each
agreement, document and instrument to be executed and delivered by or on
behalf of such Original Investor pursuant to or as contemplated by this
Agreement and to carry out the transactions contemplated hereby and thereby.
This Agreement and each agreement, document and instrument to be executed
and delivered by such Original Investor pursuant to or as contemplated by
this Agreement constitute, or when executed and delivered by such Original
Investor will constitute, valid and binding obligations of such Original
Investor enforceable in accordance with their respective terms. The
execution, delivery and performance by such Original Investor of this
Agreement and each such agreement, document and instrument:
(i) do not and will not violate any laws, rules or regulations
of the United States or any state or other jurisdiction applicable to
such Original Investor, or require such Original Investor to obtain any
approval, consent or waiver of, or to make any filing with, any Person
that has not been obtained or made; and
(ii) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under or give rise to a right
of termination of any indenture or loan or credit agreement or any
other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which such Original Investor, the Company or
any of the Subsidiaries is a party or by which the property of such
Original Investor, the Company or any of the Subsidiaries is bound or
affected, or result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance on any
of the assets or properties of such Original Investor or of the Company
or any of the Subsidiaries.
2
<PAGE>
(c) Such Original Investor hereby acknowledges that, except
for the Notes and Warrants issued pursuant to the Securities Purchase Agreement
and the Exchange Agreement and its rights under this Agreement, it has no claims
against the Company or the Subsidiaries and their respective affiliates and such
Original Investor hereby agrees on behalf of itself and its agents,
representatives, successors, and assigns to remise, release and forever
discharge the Company, the Subsidiaries, their respective affiliates, and the
present and future agents, representatives, heirs, successors and assigns of the
Company and the Subsidiaries of and from all actions, causes of action,
contributions, indemnities, apportionments, duties, debts, sums, sums of money,
suits, omissions, bonds, bond specialties, covenants, contracts, controversies,
restitutions, understandings, agreements, promises, commitments, damages,
responsibilities and any and all claims, demands, executions, liabilities and
accounts of whatsoever kind, nature or description, direct or indirect, oral or
written, known or unknown, matured or unmatured, suspected or unsuspected at the
present time, in law or in equity (including, without limitation, those in
contract or in tort or otherwise, or under the laws and regulations of the
United States or any state or other jurisdiction or public administrative board
or agency), and which may be based upon, result from, relate to or arise out of
the existing state of things, or matters arising prior to the date of execution
and delivery hereof, which such Original Investor ever had, now has or ever has
from time to time to the date hereof. Such Original Investor further represents
and agrees that the representations in this Section l.0l.(c) are freely and
voluntarily given by it without reliance on any inducements, promises or
representations which are not described herein and after the receipt of advice
from its legal counsel as to the meaning and consequences of such
representations and acknowledges its understanding of the terms contained herein
and the consequences thereof.
(d) Each Original Investor hereby acknowledges that it is a
sophisticated investor accustomed to making valuations of investments such as
the Old Warrants, the Exchange Warrants and the Notes and agrees that, in
entering into this Agreement, the Securities Purchase Agreement, the Exchange
Agreement and any other agreement contemplated hereby or thereby, each Original
Investor has relied upon its own valuation of the Old Warrants held, and
Exchange Warrants to be received, by such Original Investor and not upon a
valuation provided by the Company or any other party hereto. In this regard,
each Original Investor also acknowledges that (i) it has had complete
opportunity to ask such questions, and receive such information and material,
regarding the Company's business, assets, condition and prospects as it has
deemed relevant to its determination of the value of the Old Warrants, the
Exchange Warrants and the Notes and (ii) it has had an opportunity to consult
with its own counsel regarding the terms of the transactions contemplated hereby
and is not relying upon the Company, the New Investors or any of the respective
agents or affiliates with respect to the terms of such transactions, or the
impact of any statutes, regulations or policies applicable to it as a
Specialized Small Business Investment Company licensed by the Small Business
Administration under ss.30l(d) of the Small Business Investment Act of 1958, as
amended. Further, each Original Investor acknowledges that the terms of the
exchange of such Original Investor's Old Warrants for Exchange Warrants and (if
applicable) cash pursuant to the terms of the Exchange Agreement and the
purchase and sale of Notes pursuant to the Securities Purchase Agreement were
negotiated in arm's length transactions and that such Original Investor is aware
of the terms of each other Original
3
<PAGE>
Investor's exchange of Old Warrants for Exchange Warrants pursuant to the
Exchange Agreement and purchase of Notes pursuant to the Securities Purchase
Agreement.
(e) Each Original Investor hereby acknowledges that the
transactions contemplated hereby, by the Securities Purchase Agreement, by the
Exchange Agreement and by any other agreement contemplated hereby or thereby may
involve state, Federal or other tax implications, and that such implications may
not be the same for all of the Original Investors. In this regard, each Original
Investor also acknowledges that it has relied upon its own evaluation of such
tax implications or it has consulted its own tax adviser(s) regarding such tax
implications, and that such Original Investor has not relied upon the Company or
any other party hereto in evaluating such tax implications.
Section 1.02. Representations and Warranties of the Management
Stockholders. Each of Liggins and Hughes hereby makes the following
representations, warranties and covenants to each Investor, and Jerry A. Moore,
III hereby makes the following representations and warranties to the best of his
knowledge and covenants to each Investor:
(a) Such Management Stockholder owns beneficially and of
record the number of shares of, or options or warrants to purchase shares of,
capital stock ("Management Shares") of the Company and the subsidiaries set
forth opposite such Management Stockholder's name on Schedule 1.02(a) attached
hereto, free and clear of any and all liens, claims, options, charges,
encumbrances, rights or restrictions of any nature, except as contemplated by
the Loan Documents (as defined in both the Securities Purchase Agreement and the
Senior Loan Agreement).
(b) Such Management Stockholder has full authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Management
Stockholder pursuant to or as contemplated by this Agreement and to carry out
the transactions contemplated hereby and thereby. This Agreement and each
agreement, document and instrument to be executed and delivered by such
Management Stockholder pursuant to or as contemplated by this Agreement
constitute, or when executed and delivered by such Management Stockholder will
constitute, valid and binding obligations of such Management Stockholder
enforceable in accordance with their respective terms. The execution, delivery
and performance by such Management Stockholder of this Agreement and each such
agreement, document and instrument:
(i) do not and will not violate any laws, rules or regulations
of the United States or any state or other jurisdiction applicable to
such Management Stockholder, which such violation could reasonably be
expected to have a material adverse effect on the assets, prospects,
business or financial condition of the Management Stockholders, the
Company or the Subsidiaries, or require such Management Stockholder to
obtain any approval, consent or waiver of, or to make any filing with,
any Person that has not been obtained or made, except where the failure
to make any such filing or obtain any such consent or approval could
not reasonably be expected to have a material adverse effect on the
consummation of the transactions contemplated by this Agreement or on
the assets, prospects, business or
4
<PAGE>
financial condition of the Management Stockholders, the Company or the
Subsidiaries; and
(ii) do not and will not result in a material breach of, constitute a
default under, accelerate any material obligation under or give rise to a
right of termination of any indenture or loan or credit agreement or any
other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which such Management Stockholder, the Company or any
of the Subsidiaries is a party or by which the property of such Management
Stockholder, the Company or any of the Subsidiaries is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the assets or properties
of such Management Stockholder or of the Company or any of the Subsidiaries,
except for those under the Pledge Agreements (as defined in the Securities
Purchase Agreement and the Senior Loan Agreement, respectively).
(c) Such Management Stockholder hereby acknowledges that, except as
described on Schedule 1.02(c) hereof and except for the Management Shares and
its rights under this Agreement, it has no claims against the Company or the
Subsidiaries and their respective affiliates and such Management Stockholder
hereby agrees on behalf of itself and its agents, representatives, successors,
and assigns to remise, release and forever discharge the Company, the
Subsidiaries, their respective affiliates, and the present and future agents,
representatives, heirs, successors and assigns of the Company and the
Subsidiaries of and from all actions, causes of action, contributions,
indemnities, apportionments, duties, debts, sums, sums of money, suits,
omissions, bonds, bond specialties, covenants, contracts, controversies,
restitutions, understandings, agreements, promises, commitments, damages,
responsibilities and any and all claims, demands, executions, liabilities and
accounts of whatsoever kind, nature or description, direct or indirect, oral or
written, known or unknown, matured or unmatured, suspected or unsuspected at the
present time, in law or in equity (including, without limitation, those in
contract or in tort or otherwise, or under the laws and regulations of the
United States or any state or other jurisdiction or public administrative board
or agency), and which may be based upon, result from, relate to or arise out of
the existing state of things, or matters arising prior to the date of execution
and delivery hereof, which such Management Stockholder ever had, now has or ever
has from time to time to the date hereof. Such Management Stockholder further
represents and agrees that the representations in this Section 1.02(c) are
freely and voluntarily given by it without reliance on any inducements, promises
or representations which are not herein andafter the receipt of advice from its
legal counsel as to the meaning and consequences of such representations and
acknowledges its understanding of the terms contained herein and the
consequences thereof.
5
<PAGE>
ARTICLE II. REGISTRATION RIGHTS
Section 2.01. "Piggy-Back" Registration Rights. If at any time or times
after the date hereof, the Company shall determine or be required to register
any shares of its Common Stock for sale under the Securities Act (whether in
connection with a public offering of securities by the Company (a "primary
offering"), a public offering of securities by stockholders of the Company (a
"secondary offering"), or both, but not in connection with a registration
effected solely to implement an employee benefit plan or a transaction to which
Rule 145 or any other similar rule of the Securities and Exchange Commission
(the "Commission") under the Securities Act is applicable, the Company will
promptly give written notice thereof to the Investors that hold Registrable
Securities or Non-Voting Common Stock at that time. In connection with any such
registration, if within 30 days after the receipt of such notice, one or more
Investors request the inclusion of some or all of the Registrable Securities
(but not any other shares) held by them in such registration, the Company will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which such Investors request to be registered. In the
case of the registration of shares of Common Stock by the Company in connection
with an underwritten public offering, (i) the Company shall not be required to
include any Registrable Securities in such underwriting which are held by an
Investor that does not accept the terms of the underwriting as reasonably agreed
upon between the Company and the managing underwriter(s) for such offering, and
(ii) if the managing underwriter(s) reasonably determine(s) in writing that
marketing factors require a limitation on the number of Registrable Securities
to be offered, the Company shall not be required to register Registrable
Securities in excess of the amount, if any, of shares of capital stock which the
managing underwriter(s) for such offering shall reasonably and in good faith
agree to include in such offering in excess of any amount to be registered for
the Company; provided, however, that: (a) any Common Stock or other securities
of the Company held by any persons other than the Investors shall be the first
securities to be so excluded from such offering; (b) other than with respect to
the initial public offering of the Company, the Registrable Securities to be
registered in such offering may not be reduced below the lesser of (i) the
aggregate amount which the Investors have requested to register in such
offering; or (ii) an amount representing 30% of the aggregate number of shares
to be registered in such offering; and (b) in the event that the aggregate
amount of Registrable Securities that the Investors have requested to be
registered hereunder exceeds the amount which may be registered hereunder, each
Investor shall be entitled to register up to the lesser of (i) the amount of
Registrable Securities for which it requested registration; or (ii) its pro rata
share of the Registrable Securities which may be registered hereunder (based
upon the number of Warrants or Registrable Securities issued upon exercise of
the Warrants held by each Investor). All expenses relating to the registration
and offering of Registrable Securities pursuant to this-Section 2.01 (including
the reasonable fees and expenses of not more than one independent counsel for
the Investors) shall be borne by the Company, except that the Investors shall
bear underwriting and selling commissions attributable to their Registrable
Securities being registered and any transfer taxes on shares being sold by such
Investors. Without in any way limiting the types of registrations to which this
Section 2.01 shall apply, in the event that the Company shall effect a "shelf
registration" under Rule 415 promulgated under the Securities Act, or any other
similar rule or regulation ("Rule 415") (other than a
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shelf registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 or any other similar rule of the Commission under
the Securities Act is applicable), the Company shall take all necessary action,
including, without limitation, the filing of post-effective amendments, to
permit the Investors to include their shares in such registration in accordance
with the terms of this Section 2.01.
Section 2.02. Required Registration Rights. If on any two (2) occasions
after the earlier of (a) 180 days after the initial public offering of the
Company and (b) the third anniversary of the date hereof, Investors holding at
least 66 2/3% in outstanding principal amount of the Notes (the "Initiating
Investors") notify the Company in writing that they intend to offer or cause to
be offered for public sale all or any portion of their Registrable Securities,
the Company shall immediately notify in writing all of the Investors that hold
Registrable Securities or Non-Voting Common Stock at that time of its receipt of
such notification from such Initiating Investors. Within 30 days after receipt
from the Company of the notification from the Initiating Investors, the Company
will either (i) elect to make a primary offering, in which case the rights of
such Investors shall be as set forth in Section 2.01 above (except that any
Common Stock or other securities to be issued by the Company in such offering
shall, in the event of any limitation in the amount of securities to be
registered, be excluded from such offering prior to any of the Registrable
Securities being so excluded), or (ii) use its best efforts to cause such of the
Registrable Securities as may be requested in a written notice delivered by any
Investors (including the Initiating Investors) to the Company within 30 days
after its receipt of the initial demand notice to be registered under the
Securities Act in accordance with the terms of this Section 2.02. If so
requested by the Initiating Investors, the Company shall take such steps as are
required to register the relevant Registrable Securities for sale on a delayed
or continuous basis under Rule 415, and to keep such registration effective for
180 days or until all of such Registrable Securities registered thereunder are
sold, whichever is shorter. All expenses of such registrations and offerings
(other than underwriting and selling commissions attributable to the Registrable
Securities) and the reasonable fees and expenses of not more than one
independent counsel for the Investors in connection with any registration
pursuant to this Section 2.02 shall be borne by the Company. The Company may
postpone the filing of any registration statement required under this Section
2.02 for a reasonable period of time, not to exceed 60 days during any
twelve-month period, if the Company has been advised by legal counsel that such
filing would require disclosure of a material impending transaction or other
matter and the Company determines reasonably in good faith that such disclosure
would have a material adverse effect on the Company. The Company shall not be
required to cause a registration statement requested pursuant to this Section
2.02 to become effective prior to 180 days following the effective date of a
registration statement initiated by the Company if the request for registration
has been received by the Company subsequent to the giving of written notice by
the Company, made in good faith, to the Investors to the effect that the Company
is commencing to prepare a Company-initiated registration statement (other than
a registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 or any other similar rule of the Commission under
the Securities Act is applicable); provided, however, that the Company shall use
its best efforts to achieve such effectiveness promptly following such 180-day
period if the request pursuant to this Section 2.02 has been made prior to the
expiration of such 18O-day period. Any registration effected pursuant to this
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Section 2.02 and so designated by the Investors shall be subject to this Section
2.02, regardless of the form in which such registration is effected. In the
event that the offering requested by the Investors shall be the initial public
offering of the Company's Common Stock, the closing of such initial public
offering and the transactions related thereto shall be conditioned upon the
Senior Debt being paid in full or the consent of the Senior Lender.
Section 2.03. Form S-3. If the Company becomes eligible to use Form S-3
under the Securities Act or a comparable successor form, the Company shall use
its best efforts to continue to qualify at all times for registration of its
capital stock on Form S-3 or such successor form. In addition to their rights
under Section 2.02 hereof, one or more of the Investors shall have the right to
request and have effected registrations of Registrable Securities on Form S-3 or
such successor form for a public offering of shares of Registrable Securities
having an aggregate proposed offering price of not less than $1,000,000 (such
requests shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of such
shares by such Investors). The Company shall give notice to all of the Investors
that hold Registrable Securities or Non-Voting Common Stock at that time of the
receipt of a request for registration pursuant to this Section 2.03 and upon the
written request of any such Investor delivered to the Company within 30 days
after receipt from the Company, the Company shall use its best efforts to cause
such of the Registrable Securities as may be requested by any Investor to be
registered under the Securities Act on Form S-3 (or any successor form). If so
requested by Investors holding a majority in interest of the Registrable
Securities to be registered under this Section 2.03, the Company shall take such
steps as are required to register such Registrable Securities for sale on a
delayed or continuous basis under Rule 415, and to keep such registration
effective for 180 days or until all of such Registrable Securities registered
thereunder are sold, whichever is shorter. All expenses incurred in connection
with a registration requested pursuant to this Section 2.03 (other than
underwriting and selling commissions attributable to the Registrable Securities)
and the reasonable fees and expenses of not more than one independent counsel
for the Investors shall be borne by the Company. The Company may postpone the
filing of any registration statement required hereunder for a reasonable period
of time, not to exceed 60 days during any twelve-month period, if the Company
has been advised by legal counsel that such filing would require disclosure of a
material impending transaction or other matter and the Company determines
reasonably in good faith that such disclosure would have a material adverse
effect on the Company. The Company shall not be required to cause more than two
registration statements requested pursuant to this Section 2.03 to become
effective in any twelve-month period. The Company shall not be required to cause
a registration statement requested pursuant to this Section 2.03 to become
effective prior to 180 days following the effective date of a registration
statement initiated by the Company, if the request for registration has been
received by the Company subsequent to the giving of written notice by the
Company, made in good faith, to the Investors initiating a demand under this
Section 2.03 to the effect that the Company is commencing to prepare a
Company-initiated registration statement (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
or any other similar rule of the Commission under the Securities Act is
applicable); provided, however, that the Company shall use its best efforts to
achieve such effectiveness promptly
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following such 180-day period if the request pursuant to this Section 2.03 has
been made prior to the expiration of such 180-day period.
Section 2.04. Registrable Securities. For the purposes of this Article
II, the term "Registrable Securities" shall mean (i) any shares of Common Stock
of the Company issued or issuable upon exercise of any of the Warrants or ROFR
Warrants (as defined in section 3.02(b) hereof), (ii) any Common Stock issued or
issuable with respect to any of the shares of Common Stock referred to in clause
(i) above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, (iii) any shares of Common Stock issued or issuable upon
conversion of any shares of Non-Voting Common Stock held by the Investors, and
(iv) any shares of Common Stock issued or issuable upon conversion of shares of
Non-Voting Common Stock issued or issuable upon exercise of any of the Warrants.
In no event shall Non-Voting Common Stock be considered Registrable Securities
hereunder.
Section 2.05. Further obligations of the Companv. Whenever under the
preceding Sections of this Article II the Company is required hereunder to
register any Registrable Securities, it agrees that it shall also do the
following:
(a) Use its best efforts (with due regard to the management of
the ongoing business of the Company) to diligently prepare and file with the
Commission a registration statement and such amendments and supplements to said
registration statement and the prospectus used in connection therewith as may be
necessary to keep said registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale of securities covered
by said registration statement for the lesser of: (i) 180 days or (ii) the
period necessary to complete the proposed public offering;
(b) Furnish to each selling Investor such copies of each
preliminary and final prospectus and such other documents as such Investor may
reasonably request to facilitate the public offering of its Registrable
Securities;
(c) Enter into any reasonable underwriting agreement required
by the proposed underwriter for the selling Investors, if any;
(d) Use its best efforts to register or qualify the
Registrable Securities covered by said registration statement under the
securities or "blue-sky" laws of such jurisdictions as any selling Investors may
reasonably request, provided that the Company shall not be required to register
or qualify the Registrable Securities in any jurisdictions which require it to
qualify to do business or subject itself to general service of process therein;
(e) Immediately notify each selling Investor, at any time when
a prospectus relating to its or his Registrable Securities is required to be
delivered under the Securities Act, of the happening of any event as a result of
which such prospectus contains an untrue statement of a material fact or omits
any material fact necessary to make the statements therein not misleading, and,
at the request of any such selling Investor, prepare a supplement
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or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading;
(f) Cause all such Registrable Securities to be listed on each
securities exchange or quoted in each quotation system on which similar
securities issued by the Company are then listed or quoted; and
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to each selling Investor, in each case as soon as practicable, but not later
than 45 days after the close of the period covered thereby (or 90 days in case
the period covered corresponds to a fiscal year of the Company), an earnings
statement of the Company which will satisfy the provisions of Section ll(a) of
the Securities Act.
Section 2.06. Indemnification: Contribution.
(a) Incident to any registration statement referred to in this
Article II, and subject to applicable law, the Company will, subject to the
terms of the Intercreditor and Subordination Agreement, indemnify and hold
harmless each underwriter, each Investor who holds any Registrable Securities
(including its respective directors or partners, officers, employees and agents)
so registered, and each person who controls any of them within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
Act"), from and against any and all losses, claims, damages, expenses and
liabilities, joint or several (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are based
on (i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement (including any related preliminary or
definitive prospectus, or any amendment or supplement to such registration
statement or prospectus), (ii) any omission or alleged omission to state in such
document a material fact required to be stated in it or necessary to make the
statements in it not misleading, or (iii) any violation by the Company of the
Securities Act, any state securities or "blue sky" laws or any rule or
regulation thereunder in connection with such registration, provided, however,
that the Company will not be liable to the extent that such loss, claim, damage,
expense or liability arises from and is based on an untrue statement or omission
or alleged untrue statement or omission made in reliance on and in conformity
with information furnished in writing to the Company by such underwriter,
Investor or controlling person expressly for use in such registration statement.
With respect to such untrue statement or omission or alleged untrue statement or
omission in the information furnished in writing to the Company by such Investor
expressly for use in such registration statement, such Investor will indemnify
and hold harmless each underwriter, the Company (including its directors,
officers, employees and agents), each other Investor
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holding Registrable Securities (including its respective directors or partners,
officers, employees and agents) so registered, and each person who controls any
of them within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages, expenses
and liabilities, joint or several, to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise to the same extent
provided in the immediately preceding sentence. In no event, however, shall the
liability of an Investor for indemnification under this Section 2.06(a) exceed
the lesser of (i) that proportion of the total of such losses, claims, damages
or liabilities indemnified against equal to the proportion of the total
Registrable Securities sold under such registration statement which is being
sold by such Investor or (ii) the proceeds received by such Investor from its
sale of Registrable Securities under such registration statement.
(b) If the indemnification provided for in Section 2.06(a)
above for any reason is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any losses, claims, damages,
expenses or liabilities referred to therein, then each indemnifying party under
this Section 2.06, in lieu of indemnifying such indemnified party thereunder,
shall, subject to the terms of the Subordination Agreement, contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the other
selling Investors and the underwriters from the offering of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the other selling Investors and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
selling Investors and the underwriters shall be deemed to be in the same
respective proportions as the net proceeds from the offering (before deducting
expenses) received by the Company and the selling Investors and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the Company,
the selling Investors and the underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the selling Investors or the underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Investors, and the underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 2.06(b) were determined by pro rata or per
capita allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. In no event, however, shall an Investor be required to contribute any
amount under this Section 2.06(b) in excess of the lesser of (i) that proportion
of the total of such losses, claims, damages or liabilities indemnified against
equal to the proportion of the total Registrable Securities sold under such
registration statement which is being sold by such Investor or (ii) the proceeds
received by such Investor from its sale of Registrable Securities under such
registration statement. No
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person found guilty of fraudulent misrepresentation (within the meaning of
Section 9(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(c) The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in this
Section 2.06 shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim. The
indemnification and contribution provided for in this Section 2.06 will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified parties or any director or partner, officer, employee, agent or
controlling person of the indemnified parties.
Section 2.07. Rule 144 Requirements. If the Company becomes subject to
the reporting requirements of either Section 13 or 15(d) of the Exchange Act,
the Company will use its best efforts to file with the Commission such
information as the Commission may require under either of said Sections; and in
such event, the Company shall use its best efforts to take all action as may be
required as a condition to the availability of Rule 144 under the Securities Act
(or any successor or similar exemptive rules hereafter in effect). The Company
shall furnish to any Investor upon request a written statement executed by the
Company as to the steps it has taken to comply with the current public
information requirement of Rule 144 or such successor rules.
Section 2.08. Market Stand-off. Each Investor and Management
Stockholder: (a) agrees, if requested by the Company and the managing
underwriter(s) for the Company's initial public offering or any offering in
which Registrable Securities are permitted to be included hereunder, not to sell
or otherwise transfer or dispose of any Registrable Securities held by it for up
to 180 days following the effective date of the registration statement relating
to such offering; and (b) acknowledges that the Company may impose stop transfer
restrictions on any such Registrable Securities held by such Investor or
Management Stockholder as a means of enforcing the provisions hereof regardless
of whether such Person executes a "lock-up" agreement reflecting the terms
hereof.
Section 2.09. Transfer of Registration Rights. The registration rights
and related obligations under this Article II of the Investors with respect to
their Registrable Securities may only be assigned to an affiliate or a
transferee of all of the Warrants and Registrable Securities held by the
transferring Investor and upon such transfer the relevant transferee shall be
deemed to be included within the definition of an "Investor" for purposes of
this Article II. Any transferring Investor shall notify the Company at the time
of such transfer.
ARTICLE III. MANAGEMENT STOCKHOLDER AND INVESTOR COVENANTS.
Until the Company shall successfully complete a Qualified Public
Offering (defined below), each of the Management Stockholders shall comply with
the covenants described in Sections 3.01, 3.02 and 3.03 and each of the
Investors shall comply with the covenants
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described in Section 3.04 during the period that any of the Notes, Warrants or
Registrable Securities remain outstanding. The Company shall ensure that the
stock certificates held by the Management Stockholders and their Permitted
Transferees and the Warrant certificates and any stock certificates held by the
Investors (as defined below) are properly legended to reference these
restrictions on transfer. For purposes of this Agreement, a "Qualified Public
Offering" shall mean the closing of the first underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock to the public in which the proceeds
received by the Company, net of underwriting discounts and commissions, equal or
exceed $15,000,000 at a per share sale price to the public which reflects a
market capitalization of no less than $100 million on a fully-diluted basis.
Section 3.01. Prohibited and Permitted Transfers;Definitions.
(a) From and after the date hereof, none of the Management
Stockholders shall sell, assign, transfer, pledge, hypothecate, mortgage,
encumber or dispose of all or any of his or her Shares (as defined below) except
to the Senior Lender pursuant to the terms of the Loan Documents (as defined in
the Senior Loan Agreement) or in compliance with the terms of this Article III.
Notwithstanding the foregoing, Shares may be transferred without complying with
Section 3.02 and 3.03 hereof as set forth in the following clauses (individuals
receiving Shares from the Management Stockholders pursuant to any of the
following permitted transfers are collectively referred to as the "Permitted
Transferees"): (i) by way of gift to their respective spouses or to their
siblings or lineal descendants or ancestors or to any qualified trust under Code
Section 1361(c)(2) for the benefit of any one or more of the foregoing or to an
unleveraged partnership, limited liability company or corporation in which all
of the equity interests are beneficially owned by any one or more of the
foregoing; provided, that any such Permitted Transferee shall agree in writing
with the Investors, as a condition to such transfer, to be bound by all of the
provisions of this Agreement with respect to such Shares to the same extent as
the Management Stockholders and provided, further, that such transfers in the
aggregate represent less than 5% of the Shares held by the applicable Management
Stockholder; (ii) by any sale or disposition of Shares pursuant to a registered
public offering in which the Investors have rights to participate under Article
II hereof; (iii) any transfer, disposition, assignment, sale or hypothecation of
Management Shares pursuant to a merger or consolidation of the Company which is
permitted under the Securities Purchase Agreement; (iv) any transfer by will or
laws of descent upon the death of a Management Stockholder; provided, that any
such Permitted Transferee shall agree in writing with the Investors, as a
condition to such transfer, to be bound by all of the provisions of this
Agreement with respect to such Shares to the same extent as the Management
Stockholders; (v) by any sale or disposition of Shares in connection with the
exercise of the Senior Lender's remedies under the Senior Loan Agreement
(including sales or dispositions of the Shares to third parties or subsequent
sales by such third parties); or (vi) by any sale, disposition or other transfer
of Shares from Hughes to Liggins, provided, that Liggins shall agree in writing
with the Investors as a condition to such transfer, to be bound by all of the
terms of this Agreement with respect to such Shares to the same extent as
Hughes. Notwithstanding the foregoing, if the Company is required to continue to
qualify as an S corporation under the Securities Purchase Agreement, the
transferee (excluding however
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transferees from the sale or disposition of the Shares pursuant to the rights of
the Senior Lender under the Senior Loan Agreement and the Subordination
Agreement) must be a permitted stockholder in an S corporation and the transfer
must not otherwise disqualify the Company as an S corporation under Code
Sections 1361 et seq.
(b) "Shares" shall mean and include: (i) with respect to the
Investors, all Warrants, ROFR Warrants, if any, and all shares of Registrable
Securities or Non-Voting Common Stock for which the Warrants and ROFR Warrants,
if any, are ultimately exercisable; and (ii) with respect to the Management
Stockholders (which term, for the purpose of this Article III shall be deemed to
include all Permitted Transferees of the Management Stockholders), all shares of
Common Stock and any option or other securities exercisable or convertible into
Common Stock and/or other capital stock of the Company now owned or hereafter
acquired by any of the Management Stockholders or their Permitted Transferees
and, in each case together with any securities acquired as a result of any
conversion, stock split, stock dividend, recapitalization or the like. For all
purposes of this Article III, options and other securities convertible into or
exchangeable for capital stock shall be deemed to be equivalent to the number of
shares of capital stock which they may be exercised for or converted into, as of
the applicable date, with appropriate adjustments to reflect applicable exercise
prices, if any.
Section 3.02. Right of First Refusal.
(a) If at any time any of the Management Stockholders desires
to sell or otherwise transfer all or any part of his or her Shares pursuant to a
bona fide offer from a third party (the "Proposed Transferee") such Management
Stockholders shall submit a written offer (the "offer") to sell such Shares (the
"offered Shares") to the Investors on terms and conditions, including price, not
less favorable than those on which such Management Stockholders proposed to sell
such offered Shares to the Proposed Transferee; provided, however, that the
Management Stockholder(s) shall not, so long as the Company is required to
qualify as an S corporation under the Securities Purchase Agreement, be
permitted to accept or entertain any offer from a Person that is not a permitted
stockholder of an S corporation or if the proposed transfer would otherwise
disqualify the Company as an S corporation for federal income tax purposes. The
offer shall be submitted to the Investors at least 45 days prior to the proposed
transfer and shall disclose the identity of the Proposed Transferee, the number
of offered Shares proposed to be sold, the total number of Shares owned by such
Management Stockholder(s), the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
offer shall further state that the Investors may purchase all, but not less than
all, of the offered Shares for the price and upon the other terms and
conditions, including deferred payment (if applicable), set forth therein and
shall also advise the Investors of their co-sale rights pursuant to Section 3.03
hereof; each Investor who desires to purchase any of the offered Shares shall
communicate in writing its election to purchase to the applicable Management
Stockholder(s), which communication shall state the number of offered Shares
that such Investor desires to purchase, and shall be given within 30 days of the
date on which notice of the offer is given. In the event that the Investors
elect to purchase an aggregate number of offered Shares that is greater than the
number of offered Shares, then each Investor will be
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deemed to have elected to purchase that number of offered Shares that is equal
to the total number of offered Shares multiplied by a fraction, the numerator of
which is the total number of offered Shares that such Investor elected to
purchase and the denominator of which is the total number of offered Shares that
all of the Investors electing to purchase offered Shares elected to purchase.
(b) Any communication of acceptance from the Investors shall,
when taken in conjunction with the offer and except as provided in Section
3.02(c) hereof, be deemed to constitute a valid, legally binding and enforceable
agreement for the sale and purchase of such offered Shares. Sales of the offered
Shares to be sold to the Investors shall be made at the offices of the Company
within 60 days after the offer was first made. Such sale shall be effected by
the applicable Management Stockholder's delivery of a certificate or
certificates evidencing the offered Shares to be sold, duly endorsed for
transfer against payment of the purchase price therefor; provided, however, that
if (i) the Company is a duly qualified Subchapter S corporation for federal
income tax purposes at the time of such transfer and (ii) Investors holding a
majority in outstanding principal amount of the Notes do not in writing
expressly allow such Subchapter S election to be terminated, the Management
Stockholder(s) shall endorse the certificate(s) evidencing the offered Shares to
the Company in exchange for (i) promissory notes in the form of Exhibit A hereof
and in a principal amount equal to the purchase price for the offered Shares
(the "ROFR Notes"), and (ii) warrants ("ROFR Warrants") exercisable for Common
Stock equal in amount to the number of offered Shares and having a per share
exercise price equal to the purchase price of the offered Shares, which such
ROFR Notes and ROFR Warrants, upon payment by the Investors to the applicable
Management Stockholder(s) of the purchase price therefor, shall then be
delivered to the Investors in lieu of the Offered Shares.
(c) If the Investors collectively do not elect to purchase all
of the Offered Shares, none of the Offered Shares shall be sold to or purchased
by the Investors, and the Offered Shares may be sold by the applicable
Management Stockholder(s) at any time within the 90-day period after the
expiration of all applicable periods referred to in Section 3.03(b) hereof. Any
such sale shall be to the Proposed Transferee(s), on terms and conditions,
including price, not more favorable to the Proposed Transferee(s) than those
specified in the offer and shall, in any event, be subject to Section 3.03
hereof. Any Offered Shares not sold within such 90-day period shall continue to
be subject to the requirements of this Section 3.02 and Section 3.03 hereof. If
offered Shares are sold pursuant to this Section 3.02 to any person who is not a
party to this Agreement, the offered Shares so sold shall no longer be subject
to the restrictions or benefits imposed by this Section 3.02.
Section 3.03. Right of Participation in Sales.
(a) If at any time any Management Stockholder(s) or his, her
or their Permitted Transferees desire to sell all or any part of the Shares
owned by them to any person other than to a Permitted Transferee or to the
Investors pursuant to Section 3.02 (such person or entity referred to herein as
a "Third Party Purchaser"), each Investor shall have the right to sell to the
Third Party Purchaser, as a condition to such sale by the applicable Management
Stockholder(s), at the same price per share and otherwise upon other terms and
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conditions that are in the aggregate the same as involved in such sale by such
Management Stockholder(s), up to such Investor's Pro Rata Share (as defined
below) of the total number of Shares proposed to be sold by such Management
Stockholder(s) and/or his, her or their Permitted Transferees (subject to
subsection (b) below). For purposes of this Section 3.03, the term "Pro Rata
Share" shall mean the percentage of all Common Equity that the Shares held by an
Investor then represent on a fully-diluted basis.
(b) At the time of the initial notice described in Section
3.02(a) above, any transferring Management Stockholder(s) shall also provide
each Investor with a calculation as to the number of Shares that may be sold by
them to the Third Party Purchaser pursuant to this Section 3.03. Each Investor
wishing to participate in any sale under this Section 3.03 shall notify the
transferring Management Stockholder(s) in writing within 30 days after the
giving of the notice described in Section 3.02(a). Except as provided in Section
3.03(d) below, no Shares may be purchased by the Third Party Purchaser from the
transferring Management Stockholder(s) unless the Third Party Purchaser
simultaneously purchases from the Investors all Shares which they have elected
to sell pursuant to this Section 3.03, with the sales to such Third Party
Purchaser to be consummated not prior to the expiration of all notice periods
described in this Section 3.03(b) and (in the case of the transferring
Management Stockholder(s)) not after the expiration of the 90-day period
described in Section 3.02(c).
(c) Any Shares sold to a Third Party Purchaser pursuant to
this Section 3.03 shall no longer be subject to the restrictions or benefits
imposed by this Section 3.03.
(d) If the Investors do not hold securities of the type being
offered under this Section 3.03 by the transferring Management Stockholder(s),
(i) the Investor shall have the right to sell such portion of either their
Warrants, their ROFR Warrants and ROFR Notes as a unit and/or Non-Voting Common
Stock as is equivalent to the number of shares of Common Stock (or equivalent
securities) which the Investors would otherwise have been entitled to sell under
this Section 3.03 to the Third Party Purchaser (with appropriate adjustments to
reflect the exercise price of such Warrants or ROFR Warrants, as the case may
be).
Section 3.04. New Investor Tag-Along Right. In the event that any of
the New Investors receives or makes a bona fide offer upon specific terms and
conditions for the transfer of any Notes, Warrants and/or Shares (the "Co-Sale
Securities") held by it or him to a third party which is exempt from
registration under the Securities Act and which is not made in connection with
an offering subject to Article II hereof (a "Transaction offer"), the New
Investor may, subject to the terms of the Subordination Agreement, transfer such
Co-Sale Securities pursuant to and in accordance with the following provisions
of this Section 3.04.
(a) Such New Investor shall cause the Transaction Offer to be
reduced to writing and shall notify the other New Investors in writing of its
wish to accept or effect the Transaction Offer and otherwise comply with the
provisions of this Section 3.04.
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(b) Each of the other New Investors shall have the right,
exercisable upon written notice to the selling New Investor within ten (10) days
after receipt of the notice referred to in clause (a) above, to participate in
the Transaction offer on the terms and conditions herein stated.
(c) Each of the other New Investors may sell all or any
portion of its applicable Co-Sale Securities as is equal to the product obtained
by multiplying (i) the aggregate amount of Co-Sale Securities covered by the
Transaction offer by (ii) a fraction, the numerator of which is the amount of
applicable Co-Sale Securities owned by such other New Investor and the
denominator of which is the amount of applicable Co-Sale Securities owned by all
of the New Investors.
(d) Each of the other New Investors may effect its
participation in any Transaction offer hereunder by delivery of title to the
relevant purchaser, or to the selling New Investor for transfer to the relevant
purchaser, of one or more certificates or promissory notes, as the case may be,
properly endorsed for transfer, representing the applicable Co-Sale Securities
it elects to sell therein; provided, however, that such relevant purchaser shall
not take possession of Co-Sale Securities which shall be subject to a Pledge
Agreement (as defined in the Senior Loan Agreement) until such Pledge Agreement
has been terminated or the Senior Lenders otherwise consent. At the time of
consummation of the Transaction offer, the relevant purchaser shall remit
directly to the other New Investors that portion of the sale proceeds to which
the other New Investors are entitled by reason of their participation therein.
ARTICLE IV. RIGHT TO PARTICIPATE IN SALES BY COMPANY OF ADDITIONAL
SECURITIES.
Section 4.01. Offer to Investors. The Company covenants and agrees that
it will not, except as contemplated by this Agreement or the Securities Purchase
Agreement, sell or issue any shares of capital stock of the Company or any
Subsidiary, or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for capital stock of the Company or
any Subsidiary, or options, warrants or rights carrying any rights to purchase
capital stock or convertible or exchangeable securities of the Company or any
Subsidiary or any other equity interests in the Company or any Subsidiary, other
than in connection with an initial public offering of the Company's Common
Stock, unless (i) the Company shall have received a bona fide arm's-length offer
to purchase such stock, bonds, certificates of indebtedness, debentures,
securities, options, warrants, rights or other equity interests from a third
party, and (ii) the Company first submits a written offer to the Investors
identifying the third party to whom such stock, bonds, certificates of
indebtedness, debentures, securities, options, warrants, rights or other equity
interests are proposed to be sold and the terms of the proposed sale, and
offering to the Investors the opportunity to purchase their proportionate share
of such securities on terms and conditions, including price, not less favorable
to the Investors than those on which the Company proposes to sell such
securities to the third party. Each Investor shall have the right to purchase
its Pro Rata Share (as defined in Section 3.03(a)) of such securities. The
Company's offer to the
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Investors shall remain open and irrevocable for a period of at least 45 days.
Any Investor may only transfer its right of participation under this Section
4.01 to a transferee of its Shares who (A) is an affiliate of such Investor
(including a partner of an Investor or a stockholder, partner or other investor
in such Investor which is an investment fund and who receives Investor Shares as
a distribution from such Investor) or (B) receives all of the Shares held by the
transferring Investor.
Section 4.02. Sale to Offeror. Any securities so offered to the
Investors which are not purchased pursuant to such offer may be sold by the
Company to the third party originally named in the offer to the Investors on
terms and conditions, including price, not more favorable to the third party
than those set forth in such offer at any time within 60 days following the date
of such offer, but may not be sold to any other person or after such 60-day
period without renewed compliance with this Article IV.
Section 4.03. Right to Participate Inapplicable. The right of
participation granted in this Article IV shall not apply to: (i) issuances of
options or Common Stock to employees of the Company which are permitted under
the Securities Purchase Agreement; (ii) the issuance of Registrable Securities
or Non-Voting Common Stock upon the exercise of any Warrants or ROFR Warrants
held by the Investors, the issuance of Common Stock upon any conversion of
Non-Voting Common Stock and the issuance of Non-Voting Common Stock upon any
conversion of Common Stock; (iii) issuances of securities in a registered public
offering; (iv) issuances of securities upon a stock split or stock dividend with
respect to the Common Equity; and (v) sales or transfers of any shares of
capital stock of the Company or any Subsidiary or options, warrants, rights or
other securities of the Company or any Subsidiary by the Senior Lender (or any
transferee, assignee or purchaser of or from the Senior Lender) pursuant to the
exercise of its remedies in connection with a foreclosure under the Loan
Documents (as defined in the Senior Loan Agreement).
ARTICLE V. PUT AND CALL RIGHTS.
Section 5.01. Investors' Put Right. Subject to the provisions of the
Subordination Agreement, Investors holding a majority in outstanding principal
amount of the Notes may elect, upon 120 days prior written notice, to require
the Company to purchase (subject to the provisions of the Subordination
Agreement) all outstanding Warrants, Registrable Securities, Non-Voting Common
Stock, ROFR Warrants and ROFR Notes held by all of the Investors (collectively,
"Put/Call Securities") pursuant to this Article V (the "Put") at any time on or
after (i) the payment in full or acceleration of the Notes, (ii) the merger or
consolidation of the Company (other than with a Subsidiary or as permitted under
the Securities Purchase Agreement), or (iii) the sale of all or substantially
all of the capital stock or assets of the Company or any Subsidiary (other than
to a Subsidiary or as permitted under the Securities Purchase Agreement). The
Company agrees to give the Investors at least 180 days' prior written notice of
any of the foregoing events. Each Investor may also elect to Put their Put/Call
securities to the Company on the Maturity Date upon 120 days prior written
notice to the Company. Investors whose Put/Call Securities are subject to a Put
hereunder shall be referred to as the "Put Investors." In connection with any
Put, all Put Investors shall be
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obligated to sell their Put/Call Securities to the Company on the terms set
forth in this Article V and, upon tender by the Company of the applicable
Put/Call Price (as defined in Section 5.04)(subject to the terms of the
Subordination Agreement) to each Put Investor, such Put Investor's Put/Call
Securities shall be deemed to no longer be outstanding and such Put Investor's
only right shall be to receive the Put/Call Price in accordance with the terms
hereof; provided, however, that the failure of any Put Investor(s) to transfer
its or their Put/Call Securities in accordance with the terms of this Section
5.01 shall not relieve the Company of its obligation to purchase the Put/Call
Securities tendered by all other Put Investors hereunder.
Section 5.02. Company Call Right.
(a) Exercise of Call Right. At the election of the Company,
the Company may repurchase all, but not less than all, of the Put/Call
Securities then outstanding at any time after the Maturity Date (a "Call"), so
long as: (i) the Investors do not have outstanding a request for a demand
registration under Section 2.02 hereof; and (ii) the Senior Debt and the Notes
shall have been repaid in full, together with all accrued but unpaid interest
thereon, on or prior to the Put/Call Closing (as defined below). If the Company
elects to repurchase the Put/Call Securities, it shall give written notice of
such election at least 90 days prior to the Put/Call Closing and all Put/Call
Securities shall be repurchased on the Put/Call Closing date specified in the
Company's notice for an aggregate cash purchase price equal to the Put/Call
Price. Each Investor shall receive at the Put/Call Closing the Put/Call Price
for their Put/Call Securities, taking into account the exercise price of any
Warrants held by such Investor.
(b) Recapture. From and after the Put/Call Closing, unless
there shall have been a default in payment or tender by the Company of the
Put/Call Price, all rights of the holders with respect to such repurchased
Put/Call Securities (except the right to receive the Put/Call Price in
accordance with the terms hereof upon surrender of their certificates) shall
cease and such shares shall not thereafter be transferred on the books of the
Company or be deemed to be outstanding for any purpose whatsoever; provided,
however, that, with respect to this Section 5.02, each Investor shall, in the
event of an offering by the Company of equity securities or securities
convertible into or exchangeable for equity securities, a sale of all or any
substantial portion of the assets or outstanding capital stock of the Company or
any Subsidiary or a merger or consolidation of the Company or any Subsidiary
with or into another corporation or entity, in any such case occurring within
two years of the Put/Call Closing, be entitled upon the consummation of such
transaction to receive the excess of: (i) the consideration which such Investor
would have been entitled to receive on his, her or its Put/Call Securities had
they been outstanding on such date or, in the event of a securities offering,
been sold in such offering; over (ii) that portion of the Put/Call Price
previously received by such Investor.
Section 5.03. Put/Call Price. The purchase price for any Put/Call
Securities hereunder (the "Put/Call Price") shall be equal to the product of (x)
the number of Shares represented by such Put/Call Securities (with each unit of
ROFR Warrants and the corresponding principal amount of ROFR Notes constituting
one Share), multiplied by (y) the
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Per Share Net Equity Value of the Company reduced, in the case of the
Warrants and ROFR Warrants, by the per share exercise price therefor. The "Per
Share Net Equity Value" of the Company shall be the quotient of (a) the Net
Equity Value of the Company (as determined below) divided by (b) the total
number of outstanding shares of Common Equity (determined on a fully-diluted
basis and after giving effect to the exercise of any Warrants, ROFR Warrants or
other options for Common Equity and the conversion and exchange of any
securities convertible into or exchangeable for Common Equity). "Net Equity
Value" of the Company shall mean the aggregate of: (A) the fair market value of
the Company as determined below; plus (B) all accounts receivable, cash and cash
equivalents held by the Company as of the date of determination and the
aggregate exercise price of all outstanding Warrants, ROFR Warrants or options
for Common Equity; reduced by (C) the aggregate of all Indebtedness for borrowed
money and current liabilities of the Company required to be included on a
balance sheet in accordance with generally accepted accounting principles
(excluding the current maturities of Indebtedness). In connection with a Put or
Call occurring in connection with a sale or transfer to a third party of all or
substantially all of the Common Equity in, or the assets of, the Company and the
Subsidiaries, the fair market value of the Company shall be the aggregate amount
of consideration paid to the Company, the Management Stockholders and any other
holders of outstanding capital stock of the Company, including any payments made
to the Management Stockholders under any consulting, noncompetition or
employment agreements. Otherwise, the applicable Investors as a group (with
decision-making power belonging to Investors holding a majority in outstanding
principal amount of the Notes held by all Investors, in the case of a Call, and
the Put Investors in the case of a Put) and the Company shall in good faith seek
to reach agreement as to the fair market value of the Company at least sixty
(60) days prior to any Put/Call Closing. If the applicable Investors and the
Company are unable to reach agreement within such time frame, the fair market
value of the Company shall be determined by an appraisal process and the Company
and the applicable Investors as a group (with decision-making power belonging to
Investors holding a majority in outstanding principal amount of the Notes held
by all Investors, in the case of a Call, and the Put Investors in the case of a
Put) shall, within seven (7) days thereafter, each select an independent,
non-affiliated investment banking firm of recognized national standing or a
brokerage firm having not less than five (5) years of experience in the radio
broadcasting industry (each an "Independent Appraiser"). Within twenty (20) days
after selection, each Independent Appraiser shall prepare and deliver to the
Company and the applicable Investors an appraisal of the fair market value of
the Company in accordance with the terms set forth below and, in the absence of
manifest error or fraud and so long as the lower appraisal is no less than 90%
of the higher appraisal, the two appraisals shall be averaged and the result
shall be the fair market value of the Company. If the lower appraisal is less
than 90% of the higher appraisal, the two Independent Appraisers shall, within
seven (7) days thereafter, choose a third Independent Appraiser who shall
deliver its own appraisal of the fair market value of the Company within twenty
(20) days thereafter. The two appraisals that are closest in value shall then be
averaged and the result shall, in the absence of manifest error or fraud, be the
fair market value of the Company (unless the third appraisal is equal to the
average of the first two appraisals, in which case it shall be the fair market
value of the Company). All appraisals hereunder will appraise the fair market
value of the Company (i) as a going concern and valued as if debt-free and
without regard to the illiquidity of the Company's
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capital stock or to any discount attributable to the minority interest
represented by the Put/Call Securities, if applicable, or other considerations
relating to the nonpublic status of the Company's securities, (ii) on the basis
of what a willing buyer, with recourse to any necessary financing, would pay to
a willing seller who is under no compunction to sell, (iii) assuming a form of
transaction which will maximize such value and (iv) without diminution for any
taxes that might otherwise be viewed by the Company or any Securityholder in
connection with any hypothetical sale of the Common Equity in, or the assets of,
the Company and the Subsidiaries. All costs of any appraisals shall be borne by
the Company. If the appraisal process has not been completed by the Put/Call
Closing date or the Company otherwise fails to meet its Put or Call obligations
by such date, the applicable Investors shall continue to have all of the rights
and benefits of this Agreement until the Net Equity Value has been determined
and the Put/Call Securities have been redeemed in full; provided, however, that
the applicable Investors shall be entitled to receive interest on the Put/Call
Price that is ultimately determined hereunder from the Put/Call Closing date at
the rate of fifteen percent (15%) per annum, compounded annually.
Section 5.04. Put/Call Closing. The closing for a Put or a Call (the
"Put/Call Closing") shall take place on the date set for such Put or Call in the
notice referred to in Section 5.01 or 5.02 above, as the case may be, at the
offices of the Company or on such other date and at such other place as the
parties shall mutually agree. At the Put/Call Closing, the Company shall pay to
each Investor (or, in the case of a Put, each Put Investor) the Put/Call Price
for its Put/Call Securities by wire transfer or in other immediately available
funds upon delivery by such Investor of the certificates representing the
Put/Call Securities held by it, or, in lieu thereof, an indemnification and loss
certificate in form and substance reasonably satisfactory to the Company. In
connection with a Put or Call, each Investor (or, in the case of a Put, each Put
Investor) shall transfer its Put/Call Securities to the Company without
representation or recourse other than as to its title to such Put/Call
Securities, which title shall be free and clear of any and all claims, liens and
encumbrances created or incurred by such Investor. Prior to any Put/Call
Closing, the Company shall use reasonable efforts to obtain any financing
approvals, consents or waivers necessary or desirable for the consummation of
such Put or Call and shall provide the applicable Investors with evidence that
any such financing approvals, consents or waivers have been obtained.
ARTICLE VI. INVESTORS GO-ALONG RIGHT.
Investors holding a majority in outstanding principal amount of the
Notes shall have the option, exercisable upon 30 days' prior written notice to
the Company and all the other Securityholders and subject to the terms of the
Subordination Agreement, to cause the sale or refinancing of either the entire
business and assets of the Company or all of the Common Stock, Warrants and
other equity interests in the Company, upon the first to occur of the following:
(i) a breach by the Company of its obligations under Article V with respect to a
Put which has not been cured within 30 days after written notice thereof; (ii) a
breach by the Company of Section 10 of the Securities Purchase Agreement, and
(iii) any breach by the Company of its obligations under Section 2.O2 hereof
(the "Go-Along Right"); provided, however, that any sale of either the entire
business and assets of the Company or all of the
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Common Stock, Warrants and other equity interests in the Company to an Affiliate
of Investors holding a majority in outstanding principal amount of the Notes or
a majority in interest of the Warrants shall not be for less than ninety percent
(90%) of the Fair Market Value of the Company (as determined below). The
Go-Along Right granted hereunder includes the power and authority to negotiate
and consummate the sale of all or any substantial part of the assets of or
capital stock, partnership interests and/or other equity interests in the
Company and its Subsidiaries. By their execution hereof, each of the parties to
this Agreement hereby consents to the taking of any action by the Investors
exercising the Go-Along Right, including without limitation, the right to seek
to take control, or appoint a receiver, trustee, transferee or other official to
take control, of the Company and each Subsidiary (and/or the right to expand the
Board of Directors of the Company and each Subsidiary to up to nine (9)
Directors and appoint individuals to the vacancies created by such expansions)
solely for the purpose of effecting the Go-Along Right and to consummate the
transactions contemplated thereby, subject to necessary FCC approval, and agrees
to cooperate fully in the taking of any such action (including, without
limitation, the execution and delivery of agreements, assignments and other
instruments relating to such action and full cooperation and assistance in
obtaining third-party consents), and using its best efforts in connection
therewith, and hereby irrevocably appoints the Investors who exercise the
Go-Along Right and each of them as proxies and attorneys-in-fact with full power
and substitution, in order to accomplish such action, which power-of-attorney
shall be deemed to be coupled with an interest and shall be irrevocable. The
Go-Along Right shall not be deemed to constitute a de facto transfer of control
for FCC purposes and shall be subject to the requirements that (i) the Company
and/or its Subsidiaries obtain any necessary FCC approvals for the actions taken
hereunder and (ii) prior to or upon consummation of any sale or refinancing
hereunder the Company and its Subsidiaries repay in full the Senior Debt and the
Notes and that the Senior Loan Agreement shall have terminated prior to the
transfer of any assets of, or equity interest in, the Company and its
Subsidiaries, and shall be subject to the requirement that all express terms of
any such sale be equivalent with respect to all Securityholders (other than
differences reflecting the exercise price of the Warrants and the ROFR Warrants
and the fact that the Management Stockholders may be required to enter into a
reasonable noncompetition agreement subject to the payment of reasonable
compensation to them in exchange therefor).
For purposes of this Article VI, the Fair Market Value of the Company
shall be determined as follows:
Within ten (10) days of the delivery of the written notice to the
Company of the exercise of the Go-Along Right, Investors holding a
majority in outstanding principal amount of the Notes shall select an
independent, non-affiliated investment banking firm of recognized
national standing or a brokerage firm having not less than five (5)
years of experience in the radio broadcasting industry (the
"Appraiser"). Within twenty (20) days after selection, the Appraiser
shall prepare and deliver to the Company and the Investors an appraisal
of the Fair Market Value of the Company in accordance with the terms
set forth below and, in the absence of manifest error or fraud, the
appraisal shall be the Fair Market Value of the Company. Any appraisal
hereunder will appraise the Fair Market Value of the Company as a going
concern
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and valued as if debt-free on the basis of what a willing buyer, with
recourse to any necessary financing, would pay to a willing seller who
is under no compunction to sell. All costs of any appraisals shall be
borne by the Company.
ARTICLE VII. SPECIAL COVENANTS
So long as the Notes, Warrants or Shares issued upon exercise of the
Warrants are outstanding and subject to the terms of the Subordination
Agreement: (a) each of the Interested Parties (as such term is defined in the
Securities Purchase Agreement) will take any action which the Investors may
reasonably request in order to obtain and enjoy the full rights and benefits
granted to the Investors under this Agreement and the agreements contemplated
hereby, including, without limitation, the use of his, her or its best efforts,
consistent with the rules, regulations and policies of the FCC and any other
Regulatory Agencies, to obtain any necessary approvals for any action or
transaction contemplated by this Agreement or any agreement contemplated hereby,
for which such approval is then required or prudent, including, without
limitation, preparing, signing and filing, with the FCC or any other pertinent
Regulatory Agency or authority, any applications, notices, filings or reports
necessary or prudent for approval of any such actions or transactions; (b) none
of the Interested Parties will take any action to obstruct, impede or infringe
upon the Investors' enforcement of their rights, benefits and remedies under
this Agreement and any agreement contemplated hereby; (c) each of the Interested
Parties agrees to cooperate fully with any and all actions taken by the
Investors, including without limitation the full and complete cooperation and
assistance in all proceedings, correspondence and other communications before or
with the FCC, and any other state, local or other authority in connection with
obtaining the approvals referred to above, all using its best efforts; and (d)
each of the Interested Parties agrees to exercise its voting and consent rights
with respect to its shares of capital stock or partnership interests in the
Company and the Subsidiaries (i) to comply with their respective
representations, warranties, covenants and other obligations under this
Agreement and any agreement contemplated hereby and to not otherwise take any
action that would or could conflict with or impair the rights and benefits of
the Investors under this Agreement or any agreement contemplated hereby; and
(ii) to cooperate with, and use their respective best efforts to help
effectuate, any actions taken by the Investors to enforce their rights, benefits
and remedies hereunder, and under this Agreement and any agreement contemplated
hereby.
The Interested Parties hereto acknowledge that the foregoing provisions
are, inter alia, intended to ensure that, subject to the terms and provisions of
the Subordination Agreement, upon the occurrence of one of the events specified
in Article VI hereof, the Investors receive, to the fullest extent permitted by
applicable law and governmental policy (including, without limitation, the
rules, regulations and policies of the FCC), all rights necessary or desirable
to sell either the entire business and assets of the Company or all of the
Common Stock, Warrants and other equity interests in the Company as described in
Article VI hereof (including, without limitation, the FCC Licenses), and to
exercise all remedies available to them under this Agreement and the other
agreements contemplated hereunder, the Uniform Commercial Code of Massachusetts
or other applicable law. The Interested Parties also
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acknowledge and agree that the Investors have the right under this Agreement,
subject to the terms of the Subordination Agreement, to seek appointment of a
receiver, trustee, transferee or similar official to effect the transactions
contemplated by Article IV of this Agreement, including without limitation, the
transfer of the FCC Licenses, in connection with foreclosure or enforcement
proceedings, subject to necessary FCC approval, and that the Investors are
entitled to seek such relief and the Interested Parties agree not to object
thereto on any grounds other than that such action is expressly prohibited under
the Subordination Agreement. The Interested Parties further acknowledge and
agree that, in the event of changes in law or governmental policy occurring
subsequent to the date hereof that affect in any manner the Investors' rights as
described in Article VI, or the procedures necessary to enable the Investors to
obtain such rights, the parties hereto shall amend this Agreement and the
agreements contemplated hereunder, in such manner as the Investors shall
reasonably request, in order to provide such rights to the greatest extent
possible, consistent with then-applicable law and governmental policy.
Notwithstanding anything to the contrary contained herein, the
Investors will not take any action pursuant to this Warrantholders' Agreement or
the Warrants which would constitute or result in any change of control of the
Company or any of its Subsidiaries if such change of control would require,
under then existing law, the prior approval of any federal, state or local
governmental or regulatory authority (the "Authority") without first obtaining
such approval of such Authority.
ARTICLE VIII. ELECTION OF DIRECTORS OF THE COMPANY.
Section 8.01. Election of Directors of the Company and the Subsidiaries.
(a) With respect to each election or removal of members of the Board of
Directors of the Company and each of the Subsidiaries which is a corporation
(including, without limitation, any replacement members), whether at an annual
or special meeting of stockholders or by written consent of stockholders, each
of the parties to this Agreement (to the extent they have voting rights at any
time) and all transferees of their shares agrees to vote his, her or its shares
of capital stock of the Company ("Capital Stock") or shares of capital stock of
the Subsidiaries ("Subsidiary Capital Stock"), as the case may be (and any
shares of Capital Stock or Subsidiary Capital Stock, as the case may be, over
which he, she or it exercises voting control), and to take such other action
necessary so as to fix the number of members of the Boards of Directors of the
Company and each of the Subsidiaries at five (5) members and to elect and
thereafter continue in office as Directors of the Company and the Subsidiaries
one (1) individual designated for such directorship by ASDP (the "ASDP
Designee"), one (1) individual designated for such directorship by the Original
Investors holding a majority in interest of the Exchange Warrants (the "Original
Investor Designee") and three (3) individuals designated for such directorships
by a majority in interest of the Management Stockholders (the "Management
Designees"). Each of the parties hereto and/or their transferees, if any,
further agrees to vote such shares of Capital Stock or Subsidiary Capital Stock
for the removal of any such designee upon the request of the investor group
entitled to designate him or her and for the election of a substitute designee
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nominated by such investor group. The parties hereto acknowledge that the
initial ASDP Designee shall be Brian McNeill, the initial Original Investor
Designee shall be Terry Jones and the initial Management Designees shall be
Catherine L. Hughes, Alfred C. Liggins and an individual to be nominated later.
(b) In connection with the foregoing, the Management Stockholders and
the Company shall each grant to ASDP and the Original Investors an irrevocable
proxy in the form of Exhibit B hereto.
Section 8.02. Vacancies. Each of the parties to this Agreement and all
transferees of their shares agrees to vote the shares of Capital Stock or
Subsidiary Capital Stock described in Section 8.01 in such manner as shall be
necessary or appropriate so as to ensure that any vacancy occurring for any
reason in any one of the board positions held by designees of an investor group
as contemplated by Section 8.01 shall be filled only by an individual who (a) is
nominated directly or indirectly by such investor group and (b) causes the
requirements described in Section 8.01 relating to the composition of the
Company's and Subsidiaries' Boards of Directors to be satisfied.
ARTICLE IX. MISCELLANEOUS PROVISIONS.
Section 9.01. Survival of Representations and Covenants; No Third Party
Beneficiaries. Each of the parties hereto agree that each representation,
warranty, covenant and agreement made by each of them in this Agreement or in
any certificate, instrument or other document delivered pursuant to this
Agreement is material, shall be deemed to have been relied upon by the other
parties, shall remain operative and in full force and effect after the date
hereof regardless of any investigation or the acceptance of securities hereunder
and payment therefor. All such representations, warranties, covenants and
agreements shall be binding upon any successors and assigns of the relevant
parties.
This Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties hereto and their respective
successors and permitted assigns to the extent contemplated herein.
Section 9.02. Indemnification
(a) The Company shall, subject to the terms of the
Subordination Agreement, to the full extent permitted by law, and in addition to
any such rights which any Indemnified Party (as defined herein) may have
pursuant to statute, the Company's charter, the Company's by-laws, or otherwise,
indemnify and hold harmless each Investor (including its respective directors,
officers, partners, employees and agents, an "Indemnified Investor") and each
person (a "Controlling Person" and collectively with Indemnified Investors, the
"Indemnified Parties") who controls any of them within the meaning of Section 15
of the Securities Act, or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, expenses and liabilities, joint or several,
including any investigation, legal and other expenses incurred in connection
with the investigation, defense, settlement or appeal of, and any amount paid in
settlement of, any action, suit or proceeding or any claim
25
<PAGE>
asserted ("Losses" or "Loss"), to which they, or any of them, may become subject
by reason of their status as a securityholder, creditor, director, agent,
representative or controlling person of the Company, (including, without
limitation, any and all Losses under the Securities Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise,
which relates directly or indirectly to the registration, purchase, sale or
ownership of any securities of the Company or to any fiduciary obligation owed
with respect thereto); provided, however, that the Company will not be liable to
the extent that such Loss arises from and is based on an untrue statement or
omission or alleged untrue statement or omission in a registration statement or
prospectus which is made in reliance on and in conformity with written
information furnished to the Company in an instrument duly executed by or on
behalf of such Indemnified Party specifically stating that it is for use in the
preparation thereof. The indemnification and contribution provided for in this
Section 9.02 will remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Parties or any officer,
director, employee, agent or Controlling Person of the Indemnified Parties.
(b) If the indemnification provided for in Section 9.02(a)
above for any reason is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party in respect of any Losses referred to
therein, then the Company, in lieu of indemnifying such Indemnified Party
thereunder, shall, subject to the terms of the Subordination Agreement,
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Investors, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Investors in connection with the action or inaction which resulted in such
Losses, as well as any other relevant equitable considerations. In connection
with the registration of the Company's securities, the relative benefits
received by the Company and the Investors shall be deemed to be in the same
respective proportions that the net proceeds from the offering (before deducting
expenses) received by the Company and the Investors, in each case as set forth
in the table on the cover page of the applicable prospectus, bear to the
aggregate public offering price of the securities so offered. The relative fault
of the Company and the Investors shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Investors and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to this Section 9.02(b) were determined
by pro rata or per capita allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. In connection with the registration of the
Company's securities, in no event shall an Investor be required to contribute
any amount under this Section 9.02(b) in excess of the lesser of (i) that
proportion of the total of such Losses indemnified against equal to the
proportion of the total securities sold under such registration statement which
is being sold by such Investor or (ii) the
26
<PAGE>
proceeds received by such Investor from its sale of securities under such
registration statement. No person found guilty of fraudulent misrepresentation
(within the meaning of Section ll(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
Section 9.03. Amendment and Waiver. Any party may waive any provision
hereof intended for its benefit in writing. No failure or delay on the part of
any party hereto in exercising any right, power or remedy hereunder shall
operate as a waiver thereof. The remedies provided for herein are cumulative and
are not exclusive of any remedies that may be available to any party hereto at
law or in equity or otherwise. Subject to the terms of the Subordination
Agreement, this Agreement may be amended with the prior written consent of the
Company, and if required pursuant to the terms of the Subordination Agreement,
the Senior Lender (until payment in full of the Senior Debt and termination of
the Senior Loan Agreement), a majority in interest of the Management
Stockholders and the holders of a majority in outstanding principal amount of
the Notes, in which event such amendment shall be binding on all parties hereto;
provided, however, that if such amendment would amend any provision requiring a
consent or approval of the Investors, such amendment shall require the consent
of Investors holding that percentage in outstanding principal amount of the
Notes required pursuant to the provision to be amended; and provided further,
that if such amendment would have a disproportionately negative impact on any
party hereto, such amendment shall require the consent of such party.
With respect to any action hereunder requiring the consent or approval
of the Investors, if the outstanding principal amount of the Notes has been paid
in full, such action shall then require the consent or approval of Investors
that held, immediately prior to such payment, at least that percentage of the
outstanding principal amount of the Notes that is otherwise required to secure
the consent or approval of such action under the terms of this Agreement.
Section 9.04. Intercreditor Matters. The Investors hereby acknowledge
that their rights to receive any payments hereunder are, pursuant to the terms
of the Subordination Agreement, subordinate in right of payment to the
Indebtedness of the Company to the Senior Lender under the Senior Loan
Agreement. In addition, in the event of any conflict between any term or
provision of this Agreement and any term or provision of the Subordination
Agreement, the term or provision of the Subordination Agreement will control and
govern.
Section 9.05. Notices. All notices and other communications provided
for herein shall be in writing and shall be deemed to have been duly given (a)
if delivered personally or (b) if sent by telex or telecopier, registered or
certified mail (return receipt requested) with postage prepaid, or by courier
guaranteeing next day delivery, in each case to the party to whom it is directed
at the following addresses (or at such other address for any party as shall be
specified by notice given in accordance with the provisions hereof, provided
that notices of a change of address shall be effective only upon receipt
thereof). Notices delivered personally shall be effective on the day so
delivered, notices sent by registered or certified mail shall be effective three
days after mailing, notices sent by telex shall be effective when
27
<PAGE>
answered back, notices sent by telecopier shall be effective when receipt is
acknowledged and notices sent by courier guaranteeing next day delivery shall be
effective on the earlier of the second business day after timely delivery to the
courier or the day of actual delivery by the courier:
(a) if to the New Investors, at the following address:
(i) Alta Subordinated Debt Partners III, L.P.
Burr, Egan, Deleage & Co.
One Post office Square
Suite 3800
Boston, MA 02109
Attn: Brian McNeill
(ii) BancBoston Investments Inc.
100 Federal Street
32nd Floor
Boston, MA 02110
Attn: Sanford Anstey
(iii) Grant M. Wilson
201 Concord Street
Carlisle, MA 01741
with a copy to:
(i) Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
Attention: John J. Egan, Esq.
(ii) Ropes & Gray
One International Place
Boston, MA 02110
Attn: Winthrop G. Minot
(b) if to the Management Stockholders, the Company or the
Subsidiaries, at the following address:
Radio One, Inc.
100 St. Paul Street
Baltimore, Maryland 21202
Attn: Alfred C. Liggins and Catherine L. Hughes
28
<PAGE>
with a copy to:
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue
Washington, DC 20006
Attention: James Parker, Esq.
(iii) if to the Original Investors, to the address set forth
next to their respective names on Schedule B hereto.
Section 9.06. Headings. The Article and Section headings used or
contained in this Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
Section 9.07. Gender. As used herein, the masculine, feminine or neuter
gender, and the singular or plural number, shall be deemed to be or to include
the other genders or number, as the case may be, whenever the context so
indicates or requires.
Section 9.08. Counterparts. This Agreement may be executed in one or
more counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall be deemed to constitute one and the same agreement.
Section 9.09. Remedies: Severability. It is specifically understood and
agreed that any breach of the provisions of this Agreement by any Person subject
hereto will result in irreparable injury to the other parties hereto, that the
remedy at law alone will be an inadequate remedy for such breach, and that, in
addition to any other legal or equitable remedies which they may have, such
other parties may enforce their respective rights by actions for specific
performance (to the extent permitted by law).
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
Section 9.10. Entire Agreement. This Agreement, together with the
Securities Purchase Agreement, the Subordination Agreement and the Exchange
Agreement and other agreements contemplated hereby and thereby, is intended by
the parties as a final expression of their agreement and intended to be the
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
This Agreement, the Securities Purchase Agreement, the Subordination Agreement,
the Exchange Agreement and the other agreements contemplated hereby and thereby
(including the exhibits hereto and thereto) supersede all prior agreements and
understandings between the parties with respect to such subject matter,
including without limitation those
29
<PAGE>
agreements listed on Appendix B to the Securities Purchase Agreement, all
related agreements and any other agreement entered into among (i) any of the
Company, the Subsidiaries or the Managing Stockholders and (ii) the Original
Investors or any original Investor.
Section 9.11. Governing Law: Jurisdiction: Venue. THIS AGREEMENT SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. EACH OF THE PARTIES HERETO
HEREBY REPRESENTS, WARRANTS AND AGREES THAT THE NEGOTIATION OF THIS AGREEMENT
AND ALL OTHER PRINCIPAL TRANSACTIONS BETWEEN THE PARTIES HERETO HAVE TAKEN PLACE
IN THE COMMONWEALTH OF MASSACHUSETTS. EACH OF THE PARTIES HERETO HEREBY
ACKNOWLEDGES THAT HE, SHE OR IT HAS CAREFULLY REVIEWED AND UNDERSTANDS THE TERMS
OF THIS AGREEMENT, HAS OBTAINED AND CONSIDERED THE ADVICE OF COUNSEL WITH
RESPECT TO SUCH TERMS AND HAS HAD AN OPPORTUNITY TO FULLY NEGOTIATE SUCH TERMS.
Each party hereto hereby agrees that the state and federal courts of the
Commonwealth of Massachusetts or, at the option of the Investors, as
appropriate, any other court in which the Investors, as appropriate, shall
initiate legal or equitable proceedings, to the extent such court otherwise has
jurisdiction, shall have jurisdiction to hear and determine any claims or
disputes between any of the parties hereto pertaining directly or indirectly to
this agreement and all documents, instruments and agreements executed pursuant
hereto, or to any matter arising therefrom (unless otherwise expressly provided
for therein). To the extent permitted by law, each party hereto hereby expressly
submits and consents in advance to such jurisdiction in any action or proceeding
commenced by any party hereto in any of such courts, and agrees that service of
such summons and complaint or other process or papers may be made by registered
or certified mail addressed to such other party or parties hereto at the address
to which notices are to be sent pursuant to this agreement. Each party hereto
waives any claim that Boston, Massachusetts is an inconvenient forum or an
improper forum based on lack of venue. To the extent permitted by law, should
any party hereto, after being so served, fail to appear or answer to any
summons, complaint, or process or papers so served within 30 days after the
mailing thereof, such party shall be deemed in default and an order and/or
judgment may be entered by the other party or parties to such actions, as
appropriate, against such party, as demanded or prayed for in such summons,
complaint, process or papers. The exclusive choice of forum set forth in this
Section 9.11 shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action to enforce the same in any
other appropriate jurisdiction.
Section 9.12. Term. This Agreement shall remain in effect so long as
any of the Investors hold Warrants or Registrable Securities; provided, however,
that the provisions of Articles III, IV and VIII shall terminate upon the
closing of a Qualified Public offering by the Company; and, provided, further,
that the provisions of Articles VIII hereof shall, in any event, terminate on
the tenth anniversary of the date hereof.
30
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
--------
RADIO ONE, INC.
By: /s/ Alfred C. Liggins
----------------------------------------
Name: Alfred C Liggins
Title: President
SUBSIDIARIES:
-------------
RADIO ONE OF MARYLAND, INC.
By: /s/ Alfred C. Liggins
----------------------------------------
Name: Alfred C. Liggins
Title: President
RADIO ONE LICENSE, INC.
By: /s/ Alfred C. Liggins
----------------------------------------
Name: Alfred C. Liggins
Title: President
RADIO ONE OF MARYLAND LICENSE, INC.
By: /s/ Alfred C. Liggins
----------------------------------------
Name: Alfred C. Liggins
Title: President
S-1
<PAGE>
MANAGEMENT STOCKHOLDERS:
------------------------
/s/ Alfred C. Liggins
---------------------------------------------
Alfred C. Liggins, individually
/s/ Catherine L. Hughes
---------------------------------------------
Catherine L. Hughes, individually
Jerry A. Moore III
---------------------------------------------
Jerry A. Moore III, individually
NEW INVESTORS:
--------------
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt
Management III, L.P., its
General Partner
By: /s/ Brian W. McNeill
----------------------------------------
Name: Brian W. McNeill
Title: General Partner
BANCBOSTON INVESTMENTS INC.
By: /s/ Lars A. Swanson
----------------------------------------
Name: Lars A. Swanson
Title: Assistant Vice President
/s/ Grant M. Wilson
---------------------------------------------
Grant M. Wilson, individually
S-2
<PAGE>
ORIGINAL INVESTORS:
-------------------
SYNCOM CAPITAL CORPORATION
By: /s/ Terry L. Jones
----------------------------------------
Name: Terry L. Jones
Title: President
ALLIANCE ENTERPRISE CORPORATION
By: /s/ Divakar R. Kamath
----------------------------------------
Name: Divakar R. Kamath
Title: Exec. V.P.
GREATER PHILADELPHIA VENTURE
CAPITAL CORPORATION, INC.
By: /s/ Fred G. Choate
----------------------------------------
Name: Fred G. Choate
Title: Manager
OPPORTUNITY CAPITAL CORPORATION
By: /s/ J. Peter Thompson
----------------------------------------
Name: J. Peter Thompson
Title: President
CAPITAL DIMENSIONS VENTURE
FUND, INC.
By: /s/ Dean Pickerell
----------------------------------------
Name: Dean Pickerell
Title: President
S-3
<PAGE>
TSG VENTURES INC.
By: /s/ Scott R. Royster
----------------------------------------
Name: Scott R. Royster
Title: Principal
FULCRUM VENTURE CAPITAL
CORPORATION
By: /s/ Brian Argrett
----------------------------------------
Name: Brian Argrett
Title: President
S-4
<PAGE>
Schedule A
New Investors
-------------
New Investors
-------------
Alta Subordinated Debt III, L.P.
BancBoston Investments Inc.
Grant M. Wilson
SS-1
<PAGE>
Schedule B
Original Investors Address
------------------ -------
Syncom Capital Corporation 8401 Colesville Road #300
Silver Spring, MD 20910
Attention: Terry L. Jones
Alliance Enterprise Corporation 12655 N. Central Expwy.
Suite 700
Dallas, TX 75243
Attention: Divakar Kamath
Greater Philadelphia Venture 351 E. Connestoga Road
Capital Corporation, Inc. Wayne, PA 19087
Attention: Fred Choate
Opportunity Capital Corporation 2201 Walnut Avenue, Suite 210
Freemont, CA 94538
Attention: J. Peter Thompson
Capital Dimensions Venture 2 Appletree Square #335
Fund, Inc. Minneapolis, MN 55425-1637
Attention: Dean Pickerell
TSG Ventures Inc. 1055 Washington Blvd., 10th Floor
Stamford, CT 06901
Attention: Scott R. Royster
Fulcrum Venture Capital Corporation 300 Corporate Point
Suite 380
Culver City, CA 90230
Attention: Brian E. Argrett
SS-2
<PAGE>
Schedule 1.02(a)
Capital Stock Held by Management Stockholders
---------------------------------------------
Preferred Stock Common Stock Options Warrants
--------------- ------------ ------- --------
Catherine L. Hughes -0- 75 -0- -0-
Alfred C. Liggins -0- 5 57.45/1/ -0-
Jerry A. Moore, III -0- 1 -0- -0-
- --------------------------------------
1 This does not include an option or restricted stock grant for up to 5.71
shares of Common Stock which may become exercisable or vested in the future.
SS-3
<PAGE>
Schedule l.02(c)
NONE.
-----
SS-4
<PAGE>
FIRST AMENDMENT TO THE
WARRANTHOLDERS' AGREEMENT
This First Amendment to the Warrantholders' Agreement (this
"Amendment") is made as of this 19th day of May, 1997, by and among Radio One,
Inc., a Delaware corporation (the "Company"), Radio One Licenses, Inc., a
Delaware corporation and the surviving corporation of the merger with Radio One
License LLC ("ROL"), Catherine L. Hughes, Alfred C. Liggins and Jerry A. Moore,
III (collectively, the "Management Stockholders"), the investors listed on the
signature pages hereto as Series B Preferred Investors (the "Series B Preferred
Investors"), and the investors listed on the signature pages hereto as Series A
Preferred Investors (the "Series A Preferred Investors") (the Series B Preferred
Investors and the Series A Preferred Investors being collectively referred to
herein as the "Investors" and each individually as an "Investor," and the
Investors and the Management Stockholders being collectively referred to herein
as the "Securityholders" and each individually as a "Securityholder").
W I T N E S S E T H
WHEREAS, the Company, the subsidiaries of the Company then existing,
the Management Stockholders and the Investors entered into a Securities Purchase
Agreement dated as of June 6, 1995 (the "Securities Purchase Agreement"),
pursuant to which (i) the Company sold and the Investors purchased from the
Company subordinated promissory notes due in the year 2003 in an aggregate
principal amount of $17,000,000 (the "Subordinated Notes"), and (ii) the Company
sold and the Series B Preferred Investors purchased from the Company warrants
(the "Original Warrants") for an aggregate of 50.93 shares of the Common Equity
of the Company on a fully-diluted basis;
WHEREAS, simultaneously with the execution of the Securities Purchase
Agreement, the Company and the Series A Preferred Investors entered into an
Exchange Agreement, dated as of June 6, 1995, pursuant to which the Series A
Preferred Investors exchanged all of their then existing warrants for $6,251,094
in cash and new warrants (the "Exchange Warrants") to purchase an aggregate of
up to 96.11 shares of the Common Equity of the Company on a fully-diluted basis;
WHEREAS, simultaneously with the execution of the Securities Purchase
Agreement, the Company, the subsidiaries of the Company then existing, the
Management Stockholders and the Investors entered into a Warrantholders'
Agreement, dated as of June 6, 1995 (the "Warrantholders' Agreement"), to govern
the rights connected to the Original Warrants and Exchange Warrants;
WHEREAS, simultaneously with the Closing, the Company will issue 12%
Senior Subordinated Notes due 2004 (the "Senior Subordinated Notes") to certain
investors pursuant to an offering under Rule 144A of the Securities Act, the
gross proceeds of which will be approximately $75,000,000 (the "Senior
Subordinated Debt Financing");
1
<PAGE>
WHEREAS, as of the date hereof, the Company, ROL, the Management
Stockholders and the Investors have entered into a Preferred Stockholders'
Agreement (the "Preferred Stockholders' Agreement"), pursuant to which, and as a
necessary condition to the Senior Subordinated Debt Financing: (i) the Series A
Preferred Investors will exchange all of their Subordinated Notes (including all
accrued but unpaid interest thereon) for the number of shares of Series A 15%
Senior Cumulative Exchangeable Redeemable Preferred Stock of the Company (the
"Series A Preferred Stock") listed on Schedule A to the Preferred Stockholders'
Agreement; and (ii) the Series B Preferred Investors will exchange all of their
Subordinated Notes (including all accrued but unpaid interest thereon) for the
number of shares of Series B 15% Senior Cumulative Exchangeable Redeemable
Preferred Stock of the Company (the "Series B Preferred Stock," and together
with the Series A Preferred Stock, the "Preferred Stock") listed on Schedule A
to the Preferred Stockholders' Agreement (the exchanges of Subordinated Notes
for Preferred Stock referred to in (i) and (ii) of this paragraph are
hereinafter collectively referred to as the "Exchanges"). The Preferred
Stockholders' Agreement generally provides for representations and warranties,
covenants and rights relating to all parties thereto which are substantially
similar to those provided for in the Securities Purchase Agreement;
WHEREAS, in connection with the Exchanges, (i) the Company will replace
the certificates held by the Series B Preferred Investors representing all of
their Original Warrants with amended and restated warrant certificates (the
"Series B Amended and Restated Warrants") in order to conform the Original
Warrants to reflect the transactions contemplated herein, and (ii) the Company
will similarly replace the certificates held by the Series A Preferred Investors
representing all of their Exchange Warrants with amended and restated warrant
certificates (the "Series A Amended and Restated Warrants," and, collectively
with the Series B Amended and Restated Warrants, the "Warrants") in order to
conform such Exchange Warrants to reflect the transactions contemplated herein;
and
WHEREAS, in connection with the Senior Subordinated Debt Financing and
the related Exchanges, the Company, ROL, the Management Stockholders and the
Investors now desire to amend the Warrantholders' Agreement as set forth herein,
and each party hereto agrees and is willing to amend the Warrantholders'
Agreement on the terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree to amend the Warrantholders' Agreement as follows:
1. Amendment to Certain Terms of the Warrantholders' Agreement. The
Warrantholders' Agreement is hereby amended as follows: (i) each reference
therein to the terms "Original Investor" and "Original Investors" shall be
deleted, and in their place shall be inserted the terms "Series A Preferred
Investor" and "Series A Preferred Investors," respectively; (ii) each reference
therein to the terms "New Investor" and "New Investors"
2
<PAGE>
shall be deleted, and in their place shall be inserted the terms "Series B
Preferred Investor" and "Series B Preferred Investors," respectively; (iii) each
reference therein to the term "Notes" shall be deleted, and in its place shall
be inserted the term "Preferred Stock;" (iv) each reference therein to the term
"Intercreditor and Subordination Agreement" or to the term "Subordination
Agreement" shall be deleted, and in its place shall be inserted the term
"Standstill Agreement;" and (v) each reference to the term "Securities Purchase
Agreement" in Articles II through VIII shall be deleted, and in its place shall
be inserted the term "Preferred Stockholders' Agreement."
2. Amendment to the Legend on the Warrantholders' Agreement. The legend
on the cover page to the Warrantholders' Agreement is hereby amended by deleting
the existing legend in its entirety, and replacing it with the following:
This instrument/agreement is subject to a Standstill Agreement dated as
of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling.
3. Amendment to the Preamble of the Warrantholders' Agreement. The
Preamble of the Warrantholders' Agreement is hereby amended by deleting the
existing second paragraph of the Preamble in its entirety, and replacing it with
the following:
The capitalized terms used and not otherwise defined herein which are
defined in the Preferred Stockholders' Agreement, dated as of May 14,
1997, by and among the Company, ROL and the Securityholders (the
"Preferred Stockholders' Agreement"), shall have the meanings ascribed
to them in the Preferred Stockholders' Agreement. Any capitalized term
used and not otherwise defined herein which is not defined in the
Preferred Stockholders' Agreement but which is defined in the
Securities Purchase Agreement, dated as of June 6, 1995, by and among
the Company, the subsidiaries of the Company then existing and the
Securityholders (the "Securities Purchase Agreement"), shall have the
meaning ascribed to such term in the Securities Purchase Agreement.
4. Amendment to Section 2.02 of the Warrantholders' Agreement. Section
2.02 of the Warrantholders' Agreement is hereby amended by deleting the existing
first sentence of Section 2.02 in its entirety, and replacing it with the
following:
3
<PAGE>
If on any two (2) occasions after the earlier of (a) 180 days after the
consummation of an initial public offering of the Company and (b) the
third anniversary of the date hereof, Investors holding at least 662/3
of the outstanding shares of Preferred Stock (the "Initiating
Investors") notify the Company in writing that they intend to offer or
cause to be offered for public sale all or any portion of their
Registrable Securities, the Company shall immediately notify in writing
all of the Investors that hold Registrable Securities or Non-Voting
Common Stock at the time of its receipt of such notification from such
Initiating Investors.
5. Amendment to Section 5.01 of the Warrantholders' Agreement. Section
5.01 of the Warrantholders' Agreement is hereby amended by deleting the existing
Section 5.01 in its entirety, and replacing it with the following:
Section 5.01. Investors' Put Right. Subject to the provisions
of the Standstill Agreement, dated as of May 19, 1997, by and among the
Company, ROL, the Investors, the Senior Lender and the Trustee for the
benefit of the holders of Senior Subordinated Notes (the "Standstill
Agreement"), Investors holding a majority of the outstanding shares of
Preferred Stock may elect, upon 120 days prior written notice, to
require the Company to purchase (subject to the provisions of the
Standstill Agreement) all outstanding Warrants, Registrable Securities,
Non-Voting Common Stock, ROFR Warrants and ROFR Notes held by all of
the Investors (collectively, "Put/Call Securities") pursuant to this
Article V (the "Put") at any time on or after (i) the redemption in
full of all of the outstanding shares of Preferred Stock, together with
all accumulated and accrued but unpaid dividends thereon, (ii) the
merger or consolidation of the Company (other than with a Subsidiary or
as permitted under the Preferred Stockholders' Agreement), or (iii) the
sale of all or substantially all of the capital stock or assets of the
Company or any Subsidiary (other than to a Subsidiary or as permitted
under the Preferred Stockholders' Agreement). The Company agrees to
give the Investors at least 150 days' prior written notice of any of
the foregoing events. Each Investor may also elect to Put their
Put/Call Securities to the Company on the tenth day after the eighth
anniversary of the date of the original issuance of the shares of
Preferred Stock issuable under the Preferred Stockholders' Agreement
(the "Mandatory Redemption Date"), upon 120 days prior written notice
to the Company. Investors whose Put/Call Securities are subject to a
Put hereunder shall be referred to as the "Put Investors." In
connection with any Put, all Put Investors shall be obligated to sell
their Put/Call Securities to the Company on the terms set forth in this
Article V and, upon tender by the Company of the applicable Put/Call
Price (as defined in Section 5.03) (subject to the provisions of the
Standstill Agreement) to each Put Investor, such Put Investor's
Put/Call Securities shall be deemed to no longer be outstanding and
such Put Investor's only right shall be to receive the Put/Call Price
in accordance with the terms hereof; provided, however, that the
failure of any Put Investor(s) to transfer its or their Put/Call
Securities in accordance with the terms of this Section 5.01 shall not
relieve the Company of its obligation to purchase the Put/Call
Securities tendered by all other Put Investors hereunder.
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<PAGE>
6. Amendment to Section 5.02(a) of the Warrantholders' Agreement.
Section 5.02(a) of the Warrantholders' Agreement is hereby amended by deleting
the existing Section 5.02(a) in its entirety, and replacing it with the
following:
(a) Exercise of Call Right. At the election of the Company,
the Company may repurchase all, but not less than all, of the Put/Call
Securities then outstanding at any time after the Mandatory Redemption
Date (a "Call"), so long as: (i) the Investors do not have outstanding
a request for a demand registration under Section 2.02 hereof; and (ii)
the Senior Debt shall have been paid in full, together with all accrued
but unpaid interest thereon, and all outstanding shares of Preferred
Stock shall have been redeemed in full, together with all accumulated
and accrued but unpaid dividends thereon, on or prior to the Put/Call
Closing (as defined below). If the Company elects to repurchase the
Put/Call Securities, it shall give written notice of such election at
least 90 days prior to the Put/Call Closing and all Put/Call Securities
shall be repurchased on the Put/Call Closing date specified in the
Company's notice for an aggregate cash purchase price equal to the
Put/Call Price. Each Investor shall receive at the Put/Call Closing the
Put/Call Price for their Put/Call Securities.
7. Amendment to Section 5.03 of the Warrantholders' Agreement. Section
5.03 of the Warrantholders' Agreement is hereby amended by deleting the existing
Section 5.03 in its entirety, and replacing it with the following:
Section 5.03. Put/Call Price. The purchase price for any
Put/Call Securities hereunder (the "Put/Call Price") shall be equal to
the product of (x) the number of Shares represented by such Put/Call
Securities (with each unit of ROFR Warrants and the corresponding
principal amount of ROFR Notes constituting one Share), multiplied by
(y) the Per Share Net Equity Value of the Company reduced, in the case
of the Warrants and ROFR Warrants, by the per share exercise price
therefor. The "Per Share Net Equity Value" of the Company shall be the
quotient of (a) the Net Equity Value of the Company (as determined
below) divided by (b) the total number of outstanding shares of Common
Equity (determined on a fully-diluted basis and after giving effect to
the exercise of any Warrants, ROFR Warrants or other options for Common
Equity and the conversion and exchange of any securities convertible
into or exchangeable for Common Equity). "Net Equity Value" of the
Company shall mean the aggregate of: (A) the fair market value of the
Company as determined below; plus (B) all accounts receivable, cash and
cash equivalents held by the Company as of the date of determination
and the aggregate exercise price of all outstanding Warrants, ROFR
Warrants or options for Common Equity; reduced by (C) the aggregate of
all Indebtedness for borrowed money and current liabilities of the
Company required to be included on a balance sheet in accordance with
generally accepted accounting principles (excluding the current
maturities of Indebtedness). In connection with a Put or Call occurring
in connection with a sale or transfer to a third party of all or
substantially all of the Common Equity in, or the assets of, the
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<PAGE>
Company or any Subsidiary, the fair market value of the Company shall
be the aggregate amount of consideration paid to the Company, the
Management Stockholders and any other holders of outstanding capital
stock of the Company, including any payments made to the Management
Stockholders under any consulting, noncompetition or employment
agreements. Otherwise, the applicable Investors as a group (with
decision-making power belonging to Investors holding a majority of the
outstanding shares of Preferred Stock held by all Investors, in the
case of a Call, and the Put Investors in the case of a Put) and the
Company shall in good faith seek to reach agreement as to the fair
market value of the Company at least sixty (60) days prior to any
Put/Call Closing. If the applicable Investors and the Company are
unable to reach agreement within such time frame, the fair market value
of the Company shall be determined by an appraisal process and the
Company and the applicable Investors as a group (with decision-making
power belonging to Investors holding a majority of the outstanding
shares of Preferred Stock held by all Investors, in the case of a Call,
and the Put Investors in the case of a Put) shall, within seven (7)
days thereafter, each select an independent, non-affiliated investment
banking firm of recognized national standing or a brokerage firm having
not less than five (5) years of experience in the radio broadcasting
industry (each an "Independent Appraiser"). Within twenty (20) days
after selection, each Independent Appraiser shall prepare and deliver
to the Company and the applicable Investors an appraisal of the fair
market value of the Company in accordance with the terms set forth
below and, in the absence of manifest error or fraud and so long as the
lower appraisal is no less than 90% of the higher appraisal, the two
appraisals shall be averaged and the result shall be the fair market
value of the Company. If the lower appraisal is less than 90% of the
higher appraisal, the two Independent Appraisers shall, within seven
(7) days thereafter, choose a third Independent Appraiser who shall
deliver its own appraisal of the fair market value of the Company
within twenty (20) days thereafter. The two appraisals that are closest
in value shall then be averaged and the result shall, in the absence of
manifest error or fraud, be the fair market value of the Company
(unless the third appraisal is equal to the average of the first two
appraisals, in which case it shall be the fair market value of the
Company). All appraisals hereunder will appraise the fair market value
of the Company (i) as a going concern and valued as if debt-free,
without including the Company's cash balances and without regard to
accounts receivable or the illiquidity of the Company's capital stock
or to any discount attributable to the minority interest represented by
the Put/Call Securities, if applicable, or other considerations
relating to the nonpublic status of the Company's securities, (ii) on
the basis of what a willing buyer, with recourse to any necessary
financing, would pay to a willing seller who is under no compunction to
sell, (iii) assuming a form of transaction which will maximize such
value to the extent such form could be realistically and reasonably
achieved, and (iv) without diminution for any taxes that might
otherwise be incurred by the Company or any Securityholder in
connection with any hypothetical sale of the Common Equity in, or the
assets of, the Company or any Subsidiary. All costs of any appraisals
shall be borne by the Company. If the appraisal process has not been
completed by the Put/Call Closing
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<PAGE>
date or the Company otherwise fails to meet its Put or Call obligations
by such date, the applicable Investors shall continue to have all of
the rights and benefits of this Agreement until the Net Equity Value
has been determined and the Put/Call Securities have been redeemed in
full; provided, however, that the applicable Investors shall be
entitled to receive interest on the Put/Call Price that is ultimately
determined hereunder from the Put/Call Closing date at the rate of
fifteen percent (15%) per annum, compounded annually.
8. Amendment to Article VI of the Warrantholders' Agreement. Article VI
of the Warrantholders' Agreement is hereby amended by deleting the existing
Article VI in its entirety, and replacing it with the following:
ARTICLE VI. INVESTORS GO-ALONG RIGHT.
Investors holding a majority of the outstanding shares of
Preferred Stock shall have the option (the "Go-Along Right"),
exercisable upon 30 days' prior written notice to the Company and all
the other Securityholders and subject to the terms of the Standstill
Agreement, to cause the sale or refinancing of either the entire
business and assets of the Company or all of the Common Stock, Warrants
and other equity interests in the Company, upon the first to occur of
the following: (i) a breach by the Company of its obligations under
Article V with respect to a Put which has not been cured within 30 days
after written notice thereof; (ii) a breach by the Company of Section
10 of the Preferred Stockholders' Agreement, and (iii) any breach by
the Company of its obligations under Section 2.02 hereof; provided,
however, that any sale of either the entire business and assets of the
Company or all of the Common Stock, Warrants and other equity interests
in the Company to an Affiliate of the Investors holding a majority of
the outstanding shares of Preferred Stock or a majority in interest of
the Warrants shall not be for less than ninety percent (90%) of the
Fair Market Value of the Company (as determined below). The Go-Along
Right granted hereunder includes the power and authority to negotiate
and consummate the sale of all or any substantial part of the assets of
or capital stock, partnership interests and/or other equity interests
in the Company and its Subsidiaries. By their execution hereof, each of
the parties to this Agreement hereby consents to the taking of any
action by the Investors exercising the Go-Along Right, including
without limitation, the right to seek to take control, or appoint a
receiver, trustee, transferee or other official to take control, of the
Company and each Subsidiary (and/or the right to expand the Board of
Directors of the Company and each to up to nine (9) Directors and
appoint individuals to the vacancies created by such expansions) solely
for the purpose of effecting the Go-Along Right and to consummate the
transactions contemplated thereby, subject to necessary FCC approval,
and agrees to cooperate fully in the taking of any such action
(including, without limitation, the execution and delivery of
agreements, assignments and other instruments relating to such action
and full cooperation and assistance in obtaining third-party consents),
and using its best efforts in connection therewith (provided, however,
that in the case of the Management Stockholders, "best
7
<PAGE>
efforts" shall not include or require the payment of money), and hereby
irrevocably appoints the Investors who exercise the Go-Along Right and
each of them as proxies and attorneys-in-fact with full power and
substitution, in order to accomplish such action, which
power-of-attorney shall be deemed to be coupled with an interest and
shall be irrevocable. The Go-Along Right shall not be deemed to
constitute a de facto transfer of control for FCC purposes and shall be
subject to the requirements that (i) the Company and/or its
Subsidiaries obtain any necessary FCC approvals for the actions taken
hereunder and (ii) prior to or upon consummation of any sale or
refinancing hereunder the Company and its Subsidiaries repay in full
all indebtedness for money borrowed including, but not limited to, the
Senior Indebtedness (as defined in the Standstill Agreement) and that
the Senior Loan Agreement and the Indenture shall have terminated prior
to the transfer of any assets of, or equity interest in, the Company
and its Subsidiaries, and shall be subject to the requirement that all
express terms of any such sale be equivalent with respect to all
Securityholders (other than differences reflecting the exercise price
of the Warrants and the ROFR Warrants and the fact that the Management
Stockholders may be required to enter into a reasonable noncompetition
agreement subject to the payment of reasonable compensation to them in
exchange therefor).
For purposes of this Article VI, the Fair Market Value of the
Company shall be determined as follows:
Within ten (10) days of the delivery of the written
notice to the Company of the exercise of the Go-Along Right,
Investors holding a majority of the outstanding shares of
Preferred Stock shall select an independent, non-affiliated
investment banking firm of recognized national standing or a
brokerage firm having not less than five (5) years of
experience in the radio broadcasting industry (the
"Appraiser"). Within twenty (20) days after selection, the
Appraiser shall prepare and deliver to the Company and the
Investors an appraisal of the Fair Market Value of the Company
in accordance with the terms set forth below and, in the
absence of manifest error or fraud, the appraisal shall be the
Fair Market Value of the Company. Any appraisal hereunder will
appraise the Fair Market Value of the Company as a going
concern and valued as if debt-free on the basis of what a
willing buyer, with recourse to any necessary financing, would
pay to a willing seller who is under no compunction to sell.
All costs of any appraisals shall be borne by the Company.
9. Amendment to Article VII of the Warrantholders' Agreement. Article
VII of the Warrantholders' Agreement is hereby amended to insert the following
clause after the words "best efforts" each time such words are used in such
Article VII:
(provided, however, that in the case of the Management Stockholders,
"best efforts" shall not include or require the payment of money)
8
<PAGE>
10. Amendment to Section 8.01(a) of the Warrantholders' Agreement.
Section 8.01(a) of the Warrantholders' Agreement is hereby amended by adding the
following sentence as the last sentence of such Section 8.01(a):
Notwithstanding the provisions of this Section 8.01(a), the Board of
Directors may be expanded to up to nine (9) members in a manner
consistent with Article VI hereof, Section 10 of the Preferred
Stockholders' Agreement, and the Company's Bylaws.
11. Amendment to Section 8.02 of the Warrantholders' Agreement.
Section 8.02 of the Warrantholders' Agreement is hereby amended to add
the following sentence as the last sentence of such Section 8.02:
Vacancies created or occurring as a result of the exercise of the
rights granted to the Investors under Article VI of this Agreement or
under Section 10 of the Preferred Stockholders' Agreement shall be
filled as provided in such Article VI or Section 10, as applicable.
12. Amendment to Section 9.03 of the Warrantholders' Agreement. Section
9.03 of the Warrantholders' Agreement is hereby amended by deleting the existing
Section 9.03 in its entirety, and replacing it with the following:
Section 9.03. Amendment and Waiver. Any party may waive any
provision hereof intended for its benefit in writing. No failure or
delay on the part of any party hereto in exercising any right, power or
remedy hereunder shall operate as a waiver thereof. The remedies
provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party hereto at law or in equity
or otherwise. Subject to the terms of the Standstill Agreement, this
Agreement may be amended with the prior written consent of the Company,
and if required pursuant to the terms of the Standstill Agreement, the
Senior Lender and the Trustee, on behalf of the holders of the Senior
Subordinated Notes (until payment in full of the Senior Debt and the
Senior Subordinated Notes and termination of the Senior Loan Agreement
and the Indenture), a majority in interest of the Management
Stockholders and the holders of a majority of the outstanding shares of
Preferred Stock, in which event such amendment shall be binding on all
parties hereto; provided, however, that if such amendment would amend
any provision requiring a consent or approval of the Investors, such
amendment shall require the consent of Investors holding that
percentage of the outstanding shares of Preferred Stock required
pursuant to the provision to be amended; and provided further, that if
such amendment would have a disproportionately negative impact on any
party hereto, such amendment shall require the consent of such party.
9
<PAGE>
With respect to any action hereunder requiring the consent or
approval of the Investors, if all of the outstanding shares of the
Preferred Stock, together with all accumulated and accrued but unpaid
dividends thereon, have been redeemed in full for any reason, such
action shall then require the consent or approval of Investors that
held, immediately prior to such redemption, at least that percentage of
the outstanding shares of Preferred Stock that would otherwise have
been required to secure the consent or approval of such action under
the terms of this Agreement.
13. Amendment to Section 9.04 of the Warrantholders' Agreement. Section
9.04 of the Warrantholders' Agreement is hereby amended to add the following
clause at the end of the first sentence of such Section 9.04:
and the Indebtedness of the Company under the Senior Subordinated
Notes and the Indenture.
14. Amendment to Section 9.05 of the Warrantholders' Agreement. Section
9.05 of the Warrantholders' Agreement is hereby amended by deleting the existing
Section 9.05 in its entirety, and replacing it with the following:
Section 9.05. Notices. All notices and other communications
provided for herein shall be in writing and shall be deemed to have
been duly given (a) if delivered personally or (b) if sent by telex or
telecopier, registered or certified mail (return receipt requested)
with postage prepaid, or by courier guaranteeing next day delivery, in
each case to the party to whom it is directed at the following
addresses (or at such other address for any party as shall be specified
by notice given in accordance with the provisions hereof, provided that
notices of a change of address shall be effective only upon receipt
thereof). Notices delivered personally shall be effective on the day so
delivered, notices sent by registered or certified mail shall be
effective three days after mailing, notices sent by telex shall be
effective when answered back, notices sent by telecopier shall be
effective when receipt is acknowledged, and notices sent by courier
guaranteeing next day delivery shall be effective on the earlier of the
second business day after timely delivery to the courier or the day of
actual delivery by the courier:
(a) if to the Series B Preferred Investors, at the following
address:
(i) Alta Subordinated Debt Partners III, L.P.
c/o Burr, Egan, Deleage & Co.
One Post Office Square
Suite 3800
Boston, MA 02109
Attention: Brian McNeill
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<PAGE>
(ii) BancBoston Investments Inc.
175 Federal Street
10th Floor
Boston, MA 02110
Attention: Sanford Anstey
(iii) Grant M. Wilson
201 Concord Street
Carlisle, MA 01741
with a copy to:
(i) Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attention: John J. Egan III, Esq.
(ii) Ropes & Gray
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
(b) if to the Management Stockholders, the Company or ROL, at
the following address:
Radio One, Inc.
4001 Nebraska Avenue, N.W.
Washington, D.C. 20016
Attention: Alfred C. Liggins and Catherine L. Hughes
with a copy to:
Kirkland & Ellis
655 Fifteenth Street N.W.
Washington, D.C. 20005
Attention: Richard L. Perkal, Esq.
(c) if to the Series A Preferred Investors, to the address set
forth next to their respective names on Schedule B hereto.
15. Amendment to Section 9.10 of the Warrantholders' Agreement. Section
9.10 of the Warrantholders' Agreement is hereby amended by deleting the existing
Section 9.10 in its entirety, and replacing it with the following:
11
<PAGE>
Section 9.10. Entire Agreement. This Agreement, together with
the Securities Purchase Agreement, the Preferred Stockholders' Agreement, the
Standstill Agreement, and the Exchange Agreement and other agreements
contemplated hereby and thereby, is intended by the parties as a final
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Agreement, the Securities
Purchase Agreement, the Preferred Stockholders' Agreement, the Standstill
Agreement, the Exchange Agreement and the other agreements contemplated hereby
and thereby (including the exhibits hereto and thereto) supersede all prior
agreements and understandings between the parties with respect to such subject
matter, including without limitation those agreements listed on Appendix B to
the Securities Purchase Agreement and Appendix B to the Preferred Stockholders'
Agreement, all related agreements and any other agreement entered into among (i)
any of the Company, the Subsidiaries or the Managing Stockholders and (ii) the
Series A Preferred Investors or any Series A Preferred Investor.
16. Amendment to Schedule B to the Warrantholders' Agreement. Schedule B
to the Warrantholders' Agreement is hereby amended by deleting the existing
address given for TSG Ventures Inc. in its entirety, and replacing it with the
following:
177 Broad Street, 12th Floor
Stamford, Connecticut 06901
Attention: Duane Hill
17. Documents Otherwise Unchanged. Except as provided herein, the
Warrantholders' Agreement shall remain unchanged and in full force and effect.
18. Waiver of Preemptive Rights. The Investors hereby waive the
requirements of and any rights they may have under Article IV of the
Warrantholders' Agreement with respect to the issuance by the Company of the
Preferred Stock.
19. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be identical and all of which, when taken
together, shall constitute one and the same instrument, and any of the parties
hereto may execute this Amendment by signing any such counterpart.
20. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and any respective successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Warrantholders' Agreement as of the date first above written.
COMPANY:
RADIO ONE, INC.
By: /s/ Alfred C. Liggins
--------------------------------
Name: Alfred C. Liggins
Title: President
SUBSIDIARY:
RADIO ONE LICENSES, INC.
By: /s/ Alfred C. Liggins
--------------------------------
Name: Alfred C. Liggins
Title: President
MANAGEMENT STOCKHOLDERS:
/s/ Alfred C. Liggins
---------------------------------
Alfred C. Liggins, individually
Catherine L. Hughes
---------------------------------
Catherine L. Hughes, individually
/s/ Jerry A. Moore
---------------------------------
Jerry A. Moore III, individually
[Signature Pages Continue]
S-1
<PAGE>
SERIES B PREFERRED INVESTORS:
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt
Management III, L.P., its
General Partner
By: /s/ Eileen McCarthy
--------------------------------
Name: Eileen McCarthy
Title:
BANCBOSTON INVESTMENTS INC.
By: /s/ Lars A. Swanson
--------------------------------
Name: Lars A. Swanson
Title:Vice President
/s/ Grant M. Wilson
------------------------------------
Grant M. Wilson, individually
SERIES A PREFERRED INVESTORS:
SYNCOM CAPITAL CORPORATION
By: /s/ Terry L. Jones
--------------------------------
Name: Terry L. Jones
Title: President
ALLIANCE ENTERPRISE CORPORATION
By: /s/ Divakar Kamath
--------------------------------
Name: Divakar Kamath
Title: Executive Vice President
[Signature Page to First Amendment to Warrantholders' Agreement]
[Signature Pages Continue]
S-2
<PAGE>
GREATER PHILADELPHIA VENTURE
CAPITAL CORPORATION, INC.
By: /s/ Fred G. Choate
--------------------------------
Name: Fred G. Choate
Title: Manager
OPPORTUNITY CAPITAL CORPORATION
By: /s/ J.P. Thompson
--------------------------------
Name: J. Peter Thompson
Title: President
CAPITAL DIMENSIONS VENTURE
FUND, INC.
By: /s/ Dean Pickerell
--------------------------------
Name: Dean Pickerell
Title: President
TSG VENTURES INC.
By: /s/ Duane E. Hill
--------------------------------
Name: Duane E. Hill
Title: Principal
FULCRUM VENTURE CAPITAL
CORPORATION
By: /s/ Brian Argrett
--------------------------------
Name: Brian Argrett
Title: President
[Signature Page to First Amendment to Warrantholders' Agreement]
S-3
WARRANT NO. 2 36.12 WARRANTS
---------- -------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, SYNCOM CAPITAL CORPORATION or registered assigns under
Section 8 hereof (the "Holder") is the owner of THIRTY-SIX AND 12/100 (36.12)
WARRANTS specified above (the "Warrants") each of which entitles the Holder
thereof to purchase one (1) fully paid and nonassessable share of Common Stock,
par value $.01 per share, of Radio One, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), or such other number of shares as
may be determined pursuant to an adjustment in accordance with Section 4 hereof,
at the price per share set forth in Section 4 hereof, subject to adjustment from
time to time pursuant to Section 4 hereof (the "Warrant Price") and subject to
the provisions and upon the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of
2
<PAGE>
the Warrants represented by this Warrant Certificate have been fully exercised
or have expired pursuant to Section 1 hereof, a new Warrant Certificate
representing the shares of Common Stock, if any, with respect to which the
Warrants represented by this Warrant Certificate shall not then have been
exercised, shall also be issued to the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in,
3
<PAGE>
or make any other distribution with respect to its Common Stock consisting of,
shares of Common Stock, then the Warrant Price shall be adjusted, from and after
the date of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and
4
<PAGE>
subject to the terms and conditions of the Preferred Stockholders' Agreement and
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary
5
<PAGE>
notwithstanding, unless and until such Holder seeks to transfer registered
ownership of the Warrants on the books of the Company and such transfer is
effected.
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
------------------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
of _____________ Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of ___________
Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated: __________________________
______________________________
Signature
9
WARRANT NO. 5 18.70 WARRANTS
--------- -------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, ALLIANCE ENTERPRISE CORPORATION or registered assigns under
Section 8 hereof (the "Holder") is the owner of EIGHTEEN AND 70/100 (18.70)
WARRANTS specified above (the "Warrants") each of which entitles the Holder
thereof to purchase one (1) fully paid and nonassessable share of Common Stock,
par value $.01 per share, of Radio One, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), or such other number of shares as
may be determined pursuant to an adjustment in accordance with Section 4 hereof,
at the price per share set forth in Section 4 hereof, subject to adjustment from
time to time pursuant to Section 4 hereof (the "Warrant Price") and subject to
the provisions and upon the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of
2
<PAGE>
the Warrants represented by this Warrant Certificate have been fully exercised
or have expired pursuant to Section 1 hereof, a new Warrant Certificate
representing the shares of Common Stock, if any, with respect to which the
Warrants represented by this Warrant Certificate shall not then have been
exercised, shall also be issued to the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
------------------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
____________ of Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________
Signature
9
AMENDED AND RESTATED WARRANT
WARRANT NO. 4 0.97 WARRANTS
----------- -----
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, GREATER PHILADELPHIA VENTURE CAPITAL CORPORATION, INC. or
registered assigns under Section 8 hereof (the "Holder") is the owner of 97/100
(0.97) WARRANTS specified above (the "Warrants") each of which entitles the
Holder thereof to purchase one (1) fully paid and nonassessable share of Common
Stock, par value $.01 per share, of Radio One, Inc., a corporation organized
under the laws of the State of Delaware (the "Company"), or such other number of
shares as may be determined pursuant to an adjustment in accordance with Section
4 hereof, at the price per share set forth in Section 4 hereof, subject to
adjustment from time to time pursuant to Section 4 hereof (the "Warrant Price")
and subject to the provisions and upon the terms and conditions set forth
herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired pursuant to Section 1 hereof, a new Warrant
Certificate representing the
2
<PAGE>
shares of Common Stock, if any, with respect to which the Warrants represented
by this Warrant Certificate shall not then have been exercised, shall also be
issued to the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of Common Stock, then the Warrant
Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of
3
<PAGE>
determination by a fraction (i) the numerator of which shall be the total number
of shares of Common Stock outstanding immediately prior to such dividend or
distribution and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such dividend or
distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and Warrantholders' Agreement, and in the event of any
inconsistency between the terms hereof and the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement, as the case may be,
the terms of the Preferred Stockholders' Agreement or the Warrantholders'
Agreement shall control. Without limiting the generality of the foregoing, this
Warrant Certificate and the Warrants represented hereby are subject to the "put"
and
4
<PAGE>
"call" provisions of Article V of the Warrantholders' Agreement which are
incorporated herein by reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the
5
<PAGE>
case of loss, theft or destruction, on delivery of an indemnity agreement or
bond reasonably satisfactory in form and amount to the Company or, in the case
of mutilation, on surrender and cancellation of this Warrant Certificate, the
Company, at its expense, will execute and deliver, in lieu of this Warrant
Certificate, a new warrant certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder
6
<PAGE>
by the Company, but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
------------------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
____________ of Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________
Signature
9
WARRANT NO. 7 6.20 WARRANTS
------ ---------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, OPPORTUNITY CAPITAL CORPORATION or registered assigns under
Section 8 hereof (the "Holder") is the owner of SIX AND 20/100 (6.20) WARRANTS
specified above (the "Warrants") each of which entitles the Holder thereof to
purchase one (1) fully paid and nonassessable share of Common Stock, par value
$.01 per share, of Radio One, Inc., a corporation organized under the laws of
the State of Delaware (the "Company"), or such other number of shares as may be
determined pursuant to an adjustment in accordance with Section 4 hereof, at the
price per share set forth in Section 4 hereof, subject to adjustment from time
to time pursuant to Section 4 hereof (the "Warrant Price") and subject to the
provisions and upon the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired
2
<PAGE>
pursuant to Section 1 hereof, a new Warrant Certificate representing the shares
of Common Stock, if any, with respect to which the Warrants represented by this
Warrant Certificate shall not then have been exercised, shall also be issued to
the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
-------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
____________ of Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________
Signature
9
WARRANT NO. 1 15.24 WARRANTS
---------- -------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, CAPITAL DIMENSIONS VENTURE FUND, INC. or registered assigns
under Section 8 hereof (the "Holder") is the owner of FIFTEEN AND 24/100 (15.24)
WARRANTS specified above (the "Warrants") each of which entitles the Holder
thereof to purchase one (1) fully paid and nonassessable share of Common Stock,
par value $.01 per share, of Radio One, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), or such other number of shares as
may be determined pursuant to an adjustment in accordance with Section 4 hereof,
at the price per share set forth in Section 4 hereof, subject to adjustment from
time to time pursuant to Section 4 hereof (the "Warrant Price") and subject to
the provisions and upon the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired
2
<PAGE>
pursuant to Section 1 hereof, a new Warrant Certificate representing the shares
of Common Stock, if any, with respect to which the Warrants represented by this
Warrant Certificate shall not then have been exercised, shall also be issued to
the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
-------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
____________ of Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________
Signature
9
WARRANT NO. 6 3.27 WARRANTS
------- --------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, TSG VENTURES INC. or registered assigns under Section 8
hereof (the "Holder") is the owner of THREE AND 27/100 (3.27) WARRANTS specified
above (the "Warrants") each of which entitles the Holder thereof to purchase one
(1) fully paid and nonassessable share of Common Stock, par value $.01 per
share, of Radio One, Inc., a corporation organized under the laws of the State
of Delaware (the "Company"), or such other number of shares as may be determined
pursuant to an adjustment in accordance with Section 4 hereof, at the price per
share set forth in Section 4 hereof, subject to adjustment from time to time
pursuant to Section 4 hereof (the "Warrant Price") and subject to the provisions
and upon the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired
2
<PAGE>
pursuant to Section 1 hereof, a new Warrant Certificate representing the shares
of Common Stock, if any, with respect to which the Warrants represented by this
Warrant Certificate shall not then have been exercised, shall also be issued to
the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
-------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
____________ of Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________
Signature
9
WARRANT NO. 3 15.61 WARRANTS
---------- -----
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, FULCRUM VENTURE CAPITAL CORPORATION or registered assigns
under Section 8 hereof (the "Holder") is the owner of FIFTEEN AND 61/100 (15.61)
WARRANTS specified above (the "Warrants") each of which entitles the Holder
thereof to purchase one (1) fully paid and nonassessable share of Common Stock,
par value $.01 per share, of Radio One, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), or such other number of shares as
may be determined pursuant to an adjustment in accordance with Section 4 hereof,
at the price per share set forth in Section 4 hereof, subject to adjustment from
time to time pursuant to Section 4 hereof (the "Warrant Price") and subject to
the provisions and upon the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired
2
<PAGE>
pursuant to Section 1 hereof, a new Warrant Certificate representing the shares
of Common Stock, if any, with respect to which the Warrants represented by this
Warrant Certificate shall not then have been exercised, shall also be issued to
the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
-------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
____________ of Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________
Signature
9
WARRANT NO. 8 29.52 WARRANTS
---------- ------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, ALTA SUBORDINATED DEBT PARTNERS III, L.P. or registered
assigns under Section 8 hereof (the "Holder") is the owner of TWENTY-NINE AND
52/100 (29.52) WARRANTS specified above (the "Warrants") each of which entitles
the Holder thereof to purchase one (1) fully paid and nonassessable share of
Common Stock, par value $.01 per share, of Radio One, Inc., a corporation
organized under the laws of the State of Delaware (the "Company"), or such other
number of shares as may be determined pursuant to an adjustment in accordance
with Section 4 hereof, at the price per share set forth in Section 4 hereof,
subject to adjustment from time to time pursuant to Section 4 hereof (the
"Warrant Price") and subject to the provisions and upon the terms and conditions
set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired
2
<PAGE>
pursuant to Section 1 hereof, a new Warrant Certificate representing the shares
of Common Stock, if any, with respect to which the Warrants represented by this
Warrant Certificate shall not then have been exercised, shall also be issued to
the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or
distribution payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial
public offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
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<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
------------------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
____________ of Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________
Signature
9
WARRANT NO. 9 20.15 WARRANTS
---------- -----
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, BANCBOSTON INVESTMENTS INC. or registered assigns under
Section 8 hereof (the "Holder") is the owner of TWENTY AND 15/100 (20.15)
WARRANTS specified above (the "Warrants") each of which entitles the Holder
thereof to purchase one (1) fully paid and nonassessable share of Common Stock,
par value $.01 per share, of Radio One, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), or such other number of shares as
may be determined pursuant to an adjustment in accordance with Section 4 hereof,
at the price per share set forth in Section 4 hereof, subject to adjustment from
time to time pursuant to Section 4 hereof (the "Warrant Price") and subject to
the provisions and upon the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired
2
<PAGE>
pursuant to Section 1 hereof, a new Warrant Certificate representing the shares
of Common Stock, if any, with respect to which the Warrants represented by this
Warrant Certificate shall not then have been exercised, shall also be issued to
the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or distribution
payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial public
offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
-------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
of ____________ Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of ____________
Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
______________________________ ______________________________
Signature
9
WARRANT NO. 10 1.26 WARRANTS
---------- -------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES
LAW.
"This instrument/agreement is subject to a Standstill Agreement dated
as of the Closing Date among RADIO ONE, INC., the Subsidiaries of Radio
One, Inc. from time to time, the Investors (as defined therein), the
Senior Lenders (as defined therein) and NationsBank of Texas, N.A., as
Agent to the Senior Lenders (as defined therein) and individually as a
Lender, and United States Trust Company of New York, as Trustee for the
Senior Subordinated Noteholders (as defined therein). By its acceptance
of this instrument/agreement, the holder hereof agrees to be bound by
the provisions of such Standstill Agreement to the same extent that
each Investor is bound. In the event of any inconsistency between the
terms of this instrument/agreement and the terms of such Standstill
Agreement, the terms of the Standstill Agreement shall govern and be
controlling."
RADIO ONE, INC.
This warrant certificate (the "Warrant Certificate") certifies that,
for value received, GRANT M. WILSON or registered assigns under Section 8 hereof
(the "Holder") is the owner of ONE AND 26/100 (1.26) WARRANTS specified above
(the "Warrants") each of which entitles the Holder thereof to purchase one (1)
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
Radio One, Inc., a corporation organized under the laws of the State of Delaware
(the "Company"), or such other number of shares as may be determined pursuant to
an adjustment in accordance with Section 4 hereof, at the price per share set
forth in Section 4 hereof, subject to adjustment from time to time pursuant to
Section 4 hereof (the "Warrant Price") and subject to the provisions and upon
the terms and conditions set forth herein.
<PAGE>
1. Term of Warrant.
Each Warrant is exercisable (i) at any time after the date hereof by
Investors holding a majority of the outstanding shares of Preferred Stock (or,
if the Preferred Stock has been redeemed in full prior to such date, by
Investors holding a majority of the outstanding shares of Preferred Stock
immediately prior to such redemption) (the "Requisite Holders"), or (ii) at any
time after the Preferred Stock has been paid in full at the option of the Holder
hereof; provided, however, that if the Holder is a "Specialized Small Business
Investment Company" (as defined in the 26 U.S.C. Section 1044(c)(3)), this
Warrant may not in any event be exercised after the sixth (6th) anniversary of
the redemption in full of all Preferred Stock held by the Holder. Upon the
consummation by the Company of a Qualified Public Offering, this Warrant shall
be subject to automatic exercise, on a net basis, as provided in Section 2(a)
hereof.
2. Method of Exercise and Payment; Issuance of New Warrant
Certificate; Contingent Exercise.
(a) In connection with any exercise pursuant to Section 1
hereof, this Warrant Certificate shall be surrendered (with the notice of
exercise form attached hereto as Exhibit 1 duly executed) at the principal
office of the Company together with the payment to the Company of (i) cash or a
certified check or a wire transfer in an amount equal to the then applicable
Warrant Price multiplied by the number of shares of Common Stock then being
purchased or (ii) that number of shares of Common Stock of the Company having a
fair market value (as defined below) equal to the then applicable Warrant Price
multiplied by the number of shares of Common Stock then being purchased. In the
alternative, the Holder hereof may exercise its right to purchase some or all of
the shares of Common Stock pursuant to this Warrant Certificate on a net basis,
such that, without the exchange of any funds, the Holder hereof receives that
number of shares of Common Stock subscribed to pursuant to this Warrant
Certificate less that number of shares of Common Stock having an aggregate fair
market value (as defined below) at the time of exercise equal to the aggregate
Warrant Price that would otherwise have been paid by the Holder for the number
of shares of Common Stock subscribed to under this Warrant Certificate. Fair
market value, on a per-share basis, shall be deemed to be (i) the initial
offering price of the Common Stock to the public in a Qualified Public Offering;
and (ii) if the Common Stock is not publicly held or traded, "fair market value"
shall mean the Per Share Net Equity Value of the Company as determined pursuant
to Section 5.03 of the Warrantholders' Agreement.
(b) The Company agrees that the shares of Common Stock so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such shares as of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of the rights represented by this
Warrant Certificate, certificates for the shares of Common Stock so purchased
shall be delivered to the Holder hereof within 15 days thereafter and, unless
all of the Warrants represented by this Warrant Certificate have been fully
exercised or have expired
2
<PAGE>
pursuant to Section 1 hereof, a new Warrant Certificate representing the shares
of Common Stock, if any, with respect to which the Warrants represented by this
Warrant Certificate shall not then have been exercised, shall also be issued to
the Holder hereof within such 15 day period.
3. Common Stock Fully Paid; Reservation of Shares.
All Common Stock which may be issued upon the exercise of the Warrants
will, upon issuance, be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant Certificate may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issuance upon exercise of the purchase rights evidenced by this Warrant
Certificate, a sufficient number of shares of its Common Stock to provide for
the exercise of the Warrants.
4. Warrant Price; Adjustment of Warrant Price and Number of Shares.
The Warrant Price shall be $100.00 per share of Common Stock, and the
Warrant Price and the number of shares of Common Stock purchasable upon exercise
of the Warrants shall be subject to adjustment from time to time, as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of the Warrants, or in case of any consolidation or merger of the
Company with or into another corporation or entity, other than a consolidation
or merger with another corporation or entity in which the Company is the
continuing corporation and which does not result in any reclassification,
conversion or change of outstanding securities issuable upon exercise of the
Warrants, or in case of any sale of all or substantially all of the assets of
the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new warrant certificate (the "New Warrant
Certificate"), providing that the Holder of this Warrant Certificate shall have
the right to exercise such new warrants and procure upon such exercise, in lieu
of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation, or merger by a holder of one share of Common Stock. Such New
Warrant Certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers and transfers.
(b) Subdivisions, Combinations and Stock Dividends. If the
Company at any time while this Warrant Certificate is outstanding and unexpired
shall subdivide or combine its Common Stock, or shall pay a dividend with
respect to Common Stock payable in, or make any other distribution with respect
to its Common Stock consisting of, shares of
3
<PAGE>
Common Stock, then the Warrant Price shall be adjusted, from and after the date
of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
Upon each adjustment in the Warrant Price pursuant to this
Section 4(b), the number of shares of Common Stock purchasable hereunder shall
be adjusted to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction (i) the numerator of which shall be the Warrant Price immediately prior
to such adjustment and (ii) the denominator of which shall be the Warrant Price
immediately thereafter.
(c) [Intentionally Omitted.]
5. Notice of Adjustments.
Whenever any adjustment shall be made pursuant to Section 4 hereof, the
Company shall prepare a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment and the number of
shares of Common Stock then purchasable upon exercise of the Warrants, and shall
cause copies of such certificate to be mailed to the Holder hereof at the
address specified in Section 9(d) hereof, or at such other address as may be
provided to the Company in writing by the Holder hereof.
6. Other Agreements; Definitions; Put and Call Rights.
For purposes of this Warrant Certificate, all capitalized terms that
are used herein without definition shall have the respective meanings ascribed
thereto in either the Preferred Stockholders' Agreement (the "Preferred
Stockholders' Agreement"), dated as of May 14, 1997, by and among the Holder,
the Company and certain other parties named therein, the Warrantholders'
Agreement, dated as of June 6, 1995, as amended by the First Amendment to the
Warrantholders' Agreement, dated as of May 19, 1997, by and among the Holder,
the Company and certain other parties named therein (the "Warrantholders'
Agreement") or, in the event that a capitalized term used herein without
definition is not defined in the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, but is defined in the Securities Purchase Agreement,
dated as of June 6, 1995, by and among the Holder, the Company and certain other
parties named therein (the "Securities Purchase Agreement"), the Securities
Purchase Agreement. The Holder of this Warrant Certificate shall be entitled to
the rights and subject to the terms and conditions of the Preferred
Stockholders' Agreement and
4
<PAGE>
Warrantholders' Agreement, and in the event of any inconsistency between the
terms hereof and the terms of the Preferred Stockholders' Agreement or the
Warrantholders' Agreement, as the case may be, the terms of the Preferred
Stockholders' Agreement or the Warrantholders' Agreement shall control. Without
limiting the generality of the foregoing, this Warrant Certificate and the
Warrants represented hereby are subject to the "put" and "call" provisions of
Article V of the Warrantholders' Agreement which are incorporated herein by
reference.
7. Compliance with Securities Act.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrants and the shares of Common Stock to be issued upon exercise
thereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise thereof except under circumstances which will not result in a
violation of the Act. Upon exercise of the Warrants, the Holder hereof shall, if
requested by the Company, confirm in writing that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant Certificate and all shares of Common Stock
issued upon exercise of the Warrants (unless registered under the Act) shall be
stamped or imprinted with a legend substantially in the following form:
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
IN A TRANSACTION WHICH IS NOT IN VIOLATION OF THE REGISTRATION
REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATE SECURITIES LAW.
8. Transfer.
Subject to compliance with the terms of Section 7 above, the Warrants
and all rights under this Warrant Certificate are transferable, in whole or in
part, at the principal office of the Company by the Holder hereof, in person or
by its duly authorized attorney, upon surrender of this Warrant Certificate
properly endorsed (with the instrument of transfer form attached hereto as
Exhibit 2 duly executed). Each Holder of this Warrant Certificate, by taking or
holding the same, consents and agrees that this Warrant Certificate, when
endorsed in blank, shall be deemed negotiable; provided, however, that the last
Holder of this Warrant Certificate as registered on the books of the Company may
be treated by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner of the Warrants for any purposes and as the
person entitled to exercise the rights represented by this Warrant Certificate
or to transfer the Warrants on the books of the Company, any notice to the
contrary notwithstanding, unless and until such Holder seeks to transfer
registered ownership of the Warrants on the books of the Company and such
transfer is effected.
5
<PAGE>
9. Miscellaneous.
(a) Replacement. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver, in lieu of this Warrant Certificate, a new warrant
certificate of like tenor.
(b) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or distribution
payable to the holders of shares of Common Stock;
(ii) there shall be any capital reorganization or
reclassification of the capital of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or business organization;
(iii) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(iv) the Company shall propose to commence an initial public
offering;
then, in any one or more of said cases, the Company shall give the Holder hereof
written notice of such event, in the manner set forth in Section 9(d) below, at
least 90 days prior to the date on which a record shall be taken for such
dividend or distribution or for determining shareholders entitled to vote upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or the date when any such transaction shall take place,
as the case may be.
(d) Notice. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
6
<PAGE>
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant Certificate.
(f) Governing Law. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
This Warrant Certificate has been executed as of this 19th day of May,
1997.
RADIO ONE, INC.
By: /s/ Alfred Liggins
-------------------------
Name: Alfred Liggins
Title: President
7
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: _____________
[Collective Exercise]
The undersigned, constituting the Requisite Holders, hereby elect to
exercise all of the Warrants contemplated by a certain Warrantholders' Agreement
dated as of June 6, 1995, as amended.
[Individual Exercise]
1. The undersigned hereby elects to purchase ___________ shares of the
__________ Common Stock of ___________________ pursuant to the terms of the
attached Warrant.
2. Please issue a certificate or certificates representing said shares
of _____________ Common Stock in the name of the undersigned or in such other
name as is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
3. The undersigned represents that the aforesaid shares of ____________
Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares.
Dated:
______________________________
Signature
8
<PAGE>
EXHIBIT 2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________ the rights represented by the within Warrant
Certificate to purchase [_____________] shares of Common Stock of Radio One,
Inc. to which the within Warrant Certificate relates and appoints
_______________________ to transfer such rights on the books of Radio One, Inc.
with full power of substitution in the premises.
Dated:
_________________________________ ______________________________
Signature
9
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated and effective as of August 1, 1996 by and between
Radio One, Inc., a Delaware corporation ("Manager"), and Radio One of Atlanta,
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to engage Manager to provide certain management
services with respect to the business of the Company and its subsidiaries and to
provide other services and advice more fully set forth herein, and Manager is
willing to undertake these responsibilities on the terms and conditions set
forth herein;
NOW THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties to this Agreement hereby agree as follows:
1. Services of Manager. Subject to the terms and conditions of this
Agreement, Manager will provide the following services to the Company
(collectively, the "Basic Management Services"):
(a) provide advice and consultation to management concerning the
business, financial and strategic development and performance of the
Company and its subsidiaries; and
(b) provide general services, including corporate secretarial
services; maintenance of corporate records; tax counsel, employee benefits,
insurance and risk management services and such other services of such
nature as the Company and Manager may reasonably agree upon; and
<PAGE>
(c) In addition to the services of its own staff, Manager shall select
and, with the consent of the Company, engage on behalf of the Company the
services of other professionals and consultants in connection with the
provision of the services set forth above, including management
consultants, bankers, investment bankers, underwriters, accountants,
actuaries, insurance brokers, tax advisors, appraisers, risk management
consultants and employee benefits consultants and attorneys.
2. Strategic Guidance by Manager. In connection with the planning for, or
consummation of, any transaction proposed to be entered into by the Company or
any subsidiary of the Company outside of the ordinary course of business,
including any acquisition, disposition, merger, business combination,
dissolution, liquidation, securities offering, recapitalization, restructuring,
leasing or financing (equity, debt, lease or otherwise) of or involving the
business and assets of the Company and its subsidiaries, Manager will provide to
the Company, or procure on behalf of the Company and its subsidiaries (and will
promptly notify the Company of such procurement), the following services
(collectively, the "Specialized Services"):
(a) management consulting, banking, investment banking, underwriting,
brokerage, tax, custodial, accounting, data processing, employee relations
and appraisal and recommend for retention by the Company and its
subsidiaries the services of attorneys; and
<PAGE>
(b) such other services outside the ordinary course of business of, an
administrative or managerial nature as the Company may reasonably request.
3. Limitations on Manager's Authority. Manager will not be authorized to
manage the affairs of, act in the name of, direct the actions of employees of or
in any way bind the Company or any of its subsidiaries (unless otherwise
authorized in writing by the company to do so). The management, policies and
operations of the Company and its subsidiaries will be the responsibility of the
directors and officers of the Company and its subsidiaries acting pursuant to
and in accordance with the relevant corporate charter and by-laws, and all
decisions relating to corporate matters will be made by the directors and
officers of the Company and its subsidiaries acting pursuant to and in
accordance with the relevant corporate charter and by-laws.
4. Independent Contractor Status. Manager will render and perform the
services under this Agreement as an independent contractor in accordance with
its own standards, subject to its compliance with the provisions of this
Agreement and with all applicable laws, ordinances and regulations.
5. Availability of Employees. Manager will make available to the Company the
services of such of its employees and consultants as are necessary, in the
reasonable judgment of the Manager, to the performance from time to time of the
services described in Sections 1 and 2 of this Agreement, provided that the
inability of the Manager to make available to the Company a specific employee or
consultant of the Manager for any reason, including without limitation the death
or disability of such employee or consultant, the termination of an employment
or consulting agreement with any such person or the assignment of such employee
or consultant to other duties, shall not constitute a default hereunder.
<PAGE>
6. Limited Liability of Manager.
(a) Neither Manager nor any director, officer, stockholder, employee
or agent of Manager makes any express or implied representation, warranty,
or guarantee to the Company, to any of its subsidiaries, to any of its
stockholders or to any third party relating to the services to be performed
by Manager pursuant to this Agreement or the quality or results of such
services.
(b) Manager shall not be liable to the Company, to any of its
subsidiaries, to any of its stockholders or to any third party for any
expense, claim, loss or damage, including, without limitation, indirect,
special, consequential or exemplary damages suffered other than by reason
of Manager's intentional failure to perform the services to be performed by
Manager pursuant to this Agreement, or by reason of action taken by Manager
which was in bad faith and in a manner not reasonably believed by Manager
to be in the best interests of the Company.
(c) Manager shall not be liable to the Company, to any of its
subsidiaries, to any of its stockholders or to any third party for the
consequences of any failure to perform or delay in performing any of its
obligations under this Agreement if that failure shall be caused by events
or circumstances beyond its control including, without limitation, by
strikes or labor disputes; provided, that Manager shall reasonably provide
prompt notice to the Company or its subsidiaries of such inability and the
reasons therefor.
<PAGE>
7. Indemnification. The Company will indemnify Manager and each director,
officer, stockholder, employee and agent of Manager against any losses, claims,
damages or liabilities (including legal or other expenses reasonably incurred
investigating or defending against any such losses, claims, damages or
liabilities), joint or several ("Liabilities"), to which any of such persons may
become subject by reason of being a director, officer, stockholder, employee or
agent of Manager (but only to the extent that such Liabilities arise out of or
relate to and with respect to the services performed by Manager under this
Agreement); provided that the party to be indemnified acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The Company may pay expenses (including attorneys' fees) incurred by Manager
and any director, officer, stockholder, employee and agent of Manager in
defending any civil, criminal, administrative or investigative action, suit or
proceedings, in advance of the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of a party which may
be entitled to indemnification to repay such amount if it shall be ultimately
determined that he is not entitled to be indemnified by the Company as
authorized in this Agreement.
8. Fee For Services; Expenses. Commencing on the effective date of this
Agreement and throughout the Term (as hereinafter defined), the Company will pay
to Manager a fixed fee, payable monthly, of $8,333 per month (subject to
periodic adjustments upwards or downwards, to be negotiated by the parties, such
adjustments to take into account the extent of services to be performed by
Manager in the future and to be effective prospectively, provided that such fee
shall not be reduced below $2,500 per month) for providing the Basic Management
Services. Such fees will be due and payable monthly in advance by the Company
<PAGE>
on the first business day of each calendar month during the period in which
services are being provided unless the parties agree that the amount due will be
deferred and become due and payable at such time in the future that the parties
agree to. In addition to the management fee referred to above, the Company will
pay or reimburse Manager for all out-of-pocket costs and expenses incurred in
fulfilling its obligations as they relate to the Company under this Agreement,
including any expenses of third parties engaged by Manager; provided that
Manager will not be entitled to reimbursement for compensation of its officers,
directors, employees, consultants or stockholders who provide services under
this Agreement. The Company shall also pay to Manager such additional fees in an
amount to be agreed to by the parties from time to time, based upon fees that
would be charged for comparable services by similarly situated third party
providers, for any Specialized Services provided by Manager. The Company shall
pay or reimburse Manager for all out-of-pocket costs and expenses incurred in
providing any Specialized Services, including any expenses of third parties
engaged by Manager, provided that Manager shall not be entitled to reimbursement
for compensation of its employees, officers, directors, or stockholders who
provide services hereunder.
9. Other Relationships. Nothing contained in this Agreement will, or will be
deemed to, prohibit, restrict or limit in any manner any business or investment
activities of Manager or the directors, officers, employees or affiliates of
Manager.
10. Assignment. This Agreement and all the provisions of it will be binding
on and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests and obligations under this Agreement may be assigned by
either party without the prior written consent of the other party to this
Agreement,
<PAGE>
which consent shall not be unreasonably withheld. Nothing in this Agreement,
whether expressed or implied, may be construed to give any person other than the
parties to this Agreement any legal or equitable right, remedy or claim under or
in respect of this Agreement.
11. Term; Effect of Termination.
(a) This Agreement will be effective on the date first written above
and will continue for a term ending on December 31, 2001 (the "Term") only
upon the written agreement of the parties. If the parties do not agree to
terminate the Agreement, the Agreement will renew for an additional five
years.
(b) This Agreement may not be terminated for any reason, except by the
express written consent of the parties.
(c) At the end of the Term of this Agreement, or in the event the
parties agree to an earlier termination of this Agreement (in each case,
the "Termination Date"), each party will perform its obligations under this
Agreement accrued to the Termination Date, and the Company (i) will assume,
pay and honor all obligations to third parties engaged by Manager in
connection with its services hereunder and (ii) will promptly pay Manager
all accrued fees and expenses and honor all indemnification obligations
arising hereunder. On termination, Manager will return to the Company any
corporate records of the Company and its subsidiaries.
<PAGE>
12. Alternate Dispute Resolution/Arbitration
(a) Dispute Resolution. Any claim, dispute, difference or controversy
between the parties hereto arising out of, or relative to, this Agreement
which cannot be settled by reference to other terms of this Agreement or by
mutual understanding between the parties shall be submitted to alternative
dispute resolution as described in this Section 12.
(b) Pre-Arbitration Referral to Representatives.
(i) The dispute, claim or controversy arising out of or in
relation to this Agreement or the interpretation or breach thereof
shall be resolved in accordance with this Section 12, being subjected
first to the procedure in this subsection (b) then, if still
unresolved, to binding arbitration in accordance with subsection (c)
below. Any party may cause a proceeding to be commenced by giving
written notice to the other party that it desires to do so (the date
of such notice is hereinafter referred to as the "Notice Date"). Each
party shall thereupon prepare a written statement (the "Statement")
briefly describing such party's position on the matter in dispute. For
purposes hereof, the Company designates Mary Catherine Sneed and
Manager designates Alfred C. Liggins (collectively, the
"Representatives") as the individuals who shall represent such
parties. The Statement shall be prepared within fifteen (15) days of
the Notice Date and given to all parties.
<PAGE>
(ii) The Representatives shall, during the fifteen (15) day
period commencing on the fifteenth day after the Notice Date, meet and
negotiate in good faith in an attempt to resolve the matter in
dispute. If such attempt proves unsuccessful in the judgment of any
party, such party may cause all parties involved to pursue the
procedure set forth below by delivering written notice to them of such
party's desire to do so within five (5) days after the end of such
negotiation period.
(c) Arbitration. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof which are not
resolved by the foregoing procedure shall be finally settled by arbitration
conducted expeditiously in accordance with the Center for Public Resources
Rules for Nonadministered Arbitration of Business Disputes (the "CPR
Rules"). The Center for Public Resources shall appoint a neutral advisor
from its National CPR Panel. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon
the award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be Washington, DC or
any other location as agreed to by the parties.
Such proceedings shall be administered by the neutral advisor in
accordance with the CPR Rules as he/she deems appropriate, however, such
proceedings shall be guided by the following agreed upon procedures:
<PAGE>
(i) mandatory exchange of all relevant documents, to be
accomplished within forty-five (45) days of the initiation of the
procedure;
(ii) no other discovery;
(iii) hearings before the neutral advisor which shall consist of
a summary presentation by each side of not more than three hours; such
hearings to take place on one or two days at a maximum; and
(iv) decision to be rendered not more than ten (10) days
following such hearings.
Notwithstanding anything to the contrary contained herein, the
provisions of this subsection (c) shall not apply with regard to any
equitable remedies to which any party may be entitled hereunder.
The parties hereto (i) hereby irrevocably submit to the jurisdiction
of the United States District Court for the District agreed to by the
parties, for the purpose of enforcing the award or decision in any such
proceeding and (ii) hereby waive, and agree not to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be
enforced in or by such court, and
<PAGE>
(iii) hereby waive and agree not to seek any review by any court of any
other jurisdiction which may be called upon to grant an enforcement of the
judgment of any such court. The parties hereto hereby consent to service of
process by registered mail at the address to which notices are to be given.
Each of the Company and Manager agrees that its submission to jurisdiction
and its consent to service of process by mail is made for the express
benefit of the other parties hereto. Final judgment against the Company or
Manager in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any
other manner provided by or pursuant to the laws of such other
jurisdiction; provided, however, that any party may at its option bring
suit, or institute other judicial proceedings, in any state or federal
court of the United States or of any country or place where the other
parties or their assets, may be found.
The losing party shall bear all of the expenses incurred by both
parties in connection with any arbitration, including legal and other
expenses, unless the neutral advisor determines that it is appropriate for
the parties to share all or any part of the expenses incurred in connection
with the arbitration and the legal and other expenses, provided that any
costs incurred by a party to enforce an award of the neutral advisor
pursuant to the foregoing terms of this subsection (c) shall be borne by
the party resisting enforcement.
<PAGE>
13. Notices. All notices, requests, demands and other communications provided
for by this Agreement must be in writing and will be deemed to have been given
at the time when hand delivered or mailed in any general or branch United States
post office enclosed in a registered or certified post-paid envelope, addressed
to the following addresses of the parties to this Agreement or to such changed
address as such party may have given the other party notice as provided in this
Agreement:
The Company:
Radio One of Atlanta, Inc.
5526 B&C Old National Highway, Suite 200
College Park, GA 30349
(404) 765-9750
Attn: Mary Catherine Sneed
Manager:
Radio One, Inc.
4001 Nebraska Avenue, NW
Washington, DC 20016
(202) 686-9300
Attn: Alfred C. Liggins
14. Miscellaneous.
(a) This Agreement, or any term or provision of it, may only be
amended, modified or waived by an instrument in writing signed by the party
against whom such amendment, modification or waiver is sought to be
enforced.
(b) The provisions of this Agreement will be construed in accordance
with and governed by the laws of the State of Georgia.
(c) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
<PAGE>
(d) This Agreement is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments or writings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Radio One, Inc.
By: /s/ Scott R. Royster
----------------------------------
Name: Scott R. Royster
--------------------------------
Title: Chief Financial Officer
-------------------------------
Radio One of Atlanta, Inc.
By: /s/ Mary Catherine Sneed
---------------------------------
Name: Mary Catherine Sneed
--------------------------------
Title: Vice President/ General Manager
-------------------------------
RADIO
ONE
12 March 1997
WASHINGTON, DC
WMMJ-FM Mr. Carr T. Preston
WKYS-FM Senior Vice President
WOL-AM Allied Capital
1666 K Street N.W.
BALTIMORE, MD 9th Floor
WERQ-FM Washington, D.C. 20008
WWIN-FM
WWIN-AM
WOLB-AM By Telecopier (202) 858-2053
ATLANTA, GA
WNTA-FM Dear Mr. Preston:
This Letter of Intent (the "LOI") outlines the principal terms
whereby Radio One Inc., a Delaware corporation ("Radio One" or
the "Buyer"), or any entity controled by the same principals who
control Buyer, will purchase from Allied Capital Financial
Corporation ("Allied" or the "Seller") in a warrant and stock
transaction (the "Transaction"), a warrant for all of the issued
and outstanding capital stock of Broadcast Holdings, Inc. ("BHI")
which owns radio station WYCB (AM), licensed to Washington, D.C.
(the "Station").
The consummation of the transaction contemplated by this LOI is
conditioned upon: Buyer's satisfaction, in its sole discretion,
with the results of its due diligence review of the Company as
further set forth below and the approval of the Federal
Communications Commission (the "FCC") and the negotiation and
execution of a definitive, mutually acceptable stock purchase
agreement (the "Definitive Agreement"). The parties hereto intend
this LOI to set forth the fundamental points of agreement and it
shall constitute a legally binding document, subject only to the
occurrence of such future events.
Buyer and Seller expect to enter into a Definitive Agreement,
within sixty (60) days of both Buyer and Seller executing this
LOI, subject solely to Buyer's reasonable satisfaction with its
due diligence investigation for a period of two weeks from the
date of execution of this LOI, after which, unless Buyer has so
notified Seller, the Buyer and Seller shall negotiate a
Definitive Agreement which shall be conditioned upon FCC approval
of the Transaction. Seller shall give Buyer and its authorized
representatives reasonable access at reasonable times to the
Station and shall furnish all information relating thereto as
they may request to enable Buyer to make such examinations and
investigations thereof as Buyer shall reasonably deem necessary.
We are prepared to move forward expeditously with the following
offer.
<PAGE>
Mr. Carr T. Preston
12 March 1997
Page 2
1. Consideration to be Paid by Buyer. On the date of closing, the
warrant shall be exercised by Buyer for $1.00 to purchase the BHI
stock. The consideration paid to Seller for the sale of the
warrant for the stock of BHI shall be $4,000,000 (the "Purchase
Price") of which $2,800,000 shall be used by Seller and BHI to
satisfy certain existing obligations of BHI; subject to
adjustment for any prorations and contingent liabilities, payable
as follows:
On the date of closing, by wire transfer to bank accounts
designated by Seller, the sum of $4,000,00 in immediately
available funds.
2. Escrow Closing.
(a) The date of closing for the transaction being
proposed herein shall occur no later than ten (10) days after the
consent of the FCC to the transfer of control of the licenses
shall have become a Final Order (the "Closing Date"). If the FCC
has not granted a transfer of control of the Station's licenses
within nine months after the FCC's acceptance for filing of the
application for transfer of control of such licenses, each of
Seller and Buyer shall have the right to rescind its obligations
under the Definitive Agreement, provided that such terminating
party is not then in breach of the terms and conditions of the
Definitive Agreement.
(b) If Buyer materially breaches the Definitive
Agreement or defaults in the performance of its obligations
thereunder, the sum of $100,000 shall be paid to Seller as
liquidated damages.
(c) If Seller materially breaches the Definitive
Agreement, Buyer shall have the right of specific performance.
3. Definitive Agreement. Radio One and Allied shall negotiate in
good faith the terms of the Definitive Agreement which shall
contain representations, warranties, covenants and conditions by
such parties as are usual and customary in transactions of this
kind, including provisions regarding (i) Indemnification of Radio
One and Allied; (ii) representations by the sole shareholder of
BHI as to the validity of the warrant and shares of stock; (iii)
Seller's responsibility for payment of all payables of BHI that
exist at closing and Seller's right to all pre-closing
receivables and cash; (iv) Seller's responsibility for all
obligations and liabilities that BHI may have for the employees
that Buyer does not assume. Buyer and Seller will jointly file an
application
<PAGE>
Mr. Carr T. Preston
12 March 1997
Page 3
requesting FCC approval of the transfer of control of the
Station's licenses to Buyer as contemplated herein no later than
five (5) business days after execution of the Definitive
Agreement.
4. Agreement to Negotiate Confidentiality. Buyer and Seller agree
to proceed diligently, expeditiously, and in good faith, to
execute the Definitive Agreement and the Transaction contemplated
herein in accordance with the terms set forth in this Letter of
Intent. Until the expiration or earlier termination of this
Letter of Intent, Seller shall not solicit, or negotiate with ,
any other prospective purchaser of the Station.
This Letter of Intent shall expire and be null and void upon the
earlier of (1) the expiration of the 60th day after the date of
acceptance of this Letter of Intent (subject to a reasonable
extension if the drafting of the Definitive Agreement is
proceeding diligently, (ii) the execution and delivery of the
Definitive Agreement).
We look forward to working with you to consummate the Transaction
proposed herein. Please do not hesitate to call me at
202-885-4567 with any questions or comments you may have relative
to anything contained herein.
Very truly yours,
RADIO ONE, INC.
By: /s/ Scott R. Royster
-----------------------------------------
Scott R. Royster, Chief Financial Officer
Agreed: /s/ Carr T. Preston
------------------------------------
By: Carr T. Preston
------------------------------------
Name
SVP
------------------------------------
Title
3/13/97
------------------------------------
Date of Acceptance
<PAGE>
July 1, 1997
Mr. Carr T. Preston
Senior Vice President
Allied Capital
1666 K Street, NW
Washington, D.C. 20006
Dear Mr. Preston:
Reference is made to that certain Letter of Intent dated as of March 12, 1997 by
and between Radio One, Inc. ("Radio One" or "Buyer") and Allied Capital
Financial Corporation ("Allied" or "Seller") pursuant to which Radio One, or any
entity controlled by the same principals who control Radio One, will purchase
from Allied, in a warrant and stock transaction, a warrant for all of the issued
and outstanding capital stock of BHI, as such Letter of Intent was extended by
that certain First Amendment dated as of May 6, 1997, that certain Second
Amendment dated as of May 30, 1997 and that certain Third Amendment dated as of
June 5, 1997, which Letter of Intent, as so amended, lapsed on June 18, 1997.
Capitalized terms used herein without definition shall have the meanings
assigned such terms in the Letter of Intent. Radio One and Allied hereby agree
to reinstate the provisions of the Letter of Intent, as amended by the
following:
1. The final sentence of the second paragraph of the Letter of Intent is hereby
deleted in its entirety and replaced with the following:
"The parties hereto intend this LOI to set forth the fundamental points of
agreement. However, this LOI shall not constitute a legally binding document."
2. The first sentence of the third paragraph of the Letter of Intent is hereby
deleted in its entirety.
3. Numbered Paragraph 1 of the Letter of Intent is hereby deleted in its
entirety and replaced with the following:
"Consideration to Paid by Buyer. On the date of closing, the warrant shall be
exercised by Buyer for $1.00 to purchase the BHI stock. The consideration paid
to Seller for the sale of the warrant for the stock of BHI, assuming BHI has no
debt at closing, shall be $4,000,000 (the "Purchase Price"), subject to
adjustment for any prorations and contingent liabilities. The form of payment of
the Purchase Price (i.e., cash, notes or a combination thereof) shall be
mutually agreed upon by Buyer and Seller."
4. The first sentence of numbered Paragraph 4 of the Letter of Intent is hereby
deleted in its entirety and replaced with the following:
"Buyer and Seller agree to proceed diligently, expeditiously, and in good faith
to reach agreement on the form of payment of the Purchase Price, and thereafter
to execute the Definitive Agreement and consummate the Transaction contemplated
herein in accordance with the terms set forth in this Letter of Intent, as
amended; provided, however, that nothing in this letter shall be construed to
create a duty of exclusive dealings between the parties."
5. The final sentence of numbered Paragraph 4 of the Letter of Intent is hereby
deleted in its entirety.
4. The penultimate paragraph of the Letter of Intent is hereby deleted in its
entirety and replaced with the following:
"This Letter of Intent shall expire and be null and void upon the earlier of (i)
July 31, 1997 (subject to a reasonable extension if the drafting of the
Definitive Agreement is proceeding diligently) and (ii) the execution and
delivery of the Definitive Agreement."
<PAGE>
We look forward to working with you to consummate the transactions contemplated
by the Letter of Intent as modified hereby. Please do not hesitate to call me at
301/429-2642 with any questions or comments you may have relative to anything
contained herein.
Very truly yours,
RADIO ONE, INC.
By: /s/ Scott R. Royster
-------------------------------
Scott R. Royster
Chief Financial Officer
Agreed:
ALLIED CAPITAL FINANCIAL CORPORATION
By: /s/ Carr T. Preston
-------------------------------
Carr T. Preston
Senior Vice President
<PAGE>
FIRST AMENDMENT TO LETTER OF INTENT TO ENTER INTO OPTION AND
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO LETTER OF INTENT TO ENTER INTO OPTION AND STOCK
PURCHASE AGREEMENT, is dated this 6th day of May, 1997, and is made between
RADIO ONE, INC., and ALLIED CAPITAL FINANCIAL CORPORATION.
Radio One, Inc. ("Buyer") and Allied Capital Financial Corporation
("Seller") have executed a letter of intent dated March 12, 1997, which was
accepted by Seller on March 13, 1997 ("Letter"). The Letter describes the terms
upon which the parties would enter into an Option and Stock Purchase Agreement
("Agreement") whereby Buyer would acquire from Seller its option to acquire the
stock of Broadcast Holdings, Inc., licensee of Station WYCB(AM), Washington,
D.C.
Buyer and Seller agree that it would be mutually beneficial to amend
the provision contained in the Letter which requires that the parties enter into
an Agreement on or before May 12, 1997.
In consideration of the parties' mutual agreement to continue in good
faith to finalize the Agreement, which the parties hereby acknowledge
constitutes good and valuable consideration, Buyer and Seller agree to extend
the time period to May 30, 1997, in which to negotiate and enter into an
Agreement.
Except as described above, the terms and conditions of the Letter shall
not be modified.
This amendment may be signed in counterparts, facsimile signatures to
be binding upon receipt by facsimile transmission.
AGREED TO: AGREED TO:
/s/ Alfred C. Liggins, III /s/ Carr T. Preston
- --------------------------- ---------------------------
Alfred C. Liggins, III Carr T. Preston
Radio One, Inc. Allied Capital Financial
Corporation
<PAGE>
SECOND AMENDMENT TO LETTER OF INTENT TO ENTER INTO OPTION AND
STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO LETTER OF INTENT TO ENTER INTO OPTION AND
STOCK PURCHASE AGREEMENT, is dated this 30th day of May, 1997, and is made
between RADIO ONE, INC., and ALLIED CAPITAL FINANCIAL CORPORATION.
Radio One, Inc. ("Buyer") and Allied Capital Financial Corporation
("Seller") have executed a letter of intent dated March 12, 1997, which was
accepted by Seller on March 13, 1997 ("Letter"). The Letter describes the terms
upon which the parties would enter into an Option and Stock Purchase Agreement
("Agreement") whereby Buyer would acquire from Seller its option to acquire the
stock of Broadcast Holdings, Inc., licensee of Station WYCB(AM), Washington,
D.C.
Buyer and Seller agree that it would be mutually beneficial to amend
the provision contained in the Letter which requires that the parties enter into
an Agreement on or before May 30, 1997.
In consideration of the parties' mutual agreement to continue in good
faith to finalize the Agreement, which the parties hereby acknowledge
constitutes good and valuable consideration, Buyer and Seller agree to extend
the time period to June 6, 1997, in which to negotiate and enter into an
Agreement.
Except as described above, the terms and conditions of the Letter, as
amended on May 6, 1997, shall not be modified.
This amendment may be signed in counterparts, facsimile signatures to
be binding upon receipt by facsimile transmission.
AGREED TO: AGREED TO:
/s/ Alfred C. Liggins, III /s/ Carr T. Preston
- --------------------------- ---------------------------
Alfred C. Liggins, III Carr T. Preston
Radio One, Inc. Allied Capital Financial
Corporation
<PAGE>
THIRD AMENDMENT TO LETTER OF INTENT TO ENTER INTO OPTION AND
STOCK PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO LETTER OF INTENT TO ENTER INTO OPTION AND STOCK
PURCHASE AGREEMENT, is dated this 5th day of June, 1997, and is made between
RADIO ONE, INC., and ALLIED CAPITAL FINANCIAL CORPORATION.
Radio One, Inc. ("Buyer") and Allied Capital Financial Corporation
("Seller") have executed a letter of intent dated March 12, 1997, which was
accepted by Seller on March 13, 1997 ("Letter"). The Letter describes the terms
upon which the parties would enter into an Option and Stock Purchase Agreement
("Agreement") whereby Buyer would acquire from Seller its option to acquire the
stock of Broadcast Holdings, Inc., licensee of Station WYCB(AM), Washington,
D.C.
Buyer and Seller agree that it would be mutually beneficial to amend
the provision contained in the Letter which requires that the parties enter into
an Agreement on or before June 6, 1997.
In consideration of the parties' mutual agreement to continue in good
faith to finalize the Agreement, which the parties hereby acknowledge
constitutes good and valuable consideration, Buyer and Seller agree to extend
the time period to June 18, 1997, in which to negotiate and enter into an
Agreement.
Except as described above, the terms and conditions of the Letter, as
amended on May 6, 1997, and May 30, 1997, shall not be modified.
This amendment may be signed in counterparts, facsimile signatures to
be binding upon receipt by facsimile transmission.
AGREED TO: AGREED TO:
/s/ Alfred C. Liggins, III /s/ Carr T. Preston
- --------------------------- ---------------------------
Alfred C. Liggins, III Carr T. Preston
Radio One, Inc. Allied Capital Financial
Corporation
RADIO ONE, INC. AND SUBSIDIARY
------------------------------
RATIO OF EARNINGS TO FIXED CHARGES
----------------------------------
FOR THE YEARS ENDED DECEMBER 27, 1992, DECEMBER 26, 1993
--------------------------------------------------------
DECEMBER 25, 1994, DECEMBER 31, 1995 AND 1996
---------------------------------------------
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 30, 1997
----------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER
--------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
-------------- -------------- -------------- -------------- --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Earnings
Net income (loss) $ 127,000 $ 14,000 $ 1,223,000 $ (1,856,000) $ (3,609,000)
Add:
Provision for income taxes - 92,000 30,000 - -
Extraordinary item - 138,000 - 468,000 -
Fixed charges (1) 1,198,000 2,086,000 2,783,000 5,588,000 7,762,000
-------------- -------------- -------------- -------------- --------------
Total earnings $ 2,108,000 $ 2,330,000 $ 4,036,000 $ 4,200,000 $ 4,153,000
============== ============== ============== ============== ==============
Fixed charges(1) $ 1,981,000 $ 2,086,000 $ 2,783,000 $ 5,588,000 $ 7,762,000
============== ============== ============== ============== ==============
Ratio of earnings to fixed
charges 1.06 1.12 1.45 0.75 0.54
============== ============== ============== ============== ==============
</TABLE>
MARCH
--------------------------------
1996 1997
-------------- --------------
Earnings (UNAUDITED)
Net income (loss) $ (1,926,000) $ (1,960,000)
Add:
Provision for income taxes - -
Extraordinary item - -
Fixed charges (1) 1,856,000 1,842,000
-------------- --------------
Total earnings $ (70,000) $ (118,000)
============== ==============
Fixed charges(1) $ 1,856,000 $ 1,842,000
============== ==============
Ratio of earnings to fixed
charges 0.04 0.06
============== ==============
(1) Fixed charges represented interest expense, including amortization of
discounts and the component of rent expense believed by management to be
representative of the interest factor (one-third of rent expense).
Exhibit 21.1
------------
Subsidiaries
------------
Radio One Licenses, Inc., a Delaware corporation, is the only subsidiary of
Radio One, Inc., and does business under the following call letters:
WKYS-FM
WMMJ-FM
WOL-AM
WYCB-AM
WERQ-FM
WOLB-AM
WWIN-FM
WWIN-AM
WPHI-FM
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
Baltimore, Maryland
June 27, 1997
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated February 3, 1995, on our audits of the financial statements of
WKYS-FM, Inc. We also consent to the reference to our firm under the caption
"Experts".
Coopers & Lybrand LLP
Denver, Colorado
June 27, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
_______________________
FORM T- 1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
______________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_________
___________________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification Number)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
______________________________
RADIO ONE, INC.
(Exact name of OBLIGOR as specified in its charter)
Delaware 52-1166660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
5900 Princess Garden Parkway, 7th Floor 20706
Lanham, Maryland (Zip code)
(Address of principal executive offices)
_______________________________
12% Senior Subordinated Notes due 2004
(Title of the indenture securities)
================================================================================
<PAGE>
-2-
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York (Board of Governors of the Fecleral Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obliger is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5.6,7,8,9,10,11,12,13,14 and 15.
The obliger is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is
Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14 and 15 of Form T-1 ARE not required under General
Instruction B.
16. List of Exhibit
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to
Form T-1 filed on September 15, 1995 with the the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 of 1990 (Registration
No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. List of Exhibits (continued)
T-1.4 -- The By-laws of the United States Trust Company of New York,
as amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No. 33-
97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of June 13, 1997, the trustee had 2,999,020 shares of
Common Stock outstanding, all of which are owned by its
parent company, U. S. Trust Corporation. The term "trustee"
in Item 2, refers to each of United States Trust Company of
New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility, as to
matters peculiarly within the knowledge of the obliger or
its directors, the trustee has relied upon information
furnished to it by the obligor and will rely on information
to be furnished by the obliger and the trustee disclaims
responsibility for the accuracy or completeness of such
information.
Pursuant to the requirements of the Trust Indenture Act of
1939, the trustee, United States Trust Company of New York,
a corporation organized and existing under the laws of the
State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned,
"hereunto duly authorized, all in the city of New York, and
state of New York, on the 13th day of June, 1997.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ Patricia Stermer
---------------------
Assistant Vice President
<PAGE>
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
-----------------------
Senior Vice President
<PAGE>
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31. 1996
_____________________________________
(IN THOUSANDS)
ASSETS
-------
Cash and Due from Banks $ 75,754
Short-Term Investments 276,399
Securities, Available For Sale 925,886
Loans 1,638,516
Less: Allowance for Credit Losses 13,168
----------
Net Loans 1,625,348
Premises and Equipment 61,278
Other Assets 120,903
----------
TOTAL ASSETS $ 3,085,568
===========
LIABILITIES
------------
Deposits:
Non-Interest Bearing $ 645,424
Interest Bearing 1,694,581
===========
Total Deposits 2,340,005
Short-Term Credit Facilities 449,183
Accounts Payable and Accrued Liabilities 139,261
------------
TOTAL LIABILITIES 2,928,449
------------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,926
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 804
-------------
TOTAL STOCKHOLDER'S EQUITY 157,119
TOTAL LIABILITIES AND -------------
STOCKHOLDER'S EQUITY $ 3,085,568
===============
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
/s/ Richard E. Brinkmann
- --------------------------------------
Signature of Officer
April 9, 1997
- --------------------------------------
Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of the Company for the three fiscal years
ended December 25, 1995, December 31,1995 and December 31, 1996, and for the the
three months ended March 31, 1996 and March 30, 1997, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-25-1994 DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1994 JAN-01-1995 JAN-01-1996 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-25-1994 DEC-31-1995 DEC-31-1996 MAR-31-1996 MAR-30-1997
<EXCHANGE-RATE> 1 1 1 1 1
<CASH> 0 2,702,868 1,708,295 0 3,293,452
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 6,433,086 7,184,295 0 6,334,541
<ALLOWANCES> 0 (669,400) (765,200) 0 (865,500)
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 0 8,697,341 8,244,788 0 9,097,121
<PP&E> 0 5,635,604 5,647,831 0 5,767,064
<DEPRECIATION> 0 (2,008,173) (2,640,827) 0 (2,809,921)
<TOTAL-ASSETS> 0 55,893,572 51,776,780 0 51,481,426
<CURRENT-LIABILITIES> 0 4,805,085 7,474,311 0 8,477,056
<BONDS> 0 64,585,264 64,936,511 0 65,600,459
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 1 1 0 1
<OTHER-SE> 0 (11,393,514) (15,002,757) 0 (16,962,804)
<TOTAL-LIABILITY-AND-EQUITY> 0 55,893,572 51,776,780 0 51,481,426
<SALES> 17,856,242 24,625,834 27,026,888 5,274,761 6,298,351
<TOTAL-REVENUES> 17,856,242 24,625,834 27,026,888 5,274,761 6,298,351
<CGS> (2,314,825) (3,171,059) (3,325,063) (604,802) (765,804)
<TOTAL-COSTS> (2,314,825) (3,171,059) (3,325,063) (604,802) (765,804)
<OTHER-EXPENSES> 11,661,785 17,642,338 19,982,036 4,803,737 5,748,629
<LOSS-PROVISION> 619,841 544,904 1,105,329 140,128 206,806
<INTEREST-EXPENSE> 2,664,873 5,289,054 7,252,377 1,791,834 1,765,328
<INCOME-PRETAX> 1,253,134 (1,387,370) (3,609,243) (1,925,612) (1,960,047)
<INCOME-TAX> 30,500 0 0 0 0
<INCOME-CONTINUING> 1,222,634 (1,387,370) (3,609,243) (1,925,612) (1,960,047)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 (468,233) 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 1,222,634 (1,855,603) (3,609,243) (1,925,612) (1,960,047)
<EPS-PRIMARY> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
LETTER OF TRANSMITTAL
To Tender for Exchange
12% Senior Subordinated Notes due 2004
of
RADIO ONE, INC.
Pursuant to the Prospectus Dated ____________, 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON _______________, 1997 UNLESS EXTENDED (THE
"EXPIRATION DATE").
- -------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
<TABLE>
<CAPTION>
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed, and submitted to the Exchange Agent:
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Attn: Corporate Trust Services
Attn: Corporate Trust Services Attn: Corporate Trust Services Cooper Station
New York, New York 10006 New York, New York 10276-
0844
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT
800-548-6565, OR BY FACSIMILE AT 212-420-6152.
The undersigned hereby acknowledges receipt of the Prospectus dated
___________, 1997 (the "Prospectus") of Radio One, Inc., a Delaware corporation
(the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Issuer's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its Series B 12% Senior Subordinated Notes due
2004 (the "Exchange Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement, for each $1,000 in principal amount of its outstanding 12% Senior
Subordinated Notes due 2004 (the "Notes"), of which $85,478,000 aggregate
principal amount is outstanding. Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instruction to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
<PAGE>
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Issuer, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Issuer upon receipt by the
Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer-Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owners hereunder shall be
binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, and adverse claims
when the Tendered Notes are acquired by the Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner that are not Participating Broker-Dealers, are not engaged in
and do not intend to engage in, and have no arrangement or understanding with
any person to engage in, a distribution of the Exchange Notes, (iii) except as
otherwise disclosed in writing herewith, neither the undersigned nor any
Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Issuer, and (iv) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), in connection with a secondary resale of the
2
<PAGE>
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission (the "Commission") set forth in
the no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer." In addition, by accepting the Exchange Offer, the
undersigned hereby (i) represents and warrants that, if the undersigned or any
Beneficial Owner of the Notes is a Participating Broker-Dealer, such
Participating Broker-Dealer acquired the Notes for its own account as a result
of market-making activities or other trading activities and has not entered into
any arrangement or understanding with the Company or any affiliate of the
Company (within the meaning of Rule 405 under the Securities Act) to distribute
the Exchange Notes to be received in the Exchange Offer, and (ii) acknowledges
that, by receiving Exchange Notes for its own account in exchange for Notes,
where such Notes were acquired as a result of market-making activities or other
trading activities, such Participating Broker-Dealer will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOKENTRY TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer"
BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF NOTES TENDERED
(Attach additional signed pages, if necessary)
- ----------------------------------------------------------------------------------------------------------------
Aggregate
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Note Holder(s), Certificate Principal Amount Aggregate
exactly as name(s) appear(s) on Note Certificate(s) Number(s) of Represented by Principal Amount
(Please fill in, if blank) Notes* Certificate(s) Tendered**
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes.
All other tenders must be in integral multiples of $1,000 of principal
amount. Unless otherwise indicated in this column, the principal amount
of all Note Certificates identified in this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------
State of Principal Residence of Principal Amount of Tendered Notes
Beneficial Owner of Tendered Notes Held for Account of Beneficial Owner
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES
ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT
AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
- --------------------------------------------------------------------------------
(please print)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.:
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
BOX 4
USE OF GUARANTEED DELIVERY
(See Instruction 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Name of Institution which Guaranteed Delivery:
----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(See Instruction 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
--------------------------------------------------
Account Number:
-----------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
In Addition, Complete Substitute Form W-9
- --------------------------------------------------------------------------------
X Signature-Guarantee
------------------------------------- (If required by Instruction 5)
X
------------------------------------
(Signature of Registered Holder(s) or Authorized-Signature
Authorized Signatory)
Note: The above lines must be X ----------------------------------
signed by the registered holder(s) of
Notes as their name(s) appear(s) on Name:-------------------------------
the Notes or by persons(s) authorized (please print)
to become registered holder(s)
(evidence of which authorization must
be transmitted with this Letter of Title: -----------------------------
Transmittal). If signature is by a
trustee, executor, administrator, Name of Firm: ----------------------
guardian, attorney-in-fact, officer, (Must be an Eligible Institution
or other person acting in a fiduciary as-defined in Instruction 2)
or representative capacity, such
person must set forth his or her full Address: ----------------------------
title below. See Instruction 5.
----------------------------
Name(s):-------------------------------
----------------------------
------------------------------ (include Zip Code)
Capacity:----------------------------- Area Code and Telephone Number:
------------------------------ ----------------------------
Street Address: ---------------------- Dated: ----------------------------
------------------------------
------------------------------
------------------------------
(include Zip Code)
Area-Code-and-Telephone Number:
------------------------------
Tax Identification or Social Security Number:
------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 7
BROKER-DEALER STATUS
- --------------------------------------------------------------------------------
|_| Check this box if the Beneficial Owner of the Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Notes for its own account as a result of market-making
activities or other trading activities.
- --------------------------------------------------------------------------------
|_| Check here if you are a Participating Broker-Dealer and wish to
receive 10 additional copies of the prospectus and 10 copies of any
amendments or supplements thereto.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
PAYOR'S NAME: RADIO ONE, INC.
- --------------------------------------------------------------------------------
Name (if joint names, list first and circle the name
of the person or entity whose number you enter in
SUBSTITUTE Part 1 below. See instructions if your name has
changed.)
FORM W-9 ----------------------------------------------------
Address:
Department of the Treasury
----------------------------------------------------
Internal Revenue Service
City, State and ZIP Code:
----------------------------------------------------
List account number(s) here (optional)
----------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION Social Security
NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY Number or TIN
SIGNING AND DATING BELOW
--------------------------------------------------------------------------
PART 2--Check the box if you are NOT subject to
backup withholding under the provisions of section
3406(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject
to backup withholding as a result of failure to
report all interest or dividends or (2) the Internal
Revenue
Service has notified you that you are no
longer subject to backup withholding. [ ]
- --------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I Part 3--
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM Awaiting TIN [ ]
IS TRUE, CORRECT AND COMPLETE.
SIGNATURE _________________ DATE ____________________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
- ---- WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
7
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute Form
W-9, and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "Exchange Offer--Book-Entry Transfer" (and a confirmation of such
transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of certificates
for Tendered Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the tendering holder and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the Holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Notes should be sent to the Company. Neither the Issuer nor the
registrar is under any obligation to notify any tendering holder of the Issuer's
acceptance of Tendered Notes prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedures set forth below, including completion of Box
4. Pursuant to such procedures: (i) such tender must be made by or through a
firm which is a member of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (an "Eligible Institution") and the Notice
of Guaranteed Delivery must be signed by the holder; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of the Tendered Notes and the principal amount
of Tendered Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal together with the certificate(s)
representing the Notes and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all Tendered
Notes in proper form for transfer, must be received by the Exchange Agent within
five New York Stock Exchange trading days after the Expiration Date. Any holder
who wishes to tender Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Notes prior to 5:00 p.m., New York City
time, on the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed by
an Eligible Holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of
8
<PAGE>
the box entitled "Description of Notes Tendered" (Box 1) above. The entire
principal amount of Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated. If the entire principal amount of all
Notes held by the holder is not tendered, then Notes for the principal amount of
Notes not tendered and Exchange Notes issued in exchange for any Notes tendered
and accepted will be sent to the Holder at his or her registered address, unless
a different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Notes is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the Exchange Notes and/or
substitute Notes for principal amounts not tendered or not accepted for exchange
are to be sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
9
<PAGE>
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Issuer is not provided with the correct TIN, the Holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Tendered Notes are registered in more than one name or are
not in the name of the actual owner, consult the "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the right to reject any and all Notes not
validly tendered or any Notes the Issuer's acceptance of which would, in the
opinion of the Issuer or their counsel, be unlawful. The Issuer also reserves
the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms and
conditions of the Exchange Offer (including this Letter of Transmittal and the
instructions hereto) by the Issuer shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of Notes
must be cured within such time as the Issuer shall determine. Neither the
Issuer, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, Lost, Stolen or Destroyed Notes. Any tendering Holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF NOTES.
Subject to the terms and conditions of the Exchange Offer, the Issuer will
accept for exchange all validly tendered Notes as soon as practicable after the
Expiration Date and will issue Exchange Notes therefor as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter.
10
<PAGE>
For purposes of the Exchange Offer, the Issuer shall be deemed to have accepted
tendered Notes when, as and if the Issuer has given written or oral notice
(immediately followed in writing) thereof to the Exchange Agent. If any Tendered
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Notes will be returned, without expense, to the undersigned at the
address shown in Box 1 or at a different address as may be indicated herein
under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer."
11
NOTICE OF GUARANTEED DELIVERY
With Respect to
12% Senior Subordinated Notes due 2004
of
RADIO ONE, INC.
Pursuant to the Prospectus Dated _______________, 1997
This form must be used by a holder of 12% Senior Subordinated Notes due
2004 (the "Notes") of Radio One, Inc., a Delaware corporation (the "Company"),
who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer - Guaranteed Delivery
Procedures" of the Company's Prospectus, dated ____________, 1997 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
<TABLE>
<CAPTION>
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ________________, 1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
- ----------------------------------------------------------------------------------------------------------
United States Trust Company of New York
(the "Exchange Agent")
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Attn: Corporate Trust Services
Attn: Corporate Trust Services Attn: Corporate Trust Services Cooper Station
New York, New York 10006 New York, New York 10276-0844
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
PLEASE SIGN AND COMPLETE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C>
Signatures of Registered Holder(s) or
Authorized Signatory:______________________ Date: ___________________, 1996
________________________________________ Address:_________________________________
- ---------------------------------------- ------------------------------------------
Name(s) of Registered Holder(s):_____________ Area Code and Telephone No._______________
- ----------------------------------------
- ----------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): _______________________________________________________________________
- --------------------------------------------------------------------------------
Capacity: ______________________________________________________________________
Address(es):____________________________________________________________________
- --------------------------------------------------------------------------------
3
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility described in the
prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange
trading day following the Expiration Date.
<TABLE>
<CAPTION>
<S> <C>
Name of firm_____________________________ ________________________________________
(Authorized Signature)
Address__________________________________ Name____________________________________
(Please Print)
________________________________________ Title_____________________________________
(Include Zip Code)
Area Code and Tel. No. ___________________ Dated______________________________, 1996
</TABLE>
- ------------
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
4
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
5
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
RADIO ONE, INC.
12% SENIOR SUBORDINATED NOTES DUE 2004
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
_____________, 1997 (the "Prospectus") of Radio One, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 12% Senior Subordinated Notes due 2004 (the "Notes")
held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 12% Senior Subordinated Notes due 2004
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF
ANY): $
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (fill in state) , (ii) the
undersigned is acquiring the Exchange Notes in the ordinary course of business
of the undersigned, (iii) the undersigned is not participating, does not
participate, and has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iv) the undersigned
acknowledges that any person participating in the Exchange Offer for the purpose
of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Act"), in connection with a secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer--Resales
of the Exchange Notes," and (v) the undersigned is not an "affiliate," as
defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of
the undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
SIGN HERE
Name of beneficial owner(s): ---------------------------------------------------
Signature(s):-------------------------------------------------------------------
Name (please print):------------------------------------------------------------
Address: -------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
Telephone number: ------------------------------------------------------------
Taxpayer Identification or Social Security Number: -----------------------------
Date: --------------------------------------------------------------------------
- --------------------------------------------------------------------------------
