<PAGE>
As filed with the Securities and Exchange Commission on March , 1999
Registration No. [333- ]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
Radio One, Inc.
(Exact name of Registrant as specified in its charter)
---------------
Delaware 52-1166660 4832
(State or other (I.R.S. Employer (Primary Standard Industry
jurisdiction of Identification No.) Classification Number)
incorporation of
organization)
5900 Princess Garden Parkway, 8th Floor
Lanham, MD 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
Chief Executive Officer and President
Radio One, Inc.
5900 Princess Garden Parkway, 8th Floor
Lanham, MD 20706
Telephone: (301) 306-1111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
RICHARD L. PERKAL, ESQ. ANTOINETTE COOK BUSH, ESQ.
Kirkland & Ellis STEPHEN W. HAMILTON, ESQ.
655 Fifteenth Street, N.W. Skadden, Arps, Slate, Meagher &
Washington, D.C. 20005 Flom LLP
Telephone: (202) 879-5000 1440 New York Avenue, N.W.
Washington, D.C. 20005
Telephone: (202) 371-7000
---------------
Approximate date of commencement of the proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [_]
If this Form is filed to register additional securities for an offering pur-
suant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier ef-
fective Registration Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) un-
der the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
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- ----------------------------------------------------------------------------------
<CAPTION>
Proposed
Maximum
Title of each Class of Amount Proposed Aggregate Amount of
Securities to be to be Maximum Offering Registration
Registered Registered(/1/) Offering Price Price(/2/) Fee
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
par value $0.01 per
share................ Shares $ $115,000,000 $31,970
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</TABLE>
(1) Includes shares that the underwriters have the option to purchase
from the Company to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to paragraph (o) of Rule 457 of the Securities Act.
---------------
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 Registra-
tion Statement shall thereafter become effective in accordance with Section
8(a) of the Securities Act or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting pur-
suant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities and it is not soliciting +
+an offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED 12, 1999
Shares
[LOGO OF RADIO ONE APPEARS HERE]
Class A Common Stock
--------
We are selling shares of Class A Common Stock and the selling
stockholders are selling shares of Class A Common Stock. We
will not receive any proceeds from shares sold by the
selling stockholders.
Prior to this offering, there has been no public market for our Class A
Common Stock. The initial public offering price is expected to be between
$ and $ per share. We have applied to list our Class A Common
Stock on The Nasdaq Stock Market's National Market under the symbol
"ROIA."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
Investing in our Class A Common Stock involves risks. See "Risk Factors" on
page 9.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions Radio One Stockholders
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share.................................. $ $ $ $
Total...................................... $ $ $ $
</TABLE>
Delivery of the shares of Class A Common Stock will be made on or about ,
1999, against payment in immediately available funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston
NationsBanc Montgomery Securities LLC
Bear, Stearns & Co. Inc.
Prudential Securities
Prospectus dated , 1999.
<PAGE>
[Map of Eastern U.S. with ROI radio station logos, call signs and frequencies.]
<PAGE>
------------
TABLE OF CONTENTS
------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Dilution................................................................. 15
Capitalization........................................................... 16
Recent and Pending Transactions.......................................... 18
Unaudited Pro Forma Consolidated Financial Information................... 21
Selected Historical Consolidated Financial Data.......................... 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 32
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business................................................................... 41
Management................................................................. 69
Certain Relationships and Related Transactions............................. 73
Selling Stockholders....................................................... 75
Principal Stockholders..................................................... 75
Description of Capital Stock............................................... 77
Description of Indebtedness................................................ 81
Shares Eligible for Future Sale............................................ 83
Underwriting............................................................... 85
Notice to Canadian Residents............................................... 88
Legal Matters.............................................................. 89
Experts.................................................................... 89
Additional Information..................................................... 89
Index to Financial Statements.............................................. F-1
</TABLE>
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Radio One's principal executive offices are located at 5900 Princess Garden
Parkway, 8th Floor, Lanham, MD 20706, and our telephone number is (301) 306-
1111.
i
<PAGE>
PROSPECTUS SUMMARY
In this prospectus, unless otherwise noted, the terms "Radio One," "we,"
"our" and "us" refer to Radio One, Inc. and our subsidiaries Radio One
Licenses, Inc., WYCB Acquisition Corporation, Broadcast Holdings, Inc., Bell
Broadcasting Company, Radio One of Detroit, Inc., Allur-Detroit, Inc., Allur
Licenses, Inc., Radio One of Atlanta, Inc., ROA Licenses, Inc., Dogwood
Communications, Inc. and Dogwood Licenses, Inc., from the time of their
respective acquisitions. This summary contains a general discussion of our
business, this offering and summary financial information. We encourage you to
read the entire prospectus for a more complete understanding of Radio One and
this offering. Except where otherwise noted, all share numbers and per share
data in this prospectus give effect to the capitalization transactions
described in "Capitalization."
RADIO ONE, INC.
Introduction
Radio One was founded in 1980 and is the largest radio broadcasting company
in the United States primarily targeting African-Americans. After we complete
our pending acquisitions, we will own and operate 26 radio stations. Twenty-
five of these stations (eighteen FM and seven AM) are in nine of the top 20
African-American radio markets: Washington, D.C., Baltimore, Atlanta,
Philadelphia, Detroit, St. Louis, Cleveland, Richmond and an East Coast market.
Our strategy is to expand within our existing markets and into new markets that
have a significant African-American presence. We believe radio broadcasting
primarily targeting African-Americans has significant growth potential. We also
believe that we have a competitive advantage in the African-American market,
and the radio industry in general, due to our primary focus on urban formats,
our skill in programming and marketing these formats, and our turnaround
expertise.
We have succeeded in increasing ratings, net broadcast revenue and broadcast
cash flow of all of the FM stations we have owned or managed for at least one
year. The radio station clusters that we owned as of December 31, 1998, were
ranked first or second in all of their markets in combined audience and revenue
share among radio stations primarily targeting African-Americans. Our net
broadcast revenue and broadcast cash flow have grown significantly on both a
total and same station basis:
. Net broadcast revenue grew at a compound annual rate of 60.2% from an
actual $23.7 million in 1996 to $60.8 million in 1998, pro forma for
completed transactions.
. Broadcast cash flow grew at a compound annual rate of 66.0% from an
actual $9.8 million in 1996 to $27.0 million in 1998, pro forma for
completed transactions.
. Same station net broadcast revenue and broadcast cash flow grew at
average annual rates of 28.0% and 42.1%, respectively, from 1996 through
1998, pro forma for Radio One of Atlanta, Inc., which was managed by us
during this period.
. After-tax cash flow grew at a compound annual rate of 206.2% from an
actual $0.8 million in 1996 to $7.5 million in 1998, pro forma for
completed transactions.
Radio One is led by our Chairperson and co-founder, Ms. Catherine L. Hughes,
and her son, Mr. Alfred C. Liggins, III, our Chief Executive Officer and
President, who together have over 40 years of operating experience in radio
broadcasting. Ms. Hughes, Mr. Liggins and our strong management team have
successfully implemented a strategy of acquiring and turning around
underperforming radio stations. We believe that we are well positioned to apply
our proven operating strategy to our recently or soon to be acquired stations
in Detroit, St. Louis, Cleveland, Richmond and an East Coast market, and to
other radio stations in existing and new markets as attractive acquisition
opportunities arise.
1
<PAGE>
The African-American Market Opportunity
We believe that operating urban formatted radio stations primarily
targeting African-Americans has significant growth potential for the
following reasons:
. Rapid Population Growth. The African-American population is growing more
quickly than the population as a whole, and is expected to exceed 40
million by 2010. (Source: 1996 U.S. Census Bureau Current Population
Report)
. Higher Income Growth. African-Americans' household income is increasing
more quickly than the household income of the population as a whole, and
is estimated to reach $533 billion, or 8.2% of total buying power, in
1999. (Source: "African-American Buying Power by Place of Residence:
1990-1999" Dr. Jeffrey M. Humphreys)
. Growth in Advertising Targeting the African-American Market. In a recent
study, it was estimated that major national advertisers spent $881
million on advertising targeting African-American consumers in 1997, up
from $463 million in 1985. (Source: Target Market News - 1997)
. Urbanization of American Culture and Society. We believe that there is
an ongoing "urbanization" of many facets of American society as
evidenced by the influence of African-American culture in the areas of
music, film, fashion, sports and urban-oriented television shows.
. Growing Popularity of Urban Formats. In 1998, urban formats were one of
the top three formats in nine of the top ten radio markets nationwide
and the top format in five of these markets. (Source: INTEREP, Research
Division, 1998 Urban Radio Study)
. Concentrated Presence in Urban Markets. In 1996, approximately 58.0% of
the African-American population was located in the top 30 African-
American markets. (Source: BIA Fourth Edition 1998)
. Strong Audience Listenership and Loyalty. In 1996, African-Americans
spent more time listening to radio broadcasts than did other segments of
the population in the ten largest markets, and we believe African-
Americans exhibit greater loyalty to radio stations that target the
African-American community. (Source: INTEREP, Research Division, 1998
Urban Radio Study)
2
<PAGE>
Radio One and Our Markets(/1/)
<TABLE>
<CAPTION>
Pro Forma Radio One Data(/2/) Market Data(/3/)
------------------------------------------------- ------------------------------------------------
Number of African-American
Stations Market Entire Market 1996 MSA Population
--------- ------------------ ---------------- ------------------------
Ranking by
1998 Annual Size of
Radio African-
Audience Revenue Audience Revenue Revenue American Total African-
Market FM AM Share Rank Rank Share Share ($ millions) Population (in millions) American %
- ------ ---- ---- ---------- ------- -------- ------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Washington, D.C....... 2 2 1 1 12.0 9.5% $257.0 3 4.2 27.2%
Detroit............... 2 2(/4/) 2 2 4.7 3.6 211.5 5 4.5 22.5
Philadelphia.......... 1 -- 2 2 3.3 2.2 249.1 6 4.9 19.9
Atlanta............... 2 -- 2 3 6.3 4.6 257.7 7 3.6 25.7
Baltimore............. 2 2 1 1 17.0 19.1 100.2 11 2.5 26.0
St. Louis............. 1 -- n/a n/a n/a n/a 114.4 16 2.6 17.2
Cleveland............. 1 1 n/a n/a n/a n/a 97.0 17 2.1 18.7
Richmond.............. 6 1 n/a n/a n/a n/a 43.1 19 0.9 30.0
</TABLE>
- --------
(1) This table summarizes more detailed information provided under "Business."
"n/a" means not applicable because we did not own or manage stations in
these markets at the end of 1998. This table does not include information
with respect to our pending acquisition of a radio station in an East Coast
market.
(2) Audience Share Rank and Audience Share data are from the Fall 1998 Arbitron
Survey. Revenue Rank and Revenue Share data are from Hungerford or Miller
Kaplan, adjusted to include WYCB-AM, which does not report to Hungerford or
Miller Kaplan.
(3) Annual Radio Revenue data are from Hungerford or Miller Kaplan. Population
data are from BIA (Fourth Edition 1998).
(4) Includes WJZZ-AM, which is located in Kingsley, Michigan.
Acquisition Strategy
Our acquisition strategy is to acquire and turn around underperforming radio
stations principally in the top 30 African-American markets. We consider
acquisitions in existing markets where expanded coverage is desirable and in
new markets where we believe it is advantageous to establish a presence. For
strategic reasons, or as a result of a station cluster purchase, we may also
acquire and operate stations with formats that target non-African-American
segments of the population.
Turnaround Expertise
We typically enter a market by acquiring a station or stations that have
little or negative broadcast cash flow. Additional stations we have acquired in
existing markets have often been, in our opinion, substantially
underperforming. By implementing our operating strategy, we have succeeded in
increasing ratings, net broadcast revenue and broadcast cash flow of all the FM
stations we have owned or managed for at least one year. We have achieved these
improvements while operating against much larger competitors. Some of these
successful turnarounds are described below by market:
. Washington, D.C. In 1995, we acquired WKYS-FM for approximately $34.0
million. At the time, WKYS-FM was ranked number 12 by Arbitron in the
12-plus age demographic. Over a two-year period, we repositioned WKYS-
FM, improved its programming and enhanced the station's community
involvement and image. In the Fall 1998 Arbitron Survey, the station was
ranked number one in the 18-34 age demographic (with a 10.2 share) and
number two in the 12-plus age demographic (with a 5.4 share), behind two
stations tied for number one (each with a 5.6 share).
In 1987, we acquired WMMJ-FM for approximately $7.5 million. At the
time, WMMJ-FM was being programmed in a general market Adult
Contemporary format, and had a 1.2 share of the 12-plus age demographic.
After extensive research, we changed the station's format, making WMMJ-
FM the first FM radio station on the East Coast to introduce an Urban
Adult Contemporary programming format. In the Fall 1998 Arbitron Survey,
the station was ranked number three in the 25-54 age demographic (with a
5.8 share) and number five in the 12-plus age demographic (with a 5.0
share).
3
<PAGE>
. Baltimore. In 1993, we acquired WERQ-FM and WOLB-AM (formerly WERQ-AM)
for approximately $9.0 million. At the time, these stations had mediocre
ratings. We converted WERQ-FM's programming to a more focused Young
Urban Contemporary format and began aggressively marketing the station.
WERQ-FM is now Baltimore's dominant station, ranked number one in the
12-plus, 18-34 and 25-54 age demographics in the Fall 1998 Arbitron
Survey, a position it first achieved in the Spring 1997 Arbitron Survey.
In 1992, we acquired WWIN-FM and its sister station, WWIN-AM, for
approximately $4.7 million. At the time, WWIN-FM was a distant second in
ratings to its in-format direct competitor, WXYV-FM. We repositioned
WWIN-FM towards the 25-54 age demographic, and in the Fall 1998 Arbitron
Survey the station was ranked number two in that age demographic (with a
7.5 share) behind two stations tied for number one (each with a 7.7
share), including Radio One's WERQ-FM.
. Atlanta. In 1995, Radio One of Atlanta, Inc., then an affiliate of Radio
One, acquired WHTA-FM (formerly WQUL-FM), a Class A radio station
located approximately 40 miles from Atlanta, for approximately $5.0
million. Prior to that acquisition, the previous owners, together with
our management, upgraded and moved the station approximately 20 miles
closer to Atlanta. The result was the introduction of a new, Young Urban
Contemporary radio station in the Atlanta market. The station's ratings
increased quickly to an approximate 5.0 share in the 12-plus age
demographic. In the Fall 1998 Arbitron Survey, the station was ranked
number four in the 18-34 age demographic (with an 8.3 share).
. Philadelphia. In 1997, we acquired WPHI-FM (formerly WDRE-FM) for
approximately $20.0 million. At the time, WDRE-FM was being programmed
in a Modern Rock format and had a 2.0 share in the 12-plus age
demographic. We changed the station's format to Young Urban Contemporary
and, in the Fall 1998 Arbitron Survey, the station was ranked number 14
in the 12-plus age demographic (with a 3.3 share) and number five in the
18-34 age demographic (with a 6.0 share).
Operating Strategy
In order to maximize net broadcast revenue and broadcast cash flow at our
radio stations, we strive to achieve the largest audience share of African-
American listeners in each market, convert these audience share ratings to
advertising revenue, and control operating expenses.
4
<PAGE>
Recent and Pending Acquisitions
We have acquired or agreed to acquire 18 radio stations since January 1,
1998. These acquisitions diversify our net broadcast revenue, broadcast cash
flow and asset bases and increase the number of top 20 African-American markets
in which we operate from three to nine. The table below sets forth information
regarding each of our recently completed or pending acquisitions as of March
31, 1999.
<TABLE>
<CAPTION>
No. of Approximate
Market Stations Call Letters Purchase Price Date Completed
- ------ -------- ------------ -------------- --------------
(in millions)
<S> <C> <C> <C> <C>
Completed Transactions
Washington, D.C.
(Broadcast Holdings,
Inc.)................ 1 WYCB-AM $ 3.8 3/98
Detroit/Kingsley (Bell
Broadcasting
Company)............. 3 WDTJ-FM 34.2 6/98
WCHB-AM
WJZZ-AM
Detroit (Allur-
Detroit, Inc.)....... 1 WWBR-FM 26.5 12/98
Atlanta (Radio One of
Atlanta, Inc. and
Dogwood
Communications,
Inc.)................ 2 WHTA-FM (1) 3/99
WAMJ-FM
--- ------
Subtotal............ 7 64.5(/2/)
--- ------
Pending Transactions
St. Louis............. 1 WFUN-FM 13.6 --
Cleveland............. 2 WENZ-FM 20.0 --
WERE-AM
Richmond I............ 1 WDYL-FM 4.6 --
Richmond II........... 2 WKJS-FM 12.0 --
WSOJ-FM
Richmond III.......... 4 WJRV-FM 34.0 --
WCDX-FM
WPLZ-FM
WGCV-AM
East Coast market..... 1 -- -- --
--- ------
Subtotal............ 11 84.2(/3/)
--- ------
Total............. 18 $148.7(/2/)(/3/)
=== ======
</TABLE>
- --------
(1) Radio One issued shares of our Common Stock and assumed
approximately $16.3 million of net debt in this transaction.
(2) Excludes Radio One of Atlanta, Inc. and Dogwood Communications, Inc.
(3) Excludes our pending acquisistion in an East Coast market.
Preferred Stock Offering and Redemption
Concurrent with this offering, we intend to sell $50.0 million of % New
Preferred Stock. The Preferred Stock Offering is being made by a separate
prospectus. We intend to use the proceeds of the Preferred Stock Offering to
redeem all of our outstanding Senior Preferred Stock and to reduce outstanding
amounts under our Bank Credit Facility.
5
<PAGE>
The Offering
Class A Common Stock offered(/1/)... shares by Radio One
shares by the selling stockholders
-----
shares of Class A Common Stock
-----
-----
Common Stock to be outstanding
after this offering(/1/)(/2/).......
shares of Class A Common Stock
shares of Class B Common Stock
shares of Class C Common Stock
-----
shares of Common Stock
-----
-----
Voting Rights....................... Holders of Class A Common Stock are
entitled to one vote per share and are
entitled to elect two independent
directors. Holders of Class B Common
Stock are entitled to ten votes per
share. Holders of Class C Common Stock do
not have voting rights, except as
required by law.
Other Rights........................ Except as to voting and conversion
rights, each class of Common Stock has
the same rights.
Use of Proceeds..................... Radio One intends to use the net proceeds
of this offering and the Preferred Stock
Offering to:
. repay amounts borrowed under our Bank
Credit Facility;
. repay amounts borrowed to fund our
acquisition of WYCB-AM in Washington,
D.C.;
. redeem our Senior Preferred Stock; and
. increase our working capital.
Proposed NASDAQ Symbol.............. ROIA
- --------
(1) Excludes shares of Class A Common Stock that may be issued to cover
over-allotments of shares.
(2) Excludes shares of Class A Common Stock issuable upon exercise of
stock options with a weighted average price of $ per share.
6
<PAGE>
Summary Historical and Pro Forma Consolidated Financial Data
The following table contains summary historical financial information
derived from the audited consolidated financial statements of Radio One. The
table also contains summary unaudited pro forma financial information derived
from the unaudited pro forma financial information set forth under "Unaudited
Pro Forma Consolidated Financial Information." The summary unaudited pro forma
consolidated financial information does not purport to represent what our
results of operations or financial condition would actually have been had the
transactions described below occurred on the dates indicated or to project our
results of operations or financial condition for any future period or date. The
summary financial data set forth in the following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Consolidated Financial
Information" and the consolidated financial statements of Radio One included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
---------------------------------------------------
Historical 1998 Pro Forma
----------------------------- ---------------------
Completed As
1996 1997 1998 Transactions Adjusted
--------- --------- --------- ------------ --------
(audited) (audited) (audited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Net broadcast revenue.... $23,702 $32,367 $46,109 $ 60,828 $ 73,309
Station operating ex-
penses.................. 13,927 18,848 24,501 34,118 42,403
Corporate expenses....... 1,793 2,155 2,800 3,213 3,213
Depreciation and amorti-
zation.................. 4,262 5,828 8,445 15,570 21,577
------- ------- ------- -------- --------
Operating income....... 3,720 5,536 10,363 7,927 6,116
Interest expense......... 7,252 8,910 11,455 16,603
Other income (expense),
net..................... (77) 415 358 329
Income tax benefit (ex-
pense).................. -- -- 1,575 2,480
------- ------- ------- -------- --------
Income (loss) before
extraordinary item.... $(3,609) $(2,959) $ 841 $ (5,867) $
======= ======= ======= ======== ========
Earnings per common
share:
Basic.................. $ $ $ $ $
Diluted................
Weighted average common
shares outstanding:
Basic..................
Diluted................
Other Data:
Broadcast cash flow...... $ 9,775 $13,519 $21,608 $ 27,004 $ 31,200
Broadcast cash flow mar-
gin..................... 41.2% 41.8% 46.9% 44.4% 42.6%
EBITDA (before non-cash
compensation expense)... $ 7,982 $11,364 $18,808 $ 23,791 $ 27,987
After-tax cash flow...... 806 2,869 7,248 7,517
Cash interest expense.... 4,815 4,413 7,192 12,340
Capital expenditures..... 252 2,035 2,236 3,921
</TABLE>
<TABLE>
<S> <C>
Ratio of earnings to fixed charges*...................................... x
Ratio of total debt to EBITDA (before non-cash compensation expense) .... x
Ratio of EBITDA (before non-cash compensation expense) to interest ex-
pense .................................................................. x
Ratio of EBITDA (before non-cash compensation expense) to cash interest
expense ................................................................ x
</TABLE>
<TABLE>
<S> <C> <C> <C>
Balance Sheet Data (at period end):
Cash and cash equivalents............................ $ 4,455 $ 1,466 $
Intangible assets, net............................... 127,639 176,786
Total assets......................................... 153,856 204,717
Total debt (including current portion and deferred
interest)........................................... 131,739 148,176
Preferred stock...................................... 26,684 26,684
Total stockholders' equity (deficit)................. (24,859) 8,376
</TABLE>
- --------
* Earnings were insufficient to cover fixed charges for the fiscal years ended
December 31, 1996, 1997 and 1998 by approximately $3.6 million, $3.0 million,
and $734,000, respectively, and on a pro forma as adjusted basis for the year
ended December 31, 1998 by approximately $ million.
7
<PAGE>
. The pro forma amounts for the year ended December 31, 1998, in the
column "Completed Transactions" are adjusted to give effect to the
following acquisitions as if they had occurred as of the beginning of
the period:
-- Bell Broadcasting Company;
-- Allur-Detroit, Inc.;
-- Radio One of Atlanta, Inc.; and
-- Dogwood Communications, Inc. (by Radio One of Atlanta, Inc.).
. The pro forma amounts for the year ended December 31, 1998, in the
column "As Adjusted" are adjusted to give effect to the completed
transactions described above and the following pending acquisitions and
other transactions as if they had occurred as of the beginning of the
period:
-- the pending acquisitions:
. assets of WFUN-FM in St. Louis (pro forma balance sheet only);
. WENZ-FM and WERE-AM in Cleveland;
. WDYL-FM in Richmond;
. WKJS-FM and WSOJ-FM in Richmond;
. WJRV-FM, WCDX-FM, WPLZ-FM and WGCV-AM in Richmond; and
. a radio station in an East Coast market.
-- this offering;
-- the Preferred Stock Offering;
-- the redemption of our Senior Preferred Stock; and
-- the repayment of debt.
. The pro forma balance sheet data are adjusted to give effect to the
transactions described above as if they had occurred on December 31,
1998.
8
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information in
this prospectus before deciding to invest in shares of Class A Common Stock of
Radio One.
Substantial Leverage - Our substantial level of indebtedness could adversely
affect us.
As of December 31, 1998, on a pro forma basis after giving effect to the
transactions described under "Unaudited Pro Forma Consolidated Financial
Information," we would have had outstanding total debt of $ million
(including $ million bearing interest at variable rates), New Preferred
Stock with an aggregate liquidation preference of $50 million and stockholders'
equity of $ million.
Our substantial level of indebtedness could adversely affect us for various
reasons, including limiting our ability to:
. obtain additional financing for working capital, capital expenditures,
acquisitions, debt service requirements or other corporate purposes;
. have sufficient funds available for operations, future business
opportunities or other purposes;
. compete with competitors who are less leveraged than we are; and
. react to changing market conditions, changes in our industry and
economic downturns.
Restrictions Imposed by Terms of Indebtedness - The terms of our indebtedness
restrict us from engaging in many activities and require us to satisfy various
financial tests.
Our Bank Credit Facility and the agreements governing our other outstanding
debt and New Preferred Stock contain covenants that restrict, among other
things, our ability to incur additional debt, pay cash dividends, purchase our
capital stock, make capital expenditures, make investments or other restricted
payments, swap or sell assets, engage in transactions with affiliates, create
liens securing non-senior debt or merge, consolidate or sell all or
substantially all of our assets.
Our Bank Credit Facility also requires us to get our banks' consent before
we make acquisitions. This restriction may make it more difficult to pursue our
acquisition strategy. Our Bank Credit Facility also requires us to maintain
specific financial ratios. Events beyond our control could affect our ability
to meet those financial ratios, and we cannot assure you that we will meet
them.
All of the loans under our Bank Credit Facility are due on December 31,
2003. A breach of any of the covenants contained in our Bank Credit Facility
could allow our lenders to declare all amounts outstanding under the Bank
Credit Facility to be immediately due and payable. In addition, our lenders
could proceed against the collateral granted to them to secure that
indebtedness. If the amounts outstanding under the Bank Credit Facility are
accelerated, we cannot assure you that our assets will be sufficient to repay
in full the money owed to the banks or to our other debt holders.
History of Net Losses - We have a history of losses and may have losses in the
future.
Prior to 1998, we experienced net losses in most years and, after giving
effect to the transactions described under "Unaudited Pro Forma Consolidated
Financial Information," as if they had occurred on January 1, 1998, we had net
losses of $ million for the year ended December 31, 1998, on a pro forma as
adjusted basis.
The primary reasons for these losses are significant charges for
depreciation and amortization relating to the acquisition of radio stations and
interest charges on our outstanding debt. If we acquire additional stations,
these charges will probably increase.
9
<PAGE>
Dependence on Key Personnel - We are dependent on certain key personnel to
operate our growing business.
Our business depends upon the continued efforts, abilities and expertise of
our executive officers and other key employees. We intend to enter into
employment agreements with several of our key employees, including Ms.
Catherine L. Hughes, Mr. Alfred C. Liggins, III, and other executive officers.
We believe that the loss of any of these individuals could have a material
adverse effect on us.
Competition - We operate in a highly competitive industry. Our competition
comes from other stations and other media.
Our stations compete for audiences and advertising revenue with other radio
stations and with other media such as television, newspapers, direct mail and
outdoor advertising. Audience ratings and advertising revenue are subject to
change and any adverse change in a market could adversely affect our net
broadcast revenue in that market. If a competing station converts to a format
similar to that of one of our stations, or if one of our competitors
strengthens its operations, our stations could suffer a reduction in ratings
and advertising revenue. Other radio companies which are larger and have more
resources may also enter markets in which we operate. Although we believe our
stations are well positioned to compete, we cannot assure you that our stations
will maintain or increase their current ratings or advertising revenue.
Risks of Acquisition Strategy - Many factors will affect our ability to execute
our acquisition strategy.
We intend to grow by acquiring radio stations primarily in top 30 African-
American markets. We cannot assure you that our acquisition strategy will be
successful due to the following risks, including:
. We cannot assure you that our pending acquisitions will be consummated;
. Acquired stations may not increase our broadcast cash flow or yield
other anticipated benefits;
. Required regulatory approvals may result in unanticipated delays in
completing acquisitions;
. We may have difficulty integrating the operations, systems and
management of our acquired stations;
. Our acquisition strategy may divert management's attention from other
business concerns;
. We may lose key employees of acquired stations;
. We may be required to raise additional financing and our ability to do
so is limited by the terms of our debt instruments; and
. We may not be able to acquire additional stations on attractive terms
due to increased competition for acquisition opportunities.
Controlling Stockholders - Two stockholders have a majority interest in Radio
One and have the power to control matters on which Radio One's stockholders may
vote.
Upon completion of this offering, Ms. Catherine L. Hughes and her son, Mr.
Alfred C. Liggins, III, will collectively hold approximately percent
( percent if the underwriters exercise their over-allotment option) of the
outstanding voting power of Radio One's Common Stock. As a result, Ms. Hughes
and Mr. Liggins will control most decisions involving Radio One, including
transactions involving a change of control of Radio One, such as a sale or
merger. In addition, certain covenants in Radio One's debt instruments require
that Ms. Hughes and Mr. Liggins maintain specified ownership and voting
interests in Radio One, and prohibit other parties' voting interests from
exceeding specified amounts. Ms. Hughes and Mr. Liggins have agreed to vote
their shares together in elections to the Board of Directors.
10
<PAGE>
Technology Changes, New Services and Evolving Standards - We must respond to
the rapid changes in technology, services and standards which characterize our
industry in order to remain competitive.
The radio broadcasting industry is subject to rapid technological change,
evolving industry standards and the emergence of new media technologies.
Several new media technologies are being developed, including the following:
. Audio programming by cable television systems, direct broadcast
satellite systems, Internet content providers and other digital audio
broadcast formats;
. Satellite digital audio radio service, which could result in the
introduction of several new satellite radio services with sound quality
equivalent to that of compact discs; and
. In-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services.
We recently entered into a programming agreement with a satellite digital
audio radio service and have also invested in a developer of digital audio
broadcast technology. However, we cannot assure you that these arrangements
will be successful or enable us to adapt effectively to these new media
technologies. We also cannot assure you that we will continue to have the
resources to acquire other new technologies or to introduce new services that
could compete with other new technologies.
Importance of the Washington, D.C. and Baltimore Markets - A large portion of
our net broadcast revenue and broadcast cash flow comes from these markets.
Based upon the stations we owned or managed at the end of 1998, our radio
stations in Washington, D.C. and Baltimore collectively accounted for 62.9% and
70.4% of our net broadcast revenue and broadcast cash flow, respectively, for
the year ended December 31, 1998, on a pro forma basis, after giving effect to
the completed transactions described under "Unaudited Consolidated Pro Forma
Financial Information." A significant decline in net broadcast revenue or
broadcast cash flow from our stations in these markets could have a material
adverse effect on our financial position and results of operations.
Government Regulation - Our business depends on maintaining our licenses with
the FCC. We cannot assure you that we will be able to maintain these licenses.
Radio broadcasters depend upon maintaining radio broadcasting licenses
issued by the FCC. These licenses are ordinarily issued for a maximum term of
eight years and may be renewed. Our radio broadcasting licenses expire at
various times from October 1, 2003 to August 1, 2006. Although we may apply to
renew our FCC licenses, interested third parties may challenge our renewal
applications. In addition, if Radio One or any of our stockholders, officers,
or directors violates the FCC's rules and regulations or the Communications Act
of 1934, as amended, or is convicted of a felony, the FCC may commence a
proceeding to impose sanctions upon us. Examples of possible sanctions include
the imposition of fines; the revocation of our broadcast licenses; or the
renewal of one or more of our broadcasting licenses for a term of fewer than
eight years. If the FCC were to issue an order denying a license renewal
application or revoking a license, we would be required to cease operating the
radio station covered by the license only after we had exhausted administrative
review without success.
The radio broadcasting industry is subject to extensive and changing federal
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 and assignments. The filing of petitions or complaints
against Radio One or any FCC licensee from which we are acquiring a station
could result in the FCC delaying the grant of, or refusing to grant or imposing
conditions on its consent to the assignment or transfer of licenses. The
Communications Act and FCC rules also impose limitations on non-U.S. ownership
and voting of the capital stock of Radio One.
11
<PAGE>
Antitrust Matters - Our growth strategy may be adversely affected by future
legal and regulatory changes. We may have difficulty obtaining regulatory
approval for our acquisitions.
An important part of our growth strategy is the acquisition of additional
radio stations. After the passage of the Telecommunications Act of 1996, the
U.S. Department of Justice has become more aggressive in reviewing proposed
acquisitions of radio stations and radio station networks. The Justice
Department is particularly aggressive when the proposed buyer already owns one
or more radio stations in the market of the station it is seeking to buy.
Recently, the Justice Department has challenged a number of radio broadcasting
transactions. Some of those challenges ultimately resulted in consent decrees
requiring, among other things, divestitures of certain stations. In general,
the Justice Department has more closely scrutinized radio broadcasting
acquisitions that result in local market shares in excess of 40% of radio
advertising revenue. Similarly, the FCC has announced new procedures to review
proposed radio broadcasting transactions even if the proposed acquisition
otherwise complies with the FCC's ownership limitations. In particular, the FCC
may invite public comment on proposed radio transactions that the FCC believes,
based on its initial analysis, may present ownership concentration concerns in
a particular local radio market.
Dilution - New investors will incur immediate and substantial dilution.
Based upon an assumed public offering price of $ per share, stock
purchased in this offering will incur immediate and substantial dilution in net
tangible book value of $ per share (or $ per share if the over-allotment
option is exercised in full).
Shares of Common Stock Eligible for Future Sale - Future sales by existing
stockholders could depress the market price of Class A Common Stock.
Immediately after this offering, the public market for the Common Stock will
include only the shares that we and the selling stockholders are selling in
this offering. At that time, there will be an additional shares of
Common Stock outstanding. The shares held by our existing stockholders are
subject to "lock-up" agreements that prohibit such existing stockholders from
selling their shares of Common Stock in the public market for 180 days after
the date of this prospectus (or earlier with the consent of Credit Suisse First
Boston Corporation in its sole discretion). When the 180-day "lock-up" period
expires, our existing stockholders will be able to sell their shares in the
public market, subject to certain legal restrictions. If our existing
stockholders sell a large number of shares, the market price of shares of
Common Stock could decline dramatically. Moreover, the perception in the public
market that these stockholders might sell shares of Common Stock could depress
the market price of the Common Stock. Furthermore, our existing stockholders
have the right to require us to register their shares, which may facilitate
their sale of shares in the public market.
No Prior Public Market for the Class A Common Stock - Investors will be subject
to market risks typically associated with initial public offerings.
Prior to this offering, there has been no public market for the Class A
Common Stock. We have applied to list the Class A Common Stock for trading on
the Nasdaq's National Market. After this offering, an active trading market
might not develop or continue. If you purchase shares of Class A Common Stock
in this offering, you will pay a price that was not established in a
competitive market. Rather, you will pay a price that we negotiated with our
underwriters and the selling stockholders. The price of the Class A Common
Stock that will prevail in the market after this offering may be higher or
lower than the price you pay. For a description of the factors we will consider
in negotiating the public offering price, see "Underwriting."
Year 2000 - Computer programs and microprocessors that have date sensitive
software may recognize a date using "00" as year 1900 rather than 2000, or not
recognize the date at all, which could result in major system failures or
miscalculations.
We rely, directly and indirectly, on information technology systems to
operate our radio stations, provide our radio stations with up-to-date news and
perform a variety of administrative services, including accounting,
12
<PAGE>
financial reporting, advertiser spot scheduling, payroll and invoicing. We also
use non-information technology systems, such as microchips, for dating and
other automated functions. We are in the process of assessing and remediating
potential risks to our business related to the Year 2000 problem. Although we
believe that, as a result of these efforts, our critical systems are or will be
substantially Year 2000 ready, we cannot assure you that this will be the case.
One of our greatest potential Year 2000 risks may be that third parties with
whom we deal will fail to be Year 2000 ready. For example, our business may be
adversely affected if our programming suppliers or key advertisers experience
significant disruptions in their businesses because of the Year 2000 problem.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that have been made
pursuant to the provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are not historical facts, but rather are
based on our current expectations, estimates and projections about Radio One's
industry, our beliefs and assumptions. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
are intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. These risks
and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. We are not obligated to update these statements or publicly release
the result of any revisions to them to reflect events or circumstances after
the date of this prospectus or to reflect the occurrence of unanticipated
events.
13
<PAGE>
USE OF PROCEEDS
The net proceeds from this offering to Radio One (after deducting
underwriting discounts and commissions and estimated offering expenses), based
on the assumed initial public offering price of $ per share, are estimated
to be approximately $ million ($ million if the underwriters' over-
allotment option is exercised in full). The net proceeds from this offering,
together with the net proceeds from the Preferred Stock Offering, will be used
as set forth below. Pending such uses, the net proceeds from this offering may
be temporarily invested in short-term, interest-bearing, investment-grade
securities. The following table sets forth the estimated sources and uses of
funds for the transactions described above as of , 1999:
<TABLE>
<CAPTION>
Amount
--------------
(in thousands)
<S> <C>
Sources:
Net proceeds from this offering......................... $
Net proceeds from the Preferred Stock Offering..........
-----
Total sources......................................... $
=====
Uses:
Repayment of amounts borrowed under the Bank Credit
Facility............................................... $
Repayment of WYCB acquisition loan......................
Redemption of Senior Preferred Stock....................
Increase in working capital.............................
-----
Total uses............................................ $
=====
</TABLE>
Radio One will not receive any proceeds from Class A Common Stock sold by
the selling stockholders.
DIVIDEND POLICY
We intend to retain future earnings for use in our business and do not
anticipate declaring or paying any cash or stock dividends on shares of our
Common Stock in the foreseeable future. In addition, any determination to
declare and pay dividends will be made by our Board of Directors in light of
our earnings, financial position, capital requirements, the Bank Credit
Facility, the Indenture and the terms of the New Preferred Stock, and such
other factors as the Board of Directors deems relevant. See "Description of
Indebtedness" and "Description of Capital Stock."
14
<PAGE>
DILUTION
Purchasers of the Class A Common Stock offered by this prospectus will
suffer an immediate and substantial dilution in net tangible book value per
share. Dilution is the amount by which the initial public offering price paid
by the purchasers of the shares of Class A Common Stock will exceed the net
tangible book value per share of Common Stock after the offering. The net
tangible book value per share of Common Stock is determined by subtracting
total liabilities from the total book value of the tangible assets and dividing
the difference by the number of shares of Common Stock deemed to be outstanding
on the date the book value is determined. As of December 31, 1998, Radio One
had a pro forma negative tangible book value of $ or $ per share after
giving effect to the completed and pending acquisitions and capital
transactions described under "Capitalization," excluding this offering.
Assuming the sale of shares at an initial public offering price of
$ per share and deducting underwriters' discounts and commissions and
estimated offering expenses, Radio One's pro forma tangible book value as of
December 31, 1998 would have been a negative $ or $ per share. This
represents an immediate increase in pro forma net tangible book value to
existing stockholders of $ per share and an immediate dilution to new
investors of $ per share. The following table illustrates this per share
dilution:
<TABLE>
<CAPTION>
Per
Share
-----
<S> <C> <C>
Assumed initial public offering price........................... $
----
Pro forma net negative tangible book value before this
offering..................................................... $
----
Increase in net tangible book value per share attributable to
this offering................................................
----
Pro forma net tangible book value after this offering...........
----
Dilution to new investors....................................... $
====
</TABLE>
The following table summarizes, on a pro forma as adjusted basis as of
December 31, 1998, the number of shares of Common Stock purchased from Radio
One, the estimated value of the total consideration paid for or attributed to
such Common Stock, and the average price per share paid by or attributable to
existing stockholders and the new investors purchasing shares in this offering
at an assumed initial offering price of $ per share.
<TABLE>
<CAPTION>
Average
Shares of Price
Common Per
Stock Total Share
Purchased Consideration of
-------------- -------------- Common
Number Percent Amount Percent Stock
------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... % $ % $
New investors.............................
---- ----- ----- -----
Total................................... 100.0% $ 100.0%
==== ===== ===== =====
</TABLE>
As of , 1999 there were outstanding options to purchase an additional
shares of Class A Common Stock at an exercise price of $ per share.
To the extent these options are exercised, there may be further dilution to new
investors.
15
<PAGE>
CAPITALIZATION
The table below sets forth our capitalization as of December 31, 1998, on an
actual basis, on a pro forma basis giving effect to the acquisitions identified
in the first bullet below, and on a pro forma as adjusted basis giving effect
to those acquisitions and the transactions identified in the second bullet
below. The actual amounts give effect to the following 1999 capital
transactions as if they had occurred as of December 31, 1998: the for
one stock split of Common Stock, the exchange of certain shares of Class A
Common Stock for shares of Class B and Class C Common Stock, the issuance of
shares of Class A Common Stock upon the exercise of the Warrants, and
the issuance of shares of Class C Common Stock to employees.
. The column "Pro forma for Completed and Pending Transactions" gives
effect to the acquisition of:
-- Radio One of Atlanta, Inc. ("ROA");
-- Dogwood Communications, Inc. ("Dogwood") by ROA;
-- the assets of WFUN-FM in St. Louis;
-- WENZ-FM and WERE-AM in Cleveland;
-- WDYL-FM in Richmond ("Richmond I");
-- WKJS-FM and WSOJ-FM in Richmond ("Richmond II");
-- WJRV-FM, WCDX-FM, WPLZ-FM and WGCV-AM in Richmond ("Richmond III");
and
-- a radio station in an East Coast market.
. The column "Pro Forma as Adjusted" gives effect to:
-- the above transactions;
-- this offering;
-- the offering (the "Preferred Stock Offering") of $50.0 million of %
senior cumulative exchangeable preferred stock due (the "New
Preferred Stock");
-- the redemption of the Senior Preferred Stock; and
-- the repayment of debt.
16
<PAGE>
The information in this table should be read in conjunction with "Use of
Proceeds," "Unaudited Pro Forma Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------
Pro Forma
for
Completed
and Pending Pro Forma
Actual Transactions as Adjusted
--------- ------------ -----------
(audited) (unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C>
Cash and cash equivalents................ $ 4,455 (92,734) $
======== ======== ====
Long-term debt (including current
portion):
Bank Credit Facility................... $ 49,350 $ 65,787 $
12% Senior Subordinated Notes due May
15, 2004.............................. 78,458 78,458
WYCB acquisition debt.................. 3,841 3,841
Other long-term debt................... 90 90
-------- -------- ----
Total debt........................... 131,739 148,176
-------- -------- ----
Senior Cumulative Redeemable Preferred
Stock:
Series A, $0.01 par value, 140,000
shares authorized,
84,843 shares, 84,843 shares, and no
shares issued and outstanding......... 10,816 10,816 --
Series B, $0.01 par value, 150,000
shares authorized,
124,467 shares, 124,467 shares, and no
shares issued and outstanding......... 15,868 15,868 --
Series C, $0.01 par value,
shares authorized,
no shares, no shares and shares
issued and outstanding................ -- --
-------- -------- ----
Stockholders' equity (deficit):
Class A Common Stock, $0.01 par value,
shares authorized,
shares, shares and
shares, issued and outstanding........ -- --
Class B Common Stock, $0.01 par value,
shares authorized, shares,
shares, and shares, issued and
outstanding........................... -- --
Class C Common Stock, $0.01 par value,
shares authorized, shares,
shares and shares issued
and outstanding....................... -- --
Additional paid-in capital............. -- --
Accumulated equity (deficit)........... (24,859) 8,376
-------- -------- ----
Total stockholders' equity
(deficit)........................... (24,859) 8,376
-------- -------- ----
Total capitalization............... $133,564 $183,236 $
======== ======== ====
</TABLE>
17
<PAGE>
RECENT AND PENDING TRANSACTIONS
ACQUISITIONS
We have acquired or agreed to acquire 18 radio stations since January 1,
1998. These acquisitions diversify our net broadcast revenue, broadcast cash
flow and asset bases and increase the number of top 20 African-American markets
in which we operate from three to nine. See "Business" for a more detailed
description of the following transactions.
The table below sets forth information regarding each of the recently
completed or pending acquisitions as of March 31, 1999.
<TABLE>
<CAPTION>
No. of Approximate Date
Market Stations Call Letters Purchase Price Completed
------ -------- ------------ -------------- ---------
(in millions)
<S> <C> <C> <C> <C>
Completed Transactions
Washington, D.C.
(Broadcast Holdings,
Inc.)................ 1 WYCB-AM $ 3.8 3/98
Detroit/Kingsley (Bell
Broadcasting
Company)............. 3 WDTJ-FM 34.2 6/98
WCHB-AM
WJZZ-AM
Detroit (Allur-
Detroit, Inc.)....... 1 WWBR-FM 26.5 12/98
Atlanta (Radio One of
Atlanta, Inc. and
Dogwood
Communications,
Inc.)................ 2 WHTA-FM (1) 3/99
WAMJ-FM
--- ------
Subtotal.............. 7 64.5(/2/)
--- ------
Pending Transactions
St. Louis............. 1 WFUN-FM 13.6 --
Cleveland............. 2 WENZ-FM 20.0 --
WERE-AM
Richmond I............ 1 WDYL-FM 4.6 --
Richmond II........... 2 WKJS-FM 12.0 --
WSOJ-FM
Richmond III.......... 4 WJRV-FM 34.0 --
WCDX-FM
WPLZ-FM
WGCV-AM
East Coast market..... 1 -- -- --
--- ------
Subtotal.............. 11 84.2(/3/)
--- ------
Total................. 18 $148.7(/2/)(/3/)
=== ======
</TABLE>
- --------
(1) Radio One issued shares of our Common Stock and assumed $16.3 million
of net debt in this transaction.
(2) Excludes Radio One of Atlanta, Inc. and Dogwood Communications, Inc.
(3) Excludes our pending acquisition in an East Coast market.
Completed Transactions
Washington, D.C.--WYCB-AM Acquisition
On March, 16, 1998, Radio One acquired, through an Unrestricted Subsidiary,
Broadcast Holdings, Inc. ("BHI"), the owner of WYCB-AM, for approximately $3.8
million. Following this acquisition, we integrated the operations of WYCB-AM
into our existing radio station operations in Washington, D.C.
Detroit--Bell Broadcasting Acquisition
On June 30, 1998, Radio One acquired Bell Broadcasting Company ("Bell
Broadcasting") for approximately $34.2 million in cash. Bell Broadcasting owns
three radio stations, WDTJ-FM (formerly WCHB-FM) and WCHB-AM, located in the
Detroit, Michigan market, and WJZZ-AM, located in Kingsley, Michigan.
18
<PAGE>
Detroit--Allur-Detroit Acquisition
On December 28, 1998, Radio One acquired Allur-Detroit, Inc. ("Allur-
Detroit"), owner of WWBR-FM, for approximately $26.5 million in cash. Allur-
Detroit's stockholders included Syndicated Communications Venture Partners II,
L.P. ("Syncom Venture Partners"), which is an affiliate of one of Radio One's
stockholders, Syncom Capital Corporation ("Syncom").
Atlanta--Radio One of Atlanta and Dogwood Communications Acquisitions
On March , 1999, Radio One acquired Radio One of Atlanta, Inc. ("ROA"), an
affiliate of Radio One, for shares of Radio One Common Stock. Radio One
also assumed and retired approximately $16.3 million of net indebtedness of ROA
and Dogwood. At the time, ROA owned approximately 33% of Dogwood. On March ,
1999, Radio One acquired the remaining approximate 67% of Dogwood for
$3.6 million. Founded in 1995, ROA owns and operates WHTA-FM. Dogwood owns
WAMJ-FM which, prior to ROA's acquisition of 100% of Dogwood, ROA operated
under a local marketing agreement ("LMA"). Upon the completion of these
acquisitions, ROA became a wholly owned subsidiary of Radio One, and Dogwood
became a wholly owned subsidiary of ROA. See "Certain Relationships and Related
Transactions."
Pending Transactions
St. Louis--WFUN-FM Acquisition
On November 23, 1998, Radio One entered into an asset purchase agreement to
acquire the assets of WFUN-FM, licensed to Bethalto, Illinois, for
approximately $13.6 million in cash. We expect to move WFUN-FM to a broadcast
tower site closer to downtown St. Louis, reformat the station and upgrade its
signal from 6 kW to 25 kW. We expect this acquisition to close during the
second quarter of 1999.
Cleveland--WENZ-FM and WERE-AM Acquisition
On March , 1999, Radio One entered into an asset purchase agreement to
acquire WENZ-FM and WERE-AM, both of which are licensed to Cleveland, Ohio, for
approximately $20.0 million in cash. We expect this acquisition to close by the
end of the third quarter of 1999.
Richmond--WDYL-FM Acquisition, WKJS-FM and WSOJ-FM Acquisition and WJRV-FM,
WCDX-FM, WPLZ-FM and WGCV-AM Acquisition
On February 10, 1999, Radio One entered into an asset purchase agreement to
acquire WDYL-FM, licensed to Chester, Virginia, for approximately $4.6 million
in cash. We expect this acquisition to close by the end of the third quarter of
1999.
On February 26, 1999, Radio One entered into an asset purchase agreement to
acquire WKJS-FM, licensed to Crewe, Virginia, and WSOJ-FM, licensed to
Petersburg, Virginia, for approximately $12.0 million in cash, subject to
purchase price adjustments. We expect this acquisition to close by the end of
the third quarter of 1999.
On March , 1999, Radio One entered into an asset purchase agreement to
acquire WCDX-FM, licensed to Mechanicsville, Virginia, WPLZ-FM, licensed to
Petersburg, Virginia, WJRV-FM, licensed to Richmond, Virginia, and WGCV-AM,
licensed to Petersburg, Virginia, for approximately $34.0 million in cash. We
expect this acquisition to close during the second half of 1999.
East Coast Market--Radio Station Acquisition
On February 11, 1999, Radio One entered into a letter of intent to acquire a
radio station in an East Coast market. We expect this acquisition to close
during the second half of 1999.
19
<PAGE>
RECENT FINANCINGS
Preferred Stock Offering and Redemption
Concurrent with this offering, we intend to sell $50.0 million of % New
Preferred Stock. The Preferred Stock Offering is being made by a separate
prospectus. We intend to use the proceeds of the Preferred Stock Offering to
redeem all of our Series A 15.0% Senior Cumulative Redeemable Preferred Stock
("Series A Preferred Stock") and Series B 15.0% Senior Cumulative Redeemable
Preferred Stock ("Series B Preferred Stock," and together with the Series A
Preferred Stock, the "Senior Preferred Stock"), and to reduce outstanding
amounts under our Bank Credit Facility. See "Use of Proceeds" and "Description
of Capital Stock."
Credit Agreement
On , 1999, we entered into an amended and restated credit agreement
under which we may borrow up to $100 million on a revolving basis from a group
of banking institutions. See "Description of Indebtedness."
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements (the
"Pro Forma Consolidated Financial Statements") are based on the historical
Consolidated Financial Statements of Radio One included elsewhere in this
prospectus, adjusted to give effect to the following:
The pro forma amounts for the year ended December 31, 1998, in the column
"Completed Transactions" are adjusted to give effect to the following completed
acquisitions as if they had occurred as of January 1, 1998:
. Bell Broadcasting;
. Allur-Detroit;
. ROA; and
. Dogwood by ROA.
The pro forma amounts for the year ended December 31, 1998, in the column
"Completed and Pending Transactions" are adjusted to give effect to the
completed transactions described above and to the following pending
acquisitions as if they had occurred as of January 1, 1998:
. the assets of WFUN-FM in St. Louis (pro forma balance sheet only);
. WENZ-FM and WERE-AM in Cleveland;
. WDYL-FM in Richmond;
. WKJS-FM and WSOJ-FM in Richmond;
. WJRV-FM, WCDX-FM, WPLZ-FM and WGCV-AM in Richmond; and
. a radio station in an East Coast market.
The pro forma amounts in the column "As Adjusted" are further adjusted to
give effect to the pending and completed transactions described above and to
the following transactions as if they had occurred as of January 1, 1998:
. this offering;
. the redemption of our Senior Preferred Stock;
. the Preferred Stock Offering; and
. the repayment of debt.
The pro forma balance sheet data are adjusted to give effect to the
transactions described above as if they had occurred on December 31, 1998.
The Unaudited Pro Forma Consolidated Statements of Operations and Other Data
gives effect to these transactions as if they had occurred as of January 1,
1998, and the Unaudited Pro Forma Consolidated Balance Sheet gives effect to
these transactions as if they had occurred as of December 31, 1998. These
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 Radio One's results of operations or financial condition would actually
have been had these transactions occurred on the dates indicated or to project
Radio One'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 Radio One and the
historical consolidated financial statements of ROA, Bell Broadcasting, Allur-
Detroit, Richmond II and Richmond III included elsewhere in this prospectus,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The pending acquisitions of the assets of WFUN-FM in St. Louis, and the
operations of the stations in Cleveland, Richmond and an East Coast market,
will be accounted for using the purchase method of accounting. After an
acquisition, the total consideration of such acquisition will be allocated to
the tangible and intangible assets acquired and liabilities assumed, if any,
based upon their respective estimated fair values. The
21
<PAGE>
allocation of the aggregate total consideration included in the Pro Forma
Consolidated Financial Statements is preliminary as we believe further
refinement is impractical at this time. However, we do not expect that the
final allocation of the total consideration will materially differ from the
preliminary allocations.
Unaudited Pro Forma Consolidated Statement of Operations and Other Data
<TABLE>
<CAPTION>
Year Ended December 31, 1998
---------------------------------------------------------------------------------------------
(in thousands)
Pro Forma
Completed Pro Forma Pending for Completed Pro Forma
Transactions for Completed Transactions and Pending Offerings as
Historical(a) Adjustments(b) Transactions Adjustments(c) Transactions Adjustments Adjusted
------------- -------------- ------------- -------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net broadcast revenue... $46,109 $14,719 $60,828 $12,481 $73,309 $ -- $73,309
Station operating
expenses............... 24,501 9,617 34,118 8,285 42,403 -- 42,403
Corporate expenses...... 2,800 413 3,213 -- 3,213 -- 3,213
Depreciation and
amortization........... 8,445 7,125 15,570 6,007 21,577 -- 21,577
------- ------- ------- ------- -------- ------- -------
Operating income....... 10,363 (2,436) 7,927 (1,811) 6,116 6,116
Interest expense........ 11,455 5,148 16,603 6,408 23,011 (d)
Other income (expense),
net.................... 358 (29) 329 122 451
Income tax benefit
(expense).............. 1,575 905 2,480 2,990 5,470 (e)
------- ------- ------- ------- -------- ------- -------
Net income (loss)...... $ 841 $(6,708) $(5,867) $(5,107) $(10,974) $ $
======= ======= ======= ======= ======== ======= =======
Earnings per common
share:
Basic.................. $ $ $ $
Diluted................
Weighted average common
shares outstanding:
Basic..................
Diluted................
Other Data:
Broadcast cash flow(f).. $21,608 $27,004 $ 31,200 $31,200
Broadcast cash flow
margin(g).............. 46.9% 44.4% 42.6% 42.6%
EBITDA (before non-cash
compensation
expense)(f)............ $18,808 $23,791 $ 27,987 $27,987
After-tax cash flow(f).. 7,248 7,517 5,427
Cash interest
expense(h)............. 7,192 12,340 18,748
Capital expenditures.... 2,236 3,921 4,534
Ratio of earnings to fixed charges(i)........................................................................ x
Ratio of total debt to EBITDA (before non-cash compensation expense)......................................... x
Ratio of EBITDA (before non-cash compensation expense) to interest expense................................... x
Ratio of EBITDA (before non-cash compensation expense) to cash interest expense.............................. x
</TABLE>
Footnotes for the Unaudited Pro Forma Consolidated Statement of Operations and
Other Data for the Year Ended December 31, 1998
(a) See the consolidated financial statements included elsewhere in this
prospectus.
(b) The table below gives effect to the acquisitions completed during the
period from January 1, 1998 through March 31, 1999 as if they had occurred
on January 1, 1998:
<TABLE>
<CAPTION>
Bell
Broadcasting Allur-Detroit ROA Pro Forma
Historical(/1/) Historical(/2/) Historical(/3/) Adjustments Total
--------------- --------------- --------------- ----------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Net broadcast revenue... $2,025 $ 2,854 $10,140 $ (300)(/4/) $14,719
Station operating
expenses............... 1,423 3,239 5,529 (574)(/5/) 9,617
Corporate expenses...... 663 336 667 (1,253)(/6/) 413
Depreciation and
amortization........... 63 194 896 5,972 (/7/) 7,125
------ ------- ------- ------- -------
Operating income
(loss)............... (124) (915) 3,048 (4,445) (2,436)
Interest expense........ 52 383 2,007 2,706 (/8/) 5,148
Other income (expense),
net.................... (28) (50) 7 42 (/9/) (29)
Income tax benefit
(expense).............. (14) -- (499) 1,418 (/10/) 905
------ ------- ------- ------- -------
Net income (loss)..... $ (218) $(1,348) $ 549 $(5,691) $(6,708)
====== ======= ======= ======= =======
</TABLE>
22
<PAGE>
- --------
(/1/See)the unaudited financial statements of Bell Broadcasting for the six
months ended June 30, 1998, included elsewhere in this prospectus, which is
the period during 1998 that Bell Broadcasting was not owned by Radio One.
(/2/Derived)from the unaudited financial statements of Allur-Detroit for the
period from January 1, 1998 to December 28, 1998, which is the period
during 1998 that the entity was not owned by Radio One.
(/3/See)the consolidated financial statements of ROA included elsewhere in the
prospectus.
(/4/To)reflect the elimination of the management fee paid by ROA to Radio One
for administrative services provided by Radio One.
(/5/To)record compensation expense of $105 for a manager and a general manager
Radio One will need to hire to manage the Detroit market, eliminate bonuses
of $115 paid by Allur-Detroit to employees because of the sale, and
eliminate the salary, bonus and benefits of $564 paid to the previous
Allur-Detroit general manager who was not retained by Radio One.
(/6/To)eliminate corporate expenses which Radio One does not expect to incur
going forward which consist primarily of compensation of $617 to officers
and former owners of Bell Broadcasting who were not retained by Radio One,
the management fee of $300 paid by ROA to Radio One, and charitable
contributions and management fees of $336 paid by the former owners of
Allur-Detroit that would not have been distributed if the station had been
owned by Radio One.
(/7/To)record the additional depreciation and amortization expense that would
have been recognized if the Bell Broadcasting, Allur-Detroit, 20% of
Dogwood, and ROA acquisitions had occurred.
(/8/To)record interest expense on acquisition financing, calculated as follows:
<TABLE>
<S> <C>
Interest on Bell Broadcasting financing of $33,241 at 7.95% for
six months....................................................... $1,343
Amortization of Bell Broadcasting deferred financing costs of $651
over 5.5 years for six months.................................... 59
Less: Interest expense previously recorded by Bell Broadcasting... 52
Interest on Allur-Detroit purchase price of $26,500 at 7.95%...... 2,107
Amortization of Allur-Detroit deferred financing costs of $358
over 5 years..................................................... 72
Less: Interest expense previously recorded by Allur-Detroit....... 383
Interest on Dogwood purchase price of $3,500 at 7.95%............. 278
Interest on ROA's debt paid at the acquisition of $16,212 at
7.95%............................................................ 1,289
Less: Interest expense previously recorded by ROA................. 2,007
------
Pro forma adjustment............................................ $2,706
======
</TABLE>
(/9/To)eliminate tax penalties incurred by Bell Broadcasting that are not
expected to be incurred by Radio One on a going-forward basis.
(/10/To)record additional tax benefit related to additional loss as a result of
the acquisitions.
(c) The table below gives effect to the acquisitions pending as of March 31,
1998:
<TABLE>
<CAPTION>
East
Coast
Market
Cleveland Richmond I Richmond II Richmond III Acquisition Pro Forma
Historical(/1/) Historical(/1/) Historical(/2/) Historical(/2/) Historical(/1/) Adjustments(/3/) Total
--------------- --------------- --------------- --------------- --------------- ---------------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations:
Net broadcast
revenue.......... $3,295 $400 $1,062 $7,458 $266 $ -- $12,481
Station operating
expenses......... 1,979 368 1,002 4,668 268 -- 8,285
Corporate
expenses......... -- 14 15 413 -- (442)(/4/) --
Depreciation and
amortization..... 811 4 416 648 -- 4,128 (/5/) 6,007
------ ---- ------ ------ ---- ------- -------
Operating income
(loss)......... 505 14 (371) 1,729 (2) (3,686) (1,811)
Interest expense.. 600 -- 500 -- -- 5,308 (/6/) 6,408
Other income
(expense), net... 101 -- 21 -- -- -- 122
Income tax benefit
(expense)........ (2) (6) -- -- -- 2,998 (/7/) 2,990
------ ---- ------ ------ ---- ------- -------
Net income
(loss)......... $ 4 $ 8 $ (850) $1,729 $ (2) $(5,996) $(5,107)
====== ==== ====== ====== ==== ======= =======
</TABLE>
- --------
(/1/The)column represents the historical results of operations of the stations
to be acquired for the year ended December 31, 1998. As these stations to
be acquired did not prepare stand-alone financial statements, these
financial statements were carved out from a larger entity and include the
direct revenue and expenses charged to the stations and an allocation of
those expenses which benefited the stations but were not directly charged
to the stations. As these results of operations include allocated expenses,
these financial statements do not represent what the results from
operations would have been if the stations operated on a stand-alone basis
or what they would have been if they were owned by Radio One.
23
<PAGE>
(/2/The)column represents the historical results of operations for the year
ended December 31, 1998 that were obtained from carveout audited financial
statements. See the financial statements included elsewhere in this
prospectus.
(/3/Historical)financial statements and pro forma adjustments related to the
St. Louis acquisition have not been included in this pro forma income
statement, because Radio One has determined that this acquisition is a
purchase of assets. Income statement activity would not be relevant,
because Radio One plans to take the current station off the air, reformat
the station, and move it to a new location.
(/4/To)eliminate corporate management fees which would not be incurred by Radio
One.
(/5/To)record additional amortization of $4,128 for intangibles related to the
excess purchase price of $76,733 over 15 years, less the amortization
previously recorded by the acquired companies.
(/6/To)record interest expense, calculated as follows:
(/7/)To record additional tax benefit related to additional loss as a result of
the acquisitions.
<TABLE>
<S> <C>
Total acquisition cost for Cleveland, Richmond I, II and III and
the East Coast market.......................................... $80,600
=======
Interest expense on total acquisition cost at 7.95% for one
year......................................................... $ 6,408
Less: Interest expense previously recorded by acquired
companies...................................................... 1,100
-------
Pro forma adjustment.......................................... $ 5,308
=======
</TABLE>
(d) To record the decrease in interest expense related to the use of proceeds
of this offering and the Preferred Stock Offering, calculated as follows:
<TABLE>
<S> <C>
Proceeds of this offering........................................ $
Proceeds of the Preferred Stock Offering.........................
-------
Total..........................................................
Less: Retirement of preferred stock..............................
Less: Underwriting discounts and commissions, and offering cost
expenses........................................................
-------
Subtotal.......................................................
-------
Pro forma adjustment............................................. $
=======
</TABLE>
(e) To record the tax effect of the reduction in interest expense.
(f) Broadcast cash flow consists of operating income before depreciation,
amortization, non-cash compensation expense, local marketing agreement fees
and corporate expenses. EBITDA (before non-cash compensation expense)
consists of operating income before depreciation, amortization, non-cash
compensation expense and local marketing agreement fees. After-tax cash
flow consists of income before income tax benefit (expense) and
extraordinary items, minus net gain on sale of assets (net of tax) and the
current income tax provision, plus depreciation and amortization expense
and non-cash compensation expense. Although broadcast cash flow, EBITDA
(before non-cash compensation expense), and after-tax cash flow are not
measures of performance or liquidity calculated in accordance with GAAP, we
believe that these measures are useful to an investor in evaluating Radio
One because these measures are widely used in the broadcast industry as a
measure of a radio broadcasting company's performance. Nevertheless,
broadcast cash flow, EBITDA (before non-cash compensation expense) and
after-tax 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. Moreover, because broadcast cash
flow, EBITDA (before non-cash compensation expense) and after-tax cash flow
are not measures calculated in accordance with GAAP, these performance
measures are not necessarily comparable to similarly titled measures
employed by other companies.
(g) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcast revenue.
(h) Cash interest expense 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.
24
<PAGE>
(i) For purposes of this calculation, earnings consist of income (loss) before
income taxes, extraordinary items and fixed charges without including any
activities relating to the acquisition of WYCB-AM, an Unrestricted
Subsidiary. Fixed charges consist of interest expense, including the
amortization of discounts on debt and the amortization of deferred
financing costs. Earnings were insufficient to cover fixed charges for the
fiscal year ended December 31, 1998, by approximately $734,000 and on a pro
forma as adjusted basis for the year ended December 31, 1998, by
approximately $ million.
25
<PAGE>
Unaudited Pro Forma Consolidated Balance Sheet
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------------------------------------------------------------------------
Pro Forma for
Completed Pro Forma for Pending Completed
Transactions Completed Transactions and Pending Offerings Pro Forma
Historical (a) Adjustments (b) Transactions Adjustments (c) Transactions Adjustments as Adjusted
-------------- --------------- ------------- --------------- ------------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........ $ 4,455 $(2,989) $ 1,466 $(94,200) $(92,734) $ (d) $
Trade accounts
receivable, net.... 12,026 2,479 14,505 703 15,208 --
Prepaid expenses
and other.......... 334 202 536 31 567 --
Deferred taxes...... 826 164 990 -- 990 --
-------- ------- -------- -------- -------- -------- -------
Total current
assets........... 17,641 (144) 17,497 (93,466) (75,969)
Property and
equipment, net...... 6,717 1,758 8,475 3,133 11,608 --
Intangible assets,
net................. 127,639 49,147 176,786 90,333 267,119 --
Deferred taxes....... -- 60 60 -- 60 --
Other assets......... 1,859 40 1,899 -- 1,899 --
-------- ------- -------- -------- -------- -------- -------
Total assets...... $153,856 $50,861 $204,717 $ -- $204,717 $ $
======== ======= ======== ======== ======== ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
and accrued
expenses........... $ 4,898 $ 1,189 $ 6,087 $ -- $ 6,087 $ -- $
Income taxes
payable............ 143 -- 143 -- 143 --
-------- ------- -------- -------- -------- -------- -------
Total current
liabilities...... 5,041 1,189 6,230 -- 6,230 --
Bank Credit
Facility............ 49,350 16,437 65,787 -- 65,787 (e)
12% Notes due 2004... 78,458 -- 78,458 -- 78,458 --
WYCB acquisition
debt................ 3,841 -- 3,841 -- 3,841 --
Other long-term
debt................ 90 -- 90 -- 90 --
Deferred tax
liability........... 15,251 -- 15,251 -- 15,251 --
-------- ------- -------- -------- -------- -------- -------
Total
liabilities...... 152,031 17,626 169,657 -- 169,657
-------- ------- -------- -------- -------- -------- -------
Senior Preferred
Stock:
Series A............ 10,816 -- 10,816 -- 10,816 (f) --
Series B............ 15,868 -- 15,868 -- 15,868 (f) --
New Preferred
Stock.............. -- -- -- -- -- (f)
-------- ------- -------- -------- -------- -------- -------
26,684 -- 26,684 -- 26,684
-------- ------- -------- -------- -------- -------- -------
Stockholders' equity
(deficit):
Class A Common
Stock.............. -- -- -- -- -- (g)
Class B Common
Stock.............. -- -- -- -- --
Class C Common
Stock.............. -- -- -- -- --
Additional paid in
capital............ -- 33,235 33,235 -- 33,235 (g)
Accumulated
earnings
(deficit).......... (24,859) -- (24,859) -- (24,859)
-------- ------- -------- -------- -------- -------- -------
Total
stockholders'
equity
(deficit)........ (24,859) 33,235 8,376 -- 8,376
-------- ------- -------- -------- -------- -------- -------
Total liabilities
and stockholders'
equity
(deficit)........ $153,856 $50,861 $204,717 $ -- $204,717 $ $
======== ======= ======== ======== ======== ======== =======
</TABLE>
26
<PAGE>
Footnotes for the Unaudited Pro Forma Consolidated Balance Sheet as of December
31, 1998
(a) See the Consolidated Financial Statements included elsewhere in this
prospectus.
(b) The table below gives effect to the acquisition of ROA, the retirement of
ROA's outstanding debt and the purchase of the remaining 20% of Dogwood.
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------------------
ROA Pro Forma
Historical(/1/) Adjustments Total
--------------- ----------- -------
(in thousands)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....... $ 1,711 $(4,700)(/2/) $(2,989)
Trade accounts receivable, net.. 2,479 -- 2,479
Prepaid expenses and other...... 202 -- 202
Deferred taxes.................. 164 -- 164
------- ------- -------
Total current assets.......... 4,556 (4,700) (144)
Property and equipment, net....... 1,758 -- 1,758
Intangible assets, net............ 10,867 38,280 (/3/) 49,147
Deferred taxes.................... 60 -- 60
Other assets...................... 40 -- 40
------- ------- -------
Total assets.................. $17,281 $33,580 $50,861
======= ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Account payable and accrued
expenses....................... $ 1,189 $ -- $ 1,189
Current portion of long-term
debt........................... 327 (327)(/4/) --
------- ------- -------
Total current liabilities..... 1,516 (327) 1,189
Long-term debt and deferred
interest......................... 15,525 912 (/4/) 16,437
------- ------- -------
Total liabilities............. 17,041 585 17,626
------- ------- -------
Stockholders' Equity (Deficit):
Common Stock.................... 10 (10)(/5/) --
Additional paid in capital...... 1,390 31,845 (/5/) 33,235
Accumulated earnings (deficit).. (1,160) 1,160 (/5/) --
------- ------- -------
Total stockholders' equity ... 240 32,995 33,235
------- ------- -------
Total liabilities and
stockholders' equity ........ $17,281 $33,580 $50,861
======= ======= =======
</TABLE>
- --------
(1) See the Consolidated Financial Statements included elsewhere in this
prospectus.
(2) To reflect the $3,500 payment for the remaining 20% interest in Dogwood and
a $1,200 fee paid by ROA to a stockholder for arranging the acquisition.
(3) To reflect the acquisition of the remaining 20% interest in Dogwood for
$3,500 and the step up of the assets from the acquisition of ROA. Radio One
applied step up accounting to the portion of ROA owned by non-Radio One
stockholders and non-controlling stockholders of ROA. The portion of ROA
owned by the controlling stockholder of ROA and stockholder of Radio One
was accounted for based on historical cost. The valuation of ROA for
purposes of the step-up adjustment was based on Radio One's estimate of
ROA's value as of the date the parties agreed in principle to the
acquisition.
(4) To record the refinancing of ROA's outstanding debt of $15,852 plus
unamortized discount of $360 and deferred financing costs of $225 related
to the Bank Credit Facility.
(5) To eliminate the stockholders' equity accounts of ROA, record the increase
to additional paid in capital for the step up of the assets related to the
ROA acquisition, reduce net equity for the write-off of the unamortized
discount and deferred financing costs on ROA's debt and to record a $1,200
fee paid by ROA to a stockholder for arranging the acquisition.
27
<PAGE>
(c) The table below gives effect to the Pending Transactions as of March 31,
1999 as if they had occurred on December 31, 1998.
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------------------------------------------------------------------------------------
St. Louis and
East Coast
Market
Cleveland Richmond I Richmond II Richmond III Acquisitions Acquisitions
Historical(/1/) Historical(/1/) Historical(/3/) Historical(/3/) Historical(/2/) Adjustments Total
--------------- --------------- --------------- --------------- --------------- ------------ --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents...... $ -- $ -- $ 34 $ 142 $ -- $(94,376)(/4/) $(94,200)
Trade accounts
receivable,
net.............. 315 62 326 1,400 -- (1,400)(/5/) 703
Prepaid expenses
and other........ -- -- -- 31 -- -- 31
------ ----- ------ ------ ------ -------- --------
Total current
assets......... 315 62 360 1,573 -- (95,776) (93,466)
Property and
equipment, net.... 825 27 1,079 1,202 -- -- 3,133
Intangible assets,
net............... 4,788 -- 3,343 3,692 -- 78,510 (/6/) 90,333
Other assets....... -- -- -- -- -- -- --
Deferred taxes..... -- -- -- -- -- --
------ ----- ------ ------ ------ -------- --------
Total assets.... $5,928 $ 89 $4,782 $6,467 $ -- $(17,266) $ --
====== ===== ====== ====== ====== ======== ========
LIABILITIES AND
STATION EQUITY
Current
Liabilities:
Accounts payable
and accrued
expenses......... $ -- $ -- $ 168 $ 566 $ -- $ (734)(/7/) $ --
Current portion
of long-term
debt............. -- -- 5,013 -- -- (5,013)(/7/) --
------ ----- ------ ------ ------ -------- --------
Total current
liabilities.... -- -- 5,181 566 -- (5,747)(/7/) --
Long-term debt and
deferred
interest.......... -- -- 49 -- -- (49)(/7/) --
------ ----- ------ ------ ------ -------- --------
Total
liabilities.... -- -- 5,230 566 -- (5,796) --
Station equity
(deficit)......... 5,928 89 (448) 5,901 -- (11,470)(/8/) --
------ ----- ------ ------ ------ -------- --------
Total
liabilities and
station equity
(deficit)...... $5,928 $ 89 $4,782 $6,467 $ -- $(17,266) $ --
====== ===== ====== ====== ====== ======== ========
</TABLE>
- --------
(1) The column represents the historical balance sheet of the stations
acquired. As the stations acquired did not prepare stand-alone financial
statements, these financial statements were carved out from a larger entity
and include the assets and liabilities of the stations to be acquired.
(2) Historical financial statements related to the St. Louis and East Coast
market acquisitions have not been included in this pro forma balance sheet
because Radio One has determined that these acquisitions are purchases of
the license only.
(3) See Financial Statements included elsewhere in this prospectus.
(4) To reflect the cash paid by Radio One of $94,200 for the St. Louis,
Cleveland, Richmond I, II and III and East Coast market acquisitions and to
reflect cash not assumed from acquired companies.
(5) To eliminate the trade accounts receivable not purchased in the Richmond
III acquisition.
(6) To record intangible assets booked as a result of the acquisitions,
calculated as follows:
<TABLE>
<CAPTION>
Net Tangible
Purchase Assets Intangibles
Price Acquired Acquired
-------- ------------ -----------
<S> <C> <C> <C>
Total.................................... $94,200 $3,867 $90,333
Less: Intangibles recorded on historical books................. 11,823
-------
Pro forma adjustment......................................... $78,510
=======
</TABLE>
(7) To eliminate accounts payable, accrued expenses and debt that will not be
assumed by Radio One.
(8) To eliminate the station equity from the entities acquired.
(d) To reflect the net proceeds of this offering at an assumed public offering
price of $ per share and to reflect the Preferred Stock Offering less
underwriting discounts and commissions, offering expenses of $ ,
redemption of the Senior Preferred Stock and retirement of debt.
28
<PAGE>
(e) To reflect the retirement of debt with the proceeds from this offering.
(f) To reflect proceeds of $50,000 from the Preferred Stock Offering, and the
redemption of the Senior Preferred Stock.
(g) To reflect the net proceeds of this offering less underwriting discounts,
commissions and offering expenses.
29
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table contains selected historical consolidated financial data
with respect to Radio One. The selected historical consolidated financial data
have been derived from the Consolidated Financial Statements of Radio One for
each of the fiscal years for the five year period ended December 31, 1998,
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected historical consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of Radio
One included elsewhere in this prospectus.
The following table includes information regarding broadcast cash flow,
EBITDA, and after-tax cash flow. Broadcast cash flow consists of operating
income before depreciation, amortization, non-cash compensation expense, local
marketing agreement fees and corporate expenses. EBITDA consists of operating
income before depreciation, amortization, and local marketing agreement fees.
After-tax cash flow consists of income before income tax benefit (expense) and
extraordinary items, minus net gain on sale of assets (net of tax) and the
current income tax provision, plus depreciation and amortization expense.
Although broadcast cash flow, EBITDA, and after-tax cash flow are not measures
of performance or liquidity calculated in accordance with GAAP, we believe that
these measures are useful to an investor in evaluating Radio One because these
measures are widely used in the broadcast industry as a measure of a radio
broadcasting company's performance. Nevertheless, broadcast cash flow, EBITDA
and after-tax 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. Moreover, because broadcast cash flow,
EBITDA and after-tax cash flow are not measures calculated in accordance with
GAAP, these performance measures are not necessarily comparable to similarly
titled measures employed by other companies.
30
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended(/1/)
--------------------------------------------
Dec. December 31,
25, -----------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Net broadcast revenue........... $15,541 $21,455 $23,702 $32,367 $ 46,109
Station operating expenses...... 8,506 11,736 13,927 18,848 24,501
Corporate expenses.............. 1,128 1,995 1,793 2,155 2,800
Depreciation and amortization... 2,027 3,912 4,262 5,828 8,445
------- ------- ------- ------- --------
Operating income.............. 3,880 3,812 3,720 5,536 10,363
Interest expense(/2/)........... 2,665 5,289 7,252 8,910 11,455
Other income (expense), net..... 38 89 (77) 415 358
Income tax benefit
(expense)(/3/)................. (30) -- -- -- 1,575
------- ------- ------- ------- --------
Income (loss) before
extraordinary item........... 1,223 (1,388) (3,609) (2,959) 841
Extraordinary loss.............. -- 468 -- 1,985 --
------- ------- ------- ------- --------
Net income (loss)............. $ 1,223 $(1,856) $(3,609) $(4,944) $ 841
======= ======= ======= ======= ========
Earnings per common share:(/4/)
Basic......................... $ $ $ $ $
Diluted.......................
Weighted average common shares
outstanding:(/4/)
Basic.........................
Diluted.......................
Other Data:
Broadcast cash flow............. $ 7,035 $ 9,719 $ 9,775 $13,519 $ 21,608
Broadcast cash flow
margin(/5/).................... 45.3% 45.3% 41.2% 41.8% 46.9%
EBITDA (before non-cash
compensation).................. $ 5,907 $ 7,724 $ 7,982 $11,364 $ 18,808
After-tax cash flow............. 2,763 2,524 806 2,869 7,248
Cash interest expense(/6/)...... 2,356 5,103 4,815 4,413 7,192
Capital expenditures............ 639 224 252 2,035 2,236
Balance Sheet Data (at period
end):
Cash and cash equivalents....................................... $ 4,455
Intangible assets, net.......................................... 127,639
Total assets.................................................... 153,856
Total debt (including current portion and deferred interest).... 131,739
Preferred stock................................................. 26,684
Total stockholders' deficit..................................... 24,859
</TABLE>
- --------
(/1/Year-to-year)comparisons are significantly affected by Radio One's
acquisition of various radio stations during the periods covered. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Prior to the fiscal year ended December 31, 1996, Radio One'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, we
changed our fiscal year end to December 31.
(/2/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.
(/3/From)January 1, 1996 to May 19, 1997, Radio One elected to be treated as an
S corporation for U.S. federal and state income tax purposes and,
therefore, generally was not subject to income tax at the corporate level
during that period.
(/4/Assumes)a for one stock split, the exercise of warrants to acquire
shares of Common Stock and shares of Common Stock issued to employees
were effective for all periods presented.
(/5/Broadcast)cash flow margin is defined as broadcast cash flow divided by net
broadcast revenue.
(/6/Cash)interest expense 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.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with "Selected
Historical Consolidated Financial Data" and the Financial Statements and the
notes thereto included elsewhere in this prospectus.
Introduction
The net broadcast revenue of Radio One is derived from local and national
advertisers and, to a much lesser extent, ticket and other revenue related to
special events sponsored by Radio One throughout the year. Our 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. We strive to
control these expenses by centralizing certain functions such as finance,
accounting, legal, human resources and management information systems and the
overall programming management function, as well as using our multiple
stations, market presence and purchasing power to negotiate favorable rates
with certain vendors and national representative selling agencies. Depreciation
and amortization of costs associated with the acquisition of the stations and
interest carrying charges are significant factors in determining Radio One's
overall profitability.
Radio One's net broadcast revenue is affected primarily by the advertising
rates our 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) developed 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. In 1998,
approximately 67.4% of Radio One's revenue was generated from local advertising
and 30.3% was generated from national spot advertising. The balance of 1998
revenue was generated primarily from network advertising, tower rental income
and ticket and other revenue related to Radio One sponsored events.
The performance of an individual radio station or cluster of radio stations
in a particular market is customarily measured by its ability to generate net
broadcast revenue and broadcast cash flow, although broadcast cash flow is not
a measure utilized under GAAP. 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 GAAP, nor as a measure of Radio One'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 net broadcast revenue
in the period in which such expenses are incurred. We generally incur
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 on a quarterly basis.
In the broadcasting industry, radio stations often utilize trade (or barter)
agreements to reduce expenses by exchanging advertising time for goods or
services. In order to maximize cash revenue from our spot inventory, we
minimize the use of trade agreements and have reduced trade revenue to
approximately 1.2% of our gross revenue in 1998, down from approximately 4.2%
in 1996.
Radio One calculates "same station" growth over a particular period by
comparing performance of stations owned (or operated under an LMA) during the
current period with the performance of the same
32
<PAGE>
stations for the corresponding period in the prior year. However, no station
will be included in such a comparison unless it has been owned (or operated
under an LMA) for at least one month of every quarter included in each of the
current and corresponding prior-year periods.
From January 1, 1996, to December 31, 1998, Radio One acquired six radio
stations. On May 19, 1997, Radio One acquired WPHI-FM (formerly WDRE-FM), in
Philadelphia, for approximately $20.0 million (after having operated the
station under an LMA since February 8, 1997). On March 16, 1998, Radio One,
through an Unrestricted Subsidiary, acquired BHI, owner and operator of WYCB-
AM, in Washington, D.C., for approximately $3.8 million. On June 30, 1998,
Radio One acquired Bell Broadcasting, owner and operator of WDTJ-FM (formerly
WCHB-FM) and WCHB-AM in Detroit, and WJZZ-AM in Kingsley, Michigan, for
approximately $34.2 million. On December 28, 1998, Radio One acquired Allur-
Detroit, owner and operator of WWBR-FM, in Detroit, for approximately $26.5
million.
The consolidated financial statements of Radio One included elsewhere in
this prospectus set forth the results of operations of: WPHI-FM for
approximately 11 months of fiscal year 1997 (including the LMA period) and for
fiscal year 1998; WYCB-AM from March 16, 1998, through the end of fiscal year
1998; Bell Broadcasting from July 1, 1998, through the end of fiscal year 1998;
and Allur-Detroit from December 29, 1998, through the end of fiscal year 1998.
The discussion below concerning results of operations reflects the operations
of radio stations Radio One owned and/or managed by during the periods
presented. As a result of the acquisition of WPHI-FM in May 1997 (with an LMA
for this station beginning in February 1997), WYCB-AM in March 1998, Bell
Broadcasting in June 1998, and Allur-Detroit in December 1998, Radio One's
historical financial data prior to such times are not directly comparable to
Radio One's historical financial data for subsequent periods. Additionally, due
to recent acquisition activity, our 1998 pro forma results differ materially
from our actual 1998 results. For the year ended December 31, 1998, pro forma
for completed transactions, net broadcast revenue and broadcast cash flow were
approximately $60.8 million and $27.0 million, respectively, compared to actual
net broadcast revenue and broadcast cash flow of $46.1 million and $21.6
million, respectively.
33
<PAGE>
Results of Operations
The following table summarizes Radio One's historical consolidated results
of operations.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1996 1997 1998
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Statement of Operations:
Net broadcast revenue........................... $23,702 $32,367 $46,109
Station operating expenses...................... 13,927 18,848 24,501
Corporate expenses.............................. 1,793 2,155 2,800
Depreciation and amortization................... 4,262 5,828 8,445
------- ------- -------
Operating income.............................. 3,720 5,536 10,363
Interest expense................................ 7,252 8,910 11,455
Other income (expense), net..................... (77) 415 358
------- ------- -------
Loss before benefit for income taxes and
extraordinary item............................. (3,609) (2,959) (734)
------- ------- -------
Income tax benefit.............................. -- -- 1,575
------- ------- -------
Income (loss) before extraordinary item....... (3,609) (2,959) 841
Extraordinary loss.............................. -- 1,985 --
------- ------- -------
Net income (loss)............................. $(3,609) $(4,944) $ 841
======= ======= =======
Broadcast cash flow............................. $ 9,775 $13,519 $21,608
Broadcast cash flow margin...................... 41.2% 41.8% 46.9%
EBITDA.......................................... $ 7,982 $11,364 $18,808
After-tax cash flow............................. 806 2,869 7,248
</TABLE>
Fiscal Year Ended December 31, 1998 Compared to Fiscal Year Ended December 31,
1997
Net Broadcast Revenue. Net broadcast revenue increased to approximately
$46.1 million for the fiscal year ended December 31, 1998, from approximately
$32.4 million for the fiscal year ended December 31, 1997, or 42.3%.
Approximately $3.8 million of the increase was attributable to stations
acquired during 1998. On a same station basis, net revenue for the period
increased approximately 30.6% to approximately $42.3 million in 1998 from
approximately $32.4 million in 1997. This increase was the result of continuing
broadcast revenue growth in Radio One's Washington, D.C., Baltimore, and
Philadelphia markets as we benefitted from ratings increases at certain of our
radio stations, improved power ratios at these stations and radio market
growth.
Station Operating Expenses. Station operating expenses excluding
depreciation and amortization increased to approximately $24.5 million for the
fiscal year ended December 31, 1998, from approximately $18.8 million for the
fiscal year ended December 31, 1997, or 30.3%. Approximately $2.5 million of
the increase was attributable to stations acquired during 1998. On a same
station basis, station operating expenses for the period increased
approximately 17.0% to approximately $22.0 million in 1998 from approximately
$18.8 million in 1997. This increase was primarily related to increases in
sales commissions and license fees due to significant revenue growth, as well
as additional programming costs related to ratings gains at some of our larger
radio stations.
Corporate Expenses. Corporate expenses increased to approximately $2.8
million for the fiscal year ended December 31, 1998, from approximately $2.2
million for the fiscal year ended December 31, 1997, or 27.3%. This increase
was due primarily to growth in the corporate staff consistent with our overall
expansion, annual costs associated with the 12% Notes due 2004 and costs
associated with our public reporting requirements.
34
<PAGE>
Depreciation and Amortization. Depreciation and amortization increased to
approximately $8.4 million for the fiscal year ended December 31, 1998, from
approximately $5.8 million for the fiscal year ended December 31, 1997, or
44.8%. This increase was due primarily to our asset growth as well as our
acquisitions in 1998.
Operating Income. Operating income increased to approximately $10.4 million
for the fiscal year ended December 31, 1998, from approximately $5.5 million
for the fiscal year ended December 31, 1997, or 89.1%. This increase was
attributable to the increases in broadcast revenues partially offset by higher
operating expenses and higher depreciation and amortization expenses as
described above.
Interest Expense. Interest expense increased to approximately $11.5 million
for the fiscal year ended December 31, 1998, from approximately $8.9 million
for the fiscal year ended December 31, 1997, or 29.2%. This increase was
primarily due to the 12% Notes Offering, the retirement of our approximately
$45.6 million bank credit facility and borrowings under our Bank Credit
Facility associated with the Bell Broadcasting acquisition.
Other Income. Other income decreased to $358,000 for the fiscal year ended
December 31, 1998, from $415,000 for the fiscal year ended December 31, 1997,
or 13.7%. This decrease was primarily attributable to lower interest income due
to lower cash balances as we used a portion of our cash balances to help fund
the Bell Broadcasting acquisition.
Loss before Benefit from Income Taxes. Loss before benefit from income taxes
decreased to $734,000 for the fiscal year ended December 31, 1998, from
approximately $3.0 million for the fiscal year ended December 31, 1997, or
75.5%. This decrease was due to higher operating income partially offset by
higher interest expense and lower other income. The income tax benefit of
approximately $1.6 million for the year ended December 31, 1998, was the result
of reversing our valuation allowance recorded in prior years related to our net
operating loss carryforward and other deferred tax assets, offset by an income
tax provision of $483,000 as we had net income for tax reporting purposes as a
result of non-deductible amortization expense for income tax purposes. Certain
intangible assets acquired as a result of the Bell Broadcasting acquisition
maintained their old income tax basis because the Bell Broadcasting acquisition
was a stock purchase.
Net Income (Loss). Net income increased to $841,000 for the fiscal year
ended December 31, 1998, from a net loss of approximately $4.9 million for the
fiscal year ended December 31, 1997. The increase was due to higher operating
income and an income tax benefit, partially offset by higher interest expense
as described above and an approximate $2.0 million extraordinary loss related
to the refinancing of debt.
Broadcast Cash Flow. Broadcast cash flow increased to approximately $21.6
million for the fiscal year ended December 31, 1998, from approximately $13.5
million for the fiscal year ended December 31, 1997, or 60.0%. Approximately
$1.3 million of the increase was attributable to stations acquired during 1998.
On a same station basis, broadcast cash flow for the period increased
approximately 50.4% to approximately $20.3 million in 1998 from approximately
$13.5 million in 1997. This increase was attributable to the increase in net
broadcast revenue partially offset by higher station operating expenses as
described above.
Our broadcast cash flow margin increased to approximately 46.9% for the
fiscal year ended December 31, 1998, from 41.8% for the fiscal year ended
December 31, 1997. On a same station basis, broadcast cash flow margin for the
period increased to approximately 48.0% in 1998 from approximately 41.8% in
1997. This increase was the result of strong revenue gains in our more mature
markets partially offset by slower expense growth in those markets. The lower
actual broadcast cash flow margin versus that reported on a same station basis
for 1998 was the result of our recent entrance into the Detroit market where we
acquired underperforming stations with profit margins lower than those of many
of the radio stations we own in markets in which we have operated for a longer
period of time.
35
<PAGE>
EBITDA. EBITDA increased to approximately $18.8 million for the fiscal year
ended December 31, 1998, from approximately $11.4 million for the fiscal year
ended December 31, 1997, or 64.9%. This increase was attributable to the
increase in net broadcast revenue partially offset by higher station operating
and corporate expenses as described above.
After-Tax Cash Flow. After-tax cash flow increased to approximately $7.2
million for the fiscal year ended December 31, 1998, from approximately $2.9
million for the fiscal year ended December 31, 1997, or 148.3%. This increase
was attributable to higher net income and depreciation and amortization as
described above.
Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended December 31,
1996
Net Broadcast Revenue. Net broadcast revenue increased to approximately
$32.4 million for the fiscal year ended December 31, 1997, from approximately
$23.7 million for the fiscal year ended December 31, 1996, or 36.7%.
Approximately $2.6 million of the increase was attributable to stations
acquired during 1997. On a same station basis, net revenue for the period
increased approximately 25.7% to approximately $29.8 million in 1997 from
approximately $23.7 million in 1996. This increase was primarily the result of
significant net broadcast revenue growth in our Washington, D.C. and Baltimore
markets as we benefitted from ratings increases at our larger radio stations as
well as radio market growth.
Station Operating Expenses. Station operating expenses excluding
depreciation and amortization increased to approximately $18.8 million for the
fiscal year ended December 31, 1997, from approximately $13.9 million for the
fiscal year ended December 31, 1996, or 35.3%. Approximately $2.4 million of
the increase was attributable to stations acquired during 1997. On a same
station basis, station operating expenses for the period increased
approximately 18.0% to approximately $16.4 million in 1997 from approximately
$13.9 million in 1996. This increase was due to higher sales, programming and
administrative costs associated with the significant net broadcast revenue
growth and ratings gains at our radio stations.
Corporate Expenses. Corporate expenses increased to approximately $2.2
million for the fiscal year ended December 31, 1997, from approximately $1.8
million for the fiscal year ended December 31, 1996, or 22.2%. This increase
was due primarily to growth in the corporate staff consistent with our overall
expansion, annual costs associated with the 12% Notes due 2004 and the costs
associated with our public reporting requirements.
Depreciation and Amortization. Depreciation and amortization increased to
approximately $5.8 million for the fiscal year ended December 31, 1997, from
approximately $4.3 million for the fiscal year ended December 31, 1996, or
34.9%. This increase was due primarily to our acquisition of WPHI-FM (formerly
WDRE-FM) in 1997.
Operating Income. Operating income increased to approximately $5.5 million
for the fiscal year ended December 31, 1997, from approximately $3.7 million
for the fiscal year ended December 31, 1996, or 48.6%. This increase was
attributable to the increases in net broadcast revenue partially offset by
higher operating expenses, higher depreciation and amortization expenses and
start-up losses incurred earlier in 1997 related to the acquisition of WPHI-FM.
Interest Expense. Interest expense increased to approximately $8.9 million
for the fiscal year ended December 31, 1997, from approximately $7.3 million
for the fiscal year ended December 31, 1996, or 21.9%. This increase related
primarily to the 12% Notes Offering and the associated retirement of our $45.6
million bank credit facility at that time.
Other Income (Loss). Other income increased to approximately $415,000 for
the fiscal year ended December 31, 1997, from a loss of approximately $77,000
for the fiscal year ended December 31, 1996. This increase was primarily
attributable to higher interest income due to higher cash balances associated
with our cash flow growth and capital raised in the 12% Notes Offering.
36
<PAGE>
Loss before Benefit for Income Taxes. Loss before provision for income taxes
and extraordinary item decreased to approximately $3.0 million for the fiscal
year ended December 31, 1997, from approximately $3.6 million for the fiscal
year ended December 31, 1996, or 16.7%. The decrease was due to higher
operating and other income partially offset by higher interest expense
associated with the 12% Notes Offering.
Net Loss. Net loss increased to approximately $4.9 million for the fiscal
year ended December 31, 1997, from approximately $3.6 million for the fiscal
year ended December 31, 1996, or 36.1%. This increase was due to a loss of
approximately $2.0 million on the early retirement of the indebtedness under
our bank credit facility with the proceeds from the 12% Notes Offering, as well
as the exchange of our 15% Subordinated Promissory Notes due 2004 for Senior
Preferred Stock.
Broadcast Cash Flow. Broadcast cash flow increased to approximately $13.5
million for the fiscal year ended December 31, 1997, from approximately $9.8
million for the fiscal year ended December 31, 1996, or 37.8%. Approximately
$0.2 million of the increase was attributable to stations acquired during 1997.
On a same station basis, broadcast cash flow for the period increased
approximately 35.7% to approximately $13.3 million in 1998 from approximately
$9.8 million in 1997. This increase was attributable to the increases in net
broadcast revenue partially offset by higher station operating expenses.
Our broadcast cash flow margin increased to approximately 41.8% for the
fiscal year ended December 31, 1997 from 41.2% for the fiscal year ended
December 31, 1996. On a same station basis, broadcast cash flow margin for the
period increased to approximately 44.6% in 1997 from approximately 41.2% in
1996. This increase was the result of strong revenue gains in our more mature
markets partially offset by slower expense growth in those markets. The lower
actual broadcast cash flow margin versus that reported on a same station basis
for 1997 is the result of our entry into the Philadelphia market where we
acquired an underperforming station with profit margins lower than those of
many of the radio stations we own in markets in which we have operated for a
longer period of time.
EBITDA. EBITDA increased to approximately $11.4 million for the fiscal year
ended December 31, 1997, from approximately $8.0 million for the fiscal year
ended December 31, 1996, or 42.5%. This increase was attributable to the
increase in net broadcast revenue partially offset by higher operating and
corporate expenses.
After-Tax Cash Flow. After-tax cash flow increased to approximately $2.9
million for the fiscal year ended December 31, 1997, from approximately
$806,000 for the fiscal year ended December 31, 1996, or 259.8%. This increase
was attributable to higher net income and depreciation and amortization as
described above.
Liquidity and Capital Resources
Our primary source of liquidity is cash provided by operations and, to the
extent necessary, undrawn commitments available under the Bank Credit Facility.
Our ability to borrow in excess of the commitments set forth in the Credit
Agreement is limited by the terms of the Indenture and our preferred stock.
Additionally, such terms place restrictions on Radio One with respect to the
sale of assets, liens, investments, dividends, debt repayments, capital
expenditures, transactions with affiliates, consolidation and mergers, and the
issuance of equity interests among other things.
We have used a significant portion of our capital resources to consummate
acquisitions. These acquisitions were or will be funded from (i) the Bank
Credit Facility, (ii) the proceeds of this offering and the Preferred Stock
Offering, and (iii) internally generated cash flow. A portion of the net
proceeds from these offerings will be used to repay our outstanding
indebtedness under the Bank Credit Facility. See "Use of Proceeds."
Radio One's balance of cash and cash equivalents was approximately $4.5
million as of December 31, 1998, and approximately $8.5 million as of December
31, 1997. This decrease in cash resulted primarily from
37
<PAGE>
our use of approximately $9.5 million of our then available cash to fund
partially the Bell Broadcasting acquisition, offset by an increase in cash from
operations. The balance of the purchase price and expenses related to the Bell
Broadcasting acquisition was funded with approximately $25.4 million drawn on a
$32.5 million Bank Credit Facility that we entered into concurrent with the
closing of the acquisition of Bell Broadcasting. We subsequently increased the
Bank Credit Facility to $57.5 million from which we drew down an additional
$24.0 million to fund partially the acquisition of Allur-Detroit. On December
31, 1998, approximately $8.1 million was available to be drawn down from the
Bank Credit Facility. On , we entered into an amended and restated
credit agreement under which we may borrow up to $100 million on a revolving
basis from a group of banking institutions. Immediately following the
acquisition of ROA, approximately $67.0 million was outstanding under our Bank
Credit Facility.
Concurrent with this offering, we anticipate issuing $50 million in New
Preferred Stock. The proceeds of the Preferred Stock Offering will be used in
part to increase availability under our Bank Credit Facility. This availability
is expected to be used in part to fund pending acquisitions. In the event the
Preferred Stock Offering is not consummated, we believe we have adequate
liquidity and access to other financing sources to fund these acquisitions.
Net cash flow from operating activities increased to approximately $9.3
million for the fiscal year ended December 31, 1998, from approximately $4.9
million for the fiscal year ended December 31, 1997, or 89.8%. This increase
was primarily due to higher net income (versus a net loss in 1997) and non-cash
expenses. Non-cash expenses of depreciation and amortization increased to
approximately $8.4 million for fiscal year ended December 31, 1998, from
approximately $5.8 million for the fiscal year ended December 31, 1997, or
44.8% due to our recent acquisitions, as well as leasehold improvements made to
our new headquarters and Washington, D.C. radio studios in the second half of
1997. Non-cash expenses of amortization of debt financing costs, unamortized
discount and deferred interest increased to approximately $4.1 million for the
fiscal year ended December 31, 1998, from approximately $3.3 million for the
fiscal year ended December 31, 1997, or 24.2%, due to the 12% Notes Offering.
We also incurred a non-cash expense of approximately $2.0 million related to
the loss on extinguishment of debt during the fiscal year ended December 31,
1997.
Net cash flow used in investing activities increased to approximately $61.2
million for the fiscal year ended December 31, 1998, compared to approximately
$23.2 million for the fiscal year ended December 31, 1997, or 163.8%. During
the fiscal year ended December 31, 1998, we acquired Bell Broadcasting for
approximately $34.2 million plus the cost of additional assets and expenses
related to the transaction, and acquired Allur-Detroit for approximately $26.5
million. Additionally, we made purchases of capital equipment totaling
approximately $2.2 million. During the fiscal year ended December 31, 1997, we
acquired WPHI-FM for approximately $20.0 million and made purchases of capital
equipment totaling approximately $2.0 million.
Net cash flow from financing activities was approximately $47.8 million for
the fiscal year ended December 31, 1998. During the fiscal year ended December
31, 1998, Radio One entered into a $57.5 million Bank Credit Facility, of
which, approximately $49.4 million was used to finance partially the
acquisitions of Bell Broadcasting and Allur-Detroit. In conjunction with this
facility, we incurred approximately $1.0 million in deferred debt financing
costs. Additionally, during the fiscal year ended December 31, 1998, a wholly-
owned Unrestricted Subsidiary of Radio One financed the acquisition of WYCB-AM
with a promissory note due to the seller for approximately $3.8 million. Net
cash flow from financing activities was approximately $25.1 million for the
fiscal year ended December 31, 1997. During the fiscal year ended December 31,
1997, we completed the 12% Notes Offering and raised net proceeds of
approximately $72.8 million. We used approximately $19.1 million of these
proceeds to acquire WPHI-FM (formerly WDRE-FM) and approximately $45.6 million
of the proceeds to retire the outstanding indebtedness under our then existing
bank credit facility. In conjunction with the 12% Notes Offering we incurred
approximately $2.1 million in deferred debt financing costs. As a result, cash
and cash equivalents decreased by approximately $4.0 million during the fiscal
year ended December 31, 1998, compared to an increase of approximate $6.8
million during the fiscal year ended December 31, 1997.
38
<PAGE>
We continuously review, and are currently reviewing, opportunities to
acquire additional radio stations, primarily in the top 30 African-American
markets. As of the date of this prospectus, other than the pending
transactions, we have no written or oral understandings, letters of intent or
contracts to acquire radio stations. We anticipate that any future radio
station acquisitions would be financed through funds generated from operations,
equity financings, permitted debt financings, debt financings through
Unrestricted Subsidiaries or a combination of these sources. However, there can
be no assurance that financing from any of these sources, if available, will be
available on favorable terms.
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 Radio One's indebtedness, to fund anticipated
capital expenditures and working capital requirements and to enable us to
comply with the terms of our debt agreements. Our ability to meet our debt
service obligations and reduce our total debt, and our ability to refinance the
12% Notes due 2004, at or prior to their scheduled maturity date in 2004, will
depend upon our future performance which, in turn, will be subject to general
economic conditions and to financial, business and other factors, including
factors beyond our control. For 1999, we anticipate maintenance capital
expenditures to be between $1.0 million and $2.0 million and total capital
expenditures to be between $4.0 million and $6.0 million. During 1997, Radio
One converted from a S corporation to a C corporation.
Impact of Inflation
We believe that inflation has not had a material impact on our results of
operations for each of our fiscal years in the three-year period ended December
31, 1998. However, there can be no assurance that future inflation would not
have an adverse impact on our operating results and financial condition.
Seasonality
Seasonal net broadcast revenue fluctuations are common in the radio
broadcasting industry and are due primarily to fluctuations in advertising
expenditures by local and national advertisers. Radio One's first fiscal
quarter generally produces the lowest net broadcast revenue for the year.
Year 2000 Compliance
Radio One has commenced a process to ensure Year 2000 compliance of all
hardware, software, and ancillary equipment that are date dependent. This
process involves four phases:
Phase I--Inventory and Data Collection. This phase involves an
identification of all systems that are date dependent. This phase
was completed during the first quarter of 1998.
Phase II--Compliance Identification. This phase involves Radio One
identifying and beginning to replace critical systems that cannot
be updated or certified as compliant. We commenced this phase in
the first quarter of 1999 and expect to complete the substantial
majority of this phase before the end of the second quarter of
1999. To date, we have verified that our accounting, payroll, and
local wide area network hardware and software systems are
substantially compliant. In addition, we have determined that
most of our personal computers and PC applications are compliant.
We are currently reviewing our security systems and other
miscellaneous systems.
Phase III--Test, Fix, and Verify. This phase involves testing all systems
that are date dependent and upgrading all non-compliant systems. We
expect to complete this phase during the third quarter of 1999.
Phase IV--Final Testing, New Item Compliance. This phase involves a review
of failed systems for compliance and re-testing as necessary. We
expect to complete this phase by the end of the third quarter of
1999.
39
<PAGE>
To date, we have no knowledge that any of our major systems are not Year
2000 ready or will not be Year 2000 ready by the end of the third quarter of
1999. We have not incurred significant expenditures and believe we will achieve
substantial Year 2000 readiness without the need to acquire significant new
hardware, software or systems. As part of our expansion over the past two
years, we have undertaken significant build-outs, upgrades and expansions to
our radio station studios, business offices and technology infrastructure.
These enhancement efforts are continuing in all of the markets in which we have
recently acquired radio stations and will expand into the new markets in which
we will be acquiring radio stations. We believe that most, if not all, of the
new equipment installed in conjunction with these recent build-outs is Year
2000 compliant. Based upon our experience to date, we estimate the remaining
costs to achieve Year 2000 readiness will be approximately $100,000,
independent of the costs associated with the previously-mentioned expansions
which are being undertaken in the normal course of our business development.
All costs directly related to preparing for Year 2000 readiness will be
expensed as incurred. We are not aware of any Year 2000 problems that would
have a material effect on our operations. We are also not aware of any non-
compliance by our suppliers that is likely to have material impact on our
business. Nevertheless, we cannot assure you that our critical systems, or the
critical systems of our suppliers, will be Year 2000 ready.
Radio One does not intend to develop any contingency plans to address
possible failures by itself or its vendors related to Year 2000 compliance.
Radio One does not believe that such contingency plans are required because it
believes that the Company and its significant vendors will be Year 2000
compliant before January 2000.
40
<PAGE>
BUSINESS
Radio One was founded in 1980 and is the largest radio broadcasting company
in the United States primarily targeting African-Americans. After we complete
our pending acquisitions, we will own and operate 26 radio stations. Twenty-
five of these stations (eighteen FM and seven AM) are in nine of the top 20
African-American radio markets: Washington, D.C., Baltimore, Atlanta,
Philadelphia, Detroit, St. Louis, Cleveland, Richmond and an East Coast market.
Our strategy is to expand within our existing markets and into new markets that
have a significant African-American presence. We believe radio broadcasting
primarily targeting African-Americans has significant growth potential. We also
believe that we have a competitive advantage in the African-American market and
the radio industry in general, due to our primary focus on urban formats, our
skill in programming and marketing these formats, and our turnaround expertise.
We have succeeded in increasing ratings, net broadcast revenue and broadcast
cash flow of all of the FM stations we have owned or managed for at least one
year. The radio station clusters that we owned as of December 31, 1998, were
ranked first or second in all of their markets in combined audience and net
broadcast revenue share among radio stations targeting African-Americans. Our
net broadcast revenue and broadcast cash flow have grown significantly on both
a total and same station basis:
. Net broadcast revenue grew at a compound annual rate of 60.2% from an
actual $23.7 million in 1996 to $60.8 million in 1998, pro forma for
completed transactions.
. Broadcast cash flow grew at a compound annual rate of 66.0% from an
actual $9.8 million in 1996 to $27.0 million in 1998, pro forma for
completed transactions.
. Same station net broadcast revenue and broadcast cash flow grew at
average annual rates of 28.0% and 42.1%, respectively, from 1996 through
1998, pro forma for Radio One of Atlanta, Inc., which was managed by us
during this period.
. After-tax cash flow grew at a compound annual rate of 206.2% from an
actual $0.8 million in 1996 to $7.5 million in 1998, pro forma for
completed transactions.
Radio One is led by our Chairperson and co-founder, Ms. Catherine L. Hughes,
and her son, Mr. Alfred C. Liggins, III, our Chief Executive Officer and
President, who together have over 40 years of operating experience in radio
broadcasting. Ms. Hughes, Mr. Liggins and our strong management team have
successfully implemented a strategy of acquiring and turning around
underperforming radio stations. We believe that we are well positioned to apply
our proven operating strategy to our recently or soon to be acquired stations
in Detroit, St. Louis, Cleveland, Richmond and an East Coast market, and to
other radio stations in existing and new markets as attractive acquisition
opportunities arise.
The African-American Market Opportunity
We believe that operating urban formatted radio stations primarily targeting
African-Americans has significant growth potential for the following reasons:
. Rapid Population Growth. 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 20.0% increase from 1995,
compared to an expected increase of 13.0% for the population as a
whole). (Source: 1996 U.S. Census Bureau Current Population Report)
. Higher Income Growth. According to the U.S. 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. African-American buying power is
estimated to reach $533 billion in 1999 (up 73.0% from 1990 compared to
a 57.0% increase for all Americans) and to account for 8.2% of total
buying power in 1999 (compared to 7.4% in 1990). (Source: "African-
American Buying Power by Place of Residence: 1990-1999," Dr. Jeffrey M.
Humphreys). In addition, the African-American consumer tends to have a
different consumption profile than non-African-Americans. For example,
31% of African-Americans purchased a TV, VCR or stereo in the past year
compared to 25% of average U.S. households. African-Americans' higher
41
<PAGE>
than average rate of consumption is a powerful reason for U.S. retailers
to increase targeted advertising spending toward this consumer group.
(Source: Pricewaterhouse Coopers, LLP 1998 Study)
. Growth in Advertising Targeting the African-American Market. We believe
that large corporate advertisers are becoming more focused on reaching
minority consumers in the United States. The African-American and
Hispanic communities are viewed as an emerging growth market within the
mature domestic market. A 1997 study estimated that major national
advertisers spent $881 million on advertising targeting African-American
consumers, up from $463 million in 1985. (Source: Target Market News
(Chicago, IL-1997)). For example, Ford Motor Company reportedly plans to
increase its spending targeting African-Americans and Hispanics by 20%
in the 1998-99 model year. (Source: Ad Week Midwest September 28, 1998).
We believe Ford is one example of many large corporations currently
expanding their commitment to ethnic advertising.
. Urbanization of American Culture and Society. We believe that there is
an ongoing "urbanization" of many facets of American society as
evidenced by the influence of African-American culture in the areas of
music (for example, hip-hop and rap music), film, fashion, sports and
urban-oriented television shows and networks. We believe that companies
as disparate as the News Corporation's Fox television network, the
sporting goods manufacturer Nike(R), the fast food chain McDonald's(R),
and prominent fashion designers have embraced this urbanization trend in
their products as well as their advertising messages.
. Growing Popularity of Urban Formats. We believe that urban programming
has been expanded to target a more diverse urban listener base and has
become more popular with listeners and advertisers over the past ten
years. The number of urban radio stations has increased from 294 in 1990
to an estimated 371 in 1998, or 26%, and is expected to increase an
additional 10% to 409 by 2002. In 1998, urban formats were one of the
top three formats in nine of the top ten radio markets nationwide and
the top format in five of these markets. (Source: INTEREP, Research
Division, 1998 Urban Radio Study)
. Concentrated Presence in Urban Markets. In 1996, approximately 58.0% of
the African-American population was located in the top 30 African-
American markets. Relative to radio broadcasters targeting a broader
audience, we believe we can cover the various segments of our target
market with fewer programming formats and therefore fewer radio stations
than the maximum allowed by the FCC (up to eight radio stations in the
largest markets with no more than five being FM or AM). (Source: BIA,
Fourth Edition 1998)
. Strong Audience Listenership and Loyalty. In 1996, African-Americans
listened to radio broadcasts an average of 27.2 hours per week compared
to 22.9 hours per week for non-African-Americans among all persons in
the ten largest markets. In addition, Radio One believes that African-
American radio listeners exhibit greater loyalty to radio stations that
target the African-American community because those radio stations
become a valuable source of entertainment and information responsive to
the community's interests and lifestyles. (Source: INTEREP Research
Division, 1998 Urban Radio Study)
Acquisition Strategy
Our acquisition strategy is to acquire and turn around underperforming radio
stations principally in the top 30 African-American markets. We consider
acquisitions in existing markets where expanded coverage is desirable and in
new markets where we believe it is advantageous to establish a presence. In
analyzing potential acquisition candidates, we generally consider:
. the price and terms of the purchase;
. whether the radio station has a signal adequate to reach a large
percentage of the African-American community in a market;
42
<PAGE>
. whether we can increase ratings and net broadcast revenue of the radio
station;
. whether we can reformat or improve the radio station's programming in
order to serve profitably the African-American community;
. whether the radio station affords us the opportunity to introduce
complementary formats in a market where Radio One already maintains a
presence; and
. the number of competitive radio stations in the market.
For strategic reasons, or as a result of a station cluster purchase, we may
also acquire and operate stations with formats that target non-African-American
segments of the population.
Turnaround Expertise
We typically enter a market by acquiring a station or stations that have
little or negative broadcast cash flow. Additional stations we have acquired in
existing markets have often been, in our opinion, substantially
underperforming. By implementing our operating strategies, we have succeeded in
increasing ratings, net broadcast revenue and broadcast cash flow of all the FM
stations we have owned or managed for at least one year. We have achieved these
improvements while operating against much larger competitors. Some of these
successful turnarounds are described below by market:
. Washington, D.C. In 1995, we acquired WKYS-FM for approximately $34.0
million. At the time, WKYS-FM was ranked number 13 by Arbitron in the
12-plus age demographic. Over a two-year period, we repositioned WKYS-
FM, improved its programming and enhanced the station's community
involvement and image. In the Fall 1998 Arbitron Survey, the station was
ranked number one in the 18-34 age demographic (with a 10.2 share) and
number two in the 12-plus age demographic (with a 5.4 share), behind two
stations tied for number one (each with a 5.6 share).
In 1987, we acquired WMMJ-FM for approximately $7.5 million. At the
time, WMMJ-FM was being programmed in a general market Adult
Contemporary format, and had a 1.2 share of the 12-plus age
demographic. After extensive research we changed the station's format,
making WMMJ-FM the first FM radio station on the East Coast to
introduce an Urban Adult Contemporary programming format. In the Fall
1998 Arbitron Survey, the station was ranked number three in the 25-54
age demographic (with a 5.8 share) and number five in the 12-plus age
demographic (with a 5.0 share).
. Baltimore. In 1993, we acquired WERQ-FM and WOLB-AM (formerly WERQ-AM)
for approximately $9.0 million. At the time, these stations had mediocre
ratings. We converted WERQ-FM's programming to a more focused Young
Urban Contemporary format and began aggressively marketing the station.
WERQ-FM is now Baltimore's dominant station, ranked number one in the
12-plus, 18-34 and 25-54 age demographics in the Fall 1998 Arbitron
Survey, a position it first achieved in the Spring 1997 Arbitron Survey.
In 1992, we acquired WWIN-FM and its sister station, WWIN-AM, for
approximately $4.7 million. At the time, WWIN-FM was a distant second
in ratings to its in-format direct competitor, WXYV-FM. We repositioned
WWIN-FM towards the 25-54 age demographic, and in the Fall 1998
Arbitron Survey the station was ranked number two in that age
demographic (with a 7.5 share) behind two stations tied for number one
(each with a 7.7 share), including Radio One's WERQ-FM.
. Atlanta. In 1995, ROA, then an affiliate of Radio One, acquired WHTA-FM
(formerly WQUL- FM), a Class A radio station located approximately 40
miles from Atlanta, for approximately $5.0 million. Prior to that
acquisition, the previous owners, together with our management, upgraded
and moved the station approximately 20 miles closer to Atlanta. The
result was the introduction of a new, Young Urban Contemporary radio
station in the Atlanta market. The station's ratings increased quickly,
to an approximate 5.0 share in the 12-plus age demographic. In the Fall
1998 Arbitron Survey, the station was ranked number four in the 18-34
age demographic (with an 8.3 share).
43
<PAGE>
. Philadelphia. In 1997, we acquired WPHI-FM (formerly WDRE-FM) for
approximately $20.0 million. At the time WDRE-FM was being programmed in
a Modern Rock format and had a 2.0 share in the 12 plus age demographic.
We changed the station's format to Young Urban Contemporary and, in the
Fall 1998 Arbitron Survey, the station was ranked number 14 in the 12-
plus age demographic (with a 3.3 share) and number five in the 18-34 age
demographic (with a 6.0 share).
Top 30 African-American Radio Markets in the United States(/1/)
Boxes enclose the tabular information for Washington, D.C., Detroit,
Philadelphia, Atlanta, Baltimore, St. Louis, Cleveland and Richmond.
<TABLE>
<CAPTION>
African-Americans
as a Percentage of the
African-American Overall Population
Rank Market Population in the Market(/2/) in the Market(/2/)
---- ------ ----------------------------- ----------------------
(in thousands)
<C> <S> <C> <C>
1. New York 3,731 22.2%
2. Chicago 1,648 19.4
- ------------------------------------------------------------------------------------
3. Washington, D.C. 1,150 27.2
- ------------------------------------------------------------------------------------
4. Los Angeles 1,134 9.4
- ------------------------------------------------------------------------------------
5. Detroit 1,004 22.5
6. Philadelphia 947 19.9
7. Atlanta 921 25.7
- ------------------------------------------------------------------------------------
8. Houston/Galveston 782 18.3
9. Miami/Ft. Lauderdale/
Hollywood 718 20.2
10. Dallas/Ft. Worth 645 14.2
- ------------------------------------------------------------------------------------
11. Baltimore 644 26.0
- ------------------------------------------------------------------------------------
12. San Francisco 599 9.2
13. Memphis 482 41.5
14. New Orleans 460 36.3
15. Norfolk/Virginia
Beach/Newport News 444 29.6
- ------------------------------------------------------------------------------------
16. St. Louis 439 17.2
17. Cleveland 398 18.7
- ------------------------------------------------------------------------------------
18. Boston 281 7.3
- ------------------------------------------------------------------------------------
19. Richmond 281 30.0
- ------------------------------------------------------------------------------------
20. Charlotte/Gastonia/Rock
Hill 266 19.9
21. Birmingham 261 27.0
22. Raleigh/Durham 244 23.5
23. Milwaukee/Racine 237 14.4
24. Greensboro/Winston
Salem/High Point 226 19.7
25. Cincinnati 220 11.4
26. Kansas City 215 12.8
27. Tampa/St.
Petersburg/Clearwater 202 9.0
28. Jacksonville 201 19.0
29. Indianapolis 193 14.1
30. Pittsburgh 188 7.9
</TABLE>
- --------
(1) Boxes and bold text indicate markets where Radio One currently owns or will
own and operate radio stations upon consummation of the acquisitions (other
than the pending acquisition in an East Coast market) described under
"Unaudited Pro Forma Consolidated Financial Information."
(2)Population estimates are for 1996 and are based upon BIA Investing in Radio
Market Report ("BIA 1998 Fourth Edition").
44
<PAGE>
Operating Strategy
In order to maximize net broadcast revenue and broadcast cash flow at our
radio stations, we strive to achieve the largest audience share of African-
American listeners in each market, convert these audience share ratings to
advertising revenue, and control operating expenses. The success of our
strategy relies on the following:
. market research, targeted programming and marketing;
. strong management and performance-based incentives;
. strategic sales efforts;
. radio station clustering, programming segmentation and sales bundling;
. advertising partnerships and special events; and
. significant community involvement.
Market Research, Targeted Programming and Marketing
Radio One uses market research to tailor the programming, marketing and
promotions of our radio stations to maximize audience share. To achieve these
goals, we use market research to identify unserved or underserved markets or
segments of the African-American community in current and new markets and to
determine whether to acquire a new radio station or reprogram one of our
existing radio stations to target those markets or segments.
We also seek to reinforce our targeted programming by creating a distinct
and marketable identity for each of our radio stations. To achieve this
objective, in addition to our significant community involvement discussed
below, we employ and promote distinct, high-profile on-air personalities at
many of our radio stations, many of whom have strong ties to the African-
American community.
Strong Management and Performance-based Incentives
Radio One focuses on hiring highly motivated and talented individuals in
each functional area of the organization who can effectively help us implement
our growth and operating strategies. Radio One's management team is comprised
of a diverse group of individuals who bring expertise to their respective
functional areas. We seek to hire and promote individuals with significant
potential, the ability to operate with high levels of autonomy and the
appropriate team-orientation that will enable them to pursue their careers
within the organization.
To enhance the quality of our management in the areas of sales and
programming, 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 broadcast cash flow benchmarks which create an incentive for
management to focus on both sales growth and 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.
Strategic Sales Efforts
Radio One has assembled an effective, highly trained sales staff responsible
for converting audience share into revenue. We operate with a focused, sales-
oriented culture which rewards aggressive selling efforts through a generous
commission and bonus compensation structure. We hire and deploy large teams of
sales professionals for each of our stations or station clusters, and we
provide these teams with the resources necessary to compete effectively in the
markets in which we operate. We utilize various sales strategies to sell
45
<PAGE>
and market our stations as stand-alones, in combination with other stations
within a given market and across markets, where appropriate.
Radio Station Clustering, Programming Segmentation and Sales Bundling
Radio One strives to build clusters of radio stations in our markets, with
each radio station targeting different demographic segments of the African-
American population. This clustering and programming segmentation strategy
allows us to achieve greater penetration into each segment of our target
market. We are then able to offer advertisers multiple audiences and to bundle
the radio stations for advertising sales purposes when advantageous.
We believe there are several potential benefits that result from operating
multiple radio stations in the same market. First, each additional radio
station in a market provides us with a larger percentage of the prime
advertising time available for sale within that market. Second, the more
stations we program, the greater the market share we can achieve in our target
demographic groups through the use of segmented programming. Third, we are
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 us to take advantage of
our market expertise and existing relationships with advertisers.
Advertising Partnerships and Special Events
We believe that in order to create advertising loyalty, Radio One must
strive to be the recognized expert in marketing to the African-American
consumer in the markets in which we operate. We believe that Radio One has
achieved this recognition by focusing on serving the African-American consumer
and by creating innovative advertising campaigns and promotional tie-ins with
our advertising clients and sponsoring numerous entertainment events each year.
We sponsor the Stone Soul Picnic, an all-day free outdoor concert which
showcases advertisers, local merchants and other organizations to over 100,000
people in each of Washington, D.C. and Baltimore. We also sponsor The People's
Expo every March in Washington, D.C. and Baltimore, which provides
entertainment, shopping and educational seminars to Radio One's listeners and
others from the communities we serve. In these events, advertisers buy signage,
booth space and broadcast promotions to sell a variety of goods and services to
African-American consumers. As we expand our presence in our existing markets
and into new markets, we plan to increase the number of events and the number
of markets in which we host these major events.
Significant Community Involvement
We believe our active involvement and significant relationships in the
African-American community provides a competitive advantage in targeting
African-American audiences. In this way, we believe our proactive involvement
in the African-American community in each of our markets significantly improves
the marketability of our radio broadcast time to advertisers who are targeting
such communities.
We believe that a radio station's image should reflect the lifestyle and
viewpoints of the target demographic group it serves. Due to our fundamental
understanding of the African-American community, we believe we are 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 our operations and enables us to create enhanced awareness and
name recognition in the marketplace. In addition, we believe our multi-level
approach to community involvement leads to increased effectiveness in
developing and updating our programming formats. We believe our enhanced
awareness and more effective programming formats lead to greater listenership
and higher ratings over the long-term.
46
<PAGE>
We have a history of sponsoring events that demonstrate our commitment to
the African-American community, including:
. heightening the awareness of diseases which disproportionately impact
African-Americans, such as sickle-cell anemia and leukemia, and holding
fundraisers to benefit the search for their cure;
. developing contests specifically designed to assist African-American
single mothers with day care expenses;
. fundraising for the many African-American churches throughout the
country that have been the target of arsonists; and
. organizing seminars designed to educate African-Americans on personal
issues such as buying a home, starting a business, developing a credit
history, financial planning and health care.
Management Stock Option Plan
On March 10, 1999, we adopted the 1999 Stock Option and Restricted Stock
Grant Plan (the "Option Plan") designed to provide incentives relating to
equity ownership to present and future executive, managerial, and other key
employees of Radio One and our subsidiaries. The Option Plan affords us
latitude in tailoring incentive compensation for the retention of key
personnel, to support corporate and business objectives, and to anticipate and
respond to a changing business environment and competitive compensation
practices. For more information see "Management--Stock Option Plan."
47
<PAGE>
Station Operations
The following is a general description of each of our markets and our radio
stations in each market. As noted, some of the data provided in the tables
below includes information during periods the radio stations listed were not
owned or operated by Radio One.
Washington, D.C.
The Washington, D.C. market is estimated to be the eighth largest radio
market in terms of MSA population. In 1998, this market had advertising revenue
estimated to be $252.8 million, making it the sixth largest radio market in
terms of advertising revenue. In 1996, Washington, D.C. had the third largest
African-American population in the United States with an MSA population of
approximately 4.2 million (approximately 27.2% of which was African-American).
We believe that we own 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 two of the
three AM radio stations that target African-Americans. Washington, D.C.
experienced annual radio revenue growth of 5.4% between 1991 and 1996, and
radio revenue in Washington, D.C. is expected to continue growing at an annual
pace of 7.4% between 1997 and 2001. (Source: BIA 1998 Fourth Edition)
<TABLE>
<CAPTION>
1995(/4/) 1996(/4/) 1997(/4/) 1998(/4/) Fall 1998(/5/)
--------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
WKYS-FM(/1/)
Audience share (12-
plus)................ 3.8 4.5 5.8 5.2 5.4
Audience share rank
(12-plus)............ 9t 6t 2 3 2
Audience share (18-
34).................. 5.8 7.5 10.4 10.1 10.2
Audience share rank
(18-34).............. 6 2 1 1 1
Revenue share......... 3.8% 3.3% 4.5% 5.0% n/a
Revenue rank.......... 14 14 10 9 n/a
WMMJ-FM(/2/)
Audience share (12-
plus)................ 3.7 4.5 4.1 4.3 5.0
Audience share rank
(12-plus)............ 11t 6t 9 8 5
Audience share (25-
54).................. 4.6 5.4 4.9 5.1 5.8
Audience share rank
(25-54).............. 8 3t 7 4 3
Revenue share......... 3.7% 3.4% 2.9% 3.2% n/a
Revenue rank.......... 15 13 17 18 n/a
WOL-AM
Audience share (12-
plus)................ 1.7 1.0 1.1 0.8 0.7
Audience share rank
(12-plus)............ 19 23t 20 25 25t
Audience share (35-
64).................. 2.3 1.1 1.4 1.1 1.0
Audience share rank
(35-64).............. 14t 23 19 22 21t
Revenue share......... 2.0% 1.8% 1.6% 0.8% n/a
Revenue rank.......... 18 18 19 21 n/a
WMMJ-FM AND WOL-AM
(combined)
Audience share (12-
plus)................ 5.4 5.5 5.2 5.1 5.7
Audience share (25-
54).................. 6.4 6.2 5.9 5.9 6.5
Revenue share......... 5.6% 5.3% 4.5% 4.0% n/a
Revenue rank.......... 7 8 12 11 n/a
WYCB-AM(3)
Audience share (12-
plus)................ 1.6 1.3 1.2 1.0 0.9
Audience share rank
(12-plus)............ 20 20 19 22 22t
Audience share (35-
64).................. 1.7 1.5 1.4 1.1 1.0
Audience share rank
(35-64).............. 19 18 20 19 21t
Revenue share......... n/a n/a n/a 0.5% n/a
Revenue rank.......... n/a n/a n/a n/a n/a
</TABLE>
- --------
As used in this table, "n/a" means not available or not applicable and "t"
means tied with one or more other radio stations.
(1)WKYS-FM was acquired by Radio One on June 6, 1995.
(2)WOL-AM and WMMJ-FM advertising time is sold in combination.
(3)Radio One acquired WYCB-AM in the first quarter of 1998 through an
Unrestricted Subsidiary.
(4) Audience share and audience share rank data are based on Arbitron Survey
four book averages for the years indicated ending with the Fall Arbitron
Survey. Revenue share and rank data are based upon the Radio Revenue Report
of Hungerford for 1998, 1997, 1996, and 1995 (if applicable) except for
WYCB-AM which does not report to Hungerford. Revenue share for WYCB-AM
represents the radio station's net broadcast revenue as a percentage of the
market radio revenue reported by the Hungerford Report (December 1998), as
adjusted for WYCB-AM's net broadcast revenue.
(5)Fall 1998 Arbitron Survey.
48
<PAGE>
WOL-AM. In 1980, we acquired our first radio station, WOL-AM, for
approximately $900,000. WOL-AM was a music station with declining revenue and
audience shares that Radio One converted to one of the country's first all-talk
radio stations targeting African-Americans. Radio One'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." We believe that WOL-AM is a vital communications
platform for the African-American community and political and business leaders
in its market. WOL-AM's ratings have historically fluctuated between a 1.0 and
2.0 share in the 12-plus age demographic market.
WMMJ-FM. In 1987, Radio One purchased WMMJ-FM for approximately $7.5
million. At the time, WMMJ-FM was being programmed in a general market Adult
Contemporary format, and had a 1.2 share of the 12-plus age demographic. After
extensive research we changed the station's format, making WMMJ-FM 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 25-54 age demographic and provides adult-oriented Urban Contemporary music
from the 1960s through the 1990s. The Urban AC format was almost immediately
successful, and in the Fall 1998 Arbitron Survey, the station was ranked number
three in the 25-54 age demographic (with a 5.8 share) and number five in the
12-plus age demographic (with a 5.0 share).
WKYS-FM. In June 1995, Radio One purchased WKYS-FM for approximately $34.0
million. WKYS-FM is a Young Urban Contemporary radio station targeting African-
Americans in the 18-34 age demographic. 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 Infinity Broadcasting ("Infinity")) changed its format from Adult
Contemporary to Contemporary Hit/Urban ("CHR") Urban and in Spring 1989,
replaced WKYS-FM as the number one urban radio station in terms of audience
share. From 1986 to Fall 1994, WKYS-FM's overall ratings rank fell from number
one to number 12 with a 3.3 share of the 12-plus age demographic, while WPGC-FM
moved from near the bottom to number one with a 9.0 share of the 12-plus age
demographic. By 1995, the former owner of WKYS-FM abandoned the 18-34 age
demographic and began to target the 25-54 age demographic, making it a direct
competitor to Radio One's WMMJ-FM instead of Infinity's WPGC-FM. When Radio One
purchased WKYS-FM in June 1995, we repositioned WKYS-FM's programming away from
WMMJ-FM and back toward the 18-34 age demographic. Since June 1995, we have
been able to increase dramatically WKYS-FM's overall 12-plus age demographic
share and in 1997 WKYS-FM became Washington, D.C.'s number one rated radio
station for the 12-plus and 18-34 age demographics. During this same period,
WPGC-FM fell to the number two position in the 12-plus and 18-34 age
demographics. Recently, WKYS-FM's position has fluctuated between the number
one and number three rated station in the 12-plus age demographic while
maintaining its number one position in the 18-34 age demographic.
WYCB-AM. On March 16, 1998, Radio One acquired, through an Unrestricted
Subsidiary, BHI, the owner of WYCB-AM for approximately $3.8 million. Following
the acquisition, we integrated the operations of WYCB-AM into our existing
radio station operations in the Washington, D.C. market.
49
<PAGE>
Baltimore, Maryland
The Baltimore market is estimated to be the 20th largest radio market in
terms of MSA population and advertising revenue. In 1998, this market had
advertising revenue estimated to be $105.8 million. In 1996, Baltimore had the
11th 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). Radio One believes Baltimore is "under radioed" with only 12
viable FM radio stations, in part because of its close proximity to Washington,
D.C., and therefore, is a particularly attractive market. We believe we own the
strongest franchise of African-American targeted radio stations in the
Baltimore market with the only two FM radio stations and two of the four AM
radio stations that target African-Americans. Baltimore experienced annual
radio revenue growth of 8.6% between 1991 and 1996 and radio revenue in
Baltimore is expected to continue growing at an annual pace of 6.2% between
1997 and 2001. (Source: BIA 1998 Fourth Edition)
<TABLE>
<CAPTION>
1995(/3/) 1996(/3/) 1997(/3/) 1998(/3/) Fall 1998(/4/)
--------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
WERQ-FM(/1/)
Audience share (12-
plus)................ 5.2 6.4 9.3 9.4 9.6
Audience share rank
(12-plus)............ 7 4 1 1 1
Audience share (18-
34).................. 8.6 10.7 16 16.6 16.5
Audience share rank
(18-34).............. 2 2 1 1 1
WOLB-AM
Audience share (12-
plus)................ 0.9 0.6 0.9 0.9 0.8
Audience share rank
(12-plus)............ 23t 28t 15t 18 24t
Audience share (35-
64).................. 1.1 0.9 1.2 1.1 0.7
Audience share rank
(35-64).............. 19t 23 15 16t 26t
WERQ-FM and WOLB-AM
(combined)
Audience share (12-
plus)................ 6.1 7 10.2 10.3 10.4
Audience share (25-
54).................. 4.9 5.7 9.1 8.7 8.4
Revenue share......... 6.7% 6.7% 10.7% 13.1% n/a
Revenue rank.......... 8 8 4 2 n/a
WWIN-FM(/2/)
Audience share (12-
plus)................ 4.0 3.6 3.6 5.0 5.5
Audience share rank
(12-plus)............ 10 10 9 7 6
Audience share (25-
54).................. 5.5 4.9 4.9 6.8 7.5
Audience share rank
(25-54).............. 5 7t 7 4 3
WWIN-AM
Audience share (12-
plus)................ 1.1 1.1 0.8 1.1 1.1
Audience share rank
(12-plus)............ 18t 20t 17 17 19t
Audience share (35-
64).................. 1.1 1.4 1.1 1.1 0.8
Audience share rank
(35-64).............. 19t 18 16t 16t 25
WWIN-FM and WWIN-AM
(combined)
Audience share (12-
plus)................ 5.1 4.7 4.4 6.1 6.6
Audience share (25-
54).................. 6.6 6.0 5.8 7.6 8.2
Revenue share......... 5.7% 5.8% 5.5% 6.0% n/a
Revenue rank.......... 10 10 9 8 n/a
</TABLE>
- --------
As used in this table, "n/a" means not available or not applicable and "t"
means tied with one or more other radio stations.
(1)Based upon the Hungerford Report (1998). WERQ-FM and WOLB-AM jointly report
revenue data to Hungerford.
(2)Based upon the Hungerford Report (1998). WWIN-FM and WWIN-AM jointly report
revenue data to Hungerford.
(3) Audience share and audience share rank data are based on Arbitron Survey
four book averages book for the years indicated ending with the Fall
Arbitron Survey. Revenue share and rank data are based on the Radio Revenue
Report by Hungerford for 1998, 1997, 1996 and 1995, as applicable.
(4)Fall 1998 Arbitron Survey.
WWIN-FM and WWIN-AM. In January 1992, we made our first acquisition outside
Washington, D.C. market with the purchase of WWIN-FM and its sister station
WWIN-AM for approximately $4.7 million. At the time, WWIN-FM was a distant
second in ratings to its in-format direct competitor WXYV-FM, with less than
one-third of that radio station's market share. Today, WWIN-FM is a leading
urban radio station in the 25-54 age demographic in the Baltimore market
(ranked number two in the Fall 1998 Arbitron Survey with a 7.5 share), and
WWIN-AM continues to occupy an attractive niche on the AM frequency with its
Gospel programming format.
50
<PAGE>
WERQ-FM and WOLB-AM. In September 1993, Radio One completed another
acquisition in the Baltimore market with the purchase of WERQ-FM and WOLB-AM
(formerly WERQ-AM) for approximately $9.0 million. WERQ-FM was, at the time of
its acquisition, a CHR/Urban radio station, while WERQ-AM was a satellite-fed,
all-news radio station. We converted the format of WERQ-FM to a more focused
Young Urban Contemporary format targeted at the 18-34 age demographic, while
WOLB-AM began simulcasting with Radio One's Black Talk radio station in
Washington, D.C., WOL-AM. After we aggressively marketed the station, WERQ-FM
became Baltimore's dominant station ranked number one in the 12-plus, 18-34 and
25-54 age demographics in the Fall 1998 Arbitron Survey, a position it first
achieved in the Spring 1997 Arbitron Survey, while its former primary
competitor, WXYV-FM, changed format during 1997 and no longer targets the same
listener base as that of WERQ-FM.
Atlanta, Georgia
The Atlanta market is estimated to be the 13th largest radio market in terms
of MSA population. In 1998, this market had radio advertising revenue estimated
to be $242.2 million, making it the 10th largest radio market in terms of
advertising revenue. In 1996, Atlanta had the seventh largest African-American
population in the United States with an MSA population of approximately 3.6
million (approximately 25.7% of which was African-American). Radio One believes
Atlanta is "under radioed" with only 15 viable FM radio stations. Due to a
rapidly growing local economy, the Atlanta market has one of the country's
fastest growth rates in terms of radio revenue. Atlanta experienced annual
radio revenue growth of 12.1% between 1991 and 1998, and radio revenue in
Atlanta is expected to continue growing at an average annual rate of 8.2%
between 1997 and 2001. (Source: BIA 1998 Fourth Edition)
On March , 1999, Radio One acquired ROA, an affiliate of Radio One, for
shares of Radio One Common Stock. Radio One also assumed and retired
approximately $16.3 million of net indebtedness of ROA and Dogwood. At the
time, ROA owned approximately 33% of Dogwood. On March , 1999, Radio One
acquired the remaining approximate 67% of Dogwood for $3.6 million. Founded in
1995, ROA owns and operates WHTA-FM. Dogwood owns WAMJ-FM which, prior to ROA's
acquisition of 100% of Dogwood, ROA operated under an LMA. Upon the completion
of these acquisitions, ROA became a wholly-owned subsidiary of Radio One, and
Dogwood became a wholly owned subsidiary of ROA. See "Certain Relationships and
Related Transactions."
<TABLE>
<CAPTION>
1996(/1/) 1997(/1/) 1998(/1/) Fall 1998(/2/)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
WHTA-FM
Audience share (12-plus)......... 4.9 5.0 4.7 4.5
Audience share rank (12-plus).... 9 9 9 9
Audience share (25-54)........... 8.0 8.0 8.6 8.3
Audience share rank (25-54)...... 5 4 4 4
Revenue share.................... 2.2% 2.9% 3.5% n/a
Revenue rank..................... 12 12 12 n/a
WAMJ-FM(/3/)
Audience share (12-plus)............................. 2.2 1.8
Audience share rank (12-plus)........................ 15 17
Audience share (25-54)............................... 3.1 2.5
Audience share rank (25-54).......................... 13 14
Revenue share........................................ 1.1% n/a
Revenue rank......................................... n/a n/a
</TABLE>
- --------
As used in this table, "n/a" means not available or not applicable.
(1) Audiences share and audience share rank data are based on Arbitron Survey
four book averages for the years indicated ending with the Fall Arbitron
Survey. Revenue share and rank data are based on the Radio Revenue Report
by Miller Kaplan for 1998, 1997 and 1996, as applicable. Revenue share for
WAMJ-FM represents its net broadcast revenue as a percentage of the market
radio revenue reported by Miller Kaplan for December 1998, as adjusted for
WAMJ-FM's net broadcast revenue.
(2) Fall 1998 Arbitron Survey.
(3) WAMJ-FM commenced broadcasting in December 1997.
51
<PAGE>
WHTA-FM. In 1995, ROA acquired WHTA-FM (formerly WQUL-FM) from Design Media,
Inc. for approximately $4.8 million. WHTA-FM was a 6 kW Class A facility
licensed to Griffin, Georgia, a community 40 miles southwest of the Atlanta
market. Prior to selling the station, Design Media received a construction
permit to upgrade the station to Class C3 and changed its community of license
to Fayetteville, Georgia. In conjunction with Radio One's management, Design
Media moved the station's transmitter site 20 miles closer to Atlanta. In July
1995, ROA launched a new Young Urban Contemporary music format that has
consistently garnered a 4.5 to 5.0 share of the 12-plus age demographic. WHTA-
FM remains consistently ranked in the top three stations in its primary target
group, the 12-17 age demographic, and in the top five stations among its
secondary target group, the 18-34 age demographic, ranking number four in the
Fall 1998 Arbitron Survey with an 8.3 share.
WAMJ-FM. In March 1997, ROA entered into an agreement with Dogwood to
provide financing for a new 6 kW Class A radio station that had been assigned
to Roswell, Georgia, a community approximately twenty miles north of downtown
Atlanta. ROA received an approximate 33% ownership stake, along with an option
to purchase 100% of the station. ROA also entered into an LMA allowing ROA to
operate the station in the Atlanta market. On December 16, 1997, ROA launched
an R&B oldies format on WAMJ-FM targeting the 25-54 age demographic. In
November 1998, Dogwood received an FCC construction permit to upgrade WAMJ's
signal to Class C3. WAMJ-FM began operating at 25 kW in December 1998, greatly
improving its penetration of the Atlanta market and giving the station total
coverage of the Atlanta metropolitan area.
In Atlanta, Radio One competes directly against Infinity's Young Urban
Contemporary station, WVEE-FM, and against Midwestern Broadcasting's Urban
Adult Contemporary station, WALR-FM. However, Radio One owns more FM radio
stations targeting African-Americans in Atlanta than any other entity.
Philadelphia, Pennsylvania
The Philadelphia market is estimated to be the fifth largest radio market in
terms of MSA population. In 1998, this market had advertising revenue estimated
to be $242.3 million, making it the seventh largest radio market in terms of
advertising revenue. In 1996, 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).
Philadelphia experienced annual radio revenue growth of 9.4% between 1991 and
1996, and radio revenue in Philadelphia is expected to continue growing at an
annual pace of 6.5% between 1997 and 2001. (Source: BIA 1998 Fourth Edition)
<TABLE>
<CAPTION>
1997(/1/) 1998(/1/) Fall 1998(/2/)
--------- --------- --------------
<S> <C> <C> <C>
WPHI-FM
Audience share (12-plus)................... 3.6 3.3 3.3
Audience share rank (12-plus).............. 15 13t 14
Audience share (18-34)..................... 6.4 6.0 6.0
Audience share rank (18-34)................ 5 5 5
Revenue share.............................. 1.2% 2.2% n/a
Revenue rank............................... 18 16 n/a
</TABLE>
- --------
As used in this table, "n/a" means not available or not applicable and "t"
means tied with one or more other radio stations.
(1) Audiences share and audience share rank data are based on Arbitron Survey
four book averages ending with the Fall Arbitron Survey for the years
indicated. Revenue share and rank data are based on the Radio Revenue
Report by Miller Kaplan for December 1998 and 1997, as applicable.
(2) Fall 1998 Arbitron Survey.
WPHI-FM. On February 8, 1997, Radio One entered into an LMA with the owner
of WPHI-FM (formerly WDRE-FM), and changed the radio station's programming
format from Modern Rock to Young Urban Contemporary targeting the 18-34 age
demographic. On May 19, 1997, we acquired WPHI-FM for approximately $20.0
million, providing us with an opportunity to apply our operating strategy in
another top-30 African-American market. Although WPHI-FM is a Class A facility
operating at the equivalent of 3 kW, we believe it adequately reaches at least
90% of African-Americans in Philadelphia. In the Fall 1998 Arbitron Survey,
WPHI-FM achieved a 3.3 share in the 12-plus age demographic and had solidly
positioned itself as the number two Young Urban Contemporary station in the
market behind WUSL-FM.
52
<PAGE>
Detroit, Michigan
The Detroit market is estimated to be the seventh largest radio market in
terms of MSA population. In 1998, this market had advertising revenue estimated
to be $225.1 million, making it the 11th largest radio market in terms of
advertising revenue. Detroit is the fifth largest African-American market with
an MSA population of approximately 4.5 million in 1996 (approximately 22.5% of
which was African-American). Detroit experienced annual radio revenue growth of
8.4% between 1991 and 1996, and radio revenue in Detroit is expected to
continue growing at an annual pace of 7.5% between 1997 and 2001. (Source: BIA
1998 Fourth Edition)
<TABLE>
<CAPTION>
1998(/1/) Fall 1998(/2/)
--------- --------------
<S> <C> <C>
WDTJ-FM
Audience share (12-plus)............................. 3.4 3.3
Audience share rank (12-plus)........................ 12 13
Audience share (18-34)............................... 5.8 5.4
Audience share rank (18-34).......................... 4 5
Revenue share........................................ 2.0 n/a
Revenue rank......................................... n/a n/a
</TABLE>
- --------
As used in this table, "n/a" means not available or not applicable.
(1) Audience share and audience share rank data are based on Arbitron Survey
four book averages for the years indicated ending with the Fall Arbitron
Survey. Revenue share and rank data are based on the Radio Revenue Report
by Hungerford for 1998.
(2)Fall 1998 Arbitron Survey.
WDTJ-FM and WCHB-AM. On June 30, 1998, Radio One acquired Bell Broadcasting,
which owns two radio stations, WDTJ-FM (formerly WCHB-FM) and WCHB-AM, located
in the Detroit, Michigan market and one radio station, WJZZ-AM, located in
Kingsley, Michigan. Radio One paid approximately $34.2 million in cash and the
cost of certain improvements to the stations. WDTJ-FM is a Young Urban
Contemporary station similar to our WERQ-FM in Baltimore and WKYS-FM in
Washington, D.C. WCHB-AM's facilities were recently upgraded from 25 kW to 50
kW. In the future, we may dispose of the station located in Kingsley, Michigan
because that station is not integral to the Bell Broadcasting operation and is
located a substantial distance from Detroit.
WWBR-FM. On December 28, 1998, Radio One acquired Allur-Detroit for
approximately $26.5 million in cash. Allur-Detroit owns WWBR-FM licensed to Mt.
Clemens, Michigan, which is part of the Detroit MSA. Allur-Detroit's
stockholders included Syncom Venture Partners, an affiliate of one of Radio
One's stockholders, Syncom. On January 16, 1999, we changed the format of WWBR-
FM to Adult Contemporary. WWBR-FM is the first station owned by Radio One that
primarily targets a non-African-American audience.
St. Louis, Missouri
The St. Louis market is estimated to be the 19th largest radio market in
terms of MSA population. In 1998, this market had advertising revenue estimated
to be $116.5 million, making it the 18th largest radio market in terms of
advertising revenue. St. Louis is the 16th largest African-American market with
an MSA population of approximately 2.6 million in 1996 (approximately 17.2% of
which was African-American). St. Louis experienced annual radio revenue growth
of 8.8% between 1991 and 1996, and radio revenue in St. Louis is expected to
continue growing at an annual rate of 6.9% between 1997 and 2001. (Source: BIA
1998 Fourth Edition)
On November 23, 1998, Radio One entered into an agreement to acquire the
assets of WFUN-FM, licensed to Bethalto, Illinois for approximately $13.6
million in cash. We expect to move WFUN-FM to a broadcast tower site closer to
downtown St. Louis, reformat the station and upgrade its signal from 6 kW to
25 kW.
The FCC approved of Radio One's acquisition of the assets of WFUN-FM on
January 26, 1999. The FCC's action will become a final action on March 10,
1999, provided that no party files a petition for reconsideration of the FCC's
action and the FCC does not reconsider the decision on its own motion.
53
<PAGE>
Cleveland, Ohio
The Cleveland market is estimated to be the 23rd largest radio market in
terms of MSA population and advertising revenue. In 1998, this market had
advertising revenue estimated to be $96.7 million. Cleveland is the 17th
largest African-American market with an MSA population of approximately 2.1
million (approximately 18.7% of which was African-American). Cleveland
experienced annual radio revenue growth of 7.9% between 1991 and 1996, and
radio revenue in Cleveland is expected to continue growing at an annual pace of
6.9% between 1997 and 2001. (Source: BIA 1998 Fourth Edition)
On March , 1999, Radio One entered into an asset purchase agreement with
Clear Channel Communications to acquire WENZ-FM and WERE-AM for approximately
$20.0 million in cash.
WENZ-FM is licensed to Cleveland, Ohio, and is currently programming an
Alternative Rock format. WENZ-FM garnered 2.4 share in the Fall 1998 Arbitron
Survey of the market's 12-plus age demographic.
WERE-AM is licensed to Cleveland, Ohio, and is currently programming a News
Talk format. WERE-AM achieved a 0.4 share in the Fall 1998 Arbitron Survey of
the market's 12-plus age demographic.
Consummation of the acquisition of radio stations WENZ-FM and WERE-AM is
subject to the receipt of prior FCC approval. An application for FCC consent to
the acquisition of radio stations WENZ-FM and WERE-AM was filed on February 8,
1999, and we anticipate that initial approval will be granted before May 1,
1999, after the petition to deny period has elapsed, but there can be no
assurance that FCC approval for the acquisition will be obtained. In addition,
the acquisition will undergo review by the Justice Department pursuant to the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR
Act"). There can be no assurance that in connection with such review that the
Justice Department will not require a restructuring of the acquisition.
Richmond, Virginia
Richmond is estimated to be the 57th largest radio market in terms of MSA
population. In 1998, this market had radio advertising revenue estimated to be
$45.8 million, making it the 46th largest radio market in terms of advertising
revenue. Richmond is the 19th largest African-American market with an MSA
population of approximately 937,000 in 1996 (approximately 30.0% of which was
African-American). Richmond experienced annual radio revenue growth of 5.7%
between 1991 and 1996, and radio revenue in Richmond is expected to continue
growing at an annual rate of 6.5% between 1997 and 2001. (Source: BIA 1998
Fourth Edition)
Radio One believes that Richmond is a particularly attractive market due to
its proximity to Radio One headquarters in the Washington, D.C area. Due to
this proximity, Radio One believes that it can leverage its regional advertiser
relationships and its regionally located management and on-air talent in the
Richmond market. We have entered into agreements or letters of intent to
acquire six FM and one AM radio stations in three separate transactions. Upon
completion of these acquisitions, we believe we will be well positioned as a
strong provider of urban-oriented programming to Richmond's African-American
market. We will also be the second provider of Country programming and will
have additional signals available for other format opportunities and under-
served demographics in the Richmond market.
On February 10, 1999, Radio One entered into an asset purchase agreement to
acquire WDYL-FM, licensed to Chester, Virginia for approximately $4.6 million
in cash. WDYL-FM, currently a Religious format station, is in the Richmond,
Virginia market.
On February 26, 1999, Radio One entered into an asset purchase agreement to
acquire WKJS-FM, licensed to Crewe, Virginia, and WSOJ-FM, licensed to
Petersburg, Virginia, for approximately $12.0 million in cash, subject to
purchase price adjustments. Both stations, currently urban format stations, are
in the Richmond, Virginia market.
54
<PAGE>
WKJS-FM, licensed to Crewe, Virginia, is a 100 kW station and generally
covers the entire Richmond market. The station changed its format from Oldies
to Urban Adult Contemporary in March 1998 and has since experienced a
significant ratings increase. WKJS-FM's ratings increased from a 3.1 share in
the 12-plus age demographic in the Winter 1998 Arbitron Survey to an 8.2 share
in the 12-plus age demographic in the Fall 1998 Arbitron Survey. In the 25-54
age demographic, WKJS-FM earned a 10.6 share in the Fall 1998 Arbitron Survey,
ranking it number one, tied with one other station.
WSOJ-FM, licensed to Petersburg, Virginia, primarily covers Petersburg,
located in the southern portion of the Richmond metropolitan area. A Young
Urban Contemporary station, WSOJ-FM earned a 3.2 share in the 12-plus age
demographic in the Fall 1998 Arbitron Survey. WKJS-FM and WSOJ-FM have been
operated and sold in combination for most of 1998.
On March , 1999, Radio One entered into an asset purchase agreement to
purchase WCDX-FM, WPLZ-FM, WJRV-FM and WGCV-AM, for $34.0 million. WCDX-FM, a
Young Urban Contemporary station licensed to Mechanicsville, Virginia, covers
the entire Richmond metropolitan area. WCDX-FM has averaged a 10.1 share of the
12-plus age demographic for the last 2 years and is currently ranked number two
overall in the 12-plus age demographic, tied with another station with an 8.8
share, according to the Fall 1998 Arbitron Survey. WCDX-FM is also ranked
number one in the 18-34 age demographic and number four in the 25-54 age
demographic.
WCDX-FM's sister station, WPLZ-FM, currently programs an Urban Oldies format
and earned a 4.8 share of the 12-plus age demographic in the Fall 1998 Arbitron
Survey. WPLZ-FM, licensed to Petersburg, Virginia, primarily covers the
southern Richmond metropolitan area. The two stations have historically been
sold in combination and have been the market leaders in terms of urban radio
revenue share. WJRV-FM, licensed to Richmond, Virginia, recently changed
formats from Smooth Jazz to Country, in order to challenge WKHK-FM, the leading
country radio station in Richmond. WJRV-FM earned a 1.5 share of the 12-plus
age demographic in the Fall 1998 Arbitron Survey after approximately 3 months
in the Country format. WGCV-AM is a Religious formatted station, licensed to
Petersburg, Virginia, that does not currently have any significant audience or
revenue share.
Consummation of the acquisition of these radio stations in Richmond is
subject to the receipt of prior FCC approval. An application for FCC consent to
the acquisition of WDYL-FM was filed on February 18, 1999, and we anticipate
that initial approval of the acquisition will be granted by May 1, 1999, after
the petition to deny period has elapsed, but there can be no assurance that FCC
approval for the acquisition will be obtained. An application for FCC consent
to the acquisitions of WKJS-FM and WSOJ-FM was filed on March 5, 1999, and we
anticipate that initial approval of the acquisitions will be granted by June 1,
1999, after the petition to deny period has elapsed, but there can be no
assurance that FCC approval of the acquisitions will be obtained. An
application for FCC consent to the acquisitions of WJRV-FM, WCDX-FM, WPLZ-FM
and WGCV-AM was filed on April , 1999, and we anticipate that initial
approval of the acquisitions will be granted by June 1, 1999, after the
petition to deny period has elapsed, but there can be no assurance that FCC
approval for the acquisitions will be obtained. In addition, the acquisitions
of WRJV-FM, WCDX-FM, WPLZ-FM and WGCV-AM will undergo review by the Justice
Department pursuant to the requirements of the HSR Act. There can be no
assurance that in connection with such review the Justice Department will not
require a restructuring of the acquisitions.
East Coast Market
On February 11, 1999, Radio One entered into a letter of intent to acquire a
radio station in an East Coast market. Consummation of the acquisition of this
radio station is subject to, among other things, the receipt of prior FCC
approval. An application for FCC consent to the acquisition is expected to be
filed by May 31, 1999. Once the FCC application is filed, we anticipate that
initial approval to the acquisition will be granted after the petition to deny
period has elapsed, but there can be no assurance that FCC approval for the
acquisition will be obtained.
55
<PAGE>
Advertising Revenue
Substantially all of Radio One's net broadcast revenue is generated from the
sale of local and national advertising for broadcast on our radio stations.
Additional net broadcast revenue is generated from network compensation
payments and other miscellaneous transactions. Local sales are made by the
sales staffs located in our markets. National sales are made by firms
specializing in radio advertising sales on the national level, in exchange for
a commission from Radio One that is based on a percentage of our net broadcast
revenue from the advertising obtained. Approximately 67.4% of our net broadcast
revenue for the fiscal year ended December 31, 1998, was generated from the
sale of local advertising and 30.3% from sales to national advertisers, with
the balance of net broadcast revenue being derived from network advertising,
tower rental income and ticket and other revenue related to special events
hosted by Radio One.
We believe 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 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 to consider advertising with the radio station, and are used by
Radio One to chart audience growth, set advertising rates and adjust
programming.
Strategic Diversification
Radio One will continue to evaluate potential radio acquisitions in African-
American markets. We are exploring opportunities in other forms of media to
apply our expertise in marketing to African-Americans. Such opportunities could
include outdoor advertising in urban environments, an urban-oriented Internet
strategy, an urban-oriented radio network, music production, publishing and
other related businesses.
We recently entered into an exclusive programming agreement with XM
Satellite Radio, Inc. to provide African-American talk and music programming to
be broadcast on XM Satellite's satellite digital audio radio service, which is
expected to be available in 2000.
We have also invested, together with most publicly-traded radio companies,
in a recent private placement for USA Digital Radio, Inc., a leading developer
of in-band on-channel digital audio broadcast technology. This technology could
enable radio broadcasters to convert from analog to digital broadcasting within
the existing frequency allocation of their AM and FM stations. In conjunction
with this investment, Alfred C. Liggins, III, the Chief Executive Officer and
President of Radio One, became a board member of USA Digital Radio, Inc.
Additionally, we have recently invested in PNE Media Holdings, LLC, a
privately-held outdoor advertising company with a presence in several of the
markets in which we own radio stations.
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<PAGE>
Properties
The following chart sets forth the principal real property and radio related
facilities owned or leased by Radio One (including properties to be acquired
pursuant to pending acquisitions).
<TABLE>
<CAPTION>
Owned or Leased Approximate Size
Property Address Type of Facility and Use (Expiration Date) Tenant/Owner (Square Feet)
- ---------------- ------------------------ ------------------ ----------------- ----------------------
<S> <C> <C> <C> <C>
5900 Princess Garden
Parkway, Corporate Office, Leased Radio One 21,546
1st, 7th and 8th Floors WKYS-FM, WOL-AM (expires 12/31/11)
Lanham, MD WMMJ-FM, WYCB-AM
Studio
4001 Nebraska Avenue,
N.W. WKYS-FM Leased Radio One Tower and
Washington, D.C. Transmitter (expires 11/30/01) transmitter space
62 Pierce Street, N.E. WOL-AM Transmitter Leased Radio One Tower and
Washington, D.C. (expires 3/31/01) transmitter space
4400 Massachusetts
Avenue, N.W. WMMJ-FM Transmitter Leased Radio One Leased Tower space (+)
Washington, D.C. (expires 4/30/04) 200
100 St. Paul Street WWIN-AM/FM, Leased Radio One 8,000
Baltimore, MD WERQ-FM, WOLB-AM (expires 10/31/03)
Studio
Greenmount Avenue and WWIN-AM Transmitter Leased Radio One 225
29th Street (expires 8/31/01)
Baltimore, MD
(Waverly Towers)
1315 W. Hamburg Street WOLB-AM Transmitter Leased Radio One Tower and
Baltimore, MD (expires 12/31/00) transmitter space
7 St. Paul Street Satellite Dish Space Leased Radio One 200
Baltimore, MD (expires 4/22/04)
100 Old York Road WPHI-FM, Studio Leased Radio One 5,661
Jenkintown, PA (expires 10/31/03)
Domino Lane and Fowler
Street WPHI-FM Transmitter Leased Radio One Tower and
Philadelphia, PA (expires 6/29/06) transmitter space
2501 Hawkins Point Road WWIN-FM Transmitter Owned Radio One 16,800
Baltimore City, MD
2709 Boarman Avenue WERQ-FM Transmitter Owned Radio One 24,920
(4334-4338 Park Heights
Ave.)
Baltimore, MD
Walker Mill Road WYCB-AM Transmitter Leased BHI Tower and
District Heights, MD (expires 11/99) transmitter space
2994 East Grand River WDTJ-FM, Studio Leased Bell Broadcasting 3,000
Detroit, MI 48202 (expires 6/30/99)
24600 Greenfield Road WDTJ-FM Transmitter Leased Bell Broadcasting Tower and
Oak Park, MI (expires 3/31/04) transmitter space
32790 Henry Huff Road WCHB-AM Office Site Owned Bell Broadcasting 80 acres
Romulus, MI
York Road WJZZ-AM Transmitter Owned Bell Broadcasting
Kingsley, MI
Huron Township, MI WCHB-AM Transmitter Owned Bell Broadcasting 80 acres
Tyrone Cook Road #1 WHTA-FM Transmitter Leased ROA Tower and
Tyrone, GA (expires 12/6/09) transmitter space
75 Piedmont Ave. WHTA-FM Leased ROA 11,600
Atlanta, GA WAMJ-FM (expires 10/1/04)
Studio
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Owned or Leased Approximate Size
Property Address Type of Facility and Use (Expiration Date) Tenant/Owner (Square Feet)
- ---------------- ------------------------ ----------------- ------------ ----------------
<S> <C> <C> <C> <C>
1050 Crown Pointe WAMJ-FM Transmitter Leased Dogwood Tower and
Atlanta, GA (expires 8/31/01) transmitter space
850 Stephenson Highway WWBR-FM Leased Allur-Detroit 5,766
Troy, MI Studio (expires 2/1/02)
21340 Pitko Street WWBR-FM Transmitter Leased Allur-Detroit Tower and
Mt. Clemens, MI (expires 12/31/08) transmitter space
Edwardsville Township,
IL WFUN-FM Transmitter Owned Radio One 3 acres
500 Northwest Plaza WFUN-FM Studio Leased Radio One 1,396
Office Tower, Suite 310 (expires 3/31/99)
St. Ann, MO
Larimore Road WFUN-FM Transmitter Leased Radio One Tower and
St. Louis, MO transmitter space
North Royalton, OH WERE-AM Transmitter Owned Radio One Tower and
transmitter space
Newbury Township, OH WENZ-FM Transmitter Owned Radio One Tower and
transmitter space
WERE-AM/WENZ-FM Studio Leased Radio One
4312 Old Hundred Rd. WDYL-FM Studio Leased Radio One 1,872
Chester, VA (expires 2000)
10300 Brightwood Avenue WDYL-FM Transmitter Leased Radio One Tower and
Chesterfield, VA (expires 2014) transmitter space
6001 Wilkinson Road WKJS-FM/WSOJ-FM Leased Radio One
Richmond, VA Studio (expires 2000)
East Side Rt. 608 WKJS-FM Transmitter Owned Radio One Tower and
Nottoway County, VA transmitter space
3321 Johnson Rd. WSOJ-FM Transmitter Leased Radio One Tower and
Petersburg, VA (expires 10/31/02) transmitter space
WCDX-FM, WPLZ-FM,
WJRV-FM, and
WGCV-AM Studio
WCDX-FM Transmitter Leased Radio One Tower and
transmitter space
WPLZ-FM Transmitter Owned Radio One Tower and
transmitter space
WJRV-FM Transmitter Leased Radio One Tower and
transmitter space
WGCV-AM Transmitter Owned Radio One Tower and
transmitter space
</TABLE>
The real property owned or leased by Radio One is the subject of a security
interest held pursuant to the terms of our Bank Credit Facility.
Radio One owns substantially all of our other equipment, consisting
principally of studio equipment and office equipment. The towers, antennae and
other transmission equipment used by our radio stations are generally in good
condition, although opportunities to upgrade facilities are periodically
reviewed.
We believe that the facilities for our radio stations and office space in
Washington, D.C., Baltimore, Atlanta, Philadelphia, Detroit, St. Louis and
Richmond are generally suitable and of adequate size for their current and
intended purposes other than for routine modifications and expansions which may
be required from time to time but would not be expected to have a material
adverse effect on us or our financial position or performance. We believe we
will be able to obtain suitable facilities for our radio stations in Cleveland
and the East Coast market on reasonable terms.
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<PAGE>
Competition
The radio broadcasting industry is highly competitive. Radio One's stations
compete for audiences and advertising revenue with other radio stations and
with other media such as television, newspapers, direct mail and outdoor
advertising. Audience ratings and advertising revenue are subject to change and
any adverse change in a market could adversely affect our net broadcast revenue
in that market. If a competing station converts to a format similar to that of
one of our stations, or if one of our competitors strengthens its operations,
our stations could suffer a reduction in ratings and advertising revenue. Other
radio companies which are larger and have more resources may also enter markets
where we operate. Although we believe our stations are well positioned to
compete, we cannot assure you that our stations will maintain or increase their
current ratings or advertising revenue.
The radio broadcasting industry is also subject to rapid technological
change, evolving industry standards and the emergence of new media
technologies. Several new media technologies are being developed, including the
following: (i) audio programming by cable television systems, direct broadcast
satellite systems, Internet content providers and other digital audio broadcast
formats; (ii) satellite digital audio radio service, which could result in the
introduction of several new satellite radio services with sound quality
equivalent to that of compact discs; and (iii) in-band on-channel digital
radio, which could provide multi-channel, multi-format digital radio services
in the same band width currently occupied by traditional AM and FM radio
services. We recently entered into a programming agreement with a satellite
digital audio radio service and have also invested in a developer of digital
audio broadcast technology. However, we cannot assure you that these
arrangements will be successful or enable us to adapt effectively to these new
media technologies. We also cannot assure you that we will continue to have the
resources to acquire other new technologies or to introduce new services that
could compete with other new technologies.
Antitrust
An important part of our growth strategy is the acquisition of additional
radio stations. After the passage of the Telecommunications Act of 1996, the
Justice Department has become more aggressive in reviewing proposed
acquisitions of radio stations and radio station networks. The Justice
Department is particularly aggressive when the proposed buyer already owns one
or more radio stations in the market of the station it is seeking to buy.
Recently, the Justice Department has challenged a number of radio broadcasting
transactions. Some of those challenges ultimately resulted in consent decrees
requiring, among other things, divestitures of certain stations. In general,
the Justice Department has more closely scrutinized radio broadcasting
acquisitions that result in local market shares in excess of 40% of radio
advertising revenue. Similarly, the FCC staff has announced new procedures to
review proposed radio broadcasting transactions even if the proposed
acquisition otherwise complies with the FCC's ownership limitations. In
particular, the FCC may invite public comment on proposed radio transactions
that the FCC believes, based on its initial analysis, may present ownership
concentration concerns in a particular local radio market.
Federal Regulation of Radio Broadcasting
The radio broadcasting industry is subject to extensive and changing
regulation by the FCC of programming, technical operations, employment and
other business practices. The FCC regulates radio broadcast stations pursuant
to the Communications Act. 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; establishes technical requirements for certain transmitting equipment
used by radio broadcast stations; adopts and implements regulations and
policies that directly or
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<PAGE>
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 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 limits and other FCC 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 regulations, and the rulings of the FCC. You should
refer to the Communications Act and these FCC rules and rulings for further
information concerning the nature and extent of federal regulation of radio
broadcast stations.
A licensee's failure to observe the requirements of the Communications Act
or FCC rules and policies may result in the imposition of various sanctions,
including admonishment, fines, the grant of "short" (less than the maximum
eight-year) renewal terms, the grant of a license with conditions or, for
particularly egregious violations, the denial of a license renewal application,
the revocation of an FCC license or the denial of FCC consent to acquire
additional broadcast properties. 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 revenue
for our radio broadcast stations or affect our 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 including
proposals to grant free air time to candidates, 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 creation of a new low power radio broadcast service; the
implementation of digital audio broadcasting on both a satellite and
terrestrial basis; changes in broadcast cross-interest, multiple ownership,
foreign ownership, cross-ownership and ownership attribution policies;
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.
Radio One cannot predict what changes, if any, might be adopted, nor can we
predict what other matters might be considered in the future, nor can we judge
in advance what impact, if any, the implementation of any particular proposals
or changes might have on our 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
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<PAGE>
violations by the licensee 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 term less than the maximum
otherwise permitted, 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 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, Radio One's licenses have been renewed without any
conditions or sanctions imposed. However, there can be no assurance that the
licenses of each station owned by Radio One will be renewed or will be renewed
without conditions or sanctions.
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
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 FCC recently has proposed to divide Class C stations into two
subclasses based on antenna height. Stations not meeting the minimum height
requirement within a three-year transition period would be downgraded
automatically to the new Class C0 category.
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<PAGE>
The following table sets forth with respect to each of Radio One's radio
stations (giving pro forma effect to our pending acquisitions of radio stations
in St. Louis, Cleveland and Richmond): (i) the market, (ii) the radio station
call letters, (iii) the year of acquisition, (iv) the class of FCC license, (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)
POWER (AM) AI (AM) EXPIRATION
STATION YEARS OF FCC IN IN DATE OF
MARKET(/1/) CALL LETTERS ACQUISITION CLASS KILOWATTS(/2/) METERS(/3/) FREQUENCY LICENSE
- ----------- ------------ ----------- ----- -------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Washington, D.C. WOL-AM 1980 C 1.0 52.1 1450 kHz 10/01/2003
WMMJ-FM 1987 A 2.9(/4/) 146.0 102.3 MHz 10/01/2003
WKYS-FM 1995 B 24.0 215.0 93.9 MHz 10/01/2003
WYCB-AM 1998 C 1.0 50.9 1340 kHz 10/01/2003
Baltimore WWIN-AM 1992 C 1.0 61.0 1400 kHz 10/01/2003
WWIN-FM 1992 A 3.0 91.0 95.9 MHz 10/01/2003
WOLB-AM 1993 D 1.0 85.4 1010 kHz 10/01/2003
WERQ-FM 1993 B 37.0 174.0 92.3 MHz 10/01/2003
Atlanta WHTA-FM 1999 C3 7.9 175.0 97.5 MHz 04/01/2004
WAMJ-FM 1999 C3 25.0 98.0 107.5 MHz 04/01/2004
Philadelphia WPHI-FM 1997 A 0.3(/5/) 305.0 103.9 MHz 08/01/2006
Detroit WDTJ-FM 1998 B 20.0 221.0 105.9 MHz 10/01/2004
WCHB-AM 1998 B 25.0(/6/) 49.4 1200 kHz 10/01/2004
WJZZ-AM(/7/) 1998 D 50.0 59.7 1210 kHz 10/01/2004
WWBR-FM 1998 B 50.0 152.0 102.7 MHz 10/01/2004
St. Louis WFUN-FM 1999 A(/8/) 6.0 100.0 95.5 MHz 12/01/2003
Cleveland WERE-AM 1999 B 5.0 128.0 1300 kHz 10/01/2004
WENZ-FM 1999 B 16.0 272.0 107.9 MHz 10/01/2004
Richmond WDYL-FM 1999 A 6.0(/9/) 100.0 101.1 MHz 10/01/2003
WKJS-FM 1999 C1 100.0 299.0 104.7 MHz 10/01/2003
WSOJ-FM 1999 A 4.7 113.0 100.3 MHz 10/01/2003
WCDX-FM 1999 B1 4.5 235.0 92.1 MHz 10/01/2003
WPLZ-FM 1999 A 6.0 100.0 99.3 MHz 10/01/2003
WJRV-FM 1999 A 2.3 162.0 105.7 MHz 10/01/2003
WGCV-AM 1999 C 1.0 122.0 1240 kHz 10/01/2003
</TABLE>
- --------
(1)A broadcast station's market may be different from its community of license.
(2) 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 antenna and
the HAAT of the radio station's antenna.
(3) 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.
(4) The FCC issued a construction permit to substitute a non-directional
antenna for a directional antenna on September 11, 1998.
(5) WPHI-FM operates at a power equivalent to 3 kW at 100 meters.
(6) On October 30, 1996, the FCC issued a construction permit to operate with a
power of 50 kW day and 15 kW night and we began testing on March 4, 1999.
(7) WJZZ-AM is licensed to Kingsley, Michigan, which is located outside of
Traverse City, Michigan. The station is temporarily offthe air.
(8) An application to move the station's transmitter site closer to St. Louis
and upgrade the station to Class C3 is pending.
(9)An application for a license to operate at 6 kW is pending.
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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
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.
To obtain the FCC's prior consent to assign or transfer a broadcast license,
appropriate applications must be filed with the FCC. If the application to
assign or transfer the license involves a substantial change in ownership or
control of the licensee (e.g., the transfer of more than 50% of the voting
stock), the application must be placed on public notice for a period of 30 days
during which petitions to deny the application may be filed by interested
parties, including members of the public. Informal objections may be filed any
time up until the FCC acts upon the application. If an assignment application
does not involve new parties, or if a transfer of control application does not
involve a "substantial change" in ownership or control, it is a pro forma
application, which is not subject to the public notice and 30-day petition to
deny procedure. The pro forma application is nevertheless subject to informal
objections that may be filed any time up until the FCC acts on the application.
If the FCC grants an assignment or transfer application, interested parties
have 30 days from public notice of the grant to seek reconsideration of that
grant. The FCC usually has an additional ten days to set aside such grant on
its own motion. When ruling on an assignment or transfer application, the FCC
is prohibited from considering whether the public interest might be served by
an assignment or transfer to any party other than the assignee or transferee
specified in the application.
Under the Communications Act, a broadcast license may not be granted to or
held by any corporation that has more than 20% 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
or held by any corporation directly or indirectly controlled by any other
corporation of which more than 25% of its capital stock is owned of record or
voted by non-U.S. citizens or entities or their representatives, or foreign
governments or their representatives or by non-U.S. corporations, if the FCC
finds the public interest will be served by the refusal or revocation of such
license. These restrictions apply in modified form to other forms of business
organizations, including partnerships and limited liability companies. Thus,
the licenses for Radio One's stations could be revoked if more than 25% of
Radio One's outstanding capital stock is issued to or for the benefit of non-
U.S. citizens.
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 interests 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
under FCC policies are considered "insulated" from "material involvement" in
the management or operation of the media-related activities of the partnership.
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 voting 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. A time brokerage agreement with another radio
station in the same market creates an attributable interest in the
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brokered radio station as well 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.
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.
However, the FCC's rules also specify other exceptions to these general
principles for attribution. However, 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 holding voting stock from ten to
twenty percent, (iii) continue the single 50% stockholder exception, and/or
(iv) attribute non-voting stock or perhaps only when combined with other rights
such as voting shares or contractual relationships. More recently, the FCC has
solicited comment on proposed rules that would (i) treat an otherwise non-
attributable ownership equity or debt interest in a licensee as an attributable
interest where the interest holder is a program supplier or the owner of a
broadcast station in the same market and the equity and/or debt holding is
greater than a specified benchmark and (ii) in certain circumstances, treat the
licensee of a broadcast station that sells advertising time of another station
in the same market pursuant to a joint sales agreement as having an
attributable interest in the station whose advertising is being sold.
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, and the FCC defined market will not
necessarily be the same market used by Arbitron or other surveys, or for
purposes of the HSR Act. Under these "cross-ownership" rules, Radio One, absent
waivers, would not be permitted to own a radio broadcast station and acquire an
attributable interest in any daily newspaper or television broadcast station
(other than a low-powered television station) in the same market where we then
owned any radio broadcast station, and Radio One's stockholders, officers or
directors, absent a waiver, could not hold an attributable interest in a daily
newspaper or television broadcast station in those same markets. The FCC is
currently reviewing the ban on common ownership of a radio station and a daily
newspaper in the same market. 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 Communications Act and
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:
. In a radio market with 45 or more commercial radio stations, a party may
own, operate or control up to eight commercial radio stations, not more
than five of which are in the same service (AM or FM).
. In a radio market with between 30 and 44 (inclusive) commercial radio
stations, a party may own, operate or control up to seven commercial
radio stations, not more than four of which are in the same service (AM
or FM).
. In a radio market with between 15 and 29 (inclusive) commercial radio
stations, a party may own, operate or control up to six commercial radio
stations, not more than four of which are in the same service (AM or
FM).
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. In a radio market with 14 or fewer commercial radio stations, a party
may own, operate or control up to five commercial radio stations, not
more than three 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.
The FCC is currently reviewing the effect of local market ownership
limitations on competition and diversity in the broadcast industry to determine
if a recommendation to repeal or modify the rules should be made to Congress.
The FCC staff has also notified the public of its intention to review
transactions that comply with numerical ownership limits but that might involve
undue concentration of market share.
Because of these multiple and cross-ownership rules, if a stockholder,
officer or director 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, we may be
unable to obtain from the FCC one or more authorizations needed to conduct our
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 Radio One where the vote of such person or
entity is sufficient to affirmatively direct the affairs of Radio One, another
stockholder, unless serving as an officer and/or director, generally would not
hold an attributable interest in Radio One. However, as described above, the
FCC is currently evaluating whether to continue the exception for a single
majority stockholder of more than 50% of a licensee's voting stock. As of March
31, 1999, no single stockholder held more than 50% of the total voting power of
our Common Stock.
Under its "cross-interest" policy, the FCC considers "meaningful"
relationships among competing media outlets that serve "substantially the same
area," even if the ownership rules do not specifically prohibit the
relationship. Under this policy, the FCC may consider whether to prohibit one
party from holding an attributable interest and a substantial non-attributable
interest (including non-voting stock, limited partnership and limited liability
company interests) in a media outlet in the same market, or from entering into
a joint venture or having common key employees with competitors. The cross-
interest policy does not necessarily prohibit all of these interests, but
requires that the FCC consider whether, in a particular market, the
"meaningful" relationships between competitors could have a significant adverse
effect upon economic competition and program diversity. In a rule making
proceeding concerning the attribution rules, the FCC has sought comment on,
among other things, (i) whether the cross-interest policy should be applied
only in smaller markets, and (ii) whether non-equity financial relationships,
such as debt, when combined with multiple business relationships, such as local
marketing agreements or joint sales arrangements, raise concerns under the
cross-interest policy.
Programming and Operations. The Communications Act requires broadcasters to
serve the "public interest." Since the late 1980s, the FCC 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 of license. Nevertheless, a broadcast licensee continues to
be required to 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 pay regulatory and application fees, and 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).
The FCC has always required that licensees not discriminate in hiring
practices, develop and implement programs designed to promote equal employment
opportunities and submit reports to the FCC on these matters
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annually and in connection with each license renewal application. The FCC's
employment rules, as they related to outreach efforts for recruitment of
minorities, however, were recently struck down as unconstitutional by the U.S.
Court of Appeals for the D.C. Circuit. The FCC has proposed revising the rules
to adopt outreach efforts that are constitutional.
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.
From time to time, complaints may be filed against Radio One's radio
stations alleging violations of these or other rules. In addition, the FCC
recently has proposed to establish a system of random audits to ensure and
verify licensee compliance with FCC rules and regulations. 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
ultimately 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 enters into 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 station's 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 a joint sales
arrangement accompanied by debt financing. Also, as described above, FCC rules
prohibit a radio broadcast station 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.
Joint Sales Agreements. Over the past few years, a number of radio stations
have entered into cooperative arrangements commonly known as joint sales
agreements or JSAs. While these agreements may take varying forms, under the
typical JSA, a station licensee obtains, for a fee, the right to sell
substantially all of the commercial advertising on a separately-owned and
licensed station in the same market. The typical JSA also customarily involves
the provision by the selling party of certain sales, accounting and services to
the
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station whose advertising is being sold. The typical JSA is distinct from a
local marketing agreement in that a JSA normally does not involve programming.
The FCC has determined that issues of joint advertising sales should be left
to enforcement by antitrust authorities, and therefore does not generally
regulate joint sales practices between stations. Currently, stations for which
another licensee sells time under a JSA are not deemed by the FCC to be an
attributable interest of that licensee. However, in connection with its ongoing
rulemaking proceedings concerning the attribution rules, the FCC is considering
whether JSAs should be considered attributable interests or within the scope of
the FCC's cross-interest policy, particularly when JSAs contain provisions for
the supply of programming services and/or other elements typically associated
with local marketing agreements.
RF Radiation. In 1985, the FCC adopted rules based on a 1982 American
National Standards Institute ("ANSI") standard 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 limits. In
1992, ANSI adopted a new standard for RF exposure that, in some respects, was
more restrictive in the amount of environmental RF exposure permitted. The FCC
has since adopted more restrictive radiation limits which became effective
October 15, 1997, and which are based in part on the revised ANSI standard.
Digital Audio Radio Service. The FCC allocated spectrum to a new technology,
digital audio radio service ("DARS"), to deliver satellite-based audio
programming to a national or regional audience and issued regulations for a
DARS service in early 1997. DARS 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. The nationwide
reach of satellite DARS could allow niche programming aimed at diverse
communities that Radio One is targeting. 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. Two
companies that hold licenses for authority to offer multiple channels of
digital, satellite-delivered S-Band aural services could compete with
conventional terrestrial radio broadcasting. The licensees will be permitted to
sell advertising and lease channels in these media. The FCC's rules require
that these licensees launch and begin operating at least one space station by
2001 and be fully operational by 2003.
The FCC has established a new Wireless Communications Service ("WCS") in the
2305-2320 and 2345-2360 MHz bands (the "WCS Spectrum") and awarded licenses.
Licensees are generally permitted to provide any fixed, mobile, radio location
services, or digital satellite radio service using the WCS Spectrum.
Implementation of DARS would provide an additional audio programming service
that could compete with Radio One's radio stations for listeners, but the
effect upon Radio One cannot be predicted.
These satellite radio services use technology that may permit higher sound
quality than is possible with conventional AM and FM terrestrial radio
broadcasting.
Low Power Radio Broadcast Service. The FCC recently adopted a Notice of
Proposed Rulemaking seeking public comment on a proposal to establish two
classes of a low power radio service both of which would operate in the
existing FM radio band: a primary class with a maximum operating power of 1 kW
and a secondary class with a maximum power of 100 watts. These proposed low
power radio stations would have limited service areas of 8.8 miles and 3.5
miles, respectively. The FCC also has sought public comment on the advisability
of establishing a very low power secondary "microbroadcasting" service with a
maximum power limit of one to ten watts. These "microradio" stations would have
a service radius of only one to two miles. The service would target "niche
markets" and be possibly supported by advertising revenue. Existing licensees,
like Radio One, would be prohibited from owning or having a relationship with
these new stations. Implementation of a low power radio service or
microbroadcasting would provide an additional audio programming service that
could compete with Radio One's radio stations for listeners, but the effect
upon Radio One cannot be predicted.
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Subsidiaries and Related Entities
Radio One has title to most of the assets used in the operations of our
radio stations. The FCC licenses for the radio stations in all cases are or
will be held by direct or indirect wholly-owned subsidiaries of Radio One. In
the case of all of the Baltimore stations, three of the Washington, D.C.
stations, the St. Louis station, the Cleveland stations, the Richmond stations
and the East Coast market radio station, the FCC licenses are or will be held
by Radio One Licenses, Inc., a Delaware corporation and a wholly-owned
Restricted Subsidiary of Radio One. Radio One Licenses, Inc. holds no other
material assets. WYCB Acquisition Corporation, a Delaware corporation and a
wholly-owned Unrestricted Subsidiary, holds title to all of the outstanding
capital stock of BHI, a District of Columbia corporation and an Unrestricted
Subsidiary. The FCC licenses for WYCB-AM are held by BHI which also holds the
assets used in the operation of that station. Bell Broadcasting, a Michigan
corporation and a wholly-owned Restricted Subsidiary, holds the assets used in
the operation of WCHB-AM, WDTJ-FM and WJZZ-AM. Bell Broadcasting holds title to
all of the outstanding capital stock of Radio One of Detroit, Inc., a Delaware
corporation and a Restricted Subsidiary. The FCC licenses for WCHB-AM, WDTJ-FM
and WJZZ-AM are held by Radio One of Detroit, Inc. Radio One of Detroit, Inc.
holds no other material assets.
Allur-Detroit, a Delaware corporation and a wholly-owned Restricted
Subsidiary, holds the assets used in the operation of station WWBR-FM. Allur-
Detroit holds title to all of the outstanding capital stock of Allur Licenses,
Inc., a Delaware corporation and a Restricted Subsidiary. The FCC licenses for
WWBR-FM are held by Allur Licenses, Inc. Allur Licenses, Inc. holds no other
material assets.
ROA, a Delaware corporation and a wholly-owned Restricted Subsidiary, holds
the assets used in the operation of station WHTA-FM and some assets used in the
operation of station WAMJ-FM. ROA holds title to all of the outstanding capital
stock of ROA Licenses, Inc., a Delaware corporation and a Restricted
Subsidiary. The FCC licenses for WHTA-FM are held by ROA Licenses, Inc. ROA
Licenses, Inc. holds no other material assets. Once ROA completes the
acquisition of all outstanding capital stock of Dogwood, Dogwood will become a
Restricted Subsidiary. Dogwood holds some of the assets used in the operation
of station WAMJ-FM. Dogwood holds title to all of the outstanding capital stock
of Dogwood Licenses, Inc., a Delaware corporation and a Restricted Subsidiary.
The FCC licenses for WAMJ-FM are held by Dogwood Licenses, Inc.
Employees
As of February 28, 1999, Radio One employed 454 people. Radio One's
employees are not unionized. We have not experienced any work stoppages and
believe relations with our 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, in each of our markets we
employ one General Manager who is responsible for all of Radio One's radio
stations located in such market and Radio One's Vice President of Programming
oversees programming for all of Radio One's Urban-oriented FM radio stations.
Legal Proceedings
Radio One is involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of our business. In the opinion of Radio
One's management, the resolution of such matters will not have a material
adverse effect on Radio One's business, financial condition or results of
operations.
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MANAGEMENT
Directors, Executive Officers and Other Significant Personnel
The names, ages and positions of the directors, executive officers and other
significant personnel of Radio One 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.
<TABLE>
<CAPTION>
Age as of
Name March 31, 1999 Position
- ------------------------ -------------- -----------------------------------------------------------
<S> <C> <C>
Catherine L. Hughes..... 51 Chairperson of the Board of Directors and Secretary
Alfred C. Liggins, III.. 34 Chief Executive Officer, President, Treasurer, and Director
Scott R. Royster........ 34 Executive Vice President and Chief Financial Officer
Mary Catherine Sneed.... 47 Chief Operating Officer
Steve Hegwood........... 37 Vice President of Programming
Leslie J. Hartmann...... 37 Corporate Controller
Terry L. Jones.......... 52 Director
Brian W. McNeill........ 43 Director
</TABLE>
Ms. Hughes has been Chairperson of the Board of Directors and Secretary 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 company in 1980.
Since 1980, Ms. Hughes has worked in various capacities for Radio One including
President, General Manager, General Sales Manager and talk show host. She began
her career in radio as General Sales Manager of WHUR-FM, the Howard University-
owned, urban-contemporary radio station. Ms. Hughes is also the mother of Mr.
Liggins, Radio One's Chief Executive Officer, President, Treasurer and
director.
Mr. Liggins has been Chief Executive Officer since 1997, and President,
Treasurer and a director of Radio One since 1989. Mr. Liggins joined Radio One
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 Radio
One's Washington, D.C. operations. After becoming President, Mr. Liggins
engineered Radio One's expansion into other markets. Mr. Liggins is a graduate
of the Wharton School of Business/Executive M.B.A. Program. Mr. Liggins is the
son of Ms. Hughes, Radio One's Chairperson and Secretary.
Mr. Royster has been Executive Vice President of Radio One since 1997 and
Chief Financial Officer of Radio One since 1996. Prior to joining Radio One, 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 Radio One
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. Mr. Royster is a graduate of Duke University and
Harvard Business School.
Ms. Sneed has been Radio One's Chief Operating Officer since January 1998
and General Manager of ROA since 1995. Prior to joining Radio One, she held
various positions with Summit Broadcasting including Executive Vice President
of the Radio Division, and Vice President of Operations from 1992 to 1995.
Ms. Sneed is a graduate of Auburn University.
Mr. Hegwood has been the Vice President of Programming for Radio One and
Program Director of WKYS-FM since 1995. From 1990 to 1995, Mr. Hegwood was
Program Director of WJLB-FM in Detroit, Michigan.
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Ms. Hartmann has been Controller of Radio One since 1997. Prior to joining
Radio One, she served as Vice President and Market Controller for Bonneville
International Corporation in Phoenix, Arizona from 1991 to 1997. Ms. Hartmann
is a graduate of the University of California and has an M.B.A. degree from the
University of Phoenix.
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 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
earned an M.B.A. from the Amos Tuck School at Dartmouth College.
Committees of the Board of Directors
Radio One has formed an Audit Committee and a Compensation Committee of the
Board of Directors of Radio One, and all of the directors serving on such Audit
Committee and Compensation Committee are directors who are not employees of
Radio One.
Compensation of Directors and Executive Officers
Compensation of Directors
Non-officer directors of Radio One 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 Radio One. Officers
of Radio One who serve as directors do not receive compensation for their
services as directors other than the compensation they receive as officers of
Radio One.
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Compensation of Executive Officers
The following information relates to compensation of Radio One's Chief
Executive Officer and each of its most highly compensated executive officers
(the "Named Executives") for the fiscal years ended December 31, 1998, 1997 and
1996 (as applicable):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
--------------------------- All Other
Name and Principal Positions Year Salary Bonus Compensation
- ---------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Catherine L. Hughes................... 1998 $225,000 $100,000 $12,281
Chairperson of the Board of Directors
and Secretary 1997 193,269 50,000 3,050
1996 150,000 31,447 18,321
Alfred C. Liggins, III................ 1998 225,000 100,000 3,567
Chief Executive Officer, President, 1997 193,269 50,000 3,125
Treasurer and Director 1996 150,000 -- 19,486
Scott R. Royster...................... 1998 165,000 50,000 n/a
Executive Vice President and Chief
Financial Officer 1997 148,077 25,000 n/a
1996 55,577(/1/) -- n/a
Mary Catherine Sneed.................. 1998 200,000 50,000 n/a
Chief Operating Officer
</TABLE>
- --------
(1) Mr. Royster provided consulting services for Radio One in July 1996 and
joined Radio One 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 Employment Agreement. Radio One anticipates entering
into a three-year employment agreement with Ms. Hughes pursuant to which Ms.
Hughes will continue to serve as Radio One's Chairperson of the Board of
Directors. Ms. Hughes will receive an annual base salary of $250,000 effective
January 1, 1999, subject to an annual increase of not less than 5%, and an
annual cash bonus at the discretion of the Board of Directors. Radio One could
incur certain severance obligations under the expected terms of the employment
agreement in the event that Ms. Hughes's employment is terminated.
Mr. Alfred C. Liggins, III Employment Agreement. Radio One anticipates
entering into a three-year employment agreement with Mr. Liggins pursuant to
which Mr. Liggins will continue to serve as Radio One's Chief Executive Officer
and President. Mr. Liggins will receive an annual base salary of $300,000
effective January 1, 1999, subject to an annual increase of not less than 5%,
and an annual cash bonus at the discretion of the Board of Directors. Radio One
could incur certain severance obligations under the expected terms of the
employment agreement in the event that Mr. Liggins's employment is terminated.
Mr. Scott R. Royster Employment Agreement. Radio One anticipates entering
into a three-year employment agreement with Mr. Royster pursuant to which Mr.
Royster will continue to serve as Radio One's Chief Financial Officer and
Executive Vice President. Under the expected terms of the employment agreement
Mr. Royster will receive an annual base salary of $200,000 effective January 1,
1999, subject to an annual increase of not less than 5%, an annual cash bonus
at the discretion of the Board of Directors, and a one-time cash bonus of
$60,000, payable upon completion of an equity financing by Radio One which
results in gross proceeds to Radio One of at least $50 million. Mr. Royster has
also received a one-time restricted stock award of shares of Radio One's
Class C Common Stock and an option to purchase shares of Radio One's Class
A Common Stock at an exercise price of per share (subject to certain
adjustments). Twenty-five percent of the stock granted pursuant to the stock
award vested on the date of grant; the remaining stock will vest in equal
increments every six months beginning December 31, 1999 and ending December 31,
2001. The options will vest in equal one-sixth increments during the term of
the employment agreement. Radio One could incur certain severance obligations
under the expected terms of the employment agreement in the event that
Mr. Royster's employment is terminated.
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Ms. Mary Catherine Sneed Employment Agreement. Effective December 8, 1997,
Radio One entered into a two-year employment agreement with Ms. Sneed pursuant
to which she was hired to serve as Radio One's Chief Operating Officer. The
employment agreement provides that Ms. Sneed will receive an annual base salary
of $220,000 and an annual cash bonus of up to $50,000, contingent upon the
satisfaction of certain performance criteria. Radio One could incur certain
severance obligations under the employment agreement in the event that Ms.
Sneed's employment is terminated. If, during the term of the employment
agreement, Radio One terminates Ms. Sneed's employment without just cause or
following a change of control of Radio One, Ms. Sneed will continue to receive
her base salary for a period of twelve months, during the first six months of
which she will be subject to certain non-compete restrictions.
401(k) Plan
Radio One adopted a defined contribution 401(k) savings and retirement plan
effective August 1, 1994. Employees are eligible to participate after
completing 90 days of service and attaining age 21. Participants may contribute
up to 15% of their gross compensation subject to certain limitations.
Stock Option Plan
On March 10, 1999, we adopted the Option Plan designed to provide incentives
relating to equity ownership to present and future executive, managerial and
other key employees, directors and consultants of Radio One and our
subsidiaries ("Participants") as may be selected in the sole discretion of the
Board of Directors. The Option Plan provides for the granting to Participants
of stock options ("Options") and restricted stock grants ("Grants") as the
Compensation Committee of the Board of Directors, or such other committee of
the Board of Directors as the Board of Directors may designate (the
"Committee") deems to be consistent with the purposes of the Option Plan. An
aggregate of shares of Common Stock have been reserved for issuance under
the Option Plan. The Option Plan affords Radio One latitude in tailoring
incentive compensation for the retention of key personnel, to support corporate
and business objectives, and to anticipate and respond to a changing business
environment and competitive compensation practices.
The Committee has exclusive discretion to select the Participants, to
determine the type, size and terms of each award, to modify the terms of
awards, to determine when awards will be granted and paid, and to make all
other determinations which it deems necessary or desirable in the
interpretation and administration of the Option Plan. The Option Plan
terminates ten years from the date that the Option Plan was approved and
adopted by the stockholders of Radio One. Generally, a Participant's rights and
interest under the Option Plan are not transferable except by will or by the
laws of descent and distribution.
Options, which include non-qualified stock options and incentive stock
options, are rights to purchase a specified number of shares of Common Stock at
a price fixed by the Committee. The Option price may be less than, equal to or
greater than the fair market value of the underlying shares of Common Stock,
but in no event will the exercise price of an incentive stock option be less
than the fair market value on the date of grant. Options will expire not later
than ten years after the date on which they are granted. Options will become
exercisable at such times and in such installments as the Committee shall
determine. Upon termination of a Participant's employment with Radio One,
Options that are not exercisable will be forfeited immediately and Options that
are exercisable will be forfeited on the thirtieth day following such
termination unless exercised by the Participant. Payment of the option price
must be made in full at the time of exercise in such form (including, but not
limited to, cash or Common Stock of Radio One) as the Committee may determine.
Grants are awards of restricted Common Stock at no cost to Participants and
are generally subject to vesting provisions as determined by the Committee.
Upon termination of a Participant's employment with Radio One, Grants that are
not vested will be forfeited immediately.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of Radio One, the
Committee will make any adjustments it deems appropriate in the number and kind
of shares reserved for issuance upon the exercise of Options and vesting of
Grants under the Option Plan and in the exercise price of outstanding Options.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mableton Option
Mr. Liggins, the Chief Executive Officer and President of Radio One, has a
right, which he obtained in 1997, (the "Mableton Option") to acquire an
interest in a construction permit for an FM radio station licensed to Mableton,
Georgia (the "Mableton Station") which is in the Atlanta MSA. Mr. Liggins is in
discussions with Syncom regarding the terms and conditions pursuant to which
Syncom I would participate in the Mableton Option. Syncom I is the parent
corporation of Syncom, which is one of the selling stockholders, and will hold
approximately % of the Class A Common Stock after completion of this
offering. Terry L. Jones, the President of Syncom and Syncom I, is also a
member of Radio One's Board of Directors. Mr. Liggins has also proposed that
ROA enter into an LMA with respect to the Mableton Station, or otherwise
participate in the operations and financing of the Mableton Station. Any such
arrangement will be on terms at least as favorable to Radio One as any such
transaction with an unaffiliated third party.
Office Lease
Radio One leases office space located at 100 St. Paul Street, Baltimore,
Maryland from Chalrep Limited Partnership, a limited partnership controlled by
Ms. Hughes and Mr. Liggins. The annual rent for the office space is $152,400.
Radio One's management believes that the terms of this lease are not materially
different than if the agreement were with an unaffiliated third party.
Mr. Liggins' Loan
Radio One has extended an unsecured loan to Mr. Liggins in the amount of
$380,000, which bears interest at an annual rate of 5.56% and is evidenced by a
demand promissory note dated as of June 30, 1998. As of March 1, 1999, the
aggregate outstanding principal and interest amount on this loan was $386,386.
The purpose of the loan was to repay a loan that Mr. Liggins obtained from
NationsBank, Texas, N.A. in 1997 to purchase an additional interest in Radio
One.
Music One, Inc.
Ms. Hughes and Mr. Liggins own a music company called Music One, Inc. Radio
One sometimes engages in promoting the recorded music product of Music One,
Inc. Radio One estimates that the dollar value of such promotion is nominal.
Allur-Detroit
Allur-Detroit leases the transmitter site for WWBR-FM from American
Signalling Corporation for approximately $84,000 per year. American Signalling
Corporation is a wholly-owned subsidiary of Syncom Venture Partners. Radio
One's management believes that the terms of this lease are not materially
different than if the agreement were with an unaffiliated third party.
XM Satellite, Inc.
Radio One and XM Satellite Radio, Inc. have entered into a Programming
Partner Agreement whereby Radio One will provide programming to XM Satellite
Radio, Inc. for distribution over satellite-delivered channels. Worldspace,
Inc. holds 20% of the stock of XM Satellite Radio, Inc. Syncom Venture Partners
owns approximately 1.25% of the stock of Worldspace, Inc. Terry L. Jones, a
director of Radio One, is also a director of Worldspace, Inc.
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<PAGE>
Radio One of Atlanta, Inc.
On March , 1999, Radio One acquired all of the outstanding capital stock
of ROA. ROA's stockholders included Alta Subordinated Debt Partners III, L.P.
("Alta"), Syncom Venture Partners, and Alfred C. Liggins, III. Mr. Brian W.
McNeill, a general partner of Alta, is also a member of Radio One's Board of
Directors. In addition to holding shares of Radio One's Senior Preferred Stock
prior to the offering, Alta will hold approximately % of the Class A Common
Stock after completion of the offering. Terry L. Jones, a general partner of
the general partner of Syncom Venture Partners, is also a member of Radio One's
Board of Directors and is the President of Syncom and Syncom I. In addition to
holding shares of Radio One's Senior Preferred Stock prior to the offering,
Syncom is one of the selling stockholders and will hold approximately % of
the Class A Common Stock after completion of this offering.
Radio One issued shares of Common Stock in exchange for the
outstanding capital stock of ROA. Alta, Syncom Venture Partners and Mr. Liggins
received a majority of such shares in exchange for their shares in ROA. In
connection with this transaction, Mr. Liggins was paid a fee of approximately
$1.2 million for arranging the acquisition. Also, as part of this transaction,
Radio One assumed and retired net debt and accrued interest of approximately
$16.3 million of ROA and Dogwood. Of this amount, approximately $12.0 million
was paid to Allied Capital Corporation, which is one of the selling
stockholders, approximately $1.3 million was paid to Syncom Venture Partners,
and approximately $2.0 million was paid to Alta.
The Board of Directors authorized the formation of an ad-hoc committee to
oversee the valuation of ROA. The ad-hoc committee members are Catherine L.
Hughes of Radio One, Sanford Anstey of BancBoston Investments, Inc. and Dean
Pickerell of Medallion Capital, Inc. (formerly Capital Dimensions Venture Fund,
Inc.). The committee is comprised of members of the Board of Directors of, and
investors in, Radio One that do not have an interest in ROA.
The ad-hoc committee recommended approval of the acquisition of ROA based
upon its determination that the acquisition was fair to Radio One and its
stockholders.
Ms. Sneed's Loan
ROA has extended an unsecured loan to Mary Catherine Sneed, Chief Operating
Officer of Radio One, in the original amount of $271,000, which bears interest
at an annual rate of 5.56% and is evidenced by a demand promissory note. As of
, 1999, the aggregate outstanding principal and interest amount on this
loan was $ . The purpose of this loan was to pay Ms. Sneed's tax liability
with respect to incentive stock grants of ROA stock received by Ms. Sneed.
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<PAGE>
SELLING STOCKHOLDERS
Radio One expects some of its stockholders to sell a portion of their shares
in this offering.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our Common Stock after giving effect to this offering, by: (i)
each person (or group of affiliated persons) known by us to be the beneficial
owner of more than five percent of any class of Common Stock; (ii) each Named
Executive; (iii) each of our directors; (iv) the selling stockholders; (v) all
of our directors and officers as a group. Unless otherwise indicated in the
footnotes below, each stockholder possesses sole voting and investment power
with respect to the shares listed.
<TABLE>
<CAPTION>
Common Stock(/1/)
-------------------------------------------------------- Percent Percent
Class A Class B Class C of of
------------------ ------------------ ------------------ Total Total
Name of Number Percent Number Percent Number Percent Economic Voting
Beneficial Owner of Shares of Class of Shares of Class of Shares of Class Interest Power
- -------------------------- --------- -------- --------- -------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Catherine L. Hughes(/2/)..
Alfred C. Liggins,
III(/2/)(/12/)...........
Scott R. Royster..........
Mary Catherine Sneed......
Terry L. Jones(/3/).......
Brian W. McNeill(/4/).....
Alta Subordinated Debt
Partners III,
L.P.(/5/)(/12/)..........
Alliance Enterprise
Corporation(/6/)(/12/)...
BancBoston Investments,
Inc.(/7/)(/12/)..........
Medallion Capital,
Inc.(/8/)(/12/)..........
Fulcrum Venture Capital
Corporation(/9/)(/12/)...
Syncom Capital
Corporation(/10/)(/12/)..
Allied Capital
Corporation(/11/)(/12/)..
All Directors and Named
Executives as a group
(6 persons)..............
</TABLE>
- --------
(1) The number of shares of each class of Common Stock excludes the shares of
any other class of Common Stock issuable upon conversion of that class of
Common Stock.
(2) 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. The shares of Class B Common Stock are subject
to a voting agreement between Ms. Hughes and Mr. Liggins with respect to
the election of Radio One's directors. Pursuant to that agreement, Mr.
Liggins has transferred to Ms. Hughes voting control over shares of Common
Stock representing % of the total voting power of all Common Stock until
such time as Mr. Liggins is permitted under applicable laws and regulations
to hold in excess of 50% of such voting power. The business address for Ms.
Hughes and Mr. Liggins is c/o Radio One, 5900 Princess Garden Parkway, 8th
Floor, Lanham, Maryland 20706.
(3) Represents shares of Class A 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 Class A Common Stock and
Senior Preferred Stock held by Syncom by virtue of his affiliation with
Syncom. Mr. Jones disclaims beneficial ownership in such shares.
(4) Represents shares of Class A Common Stock held by Alta. Mr. McNeill is a
general partner of Alta 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 Class A Common Stock and Senior Preferred Stock held by Alta
by virtue of his affiliation with Alta. Mr. McNeill disclaims any
beneficial ownership of such shares.
75
<PAGE>
(5) The principal address of Alta is c/o Burr, Egan, Deleage & Co., One Post
Office Square, Boston, MA 02109.
(6) The principal address of Alliance Enterprise Corporation is 12655 N.
Central Expressway, Suite 710, Dallas, TX 75243.
(7) The principal address of BancBoston Investments, Inc. is 100 Federal
Street, 32nd Floor, Boston, MA 02110.
(8) The principal address of Medallion Capital, Inc. is 7831 Glenroy Road,
Suite 480, Minneapolis, MN 55439.
(9) The principal address of Fulcrum Venture Capital Corporation is 300
Corporate Point, Suite 380, Culver City, CA 90230.
(10) The principal address of Syncom Capital Corporation is 8401 Colesville
Road, Suite 300, Silver Spring, MD 20910.
(11) The principal address of Allied Capital Corporation is 1919 Pennsylvania
Avenue, NW, Washington, D.C. 20006-3434.
(12) Such person is a holder of shares of Senior Preferred Stock, as follows:
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Name of Stockholder Series A Preferred Stock Held Series B Preferred Stock Held
- ------------------------ ----------------------------- -----------------------------
<S> <C> <C>
Alfred C. Liggins, III.. 2,359.67 --
Alta Subordinated Debt
Partners III, L.P...... -- 72,139.57
Alliance Enterprise
Corporation............ 9,126.55 --
BancBoston Investments,
Inc.................... -- 49,249.44
Medallion Capital,
Inc.................... 37,258.14 --
Fulcrum Venture Capital
Corporation............ 9,650.09 --
Syncom Capital
Corporation............ 13,595.69 --
Allied Capital
Corporation*........... 4,000.00 --
</TABLE>
- --------
* Represents a warrant to purchase, subject to certain conditions, 4,000.00
shares of Series A Preferred Stock.
76
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company gives effect
to the consummation of the transactions contemplated under "Capitalization,"
which will occur prior to or simultaneously with this offering, the proposed
sale of shares of Class A Common Stock by the Company in this
offering and, except as otherwise provided below, the proposed sale of
shares of New Preferred Stock by the Company in the Preferred Stock
Offering. Our capital stock consists of (i) authorized shares of Common
Stock, $0.01 par value per share, which consists of (a) shares of Class A
Common Stock, of which shares are outstanding ( shares assuming the
underwriters overallotment option is exercised), (b) shares of Class B
Common Stock, of which shares are outstanding, and (c) shares of Class C
Common Stock, of which shares are outstanding, and (ii) authorized shares
of preferred stock, par value $ per share, which consists of shares of
Series A Preferred Stock, none of which is outstanding, shares of Series B
Preferred Stock, none of which is outstanding and shares of New Preferred
Stock, of which shares are outstanding. In the event the Preferred Stock
Offering were not consummated, there would be no shares of New Preferred Stock
outstanding, and there would be 140,000 shares of Series A Preferred, of which
shares would be outstanding and (b) 150,000 shares of Series B Preferred
Stock outstanding. There is no established trading market for our Common Stock
or New Preferred Stock. The following summary is qualified in its entirety by
reference to our Amended and Restated Certificate of Incorporation, which is
filed as an exhibit to the Registration Statement of which this prospectus is a
part.
Class A Common Stock
The holders of Class A Common Stock are entitled to one vote for each share
held on all matters voted upon by stockholders, including the election of
directors and any proposed amendment to the Amended and Restated Certificate of
Incorporation. The holders of Class A Common Stock are entitled to vote as a
class to elect two independent directors to the Board of Directors. The holders
of Class A Common Stock will be entitled to such dividends as may be declared
at the discretion of the Board of Directors out of funds legally available for
that purpose. The holders of Class A Common Stock will be entitled to share
ratably with all other classes of Common Stock in the net assets of Radio One
upon liquidation after payment or provision for all liabilities. All shares of
Class A Common Stock may be converted at any time into a like number of shares
of Class C Common Stock at the option of the holder of such shares. All shares
of Class A Common Stock issued pursuant to the offering will be fully paid and
non-assessable.
Application has been made for the listing of the Class A Common Stock on The
Nasdaq National Market, subject to official notice of issuance.
Class B Common Stock
The holders of Class B Common Stock are entitled to the same rights,
privileges, benefits and notices as the holders of Class A Common Stock, except
that the holders of Class B Common Stock will be entitled to ten votes per
share. All shares of Class B Common Stock may be converted at any time into a
like number of shares of Class A Common Stock at the option of the holder of
such shares. Catherine L. Hughes and Alfred C. Liggins, III may transfer shares
of Class B Common Stock held by them only to "Class B Permitted Transferees,"
and Class B Permitted Transferees may transfer shares of Class B Common Stock
only to other Class B Permitted Transferees. If any shares of Class B Common
Stock are transferred to any person or entity other than a Class B Permitted
Transferee, such shares will automatically be converted into a like number of
shares of Class A Common Stock. "Class B Permitted Transferees" include Ms.
Hughes, Mr. Liggins, their respective estates, spouses, former spouses, parents
or grandparents or lineal descendants thereof, and certain trusts and other
entities for the benefit of, or beneficially owned by, such persons. Ms. Hughes
and Mr. Liggins have agreed to vote their shares of Common Stock to elect each
other and other mutually agreeable nominees to the Board of Directors. See
"Risk Factors--Controlling Stockholders."
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<PAGE>
Class C Common Stock
The holders of Class C Common Stock are entitled to the same rights,
privileges, benefits and notices as the holders of Class A Common Stock and
Class B Common Stock, except that the holders of Class C Common Stock will be
entitled to no votes per share. All shares of Class C Common Stock may be
converted at any time into a like number of shares of Class A Common Stock at
the option of the holder of such shares, except that Class B Permitted
Transferees may convert shares of Class C Common Stock into shares of Class A
Common Stock, or otherwise acquire shares of Class A Common Stock, only in
connection with: (i) a merger or consolidation of Radio One with or into, or
other acquisition of, another entity pursuant to which the Class B Permitted
Transferees are to receive shares of Class A Common Stock in exchange for their
interest in such entity; (ii) the transfer of such shares of Class A Common
Stock to a person or entity other than a Class B Permitted Transferee; or (iii)
a registered public offering of such shares of Class A Common Stock.
New Preferred Stock
Concurrent with this offering, we intend to offer for sale shares of
our New Preferred Stock.
Dividends on the New Preferred Stock will accrue from the date of issuance
and will be payable in arrears on and of each
year, beginning , 1999, at an annual rate of % of the liquidation
preference of $1,000 per share. Dividends will be payable in cash, except that
on each dividend payment date occurring on or prior to , , dividends may
be paid, at Radio One's option, by the issuance of additional shares of New
Preferred Stock (including fractional shares) having an aggregate liquidation
preference equal to the amount of such dividends.
The New Preferred Stock will not be redeemable prior to , , except
that, on or prior to , , we may redeem, at our option, in whole but not
in part, the outstanding New Preferred Stock with the net proceeds of one or
more public equity offerings at a redemption price of % of the liquidation
preference thereof, plus accumulated and unpaid dividends to the date of
redemption. On or after , 20 , the New Preferred Stock is redeemable at
the option of Radio One, at the prices set forth below (expressed in
percentages of its liquidation preference), plus accumulated and unpaid
dividends, if redeemed during the 12-month period beginning on of the
years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
................................ %
................................
................................
and thereafter................. 100.000
</TABLE>
We are required to redeem the New Preferred Stock on , , at a
redemption price equal to 100% of its liquidation preference plus accumulated
and unpaid dividends to the date of redemption.
The New Preferred Stock will rank senior to all other classes of equity
securities of Radio One outstanding upon completion of this offering. We may
not authorize any new class of stock equal or senior in rights to the New
Preferred Stock without the approval of the holders of at least a majority of
the shares of New Preferred Stock then outstanding.
On any scheduled dividend payment date, Radio One may, at its option,
exchange all but not less than all of the shares of New Preferred Stock then
outstanding for our % Subordinated Exchange Debentures Due (the "Exchange
Debentures"). The Exchange Debentures will bear interest at a rate of % per
annum, payable semiannually in arrears on and of each year (or,
on or prior to , , in additional Exchange Debentures, at the option of
Radio One), beginning with the first such date to occur after the date of
exchange. The Exchange Debentures will be subordinated to all existing and
future senior debt of Radio One and to all indebtedness and other liabilities
(including trade payables) of Radio One's subsidiaries.
78
<PAGE>
The New Preferred Stock and, if applicable, the indenture governing the
Exchange Debentures will limit, subject to certain restrictions:
1. the incurrence of additional indebtedness and the issuance of preferred
stock by Radio One and its Restricted Subsidiaries,
2. the payment of dividends and other distributions by Radio One and its
Restricted Subsidiaries in respect of their capital stock,
3. investments or other restricted payments by Radio One and its Restricted
Subsidiaries,
4. asset sales and asset swaps,
5. certain transactions with affiliates,
6. the sale or issuance of capital stock of Restricted Subsidiaries, and
7. mergers and consolidations.
The New Preferred Stock will also prohibit certain restrictions on dividends
and other distributions from our Restricted Subsidiaries.
Foreign Ownership
Radio One's Amended and Restated Certificate of Incorporation restricts the
ownership, voting and transfer of our capital stock, including the Class A
Common Stock, in accordance with the Communications Act and the rules of the
FCC, which prohibit the issuance of more than 25% of our outstanding capital
stock (or more than 25% of the voting rights such stock represents) to or for
the account of aliens (as defined by the FCC) or corporations otherwise subject
to domination or control by aliens. Our Amended and Restated Certificate of
Incorporation prohibits any transfer of our capital stock that would cause a
violation of this prohibition. In addition, the Amended and Restated
Certificate of Incorporation authorizes the Board of Directors to take action
to enforce these prohibitions, including restricting the transfer of shares of
capital stock to aliens and placing a legend restricting foreign ownership on
the certificates representing the Class A Common Stock.
Registration Rights
The holders of substantially all of the shares of Class A Common Stock
outstanding prior to the closing of this offering, other than Mr. Liggins, are
parties to registration rights agreements with us. These agreements, which
relate to approximately shares of Class A Common Stock, provide incidental
or "piggyback" registration rights that allow such holders, under certain
circumstances, to include their shares of Class A Common Stock in registration
statements initiated by Radio One or other stockholders. Under these
agreements, the holders of Class A Common Stock may require us to register
their shares under the Securities Act for offer and sale to the public
(including by way of an underwritten public offering) on up to four occasions.
These agreements also permit demand registrations on Form S-3 registration
statements provided that we are eligible to register our capital stock on Form
S-3. All such registration rights are subject to conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares to be included in a registration. The holders of the Class A Common
Stock have waived their "piggyback" registration rights with respect to the
offering.
Limitations on Directors' and Officers' Liability
Radio One'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 Radio One 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.
79
<PAGE>
Radio One'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 Radio One. We believe these
provisions are necessary or useful to attract and retain qualified persons as
directors. Radio One maintains directors and officers insurance for the benefit
of its directors and officers.
There is no pending litigation or proceeding involving a director or officer
as to which indemnification is being sought.
Transfer Agent and Registrar
United States Trust Company of New York is our transfer agent and registrar.
80
<PAGE>
DESCRIPTION OF INDEBTEDNESS
Bank Credit Facility
On , 1999, we entered into an amended and restated credit agreement
(the "Credit Agreement") under which we may borrow up to $100 million on a
revolving basis (the "Bank Credit Facility") from a group of banking
institutions. Draw downs under the Bank Credit Facility are currently
available, subject to compliance with provisions of the Credit Agreement,
including but not limited to the financial covenants. Specifically, borrowings
under the Bank Credit Facility may be entirely of Eurodollar Loans, Alternate
Base Rate ("ABR") Loans or a combination thereof. The Bank Credit Facility will
be fully available until a maturity date of December 31, 2003. No commitment
reductions under the Bank Credit Facility will occur until the final maturity
date, provided that Radio One does not acquire or issue additional indebtedness
or Disqualified Stock (as such term is defined in the Credit Agreement).
The Bank Credit Facility terminates on December 31, 2003, at which time any
outstanding principal together with all accrued and unpaid interest thereon
would become due and payable. All amounts under the Bank Credit Facility are
guaranteed by each of Radio One's direct and indirect subsidiaries other than
WYCB Acquisition Corporation and Broadcast Holdings, Inc.
The Bank Credit Facility is secured by a perfected first priority secured
interest in: (i) substantially all of the tangible and intangible assets of
Radio One and our direct and indirect subsidiaries including, without
limitation, any and all FCC licenses to the maximum extent permitted by law and
(ii) all of the common stock of Radio One and our direct and indirect
subsidiaries, including all warrants or options and other similar securities to
purchase such securities. Radio One also granted a security interest in all
money (including interest), instruments and securities at any time held or
acquired in connection with a cash collateral account established pursuant to
the Credit Agreement, together with all proceeds thereof.
The interest rates on the borrowings under the Bank Credit Facility are
based on the ratio of total debt to EBITDA, with a maximum margin above ABR of
1.625% with respect to ABR Loans, and a maximum margin above Eurodollar rate
2.625% with respect to Eurodollar Loans. Interest on Eurodollar Loans is based
on a 360-day period for actual days elapsed, and interest on ABR Loans is based
on a 365-day period for actual days elapsed. In addition, Radio One will pay a
commitment fee equal to an amount based on the average daily amount of the
available commitment computed at a rate per year tied to a leverage ratio in
effect for the fiscal quarter preceding the date of payment of such fee. The
commitment fee is fully earned and non-refundable and is payable quarterly in
arrears on the last business day of each March, June, September and December
and on the maturity date.
The Credit Agreement contains customary and appropriate affirmative and
negative covenants including, but not limited to, financing covenants and other
covenants including limitations on other indebtedness, liens, investments,
guarantees, restricted payments (dividends, redemptions and payments on
subordinated debt), prepayment or repurchase of other indebtedness, mergers and
acquisitions, sales of assets, capital expenditures, losses, transactions with
affiliates and other provisions customary and appropriate for financing of this
type, including mutually agreed upon exceptions and baskets. The financial
covenants include: (i) a maximum ratio of total debt to EBITDA of 7.0x; (ii) a
maximum ratio of senior debt to EBITDA of 4.5x; (iii) a minimum interest
coverage ratio; and (iv) a minimum fixed charge coverage ratio.
The Credit Agreement contains the following customary events of default: (i)
failure to make payments when due; (ii) defaults under any other agreements or
instruments of indebtedness; (iii) noncompliance with covenants; (iv) breaches
of representations and warranties; (v) voluntary or involuntary bankruptcy or
liquidation proceedings; (vi) entrance of judgments; (vii) impairment of
security interests in collateral; and (viii) changes of control.
81
<PAGE>
12% Senior Subordinated Notes Due 2004
On May 15, 1997, Radio One entered into an approximate $85.0 million
aggregate principal amount offering (the "12% Notes Offering") of Radio One's
12% Senior Subordinated Notes (the "12% Notes due 2004"). The 12% Notes
Offering has an aggregate initial accreted value of approximately $75.0
million, as of Maturity Date May 15, 2004.
The 12% Notes due 2004 are generally unsecured obligations of Radio One and
are subordinated in rights of payment to all Senior Indebtedness (as defined in
the Indenture). The 12% Notes due 2004 were issued pursuant to an Indenture,
dated as of May 15, 1997 among Radio One, Radio One Licenses, Inc. and United
States Trust Company of New York (the "Indenture"). Pursuant to the First
Supplemental Indenture dated as of June 30, 1998, Bell Broadcasting and Radio
One of Detroit, Inc. became Subsidiary Guarantors of the Notes. Pursuant to the
Second Supplemental Indenture dated as of December 28, 1998, Allur-Detroit and
Allur Licenses, Inc. became Subsidiary Guarantors of the Notes.
The 12% Notes due 2004 were issued at a substantial discount from their
principal amount. The issue price to investors per Note was $877.42, which
represents a yield to maturity on the 12% Notes due 2004 of 12.0% calculated
from May 19, 1997 (computed on a semi-annual bond equivalent basis).
Cash interest on the 12% Notes due 2004 accrues at a rate of 7.0% per annum
on the principal amount of the 12% Notes due 2004 through and including May 15,
2000, and at a rate of 12.0% per annum on the principal amount of the 12% Notes
due 2004 after such date. Cash interest on the 12% Notes due 2004 is currently
payable semi-annually on May 15 and November 15 of each year.
The 12% Notes due 2004 are redeemable at any time and from time to time at
the option of Radio One, in whole or in part, on or after May 15, 2001 at the
redemption prices set forth in the 12% Notes due 2004, plus accrued and unpaid
interest to the date of redemption. In addition, on or prior to May 15, 2000,
Radio One may redeem, at our option, up to 25.0% of the aggregate original
principal amount of the 12% Notes due 2004 with the net proceeds of one or more
Public Equity Offerings at 112% of the Accreted Value thereof, together with
accrued and unpaid interest, if any, to the date of redemption, as long as at
least approximately $64.1 million of the aggregate principal amount of the 12%
Notes due 2004 remains outstanding after each such redemption. Upon a Change of
Control (as defined in the Indenture), Radio One must commence an offer to
repurchase the 12% Notes due 2004 at 101% of the Accreted Value thereof, plus
accrued and unpaid interest, if any, to the date of repurchase.
The initial gross proceeds to Radio One from the 12% Notes Offering were
approximately $75.0 million and were used to: (i) repay all the outstanding
indebtedness under Radio One's then existing credit facility; (ii) fund the
balance of the total consideration in respect to the acquisition of WPHI-FM;
(iii) pay for leasehold improvements and new equipment in respect to the Lanham
offices and other amounts associated with moving Radio One's Washington, D.C.
offices and studios; (iv) provide funding for other general purposes, including
working capital; and (v) pay related fees and expenses in connection with the
consummation of the 12% Notes Offering.
The Indenture governing the 12% Notes due 2004 contains certain restrictive
covenants with respect to Radio One and our Restricted Subsidiaries, including
limitations on: (a) the sale of assets, including the equity interests of Radio
One's Restricted Subsidiaries, (b) asset swaps, (c) the payment of Restricted
Payments (as defined in the Indenture), (d) the incurrence of indebtedness and
issuance of preferred stock by Radio One or our Restricted Subsidiaries, (e)
the issuance of Equity Interests (as defined in the Indenture) by a Restricted
Subsidiary, (f) the payment of dividends on the capital stock of Radio One and
the purchase, redemption or retirement of the capital stock or subordinated
indebtedness of Radio One, (g) certain transactions with affiliates, (h) the
incurrence of senior subordinated debt and (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.
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<PAGE>
The Indenture for the 12% Notes due 2004 includes various events of default
customary for such type of agreements, such as failure to pay principal and
interest when due on the 12% Notes due 2004, cross defaults on other
indebtedness and certain events of bankruptcy, insolvency and reorganization.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Class A
Common Stock of Radio One. The sale or availability for sale of substantial
amounts of Class A Common Stock in the public market subsequent to the
offering, or the perception that such sales could occur, could adversely affect
market prices prevailing from time to time. Sales of substantial amounts of
Class A Common Stock in the public market subsequent to the offering could also
adversely affect the ability of Radio One to raise equity capital in the
future.
Upon consummation of this offering, Radio One will have outstanding
shares of Class A Common Stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options and
shares of Class A Common Stock assuming exercise of the Underwriter's
over-allotment in full. Of these shares, the shares of Class
A Common Stock sold in this offering will be freely tradable without
restriction under the Securities Act, unless purchased by "affiliates" of Radio
One as that term is defined in Rule 144 promulgated under the Securities Act.
The remaining shares of Class A Common Stock outstanding upon
completion of the offering will be "restricted securities," as that term is
defined Rule 144 promulgated under the Securities Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 promulgated
under the Securities Act, which is summarized below.
The holders of substantially all of the shares of Class A Common Stock
outstanding prior to the closing of this offering, other than Mr. Liggins, are
parties to registration rights agreements with us. These agreements, which
relate to approximately shares of Class A Common Stock, provide
incidental or "piggyback" registration rights that allow such holders, under
certain circumstances, to include their shares of Class A Common Stock in
registration statements initiated by Radio One or other stockholders. Such
registration rights agreements also permit demand registrations. The number of
shares sold in the public market could increase if such rights are exercised.
See "Description of Capital Stock--Registration Rights."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares
of Class A Common Stock that have been outstanding and not held by any
"affiliate" of Radio One for a period of one year is entitled to sell within
any three-month period a number of shares that does not exceed the greater of
one percent of the then outstanding shares of Class A Common Stock
(approximately shares immediately after completion of this
offering assuming no exercise of the underwriters' over-allotment option) or
the average weekly reported trading volume of the Class A Common Stock during
the four calendar weeks preceding the date on which notice of such sale is
given, provided certain manner of sale and notice requirements and requirements
as to the availability of current public information are satisfied (such
information requirements have been satisfied by Radio One's filing of reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
since August 1997). Affiliates of Radio One must comply with the restrictions
and requirements of Rule 144, other than the two-year holding period
requirement, in order to sell shares of Class A Common Stock that are not
"restricted securities" (such as shares acquired by affiliates in this
offering). Under Rule 144(k), a person who is not deemed an "affiliate" of
Radio One at any time during the three months preceding a sale by him, and who
has beneficially owned shares of Class A Common Stock that were not acquired
from Radio One or an "affiliate" of Radio One within the previous two years,
would be entitled to sell such shares without regard to volume limitations,
manner of sale provisions, notification requirements or the availability of
current public information concerning Radio One. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly through the
use of one or more intermediaries controls, or is controlled by, or is under
common control with, such issuer.
83
<PAGE>
Radio One, all of its officers and directors, the selling stockholders and
other holders of Class A Common Stock have entered into contractual "lock-up"
agreements providing that they will not offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of the shares of Class A Common
Stock owned by them or that could be purchased by them through the exercise of
options to purchase Class A Common Stock of Radio One for a period of 180 days
after the date of this prospectus without the prior written consent of Credit
Suisse First Boston Corporation on behalf of the underwriters. As a result of
these restrictions, notwithstanding possible earlier eligibility for sale under
the provisions of Rules 144 and 144(k), shares subject to lock-up agreements
will not be salable until the agreements expire. Taking into account the lock-
up agreements, approximately shares of Class A Common Stock will
be eligible for sale in the public market as of the effective date of this
offering. Substantially all of the remaining Restricted Shares will become
eligible for sale in the public market 180 days after the effective date of the
offering, subject in the case of affiliates to the volume limitations described
above.
Shortly after the effective date of the offering, Radio One intends to file
a Registration Statement under the Securities Act covering shares of Class A
Common Stock reserved for issuance under Radio One's Option Plan. Such
Registration Statement will cover approximately shares. Such
Registration Statement will automatically become effective upon filing.
Accordingly, shares registered under such Registration Statement will be,
subject to Rule 144 volume limitations applicable to affiliates, available for
sale in the open market, unless such shares are subject to vesting restrictions
or the lock-up agreements described above. In , 1999, Radio
One's Board of Directors granted options to purchase an aggregate of
shares of Class A Common Stock. of these options are
immediately exercisable, but any shares acquired pursuant to the exercise of
these options are subject to the same contractual lock-up agreement as the
shares held by officers, directors and selling stockholders.
84
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement, dated , 1999, we and the selling stockholders have agreed to sell
to the underwriters named below, for whom Credit Suisse First Boston
Corporation, NationsBanc Montgomery Securities LLC, Bear, Stearns & Co. Inc.,
and Prudential Securities Incorporated are acting as representatives, the
following respective number of shares of Class A Common Stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ----------
<S> <C>
Credit Suisse First Boston Corporation............................
NationsBanc Montgomery Securities LLC.............................
Bear, Stearns & Co. Inc...........................................
Prudential Securities Incorporated................................
----------
Total...........................................................
==========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of Class A Common Stock in the offering if any are
purchased other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting underwriters
may be increased or the offering of Class A Common Stock may be terminated.
We and the selling stockholders have granted to the underwriters a 30-day
option to purchase on a pro rata basis up to additional shares from us and
an aggregate of additional shares from the selling stockholders at the
initial public offering price less the underwriting discounts and commissions.
The option may be exercised only to cover any over-allotments of Class A Common
Stock.
The underwriters propose to offer the shares of Class A Common Stock
initially at the public offering price on the cover page of this prospectus,
and to selling group members at that price less a concession of $ per share.
The underwriters and selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay.
<TABLE>
<CAPTION>
Total
-----------------------------
Per Without With
Share Over-allotment Over-allotment
----- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions
paid by us............................... $ $ $
Expenses payable by us.................... $ $ $
Underwriting Discounts and Commissions
paid by selling stockholders............. $ $ $
Expenses payable by selling stockholders.. $ $ $
</TABLE>
85
<PAGE>
The representatives have informed Radio One and the selling stockholders
that the underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
We intend to use more than 10% of the net proceeds from the sale of shares
of Class A Common Stock to repay indebtedness owed by us to lenders under the
Bank Credit Facility, including NationsBank N.A. and Credit Suisse First
Boston, New York branch, which are affiliates of NationsBanc Montgomery
Securities LLC and Credit Suisse First Boston Corporation, respectively.
Accordingly, the offering is being made in compliance with the requirements of
Rule 2710(c)(8) of the National Association of Securities Dealers, Inc. Conduct
Rules. This rule provides generally that if more than 10% of the net proceeds
from the sale of stock, not including underwriting compensation, is paid to the
underwriters or their affiliates, the initial public offering price of the
stock may not be higher than that recommended by a "qualified independent
underwriter" meeting certain standards. Accordingly, Prudential Securities is
assuming the responsibilities of acting as the qualified independent
underwriter in pricing the offering and conducting due diligence. The initial
public offering price of the shares of Class A Common Stock is no higher than
the price recommended by Prudential Securities.
We are currently in compliance in all material respects with the terms of
the Credit Agreement. The decision of Credit Suisse First Boston Corporation
and NationsBanc Montgomery Securities LLC to distribute the Class A Common
Stock was made in accordance with their respective customary procedures. Credit
Suisse First Boston Corporation and NationsBanc Montgomery Securities LLC will
not receive any benefit from this offering other than their respective portions
of the underwriting discounts as set forth on the cover page of this
prospectus.
Radio One, Catherine L. Hughes, Alfred C. Liggins, III, the selling
stockholders and certain other holders of Common Stock of Radio One have agreed
that they will not offer, sell, contract to sell, announce our intention to
sell, pledge or otherwise dispose of, directly or indirectly, or file with the
Securities Exchange Commission (the "SEC") a registration statement under the
Securities Act relating to, any additional shares of Class A Common Stock or
securities convertible into or exchangeable or exercisable for any of our Class
A Common Stock, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus.
At our request, the underwriters have reserved for sale, at the initial
public offering price up to shares of Class A Common Stock for
employees, directors and certain other persons associated with us who have
expressed an interest in purchasing Class A Common Stock in the offering. The
number of shares available for sale to the general public in the offering will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares.
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities under the Securities Act, or contribute to payments
which the underwriters may be required to make in respect thereof.
We have made application to list the shares of Class A Common Stock on The
Nasdaq Stock Market's National Market under the symbol "ROIA."
Credit Suisse First Boston Corporation has provided customary financial
advisory services to Radio One, for which it has received customary
compensation and indemnification, and in the future may provide such services.
Prior to this offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock
will be negotiated among us, the selling stockholders and the representatives.
Among the principal factors to be considered in determining the initial public
offering price will be market conditions for initial public offerings, the
history of and prospects for our business, our past and
86
<PAGE>
present operations, our past and present earnings and current financial
position, an assessment of our management, the market of securities of
companies in businesses similar to ours, the general condition of the
securities markets and other relevant factors. There can be no assurance that
the initial public offering price will correspond to the price at which the
Class A Common Stock will trade in the public market subsequent to the offering
or that an active trading market will develop and continue after the offering.
The representatives, may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Class A Common Stock in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the Class A Common Stock originally
sold by such syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Class A
Common Stock to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on The Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.
87
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Class A Common Stock in Canada is being made only on
a private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of the Class A Common Stock are
effected. Accordingly, any resale of the Class A Common Stock in Canada must be
made in accordance with applicable securities laws which will vary depending on
the relevant jurisdiction, and which may require resales to be made in
accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Class A
Common Stock.
Representations of Purchasers
Each purchaser of the Class A Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholders and
the dealer from whom such purchase confirmation is received that (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such Class A Common Stock without the benefit of a prospectus qualified under
such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent, and (iii) such purchaser has reviewed
the text above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein and the selling stockholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or substantial
portions of the assets of the issuer and such persons may be located out side
of Canada and, as a result, it may not be possible to satisfy a judgment
against the issuer or such persons in Canada or to enforce a judgment obtained
in Canadian courts against such issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of the Class A Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Class A Common Stock acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #95/17, a copy of which may be obtained from Radio
One. Only one such report must be filed in respect of the Class A Common Stock
acquired on the same date and under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of the Class A Common Stock should consult their own
legal and tax advisors with respect to the tax consequences of an investment in
the Class A Common Stock in their particular circumstances and with respect to
the eligibility of the Class A Common Stock for investment by the purchaser
under relevant Canadian legislation.
88
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the offering will be passed upon for
Radio One by Kirkland & Ellis. Certain legal matters regarding FCC issues will
be passed upon for Radio One by Davis, Wright & Tremaine LLP. Certain legal
matters will be passed upon for the underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP.
EXPERTS
The audited consolidated financial statements and schedules of Radio One,
Inc. and subsidiaries as of December 31, 1997 and 1998, and for each of the
years in the three-year period ended December 31, 1998, included in the
prospectus and registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said report.
The audited consolidated financial statements of Radio One of Atlanta, Inc.
and subsidiary as of December 31, 1997 and 1998, and for each of the years in
the three-year period ended December 31, 1998, included in the prospectus and
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
The audited financial statements of Bell Broadcasting Company as of December
31, 1997 and for each of the years in the two-year period ended December 31,
1997, included in the prospectus and registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The audited financial statements of Allur-Detroit, Inc., as of December 31,
1997, and for the year then ended, included in the prospectus and registration
statement have been audited by Mitchell & Titus, LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
The audited financial statements of the Richmond Operations of Sinclair
Telecable, Inc. as of December 31, 1997 and 1998, and for each of the years in
the two-year period ended December 31, 1998, included in the prospectus and
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
The audited financial statements of stations WKJS-FM and WSOJ-FM of FM 100,
Inc. as of December 31, 1998, and for the year then ended, included in the
prospectus and registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said report.
ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Exchange Act, and, in
accordance therewith, file reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices
located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661 and Seven World Trade Center, 13th Floor, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Section of
the SEC upon payment of certain fees prescribed by the SEC. The SEC's Web site
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of
that site is http://www.sec.gov. Our Class A Common Stock is quoted on the
Nasdaq National Market and our reports, proxy statements and other information
may also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
89
<PAGE>
We have filed a registration statement on Form S-1 with the SEC under the
Securities Act in respect of the Class A Common Stock offered pursuant to this
prospectus. This prospectus, which is a part of the registration statement,
omits certain information contained in the registration statement as permitted
by the SEC's rules and regulations. For further information with respect to
Radio One and the Class A Common Stock offered hereby, please reference the
registration statement, including its exhibits. Statements in this prospectus
concerning the contents of any contract or other document filed with the SEC as
an exhibit to the registration statement are not necessarily complete and are
qualified in all respects by such reference. Copies of the registration
statement, including all related exhibits and schedules, may be inspected
without charge at the public reference facilities maintained by the SEC, or
obtained at prescribed rates from the Public Reference Section of the SEC at
the address set forth above.
90
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Radio One, Inc. and Subsidiaries
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998............. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1997, and 1998.................................................... F-4
Consolidated Statements of Changes in Stockholders' Deficit for the years
ended December 31, 1996, 1997, and 1998................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997, and 1998.................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Radio One of Atlanta, Inc.
Report of Independent Public Accountants................................. F-17
Consolidated Balance Sheets as of December 31, 1997 and 1998............. F-18
Consolidated Statements of Operations for the years ended December 31,
1996, 1997, and 1998.................................................... F-19
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1996, 1997, and 1998................................. F-20
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997, and 1998.................................................... F-21
Notes to Consolidated Financial Statements............................... F-22
Bell Broadcasting Company
Report of Independent Public Accountants................................. F-29
Balance Sheets as of December 31, 1997, and June 30, 1998 (unaudited).... F-30
Statements of Operations for the years ended December 31, 1996 and 1997,
and the six months ended June 30, 1997 and 1998 (unaudited)............. F-31
Statements of Changes in Stockholders' Equity for the years ended
December 31, 1996, and 1997, and the six months ended June 30, 1998
(unaudited)............................................................. F-32
Statements of Cash Flows for the years ended December 31, 1996, and 1997,
and the six months ended June 30, 1997 and 1998 (unaudited)............. F-33
Notes to Financial Statements............................................ F-34
Allur-Detroit, Inc.
Report of Independent Public Accountants................................. F-39
Balance Sheets as of December 31, 1997, and September 30, 1998
(unaudited)............................................................. F-40
Statements of Operations for the year ended December 31, 1997, and the
nine months ended September 30, 1997 and 1998 (unaudited)............... F-41
Statements of Changes in Stockholders' Equity for the year ended December
31, 1997, and the nine months ended September 30, 1998 (unaudited)...... F-42
Statements of Cash Flows for the years ended December 31, 1997, and the
nine months ended September 30, 1997 and 1998 (unaudited)............... F-43
Notes to Financial Statements............................................ F-44
Richmond Operations of Sinclair Telecable, Inc.
Report of Independent Public Accountants................................. F-49
Combined Balance Sheets as of December 31, 1997 and 1998................. F-50
Combined Statements of Operations and Changes in Station Equity for the
years ended December 31, 1997 and 1998.................................. F-51
Combined Statements of Cash Flows for the years ended December 31, 1997
and 1998................................................................ F-52
Notes to Financial Statements............................................ F-53
Stations WKJS-FM and WSOJ-FM of FM 100, Inc.
Report of Independent Public Accountants................................. F-56
Combined Balance Sheet as of December 31, 1998........................... F-57
Combined Statement of Operations and Changes in Station Deficit for the
year ended December 31, 1998............................................ F-58
Combined Statement of Cash Flows for the year ended December 31, 1998.... F-59
Notes to Financial Statements............................................ F-60
</TABLE>
F-1
<PAGE>
The accompanying consolidated financial statements do not reflect the
completion of a stock split, the exercise of certain warrants or exchange of
Class A Common Stock for Classes B and C Common Stock which will take place on
or prior to the effective date of an offering of Common Stock to the public.
The following report is in the form which will be issued by us upon completion
of the three transactions above, which are described in Note 1 to the
consolidated financial statements, and assuming that from December 31, 1998, to
the date of such completion no other material events have occurred that would
affect the accompanying consolidated financial statements or require disclosure
therein:
/s/ Arthur Andersen LLP
Baltimore, Maryland,
March 11, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Radio One, Inc.:
We have audited the accompanying consolidated balance sheets of Radio One,
Inc. (a Delaware corporation) and subsidiaries (the Company) as of December 31,
1997 and 1998, 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, 1998. 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 subsidiaries as of December 31, 1997 and 1998 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Baltimore, Maryland,
, 1999
F-2
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 8,500,000 $ 4,455,000
Trade accounts receivable, net of allowance for
doubtful accounts of $904,000 and $1,243,000,
respectively.................................... 8,722,000 12,026,000
Prepaid expenses and other....................... 315,000 334,000
Deferred taxes................................... -- 826,000
------------ ------------
Total current assets........................... 17,537,000 17,641,000
PROPERTY AND EQUIPMENT, net........................ 4,432,000 6,717,000
INTANGIBLE ASSETS, net............................. 54,942,000 127,639,000
OTHER ASSETS....................................... 2,314,000 1,859,000
------------ ------------
Total assets................................... $ 79,225,000 $153,856,000
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable................................. $ 258,000 $ 1,190,000
Accrued expenses................................. 3,029,000 3,708,000
Income taxes payable............................. -- 143,000
------------ ------------
Total current liabilities...................... 3,287,000 5,041,000
LONG-TERM DEBT AND DEFERRED INTEREST, net of
current
portion........................................... 74,954,000 131,739,000
DEFERRED TAX LIABILITY............................. -- 15,251,000
------------ ------------
Total liabilities.............................. 78,241,000 152,031,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK:
Series A, $.01 par value, 140,000 shares
authorized, 84,843 shares
issued and outstanding.......................... 9,310,000 10,816,000
Series B, $.01 par value, 150,000 shares
authorized, 124,467 shares
issued and outstanding.......................... 13,658,000 15,868,000
STOCKHOLDERS' DEFICIT:
Common stock--Class A, $ par value,
shares authorized,
shares issued and outstanding............ -- --
Common stock--Class B, $ par value,
shares authorized,
shares issued and outstanding............... -- --
Common stock--Class C, $ par value,
shares authorized,
shares issued and outstanding............... -- --
Additional paid-in capital....................... -- --
Accumulated deficit.............................. (21,984,000) (24,859,000)
------------ ------------
Total stockholders' deficit.................... (21,984,000) (24,859,000)
------------ ------------
Total liabilities and stockholders' deficit.... $ 79,225,000 $153,856,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Broadcast revenue, including barter
revenue of $1,122,000, $1,010,000 and
$644,000, respectively............... $27,027,000 $36,955,000 $52,696,000
Less: Agency commissions.............. 3,325,000 4,588,000 6,587,000
----------- ----------- -----------
Net broadcast revenue............... 23,702,000 32,367,000 46,109,000
----------- ----------- -----------
OPERATING EXPENSES:
Program and technical................. 4,157,000 5,934,000 8,015,000
Selling, general and administrative... 9,770,000 12,914,000 16,486,000
Corporate expenses.................... 1,793,000 2,155,000 2,800,000
Depreciation and amortization......... 4,262,000 5,828,000 8,445,000
----------- ----------- -----------
Total operating expenses............ 19,982,000 26,831,000 35,746,000
----------- ----------- -----------
Operating income.................... 3,720,000 5,536,000 10,363,000
INTEREST EXPENSE, including amortization
of deferred financing costs............ 7,252,000 8,910,000 11,455,000
OTHER (EXPENSE) INCOME, net............. (77,000) 415,000 358,000
----------- ----------- -----------
Loss before benefit from income
taxes and extraordinary item......... (3,609,000) (2,959,000) (734,000)
BENEFIT FROM INCOME TAXES............... -- -- 1,575,000
----------- ----------- -----------
(Loss) income before extraordinary
item................................. (3,609,000) (2,959,000) 841,000
EXTRAORDINARY ITEM:
Loss on early retirement of debt...... -- 1,985,000 --
----------- ----------- -----------
Net (loss) income................... $(3,609,000) $(4,944,000) $ 841,000
=========== =========== ===========
EARNINGS PER SHARE:
Basic................................. $ $ $
----------- ----------- -----------
Diluted...............................
----------- ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic.................................
----------- ----------- -----------
Diluted...............................
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
Common Common Common Additional Total
Stock Stock Stock Paid-In Accumulated Stockholders'
Class A Class B Class C Capital Deficit Deficit
------- ------- ------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, as of December
31, 1995............... $ -- $ -- $ -- $1,205,000 $(12,599,000) $(11,394,000)
Net loss.............. -- -- -- -- (3,609,000) (3,609,000)
------ ------ ------ ---------- ------------ ------------
BALANCE, as of December
31, 1996............... -- -- -- 1,205,000 (16,208,000) (15,003,000)
Net loss.............. -- -- -- -- (4,944,000) (4,944,000)
Effect of conversion
to C corporation..... -- -- -- (1,205,000) 1,205,000 --
Preferred stock
dividends............ -- -- -- -- (2,037,000) (2,037,000)
------ ------ ------ ---------- ------------ ------------
BALANCE, as of December
31, 1997............... -- -- -- -- (21,984,000) (21,984,000)
Net income............ -- -- -- -- 841,000 841,000
Preferred stock
dividends............ -- -- -- -- (3,716,000) (3,716,000)
------ ------ ------ ---------- ------------ ------------
BALANCE, as of December
31, 1998............... $ -- $ -- $ -- $ -- $(24,859,000) $(24,859,000)
====== ====== ====== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income................... $(3,609,000) $ (4,944,000) $ 841,000
Adjustments to reconcile net (loss)
income to net cash
from operating activities:
Depreciation and amortization..... 4,262,000 5,828,000 8,445,000
Amortization of debt financing
costs, unamortized
discount and deferred interest... 3,005,000 3,270,000 4,110,000
Loss on disposals................. 153,000 -- --
Loss on extinguishment of debt.... -- 1,985,000 --
Deferred income taxes and
reduction in valuation
reserve on deferred taxes........ -- -- (2,038,000)
Effect of change in operating
assets and liabilities--
Trade accounts receivable....... (656,000) (2,302,000) (1,933,000)
Prepaid expenses and other...... 114,000 (198,000) (4,000)
Other assets.................... (71,000) (147,000) (1,391,000)
Accounts payable................ (818,000) (131,000) 830,000
Accrued expenses................ 234,000 1,576,000 296,000
Income tax payable.............. -- -- 143,000
----------- ------------ ------------
Net cash flows from operating
activities................... 2,614,000 4,937,000 9,299,000
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.. (252,000) (2,035,000) (2,236,000)
Proceeds from disposal of property
and equipment...................... -- -- 150,000
Deposits and payments for station
purchases.......................... (1,000,000) (21,164,000) (59,085,000)
----------- ------------ ------------
Net cash flows from investing
activities................... (1,252,000) (23,199,000) (61,171,000)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt................... (2,408,000) (45,599,000) (485,000)
Proceeds from new debt.............. 51,000 72,750,000 49,350,000
Deferred debt financing costs....... -- (2,148,000) (1,038,000)
Financed equipment purchases........ -- 51,000 --
----------- ------------ ------------
Net cash flows from financing
activities................... (2,357,000) 25,054,000 47,827,000
----------- ------------ ------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.......................... (995,000) 6,792,000 (4,045,000)
CASH AND CASH EQUIVALENTS, beginning
of year.............................. 2,703,000 1,708,000 8,500,000
----------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of
year................................. $ 1,708,000 $ 8,500,000 $ 4,455,000
=========== ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for--
Interest.......................... $ 4,815,000 $ 4,413,000 $ 7,192,000
=========== ============ ============
Income taxes...................... $ 50,000 $ -- $ 338,000
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
Radio One, Inc. (a Delaware corporation referred to as Radio One) and its
subsidiaries, Radio One Licenses, Inc. and WYCB Acquisition Corporation
(Delaware corporations), Broadcast Holdings, Inc. (a Washington, D.C.
corporation), Bell Broadcasting Company (a Michigan corporation), Radio One of
Detroit, Inc., Allur-Detroit, Inc. and Allur Licenses, Inc. (Delaware
corporations) (collectively referred to as the Company) were organized to
acquire, operate and maintain radio broadcasting stations. The Company owns and
operates radio stations in Washington, D.C.; Baltimore, Maryland; Philadelphia,
Pennsylvania; Detroit, Michigan; and Kingsley, Michigan markets. The Company is
highly leveraged, which requires substantial semi-annual and other periodic
interest payments and may impair the Company's ability to obtain additional
working capital financing. The Company's operating results are significantly
affected by its share of the audience in markets where it has stations.
Radio One intends to offer Common A shares to the public in an initial
public offering (IPO). The proceeds of the IPO will be used to repay certain
outstanding debt, to finance pending and future acquisitions and for other
general corporate purposes. Concurrent with the IPO, Radio One intends to issue
$50,000,000 of Series C Preferred Stock and use the proceeds to redeem all of
the existing Senior Cumulative Redeemable Preferred Stock, to retire debt or to
finance pending and future acquisitions.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Radio One, Inc. and its wholly owned subsidiaries. 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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Acquisitions
On December 28, 1998, Radio One purchased all of the outstanding stock of
Allur-Detroit, Inc. (Allur), which owned one radio station in Detroit,
Michigan, for approximately $26.5 million. Radio One financed this acquisition
through a combination of cash and $24.0 million borrowed under the Company's
line of credit. The acquisition of Allur resulted in the recording of
approximately $31.7 million of intangible assets (including the recording of a
deferred tax liability for the difference in book and tax basis in the assets
acquired from the Allur purchase price being in excess of the net book value of
Allur).
On June 30, 1998, Radio One purchased all of the outstanding stock of Bell
Broadcasting Company (Bell), which owned three radio stations in Michigan, for
approximately $34.2 million. Radio One financed this acquisition through a
combination of cash and approximately $25.4 million borrowed under the
Company's line of credit. The acquisition of Bell resulted in the recording of
approximately $42.5 million of intangible assets (including the recording of a
deferred tax liability for the difference in book and tax basis in the assets
acquired from the Bell purchase price being in excess of the net book value of
Bell).
On March 16, 1998, WYCB Acquisition Corporation, an unrestricted subsidiary
of Radio One, acquired all the stock of Broadcast Holdings, Inc. for
$3,750,000. The acquisition was financed with a promissory note for $3,750,000
at 13%, due 2001, which pays quarterly cash interest payments at an annual rate
of 10% through 2001, with the remaining interest being added to the principal.
F-7
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
On February 8, 1997, under a local marketing agreement with the former
owners of WDRE-FM licensed to Jenkintown, Pennsylvania, Radio One began to
provide programming to and selling advertising for WDRE-FM. On May 19, 1997,
Radio One acquired the broadcast assets of WDRE-FM for approximately
$16,000,000. In connection with the purchase, Radio One entered into a three-
year noncompete agreement totaling $4,000,000 with the former owners. Radio One
financed this purchase with a portion of the proceeds from the issuance of
approximately $85,500,000 of 12% Senior Subordinated Notes due 2004. Following
this acquisition, Radio One converted the call letters of the radio station
from WDRE-FM to WPHI-FM.
The unaudited pro forma summary consolidated results of operations for the
years ended December 31, 1996, 1997 and 1998, assuming the acquisitions of
WPHI-FM, WYCB-AM, Bell Broadcasting and Allur-Detroit had occurred in the
beginning of the fiscal years, are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net broadcast revenue............. $33,021,000 $39,475,000 $50,988,000
Operating expenses, excluding
depreciation and amortization.... 23,650,000 27,077,000 31,435,000
Depreciation and amortization..... 12,742,000 12,165,000 12,115,000
Interest expense.................. 14,301,000 14,295,000 15,114,000
Other (expense) income, net....... 16,000 666,000 322,000
(Benefit) provision for income
taxes............................ (7,979,000) (6,360,000) (4,064,000)
Extraordinary loss................ -- 1,985,000 --
----------- ----------- -----------
Net loss........................ $(9,677,000) $(9,021,000) $(3,290,000)
=========== =========== ===========
</TABLE>
On November 23, 1998, Radio One signed an agreement to purchase the assets
of a radio station located in the St. Louis area, for approximately $13.6
million. Radio One made a deposit of approximately $700,000 towards the
purchase price. This deposit is included in other assets in the accompanying
consolidated balance sheet as of December 31, 1998.
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.
F-8
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
Property and Equipment
Property and equipment are recorded at 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, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
Period of
1997 1998 Depreciation
---------- ----------- -------------
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT:
Land................................. $ 117,000 $ 590,000 --
Building and improvements............ 148,000 248,000 31 years
Transmitter towers................... 2,146,000 2,282,000 7 or 15 years
Equipment............................ 3,651,000 5,609,000 5 to 7 years
Leasehold improvements............... 1,757,000 2,577,000 Life of Lease
---------- -----------
7,819,000 11,306,000
Less: Accumulated depreciation....... 3,387,000 4,589,000
---------- -----------
Property and equipment, net........ $4,432,000 $ 6,717,000
========== ===========
</TABLE>
Depreciation expenses for the fiscal years ended December 31, 1996, 1997 and
1998, were $706,000, $746,000 and $1,202,000, respectively.
Revenue Recognition
In accordance with industry practice, revenue for broadcast advertising is
recognized when the commercial is broadcast.
Barter Arrangements
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 revenue. The deferred barter costs are expensed or capitalized as they
are used, consumed or received. Deferred barter revenue is recognized as the
related advertising is aired.
Financial Instruments
Financial instruments as of December 31, 1997 and 1998, consist of cash and
cash equivalents, trade accounts receivable, accounts payable, accrued
expenses, long-term debt and preferred stock, all of which the carrying amounts
approximate fair value except for the Senior Subordinated Notes as of December
31, 1998, which have a fair value of approximately $84.5 million, as compared
to a carrying value of $78.5 million. The Company has estimated the fair value
of the debt, based on its estimate of what rate it could have issued that debt
as of December 31, 1998.
Comprehensive Income
The Company has adopted SFAS, No. 130, "Reporting Comprehensive Income" and
has determined that the Company does not have any comprehensive adjustments
income for the periods presented.
F-9
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
Segment Reporting
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" as of December 31, 1998, and has determined
that the Company has only one segment, radio broadcasting. The Company came to
this conclusion because the Company has one product or service, has the same
type of customer and operating strategy in each market, operates in one
regulatory environment, has only one management group that manages the entire
Company and provides information on the Company's results as one segment to the
key decision-maker to make decisions. All of the Company's revenue is derived
from the eastern half of the United States.
Earnings Available for Common Stockholders
The Company has certain senior cumulative redeemable preferred stock
outstanding which pays dividends at 15% per annum (see Note 3). The Company
accretes dividends on this preferred stock, which is payable when the preferred
stock is redeemed. The earnings available for common stockholders for the years
ended December 31, 1997 and 1998, is the net loss or income for each of the
years, less the accreted dividend of $2,037,000 and $3,716,000 during 1997 and
1998, respectively on the preferred stock.
Earnings Per Share
Earnings per share are based on the weighted average number of common and
diluted common equivalent shares for stock options and warrants outstanding
during the period the calculation is made, divided into the earnings available
for common stockholders. Diluted common equivalent shares consist of shares
issuable upon the exercise of stock options and warrants, using the treasury
stock method at the estimated IPO price of $ per share. All warrants
outstanding to acquire common stock as of December 31, 1996, 1997 and 1998,
will be exercised prior to the IPO and have been reflected in the calculation
of earnings per share as if the stock granted from the exercise was outstanding
for all periods presented. The Company also issued stock to an employee
subsequent to year-end at a price below market value. The stock issued has been
reflected in the earnings per share calculation as if it was outstanding for
all periods presented (see Note 8). The weighted average shares outstanding is
calculated as follows:
<TABLE>
<CAPTION>
December 31,
-----------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Common stock outstanding.................................
Common stock issued from exercise of warrants............
Stock issued subsequent to year end......................
----- ----- -----
Weighted average share outstanding for both basis and
diluted earnings per share..............................
===== ===== =====
</TABLE>
The Company effected a for one stock split, effective , 1999,
in conjunction with the planned IPO. All share data included in the
accompanying consolidated financial statements and notes thereto are as if the
stock split had occurred prior to the periods presented.
Also, effective , 1999, the Company converted certain Class A
Common Stock held by the principal stockholders to Class B Common Stock which
will have ten votes per share, as compared to Class A Common Stock which has
one vote per share, and certain of their Class A Common Stock to Class C Common
Stock. Class C Common Stock will have no voting rights except as required by
Delaware law.
F-10
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
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, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
Period of
1997 1998 Amortization
----------- ------------ ------------
<S> <C> <C> <C>
FCC broadcast license................ $56,179,000 $103,792,000 7-15 Years
Goodwill............................. 7,609,000 39,272,000 15 Years
Debt financing....................... 2,147,000 3,186,000 Life of Debt
Favorable transmitter site and other
intangibles......................... 1,922,000 1,924,000 6-17 Years
Noncompete agreement................. 4,900,000 4,000,000 3 Years
----------- ------------
Total.............................. 72,757,000 152,174,000
Less: Accumulated amortization..... 17,815,000 24,535,000
----------- ------------
Net intangible assets.............. $54,942,000 $127,639,000
=========== ============
</TABLE>
Amortization expense for the fiscal years ended December 31, 1996, 1997 and
1998, was $3,556,000, $5,082,000 and $7,243,000, respectively. The amortization
of the deferred financing cost was charged to interest expense.
3. DEBT AND SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK:
As of December 31, 1997 and 1998, the Company's outstanding debt is as
follows:
<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
Senior subordinated notes (net of $10,640,000 and
$7,020,000 unamortized discounts, respectively)... $74,838,000 $ 78,458,000
Line of credit..................................... -- 49,350,000
WYCB note payable and deferred interest............ -- 3,841,000
Other notes payable................................ 35,000 23,000
Capital lease obligations.......................... 81,000 67,000
----------- ------------
Total, noncurrent................................ $74,954,000 $131,739,000
=========== ============
</TABLE>
Senior Subordinated Notes
To finance the WPHI-FM acquisition (as discussed in Note 1) and to refinance
certain other debt, Radio One issued approximately $85,500,000 of 12% Senior
Subordinated Notes due 2004. The notes were sold at a discount, with the net
proceeds to Radio One of approximately $72,750,000. The notes pay cash interest
at 7% per annum through May 15, 2000, and at 12% thereafter. In connection with
this debt offering, Radio One retired approximately $45,600,000 of debt
outstanding under a NationsBank credit agreement with the proceeds from the
offering. Radio One also exchanged approximately $20,900,000 of 15% Senior
Cumulative Redeemable Preferred Stock which must be redeemed by May 2005, for
an equal amount of Radio One's then outstanding subordinated notes and accrued
interest.
The 12% Notes due 2004 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 in the 12% Notes due 2004, 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 12% Notes due 2004 with the net proceeds of one or more
Public Equity Offerings at 112% of the Accreted Value thereof, together with
accrued and unpaid interest, if any, to the date of redemption, as long as at
least approximately $64.1 million of the aggregate principal amount of the 12%
Notes due 2004 remains outstanding after each
F-11
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
such redemption. Upon a Change of Control (as defined in the Indenture), the
Company must commence an offer to repurchase the 12% Notes due 2004 at 101% of
the Accreted Value thereof, plus accrued and unpaid interest, if any, to the
date of repurchase.
Lines of Credit
To finance the Bell Broadcasting and Allur-Detroit Acquisitions during 1998,
Radio One borrowed $49,350,000 from Credit Suisse First Boston, New York
Branch, and other financial institutions which is to mature on December 31,
2003. This credit agreement bears interest at the Eurodollar rate plus an
applicable margin. The average interest rate for the year ended December 31,
1998, was 7.58%. This credit agreement is secured by the property of the
Company (other than Unrestricted Subsidiaries), and interest and proceeds of
real estate and Key Man life insurance policies. During 1998, the month-end
weighted average and the highest month-end balances were $28,779,000 and
$49,350,000, respectively.
As of December 31, 1997, Radio One had a $7,500,000 outstanding line of
credit with NationBank. The interest rate was a base rate plus 1.375%. Radio
One's collateral for this line of credit consisted of liens and security
interest in all common and voting securities convertible or exchangeable into
common stock of the Company and substantially all of its assets (other than
WYCB Acquisition). This line of credit was not drawn on as of December 31,
1997. NationsBank was a participating financial institution in the line of
credit above, and this line of credit agreement was terminated when the Company
entered into the line of credit agreement with Credit Suisse First Boston and
one other financial institution, as discussed above.
During 1995, through a revolving credit agreement (the NationsBank Credit
Agreement) with NationsBank of Texas, N.A. and the other lenders who were
parties, Radio One borrowed $53,000,000 which was to mature on March 31, 2002.
The NationsBank Credit Agreement was refinanced on May 19, 1997, as part of the
Senior Subordinated Notes financing discussed above. The NationsBank Credit
Agreement bore interest at the LIBOR 30-day rate, plus an applicable margin.
The average interest rate for the years ending December 31, 1996 and 1997, was
8.25% and 9.28%, respectively. The credit agreement was secured by all property
of the Company (other than unrestricted subsidiaries) and interest and proceeds
of real estate and Key Man life insurance policies.
Senior Cumulative Redeemable Preferred Stock
On May 19, 1997, concurrent with the debt issuance, all of the holders of
Radio One Subordinated Promissory Notes converted all of their existing
subordinated notes consisting of approximately $17,000,000, together with any
and all accrued interest thereon of approximately $3,900,000 and outstanding
warrants, for shares of Senior Cumulative Redeemable Preferred Stock, which
must be redeemed in May 2005, and stock warrants to purchase 147.04 shares of
common stock. The Senior Cumulative Redeemable Preferred Stock can be redeemed
at 100% of its liquidation value, which is the principal and accreted
dividends. The dividends on each share accrues on a daily basis at a rate of
15% per annum. Preferred stock dividends of approximately $2,037,000 and
$3,716,000 were accrued during the years ended December 31, 1997 and 1998,
respectively. If Radio One does not redeem all of the issued and outstanding
preferred shares on the mandatory redemption date or upon the occurrence of an
event of noncompliance, the holders may elect to have the Dividend Rate
increase to 18% per annum. In the event Radio One does not meet any required
performance target relating exclusively to the operation of WPHI-FM, the
Dividend Rate for each preferred share shall be increased to 17% per annum.
Other Notes Payable
During 1996, Radio One entered into two notes totaling $51,000 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.
F-12
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
Refinancing of Debt
During 1997, Radio One retired $45,600,000 of outstanding debt. Associated
with the retirement of the debt, Radio One incurred certain early prepayment
penalties and legal fees, and had to write-off certain deferred financing costs
associated with the debt retired. These costs amounted to $1,985,000 and were
recorded as an extraordinary item in the accompanying statements of operations.
4. COMMITMENTS AND CONTINGENCIES:
Leases
Radio One has various operating leases for office space, studio space,
broadcast towers and transmitter facilities which expire on various dates
between May 1999 through October 15, 2003. One of these leases is for office
and studio space in Baltimore, Maryland, and is with a partnership in which two
of the partners are stockholders of the Company (see Note 6).
The following is a schedule of the future minimum rental payments required
under the operating leases that have an initial or remaining noncancelable
lease term in excess of one year as of December 31, 1998.
<TABLE>
<CAPTION>
Year
----
<S> <C>
1999........................................................ $1,007,000
2000........................................................ 1,055,000
2001........................................................ 1,075,000
2002........................................................ 838,000
2003........................................................ 830,000
Thereafter.................................................. 4,578,000
</TABLE>
Total rent expense for the years ended December 31, 1996, 1997 and 1998, was
$777,000, $809,000 and $888,000, respectively.
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 October 1, 2003, to August 1, 2006.
Although the Company may apply to renew its FCC licenses, third parties may
challenge the Company's renewal applications. The Company is not aware of any
facts or circumstances that would prevent the Company from having its current
licenses 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, the outcome of these claims will not have
a material adverse effect on the Company's financial position or results of
operations.
5. INCOME TAXES:
Effective January 1, 1996, Radio One elected to be treated as 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
Radio One's income, deductions, losses and credits. Effective May 19, 1997, the
Company's S Corporation status was terminated.
F-13
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
In connection with the conversion to a C corporation, in accordance with SEC
Staff Accounting Bulletin 4.B, Radio One transferred the amount of the
undistributed losses up to the amount of additional paid-in capital at the date
of conversion to additional paid-in capital.
The Company accounts 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.
During 1998, the Company acquired the stock of three companies. Associated
with these stock purchases, the Company allocated the purchase price to the
related assets acquired, with the excess purchase price allocated to goodwill.
In a stock purchase, for income tax purposes, the underlying assets of the
acquired companies retain their historical tax basis. Accordingly, the Company
recorded a deferred tax liability of approximately $16,863,000 related to the
difference between the book and tax basis for all of the assets acquired
(excluding goodwill). The result of recording this deferred tax liability is
reflected as additional goodwill of $16,863,000 related to these acquisitions.
A reconciliation of the statutory federal income taxes to the recorded
income tax provision for the years ended December 31, 1996, 1997 and 1998, is
as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Statutory tax (@ 35% rate).......... $(1,263,000) $(1,730,000) $ (257,000)
Effect of state taxes, net of
federal............................ (217,000) (245,000) (29,000)
Establishment of S corporation loss
to its stockholders................ 1,480,000 984,000 --
Effect of net deferred tax asset in
conversion to
C corporation...................... -- (1,067,000) --
Nondeductible goodwill.............. -- -- 769,000
Valuation reserve................... -- 2,058,000 (2,058,000)
----------- ----------- -----------
Benefit for income taxes.......... $ -- $ -- $(1,575,000)
=========== =========== ===========
</TABLE>
The components of the provision for income taxes for the years ended
December 31, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Current.......................................... $ -- $ 463,000
Deferred......................................... (991,000) 20,000
Establishment of net deferred tax asset in
conversion to C corporation..................... (1,067,000) --
Valuation reserve................................ 2,058,000 (2,058,000)
----------- -----------
Benefit for income taxes....................... $ -- $(1,575,000)
=========== ===========
</TABLE>
F-14
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
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, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
Deferred tax assets--
FCC and other intangibles amortization.......... $ 246,000 $ 1,152,000
Reserve for bad debts........................... 353,000 473,000
NOL carryforward................................ 1,746,000 400,000
Accruals........................................ -- 268,000
Barter activity................................. -- 85,000
Interest expense................................ -- 479,000
Other........................................... 2,000 20,000
----------- ------------
Total deferred tax assets..................... 2,347,000 2,877,000
----------- ------------
Deferred tax liabilities--
FCC license..................................... -- (16,525,000)
Depreciation.................................... (279,000) (539,000)
Other........................................... (10,000) (238,000)
----------- ------------
Total deferred tax liabilities................ (289,000) (17,302,000)
----------- ------------
Net deferred tax asset (liability)................ 2,058,000 (14,425,000)
Less: Valuation reserve........................... (2,058,000) --
----------- ------------
Net deferred taxes included in the accompanying
consolidated balance sheets...................... $ -- $(14,425,000)
=========== ============
</TABLE>
A 100% valuation reserve was applied against the net deferred tax asset as
of December 31, 1997, as its realization was not more likely than not to be
realized. During the year ended December 31, 1998, this valuation allowance was
reversed as the deferred tax assets were likely to be realized.
During 1998, the Company utilized its entire NOL carryforward, but acquired
an approximate $1,200,000 net operating loss from the purchase of Allur-
Detroit, Inc. This net operating loss acquired can only be utilized as Allur-
Detroit, Inc. has taxable income.
6. RELATED PARTY TRANSACTIONS:
Radio One leases office space for $8,000 per month from a partnership in
which two of the partners are stockholders of Radio One (Note 4). Total rent
paid to the stockholders for fiscal years 1996, 1997 and 1998, was $96,000,
$96,000 and $96,000, respectively. Radio One also has a net receivable as of
December 31, 1997 and 1998, of approximately $68,000 and $4,000, respectively,
due from Radio One of Atlanta, Inc. (ROA), of which an executive officer and
stockholder of Radio One is a major stockholder of ROA. Effective January 1,
1998 Radio One charged ROA a management fee of $300,000 per year, and prior to
January 1, 1998, the fee was $100,000 per year.
The stockholders of Radio One of Atlanta, Inc. have agreed in principle to
sell their shares of Radio One of Atlanta, Inc. to the Company in exchange for
shares of the Company's Common Stock.
As of December 31, 1998, the Company has a loan outstanding of $380,000, and
accrued interest of $7,000 from an officer. The loan is due May 2003 and bears
interest at 5.6%.
F-15
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
7. PROFIT SHARING:
Radio One has a 401(k) profit sharing plan for its employees. Radio One can
contribute to the plan at the discretion of its Board of Directors. Radio One
made no contribution to the plan during fiscal year 1996, 1997 or 1998.
8. SUBSEQUENT EVENTS:
In January 1999, the Company granted shares of common stock of the
Company to an officer of the Company. These shares will vest over three years.
The Company recognized compensation expense of approximately $200,000 during
1999, which is the estimated value of the stock on the grant date.
On February 26, 1999, Radio One signed an asset purchase agreement for the
broadcasting assets of two radio stations located in Richmond, Virginia, for
approximately $12,000,000. The Company expects to complete this transaction
during the second quarter of 1999.
On February 10, 1999, Radio One signed an agreement to purchase the assets
of a radio station located in the Richmond, Virginia, area for approximately
$4,600,000. Radio One made a deposit of $200,000 related to this purchase.
In February 1999, Radio One signed a letter of intent to purchase the
broadcasting assets of two radio stations located in Cleveland, Ohio, for
approximately $20,000,000. The Company expects to complete this transaction
during the first half of 1999.
In March 1999, Radio One signed a letter of intent to purchase the
broadcasting assets of four radio stations located in Richmond, Virginia for
approximately $34,000,000. The Company expects to complete this transaction
during the first half of 1999.
In March 1999, the Company adopted a stock option and grant plan which
provides for the issuance of qualified and nonqualified stock options and
grants to full-time key employees. The Plan allows the issuance of common stock
at the discretion of the Company's Board of Directors. There are no options
currently outstanding under this plan.
During 1999, the Company made a $1,000,000 investment in PNE Media Holdings,
LLC, a privately-held outdoor advertising company.
The Company has also signed a nonbinding letter of intent to acquire another
radio station.
F-16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Radio One of Atlanta, Inc.:
We have audited the accompanying consolidated balance sheets of Radio One of
Atlanta, Inc. (a Delaware corporation) and subsidiary as of December 31, 1997
and 1998, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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
of Atlanta, Inc. and subsidiary as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
February 19, 1999
F-17
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 1,117,000 $ 1,711,000
Trade accounts receivable, net of allowance for
doubtful accounts of $112,000 and $312,000........ 1,259,000 2,479,000
Prepaid expenses and other......................... 59,000 82,000
Due from Mableton.................................. 77,000 120,000
Income tax receivable.............................. -- 164,000
----------- -----------
Total current assets............................. 2,512,000 4,556,000
PROPERTY AND EQUIPMENT, net.......................... 585,000 1,758,000
INTANGIBLE ASSETS, net............................... 10,994,000 10,867,000
OTHER ASSETS......................................... 112,000 40,000
DEFERRED TAXES....................................... -- 60,000
----------- -----------
Total assets..................................... $14,203,000 $17,281,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................... $ 108,000 $ 276,000
Accrued expenses................................... 782,000 909,000
Current portion of long-term debt.................. 568,000 327,000
Due to affiliate................................... 68,000 4,000
----------- -----------
Total current liabilities........................ 1,526,000 1,516,000
LONG-TERM DEBT AND DEFERRED INTEREST, net of current
portion............................................. 13,398,000 15,525,000
----------- -----------
Total liabilities................................ 14,924,000 17,041,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 14,670 shares
authorized, 10,000 shares issued and outstanding.. 10,000 10,000
Additional paid-in capital......................... 978,000 1,390,000
Accumulated deficit................................ (1,709,000) (1,160,000)
----------- -----------
Total stockholders' (deficit) equity............. (721,000) 240,000
----------- -----------
Total liabilities and stockholders' equity....... $14,203,000 $17,281,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-18
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
REVENUE:
Broadcast revenue, including barter
revenue of $112,000, $86,000 and
$51,000, respectively.................. $4,257,000 $6,525,000 $11,577,000
Less: Agency commissions................ 497,000 794,000 1,437,000
---------- ---------- -----------
Net broadcast revenue................. 3,760,000 5,731,000 10,140,000
---------- ---------- -----------
OPERATING EXPENSES:
Program and technical................... 1,017,000 1,432,000 1,418,000
Selling, general and administrative..... 1,426,000 1,994,000 4,111,000
Corporate expenses...................... 241,000 637,000 667,000
Depreciation and amortization........... 429,000 577,000 896,000
---------- ---------- -----------
Total operating expenses.............. 3,113,000 4,640,000 7,092,000
---------- ---------- -----------
Operating income...................... 647,000 1,091,000 3,048,000
INTEREST EXPENSE, including amortization
of deferred financing costs.............. 839,000 1,663,000 2,007,000
OTHER EXPENSES, net....................... -- 111,000 (7,000)
---------- ---------- -----------
(Loss) income before provision for
income taxes......................... (192,000) (683,000) 1,048,000
PROVISION FOR INCOME TAXES................ -- -- 499,000
---------- ---------- -----------
Net (loss) income..................... $ (192,000) $ (683,000) $ 549,000
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-19
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
Total
Additional Stockholders'
Common Paid-In Accumulated (Deficit)
Stock Capital Deficit Equity
------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995....... $ -- $ -- $ (834,000) $ (834,000)
Net loss....................... -- -- (192,000) (192,000)
------- ---------- ----------- -----------
BALANCE, December 31, 1996....... -- -- (1,026,000) (1,026,000)
Net loss....................... -- -- (683,000) (683,000)
Issuance of stock options below
market........................ -- 264,000 -- 264,000
Tax benefit of issuance of
stock options below market.... -- 106,000 -- 106,000
Allocation for stock issued in
conjunction with debt......... -- 608,000 -- 608,000
Issuance of common stock....... 10,000 -- -- 10,000
------- ---------- ----------- -----------
BALANCE, December 31, 1997....... 10,000 978,000 (1,709,000) (721,000)
Net income..................... -- -- 549,000 549,000
Issuance of stock options below
market........................ -- 294,000 -- 294,000
Tax benefit of issuance of
stock options below market.... -- 118,000 -- 118,000
------- ---------- ----------- -----------
BALANCE, December 31, 1998....... $10,000 $1,390,000 $(1,160,000) $ 240,000
======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-20
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................... $(192,000) $ (683,000) $ 549,000
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization........... 429,000 577,000 896,000
Amortization of debt financing costs and
unamortized discount................... 399,000 172,000 630,000
Compensation expense from stock options
granted................................ -- 264,000 294,000
Loss on disposals....................... -- 157,000 --
Deferred tax liability.................. -- -- 58,000
Effect of change in operating assets and
liabilities--
Trade accounts receivable............. (774,000) (243,000) (1,220,000)
Prepaid expenses and other............ (16,000) (4,000) (23,000)
Due from Mableton..................... -- (77,000) (43,000)
Income tax receivable................. -- -- (164,000)
Other assets.......................... -- (112,000) 72,000
Accounts payable...................... (22,000) 97,000 168,000
Accrued expenses...................... 423,000 386,000 127,000
Due to affiliate...................... (19,000) (10,000) (64,000)
--------- ---------- ----------
Net cash flows from operating
activities......................... 228,000 524,000 1,280,000
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........ (235,000) (385,000) (1,242,000)
Acquisition of Dogwood.................... -- (6,792,000) --
Acquisition of intangibles................ -- -- (678,000)
--------- ---------- ----------
Net cash flows from investing
activities......................... (235,000) (7,177,000) (1,920,000)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance............... -- 7,577,000 2,000,000
Repayment of debt......................... -- -- (744,000)
Deferred debt financing costs............. -- (60,000) (22,000)
Issuance of common stock.................. -- 10,000 --
--------- ---------- ----------
Net cash flows from financing
activities......................... -- 7,527,000 1,234,000
--------- ---------- ----------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS........................... (7,000) 874,000 594,000
CASH AND CASH EQUIVALENTS, beginning of
period..................................... 250,000 243,000 1,117,000
--------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period.... $ 243,000 $1,117,000 $1,711,000
========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.................... $ 441,000 $1,305,000 $1,616,000
========= ========== ==========
Income taxes paid......................... $ -- $ -- $ 499,000
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-21
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
Radio One of Atlanta, Inc. (the Company) owns and operates a radio station
serving the Atlanta, Georgia, market, and its subsidiary, Dogwood
Communications, Inc. (Dogwood) owns a radio station serving the Atlanta,
Georgia market. The Company started operations in June, 1995. The Company is
highly leveraged, which requires substantial interest payments and may impair
the Company's ability to obtain additional financing. The Company's operating
results are significantly affected by its market share in the Atlanta, Georgia
market.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiary, Dogwood (see Note 2). 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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
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 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, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
December 31,
------------------- Period of
1997 1998 Depreciation
-------- ---------- -------------
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT:
Transmitter towers....................... $335,000 $ 493,000 7 Years
Equipment................................ 364,000 967,000 5 to 7 Years
Leasehold improvements................... 14,000 14,000 Life of Lease
Furniture and fixtures................... -- 185,000 5 to 7 Years
Construction in progress................. -- 296,000
-------- ----------
713,000 1,955,000
Less: Accumulated depreciation........... 128,000 197,000
-------- ----------
Property and equipment, net............ $585,000 $1,758,000
======== ==========
</TABLE>
Depreciation expense for the fiscal years ended December 31, 1996, 1997 and
1998, was $38,000, $64,000 and $69,000, respectively.
F-22
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Organizational Costs
As of December 31, 1998, Dogwood had $24,000 of unamortized organization
costs. In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-5 (the "SOP") regarding financial reporting on the costs of start-up
activities. Under the SOP, organizational costs are considered start-up costs
and, commencing with fiscal years beginning after December 15, 1998, entities
are required to expense such costs as they are incurred. The Company decided to
expense the unamortized organizational costs as of December 31, 1998.
Revenue Recognition
In accordance with industry practice, revenue for commercial broadcasting
advertisements 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.
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 revenue. The deferred barter costs are expensed or capitalized as they
are used or received. Deferred barter revenue is recognized as the related
advertising is aired.
Financial Instruments
Financial instruments as of December 31, 1997 and 1998, consist of cash and
cash equivalents, trade accounts receivable, accounts payable, accrued
expenses, and long-term debt, all of which the carrying amounts approximate
fair value.
Reclassifications
Certain reclassifications have been made to the 1997 financial statements in
order to conform with the 1998 presentation.
Comprehensive Income
The Company has adopted SFAS, No. 130, "Reporting Comprehensive Income." The
Company does not have any comprehensive income adjustments.
Segment Reporting
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" as of December 31, 1998, and has determined
the Company has only one segment, radio broadcasting.
F-23
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. DOGWOOD COMMUNICATIONS, INC.:
In April 1997, the Company's founder and stockholder transferred his 33 1/3%
ownership interest in Dogwood to the Company in return for the Company assuming
responsibility for certain liabilities of Dogwood. Concurrent with the transfer
of ownership, the Company contributed approximately $6 million to Dogwood to
retire Dogwood's outstanding debt. This stockholder also assigned to the
Company his option to purchase the portion of Dogwood owned by others. The
Company exercised the option to purchase up to 80% of Dogwood during 1998, for
$100,000. The Company intends to exercise its option to purchase the remaining
20% for $3.5 million during 1999.
The Company owns 33 1/3% of Dogwood, it has the ability to acquire an
additional 46 2/3% for $100,000, it has 45 1/2% of the voting control of
Dogwood, and it programs the station owned by Dogwood through a local marketing
agreement (LMA). During the years ended December 31, 1997 and 1998, Dogwood's
primary activity was an LMA of the station to the Company (the station went on
the air on December 16, 1997). As the Company controls Dogwood's operations,
Dogwood has been consolidated with the Company in the accompanying financial
statements.
3. 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, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------- Period of
1997 1998 Amortization
----------- ----------- ------------
<S> <C> <C> <C>
Debt financing costs.................... $ 313,000 $ 335,000 Life of debt
FCC broadcast license and other......... 11,602,000 12,280,000 15 Years
Organizational costs.................... 203,000 -- 5 Years
----------- -----------
Total................................. 12,118,000 12,615,000
Less: Accumulated amortization.......... 1,124,000 1,748,000
----------- -----------
Net intangible assets................. $10,994,000 $10,867,000
=========== ===========
</TABLE>
Amortization expense for the years ended December 31, 1996, 1997 and 1998,
was $391,000, $513,000 and $827,000, respectively. The amortization of the debt
financing costs was charged to interest expense.
F-24
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. LONG-TERM DEBT:
The Company is obligated under a long-term senior note and various
subordinated notes payable as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
----------- -----------
<S> <C> <C>
Allied Investment Corporation and its affiliates
(senior)........................................... $10,000,000 $12,000,000
Alta Subordinated Debt Partners III, L.P. (net of
$508,000 and $360,000 of unamortized discount
allocated to stock issuance)....................... 1,069,000 1,217,000
Syncom Capital Corporation (subordinate)............ 1,000,000 1,000,000
Shareholder (subordinate)........................... 1,000,000 960,000
Design Media, Inc. (subordinate).................... 235,000 --
Accrued interest on senior and subordinated notes... 662,000 675,000
----------- -----------
Total............................................. 13,966,000 15,852,000
Less: Current portion of long-term debt............. 568,000 327,000
----------- -----------
Total............................................. $13,398,000 $15,525,000
=========== ===========
</TABLE>
Allied Investment Corporation Debt
The start-up of the Company was partially financed through a $4,000,000
long-term debt agreement with Allied Investment Corporation and certain of its
affiliates (collectively Allied). The loan bore interest at 14%. Terms of the
note required only partial interest payments until January 1, 1997.
In April 1997, the Company renegotiated the prior Allied debt. In connection
with that renegotiation, Allied amended and restated the prior Allied debt to
provide the Company and Dogwood (see Note 2) to become co-borrowers with
respect to the $4,000,000 debt and to jointly borrow an additional $6,000,000.
In connection with this amended and restated loan, new senior secured
debentures totaling $10,000,000 were issued jointly by the Company and Dogwood,
whereby the Company will carry the debt on its books and Dogwood will act as
the guarantor. The agreements have an interest rate that ranges from 12.5% to
13.5% and matures on March 1, 2001. Interest only payments are due monthly
until May 1, 1999. Subsequent to that date, monthly principal and interest
payments are due. Also, as part of the renegotiation, the Company signed notes
for interest that had accrued but was unpaid as of December 31, 1996, on the
prior Allied debt.
In September 1998, the Company borrowed an additional $2,000,000 from
Allied. This debt has an interest rate ranging from 12.5% to 13.5%, and
principal and interest payments are due monthly until the debt matures on March
1, 2001.
In April 1997, the Company also amended and restated its Security Agreement
with Allied which grants them a security interest in all of the Company's
collateral, which includes all tangible and intangible property, all the issued
and outstanding stock of the Company, and the Company's rights and interest in
Dogwood.
The prior Allied debt was issued with detachable warrants that granted
Allied the right to acquire an equity interest in the Company. The warrants
have an aggregate exercise price of $100 per share. During 1997, the warrants
were exercised and the Company issued Allied 1,430 shares of common stock.
Subordinated Notes
In April 1997, the Company also entered into a $1,577,000 Senior Secured
Subordinated Promissory Note with Alta Subordinated Debt Partners III, L.P. The
note has an interest rate of 11%, and the unpaid principal
F-25
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and accrued interest on the note is due on April 1, 2001. The Company also
issued 1,500 shares of common stock in connection with the note. The Company
allocated the proceeds between debt and additional paid-in capital, based on
the pro-rata value of the debt and the common stock. As such, $969,000 was
assigned to the debt and $608,000 was assigned to the value of the common
stock. The value assigned to the common stock was recorded as an increase in
additional paid-in capital. The value assigned to the debt was less than the
face value, and such discount will be amortized over the life of the related
debt using the effective interest method.
The Syndicated Communications Venture Partners II, L.P. (Syncom) debt bears
an interest rate of 11% on the original principal balance of $1,000,000. In
April 1997, the Company amended the subordinated note with Syncom. Under the
new terms of the agreement, interest accrues and is added to the principal
balance, except that beginning with the period of June 20, 1998, the Company is
required to make $18,958 monthly payments. Unpaid principal and accrued
interest is due April 1, 2001.
During 1995, the Syncom note was issued with detachable stock warrants
allowing Syncom to purchase 2,400 shares of the Company for a purchase price of
$100. During 1997, the warrants were exercised and the Company issued Syncom
2,400 shares of common stock.
This note is also secured by a security agreement for the property and
equipment of the Company.
The Company has a note payable to its shareholder of $1,000,000, which bears
interest at 8%. Interest only payments were made monthly until July 1, 1998. At
that time, monthly principal and interest payments of $12,133 began. Unpaid
principal is due June 20, 2002.
The Design Media, Inc.'s note of $235,000 bore interest at 8%. Interest only
payments were made monthly until July 1, 1998. During 1998, the note was repaid
in full.
The aggregate maturities of debt as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Year Total
---- -----------
<S> <C>
1999........................................................... $ 327,000
2000........................................................... 1,620,000
2001........................................................... 13,175,000
2002........................................................... 730,000
-----------
Total........................................................ $15,852,000
===========
</TABLE>
5. LEASES:
The Company leases office space which expires in October 2004 and broadcast
towers which expire through December 2009.
The following is a schedule of the future minimum rental payments required
under the operating leases that have an initial or remaining noncancellable
lease term in excess of one year as of December 31, 1998:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1999.............................................................. $170,000
2000.............................................................. 163,000
2001.............................................................. 164,000
2002.............................................................. 170,000
2003.............................................................. 170,000
Thereafter........................................................ 259,000
</TABLE>
F-26
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Total rent expense for the years ending December 31, 1996, 1997 and 1998,
was $54,000, $57,000 and $93,000, respectively.
6. STOCK OPTION PLAN:
During 1997, the Company granted stock options to an officer of the Company
for up to 700 shares of the Company's common stock for $1.00 each. Of the 700
shares, 400 shares vested immediately and were exercised during 1997. The
officer was granted the remaining options after certain performance results
were achieved during 1998. These options granted in 1998 vested immediately. As
the options to acquire 400 shares and 300 shares granted and vested during 1997
and 1998, respectively, were significantly below their estimated fair market
value, the Company recognized compensation expense of $264,000 and $294,000
during 1997 and 1998, respectively. Compensation expense represented the
difference between the estimated fair market value of the stock and the
exercise price. The Company also recognized an income tax benefit of $106,000
and $118,000 during 1997 and 1998, respectively, related to the options, which
has been recorded as additional paid-in capital.
7. INCOME TAXES:
Effective March 31, 1997, the Company converted from an S corporation to a C
corporation. At the date of conversion, the Company had no additional paid-in
capital to convert to retained earnings.
The Company accounts 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.
A reconciliation of the statutory federal income taxes to the recorded
income tax provision for the years ended December 31, 1996, 1997 and 1998, is
as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- --------- --------
<S> <C> <C> <C>
Statutory tax (@ 35% rate)................... $(67,000) $(239,000) $367,000
Effect of state taxes, net of federal........ (9,000) (32,000) 42,000
Nondeductible amortization................... -- -- 154,000
Effect of losses while an S corporation...... 76,000 264,000 --
Establish benefit for deferred taxes at C
corporation
Conversion.................................. -- (57,000) --
Valuation reserve............................ -- 64,000 (64,000)
-------- --------- --------
Provision for income taxes................. $ -- $ -- $499,000
======== ========= ========
</TABLE>
The components of the provision for income taxes for the years ended
December 31, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Current................................................ $ -- $335,000
Deferred............................................... (64,000) 228,000
Valuation reserve...................................... 64,000 (64,000)
-------- --------
Provision for income taxes........................... $ -- $499,000
======== ========
</TABLE>
F-27
<PAGE>
RADIO ONE OF ATLANTA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets--
Reserve for bad debts................................ $ 44,000 $118,000
NOL carryforward..................................... 79,000 --
-------- --------
Total deferred tax assets.......................... 123,000 118,000
Deferred tax liabilities--
Depreciation and amortization........................ (59,000) (58,000)
-------- --------
Net deferred tax asset................................. 64,000 60,000
Less: Valuation reserve................................ (64,000) --
-------- --------
Net deferred taxes included in the accompanying
consolidated balance sheets........................... $ -- $ 60,000
======== ========
</TABLE>
A 100% valuation reserve was applied against the net deferred tax asset as
of December 31, 1997, as its realization was not more likely than not to be
realized. During 1998, this valuation allowance was reversed as the deferred
tax assets would likely be realized. During 1998, the Company utilized its
entire net operating loss carryforward.
8. RELATED PARTY TRANSACTIONS:
The Company is affiliated with Radio One, Inc., as a stockholder of the
Company is also a stockholder of Radio One, Inc. The Company has a due to
affiliate of $68,000 and $4,000 as of December 31, 1997 and 1998, respectively,
for expenses paid by Radio One, Inc. on behalf of the Company and for
administrative services. During the years ended December 31, 1996, 1997 and
1998, the Company incurred expenses of $100,000, $100,000 and $300,000,
respectively, for administrative services which Radio One, Inc. performed for
the Company.
The Company has $77,000 and $120,000 recorded as a receivable from Mableton
Investment Group (Mableton) as of December 31, 1997 and 1998, respectively.
These balances represent costs incurred by the Company for research and
feasibility studies on behalf of a new radio station to be owned by Mableton, a
company owned by a stockholder of the Company.
The stockholders of the Company have agreed in principle to sell their
shares of the Company to Radio One, Inc. in exchange for shares of Radio One,
Inc.'s Common Stock. A stockholder of the Company will receive a $1.2 million
fee related to this acquisition.
Subsequent to year end, the Company made a $271,000 unsecured loan to an
employee. The loan bears interest at 5.56% and is payable on demand.
9. PROFIT SHARING:
The Company's employees participate in a 401K profit sharing plan sponsored
by Radio One, Inc., an affiliate of the Company (see Note 8). The Company's
contribution is at the direction of its Board of Directors. The Company made no
contributions to the plan during fiscal years 1996, 1997 or 1998.
F-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Radio One, Inc.:
We have audited the accompanying balance sheet of Bell Broadcasting Company
(a Michigan Corporation) (the Company) as of December 31, 1997, and the related
statements of operations, changes in stockholders' equity and cash flows for
the years ended December 31, 1996 and 1997. 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 Bell Broadcasting Company
as of December 31, 1997, and the results of its operations and its cash flows
for the years ended December 31, 1996 and 1997, in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland,
August 28, 1998
F-29
<PAGE>
BELL BROADCASTING COMPANY
BALANCE SHEETS
As of December 31, 1997 and June 30, 1998
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................ $ 226,000 $ 186,000
Trade accounts receivable, net of allowance for
doubtful accounts of $28,000 and $69,000,
respectively....................................... 951,000 918,000
Current portion of notes receivable................. 13,000 14,000
Prepaid expenses and other.......................... 34,000 6,000
---------- ----------
Total current assets.............................. 1,224,000 1,124,000
PROPERTY AND EQUIPMENT, net........................... 859,000 1,139,000
NOTES RECEIVABLE, net of current portion.............. 491,000 184,000
OTHER ASSETS.......................................... 38,000 20,000
---------- ----------
Total assets...................................... $2,612,000 $2,467,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................... $ 251,000 $ 92,000
Accrued expenses.................................... 198,000 61,000
Current portion of long-term debt................... 149,000 --
---------- ----------
Total current liabilities......................... 598,000 153,000
LONG-TERM DEBT, net of current portion................ 592,000 --
---------- ----------
Total liabilities................................. 1,190,000 153,000
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock--Class A, $2.00 par value, 800 shares
authorized, issued and outstanding................. 2,000 2,000
Common stock--Class B, $2.00 par value, 24,000
shares authorized,
20,071 and 20,071 shares issued and outstanding,
respectively....................................... 40,000 40,000
Additional paid-in capital.......................... 198,000 1,308,000
Retained earnings................................... 1,182,000 964,000
---------- ----------
Total stockholders' equity........................ 1,422,000 2,314,000
---------- ----------
Total liabilities and stockholders' equity........ $2,612,000 $2,467,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-30
<PAGE>
BELL BROADCASTING COMPANY
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996 and 1997
and the Six Months Ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------ ------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUE:
Broadcast revenue, including
barter revenue of $121,000,
$151,000, $14,000 and
$73,000, respectively...... $ 3,917,000 $ 4,571,000 $1,916,000 $2,326,000
Less: Agency commissions.... 537,000 537,000 229,000 301,000
----------- ----------- ---------- ----------
Net broadcast revenue..... 3,380,000 4,034,000 1,687,000 2,025,000
----------- ----------- ---------- ----------
OPERATING EXPENSES:
Programming and technical... 1,154,000 1,335,000 723,000 675,000
Selling, general and
administrative............. 1,520,000 1,544,000 715,000 748,000
Corporate expenses.......... 849,000 816,000 301,000 663,000
Depreciation and
amortization............... 130,000 148,000 68,000 63,000
----------- ----------- ---------- ----------
Total operating expenses.. 3,653,000 3,843,000 1,807,000 2,149,000
----------- ----------- ---------- ----------
Operating (loss) income... (273,000) 191,000 (120,000) (124,000)
----------- ----------- ---------- ----------
INTEREST EXPENSE.............. 75,000 81,000 38,000 52,000
OTHER (INCOME) EXPENSE, net... (5,000) 54,000 59,000 28,000
----------- ----------- ---------- ----------
(Loss) income before
(benefit) provision for
income taxes............. (343,000) 56,000 (217,000) (204,000)
(BENEFIT) PROVISION FOR INCOME
TAXES........................ (78,000) 44,000 (164,000) 14,000
----------- ----------- ---------- ----------
Net (loss) income......... $ (265,000) $ 12,000 $ (53,000) $ (218,000)
=========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-31
<PAGE>
BELL BROADCASTING COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1996 and 1997
and the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Common Common Additional Total
Stock Stock Paid-In Retained Stockholders'
Class A Class B Capital Earnings Equity
------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996.. $2,000 $39,000 $ 98,000 $1,435,000 $1,574,000
Net loss................ -- -- -- (265,000) (265,000)
Stock options granted
below market........... -- -- 9,000 -- 9,000
Stock bonus
compensation........... -- -- 16,000 -- 16,000
Issuance of common
stock.................. -- -- 9,000 -- 9,000
------ ------- ---------- ---------- ----------
BALANCE, December 31,
1996..................... 2,000 39,000 132,000 1,170,000 1,343,000
Net income.............. -- -- -- 12,000 12,000
Stock options granted
below market........... -- -- 17,000 -- 17,000
Stock bonus
compensation........... -- 1,000 32,000 -- 33,000
Issuance of common
stock.................. -- -- 17,000 -- 17,000
------ ------- ---------- ---------- ----------
BALANCE, December 31,
1997..................... 2,000 40,000 198,000 1,182,000 1,422,000
Net loss................ -- -- -- (218,000) (218,000)
Capital contributed from
former owners.......... -- -- 672,000 -- 672,000
Capital contributed from
owners................. -- -- 438,000 -- 438,000
------ ------- ---------- ---------- ----------
BALANCE, June 30, 1998
(Unaudited).............. $2,000 $40,000 $1,308,000 $ 964,000 $2,314,000
====== ======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-32
<PAGE>
BELL BROADCASTING COMPANY
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 and 1997
and the Six Months Ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
December 31, June 30,
-------------------- -----------------------
1996 1997 1997 1998
--------- --------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) income.............. $(265,000) $ 12,000 $ (53,000) $(218,000)
Adjustments to reconcile net
(loss) income to net cash from
operating activities:
Depreciation and
amortization................ 130,000 148,000 68,000 63,000
Compensation expense related
to stock bonus plan and
stock granted below market
price....................... 25,000 50,000 -- --
Loss on disposal of assets... -- (8,000) (8,000) --
Effect of change in operating
assets and liabilities--
Trade accounts receivable.. 190,000 (156,000) (35,000) 33,000
Prepaid expenses and
other..................... (101,000) 119,000 19,000 19,000
Other assets............... (1,000) (17,000) -- 18,000
Accounts payable........... 56,000 (94,000) (108,000) (159,000)
Accrued expenses........... (125,000) 41,000 (68,000) (137,000)
--------- --------- --------- ---------
Net cash flows from
operating activities.... (91,000) 95,000 (185,000) (381,000)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of assets... -- 22,000 22,000 --
Principal payments received on
notes......................... -- 6,000 -- 306,000
Acquisition of property and
equipment..................... (140,000) (211,000) (109,000) (403,000)
--------- --------- --------- ---------
Net cash flows from
investing activities.... (140,000) (183,000) (87,000) (97,000)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from the issuance of
debt.......................... 739,000 220,000 103,000 438,000
Repayment of debt.............. (642,000) (211,000) -- (438,000)
Issuance of common stock....... 9,000 17,000 -- --
Contributed capital............ -- -- -- 438,000
--------- --------- --------- ---------
Net cash flows from
financing activities.... 106,000 26,000 103,000 438,000
--------- --------- --------- ---------
DECREASE IN CASH................. (125,000) (62,000) (169,000) (40,000)
CASH, beginning of period........ 413,000 288,000 288,000 226,000
--------- --------- --------- ---------
CASH, end of period.............. $ 288,000 $ 226,000 $ 119,000 $ 186,000
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid.................. $ 73,000 $ 81,000 $ 38,000 $ 55,000
========= ========= ========= =========
Income taxes paid.............. $ 117,000 $ -- $ -- $ 7,000
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE>
BELL BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
Bell Broadcasting Company (the Company), a Michigan corporation, is a radio
broadcaster, broadcasting on two stations, WCHB-AM and WDTJ-FM (formerly WCHB-
FM), both located in the Detroit metropolitan area. During 1996, the Federal
Communications Commission (FCC) approved the construction permit to increase
WCHB-AM's signal from 25 kilowatts to 50 kilowatts. In addition, in September
1997, the Canadian government approved WCHB-AM's proposal for a nighttime
increase to 15 kilowatts, and the FCC granted a construction permit for the
nighttime increase. The Company also owns one station in Kingsley, Michigan,
WJZZ-AM.
The financial statements for the six months ended June 30, 1997 and 1998,
are unaudited, but, in the opinion of management, such financial statements
have been presented on the same basis as the audited financial statements for
the year ended December 31, 1997, 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.
Financial Instruments
Financial instruments as of December 31, 1997, consist of cash, trade
accounts receivables, notes receivables, accounts payable, accrued expenses and
long-term debt, all of which the carrying amounts approximate fair value.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from those estimates.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
accelerated and straight-line methods over the estimated useful lives of the
related assets.
The components of the Company's property and equipment as of December 31,
1997, are as follows:
<TABLE>
<CAPTION>
December 31, Period of
1997 Depreciation
------------ --------------
<S> <C> <C>
Construction in progress....................... $ 122,000 --
Land........................................... 581,000 --
Buildings and improvements..................... 149,000 10 to 31 years
Transmitter towers............................. 754,000 7 to 15 years
Equipment...................................... 555,000 5 to 15 years
Leasehold improvements......................... 12,000 7 to 19 years
----------
Total property and equipment................. 2,173,000
Less: Accumulated depreciation................. 1,314,000
----------
Property and equipment, net.................... $ 859,000
==========
</TABLE>
F-34
<PAGE>
BELL BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996 and 1997
Depreciation expense for the fiscal years ended December 31, 1996 and 1997,
were $120,000 and $141,000, 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.
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 revenue. The deferred barter costs are expensed or capitalized as they
are used, consumed or received. Deferred barter revenue is recognized as the
related advertising is aired.
Sale of WKNX
In June 1997, the Company sold the assets and rights of WKNX-AM for
approximately $210,000 and recognized a loss of approximately $22,000. In
connection with the sale, the Company obtained a note receivable from the
purchasers of the station. The terms of the sale call for a note receivable
bearing interest at 10% per annum, requiring monthly payments of approximately
$3,000 through June 2007. The note is secured by certain real estate and
personal property and the pledge of the stock of Frankenmuth.
Supplemental Cash Flow Information
The Company issued 200 and 400 shares each of Class B Common Stock to two
former officers of the Company during 1996 and 1997, respectively, at a price
below the stock's estimated fair market value. Compensation expense of $25,000
and $50,000 was recorded in 1996 and 1997, respectively, in connection with the
issuance (Note 6). In June 1997, the Company sold the assets and rights to
WKNX-AM for a note receivable in the amount of $210,000. (Also see Note 7.)
New Accounting Standards
During 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income" (SFAS No. 130), which is effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for reporting and display of comprehensive income and its components.
The Company believes the adoption of SFAS No. 130 will have no impact on the
financial statements as the Company has no comprehensive income adjustments.
F-35
<PAGE>
BELL BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996 and 1997
During 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (SFAS No. 131), which is effective for
fiscal years beginning after December 15, 1997. This statement establishes a
new approach for determining segments within a company and reporting
information on those segments. The Company has performed a preliminary
assessment of this statement and believes that no disclosure is necessary as
the Company has only one segment.
2. NOTES RECEIVABLE--RELATED PARTY:
In 1995, the Company loaned the trust of a deceased shareholder $300,000
and received a note receivable. The note bears interest at the mid-term
applicable federal rate (6.31% and 5.63% as of December 31, 1996 and 1997,
respectively), with principal and interest due December 2000. The principal
and all interest due were paid on June 30, 1998.
3. DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Note payable to bank, payable in monthly installments of
$12,000, including interest at 9.35% per annum, secured by
land, equipment and the Company's AM broadcast license...... $641,000
Note payable to bank, payable in monthly installments of
$7,000, including interest at 9.35% per annum, secured by
land, equipment and the Company's FM broadcast license...... 51,000
Note payable to bank, payable in monthly installments of
$1,000, including interest at 8.99% per annum, secured by
vehicles.................................................... 40,000
Note payable in monthly installments of $400, including
interest at 11% per annum, secured by transportation
equipment................................................... 9,000
--------
Total...................................................... 741,000
Less: Current portion...................................... 149,000
--------
Total long-term debt....................................... $592,000
========
</TABLE>
This outstanding debt was repaid as of June 30, 1998.
4. COMMITMENTS AND CONTINGENCIES:
Leases
During 1996 and 1997, the Company leased the facilities under three
separate operating leases, one of which was with a related party (the former
owners of the Company). The related party lease was on a month-to-month basis
for the FM station building, at a rate of $800 per month. The second lease
covers the FM tower and transmitter space and expires in May 1999, with one
optional renewal of five years. Monthly rent under this lease is currently
$4,000. In addition, the Company leases equipment under two operating leases
expiring in 1999. Monthly rent under the equipment leases is $450.
Rental expense for the years ended December 31, 1996 and 1997, was $70,000
and $60,000, respectively.
F-36
<PAGE>
BELL BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996 and 1997
Litigation
The Company has been named as defendant in various legal proceedings arising
out of the normal course of business. It is the opinion of management, after
consultation with legal counsel, that the amount, if any, of the Company's
ultimate liability under all current legal proceedings will not have a material
adverse effect on the financial position or results of operations of the
Company.
5. STOCK OPTION AND BONUS PLANS:
The Company had an Incentive Stock Option Plan (the Stock Option Plan). The
Company granted options to two employees of the Company to purchase up to 200
shares each of Class B Common Stock at a price equal to 50% of the fair market
value of the stock on the exercise date. In 1996, the Stock Option Plan was
extended for two years (January 1, 1996 to December 31, 1997). During 1996 and
1997, the Company granted options under the plan and recognized compensation
expense because the option price was below the estimated market price of the
stock.
The Company also had a Stock Bonus Plan (the Bonus Plan). Under provisions
of the Bonus Plan, the Company could, at its discretion, award two employees of
the Company up to an aggregate of 200 shares each of Class B Common Stock. The
Bonus Plan was extended in 1996 for two years. During 1996, the Company awarded
50 shares to each employee under the Bonus Plan. During 1997, the Company
awarded 100 shares to each employee for services performed. Compensation
expense equal to the fair market value of the Class B Common Stock awarded has
been recorded for 1996 and 1997 to reflect such awards.
Agreements between the Company and three of its former stockholders
generally provide that none of their shares (as specifically defined) may be
sold, transferred or exchanged without the prior written consent of the
Company.
In addition, the agreements specify the rights of the stockholders and the
obligations of the Company in the event of death, termination of employment or
change in control of the Company. The agreements state that if a change in
control of the Company occurs, the employees' right to exercise their options
will cease. If the Company is required to repurchase any of the shares, the
purchase price shall be the fair market value of such shares (as specifically
defined). As of June 30, 1998, all options terminated.
The Company accounts for its stock option plans in accordance with
Accounting Principles Board Opinion No. 25. Had compensation cost for the plans
been determined consistent with Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation," the difference in the Company's
pro forma net income would have been immaterial.
F-37
<PAGE>
BELL BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996 and 1997
6. INCOME TAXES:
A reconciliation of the statutory federal income taxes to the recorded
income tax (benefit) provision for the years ended December 31, 1996 and 1997
is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1997
--------- --------
<S> <C> <C>
Statutory tax (@ 35% rate)............................ $(120,000) $ 19,000
Effect of state taxes, net of federal................. 16,000 3,000
Effect of graduated tax rate.......................... -- (12,000)
Other nondeductible items............................. 23,000 28,000
Nondeductible compensation expense.................... 3,000 6,000
--------- --------
(Benefit) provision for income taxes................ $ (78,000) $ 44,000
========= ========
</TABLE>
The components of the (benefit) provision for income taxes for the years
ended December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1996 1997
--------- -------
<S> <C> <C>
Current................................................ $(105,000) $20,000
Deferred............................................... 27,000 24,000
--------- -------
(Benefit) provision for income taxes................... $ (78,000) $44,000
========= =======
</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 liability as of
December 31, 1997, are as follows:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Deferred tax assets--
Reserve for bad debts....................................... $ 10,000
Deferred tax liability--
Other....................................................... (13,000)
--------
Net deferred tax liability.................................... $ (3,000)
========
</TABLE>
7. SALE OF CAPITAL STOCK:
On December 23, 1997, the stockholders of the Company entered into an
Agreement with Radio One, Inc. to sell all of the issued and outstanding shares
of the capital stock of the Company for approximately $34 million. Prior to the
sale, the stockholders of the Company assumed certain debt totaling $771,000
and acquired certain assets of the Company totaling $99,000. The net book value
of the assets acquired and the liabilities assumed prior to the sale was
recorded as a capital contribution from the owners. The sale to Radio One, Inc.
was completed on June 30, 1998.
F-38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Allur-Detroit, Inc.:
We have audited the accompanying balance sheet of Allur-Detroit, Inc. (a
wholly owned subsidiary of Syndicated Communications Venture Partners II, LP)
for the year ended December 31, 1997, and the related statements of operations,
changes in stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of Allur-Detroit, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Allur-Detroit, Inc. for the
year ended December 31, 1997, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
/s/ MITCHELL & TITUS LLP
Washington, D.C.,
March 25, 1998
F-39
<PAGE>
ALLUR-DETROIT, INC.
BALANCE SHEETS
As of December 31, 1997 and September 30, 1998
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................. $ 86,000 $ 172,000
Trade accounts receivable, net of allowance of
$77,000.......................................... 410,000 805,000
Prepaid expenses and other........................ 55,000 42,000
---------- ----------
Total current assets............................ 551,000 1,019,000
PROPERTY AND EQUIPMENT, net......................... 75,000 82,000
INTANGIBLE ASSETS, net.............................. 7,563,000 7,429,000
---------- ----------
Total assets.................................... $8,189,000 $8,530,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable an accrued expenses.............. $ 829,000 $1,056,000
---------- ----------
NOTES PAYABLE AND DEFERRED INTEREST................. 3,229,000 3,892,000
---------- ----------
Total liabilities............................... 4,058,000 4,948,000
---------- ----------
COMMITMENTS
CUMULATIVE REDEEMABLE PREFERRED STOCK,
$2,000 par value, 1,050 shares authorized, 1,050
and 975 shares issued and outstanding,
respectively....................................... 2,100,000 1,950,000
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 1,000 shares
authorized and 975 shares issued and
outstanding...................................... 1,000 1,000
Additional paid-in capital........................ 2,463,000 2,463,000
Accumulated deficit............................... (433,000) (832,000)
---------- ----------
Total stockholders' equity...................... 2,031,000 1,632,000
---------- ----------
Total liabilities and stockholders' equity...... $8,189,000 $8,530,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-40
<PAGE>
ALLUR-DETROIT, INC.
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
and for the Nine Months Ended September 30, 1997 and 1998
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
December 31, ------------------------
1997 1997 1998
------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUE:
Broadcast revenue....................... $2,473,000 $1,884,000 $2,509,000
Less: Agency commissions................ 259,000 207,000 379,000
---------- ---------- ----------
Net broadcast revenue................. 2,214,000 1,677,000 2,130,000
---------- ---------- ----------
OPERATING EXPENSES:
Programming and technical............... 894,000 477,000 592,000
Selling, general and administrative..... 1,467,000 1,247,000 1,412,000
Corporate expenses...................... 36,000 27,000 27,000
Depreciation and amortization........... 245,000 183,000 167,000
---------- ---------- ----------
Total operating expenses.............. 2,642,000 1,934,000 2,198,000
---------- ---------- ----------
Operating loss........................ (428,000) (257,000) (68,000)
---------- ---------- ----------
INTEREST EXPENSE.......................... 222,000 147,000 281,000
OTHER INCOME (EXPENSE), net............... 217,000 126,000 (50,000)
---------- ---------- ----------
Loss before provision for income
taxes................................ (433,000) (278,000) (399,000)
PROVISION FOR INCOME TAXES................ -- -- --
---------- ---------- ----------
Net loss.............................. $ (433,000) $ (278,000) $ (399,000)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-41
<PAGE>
ALLUR-DETROIT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Year Ended December 31, 1997
and for the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Equity
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996........ $1,000 $2,463,000 $ -- $2,464,000
Net loss........................ -- -- (433,000) (433,000)
------ ---------- --------- ----------
BALANCE, December 31, 1997........ 1,000 2,463,000 (433,000) 2,031,000
Net loss........................ -- -- (399,000) (399,000)
------ ---------- --------- ----------
BALANCE, September 30, 1998
(unaudited)...................... $1,000 $2,463,000 $(832,000) $1,632,000
====== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-42
<PAGE>
ALLUR-DETROIT, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1997
and for the Nine Months Ended September 30, 1997 and 1998
<TABLE>
<CAPTION>
September 30,
December 31, ------------------------
1997 1997 1998
------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................... $ (433,000) $ (278,000) $(399,000)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization........ 245,000 183,000 167,000
Effect of change in operating assets
and liabilities--
Trade accounts receivable.......... 32,000 (95,000) (395,000)
Prepaid expenses and other......... (45,000) (59,000) 13,000
Accounts payable and accrued
expenses.......................... (172,000) (60,000) 227,000
----------- ----------- ---------
Net cash flows from operating
activities...................... (373,000) (309,000) (387,000)
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment.................. (39,000) -- (40,000)
----------- ----------- ---------
Net cash flows from investing
activities...................... (39,000) -- (40,000)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of preferred stock.......... -- -- (150,000)
Repayment of debt...................... (1,676,000) (1,257,000) --
Proceeds from notes payable............ 2,152,000 1,614,000 663,000
----------- ----------- ---------
Net cash flows from financing
activities...................... 476,000 357,000 513,000
----------- ----------- ---------
NET INCREASE IN CASH..................... 64,000 48,000 86,000
CASH, beginning of period................ 22,000 22,000 86,000
----------- ----------- ---------
CASH, end of period...................... $ 86,000 $ 70,000 $ 172,000
=========== =========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING INFORMATION:
Interest paid.......................... $ 81,000 $ -- $ --
=========== =========== =========
Income taxes paid...................... $ -- $ -- $ --
=========== =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-43
<PAGE>
ALLUR-DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Allur-Detroit, Inc. (the Company) is a subsidiary of Syndicated
Communications Ventures Partners II, LP (SYNCOM II). The Company's sole
activity is to operate WWBR-FM, a radio station that broadcasts from Detroit,
Michigan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Interim Financial Statements
The financial statements for the nine months ended September 30, 1997 and
1998, are unaudited but, in the opinion of management, such financial
statements have been presented on the same basis as the audited financial
statements for the year ended December 31, 1997, 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.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method.
The components of property and equipment as of December 31, 1997 and
September 30, 1998, are as follows:
<TABLE>
<CAPTION>
December 31, September 30, Period of
1997 1998 Depreciation
------------ ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Leasehold improvements........... $ 7,000 $ 8,000 10 years
Transmitter equipment............ 17,000 17,000 5 years
Studio and other technical
equipment....................... 46,000 59,000 7 years
Office furniture and equipment... 45,000 54,000 5 years
Automobiles...................... -- 17,000 5 years
-------- --------
115,000 155,000
Less: Accumulated depreciation
and
amortization.................... 40,000 73,000
-------- --------
Property and equipment, net...... $ 75,000 $ 82,000
======== ========
</TABLE>
Intangible Assets
Management periodically reviews its unamortized intangible asset balances to
ensure that those assets have not been impaired in accordance with the
definition of Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived assets and for Long-Lived assets to be
disposed of." As of
F-44
<PAGE>
ALLUR-DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
September 30, 1998, management has made such evaluations and believes that the
net intangible asset is realizable. In any period which management believes an
impairment has occurred, management will write down the asset in accordance
with this standard.
Revenue Recognition
Revenue 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 revenue. The deferred barter costs are expensed or capitalized as they
are used, consumed or received. Deferred barter revenue is recognized as the
related advertising is aired.
Financial Instruments
Financial instruments as of December 31, 1997, and September 30, 1998,
consist of cash, trade accounts receivable, accounts payable, accrued expenses,
preferred stock, and notes payable all of which the carrying amounts
approximate fair value.
New Accounting Standards
During 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income" (SFAS No. 130), which is effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for reporting and display of comprehensive income and its components.
The Company adopted SFAS No. 130 during the nine months ended September 30,
1998, and has determined that the adoption of this statement has no impact on
the financial statements, as the Company has no comprehensive income
adjustments.
During 1997, the FASB issues SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), which is effective for
fiscal years beginning after December 15, 1997. This statement establishes a
new approach for determining segments within a company and reporting
information on those segments. The Company adopted this statement during the
nine months ended September 30, 1998 and concluded that it had only one
segment.
3. INTANGIBLE ASSETS:
Intangible asset balances and periods of amortization as of December 31,
1997, and September 30, 1998, are as follows:
<TABLE>
<CAPTION>
December 31, September 30, Period of
1997 1998 Amortization
------------ ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Goodwill and FCC license.......... $7,768,000 $7,768,000 40 years
Less: Accumulated amortization.... 205,000 339,000
---------- ----------
$7,563,000 $7,429,000
========== ==========
</TABLE>
F-45
<PAGE>
ALLUR-DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Depreciation and amortization expense for the year ended December 31, 1997,
and for the nine months ended September 30, 1997 and 1998, was $245,000,
$183,000 and $167,000, respectively.
4. RELATED PARTY TRANSACTIONS:
Notes Payable
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
(Unaudited)
<S> <C> <C>
SYNCOM II--long-term debt--10% annually......... $1,676,000 $1,676,000
SYNCOM III--long-term debt--10% annually........ 1,362,000 1,362,000
SYNCOM II--line of credit--8% annually.......... 191,000 854,000
---------- ----------
Total......................................... $3,229,000 $3,892,000
========== ==========
</TABLE>
The debt owed to SYNCOM II and SYNCOM III are due and payable in lump-sum
the earlier of a sale of the license of Allur-Detroit, a sale of substantially
all of the assets of Allur-Detroit, a sale of a controlling interest in the
common stock shares of Allur-Detroit, or at December 31, 1999 (see Note 7). The
debt is secured by the FCC license and assets of the Company.
Management Fee
The Company entered into an agreement with Syncom Management, Inc. whereby
it pays $36,000 per year for accounting services. Syncom Management, Inc. also
provides management and financial services to SYNCOM II, the owner of the
Company.
5. COMMITMENTS:
Operating Leases
The Company rents office space and transmittal sites under several operating
leases. These leases expire at various dates through 2002, with most containing
renewal options.
Future minimum rental payments under such noncancellable operating leases as
of September 30, 1998, are as follows:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1998 (remaining)................................................ $37,000
1999............................................................ 148,000
2000............................................................ 148,000
2001............................................................ 91,000
2002............................................................ 98,000
</TABLE>
F-46
<PAGE>
ALLUR-DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. CUMULATIVE REDEEMABLE PREFERRED STOCK:
On December 4, 1992, the Company issued 1,050 shares of cumulative
redeemable preferred stock to PNC Bank, formerly Continental Bank. The
preferred stock earns cumulative annual dividends of eight percent (8%) of par
value.
Under the terms of the PNC Bank/Allur-Detroit settlement agreement of
December 31, 1996, redemption of the preferred stock shall occur at the date
when: (i) repayment is effected in full of principal and interest on lenders'
new notes, or (ii) at the maturity date of the new notes when the lenders
shall cause the Company to repay, whichever happens first. In such a
situation, all outstanding shares of preferred stock shall be redeemed at a
price equal to the par value, plus an amount equal to both accrued and
undeclared dividends payable from available funds as stipulated in Section 2.2
of the Shareholders Agreement dated December 4, 1992. As of September 30,
1998, circumstances supporting the redemption of the preferred stock did not
occur.
The Company had not declared and has not recorded an accrual for cumulative
preferred stock dividends. At September 30, 1998, cumulative unpaid preferred
dividends amounted to $958,667. Such dividends, if declared, would have been
paid out of cumulative retained earnings of the Company, if any.
On February 20, 1998, the Company paid $150,000, representing a partial
payment toward the required redemption of the preferred stock held by PNC
Bank. From this date hereof, the balance due for payment on the preferred
stock is $1,950,000. Subsequent to September 30, 1998, the $1,950,000 of
preferred stock was redeemed for the face value without the dividend being
declared.
7. INCOME TAXES:
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.
A reconciliation of the statutory federal income taxes to the recorded
income tax provision for the year ended December 31, 1997, is as follows:
<TABLE>
<S> <C>
Statutory Tax (@ 35% rate)..................................... $(152,000)
Effect of state taxes, net of federal.......................... (18,000)
Effect of graduated tax rate................................... 5,000
Valuation reserve.............................................. 165,000
---------
Provision for income taxes................................... $ --
=========
</TABLE>
The components of the provision for income taxes for the years ended
December 31, 1997 are as follows:
<TABLE>
<S> <C>
Current......................................................... $ --
Deferred........................................................ (165,000)
Valuation reserve............................................... 165,000
---------
Provision for income taxes.................................... $ --
=========
</TABLE>
F-47
<PAGE>
ALLUR-DETROIT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
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, 1997, are as follows:
<TABLE>
<S> <C>
Deferred tax assets--
NOL carryforward............................................. $180,000
Deferred tax liabilities--
Depreciation................................................. (15,000)
Net deferred tax asset-- ...................................... 165,000
Less:Valuation reserve......................................... (165,000)
--------
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 is not considered to be more likely than not to be
realized.
As of December 31, 1997, there was approximately $400,000 of available net
operating loss carry forwards that expire through 2011.
8. SUBSEQUENT EVENTS:
On October 26, 1998, the stockholders of the Company entered into a stock
purchase agreement with Radio One, Inc. to sell all of the issued and
outstanding shares of capital stock of the Company for approximately $27
million. The sale is expected to be completed by December 31, 1998.
F-48
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Radio One, Inc.:
We have audited the accompanying combined balance sheets of the Richmond
operations of Sinclair Telecable, Inc., consisting of stations WCDX-FM, WPLZ-
FM, WJRV-FM and WGCV-AM (the Stations) as of December 31, 1997 and 1998, and
the related combined statements of operations and changes in station equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Stations' 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.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Stations and may not be indicative of the
conditions that would have existed or the results of operations had the
Stations been operated as an unaffiliated entity. As discussed in Note 1,
certain corporate overhead and other expenses represent allocations made by the
Stations' parent.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Richmond
operations of Sinclair Telecable, Inc., consisting of stations WCDX-FM, WPLZ-
FM, WJRV-FM and WGCV-AM as of December 31, 1997 and 1998 and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
March 5, 1999
F-49
<PAGE>
THE RICHMOND OPERATIONS OF SINCLAIR TELECABLE, INC.
COMBINED BALANCE SHEETS
As of December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 55,000 $ 142,000
Trade accounts receivable, net of allowance for
doubtful accounts of $39,000 and $50,000,
respectively.......................................... 1,282,000 1,400,000
Prepaid expenses and other............................. 47,000 31,000
---------- ----------
Total current assets................................. 1,384,000 1,573,000
PROPERTY AND EQUIPMENT, net.............................. 922,000 1,202,000
INTANGIBLE ASSETS, net................................... 4,065,000 3,692,000
---------- ----------
Total assets......................................... $6,371,000 $6,467,000
========== ==========
LIABILITIES AND STATION EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.................. $ 423,000 $ 566,000
COMMITMENTS
STATION EQUITY........................................... 5,948,000 5,901,000
---------- ----------
Total liabilities and station equity................. $6,371,000 $6,467,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-50
<PAGE>
THE RICHMOND OPERATIONS OF SINCLAIR TELECABLE, INC.
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN STATION EQUITY
For the Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
REVENUE:
Broadcast revenue, including barter revenue of
$249,000
and $304,000, respectively.......................... $8,330,000 $8,509,000
Less: Agency commissions............................. 1,041,000 1,051,000
---------- ----------
Net broadcast revenue.............................. 7,289,000 7,458,000
---------- ----------
OPERATING EXPENSES:
Program and technical................................ 1,313,000 1,498,000
Selling, general and administrative.................. 3,025,000 3,170,000
Corporate allocations................................ 311,000 413,000
Depreciation and amortization........................ 569,000 648,000
---------- ----------
Total operating expenses........................... 5,218,000 5,729,000
---------- ----------
Broadcast operating income......................... 2,071,000 1,729,000
---------- ----------
Net income......................................... 2,071,000 1,729,000
STATION EQUITY, beginning of year...................... 6,548,000 5,948,000
NET TRANSFER TO PARENT................................. (2,671,000) (1,776,000)
---------- ----------
STATION EQUITY, end of year............................ $5,948,000 $5,901,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-51
<PAGE>
THE RICHMOND OPERATIONS OF SINCLAIR TELECABLE, INC.
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 2,071,000 $ 1,729,000
Adjustments to reconcile net income to net cash
from operating activities--
Depreciation and amortization.................... 569,000 648,000
Effect of change in operating assets and
liabilities--
Trade accounts receivable...................... 109,000 (118,000)
Prepaid expenses and other..................... (33,000) 16,000
Accounts payable and accrued expenses.......... (63,000) 143,000
----------- -----------
Net cash flows from operating activities..... 2,653,000 2,418,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................. (49,000) (555,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net transfer to parent............................. (2,671,000) (1,776,000)
----------- -----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..... (67,000) 87,000
CASH AND CASH EQUIVALENTS, beginning of year......... 122,000 55,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of year............... $ 55,000 $ 142,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-52
<PAGE>
THE RICHMOND OPERATIONS OF SINCLAIR TELECABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997 and 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
The radio stations, WCDX-FM, WPLZ-FM, WJRV-FM and WGCV-AM (Stations) are
broadcast in the Richmond area. WCDX-FM, WPLZ-FM and WGCV-AM are owned by
Sinclair Telecable, Inc. (Sinclair). WJRV-FM is owned by Commonwealth
Broadcasting LLC (Commonwealth), a related party. Sinclair owns 25% of
Commonwealth. The remaining 75% of Commonwealth is owned by some of the
shareholders of Sinclair. Commonwealth has been fully consolidated into the
combined financial statements of Sinclair Telecable, Inc. and Affiliates
(combined, Sinclair).
In March 1999, Sinclair entered into a letter of intent with Radio One, Inc.
to sell ultimately all of the tangible and intangible assets of these Richmond
operations for approximately $34 million. Sinclair and Radio One, Inc. intend
to enter into a local marketing agreement under which Radio One, Inc. will
operate these Richmond operations prior to completing its acquisition of these
operations. Accordingly, these combined financial statements of the Richmond
operations include the stations to be purchased by Radio One, Inc. All inter-
station transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying combined 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. Actual results could differ from those estimates.
The Stations are allocated certain corporate expenses for services provided
by Sinclair based upon the percentage of revenue of each station to total
revenue of all stations operated by Sinclair. Though management is of the
opinion that all allocations used are reasonable and appropriate, other
allocations might be used that could produce results substantially different
from those reflected herein and these cost allocations might not be indicative
of amounts which might be paid to unrelated parties for similar services or if
Stations had been operated on a stand-alone basis.
Sinclair corporate departmental expenses of $311,000 and $413,000 have been
allocated to the Stations during 1997 and 1998, respectively, for management
salaries and benefits, legal services, corporate office, and other
miscellaneous expenses.
The acquisition of station WJRV-FM was partially financed with debt which
was allocated to the Stations. This debt and related accrued interest expense
was eliminated through cash transfers to the parent. Cash transfers in excess
of amounts required to repay debt and secured interest reduces the Stations
equity and is recorded as net transfer to parent.
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.
F-53
<PAGE>
THE RICHMOND OPERATIONS OF SINCLAIR TELECABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998
Property and Equipment
Property and equipment are recorded at cost and are being depreciated on a
straight-line basis over various periods. The components of the Stations'
property and equipment as of December 31, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
Period of
1997 1998 Depreciation
--------- ---------- --------------
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT:
Land.................................. $ 57,000 $ 57,000 --
Building and leasehold improvements... 140,000 147,000 31 or 10 years
Furniture and fixtures................ 179,000 241,000 7 or 10 years
Broadcasting equipment................ 2,145,000 2,611,000 5 to 7 years
Vehicles.............................. 55,000 75,000 5 years
--------- ----------
2,576,000 3,131,000
Less: Accumulated depreciation........ 1,654,000 1,929,000
--------- ----------
Property and equipment, net........ $ 922,000 $1,202,000
========= ==========
</TABLE>
Depreciation expenses for the fiscal years ended December 31, 1997 and 1998,
were $263,000 and $275,000, 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.
Financial Instruments
Financial instruments as of December 31, 1997 and 1998, consist of cash and
cash equivalents, trade accounts receivables, accounts payable and accrued
expenses, all of which the carrying amounts approximate fair value except.
F-54
<PAGE>
THE RICHMOND OPERATIONS OF SINCLAIR TELECABLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998
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, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
Period of
1997 1998 Amortization
---------- ---------- ------------
<S> <C> <C> <C>
FCC broadcast license..................... $4,489,000 $4,489,000 15 Years
Goodwill.................................. 45,000 45,000 40 Years
Debt financing............................ 27,000 27,000 Life of Debt
Organizational costs...................... 99,000 -- 5 Years
---------- ----------
Total................................... 4,660,000 4,561,000
Less: Accumulated amortization.......... 595,000 869,000
---------- ----------
Net intangible assets................... $4,065,000 $3,692,000
========== ==========
</TABLE>
Amortization expense for the fiscal years ended December 31, 1997 and 1998,
was $306,000 and $373,000, respectively. During 1998, the Stations wrote off
approximately $69,000 of unamortized start-up costs.
3. INCOME TAXES:
As the Stations' parent company is an S corporation, no provision for income
taxes has been included in the accompanying statements of operations.
4. COMMITMENTS:
The Stations lease office space for its office and broadcast studios and a
tower site under operating leases which expire through January 1, 2020. Rent
expense for the years ended December 31, 1997 and 1998, was $152,000 and
$154,000, respectively. The future minimum rental payments for the next five
years are as follows:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1999........................................................... $ 185,000
2000........................................................... 183,000
2001........................................................... 189,000
2002........................................................... 196,000
2003........................................................... 104,000
Thereafter..................................................... 1,335,000
</TABLE>
5. PROFIT SHARING:
Sinclair Telecable, Inc. has a 401(k) profit sharing plan for its employees.
Sinclair Telecable, Inc. can contribute to the plan at the discretion of its
Board of Directors. Sinclair Telecable, Inc. did not contribute to the plan
during fiscal year 1997 or 1998.
F-55
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Radio One, Inc.:
We have audited the accompanying combined balance sheet of the stations WKJS-FM
and WSOJ- FM of FM-100 (the Stations) as of December 31, 1998, and the related
combined statements of operations and changes in station deficit and cash flows
for the year then ended. These financial statements are the responsibility of
the Stations' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Stations and may not be indicative of the
conditions that would have existed or the results of operations had the
Stations been operated as an unaffiliated entity. As discussed in Note 1,
certain corporate overhead and other expenses represent allocations made by the
Stations' parent.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the stations WKJS-
FM and WSOJ-FM of FM-100, Inc., as of December 31, 1998, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
March 10, 1999
F-56
<PAGE>
STATIONS WKJS-FM AND WSOJ-FM OF FM 100 INC.
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1998
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 34,000
Trade accounts receivable, net of allowance for doubtful
accounts of $28,000 326,000
----------
Total current assets 360,000
PROPERTY AND EQUIPMENT, net 1,079,000
INTANGIBLE ASSETS, net 3,343,000
----------
Total assets $4,782,000
==========
</TABLE>
LIABILITIES AND STATION DEFICIT
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 168,000
Capital lease obligations 13,000
----------
Total current liabilities 181,000
LONG-TERM LIABILITIES:
Allocation of long-term debt 5,000,000
Capital lease obligations 49,000
----------
Total liabilities 5,230,000
COMMITMENTS AND CONTINGENCIES
STATION DEFICIT (448,000)
----------
Total liabilities and station deficit $4,782,000
==========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-57
<PAGE>
STATIONS WKJS-FM AND WSOJ-FM OF FM 100 INC.
COMBINED STATEMENT OF OPERATIONS AND CHANGES IN STATION DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
REVENUE:
Broadcast revenue, including barter revenue of $169,000 $1,187,000
Less: Agency commissions 125,000
----------
Net broadcast revenue 1,062,000
----------
OPERATING EXPENSES:
Program and technical 192,000
Selling, general and administrative 810,000
Corporate allocations 15,000
Depreciation and amortization 416,000
----------
Total operating expenses 1,433,000
----------
Operating loss (371,000)
----------
OTHER INCOME (EXPENSE):
Interest expense (500,000)
Other income 21,000
----------
Total other income (expense), net (479,000)
----------
Net loss (850,000)
STATION EQUITY, beginning of year 177,000
NET TRANSFER FROM PARENT 225,000
----------
STATION DEFICIT, end of year $ (448,000)
==========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-58
<PAGE>
STATIONS WKJS-FM AND WSOJ-FM OF FM 100 INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(850,000)
Adjustments to reconcile net loss to net cash used in
operating activities-
Depreciation and amortization 416,000
Effect of change in operating assets and liabilities-
Trade accounts receivable (257,000)
Prepaid expenses and other 3,000
Accounts payable and accrued expenses 99,000
---------
Net cash flows used in operating activities (589,000)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (58,000)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net transfer from parent 225,000
Proceeds from parent debt 427,000
---------
Net cash flows from financing activities 652,000
---------
INCREASE IN CASH 5,000
CASH, beginning of year 29,000
---------
CASH, end of year $ 34,000
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 477,000
=========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-59
<PAGE>
STATIONS WKJS-FM AND WSOJ-FM OF FM 100 INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
The radio stations, WKJS-FM and WSOJ-FM (the Stations) are broadcast in the
Richmond area. The combined financial statements of the Stations were formed
effective January 4, 1998, when FM 100, Inc. purchased station WKJS-FM for
$4,500,000. Station WSOJ-FM was owned by FM 100, Inc. since 1994.
In February 1999, FM 100, Inc. signed an agreement with Radio One, Inc. to sell
all tangible and intangible assets for approximately $12,000,000, subject to
certain earn-out adjustments. The sale is expected to close during 1999. The
accompanying combined financial statements include the assets, liabilities and
results of operations of those stations to be acquired by Radio One, Inc. and
were prepared from the financial statements of FM 100, Inc. All inter-station
transactions have been eliminated in consolidation.
The Stations have incurred an operating loss of $371,000 and a net loss of
$850,000 for the year ended December 31, 1998. Also, as of December 31, 1998,
the Stations had a station deficit of $448,000. These factors, along with
others could negatively impact future operations of the Stations.
Basis of Presentation
The accompanying combined 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. Actual results could differ from those estimates.
The Stations are allocated certain corporate expenses for services provided by
FM 100, Inc. based upon the percentage of revenue of each station to total
revenue of all stations operated by FM 100, Inc. Though management is of the
opinion that all allocations used are reasonable and appropriate, other
allocations might be used that could produce results substantially different
from those reflected herein and these cost allocations might not be indicative
of amounts which might be paid to unrelated parties for similar services if the
Stations had been operated on a stand-alone basis.
FM 100, Inc. corporate departmental expenses of $15,000 have been allocated to
the Stations during 1998 for accounting services and other miscellaneous
expenses.
F-60
<PAGE>
STATIONS WKJS-FM AND WSOJ-FM OF FM 100 INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are recorded at cost and are being depreciated on a
straight-line basis over various periods. The components of the Stations's
property and equipment as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Period of
1998 Depreciation
---------- ------------
<S> <C> <C>
PROPERTY AND EQUIPMENT:
Land.................................................. $ 173,000 --
Building.............................................. 646,000 15 years
Furniture and fixtures................................ 211,000 10 years
Broadcasting equipment................................ 262,000 7 years
Vehicles.............................................. 17,000 5 years
----------
1,309,000
Less: Accumulated depreciation........................ 230,000
----------
Property and equipment, net......................... $1,079,000
==========
</TABLE>
Depreciation expense for the fiscal year ended December 31, 1998, was $102,000.
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.
Financial Instruments
Financial instruments as of December 31, 1998, consist of cash and cash
equivalents, trade accounts receivables, accounts payable, accrued expenses,
long-term debt, and capital leases, all of which the carrying amounts
approximate fair value.
Supplemental Cash Flow Information
During 1998, FM 100, Inc. obtained a $5,000,000 loan from a bank of which
$4,500,000 was used to finance the purchase of WKJS-FM and $73,000 was used to
pay debt issuance cost. The remaining $427,000 transferred to the Stations for
operating purposes.
F-61
<PAGE>
STATIONS WKJS-FM AND WSOJ-FM OF FM 100 INC.
NOTES TO COMBINED 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, 1998, are as follows:
<TABLE>
<CAPTION>
Period of
1998 Amortization
---------- ------------
<S> <C> <C>
FCC broadcast license................................. $3,628,000 15 Years
Debt financing........................................ 73,000 Life of Debt
----------
Total............................................... 3,701,000
Less: Accumulated amortization...................... 358,000
----------
Net intangible assets............................... $3,343,000
==========
</TABLE>
Amortization expense for the fiscal year ended December 31, 1998, was $314,000.
3. LONG-TERM DEBT:
The acquisition of WKJS-FM was financed with $4,500,000 of debt which has been
allocated to the Stations. The debt accrued interest at 10% during 1998 and was
originally due January 6, 1999, and has been refinanced to be due January 6,
2000.
FM 100, Inc. has borrowed $500,000 from a bank which has been allocated down to
the Stations. The debt accrued interest at 10% during 1998 and was originally
due January 6, 1999 and has been refinanced to be due January 6, 2000.
As of December 31, 1998, the Stations had various capital leases for equipment.
4. INCOME TAXES:
As the Stations' parent company is an S-Corporation, no provision for income
taxes has been included in the accompanying statements of operations.
5. COMMITMENTS:
The Stations lease office space for their office and broadcast studios under an
operating lease which expires during 1999. Rent expense for the year ended
December 31, 1998, was $16,064. The future minimum rental payment is $9,311.
F-62
<PAGE>
[RADIO ONE LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions, to be paid by
Radio One:
<TABLE>
<S> <C>
SEC registration fee.................................................. *
Printing and engraving fees........................................... *
Legal fees and expenses............................................... *
Accounting fees and expenses.......................................... *
Blue Sky fees and expenses............................................ *
Trustee fees.......................................................... *
Directors' and Officers' Insurance.................................... *
Miscellaneous......................................................... *
Total............................................................... $
</TABLE>
- --------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers.
Radio One's Amended and Restated By-Laws incorporate substantially the
provisions of the General Corporation Law of the State of Delaware (the "DGCL")
in providing for indemnification of directors and officers against expenses,
judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the fact that
such person is or was an officer or director of Radio One. In addition, Radio
One is authorized to indemnify employees and agents of Radio One and may enter
into indemnification agreements with its directors and officers providing
mandatory indemnification to them to the maximum extent permissible under
Delaware law.
Radio One's Amended and Restated Certificate of Incorporation provides that
Radio One shall indemnify (including indemnification for expenses incurred in
defending or otherwise participating in any proceeding) its directors and
officers to the fullest extent authorized or permitted by the DGCL, as it may
be amended, and that such right to indemnification shall continue as to a
person who has ceased to be a director or officer of Radio One and shall inure
to the benefit of his or her heirs, executors and administrators except that
such right shall not apply to proceedings initiated by such indemnified person
unless it is a successful proceeding to enforce indemnification or such
proceeding was authorized or consented to by the Board of Directors. Radio
One's Amended and Restated Certificate of Incorporation also specifically
provides for the elimination of the personal liability of a director to the
corporation and its stockholders for monetary damages for breach of fiduciary
duty as director. The provision is limited to monetary damages, applies only to
a director's actions while acting within his or her capacity as a director, and
does not entitle Radio One to limit director liability for any judgment
resulting from (a) any breach of the director's duty of loyalty to Radio One or
its stockholders; (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (c) paying an illegal
dividend or approving an illegal stock repurchase; or (d) any transaction from
which the director derived an improper benefit.
Section 145 of the DGCL provides generally that a person sued (other than in
a derivative suit) as a director, officer, employee or agent of a corporation
may be indemnified by the corporation for reasonable expenses, including
counsel fees, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that the person's conduct was unlawful. In the case
of a derivative suit, a director, officer, employee or agent of the corporation
may be indemnified by the corporation for reasonable expenses, including
attorneys' fees, if the person has acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation, except that no
II-1
<PAGE>
indemnification shall be made in the case of a derivative suit in respect of
any claim as to, which such director, officer, employee or agent has been
adjudged to be liable to the corporation unless the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine that
such person is fairly and reasonably entitled to indemnity for proper
expenses. Indemnification is mandatory under section 145 of the DGCL in the
case of a director or officer who is successful on the merits in defense of a
suit against him.
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify Radio One, the directors, certain
officers and controlling persons of Radio One, Inc. against certain
liabilities, including liabilities under the Securities Act. Reference is made
to the form of Underwriting Agreement filed as Exhibit 1.1 hereto.
Radio One has entered into indemnification agreements with the directors
and certain officers pursuant to which Radio One has agreed to maintain
directors' and officers' insurance and to indemnify such officers to the
fullest extent permitted by applicable law except for certain claims described
therein. [Reference is made to the form of Director and Officer
Indemnification Agreement filed as Exhibit [to come] hereto.]
Radio One maintains directors and officers liability insurance for the
benefit of its directors and certain of its officers.
Item 15. Recent Sales of Unregistered Securities.
On May 15, 1997, Radio One issued approximately $85.0 million (aggregate
principal amount) of 12% senior subordinated notes to certain investors. Such
notes were offered pursuant to Rule 144A under the Securities Act.
On , Radio One issued approximately $ million of Series A and
Series B 15% senior cumulative preferred stock to certain investors. Such
shares were issued pursuant to the exemption from registration provided by
Section 4(2) of Securities Act.
On January 25, 1999, Radio One issued an aggregate of shares of Common
Stock to its Chief Financial Officer in connection with his employment
agreement. These shares were issued pursuant to the exemption from
registration provided by Rule 701 under the Securities Act.
On February 25, 1999, pursuant to a plan of recapitalization, Radio One
issued to the holders of its Class A Common Stock, in exchange for all of the
outstanding shares of Class A Common Stock, 46.15 shares of Class B Common
Stock and 92.3 shares of Class C Common Stock. These shares were issued
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act.
On March , 1999, Radio One issued an aggregate of shares of Common
Stock to the shareholders of ROA in connection with Radio One's acquisition of
ROA. These shares were issued pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed as part of this registration
statement.
<TABLE>
<S> <C>
1.1 [Underwriting Agreement](/5/)
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(/1/) Indenture dated as of May 15, 1997 among Radio One, Inc., Radio One Licenses,
Inc. and United States Trust Company of New York.
</TABLE>
- --------
(1) Incorporated by reference to Radio One's Annual Report on Form 10-K for
the period ended December 31, 1997 (File No. 333-30795; Film No. 98581327).
(2) Incorporated by reference to Radio One's Current Report on Form 8-K
filed July 13, 1998 (File No. 333-30795; Film No. 98665139).
(3) Incorporated by reference to Radio One's Current Report on Form 8-K
filed January 12, 1999 (File No. 333-30795; Film No. 99504706).
(4) Incorporated by reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 1998 (File No. 333-30795; Film No. 98688998).
(5) To be filed by Amendment to this Registration Statement on Form S-1.
II- 2
<PAGE>
<TABLE>
<S> <C>
4.2(/2/) First Supplemental Indenture dated as of June 30, 1998, to Indenture dated as of
May 15, 1997, by and among Radio One, Inc., as Issuer and United States Trust
Company of New York, as Trustee, by and among Radio One, Inc., Bell Broadcasting
Company, Radio One of Detroit, Inc., and United States Trust Company of New York,
as Trustee.
4.3(/3/) Second Supplemental Indenture dated as of December 23, 1998, to Indenture dated
as of May 15, 1997, by and among Radio One, Inc., as Issuer and United States
Trust Company of New York, as Trustee, by and among Radio One, Inc., Allur-
Detroit, Allur Licenses, Inc., and United States Trust Company of New York, as
Trustee.
4.4(/1/) 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.
4.5(/1/) 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.
4.6(/1/) 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.
4.7(/4/) Standstill Agreement dated as of June 30, 1998 among Radio One, Inc., the
subsidiaries of Radio One, Inc., United States Trust Company of New York and the
other parties thereto.
5.1(/5/) Form of Opinion and consent of Kirkland & Ellis.
8.1(/5/) Form of Opinion and consent of Kirkland & Ellis.
10.1(/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(/1/) 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(/1/) 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.
10.4(/1/) Preferred Stockholders' Agreement dated as of May 14, 1997 among Radio One, Inc.,
Radio One Licenses, Inc. and the other parties thereto.
10.5(/4/) First Amendment to Preferred Stockholders' Agreement dated as of June 30, 1998
among Radio One, Inc., Radio One Licenses, Inc., and the other parties thereto.
10.6 Second Amendment to Preferred Stockholders' Agreement dated as of November 23,
1998 among Radio One, Inc., Radio One Licenses, Inc. and the other parties
thereto.
10.7 Third Amendment to Preferred Stockholders' Agreement dated as of December 23,
1998 among Radio One, Inc., Radio One Licenses, Inc. and the other parties
thereto.
10.8 Fourth Amendment to Preferred Stockholders' Agreement dated as of December 31,
1998 among Radio One, Inc., Radio Once Licenses, Inc. and the other parties
thereto.
10.9(/1/) 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.
10.10(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Syncom Capital Corporation.
10.11(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Alliance Enterprise Corporation.
10.12(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Greater Philadelphia Venture Capital Corporation, Inc.
10.13(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Opportunity Capital Corporation.
10.14(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Capital Dimensions Venture Fund, Inc.
</TABLE>
- --------
(1) Incorporated by reference to Radio One's Annual Report on Form 10-K for
the period ended December 31, 1997 (File No. 333-30795; Film No. 98581327).
(2) Incorporated by reference to Radio One's Current Report on Form 8-K
filed July 13, 1998 (File No. 333-30795; Film No. 98665139).
(3) Incorporated by reference to Radio One's Current Report on Form 8-K
filed January 12, 1999 (File No. 333-30795; Film No. 99504706).
(4) Incorporated by reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 1998 (File No. 333-30795; Film No. 98688998).
(5) To be filed by Amendment to this Registration Statement on Form S-1.
II-3
<PAGE>
<TABLE>
<S> <C>
10.15(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to TSG Ventures Inc.
10.16(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Fulcrum Venture Capital Corporation.
10.17(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Alta Subordinated Debt Partners III, L.P.
10.18(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to BancBoston Investments, Inc.
10.19(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997, issued
to Grant M. Wilson.
10.20(/4/) Credit Agreement dated June 30, 1998 among Radio One, Inc., as the borrower and
NationsBank, N.A., as Documentation Agent and Credit Suisse First Boston as the
Agent.
10.21(/1/) Management Agreement dated as of August 1, 1996 by and between Radio One, Inc.
and Radio One of Atlanta, Inc.
10.22(/1/) Fifth Amendment dated as of July 31, 1997 to that certain Letter of Intent dated
March 12, 1997 by and* between Radio One, Inc. and Allied Capital Financial
Corporation, as amended.
10.23(/1/) Sixth Amendment dated as of September 8, 1997 to that certain Letter of Intent
dated March 12, 1997 by and between Radio One, Inc. and Allied Capital Financial
Corporation, as amended.
10.24(/1/) Time Management and Services Agreement dated March 17, 1998, among WYCB
Acquisition Corporation, Broadcast Holdings, Inc., and Radio One, Inc.
10.25(/1/) Stock Purchase Agreement dated December 23, 1997, between the shareholders of
Bell Broadcasting Company and Radio One, Inc.
10.26(/1/) Option and Stock Purchase Agreement dated November 19, 1997, among Allied Capital
Financial Corporation, G. Cabell Williams III, Broadcast Holdings, Inc. and WYCB
Acquisition Corporation.
10.27(/1/) Amended and Restated Warrant of Radio One, Inc., dated January 9, 1998, issued to
TSG Ventures L.P.
10.28(/1/) Stock Purchase Warrant of Radio One, Inc., dated March 16, 1998 issued to Allied
Capital Financial Corporation.
10.29(/1/) Amended and Restated Credit Agreement dated May 19, 1997 among several lenders,
NationsBank of Texas, N.A. and Radio One, Inc.
10.30(/1/) First Amendment to Credit Agreement dated December 31, 1997 among several
lenders, NationsBank of Texas, N.A. and Radio One, Inc.
10.31(/1/) Amendment to Preferred Stockholders' Agreement dated as of December 31, 1997
among Radio One, Inc., Radio One Licenses, Inc. and the other parties thereto.
10.32(/1/) Assignment and Assumption Agreement dated October 23, 1997, between Greater
Philadelphia Venture Capital Corporation, Inc. and Alfred C. Liggins, III.
10.33(/1/) Agreement dated February 20, 1998 between WUSQ License Limited Partnership and
Radio One, Inc.
10.34(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to Capital Dimensions Venture Fund Inc.
10.35(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to Fulcrum Venture Capital Corporation.
10.36(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to Syncom Capital Corporation.
10.37(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to Alfred C. Liggins, III.
10.38(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to TSG Ventures L.P.
10.39(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to Alliance Enterprise Corporation.
10.41(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to Alta Subordinated Debt Partners III, L.P.
</TABLE>
- --------
(1) Incorporated by reference to Radio One's Annual Report on Form 10-K for
the period ended December 31, 1997 (File No. 333-30795; Film No. 98581327).
(2) Incorporated by reference to Radio One's Current Report on Form 8-K
filed July 13, 1998 (File No. 333-30795; Film No. 98665139).
(3) Incorporated by reference to Radio One's Current Report on Form 8-K
filed January 12, 1999 (File No. 333-30795; Film No. 99504706).
(4) Incorporated by reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 1998 (File No. 333-30795; Film No. 98688998).
(5) To be filed by Amendment to this Registration Statement on Form S-1.
II-4
<PAGE>
<TABLE>
<S> <C>
10.42(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to BancBoston Investments Inc.
10.43(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998 issued
to Grant M. Wilson.
10.44(/5/) [Merger Agreement relating to the acquisition of Radio One of Atlanta, Inc.]
10.45(/5/) Asset Purchase Agreement dated as of November 23, 1998 relating to the
acquisition of
WFUN- FM, licensed to Bethalto, Illinois.
10.46(/5/) [Asset Purchase Agreement relating to the Acquisition of WENZ-FM and WERE-AM,
both licensed to Cleveland, Ohio.]
10.47(/5/) Asset Purchase Agreement dated as of February 10, 1999 relating to the
acquisition of WDYL-FM, licensed to Chester, Virginia.
10.48(/5/) Asset Purchase Agreement dated as of February 26, 1999 relating to the
acquisition of WJKS-FM, licensed to Crewe Virginia, and WSOJ-FM, licensed
Petersburg, Virginia.
10.49(/5/) [Asset Purchase Agreement relating to the acquisition of WCDX-FM, licensed to
Mechanicsville, Virginia, WPLZ-FM, licensed to Petersburg, Virginia, WJRV-FM
licensed to Richmond, Virginia, and WGCV-AM licensed to Petersburg, Virginia.]
21.1 Subsidiaries of Radio One, Inc.
23.1 Consent of Arthur Andersen, L.L.P.
23.2 Consent of Mitchell & Titus, L.L.P.
23.3(/5/) Consent of Kirkland & Ellis (included in Exhibit 5.1).
23.4(/5/) Consent of Kirkland & Ellis (included in Exhibit 8.1).
27.1 Financial Data Schedule (included on pages S1-S3).
99.1 Form of Letter of Transmittal.
</TABLE>
- --------
(1) Incorporated by reference to Radio One's Annual Report filed on Form
10-K for the period ended December 31, 1997 (File No. 333-30795; Film No.
98581327).
(2) Incorporated by reference to Radio One's Current Report on Form 8-K
filed July 13, 1998 (File No. 333-30795; Film No. 98665139).
(3) Incorporated by reference to Radio One's Current Report on Form 8-K
filed January 12, 1999 (File No. 333-30795; Film No. 99504706).
(4) Incorporated by reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 1998 (File No. 333-30795; Film No. 98688998).
(5) To be filed by Amendment to this Registration Statement on Form S-1.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the SEC 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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424 (b) (1) or (4)
or 497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating
II-5
<PAGE>
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.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Lanham, Maryland on
March 12, 1999.
RADIO ONE, INC.
BY: __ /s/ Alfred C. Liggins, II____I
Name: Alfred C. Liggins, III
Title:
President and Chief Executive
Officer
II-7
<PAGE>
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Radio One, Inc., hereby
severally constitute and appoint Alfred C. Liggins, III and Scott R. Royster
and each of them singly, our true and lawful attorneys, with full power to them
and each of them singly, to sign for us in our names in the capacities
indicated below, all pre-effective and post-effective amendments to this
Registration Statement (or any other registrar on statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act), and generally to do all things in our names and on our behalf
in such capacities to enable Radio One, Inc. to comply with the provisions of
the Securities Act, as amended, and all requirements of the SEC.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Radio One, Inc.
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
_/s/ Catherine L. Hughe___s Chairperson of the Board of Directors March 12, 1999
Catherine L. Hughes
____/s/ Terry L. Jone_____s Director March 12, 1999
Terry L. Jones
___/s/ Brian W. McNeill___ Director March 12, 1999
Brian W. McNeill
/s/ Alfred C. Liggins, II_I President and Chief Executive Officer March 12, 1999
Alfred C. Liggins, III (Principal Executive Officer)
and Director
___/s/ Scott R. Royste____r Executive Vice President and March 12, 1999
Scott R. Royster Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
II-8
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
INDEX TO SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................... S-2
Schedule II - Valuation and Qualifying Accounts............................ S-3
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Radio One, Inc.
We have audited in accordance with generally accepted auditing standards,
the consolidated balance sheets and statements of operations, changes in
stockholders' deficit and cash flows of Radio One, Inc. and subsidiaries (the
Company) included in this registration statement and have issued our report
thereon dated . Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule listed
in the accompanying index is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has 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.
Baltimore, Maryland,
, 1999
S-2
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, and 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Additions Acquired Balance
Beginning Charged to from at End
Description of Year Expense Acquisitions Deductions of Year
----------- ---------- ---------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
1996.................. $ 669 $ 628 $ -- $ 532 $ 765
1997.................. 765 894 -- 755 904
1998.................. 904 1,942 258 1,861 1,243
TAX VALUATION RESERVE:
1996.................. 1,067 -- -- 1,067 --
1997.................. -- 2,058 -- -- 2,058
1998.................. 2,058 -- -- 2,058 --
</TABLE>
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1 [Underwriting Agreement](/5/)
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(/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(/2/) First Supplemental Indenture dated as of June 30, 1998, to Indenture dated as
of May 15, 1997, by and among Radio One, Inc., as Issuer and United States
Trust Company of New York, as Trustee, by and among Radio One, Inc., Bell
Broadcasting Company, Radio One of Detroit, Inc., and United States Trust
Company of New York, as Trustee.
4.3(/3/) Second Supplemental Indenture dated as of December 23, 1998, to Indenture dated
as of May 15, 1997, by and among Radio One, Inc., as Issuer and United States
Trust Company of New York, as Trustee, by and among Radio One, Inc., Allur-
Detroit, Allur Licenses, Inc., and United States Trust Company of New York, as
Trustee.
4.4(/1/) 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.
4.5(/1/) 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.
4.6(/1/) 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.
4.7(/4/) Standstill Agreement dated as of June 30, 1998 among Radio One, Inc., the
subsidiaries of Radio One, Inc., United States Trust Company of New York and
the other parties thereto.
5.1(/5/) Form of Opinion and consent of Kirkland & Ellis.
8.1(/5/) Form of Opinion and consent of Kirkland & Ellis.
10.1(/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(/1/) 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(/1/) 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.
10.4(/1/) Preferred Stockholders' Agreement dated as of May 14, 1997 among Radio One,
Inc., Radio One Licenses, Inc. and the other parties thereto.
10.5(/4/) First Amendment to Preferred Stockholders' Agreement dated as of June 30, 1998
among Radio One, Inc., Radio One Licenses, Inc., and the other parties thereto.
10.6 Second Amendment to Preferred Stockholders' Agreement dated as of November 23,
1998 among Radio One, Inc., Radio One Licenses, Inc. and the other parties
thereto.
10.7 Third Amendment to Preferred Stockholders' Agreement dated as of December 23,
1998 among Radio One, Inc., Radio One Licenses, Inc. and the other parties
thereto.
10.8 Fourth Amendment to Preferred Stockholders' Agreement dated as of December 31,
1998 among Radio One, Inc., Radio Once Licenses, Inc. and the other parties
thereto.
<CAPTION>
Page
----------- ----
<C>
</TABLE>
- --------
(1) Incorporated by reference to Radio One's Annual Report on Form 10-K for
the period ended December 31, 1997 (File No. 333-30795; Film No. 98581327).
(2) Incorporated by reference to Radio One's Current Report on Form 8-K
filed July 13, 1998 (File No. 333-30795; Film No. 98665139).
(3) Incorporated by reference to Radio One's Current Report on Form 8-K
filed January 12, 1999 (File No. 333-30795; Film No. 99504706).
(4) Incorporated by reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 1998 (File No. 333-30795; Film No. 98688998).
(5) To be filed by Amendment to this Registration Statement on Form S-1.
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.9(/1/) 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.
10.10(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Syncom Capital Corporation.
10.11(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Alliance Enterprise Corporation.
10.12(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Greater Philadelphia Venture Capital Corporation, Inc.
10.13(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Opportunity Capital Corporation.
10.14(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Capital Dimensions Venture Fund, Inc.
10.15(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to TSG Ventures Inc.
10.16(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Fulcrum Venture Capital Corporation.
10.17(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Alta Subordinated Debt Partners III, L.P.
10.18(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to BancBoston Investments, Inc.
10.19(/1/) Amended and Restated Warrant of Radio One, Inc. dated as of May 19, 1997,
issued to Grant M. Wilson.
10.20(/4/) Credit Agreement dated June 30, 1998 among Radio One, Inc., as the borrower and
NationsBank, N.A., as Documentation Agent and Credit Suisse First Boston as the
Agent.
10.21(/1/) Management Agreement dated as of August 1, 1996 by and between Radio One, Inc.
and Radio One of Atlanta, Inc.
10.22(/1/) Fifth Amendment dated as of July 31, 1997 to that certain Letter of Intent
dated March 12, 1997 by and* between Radio One, Inc. and Allied Capital
Financial Corporation, as amended.
10.23(/1/) Sixth Amendment dated as of September 8, 1997 to that certain Letter of Intent
dated March 12, 1997 by and between Radio One, Inc. and Allied Capital
Financial Corporation, as amended.
10.24(/1/) Time Management and Services Agreement dated March 17, 1998, among WYCB
Acquisition Corporation, Broadcast Holdings, Inc., and Radio One, Inc.
10.25(/1/) Stock Purchase Agreement dated December 23, 1997, between the shareholders of
Bell Broadcasting Company and Radio One, Inc.
10.26(/1/) Option and Stock Purchase Agreement dated November 19, 1997, among Allied
Capital Financial Corporation, G. Cabell Williams III, Broadcast Holdings, Inc.
and WYCB Acquisition Corporation.
10.27(/1/) Amended and Restated Warrant of Radio One, Inc., dated January 9, 1998, issued
to TSG Ventures L.P.
10.28(/1/) Stock Purchase Warrant of Radio One, Inc., dated March 16, 1998 issued to
Allied Capital Financial Corporation.
10.29(/1/) Amended and Restated Credit Agreement dated May 19, 1997 among several lenders,
NationsBank of Texas, N.A. and Radio One, Inc.
<CAPTION>
Page
----------- ----
<C>
</TABLE>
- --------
(1) Incorporated by reference to Radio One's Annual Report on Form 10-K for
the period ended December 31, 1997 (File No. 333-30795; Film No. 98581327).
(2) Incorporated by reference to Radio One's Current Report on Form 8-K
filed July 13, 1998 (File No. 333-30795; Film No. 98665139).
(3) Incorporated by reference to Radio One's Current Report on Form 8-K
filed January 12, 1999 (File No. 333-30795; Film No. 99504706).
(4) Incorporated by reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 1998 (File No. 333-30795; Film No. 98688998).
(5) To be filed by Amendment to this Registration Statement on Form S-1.
<PAGE>
<TABLE>
<CAPTION>
Exhib No. Description
---------- -----------
<C> <S>
10.30(/1/) First Amendment to Credit Agreement dated December 31, 1997 among several
lenders, NationsBank of Texas, N.A. and Radio One, Inc.
10.31(/1/) Amendment to Preferred Stockholders' Agreement dated as of December 31, 1997
among Radio One, Inc., Radio One Licenses, Inc. and the other parties thereto.
10.32(/1/) Assignment and Assumption Agreement dated October 23, 1997, between Greater
Philadelphia Venture Capital Corporation, Inc. and Alfred C. Liggins, III.
10.33(/1/) Agreement dated February 20, 1998 between WUSQ License Limited Partnership and
Radio One, Inc.
10.34(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to Capital Dimensions Venture Fund Inc.
10.35(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to Fulcrum Venture Capital Corporation.
10.36(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to Syncom Capital Corporation.
10.37(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to Alfred C. Liggins, III.
10.38(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to TSG Ventures L.P.
10.39(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to Alliance Enterprise Corporation.
10.41(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to Alta Subordinated Debt Partners III, L.P.
10.42(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to BancBoston Investments Inc.
10.43(/4/) Amended and Restated Warrant of Radio One, Inc. dated as of June 30, 1998
issued to Grant M. Wilson.
10.44(/5/) [Merger Agreement relating to the acquisition of Radio One of Atalanta, Inc.]
10.45(/5/) Asset Purchase Agreement dated as of November 23, 1998 relating to the
acquisition of
WFUN- FM, licensed to Bethalto, Illinois.
10.46(/5/) [Asset Purchase Agreement relating to the Acquisition of WENZ-FM and WERE-AM,
both licensed to Cleveland, Ohio.]
10.47(/5/) Asset Purchase Agreement dated as of February 10, 1999 relating to the
acquisition of WDYL-FM, licensed to Chester, Virginia.
10.48(/5/) Asset Purchase Agreement dated as of February 26, 1999 relating to the
acquisition of WJKS-FM, licensed to Crewe Virginia, and WSOJ-FM, licensed
Petersburg, Virginia.
10.49(/5/) [Asset Purchase Agreement relating to the acquisition of WCDX-FM, licensed to
Mechanicsville, Virginia, WPLZ-FM, licensed to Petersburg, Virginia, WJRV-FM
licensed to Richmond, Virginia, and WGCV-AM licensed to Petersburg, Virginia.]
21.1 Subsidiaries of Radio One, Inc.
23.1 Consent of Arthur Andersen, L.L.P.
23.2 Consent of Mitchell & Titus, L.L.P.
23.3(/5/) Consent of Kirkland & Ellis (included in Exhibit 5.1).
23.4(/5/) Consent of Kirkland & Ellis (included in Exhibit 8.1).
27.1 Financial Data Schedule (included on pages S1-S3).
99.1 Form of Letter of Transmittal.
<CAPTION>
Page
---------- ----
<C>
</TABLE>
- --------
(1) Incorporated by reference to Radio One's Annual Report on Form 10-K for
the period ended December 31, 1997 (File No. 333-30795; Film No. 98581327).
(2) Incorporated by reference to Radio One's Current Report on Form 8-K
filed July 13, 1998 (File No. 333-30795; Film No. 98665139).
(3) Incorporated by reference to Radio One's Current Report on Form 8-K
filed January 12, 1999 (File No. 333-30795; Film No. 99504706).
(4) Incorporated by reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 1998 (File No. 333-30795; Film No. 98688998).
(5) To be filed by Amendment to this Registration Statement on Form S-1.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RADIO ONE, INC.
This Amended and Restated Certificate of Incorporation of Radio One, Inc.,
was duly adopted in accordance with the provisions of Sections 141, 228, 242 and
245 of the Delaware General Corporation Law. The original Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
July 15, 1996.
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 293,000 shares, consisting of: (i)
140,000 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"), (iv) 1,000 shares of Class B Common Stock, par value $.01 per share
(the "Class B Common"), and (v) 1,000 shares of Class C Common Stock, par value
$.01 per share (the "Class C Common" and together with the Class A Common and
the Class B 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
<PAGE>
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) 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>
<TABLE>
<CAPTION>
AS OF THE TWELVE-MONTH
PERIOD ENDING BROADCAST CASH FLOW ($)
- ------------------------ -----------------------
<S> <C>
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
</TABLE>
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
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<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
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<PAGE>
the Corporation has elected to redeem as specified in the Final Redemption
Notice by a fraction, the 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
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<PAGE>
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.
(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").
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<PAGE>
(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 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.
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<PAGE>
(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.
Section 4.3 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, Class B Common and Class C Common 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, and the holders of Class B Common shall be
entitled to ten votes per share, on all matters presented for a vote of the
stockholders of the Corporation, provided that, at every meeting of the
stockholders called for the election of directors the holders of Class A Common,
voting separately as a class, shall be entitled to elect two of the directors to
be elected at such meeting. The holders of Class A Common and Class B Common,
voting together as a class, shall be entitled to elect the remaining number of
directors to be elected at such meeting. Directors elected by the holders of a
class or classes of Common Stock may be removed, with or without cause, only by
a vote of the holders of a majority of the shares of such class or classes of
Common Stock then outstanding. If, during the interval between annual meetings
of stockholders for the election of directors, the number of directors who have
been elected by the holders of any class or classes of Common Stock shall, by
reason of resignation, death or removal, be reduced, the vacancy or vacancies in
the directors elected by the holders of such class or classes of Common Stock
may be filled by a majority vote of the remaining directors elected by the
holders of such class or classes of Common Stock then in office. Any director
elected to fill any such vacancy by the remaining directors then in office may
be removed from office by a vote of the holders of a majority of the shares of
such class or classes of Common Stock then outstanding. Except as otherwise
required by law, the holders of the Class A Common and the holders of the Class
B Common shall in all matters not specified in this Section 4.3(a) vote together
as a single class, provided that the holders of shares of the Class A Common
shall be entitled to one (1) vote per share and the holders of shares of the
Class B Common shall be entitled to ten (10) votes per share. 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 C 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 C 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 and Class B 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,
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<PAGE>
the holders of Class B Common and the holders of Class C 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, the dividends payable to
the holders of Class B Common shall be payable in shares of Class B Common and
dividends payable to the holders of Class C Common shall be payable in shares of
Class C Common, and (ii) if the dividends consist of other voting securities of
the Corporation, the Corporation shall make available to each holder of Class C
Common 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 C 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: (i) Class A
Common in a quantity sufficient to provide for the conversion of all outstanding
shares of the Class B Common and Class C Common into Class A Common; and (ii)
Class C Common in a quantity sufficient to provide for the conversion of all
outstanding shares of the Class A Common into Class C Common.
(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 C 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 C Common into shares of the 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 C 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 C 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
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<PAGE>
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 C 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 C
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) Conversion of Class B Common. Each share of Class B
Common shall also be convertible, at the option of the holder thereof, into one
fully paid and nonassessable share of Class A Common. The procedures for
conversion of Class C Common into Class A Common, as set forth in paragraph (i)
of this Section 4.3(d), shall also be applicable to the conversion of Class B
Common into Class A Common. Shares of Class B Common that have been converted
hereunder shall not be cancelled but shall remain as treasury shares unless
retired by resolution of the Board of Directors.
(iii) Regulated Stockholders. No Regulated Stockholder
shall exercise its rights as a holder of shares of Class C 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 C 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 C 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 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 C 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 C 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.
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<PAGE>
(iv) Class B Stockholders. Class B Stockholders (as
hereinafter defined) and Class B Permitted Transferees (as hereinafter defined)
may exercise their respective rights as a holder of shares of Class C Common to
convert such shares into shares of Class A Common, or otherwise acquire shares
of Class A Common, only in the event that: (A) the Corporation shall merge or
consolidate with or into, or otherwise acquire, any other Person and such Class
B Stockholder or Class B Permitted Transferee receive shares of Class A Common
in exchange for such Class B Stockholder's or Class B Permitted Transferee's
interest in such other Person; (B) such Class B Stockholder or Class B Permitted
Transferee desires to sell shares of Class A Common into which all or part of
its shares of Class C Common are to be converted in connection with any proposed
purchase of Class A Common by another Person (other than a Class B Stockholder
or a Class B Permitted Transferee); or (C) such Class B Stockholder or Class B
Permitted Transferee intends to sell shares of Class A Common into which all or
part of its shares of Class C Common are to be converted pursuant to a
registration statement under the 1933 which has been declared effective.
(v) Surrender of Certificates. Subject to the other
provisions of this Section 4.3 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, Class B Common or Class C 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 C 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, Class B Common or Class C 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.
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<PAGE>
(g) Transfer of Class B Common. (i) A Beneficial Owner (as
hereinafter defined) of shares of Class B Common (herein referred to as a "Class
B Stockholder") may transfer, directly or indirectly, shares of Class B Common,
whether by sale, assignment, gift or otherwise, only to a Class B Permitted
Transferee (as hereinafter defined) and no Class B Stockholder may otherwise
transfer Beneficial Ownership (as hereinafter defined) of any shares of Class B
Common. In the event of any attempted transfer of the Beneficial Ownership of
any shares of Class B Common in violation of the limitation provided in the
preceding sentence, the shares of Class B Common with respect to which the
transfer of such Beneficial Ownership has been attempted shall be deemed to have
been converted automatically, without further deed or action by or on behalf of
any person, into shares of Class A Common. A "Class B Permitted Transferee"
shall be, if the Class B Stockholder is an individual:
(A) the estate of the Class B Stockholder or any legatee, heir or
distributees thereof;
(B) the spouse or former spouse of the Class B Stockholder;
(C) any parent or grandparent and any lineal descendant (including any
adopted child) of any parent or grandparent of the Class B Stockholder
or of the Class B Stockholder's spouse or former spouse;
(D) any guardian or custodian (including a custodian for purposes of the
Uniform Gift to Minors Act or Uniform Transfers to Minors Act) for, or
any executor, administrator, conservator and/or other legal
representative of, the Class B Stockholder and/or any Class B
Permitted Transferee or Class B Permitted Transferees thereof;
(E) a trust (including a voting trust), and any savings or retirement
account, such as an individual retirement account for purposes of
federal income tax laws, whether or not involving a trust, principally
for the benefit of such Class B Stockholder and/or any Class B
Permitted Transferee or Class B Permitted Transferees thereof,
including any trust in respect of which such Class B Stockholder
and/or any Class B Permitted Transferee or Class B Permitted
Transferees thereof has any general or special power of appointment or
general or special non-testamentary power or special testamentary
power of appointment limited to any Class B Permitted Transferee or
Class B Permitted Transferees;
(F) any corporation, partnership or other business entity if Substantial
Beneficial Ownership thereof is held by such Class B Stockholder
and/or any Class B Permitted Transferee or Class B Permitted
Transferees thereof; provided, however, that if such Class B
-------- -------
Stockholder, and all Class B Permitted Transferees thereof, cease, for
whatever reason, to hold Substantial Beneficial Ownership of such
corporation, partnership or other business entity, then any and all
shares of Class B Common that such corporation, partnership or other
business entity is the Beneficial Owner of shall be deemed to be
converted automatically, without further deed or action by or on
behalf of any person, into shares of Class A Common;
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<PAGE>
(G) any Founding Investor and/or any Class B Permitted Transferee or Class
B Permitted Transferees of a Founding Investor; and
(H) the Corporation.
A "Class B Permitted Transferee" shall be, if the Class B Stockholder is a
corporation, partnership or other business entity:
(A) any employee benefit plan, or trust thereunder or therefor, sponsored
by the Class B Stockholder;
(B) any trust (including any voting or liquidating trust) principally for
the benefit of the Class B Stockholder and/or any Class B Permitted
Transferee or Class B Permitted Transferees thereof;
(C) any corporation, partnership or other business entity if Substantial
Beneficial Ownership thereof is held by such Class B Stockholder and/or
any Class B Permitted Transferee or Class B Permitted Transferees
thereof; provided, however, that if such Class B Stockholder, and all
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Class B Permitted Transferees thereof, cease, for whatever reason, to
hold Substantial Beneficial Ownership of such corporation, partnership
or other business entity, then any and all shares of Class B Common
that such corporation, partnership or other business entity is the
Beneficial Owner of shall be deemed to be converted automatically,
without further deed or action by or on behalf of any person, into
shares of Class A Common;
(D) the stockholders of the corporation, partners of the partnership or
other owners of equity interests in any other business entity, who
receive such shares, by way of dividend or distribution (upon
dissolution, liquidation or otherwise), provided that such transfer
will not result in Beneficial Ownership of any of such shares by any
person who did not have the power to control such corporation,
partnership or business entity at the time such corporation,
partnership or business entity first acquired Beneficial Ownership of
such shares of Class B Common (other than by any person who qualifies
as a Class B Permitted Transferee pursuant to any other provision of
this paragraph (i) of this Section 4.3(g));
(E) the Corporation; and
(F) any Founding Investor and/or any Class B Permitted Transferee or Class
B Permitted Transferees of a Founding Investor.
(ii) Any person who holds shares of Class B Common for the
Beneficial Ownership of another, including (A) any broker or dealer in
securities; (B) any clearing house; (C) any bank, trust company, savings and
loan association or other financial institution; (D) any other nominee; and (E)
any savings plan or account or related trust, such as an individual retirement
account, principally for the benefit of any individual, may transfer such shares
to the person or
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persons for whose benefit it holds such shares. Notwithstanding anything to the
contrary set forth herein, any holder of Class B Common may pledge such shares
to a pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares may not
be transferred to or registered in the name of the pledgee unless such pledgee
is a Class B Permitted Transferee. In the event of foreclosure or other similar
action by the pledgee, such pledged shares shall automatically, without any act
or deed on the part of the Corporation or any other person, be converted into
shares of Class A Common unless within five business days after such foreclosure
or similar event such pledged shares are returned to the pledgor or transferred
to a Class B Permitted Transferee. The foregoing provisions of this paragraph
shall not be deemed to restrict or prevent any transfer of such shares by
operation of law upon incompetence, death, dissolution or bankruptcy of any
Class B Stockholder or any provision of law providing for, or judicial order of,
forfeiture, seizure or impoundment
(iii) Any transferee of shares of Class B Common pursuant to
a transfer made in violation of paragraphs (i) and (ii) of this Section 4.3(g)
shall have no rights as a stockholder of the Corporation and no other rights
against or with respect to the Corporation except the right to receive, in
accordance with paragraph (ii) of Section 4.3(d) or paragraphs (i) and (ii) of
this Section 4.3(g), as applicable, shares of Class A Common upon the conversion
of such transferred shares. Notwithstanding any other provision of this Amended
and Restated Certificate of Incorporation, the Corporation shall, to the full
extent permitted by law, be entitled to issue shares of Class B Common to any
person from time to time.
(iv) The Corporation and any transfer agent of Class B Common
may as a condition to the transfer or the registration of any transfer of shares
of Class B Common permitted by paragraphs (i) and (ii) of this Section 4.3(g)
require the furnishing of such affidavits or other proof as they deem necessary
to establish that such transferee is a Class B Permitted Transferee.
(v) For purposes of paragraph (i) of this Section 4.3(g): (A)
the term "Beneficial Ownership" in respect of shares of Class B Common shall
mean possession of the power and authority, either singly or jointly with
another, to vote or dispose of or to direct the voting or disposition of such
shares and the term "Beneficial Owner" in respect of shares of Class B Common
shall mean the person or persons who possess such power and authority; and (B)
the term "Substantial Beneficial Ownership" in respect of any corporation,
partnership or other business entity shall mean possession of the power and
authority, either singly or jointly with another, to vote or dispose of or to
direct the voting or disposition of at least 80% of each class of equity
ownership interest in such corporation, partnership or other business entity.
(h) 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.
(i) 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
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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 and Class C 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 and Class C 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 and Class C 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 and
Class C Common, such stock or other securities or property as the holders of the
Class B Common and Class C 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.
(j) 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
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made without charge to the original holders of the surrendered certificates for
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:
"Advance of Expenses" has the meaning set forth in Section 8.2.
"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).
"Beneficial Ownership" has the meaning set forth in Section 4.3(g)(v).
"Broadcast Cash Flow" has the meaning given to such term in the
Preferred Stockholders' Agreement.
"Capital Stock" has the meaning set forth in Section 4.1.
"Class A Common" has the meaning set forth in Section 4.1.
"Class B Common" has the meaning set forth in Section 4.1.
"Class B Permitted Transferee" has the meaning set forth in Section
4.3(g).
"Class B Stockholder" has the meaning set forth in Section 4.3(g).
"Class C Common" has the meaning set forth in Section 4.1.
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"Common Stock" has the meaning set forth in Section 4.1.
"Communications Act" has the meaning set forth in Section 9.1.
"Conversion Date" has the meaning set forth in Section 4.2(d)(i).
"Corporation" has the meaning set forth in Article I.
"Date of Issuance" has the meaning set forth in Section 4.2(a)(i).
"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.
"Deferral Notice" has the meaning set forth in Section 4.3(d)(i).
"Deferral Period" has the meaning set forth in Section 4.3(d)(i).
"DGCL" has the meaning set forth in Article III.
"Dividend Rate" has the meaning set forth in Section 4.2(a)(i).
"Dividend Reference Date" has the meaning set forth in Section
4.2(a)(iii).
"FCC" has the meaning set forth in Section 9.1.
"Final Adjudication" has the meaning set forth in Section 8.2.
"Final Redemption Notice" has the meaning set forth in Section
4.2(d)(vi).
"Founding Investor" means Alfred C. Liggins, III or Catherine L.
Hughes.
"Indemnitee" has the meaning set forth in Section 8.2.
"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.
"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.
"Mandatory Redemption Date" has the meaning set forth in Section
4.2(d)(i).
"Mandatory Redemption Notice" has the meaning set forth in Section
4.2(d)(v).
"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 M. Wilson.
"1933 Act" has the meaning set forth in Section 4.3(d)(iii).
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"Noncompliance Dividend Rate" has the meaning set forth in Section
4.2(a)(i).
"Noncompliance Event" has the meaning set forth in Section 4.2(a)(i).
"Notice" has the meaning set forth in Section 4.3(d)(i).
"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.
"Participation Notice" has the meaning set forth in Section
4.2(d)(vi).
"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 Share" has the meaning set forth in Section 4.2(a)(i).
"Preferred Stock" has the meaning set forth in Section 4.1.
"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.
"Proceeding" has the meaning set forth in Section 8.2.
"Put Notice" has the meaning set forth in Section 4.2(d)(vii).
"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.
"Redemption Notice" has the meaning set forth in Section 4.2(d)(vi).
"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.
"Retroactive Dividend Rate" has the meaning set forth in Section
4.2(a)(ii).
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"Senior Indebtedness" has the meaning given to such term in that
certain Standstill Agreement, dated as of June 30, 1998, among the Corporation,
the Subsidiaries of the Corporation party thereto, the New Investors, the
Original Investors, the Management Investors, Credit Suisse First Boston, and
United States Trust Company of New York.
"Senior Loan Agreement" has the meaning given to such term in the
Preferred Stockholders' Agreement.
"Series A Preferred " has the meaning set forth in Section 4.1.
"Series B Preferred " has the meaning set forth in Section 4.1.
"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.
"Substantial Beneficial Ownership" has the meaning set forth in
Section 4.3(g)(v).
"Undertaking" has the meaning set forth in Section 8.2.
"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.
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.
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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.
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
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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 VII - 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 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,
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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 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
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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.
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.
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<PAGE>
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
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
-25-
<PAGE>
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.
ARTICLE X - Section 203 Election
The Corporation expressly elects not to be governed by Section 203 of Title
8 of the DGCL.
ARTICLE XI - Plan of Recapitalization
In order to (i) effect certain changes in the stock of the Corporation
and the rights of stockholders of the Corporation and (ii) effect certain
reclassifications of the stock of the Corporation, the provisions of the Plan of
Recapitalization, attached hereto as Exhibit A, are hereby incorporated herein
by reference and such provisions shall be deemed effective upon, and
simultaneously with, this Amended and Restated Certificate of Incorporation
becoming effective.
-26-
<PAGE>
IN WITNESS WHEREOF, said Radio One, Inc. has caused its corporate seal
to be hereunto affixed and this Amended and Restated Certificate of
Incorporation to be signed by Alfred C. Liggins, III, its President, and
attested by Scott R. Royster, one of its Vice Presidents, this 25th day of
February, 1999.
RADIO ONE, INC.
By: /s/ Alfred C. Liggins, III,
--------------------------------
Alfred C. Liggins, III, President
[SEAL]
ATTEST:
By: /s/ Scott R. Royster
--------------------------------
Scott R. Royster, Vice President
-27-
<PAGE>
EXHIBIT A
PLAN OF RECAPITALIZATION
FOR RADIO ONE, INC.
Present Capitalization
----------------------
1. Immediately prior to the time at which this Plan of
Recapitalization becomes effective, as hereinafter set forth, the authorized
capitalization of Radio One, Inc. (the "Corporation") was 292,000 shares,
consisting of: (i) 140,000 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 "Existing Class A Common"), and (iv) 1,000 shares
of Class B Common Stock, par value $.01 per share (the "Existing Class B
Common"), of which, 84,843.03 shares of Series A Preferred, 124,467.10 shares of
Series B Preferred, and 140.42 shares of Existing Class A Common are issued,
fully paid and nonassessable, and outstanding. The outstanding shares of
Existing Class A Common are held by the following stockholders of record:
<TABLE>
<CAPTION>
No. of Shares
-------------
<S> <C>
Catherine L. Hughes 75.00
Alfred C. Liggins, III 62.45
Jerry A. Moore III 1.00
------
138.45
======
</TABLE>
The Proposed Plan of Recapitalization
-------------------------------------
2. The Corporation proposes to increase the present authorized
capital stock of the Corporation to 293,000 shares by authorizing a new class of
common stock consisting of 1,000 shares of Class C Common Stock, par value $.01
per share (the "Class C Common").
3. The Corporation proposes to amend and restate the Amended and
Restated Certificate of Incorporation of the Corporation to (i) provide for the
Class C Common, (ii) amend the rights and preferences of the Existing Class A
Common and the Existing Class B Common (as so amended, the "New Class A Common"
and the "New Class B Common"), and (iii) effect certain other modifications, all
as set forth in the Amended and Restated Certificate of Incorporation of the
Corporation, to which this Plan of Recapitalization is attached.
4. The Corporation proposes to reclassify and split each of the
presently issued and outstanding shares of Existing Class A Common
Ex. A-1
<PAGE>
into one-third of a share of New Class B Common and two-thirds of a share of
Class C Common and each fractional share of Existing Class A Common into an
appropriate pro rata number of shares (including fractional shares) of New Class
B Common and Class C Common.
5. The amount of capital which will represent the aggregate number
of shares of New Class B Common and Class C Common to be issued pursuant to this
plan shall be $1.3845.
6. If the stockholders approve the foregoing plan and the Amended
and Restated Certificate of Incorporation, and after the plan becomes effective,
(i) all rights appertaining to the Existing Class A Common, or accruing by
virtue of the ownership thereof, shall immediately cease and terminate, and the
holders thereof shall surrender the certificates therefor to the Corporation for
cancellation, and receive and accept in lieu thereof certificates of New Class B
Common and Class C Common in exchange for and in substitution of the Existing
Class A Common as above provided, (ii) all warrants exercisable for shares of
Existing Class A Common shall thereafter be exercisable for the same number of
shares of New Class A Common, and (iii) any rights then outstanding to obtain
shares of Existing Class B Common shall thereafter represent the right to obtain
the same number of shares of New Class C Common. Nothing herein is intended,
nor shall be deemed, to affect any of the rights and preferences of the holders
of the Preferred Stock as set forth in the Amended and Restated Certificate of
Incorporation.
Method of Carrying out the Plan
-------------------------------
7. Under this Plan of Recapitalization, when the reclassification
described herein has become effective, the New Class B Common and Class C Common
shall be issued as provided above and the outstanding shares of Existing Class
A Common shall be canceled.
Conditions Upon which the Plan Will Become Effective
----------------------------------------------------
8. This Plan of Recapitalization shall become effective (i) after it
has been duly adopted by the Board of Directors of the Corporation and duly
approved by the stockholders of the Corporation and (ii) upon, and
simultaneously with, the Amended and Restated Certificate of Incorporation of
the Corporation becoming effective.
IN WITNESS WHEREOF, RADIO ONE, INC., pursuant to authority duly given
by its Board of Directors has caused this Plan of Recapitalization to be duly
executed by its President and its corporate seal to be affixed hereto and
attested by its Vice President.
RADIO ONE, INC.
By:
------------------------
President
[SEAL]
Attest:
By:
-------------------------------
Vice President
Ex. A-2
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
RADIO ONE, INC.
(as of February 25, 1999)
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 presence of stockholders entitled to cast at
------
least a majority of the votes that all stockholders are entitled to cast on a
matter to be acted upon at a meeting of the stockholders shall constitute a
quorum for the purposes of consideration and action on the matter, 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 a majority of the votes cast by all
stockholders entitled to vote and, if any stockholders are entitled to vote as a
class, the vote of a majority of the votes cast by the stockholders entitled to
vote as a class, whether such stockholders are present in person or represented
by proxy at the meeting, 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.
-2-
<PAGE>
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 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, including the Class A Directors (as
hereinafter defined); 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 14,
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 the
Closing Date (as defined in the PSA), 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 board of
directors shall include two directors elected by the holders of the Class A
Common Stock by class vote pursuant to the amended and restated certificate of
incorporation of the corporation (the "Class A Directors"). The directors shall
be elected at the annual meeting of stockholders, except for the Class A
Directors and 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. The Class A Directors shall be
elected at each annual meeting of stockholders commencing with the annual
meeting of stockholders to be held in 2000.
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 vote of a
majority of the votes cast by all stockholders entitled to vote at an election
of directors, except that the Class A Directors may be removed only by the vote
of the holders of a majority of the shares of Class A Common Stock, and
-3-
<PAGE>
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 vote of a majority of the votes cast by all stockholders 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 resulting from the
resignation or removal of a Class A Director may be filled only by the vote of
the holders of a majority of the shares of Class A Common Stock; and provided,
further, 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.
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
-4-
<PAGE>
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 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
-5-
<PAGE>
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.
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 corpo ration 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
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<PAGE>
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 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 trea surer 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
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<PAGE>
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 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
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<PAGE>
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 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
- ---------
-9-
<PAGE>
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 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 canceled, and
no new certificate shall be issued in replacement until the former certificate
for a like number of shares shall have been surrendered or canceled, except as
otherwise provided in Section 2 with respect to lost, stolen or destroyed
certificates.
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<PAGE>
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 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
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<PAGE>
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.
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
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<PAGE>
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 VII - 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 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.
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<PAGE>
EXHIBIT 10.6
SECOND AMENDMENT TO PREFERRED STOCKHOLDERS' AGREEMENT
THIS AMENDMENT (this "Amendment") is executed to be effective as of
----------
November 23, 1998 (the "Effective Date") among ALTA SUBORDINATED DEBT PARTNERS
--------------
III, L.P., BANCBOSTON INVESTMENTS INC., GRANT M. WILSON, SYNCOM CAPITAL
CORPORATION, ALLIANCE ENTERPRISE CORPORATION, ALFRED C. LIGGINS, III, as
successor in interest to Greater Philadelphia Venture Capital Corporation, Inc.,
OPPORTUNITY CAPITAL CORPORATION, MEDALLION CAPITAL, INC., TSG VENTURES L.P. and
FULCRUM VENTURE CAPITAL CORPORATION (collectively, the "Investors"), RADIO ONE,
INC. (the "Company") and RADIO ONE LICENSES, INC., a subsidiary of the Company,
and ALFRED C. LIGGINS, CATHERINE L. HUGHES and JERRY A. MOORE III (the
"Management Stockholders"), with reference to that certain Preferred
-----------------------
Stockholders' Agreement (as amended, supplemented and otherwise modified from
time to time, the "Agreement") entered into as of May 14, 1997 by and among
----------
the Investors, the Company, and the Management Shareholders. Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed to them
in the Agreement.
R E C I T A L S:
- - - - - - - -
WHEREAS, the Agreement imposes certain affirmative and negative covenants on
the Company;
WHEREAS, after reviewing certain information provided by the Company
concerning performance during 1998 and expected expenditures, the Investors are
willing to amend the Agreement to provide for modifications to the covenants
subject to performance and observance in full of each of the covenants,
conditions and other terms set forth below.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto hereby agree as
follows:
Section 1. AMENDMENTS TO AGREEMENT
Subject to the terms and conditions set forth herein, and in reliance upon the
representations of the Company herein contained, the Agreement is hereby amended
as follows:
(a) Section 4.2 of the Agreement is hereby amended by substituting the
number "$2,850,000" for the number "$1,935,000".
(b) Section 4.3 of the Agreement is hereby deleted in its entirety and is
replaced with the following:
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 period, except that the
amount shall be $2,100,000 for fiscal year 1998; 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
- 1 -
<PAGE>
unused portion of permitted Capital Expenditures to the amount of the Capital
Expenditure allotment for the following fiscal year period.
(c) Section 5.9(a) of the Agreement is hereby deleted in its entirety and
is replaced with the following:
(a) ensure that meetings of the Board of Directors of the Company are held
at least four (4) times each year (provided that the number may be reduced to
three (3) for fiscal year 1998) at intervals of not more than four (4) months
(provided that the interval requirement shall not apply to fiscal year 1998)
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;
Section 2. REPRESENTATIONS AND WARRANTIES.
In order to induce the Investors to enter into this Amendment, Company
represents and warrants to the Investors that the representations and warranties
contained in Section 2 of the Agreement are true, correct and complete in all
---------
material respects on and as of the date hereof to the same extent as though made
on and as of such date, except for changes that were consented to in writing by
the Investors and except as disclosed on Attachment A hereto.
Section 3. MISCELLANEOUS
(a) Ratification and Confirmation of Agreement. Except as specifically
amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified and confirmed, and the execution, delivery and performance of
this Amendment shall not, except as expressly provided herein, operate as an
amendment of any provision of the Agreement or as a waiver of any right, power
or remedy of the Investors under the Agreement. Without limiting the generality
of the foregoing, the amendments set forth in Section 1 above shall be limited
---------
precisely as set forth above, and nothing in this Amendment shall be deemed
(i) to constitute a waiver of compliance by the Company with respect to any
other provision or condition of the Agreement or (ii) to prejudice any right or
remedy that the Investors may now have or may have in the future under or in
connection with the Agreement.
(b) Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
(c) Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
- 2 -
<PAGE>
(d) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
RADIO ONE, INC.
/s/ Alfred C. Liggins, III
By:_____________________________________
Name: Alfred C. Liggins, III
Title: President
RADIO ONE LICENSES, INC.
/s/ Alfred C. Liggins, III
By:_____________________________________
Name: Alfred C. Liggins, III
Title: President
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt Management III,
L.P., its General Partner
/s/ Brian W. McNeill
By:_____________________________________
Name: Brian W. McNeill
Title: General Partner
BANCBOSTON INVESTMENTS INC.
/s/ Lars A. Swanson
By:_____________________________________
Name: Lars A. Swanson
Title: Assistant Vice President
GRANT WILSON
/s/ Grant M. Wilson
________________________________________
Name: Grant M. Wilson
Title: Individual
- 4 -
<PAGE>
SYNCOM CAPITAL CORPORATION
/s/ Terry L. Jones
By:_____________________________________
Name: Terry L. Jones
Title:
ALLIANCE ENTERPRISE CORPORATION
/s/ Divakar Kamath
By:_____________________________________
Name: Divakar Kamath
Title: Executive Vice President
ALFRED C. LIGGINS, III
/s/ Alfred C. Liggins, III
By:_____________________________________
Name: Alfred C. Liggins, III
Title: Individual
OPPORTUNITY CAPITAL CORPORATION
/s/ J. Peter Thompson
By:_____________________________________
Name: J. Peter Thompson
Title: President
MEDALLION CAPITAL, INC.
/s/ Dean Pickerell
By:_____________________________________
Name: Dean Pickerell
Title: President
TSG VENTURES L.P.
By: TSGVI Associates, Inc., its General
Partner
/s/ Duane Hill
By:_____________________________________
Name: Duane Hill
Title: President
- 5 -
<PAGE>
FULCRUM VENTURE CAPITAL CORPORATION
/s/ Brian Argrett
By:_____________________________________
Name: Brian Argrett
Title: President
MANAGEMENT STOCKHOLDERS
/s/ Alfred C. Liggins, III
____________________________________
Alfred C. Liggins, III, individually
/s/ Catherine L. Hughes
____________________________________
Catherine L. Hughes, individually
/s/ Jerry A. Moore III
____________________________________
Jerry A. Moore III, individually
- 6 -
<PAGE>
EXHIBIT 10.7
THIRD AMENDMENT TO PREFERRED STOCKHOLDERS' AGREEMENT
This THIRD AMENDMENT TO PREFERRED STOCKHOLDERS' AGREEMENT (this
"Amendment"), dated as of December 23, 1998, by and among the investors listed
as Series A Investors on Schedule A hereto (the "Series A Preferred Investors"),
the investors listed as Series B Investors on Schedule B hereto (the "Series B
Preferred Investors"), Radio One, Inc., a Delaware corporation (the "Company"),
Radio One Licenses, Inc., a Delaware corporation ("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").
WHEREAS, the Series A Preferred Investors, the Series B Preferred
Investors, the Company, ROL and the Management Stockholders entered into a
Preferred Stockholders' Agreement (the "Amended Original Agreement") dated as of
May 14, 1997, as amended by that certain First Amendment, dated as of June 30,
1998, and that certain Second Amendment, dated as of November 23, 1998; and
WHEREAS, in connection with the closing of the transactions contemplated by
that certain Stock Purchase Agreement dated as of October 26, 1998, by and among
the Company and Syndicated Communications Venture Partners II, L.P., a Delaware
limited partnership (the "Detroit Allur Acquisition"), as to which the Investors
have previously given their consent by letter agreement dated October 2, 1998,
the Company desires to enter into a First Amendment (the "First Amendment") to
that certain Credit Agreement, dated as of June 30, 1998, by and among the
Company, Several Lenders from time to time thereto, NationsBank, N.A., and
Credit Suisse First Boston (the "CSFB Agreement"); and
WHEREAS, certain approvals, consents and amendments to the Amended Original
Agreement are required in order for the Company to enter into the First
Amendment and to take certain actions in connection therewith and in connection
with the Detroit Allur Acquisition.
NOW, THEREFORE, the parties hereto agree as follows:
1. Formation of Allur Licenses, Inc. The parties hereto hereby consent
pursuant to Section 6.4 of the Amended Original Agreement to the formation
of Allur Licenses, Inc., a Delaware corporation, for the purpose of acting
as a License Subsidiary (as such term is defined in the Amended Original
Agreement) holding the licenses, permits and authorizations required for
and/or used in the ownership and operation of the radio stations to be
acquired in the Detroit Allur Acquisition. It is understood and agreed
that, after the consummation of the Detroit Allur Acquisition, Allur
Licenses, Inc. will be wholly owned by the Company's then direct
subsidiary, Allur-Detroit, Inc.
<PAGE>
2. CSFB Agreement.
(a) The parties hereto hereby consent to the First Amendment to the CSFB
Agreement and to the incurrence of indebtedness in the maximum principal
amount of $57,500,000 on the terms and conditions contemplated by the CSFB
Agreement, together with any and all interests, fees and other charges as
contemplated thereby and documents executed in connection with such First
Amendment.
(b) The Amended Original Agreement is hereby amended to delete Section
6.1(b) thereof in its entirety and replace it with the following:
"(b) Indebtedness in a principal amount not in excess of $57,500,000
outstanding under the Credit Agreement dated as of June 30, 1998 by and
among the Company, Credit Suisse First Boston, as Agent, and the several
lenders from time to time party thereto, as such agreement may be amended,
modified, replaced, renewed or otherwise changed except as respect to the
maximum principal amount of such Indebtedness or its rate of amortization
(the "CSFB Loan Agreement") and any refinancing of the Indebtedness under
the CSFB Loan Agreement on terms substantially similar or more favorable to
the Company than the terms of the CSFB 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 CSFB Loan Agreement, (ii)
materially change the rate of amortization of the CSFB Loan Agreement,
(iii) extend the maturity of the CSFB Debt beyond its current maturity or
(iv) increase the principal amount of the CSFB Debt in an amount in excess
of $57,500,000; provided, that the Borrower is not otherwise in violation
of this clause (b)."
3. Miscellaneous.
(a) 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 HAS
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, HAS OBTAINED AND CONSIDERED THE ADVICE OF
COUNSEL WITH RESPECT TO SUCH TERMS AND HAS HAD AN OPPORTUNITY TO FULLY
NEGOTIATE SUCH TERMS.
(b) This Amendment may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies of
this Amendment, each of which may be signed by less than all of the parties
hereto, but together all such copies are signed by all of the parties
hereto.
(c) This Amendment amends the Amended Original Agreement and wherever
reference is made in the Amended Original Agreement to "the Agreement" or
"this Agreement," such
2
<PAGE>
reference shall refer to the Amended Original Agreement as amended hereby.
The terms of this Amendment shall control any conflict between the Amended
Original Agreement and this Amendment. Otherwise, all other terms and
conditions of the Amended Original Agreement shall remain in full force and
effect.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
3
<PAGE>
SCHEDULE A
Syncom Capital Corporation
Alliance Enterprise Corporation
Opportunity Capital Corporation
Medallion Capital, Inc.
TSG Ventures, L.P.
Fulcrum Venture Capital Corporation
Alfred C. Liggins, III
(successor-in-interest to Greater Philadelphia Venture Capital Corporation,
Inc.)
<PAGE>
SCHEDULE B
Alta Subordinated Debt Partners III, L.P.
BancBoston Investments Inc.
Grant M. Wilson
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Third Amendment to
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, III
----------------------------------
Name: Alfred C. Liggins, III
Title: President
SUBSIDIARY:
----------
RADIO ONE LICENSES, INC.
By: Alfred C. Liggins, III
----------------------------------
Name: Alfred C. Liggins, III
Title: President
[Signature Page to First Amendment to Preferred Stockholders' Agreement]
<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/ 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
[Signature Page to First Amendment to Preferred Stockholders' Agreement]
<PAGE>
SERIES A PREFERRED INVESTORS:
----------------------------
SYNCOM CAPITAL CORPORATION
By: /s/ Terry L. Jones
----------------------------------
Name: Terry L. Jones
Title:
ALLIANCE ENTERPRISE CORPORATION
By: /s/ Divakar Kamath
----------------------------------
Name: Divakar Kamath
Title: Executive Vice President
OPPORTUNITY CAPITAL CORPORATION
By: /s/ J. Peter Thompson
----------------------------------
Name: J. Peter Thompson
Title: President
MEDALLION CAPITAL, INC.
By: /s/ Dean Pickerell
----------------------------------
Name: Dean Pickerell
Title: President
TSG VENTURES L.P.
as successor-in-interest to TSG Ventures Inc.
[Signature Page to First Amendment to Preferred Stockholders' Agreement]
<PAGE>
BY: TSGVI Associates, Inc., its General
Partner
By: /s/ Duane Hill
----------------------------------
Name: Duane Hill
Title: President
FULCRUM VENTURE CAPITAL CORPORATION
By: /s/ Brian Argrett
----------------------------------
Name: Brian Argrett
Title: President
/s/ Alfred C. Liggins, III
----------------------------------
Alfred C. Liggins, III, as successor-in-
interest to Greater Philadelphia Venture
Capital Corporation, Inc.
MANAGEMENT STOCKHOLDERS:
-----------------------
/s/ Alfred C. Liggins, III
----------------------------------
Alfred C. Liggins, III, individually
/s/ Catherine L. Hughes
----------------------------------
Catherine L. Hughes, individually
/s/ Jerry A. Moore III
----------------------------------
Jerry A. Moore III, individually
[Signature Page to First Amendment to Preferred Stockholders' Agreement]
<PAGE>
EXHIBIT 10.8
FOURTH AMENDMENT TO PREFERRED STOCKHOLDERS' AGREEMENT
THIS AMENDMENT (this "Amendment") is executed to be effective as of
----------
December 31, 1998 (the "Effective Date") among ALTA SUBORDINATED DEBT PARTNERS
--------------
III, L.P., BANCBOSTON INVESTMENTS INC., GRANT M. WILSON, SYNCOM CAPITAL
CORPORATION, ALLIANCE ENTERPRISE CORPORATION, ALFRED C. LIGGINS, III, as
successor in interest to Greater Philadelphia Venture Capital Corporation, Inc.,
OPPORTUNITY CAPITAL CORPORATION, MEDALLION CAPITAL, INC., TSG VENTURES L.P. and
FULCRUM VENTURE CAPITAL CORPORATION (collectively, the "Investors"), RADIO ONE,
INC. (the "Company") and RADIO ONE LICENSES, INC., a subsidiary of the Company,
and ALFRED C. LIGGINS, CATHERINE L. HUGHES and JERRY A. MOORE III (the
"Management Stockholders"), with reference to that certain Preferred
-----------------------
Stockholders' Agreement (as amended, supplemented and otherwise modified from
time to time, the "Agreement") entered into as of May 14, 1997 by and among the
---------
Investors, the Company, and the Management Shareholders. Capitalized terms used
and not otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
R E C I T A L S:
- - - - - - - -
WHEREAS, the Agreement imposes certain affirmative and negative covenants on
the Company;
WHEREAS, after reviewing certain information provided by the Company
concerning performance during 1998 and expected expenditures, the Investors are
willing to amend the Agreement to provide for modifications to the covenants
subject to performance and observance in full of each of the covenants,
conditions and other terms set forth below.;
WHEREAS, pursuant to Section 12.1 of the Agreement, holders of the majority of
the outstanding shares of Preferred Stock, are permitted to make certain
amendments the Agreement;
WHEREAS, the substance of this amendment is such that the holders of a
majority of the outstanding shares of Preferred Stock are permitted to amend the
Agreement; and
WHEREAS, the undersigned Investors, Alta Subordinated Debt Partners III, L.P.
("Alta") and BancBoston Investments, Inc. ("BancBoston"), together hold a
majority of the outstanding shares of Preferred Stock.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto hereby agree as
follows:
Section 1. AMENDMENTS TO AGREEMENT
Subject to the terms and conditions set forth herein, and in reliance upon the
representations of the Company herein contained, the Agreement is hereby amended
as follows:
(a) Section 4.3 of the Agreement is hereby deleted in its entirety and is
replaced with the following:
- 1 -
<PAGE>
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 period, except that the
amount shall be $2,300,000 for fiscal year 1998; 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 2. REPRESENTATIONS AND WARRANTIES.
In order to induce the Investors to enter into this Amendment, Company
represents and warrants to the Investors that the representations and warranties
contained in Section 2 of the Agreement are true, correct and complete in all
---------
material respects on and as of the date hereof to the same extent as though made
on and as of such date, except for changes that were consented to in writing by
the Investors.
Section 3. MISCELLANEOUS
(a) Ratification and Confirmation of Agreement. Except as specifically
amended hereby, the Agreement shall remain in full force and effect and is
hereby ratified and confirmed, and the execution, delivery and performance of
this Amendment shall not, except as expressly provided herein, operate as an
amendment of any provision of the Agreement or as a waiver of any right, power
or remedy of the Investors under the Agreement. Without limiting the generality
of the foregoing, the amendments set forth in Section 1 above shall be limited
---------
precisely as set forth above, and nothing in this Amendment shall be deemed
(i) to constitute a waiver of compliance by the Company with respect to any
other provision or condition of the Agreement or (ii) to prejudice any right or
remedy that the Investors may now have or may have in the future under or in
connection with the Agreement.
(b) Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
(c) Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(d) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
RADIO ONE, INC.
By: /s/ Alfred C. Liggins, III
------------------------------
Name: Alfred C. Liggins, III
Title: President
RADIO ONE LICENSES, INC.
By: /s/ Alfred C. Liggins, III
---------------------------------
Name: Alfred C. Liggins, III
Title: 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
BANCBOSTON INVESTMENTS INC.
By: /s/ Sanford Anstey
------------------------------
Name: Sanford Anstey
Title:
- 3 -
<PAGE>
Exhibit 21.1. Subsidiaries of Radio One, Inc.
Radio One Licenses, Inc., a Delaware corporation, is a restricted
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
WYCB Acquisition Corporation, a Delaware corporation, and Broadcast
Holdings, Inc., a District of Columbia corporation, are unrestricted
subsidiaries of Radio One, Inc., and do business under the following call
letters:
WYCB-AM
Bell Broadcasting Company ("Bell"), a Michigan corporation, is a restricted
subsidiary of Radio One, Inc. Radio One of Detroit, Inc. ("Radio One of
Detroit"), a Delaware corporation, is a restricted subsidiary of Bell. Bell and
Radio One of Detroit do business under the following call letters:
WCHB-AM
WDTJ-FM
WJZZ-AM
Allur-Detroit, Inc. ("Allur-Detroit"), a Delaware corporation, is a
restricted subsidiary of Radio One, Inc. Allur Licenses, Inc. ("Allur
Licenses"), a Delaware Corporation, is a restricted subsidiary of Allur-Detroit.
Allur-Detroit and Allur Licenses do business under the following call letters:
WWBR-FM
Radio One of Atlanta, Inc. ("ROA"), a Delaware corporation, is a restricted
subsidiary of Radio One, Inc. ROA Licenses, Inc. ("ROA Licenses"), a Delaware
Corporation, is a restricted subsidiary of ROA. ROA and ROA Licenses do
business under the following call letters:
WHTA-FM
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent top the use of our reports
and to all references to our firm included in or made a part of this
registration statement.
/s/ Arthur Andersen, LLP
Baltimore, Maryland
March 12, 1999
<PAGE>
EXHIBIT 23.2
To the Board of Directors of
Radio One, Inc.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated March 25, 1998, on our audit of the financial statements of ALLUR-
DETROIT, INC. We also consent to the reference to our firm under the caption
"Experts".
/s/ Mitchell & Titus, LLP
Mitchell & Titus, LLP
Washington, D.C.
March 10, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<CASH> 0 8,500,000 4,455,000
<SECURITIES> 0 0 0
<RECEIVABLES> 0 9,626,000 13,269,000
<ALLOWANCES> 0 904,000 1,243,000
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 17,537,000 17,641,000
<PP&E> 0 7,819,000 11,306,000
<DEPRECIATION> 0 3,387,000 4,589,000
<TOTAL-ASSETS> 0 79,225,000 153,856,000
<CURRENT-LIABILITIES> 0 3,287,000 5,041,000
<BONDS> 0 0 0
0 22,968,000 26,684,000
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 0 (21,984,000) (24,859,000)
<TOTAL-LIABILITY-AND-EQUITY> 0 79,225,000 153,856,000
<SALES> 23,702,000 32,367,000 46,109,000
<TOTAL-REVENUES> 23,702,000 32,367,000 46,109,000
<CGS> 19,982,000 26,831,000 35,746,000
<TOTAL-COSTS> 19,982,000 26,831,000 35,746,000
<OTHER-EXPENSES> (77,000) 415,000 358,000
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 7,252,000 8,910,000 11,455,000
<INCOME-PRETAX> (3,609,000) (2,959,000) (734,000)
<INCOME-TAX> 0 0 1,575,000
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 1,985,000 0
<CHANGES> 0 0 0
<NET-INCOME> (3,609,000) (4,944,000) 841,000
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
