<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1997.
REGISTRATION NO. 333-36449
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BIG CITY RADIO, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4832 13-3790661
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
11 SKYLINE DRIVE
HAWTHORNE, NY 10532
(914) 592-1071
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
ARNOLD L. WADLER
EXECUTIVE VICE PRESIDENT AND SECRETARY
BIG CITY RADIO, INC.
C/O METROMEDIA COMPANY
ONE MEADOWLANDS PLAZA
EAST RUTHERFORD, NJ 07073-2137
(201) 531-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. DUBIN, ESQ. NICHOLAS P. SAGGESE, ESQ.
Paul, Weiss, Rifkind, Wharton & Garrison Skadden, Arps, Slate, Meagher & Flom LLP
1285 Avenue of the Americas 300 South Grand Avenue
New York, New York 10019-6064 Los Angeles, California 90071
(212) 373-3000 (213) 687-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, as amended (the "Securities Act") check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY
BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 16, 1997
PROSPECTUS
, 1997
4,000,000 SHARES
BIG CITY RADIO, INC.
CLASS A COMMON STOCK
All of the shares of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), of Big City Radio, Inc., a Delaware corporation ("Big
City Radio" or the "Company"), are being offered for sale by the Company (the
"Offering"). The Company's authorized capital stock includes Class A Common
Stock and Class B Common Stock, par value $.01 per share (the "Class B Common
Stock" and, together with the Class A Common Stock, the "Common Stock"). The
rights of holders of Class A Common Stock and Class B Common Stock are
identical, except that each share of Class A Common Stock entitles its holder to
one vote per share on all matters voted upon by the Company's stockholders,
whereas each share of Class B Common Stock entitles its holder to ten votes per
share on all matters voted upon by the Company's stockholders. In addition,
holders of Class B Common Stock vote as a separate class to elect up to 75% of
the members of the Company's Board of Directors. Each share of Class B Common
Stock is convertible at any time into one share of Class A Common Stock. In
addition, at such time as any share of Class B Common Stock ceases to be held by
any of the Principal Stockholders (as defined herein), their affiliates or
relatives, such share of Class B Common Stock shall convert into a share of
Class A Common Stock. After consummation of the Offering, the Principal
Stockholders will own all of the shares of Class B Common Stock, having
approximately 94% of the outstanding voting power of the Common Stock.
Prior to this Offering, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
will be between $8.00 and $10.00 per share of Class A Common Stock. See
"Underwriting" for information relating to the factors considered in determining
the initial public offering price.
The shares of Class A Common Stock offered hereby have been approved for
listing on the American Stock Exchange ("AMEX") under the symbol "YFM".
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECUR-
ITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total(3).............................. $ $ $
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS (AS DEFINED HEREIN)
AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
(2) BEFORE DEDUCTING ESTIMATED OFFERING EXPENSES PAYABLE BY THE COMPANY,
ESTIMATED AT $500,000.
(3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP
TO AN AGGREGATE OF 600,000 ADDITIONAL SHARES OF CLASS A COMMON STOCK AT THE
PRICE TO THE PUBLIC SHOWN ABOVE, LESS UNDERWRITING DISCOUNTS AND
COMMISSIONS, SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS
EXERCISED IN FULL, THE TOTAL PRICE TO THE PUBLIC, UNDERWRITING DISCOUNTS AND
COMMISSIONS AND PROCEEDS TO THE COMPANY WILL BE $ , $ AND
$ , RESPECTIVELY. SEE "UNDERWRITING."
The shares of Class A Common Stock are being offered hereby by the several
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters and subject to various prior conditions, including their
right to reject orders in whole or in part. It is expected that delivery of the
shares of Class A Common Stock offered hereby will be made in New York, New
York, or through the facilities of The Depository Trust Company, on or about,
1997.
DONALDSON, LUFKIN & JENRETTE FURMAN SELZ
SECURITIES CORPORATION
<PAGE>
Map of the Company's Los Angeles radio stations' coverage area following the FCC
Power Increase (as defined herein).
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING AND MAY BID FOR AND PURCHASE SHARES OF CLASS A COMMON STOCK IN THE OPEN
MARKET TO COVER A SYNDICATE SHORT POSITION IN THE CLASS A COMMON STOCK OR FOR
THE PURPOSE OF MAINTAINING OR STABILIZING THE PRICE OF THE CLASS A COMMON STOCK.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY AND SHOULD BE READ IN
CONJUNCTION WITH THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, AND OTHER DATA APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION INCLUDED IN THIS
PROSPECTUS (I) ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE
EXERCISED, (II) HAS BEEN ADJUSTED TO GIVE EFFECT TO THE EQUITY CONTRIBUTION AND
THE RECLASSIFICATION (EACH AS DEFINED HEREIN) AND (III) HAS BEEN ADJUSTED TO
GIVE EFFECT TO THE CHANGE BY THE COMPANY OF ITS FISCAL YEAR-END FROM SEPTEMBER
30 TO DECEMBER 31 EFFECTIVE AS OF THE CONSUMMATION OF THE OFFERING. FOR A
DEFINITION AND EXPLANATION OF INDUSTRY TERMS AND THE SOURCE OF MARKET DATA CITED
HEREIN, SEE "MARKET DATA AND CERTAIN DEFINITIONS" ON PAGE 72.
THE COMPANY
Big City Radio, Inc. (the "Company") was formed in 1994 to acquire radio
broadcast properties in or adjacent to major metropolitan markets and utilize
innovative engineering techniques and low-cost, ratings-driven operating
strategies to develop these properties into successful metropolitan radio
stations. In order to accomplish this objective, the Company applies a variety
of innovative broadcast engineering techniques to the radio broadcast properties
it acquires, including Synchronized Total Market Coverage ("STMC"). STMC
consists of acquiring two or more stations which broadcast on the same frequency
and simulcasting their signals to achieve broad coverage of a targeted
metropolitan market. In addition to STMC, the Company intends to employ other
broadcast engineering techniques to enter major metropolitan markets at
attractive valuations. These engineering techniques include acquiring suburban
radio stations and moving the station's broadcast antenna closer to the
metropolitan market ("move-ins") and acquiring high-power stations adjacent to
major metropolitan markets and focusing such stations' broadcast signal into the
metropolitan area.
The Company's acquisition/engineering strategies enable it to provide near
seamless coverage of major metropolitan markets at a significantly lower
acquisition cost than typically required to acquire a major market Class B
station. The Company currently owns and operates STMC station combinations in
New York, Los Angeles and Chicago, the three largest radio markets in the United
States in terms of aggregate advertising revenues.
The Company is controlled by Stuart Subotnick, a general partner of
Metromedia Company who will own, subsequent to the Offering, approximately 62%
of the Common Stock, representing 94% of the voting power of the Common Stock
(without giving effect to the exercise of any options to acquire shares of Class
A Common Stock).
The Company's first targeted market was Los Angeles where the Company
operates a three station combination, which broadcasts as Y-107 ("Y-107 LA"),
featuring a modern rock format on the 107.1-FM frequency. Y-107 LA currently
covers approximately 75% of the Arbitron diaries in the Los Angeles Arbitron
Metro Survey Area ("MSA") and will increase its coverage to over 90% as a result
of an increase in its transmission power pursuant to the FCC Power Increase (as
defined herein), which the Company plans to implement in the fourth quarter of
1997. The Company has demonstrated the success of its strategy in Los Angeles
where Y-107 LA has consistently ranked as one of the top 5 most listened-to
modern rock radio stations in America over the past year, and has achieved a
significant share of 1.3% in the 12+ category as of the summer 1997 Arbitron
book. The Company has successfully translated its strong listenership into
significant revenues as exemplified by the increase in its power ratio (defined
as a station's share of the aggregate radio market revenues divided by its
Arbitron listenership share) from 0.5 in the six month period ended December
1996 to 1.4 in the six month period ended June 1997. The Company's three Los
Angeles stations (the "Los Angeles Stations") were acquired in May 1996 for a
combined purchase price significantly lower than the reported purchase prices of
Class B stations in the Los Angeles MSA, as evidenced by transactions
consummated since the deregulation initiated by the passage of the Telecom Act
in 1996 (as defined herein). See "--Business Strategy" below.
The Company recently completed the acquisitions of three stations in the New
York MSA, which collectively broadcast as Y-107 ("Y-107 NY") on the 107.1-FM
frequency. Y-107 NY commenced
3
<PAGE>
operations in January 1997 as the only country music station covering the New
York City market. Y-107 NY earned a 1.1% share in the 12+category as of the
summer 1997 Arbitron book. Y-107 NY currently covers approximately 75% of the
Arbitron diaries in the New York MSA and will increase its coverage to
approximately 90% as a result of an increase in its transmission power pursuant
to the FCC Power Increase, which the Company plans to implement by the end of
the first quarter of 1998 pending receipt of approval from the Federal
Communications Commission (the "FCC"). See "Risk Factors--Regulatory Matters and
Dependence on Licenses." The Company's three New York stations (the "New York
Stations") were acquired by the Company for a combined purchase price
significantly lower than the reported purchase prices of Class B stations in the
New York MSA, as evidenced by transactions consummated since the passage of the
Telecom Act. See "--Business Strategy" below.
In August 1997, the Company acquired two radio stations in the Chicago MSA
(the "Chicago Stations"). The acquisition of the Chicago Stations secures the
Company's presence in the top three radio markets in the United States, as
measured in terms of aggregate advertising revenues. The Chicago Stations will
broadcast on the 103.1-FM frequency. The Chicago Stations were acquired for a
combined purchase price which is significantly less than the reported purchase
prices of Class B stations in the Chicago MSA, as evidenced by transactions
consummated since the passage of the Telecom Act. See "-- Business Strategy"
below. The Chicago Stations currently cover approximately 70% of the Arbitron
diaries in the Chicago MSA and will increase their coverage to approximately 90%
as a result of the planned increase in their transmission power pursuant to the
FCC Power Increase and other technical improvements, which the Company plans to
implement in the second quarter of 1998 pending receipt of FCC approval. See
"Risk Factors--Regulatory Matters and Dependence on Licenses." The Company has
selected an adult contemporary format for the Chicago Stations and expects to
formally begin broadcasting as a single station during the first quarter of
1998.
BUSINESS STRATEGY
The Company's objective is to achieve a significant presence in selected top
20 radio markets by acquiring radio broadcast properties in or adjacent to major
metropolitan markets and utilizing innovative engineering techniques and
low-cost, ratings-driven operating strategies to develop these properties into
successful metropolitan radio stations. The following are the key elements of
the Company's business strategy:
ENTER TOP-20 MARKETS WITH LOW CAPITAL INVESTMENT
The Company intends to utilize STMC and other innovative acquisition and
engineering strategies to gain low-cost entry into major metropolitan radio
markets and achieve market coverage, which the Company believes is equivalent to
the market coverage of Class B metropolitan stations.
- LOW ACQUISITION COST. Industry research indicates that the prices of Class
B radio stations in major MSAs have increased significantly since the
passage of the Telecom Act. The Company has created radio stations with an
Arbitron market coverage that the Company believes is equivalent to the
Arbitron market coverage of Class B radio stations in the three largest
radio markets, for a substantially lower capital investment. For example,
in the Los Angeles MSA, prices have ranged from $113.0 million to $312.0
million while the Company has created for $26.8 million a Los Angeles
station which, following the FCC Power Increase, will have an Arbitron
market coverage that the Company believes is equivalent to the Arbitron
market coverage of Class B radio stations in the Los Angeles MSA.
Similarly, in the New York MSA where prices have ranged from $83.5 million
to $286.0 million, the Company has created for $19.5 million a New York
station which, following the FCC Power Increase, will have an Arbitron
market coverage that the Company believes is equivalent to the Arbitron
market coverage of Class B radio stations in the New York MSA. In the
Chicago MSA, prices have ranged from $22.0 million to $225.0 million while
the Company has created for $10.6 million a Chicago station which,
following the FCC Power Increase and other technical improvements, will
have an Arbitron market coverage that the Company
4
<PAGE>
believes is equivalent to the Arbitron market coverage of Class B radio
stations in the Chicago MSA. Based on the range of purchase prices in
recently consummated transactions as specified above, achieving entry into
the top three radio markets would have required an aggregate investment of
between $218.5 million and $823.0 million, while the Company has entered
these three markets with an aggregate investment of approximately $56.9
million. All of the foregoing information regarding price ranges of Class
B stations has been derived from published industry reports of sales of
Class B radio stations in the MSAs where the Company operates. The Company
continues to explore similar opportunities in other attractive top 20
markets and believes that there is potential to achieve low-cost entry by
using methods such as STMC, "move-ins" and acquisitions of high power
stations adjacent to major metropolitan markets.
- EFFECTIVE COVERAGE OF ARBITRON RATED METROPOLITAN MARKETS. The Company's
objective is to achieve coverage in excess of 90% of the Arbitron diaries
in its targeted MSAs, which the Company believes is equivalent to the
coverage typically provided by Class B radio stations in major
metropolitan markets. Class B radio stations are defined by the FCC as
those facilities whose signal is predicted to cover a regional urban area.
Accordingly, the Company bases its acquisition strategy primarily on the
location of Arbitron diaries. Furthermore, to enhance the Arbitron diary
coverage of a station, once acquired, the Company's experienced staff
tailors an engineering solution to optimize the Arbitron diary coverage of
each station. Equivalent Arbitron diary coverage is determined by
comparing the coverage of the Company's targeted STMC stations and typical
Class B radio stations located in the same MSAs. This comparison considers
the actual received signal strength of the selected station(s) and the
actual number of Arbitron diaries covered that are predicted to receive a
listenable signal. The coverage of any one station compared to another
station within any MSA will vary due to locations of the transmitter,
generally most Class B radio stations within a targeted MSA will cover
between 90% and 100% of the Arbitron diaries. See "Risk Factors--Risks
Associated with the Company's Strategy."
MAXIMIZE STATION PERFORMANCE
The Company seeks to maximize the operating performance of its stations by
employing a ratings-driven, cash flow-focused operating strategy.
- MAXIMIZE STATION REVENUE. Based on an extensive market research study, the
Company carefully selects the format of the station to maximize
penetration of audience share and advertising revenues in that market. For
example, the Company believes that its carefully selected modern rock
format in Los Angeles and unique country music format in New York City
provide it with a competitive advantage and enhanced listenership in the
respective markets. The Company believes that its strong listenership has
translated into significant revenue as exemplified by the increase in its
power ratio from 0.5 in the six month period ended December 1996 to 1.4 in
the six month period ended June 1997 in the Los Angeles market.
- MAXIMIZE BROADCAST CASH FLOW. Another key aspect of the Company's
operating strategy will be to maximize its broadcast cash flow by
controlling its operating costs. The Company has not historically, and
does not intend at present, to expend the significant costs associated
with hiring highly compensated on-air personalities. The Company maintains
operating costs at a relatively low level and focuses on core programming
content to achieve high ratings.
GENERAL
HISTORY AND DEVELOPMENT
The Company was formed by its chairman, Stuart Subotnick and its president
and chief executive officer, Michael Kakoyiannis. Mr. Subotnick contributes his
financial, strategic and operational expertise gained through the development
and operation of the numerous media and communications businesses that he and
longtime partner John Kluge have controlled through Metromedia Company and its
predecessor. Michael Kakoyiannis, the Company's president and chief executive
officer, has been involved in the
5
<PAGE>
radio broadcasting industry for over 25 years in various functions including
sales, marketing and general management. In addition to Mr. Subotnick and Mr.
Kakoyiannis, the Company has numerous experienced radio executives involved in
all aspects of its operations, including engineering, sales, marketing,
programming and finance. The Company believes that its quality management team
will be instrumental in successfully implementing its business strategy.
EQUITY CONTRIBUTION, RECLASSIFICATION AND OTHER INFORMATION
Immediately prior to the consummation of the Offering, Stuart and Anita
Subotnick (the "Principal Stockholders") will either contribute the entire
amount of certain outstanding stockholders' loans made to the Company to the
Company's capital or contribute cash in an amount sufficient to repay a portion
of the outstanding stockholders' loans made to the Company and will contribute
the remaining balance of such loans to the Company's capital (all such
outstanding stockholders' loans aggregated $13.2 million at September 30, 1997)
(the "Equity Contribution"). Simultaneously with the Equity Contribution, each
share of the Company's Common Stock, par value $.01 per share (the "Old Common
Stock") outstanding or to be issued upon exercise of options granted under the
1997 Incentive Stock Plan (as defined herein), will be reclassified into 7,610
shares of Class A Common Stock and the Principal Stockholders will exchange each
share of Class A Common Stock held by them for one share of Class B Common Stock
(the foregoing reclassification and exchange is hereinafter referred to as the
"Reclassification"). In addition, the Company will convert from an S-Corporation
to a C-Corporation and will change its fiscal year-end from September 30 to
December 31 in connection with the Offering. The principal executive offices of
the Company are located at 11 Skyline Drive, Hawthorne, New York, New York 10532
and its telephone number is (914) 592-1071.
RISK FACTORS
See "Risk Factors" beginning on page 9 for a discussion of certain factors
that should be considered by potential investors.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered......................... 4,000,000 shares of Class A Common Stock
Common Stock to be outstanding after the
Offering(1)
Class A Common Stock..................... 5,125,062 shares
Class B Common Stock..................... 8,250,458 shares
Total.................................. 13,375,520 shares
Use of proceeds.............................. The net proceeds of the Offering, estimated
to be approximately $33.0 million
(approximately $38.0 million if the
Underwriters' over-allotment option is
exercised in full), will be used by the
Company to repay existing indebtedness under
the Existing Credit Facility (as defined
herein).
Voting rights................................ The holders of Class A Common Stock generally
have rights identical to holders of Class B
Common Stock, except that holders of Class A
Common Stock are entitled to one vote per
share on all matters voted upon by the
Company's stockholders and holders of Class B
Common Stock are entitled to ten votes per
share on all matters voted upon by the
Company's stockholders and holders of Class B
Common Stock vote as a separate class to
elect up to 75% of the members of the
Company's Board of Directors. Holders of
Class A Common Stock and Class B Common Stock
will vote as a single class on most other
matters. Each share of Class B Common Stock
is convertible at any time into one share of
Class A Common Stock. In addition, at such
time as any share of Class B Common Stock
ceases to be held by any of the Principal
Stockholders, their affiliates or relatives,
such share of Class B Common Stock shall
convert into a share of Class A Common Stock.
Proposed AMEX symbol......................... YFM
</TABLE>
- ------------------------
(1) Based on the number of shares outstanding, as of December 2, 1997, after
giving effect to the Reclassification. Does not include (i) shares of Class
A Common Stock that may be issued upon exercise of the Underwriters'
over-allotment option, (ii) an aggregate of 150,000 shares of Class A Common
Stock issuable upon exercise of outstanding options granted to certain
officers and directors of the Company under the 1997 Incentive Stock Plan at
an exercise price of $6.00 per share, (iii) an aggregate of 402,500 shares
of Class A Common Stock granted to certain officers and directors of the
Company under the 1997 Incentive Stock Plan, to be effective only
immediately prior to the consummation of the Offering, at an exercise price
per share equal to the initial public offering price per share in the
Offering, and (iv) options to acquire an aggregate of 147,500 shares of
Class A Common Stock available for grant under the 1997 Incentive Stock
Plan. See "Management--1997 Incentive Stock Plan" and "Principal
Stockholders."
7
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The following table presents selected financial and operating data of the
Company which is derived from the audited and unaudited financial statements of
the Company (i) as reported and (ii) on a pro forma basis to reflect (a) the
acquisitions of the assets of WZVU-FM and WVVX-FM, Inc.; (b) the sale of the Q
stations (as defined herein) and KWIZ-FM; (c) the consummation of the Offering
at a price of $9.00 per share (the midpoint of the range of prices set forth on
the cover page of this Prospectus) and the application of the net proceeds
therefrom; (d) the conversion of the Company from a S-Corporation to a
C-Corporation; and (e) the Equity Contribution and Reclassification. See "Pro
Forma Financial Statements." The data is qualified by reference to and should be
read in conjunction with the financial statements of the Company and the related
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. The historical
financial results of the Company are not comparable from period to period
because of the acquisition and sale of various broadcasting properties by the
Company during the periods covered.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------- NINE MONTHS ENDED SEPTEMBER 30,
PRO FORMA --------------------------------------
AS PRO FORMA
ADJUSTED AS ADJUSTED
1995 1996(2)(4) 1996(7) 1996(4) 1997(3) 1997(7)
----------- ------------ ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Net revenues.................................. $ 5,225 $ 7,944 $ 8,852 $ 5,870 $ 7,538 $ 8,198
Station operating expenses.................... 7,185 12,253 9,797 9,726 9,834 9,806
Corporate general and administrative
expenses.................................... 425 1,201 3,095 804 1,104 1,493
Employment incentive(5)....................... -- -- -- -- 3,713 3,713
Depreciation and amortization................. 798 1,388 1,629 867 1,316 1,635
----------- ------------ ---------- ----------- ------------ -----------
Operating (loss).............................. (3,183) (6,898) (5,642) (5,527) (8,429) (8,298)
----------- ------------ ---------- ----------- ------------ -----------
Net income (loss)............................. $ (4,005) $ (3,098) $ (9,338) $ (798) $ (11,435) $ (12,960)
----------- ------------ ---------- ----------- ------------ -----------
----------- ------------ ---------- ----------- ------------ -----------
Pro forma as reported and pro forma as
adjusted net loss per common share (6)...... (.33) (.70) (1.21) (.97)
Pro forma as reported and pro forma as
adjusted weighted average shares
outstanding(6).............................. 9,426 13,426 9,426 13,426
OTHER OPERATING DATA:
Broadcast cash flow(1)........................ $ (1,960) $ (4,309) $ (3,856) $ (2,296)
Operating cash flow........................... (2,942) (7,448) (5,793) (6,662)
Investing cash flow........................... (3,883) (24,235) (29,867) (22,194)
Financing cash flow........................... 7,779 30,851 34,779 28,938
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------
ACTUAL PRO FORMA
------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................................... $ 395 $ 395
Net intangible assets............................................................................. 54,439 54,439
Total assets...................................................................................... 60,996 60,996
Notes payable..................................................................................... 13,163 --
Long-term debt.................................................................................... 56,700 23,720
Stockholders' equity (deficit).................................................................... (11,522) 31,271
</TABLE>
- ------------------------------
(1) Broadcast cash flow is defined as operating loss plus depreciation and
amortization plus corporate general and administrative expenses, including
employment incentive. Although not calculated in accordance with generally
accepted accounting principles, broadcast cash flow is widely used in the
broadcast industry as a measure of a broadcast company's operating
performance. Nevertheless, this measure would not be considered in isolation
or as a substitute for operating loss, cash flows from operating activities
or any other measure for determining the Company's operating performance or
liquidity which is calculated in accordance with generally accepted
accounting principles.
(2) The Company acquired substantially all of the assets of the Los Angeles
Stations and KWIZ-FM on May 30, 1996 and commenced operations of these
stations under a LMA on March 26, 1996. The financial statements include the
operations of these stations from commencement of the LMA period. KWIZ-FM
was sold on December 20, 1996. No gain or loss was recognized on the sale of
KWIZ-FM.
(3) The Company acquired substantially all of the assets of WWHB-FM on April 1,
1997 and WZVU-FM on June 5, 1997 and commenced operations of these stations
under a LMA during December 1996. WWHB-FM and WZVU-FM together with WRGX-FM
broadcast as "Y-107 NY". The financial statements include the operations of
Y107 NY since December 1996.
(4) The statement of operations data for the year ended December 31, 1996 and
for the nine months ended September 30, 1996 include (i) the operations of
WSTC-AM and WKHL-FM (referred to herein as the Q stations) to May 30, 1996,
the date on which they were sold; and (ii) a gain on sale of stations of
$6,608 in the year ended December 31, 1996 which represents the gain on sale
of the Q stations.
(5) As of July 1, 1997, the Principal Stockholders transferred 68 shares of Old
Common Stock to the Company's Chief Executive Officer as an employment
incentive. The statement of operations for the nine months ended September
30, 1997 reflects an accounting charge of $3,713 relating to this award
which has been reflected as a capital contribution in Stockholders' Equity.
The charge represents the approximate fair market value of the stock
transferred, for accounting purposes only, and was estimated at 80% of the
assumed initial public offering price of $9.00 per share.
(6) Pro forma as reported weighted average shares outstanding equals the sum of
9,375,520 shares outstanding immediately prior to the Offering (and after
the Equity Contribution and the Reclassification), plus 50,000 shares
relating to 150,000 stock options granted on December 1, 1997 with an
exercise price of $6.00 per share computed using the treasury stock approach
(assuming an initial public offering price of $9.00 per share) and pro
forma, as adjusted further, includes the 4,000,000 shares deemed to be sold
by the Company in the Offering.
(7) Reference is made to pro forma financial statements on pages 19 through 24.
8
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION AND FINANCIAL DATA SET FORTH ELSEWHERE
IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF CLASS A
COMMON STOCK OFFERED HEREBY.
LIMITED HISTORY OF OPERATIONS; NET LOSSES AND NEGATIVE CASH FLOW FROM
OPERATIONS; EXPECTED FUTURE NET LOSSES AND NEGATIVE CASH FLOW FROM OPERATIONS
The Company was formed in August 1994 and has a limited operating history.
Accordingly, prospective investors have limited operating history and limited
historical financial information upon which to base an evaluation of the
Company's performance and an investment in shares of Class A Common Stock. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development.
Since inception, the Company has not generated significant revenue, has
incurred substantial net losses and has never generated positive cash flow from
operations. The Company had net losses of $3.1 million and $4.0 million for the
years ended December 31, 1996 and 1995, respectively, and a net loss of $11.4
million for the nine months ended September 30, 1997. In addition, as of
September 30, 1997, the Company had a deficiency of stockholders' equity of
approximately $11.5 million. The Company believes that losses will continue
while the Company pursues its strategy of acquiring and developing radio
stations. The Company will also incur losses during the initial reformatting and
assimilation process with respect to the radio stations that it acquires. There
can be no assurance that an adequate revenue base will be established or that
the Company's radio stations will become profitable or generate positive cash
flow. Continued losses and negative cash flow may prevent the Company from
pursuing its strategies for growth and may have a material adverse effect on the
Company.
RISKS ASSOCIATED WITH GROWTH THROUGH FUTURE ACQUISITIONS; FUTURE CAPITAL
REQUIREMENTS;
ASSIMILATION OF ACQUIRED RADIO STATIONS
One of the Company's principal growth strategies is to acquire additional
radio stations. Any future acquisitions, investments, strategic alliances or
related efforts will be accompanied by various associated risks, such as the
difficulty of identifying appropriate acquisition candidates, the competition
among buyers of radio stations, the difficulty of assimilating the operations of
the respective entities, the potential disruption of the Company's ongoing
business, the inability of management to capitalize on the opportunities
presented by acquisitions, investments, strategic alliances or related efforts,
the failure to successfully incorporate licensed or acquired technology and
rights into the Company's services, the inability to maintain uniform standards,
controls, procedures and policies and the impairment of relationships with
employees and customers as a result of changes in management. There can be no
assurance that the Company will be successful in overcoming these risks or any
other problems encountered with such acquisitions, investments, strategic
alliances or related efforts. See "Business--Business Strategy" and
"Business--Litigation." In addition, entities acquired by the Company may have
liabilities, including contingent liabilities, for which the Company may become
responsible.
Additional debt or equity financing may be required in order to complete
future acquisitions. The Company's ability to arrange financing and the cost of
such financing are dependent upon numerous factors, including general economic
and capital market conditions, conditions in the radio broadcasting industry,
regulatory developments, credit availability from banks or other lenders,
investor confidence in the industry and the Company, the success of the
Company's radio stations, and provisions of tax and securities laws that are
conducive to raising capital. There can be no assurance that financing will be
available to the Company on acceptable terms in the future or that, if the form
of any such future financing is through the direct or indirect issuance and sale
of equity securities, investors in the Offering will not be
9
<PAGE>
diluted. If the Company cannot arrange such financing, it may be forced to
curtail its acquisition of additional radio stations which may have an adverse
effect on its long-term business strategy.
The number of radio stations operated by the Company has increased with the
recent acquisition of the Chicago Stations. See "Business--Recently Completed
Radio Station Acquisitions." Management will be required to devote significant
time to assimilate these radio stations into the Company's business structure.
There can be no assurance that this assimilation can be accomplished in the
manner which management has planned or that the Company will be able to operate
these radio stations profitably. See "--Limited History of Operations; Net
Losses and Negative Cash Flow from Operations; Expected Future Net Losses and
Negative Cash Flow from Operations."
RISKS ASSOCIATED WITH THE COMPANY'S STRATEGY
The Company's business strategy is, in part, based upon the implementation
of engineering solutions such as STMC to create value. There are no significant
barriers preventing other persons from implementing strategies similar to STMC
and otherwise creating value by applying engineering solutions to radio
stations. Also, there can be no assurance that the broadcast engineering
techniques used by the Company enable it to provide clear and listenable signal
in the entire Arbitron diary coverage areas covered by the broadcast signals of
its radio stations. In addition, while the Company's purchase price for the Los
Angeles Stations, New York Stations and Chicago Stations is significantly lower
than the reported purchase prices of Class B stations in those markets since the
passage of the Telecom Act, the Company did not have access to detailed data as
to the financial performance, signal characteristics, listener profile and
consumer satisfaction of the radio stations used for comparison to the Company's
broadcast properties. Investors are urged to consider this limitation on
available information in evaluating the success of the Company's acquisition
strategy and its prospects. In addition, the recent consolidation in the radio
broadcasting industry has resulted in an increase in the reported purchase
prices paid for Class B radio stations and may limit the availability of Class B
radio stations, which may subsequently increase the acquisition costs of Class A
radio stations.
SUBSTANTIAL LEVERAGE; PLEDGE OF ASSETS; COVENANTS
At September 30, 1997, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the Company's total long-term debt
would have been approximately $23.7 million. Because of the Company's
substantial indebtedness, a significant portion of the Company's broadcast cash
flow is required for debt service. The Company's significant leverage could make
it vulnerable to a downturn in the economic performance of its radio stations or
a downturn in economic conditions. In addition, after giving effect to the
application of the net proceeds from the Offering as set forth under "Use of
Proceeds" herein, the amount of additional borrowings available to the Company
under the Amended and Restated Credit Agreement, to be entered into
simultaneously with the consummation of this Offering between the Company and
The Chase Manhattan Bank ("Chase") (as amended and restated, the "Credit
Facility") will be approximately $9.3 million. See "Description of Credit
Facility." Such amount may not be sufficient to support the Company's growth
strategy and as a result the Company may require additional financing in order
to acquire additional radio stations and accomplish its long-term business
strategies.
Substantially all of the Company's assets will be pledged to secure the
performance by the Company of its obligations under the Credit Facility. In
addition, the Credit Facility will impose on the Company various financial and
non-financial restrictions, including limitations on additional indebtedness,
liens, sale of assets, payment of dividends, guarantee obligations, investments
and capital expenditures. Compliance with such covenants is a condition
precedent to borrowing under the Credit Facility. The Credit Facility and the
pledge of the Company's assets may adversely affect the Company's ability to
seek additional financing and pursue its strategy of further growth through
acquisitions. See "Management's Discussion
10
<PAGE>
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Credit Facility."
REGULATORY MATTERS AND DEPENDENCE ON LICENSES
Each of the Company's radio stations operates pursuant to one or more
broadcast licenses issued by the FCC that presently have a maximum term of eight
years. The Company's broadcast licenses expire at various times from 1998 to
2005. Although the Company may apply to renew these licenses, third parties may
challenge the Company's renewal applications. While the Company is not aware of
facts or circumstances that would prevent the Company from having its current
licenses renewed, there can be no assurance that the licenses will be renewed.
Failure to obtain the renewal of any of the Company's broadcast licenses, to
obtain FCC approval for an assignment or transfer to the Company of a license in
connection with a radio station acquisition or to obtain and comply with FCC
authorization for the construction of required facilities or modification of
technical parameters or specifications for operations may have a material
adverse effect on the Company. Moreover, while the Company believes that recent
changes to FCC rules and policies will enable it to obtain FCC authorizations to
increase the operating power of several of the company's radio stations, the
applications to the FCC for such power increases, which the Company has filed or
plans to file, are subject to prior FCC approval, and there can be no assurance
that the FCC will approve these applications. Failure of the FCC to approve
these applications may have a material adverse effect on the Company by limiting
the Company's ability to expand its coverage. See "Business--Federal Regulation
of Radio Broadcasting--FCC Power Increase." In addition, if the Company or any
of its officers, directors or significant stockholders violates the FCC's rules
and regulations or the Communications Act of 1934, as amended (the
"Communications Act"), is convicted of a felony, or is otherwise found to be
disqualified from being a party to a FCC license, the FCC may in response to a
petition from a third party or on its own motion, in its discretion, commence a
proceeding to impose sanctions against the Company which could involve the
imposition of monetary penalties, the revocation of the Company's broadcast
licenses or other sanctions. In addition, the FCC has the ability upon the
occurrence of certain events to revoke outstanding licenses.
The radio broadcasting industry is subject to extensive and changing
regulation. Among other things, the Communications Act and FCC rules and
policies limit the number of stations that one individual or entity can own, or
in which that individual or entity can hold an attributable interest, in a
market and require FCC approval for transfers of control of FCC licensees and
assignments of FCC licenses. The filing of petitions or complaints against the
Company or other FCC licensees could result in the FCC delaying the grant of, or
refusing to grant, its consent to the assignment of FCC licenses to or from an
FCC licensee or the transfer of control of an FCC licensee. The Communications
Act and FCC rules operate to impose limitations on ownership by Aliens (as
defined in the Communications Act). No corporation owning a broadcast license
may be more than one-fifth directly, or one-fourth indirectly, owned by Aliens,
foreign governments or their representatives. The FCC rules also require, in
certain circumstances, prior approval for changes in voting rights of the Common
Stock and changes in the Board of Directors of the Company. There can be no
assurance that there will not be changes in the current regulatory scheme, the
imposition of additional regulations or the creation of new regulatory agencies,
which changes could restrict or curtail the ability of the Company to acquire,
operate and dispose of radio stations or, in general, to compete profitably with
other operators of radio and other media properties. Moreover, there can be no
assurance that there will not be other regulatory changes, including aspects of
deregulation, that will result in a decline in the value of broadcast licenses
held by the Company or adversely affect the Company's competitive position. See
"--Federal Regulation of Radio Broadcasting."
ANTITRUST MATTERS
An important element of the Company's growth strategy involves the
acquisition of additional radio stations, several of which are likely to require
preacquisition antitrust review by the Federal Trade
11
<PAGE>
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "Antitrust Division"). Following passage of the
Telecom Act, the Antitrust Division has more frequently reviewed proposed
acquisitions of radio stations and radio station networks, particularly in
instances where the proposed acquiror already owns one or more radio stations in
a particular market and the acquisition involves another radio station in the
same market. In the past, the Antitrust Division has obtained consent decrees
requiring an acquiror to dispose of at least one radio station in a particular
market where the acquisition otherwise would have resulted in a concentration of
radio advertising market share or domination of programming formats reaching
certain listeners by the acquiror.
COMPETITION; DEPENDENCE ON AUDIENCE SHARE RATINGS AND TECHNOLOGY CHANGES
Radio broadcasting is a highly competitive business. The financial success
of each of the Company's radio stations depends, to a significant degree, upon
its audience ratings, its share of the overall radio advertising revenue within
its geographic market and the economic health of the market. The audience
ratings and advertising revenue of the Company's individual stations are subject
to change and any adverse change in a particular market could have a material
adverse effect on the Company. The Company's radio stations compete for audience
share and advertising revenue directly with other FM and AM radio stations and
with other media within their respective markets, such as newspapers, broadcast
and cable television, magazines, billboard advertising, transit advertising, and
direct mail advertising. Many of these entities are larger and have
significantly greater resources than the Company. While the Company already
competes with other radio stations with comparable programming formats in each
of its markets, if another radio station in the market which currently does not
have the same programming format as the Company's stations were to convert its
programming format to a format similar to one of the Company's stations, if a
new station were to adopt a competitive format, or if an existing competitor
were to strengthen its operations, the Company's stations could suffer a
reduction in ratings and/or advertising revenue and could require increased
promotional and other expenses. The Telecom Act facilitates the entry of other
radio broadcasting companies into the markets in which the Company operates or
may operate in the future, some of which may be larger and have more financial
resources than the Company. In addition, certain of the Company's stations
compete, and in the future other stations of the Company may compete, with
combinations of stations operated by a single operator. There can be no
assurance that the Company's radio stations will be able to maintain or increase
their current audience ratings and radio advertising revenue. See
"Business--Competition."
Radio broadcasting is also subject to competition from new media
technologies that are being developed or have been introduced, such as digital
audio broadcasting ("DAB"). DAB may provide a medium for the delivery by
satellite (digital audio radio satellite service, or "DARS") or terrestrial
means of multiple multi-channel, multi-format digital radio services with sound
quality equivalent to compact-discs to local and national audiences. In
addition, cable television operators are introducing a new service commonly
referred to as "cable radio," which provides cable television subscribers with
several high-quality channels of music, news and other information. The Company
cannot predict the effect, if any, that any such new technologies may have on
the radio broadcasting industry or on the Company. See "Business--Competition."
The profitability of the Company's radio stations is subject to various
other factors which influence the radio broadcasting industry as a whole. The
Company's radio stations may be adversely affected by changes in audience
tastes, priorities of advertisers, new laws and governmental regulations and
policies, changes in broadcast technical requirements, proposals to limit the
tax deductibility of expenses incurred by advertisers and changes in the
willingness of financial institutions and other lenders to finance radio station
acquisitions and operations. The Company cannot predict which, if any, of these
factors might have a significant impact on the radio broadcasting industry in
the future, nor can it predict what impact, if any, the occurrence of these
events might have on the Company.
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<PAGE>
EFFECTS OF ECONOMIC RECESSION
The Company derives substantially all of its revenue from the sale of
advertising time on its radio stations. The Company's broadcasting revenue could
be adversely affected by a future national recession. In addition, because a
substantial portion of the Company's revenue is derived from local advertisers,
the Company's ability to generate advertising revenue in specific markets could
be adversely affected by local or regional economic downturns. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RELIANCE ON KEY PERSONNEL
The Company's business is managed by a small number of key management and
operating personnel, the loss of certain of whom could have a material adverse
effect on the Company. The Company believes that its future success will depend
in large part on its ability to attract and retain highly skilled and qualified
personnel and to expand, train and manage its employee base. The Company has
entered into an employment agreement with Mr. Kakoyiannis which includes
provisions restricting the ability of Mr. Kakoyiannis to compete against the
Company in certain circumstances. In addition, the Company maintains "key-man"
insurance on the life of Mr. Kakoyiannis in the amount of $2.0 million. See
"Management--Employment Agreements."
CONCENTRATION OF VOTING POWER BY PRINCIPAL STOCKHOLDERS
The holders of Class A Common Stock are entitled to one vote per share on
all matters voted upon by the Company's stockholders. Holders of Class B Common
Stock are entitled to ten votes per share on all matters voted upon by the
Company's stockholders. In addition, holders of Class B Common Stock are
entitled to vote as a separate class to elect up to 75% of the members of the
Company's Board of Directors. Each share of Class B Common Stock is convertible
at any time into one share of Class A Common Stock, and with limited exceptions
converts automatically upon any sale or transfer to a party unaffiliated with,
or unrelated to, the Principal Stockholders. The Principal Stockholders will,
upon consummation of the Offering, own all of the outstanding shares of Class B
Common Stock, which represent approximately 94% of the combined voting power of
the Common Stock (without giving effect to the exercise of outstanding options
to acquire shares of Class A Common Stock). Accordingly, the Principal
Stockholders will be able to control the Board of Directors and all stockholders
decisions and, in general, to determine (without the consent of the Company's
other stockholders) the outcome of any corporate transaction or other matter
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of the Company's assets. See
"Description of Capital Stock," "Principal Stockholders" and "Certain
Relationships and Related Transactions." In addition, the Credit Facility will
provide that an event of default will occur upon the occurrence of a "change of
control" as defined in the Credit Facility. For purposes of the Credit Facility,
a change of control will occur when (i) any person or group other than the
Principal Stockholders and their affiliates obtains the power to elect a
majority of the Board of Directors, (ii) the Company fails to own 100% of the
capital stock of its subsidiaries owning any of the FCC broadcast licenses, or
when (iii) the Board of Directors does not consist of a majority of continuing
directors.
ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK
PRICE
Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price of the Class A Common Stock will
be determined by negotiations among the Company and the Underwriters, and may
bear no relationship to the price at which the Class A Common Stock will trade
after completion of the Offering. The Class A Common Stock has been approved for
listing, subject to notice of issuance, on the AMEX; however, there can be no
assurance that an active trading market will develop or be maintained for the
Class A Common Stock following the Offering or that the Class A Common Stock
will trade in the public market at or above the initial public offering price.
For
13
<PAGE>
factors considered in determining the initial public offering price, see
"Underwriting." After completion of the Offering, the market price of the Class
A Common Stock will be subject to fluctuations in response to various factors
and events, including, among others, the liquidity of the market for the Class A
Common Stock, variations in the Company's operating results, regulatory or other
changes, both domestic and international, affecting the radio broadcasting
industry generally or the Company specifically, announcements of business
developments by the Company or its competitors, changes in operating results and
changes in general market conditions. See "--Limited History of Operations;
Negative Losses and Negative Cash Flow from Operations; Expected Future Net
Losses and Negative Cash Flow from Operations," "--Regulatory Matters and
Dependence on Licenses," "--Concentration of Voting Power by Principal
Stockholders," and "--Competition; Dependence on Audience Share Ratings and
Technology Changes."
SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL ADVERSE EFFECT ON STOCK PRICE;
REGISTRATION RIGHTS
Sales of a substantial number of shares of Class A Common Stock in the
public market, or the perception that such sales may occur could adversely
affect prevailing market prices for the Class A Common Stock and the ability of
the Company to raise capital in the future. Upon completion of the Offering, the
Company will have outstanding 5,125,062 shares of Class A Common Stock. Of such
shares, the 4,000,000 shares of Class A Common Stock being sold in the Offering
(together with any shares sold upon exercise of the Underwriters' over-allotment
option) will be immediately eligible for sale in the public market without
restriction, except for shares purchased by or issued to any affiliate (an
"Affiliate") of the Company (within the meaning of the Securities Act of 1933,
as amended (the "Securities Act")). For so long as any stockholder remains an
Affiliate of the Company, any shares of Common Stock held by such person will
only be available for public sale if such shares are registered under the
Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144 ("Rule 144") of the Securities Act, and any sales
by an Affiliate under Rule 144 would be subject to the volume and other
limitations under such rule. Upon the expiration or waiver of certain lock-up
agreements with the Underwriters, approximately 9,928,020 shares of Class A
Common Stock (including 8,250,458 shares issuable upon conversion of shares of
Class B Common Stock and 552,500 shares of Class A Common Stock issuable upon
exercise of options granted under the 1997 Incentive Stock Plan) will be
eligible for sale in the public market pursuant to Rule 144. The Company has
granted certain registration rights to Mr. Kakoyiannis for all shares of Class A
Common Stock held by him on the date of this Prospectus or to be issued to him
pursuant to his employment agreement with the Company, and to the Principal
Stockholders with respect to all shares of Class A Common Stock that may be
issued to them upon conversion of the shares of Class B Common Stock issued to
them in the Reclassification, only following the one year anniversary of the
effectiveness of this Offering. Registration of such shares under the Securities
Act would result in such shares becoming available for sale by non-Affiliates in
the public securities market without limitation, and by Affiliates, subject to
the limitations of Rule 144, immediately upon the effectiveness of such
registration. If the holders, by exercising their demand registration rights,
cause a large number of securities to be registered and sold in the public
market, such sales could have an adverse effect on the market price for the
Class A Common Stock. If the Company were to include in a Company-initiated
registration, any registrable securities pursuant to the exercise of piggy-back
registration rights, such sales may have an adverse effect on the Company's
ability to raise needed capital. See "Description of Capital Stock--
Registration Rights." Pursuant to lock-up agreements with the Underwriters, the
Company, the executive officers and the directors of the Company have agreed not
to offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any shares of Class A Common Stock or any securities that are
convertible into or exercisable or exchangeable for shares of Class A Common
Stock (other than pursuant to employee or director stock or stock option plans
existing on the date of this Prospectus) or file any registration statement with
respect to any shares of Class A Common Stock or any securities convertible into
or exercisable or exchangeable for shares of Class A Common Stock, or make any
demand for, or exercise any right with respect to the registration of any shares
of Class A Common Stock or any securities convertible
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<PAGE>
into or exchangeable for shares of Class A Common Stock, for a period of 180
days after the date of this Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), except for the
shares of Class A Common Stock offered in connection with the Offering. Promptly
after completion of the Offering, the Company intends to file with the
Commission a registration statement on Form S-8, covering the shares of Class A
Common Stock underlying options granted or to be granted under the 1997
Incentive Stock Plan and the shares that may be issued to Mr. Kakoyiannis
pursuant to his employment agreement with the Company. Such registration
statement will become effective immediately upon filing with the Commission. As
a result, the shares of Class A Common Stock so registered and issued pursuant
to the 1997 Incentive Stock Plan or Mr. Kakoyiannis' employment agreement will
be immediately available for sale by non-Affiliates in the public market without
limitation, and by Affiliates, subject to the limitations of Rule 144. See
"Certain Relationships and Related Transactions," "Description of Capital Stock"
and "Shares Eligible for Future Sale."
ABSENCE OF DIVIDENDS
The Company anticipates that all of its earnings in the foreseeable future
will be retained to finance the continued growth and expansion of its business
and has no current intention to pay cash dividends on its Common Stock and will
be restricted from so doing by the Credit Facility. See "Dividend Policy" and
"Description of Credit Facility."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Class A Common Stock in the Offering will experience immediate
and substantial dilution of $10.77 per share in the net tangible book value per
share of Class A Common Stock. See "Dilution."
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<PAGE>
USE OF PROCEEDS
The net proceeds from the Offering are estimated to be approximately $33.0
million (approximately $38.0 million if the Underwriters' over-allotment option
is exercised in full) after deducting underwriting discounts and commissions and
estimated expenses of the Offering payable by the Company. Such net proceeds
will be used by the Company to repay approximately $33.0 million under its
Existing Credit Facility. The Existing Credit Facility bears interest at a rate
based, at the option of the Company, on the participating bank's prime rate, or
upon the London Interbank Borrowing Rate and matures on May 30, 2001. The
Company's net borrowings under the Existing Credit Facility during the twelve
months ending September 30, 1997 were $24.4 million, primarily for the
acquisition of radio stations. After giving effect to the Offering and
application of the net proceeds therefrom, the Company will have approximately
$9.3 million of borrowing capacity available under the Credit Facility. See
"Description of Credit Facility."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and does not expect to do so in the foreseeable future. The Company
anticipates that all future earnings, if any, generated from operations will be
retained to finance the expansion and continued development of its business. Any
future determination with respect to the payment of dividends will be within the
sole discretion of the Company's Board of Directors and will depend upon, among
other things, the Company's earnings, capital requirements, the terms of then
existing indebtedness, applicable requirements of the General Corporation Law of
the State of Delaware (the "DGCL"), general economic conditions and such other
factors considered relevant by the Company's Board of Directors. The Credit
Facility will prohibit the payment of dividends. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Description
of Credit Facility."
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DILUTION
As of September 30, 1997, the net tangible book value (deficit) of the
Company was approximately $(66.5) million, or $(7.10) per share of outstanding
Common Stock (taking into account the Reclassification). The net tangible book
value per share of Common Stock represents the total amount of tangible assets
of the Company, less the total amount of liabilities of the Company, divided by
the number of shares of Common Stock outstanding. After giving effect to the
Equity Contribution, the Reclassification and the sale by the Company of the
4,000,000 shares of Class A Common Stock offered hereby at an assumed initial
offering price of $9.00 per share (the midpoint of the range of prices set forth
on the cover page of this Prospectus) and the application of the net proceeds
therefrom (after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company), the as adjusted net tangible book
value of the Company as of September 30, 1997 would have been approximately
$(23.7) million, or $(1.77) per share, representing an immediate increase in net
tangible book value of approximately $5.33 per share to existing stockholders
and an immediate dilution in net tangible book value of approximately $10.77 per
share to persons purchasing shares of Class A Common Stock in the Offering. The
following table illustrates this per share dilution to the new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1)..................... $ 9.00
---------
Net tangible book value per share of Common Stock at September 30, 1997
(adjusted for the Reclassification but excluding the Equity
Contribution and the Offering)....................................... $ (7.10)
---------
Increase in net tangible book value per share of Common Stock
attributable to net proceeds of the Offering and the application of
the proceeds therefrom, the Equity Contribution and Reclassification
and conversion of the Company from an S-Corporation to a
C-Corporation........................................................ 5.33
---------
Pro forma net tangible book value per share of Common Stock after
giving effect to the Offering........................................ (1.77)
---------
Dilution per share to new investors in Class A Common Stock in the
Offering............................................................. $ 10.77
---------
---------
</TABLE>
- ------------------------
(1) Before deduction of underwriting discounts and commissions and estimated
offering expenses.
The following table sets forth, on a pro forma basis as of September 30,
1997, and after giving effect to the Equity Contribution, the Reclassification
and the Offering, the number of shares of Common Stock purchased from the
Company, the total consideration paid to the Company and the average price per
share of Common Stock paid by existing stockholders and to be paid by new
investors in the Offering, assuming that shares purchased in the Offering are
sold at $9.00 per share (the midpoint of the range of prices set forth on the
cover page of this Prospectus), before deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by the
Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 9,375,520 70% $ 23,365,000 39% $ 2.49
New investors............................... 4,000,000 30 36,000,000 61% 9.00
------------ --- ------------- ---
Total..................................... 13,375,520 100% $ 59,365,000 100%
------------ --- ------------- ---
------------ --- ------------- ---
</TABLE>
The foregoing tables do not give effect to the exercise of any options
outstanding under the 1997 Incentive Stock Plan. At December 2, 1997, an
aggregate of 150,000 shares of Class A Common Stock was subject to outstanding
options granted to certain officers and directors of the Company, at an exercise
price of $6.00 per share, and an aggregate of 402,500 shares of Class A Common
Stock was subject to options granted to certain officers and directors of the
Company, to be effective only immediately prior to the consummation of the
Offering, at an exercise price per share equal to the initial public offering
price per share in the Offering. To the extent outstanding options are
exercised, there will be further dilution to new investors in the Offering. See
"Management--1997 Incentive Stock Plan" and "Principal Stockholders."
17
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization as of September
30, 1997 (i) as reported, (ii) on a pro forma basis after giving effect to the
Equity Contribution, the Reclassification and the Company's conversion from
S-Corporation status to C-Corporation status and (iii) on a pro forma basis, as
further adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom as described in "Use of Proceeds." This table
should be read in conjunction with the Financial Statements of the Company,
including the Notes thereto, and the other financial data included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt under the credit facilities.................................. $ 56,700 $ 56,700 $ 23,720
Notes payable to stockholders............................................... 13,163 -- --
---------- ----------- -----------
Total debt.............................................................. 69,863 56,700 23,720
---------- ----------- -----------
Stockholders' equity (deficit):
Class A Common Stock, par value $.01 per share; no shares authorized and,
as adjusted, 80,000,000 shares authorized; no shares issued and
outstanding and, as adjusted, 5,125,062 shares issued and outstanding
(1)..................................................................... -- 11 51
Class B Common Stock, par value $.01 per share; no shares authorized and,
as adjusted, 20,000,000 shares authorized; no shares issued and
outstanding and, as adjusted, 8,250,458 shares issued and outstanding... -- 83 83
Preferred Stock, par value $.01 per share; no shares authorized and, as
adjusted, 20,000,000 shares authorized; no shares issued and outstanding
and, as adjusted, no shares issued and outstanding...................... -- -- --
Common Stock, par value $.01 per share; 2,000 authorized shares; 1,232
shares issued and outstanding as of September 30, 1997 and, as adjusted,
no shares authorized, issued and outstanding............................ -- -- --
Additional paid-in capital................................................ 10,202 (1,803) 31,137
Accumulated (deficit)..................................................... (21,724) -- --
---------- ----------- -----------
Total stockholders' equity (deficit).................................... (11,522) (1,709) 31,271
---------- ----------- -----------
Total capitalization........................................................ $ 58,341 $ 54,991 $ 54,991
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
(1) Excludes an aggregate of 150,000 shares of Class A Common Stock subject to
options granted under the 1997 Incentive Stock Plan to certain officers and
directors of the Company, at an exercise price of $6.00 per share, and an
aggregate of 402,500 shares of Class A Common Stock subject to options
granted to certain officers and directors of the Company under the 1997
Incentive Stock Plan, to be effective only immediately prior to the
consummation of the Offering, at an exercise price per share equal to the
initial public offering price per share in the Offering. See
"Management--1997 Incentive Stock Plan" and "Principal Stockholders."
18
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma balance sheet at September 30, 1997 is presented as
if, at such date, (i) the Equity Contribution and the Reclassification had been
consummated, and the Company had converted from an S-Corporation to a
C-Corporation, and (ii) the Offering and the application of the net proceeds
therefrom had been consummated.
The unaudited pro forma statement of operations for the nine months ended
September 30, 1997 is presented as if, at the beginning of the period, (i) the
Company had completed the acquisition of the assets of WZVU-FM (which
acquisition was completed in June 1997), (ii) the Company had completed the
acquisition of the assets of WVVX-FM, Inc. (which acquisition was completed in
August 1997), (iii) the Equity Contribution and the Reclassification had been
consummated, and the Company had converted from an S-Corporation to a
C-Corporation, and (iv) the Offering and the application of the net proceeds
therefrom had been consummated.
The unaudited pro forma statement of operations for the year ended December
31, 1996 is presented as if, at the beginning of the period, (i) the Company had
completed the acquisition of the assets of WZVU-FM, (ii) the Company had
completed the acquisition of the assets of WVVX-FM, Inc., (iii) the Equity
Contribution and the Reclassificaion had been consummated, and the Company had
converted from an S-Corporation to a C-Corporation, and (iv) the Offering and
the application of the net proceeds therefrom had been consummated. Furthermore,
the unaudited pro forma statement of operations for the year ended December 31,
1996 is presented as if, throughout the period, the Company did not own the
assets of KWIZ-FM and the Q stations.
These pro forma financial statements should be read in conjunction with the
Company's Financial Statements and the Notes thereto and the Financial
Statements and Notes thereto of WZVU-FM, and WVVX-FM included elsewhere in this
Prospectus. The pro forma information is not necessarily indicative of the
results that would have been reported had such events actually occurred on the
dates specified, nor is it indicative of the Company's future results.
19
<PAGE>
BIG CITY RADIO, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash.................................................................... $ 316 $ -- $ 316
Accounts receivable, net of allowance for doubtful accounts............. 2,263 -- 2,263
Other current assets.................................................... 471 -- 471
----------- ----------- -----------
Total current assets.................................................. 3,050 -- 3,050
Property and equipment, net............................................... 2,672 -- 2,672
Intangible assets, net.................................................... 54,439 -- 54,439
Deferred financing fees................................................... 563 -- 563
Other assets.............................................................. 272 -- 272
----------- ----------- -----------
Total assets.......................................................... $ 60,996 $ -- $ 60,996
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities....................................................... $ 2,655 $ -- $ 2,655
Deferred income taxes..................................................... -- $ 3,350(3) 3,350
Long-term debt............................................................ 56,700 (32,980)(1) 23,720
Notes payable to stockholders............................................. 13,163 (13,163)(2)
Stockholders' equity (deficit)............................................ (11,522) 32,980(1) 31,271
13,163(2) --
(3,350)(3) --
----------- ----------- -----------
Total liabilities and stockholders' equity (deficit).................. $ 60,996 $ -- $ 60,996
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------------------
(1) To reflect net proceeds to the Company from the Offering (assuming an
initial public offering price of $9.00 per share) and the use of such
proceeds to repay a portion of the Existing Credit Facility (see "Use of
Proceeds").
(2) Reflects the Equity Contribution, based on the balance of Notes payable to
stockholders at September 30, 1997.
(3) To reflect the deferred tax liabilities in connection with the conversion
from S-Corporation status to C-Corporation status.
20
<PAGE>
BIG CITY RADIO, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION OF
SALE OF SALE OF OF WVVX-FM, PRO FORMA
HISTORICAL Q(1) KWIZ-FM(1) WZVU-FM(2) INC.(3) ADJUSTMENTS PRO FORMA
----------- --------- ------------- ------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues....... $ 8,567 $ (2,226) $ (1,106) $ 3,174 $ 1,138 $ -- $ 9,547
Less: commissions and
fees............... 623 (176) -- 247 1 -- 695
----------- --------- ------------- ------------- ------ ------------- -----------
Net revenues......... 7,944 (2,050) (1,106) 2,927 1,137 -- 8,852
Station operating
expenses excluding
depreciation and
amortization....... 12,253 (3,586) (313) 1,044 399 -- 9,797
----------- --------- ------------- ------------- ------ ------------- -----------
Station operating
income(loss)
excluding
depreciation and
amortization....... (4,309) 1,536 (793) 1,883 738 -- (945)
Depreciation and
amortization....... 1,388 (204) (217) 141 306 215(4) 1,629
Corporate general and
administrative
expenses........... 1,201 -- -- 1,651 243 -- 3,095
Reimbursement of
operating expenses
under LMA.......... -- -- -- (27) -- -- (27)
----------- --------- ------------- ------------- ------ ------------- -----------
Operating income
(loss)............. (6,898) 1,740 (576) 118 189 (215) (5,642)
Interest expense..... 2,827 (391) (473) 2,498 343 (4,503)(5) 301
Gain on sale......... 6,608 (6,608) -- -- -- -- --
Other (income)
expense............ (19) 82 (5) (29) 16 -- 45
----------- --------- ------------- ------------- ------ ------------- -----------
(Loss) before income
taxes.............. (3,098) (4,559) (98) (2,351) (170) 4,288 (5,988)
Provision for
(benefit from)
income
taxes(6)(7)........ -- -- -- -- (35) 3,350(7) 3,350
(35)(6) --
----------- --------- ------------- ------------- ------ ------------- -----------
Net loss............. $ (3,098) $ (4,559) $ (98) $ (2,351) $ (135) $ 903 $ (9,338)
----------- --------- ------------- ------------- ------ ------------- -----------
----------- --------- ------------- ------------- ------ ------------- -----------
Pro forma net loss
per share of Common
Stock(10).......... $ (1.28)
-----------
-----------
Pro forma weighted
average shares of
Common Stock
outstanding(10).... 9,426
Pro forma as adjusted
Net loss per share
of Common
Stock(10).......... $ (.70)
-----------
-----------
Pro forma as adjusted
weighted average
shares of Common
Stock
outstanding(10).... 13,426
-----------
-----------
</TABLE>
See notes to unaudited pro forma statement of operations
21
<PAGE>
BIG CITY RADIO, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
(1) Removes the reported historical results of operations of KWIZ-FM, for the
period from the date of its acquisition, May 30, 1996, to its date of sale,
December 20, 1996, and the reported operations of the Q stations for the
period October 1, 1995 to May 30, 1996 included in the historical Company
results.
(2) Reflects historical results of operation for the period January 1, 1996 to
December 31, 1996 of WZVU-FM, Long Branch, New Jersey, acquired from K&K
Radio Broadcasting, L.L.C. on June 5, 1997.
(3) Reflects historical results of operation for the period January 1, 1996 to
December 31, 1996 of WVVX-FM, Highland Park, Illinois, acquired from Douglas
Broadcasting, Inc. on August 8, 1997. The ownership of WVVX-FM changed
during the year ended December 31, 1996. Accordingly, operating results for
the year ended December 31, 1996 were derived by combining the information
for the period from January 1, 1996 to June 13, 1996 (Predecessor) with
those for the period June 14, 1996 to December 31, 1996 (Successor).
(4) Adjustment of historical depreciation and amortization expense of the
acquired businesses to reflect the new allocations of purchase prices to the
assets acquired.
(5) Reflects pro forma adjustments to reduce reported interest expense by
$1,090,000, $2,770,000, and $643,000 resulting from: (a) indebtedness
incurred to finance the WZVU-FM and WVVX-FM acquisitions, net of historical
interest expense; (b) the retirement of $32,980,000 indebtedness under the
Existing Credit Facility from the use of net proceeds of the Offering; and
(c) the Equity Contribution.
(6) Pro forma adjustment relating to the elimination of taxes due to net
operating losses.
(7) To reflect the deferred tax liabilities in connection with the conversion
from S-Corporation status to C-Corporation status.
(8) In connection with the consummation of the Offering, the Company's Chief
Executive Officer will be entitled to receive 93,755 shares of Class A
Common Stock for every 20% increase in the average closing price of the
Class A Common Stock following the consummation of the Offering; provided
that such increase remains in effect for six months (up to a maximum of
281,265 shares). If the Company's Chief Executive Officer earns these grants
of Class A Common Stock, the Company will record minimum future non-cash
charges aggregating approximately $3,686,000 based on an assumed initial
public offering price of $9.00 per share. These non-cash charges have not
been included in the accompanying Pro Forma Financial Statements.
(9) In December 1997, the Company granted options to purchase an aggregate of
150,000 shares of Class A Common Stock to certain officers and directors at
an exercise price of $6.00 per share. These shares will result in the
Company recording a future non-cash charge of approximately $450,000 based
on an assumed initial public offering price of $9.00 per share. These
non-cash charges have not been included in the accompanying pro forma
financial statements.
(10) Net loss per share is presented (i) on a pro forma basis after giving
effect to the Equity Contribution, the Reclassification, the Company's
conversion from S-Corporation status to C-Corporation status and the
acquisitions and dispositions noted above and (ii) on a pro forma basis, as
further adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom.
22
<PAGE>
BIG CITY RADIO, INC
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUISITION OF
ACQUISITION OF WVVX-FM, PRO FORMA
HISTORICAL WZVU-FM (1) INC. (2) ADJUSTMENTS PRO FORMA
---------- --------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $ 8,485 $ 414 $ 623 $ (375)(3) $ 9,147
Less: commissions and fees.............. 947 1 1 949
---------- ----- ----- ----------- ------------
Net revenues.......................... 7,538 413 622 (375) 8,198
Station operating expenses excluding
depreciation and amortization......... 9,834 92 255 (375)(3) 9,806
---------- ----- ----- ----------- ------------
Station operating income (loss)
excluding depreciation and
amortization.......................... (2,296) 321 367 0 (1,608)
Depreciation and amortization........... 1,316 51 169 99(4) 1,635
Corporate, general and administrative
expenses.............................. 1,104 220 169 -- 1,493
Employment incentive.................... 3,713 -- -- -- 3,713
Reimbursement of operating expenses
under LMA............................. -- (151) -- -- (151)
---------- ----- ----- ----------- ------------
Operating income (loss)................. (8,429) 201 29 (99) (8,298)
Interest expense........................ 3,062 180 231 (2,105)(5) 1,368
Other (income) expense.................. (56) -- -- -- (56)
---------- ----- ----- ----------- ------------
Income (Loss) before income taxes....... (11,435) 21 (202) 2,006 (9,610)
Provision for (benefit from) income
taxes................................. -- -- (66) 3,350(7) 3,350
66(6) --
---------- ----- ----- ----------- ------------
Net income (loss)....................... $ (11,435) $ 21 $ (136) $ (1,410) $ (12,960)
---------- ----- ----- ----------- ------------
---------- ----- ----- ----------- ------------
Pro forma net loss per
share of Common Stock(10)............. $ (1.58)
------------
------------
Pro forma weighted average
shares of Common Stock
outstanding(10)....................... 9,426
------------
------------
Pro forma as adjusted net loss per share
of Common Stock(10)................... $ (.97)
------------
------------
Pro forma as adjusted weighted average
shares of Common Stock
outstanding(10)....................... 13,426
------------
------------
</TABLE>
See notes to unaudited pro forma statement of operations.
23
<PAGE>
BIG CITY RADIO, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
(1) Reflects historical results of operation for the period January 1, 1997 to
May 31, 1997 of WZVU-FM, Long Branch, New Jersey, acquired from K&K Radio
Broadcasting, L.L.C. on June 5, 1997.
(2) Reflects historical results of operation for the period January 1, 1997 to
July 31, 1997 of WVVX-FM, Highland Park, Illinois, acquired from Douglas
Broadcasting, Inc. on August 8, 1997.
(3) Eliminates LMA fees and expenses in the period January 1, 1997 to June 5,
1997, the period during which the Company managed WZVU-FM prior to ownership
(see "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations"). These fees and expenses were reported
in the Company's historical results as station operating expenses and in the
historical results of the acquired businesses as Other Income.
(4) Adjustment of historical depreciation and amortization expense of the
acquired businesses to reflect the new allocations of purchase prices to the
assets acquired.
(5) Reflects pro forma adjustments to (increase) decrease reported interest
expense by $(418,000), $1,905,000 and $618,000 resulting from: (a)
indebtedness incurred to finance the WZVU-FM and WVVX-FM acquisitions, net
of historical interest expense; (b) the retirement of $32,980,000 in
indebtedness under the Existing Credit Facility from the use of net proceeds
of the Offering; and (c) the Equity Contribution.
(6) Pro forma adjustment relating to the elimination of taxes due to net
operating losses.
(7) To reflect the deferred tax liabilities in connection with the conversion
from
S-Corporation status to C-Corporation status.
(8) In connection with the consummation of the Offering, the Company's Chief
Executive Officer will be entitled to receive 93,755 shares of Class A
Common Stock for every 20% increase in the average closing price of the
Common Stock following consummation of the Offering; provided that such
increase remains in effect for six months (up to a maximum of 281,265
shares). If the Company's Chief Executive Officer earns these grants of
Class A Common Stock, the Company will record minimum future non-cash
charges aggregating approximately $3,686,000 based on an assumed initial
public offering price of $9.00 per share. These non-cash charges have not
been included in the accompanying pro forma financial statements.
(9) In December 1997, the Company granted options to purchase an aggregate of
150,000 shares of Class A Common Stock to certain officers and directors at
an exercise price of $6.00 per share. These shares will result in the
Company recording a future non-cash charge of approximately $450,000 based
on an assumed initial public offering price of $9.00 per share. These
non-cash charges have not been included in the accompanying pro forma
financial statements.
(10) Net loss per share is presented (i) on a pro forma basis after giving
effect to the Equity Contribution, the Reclassification, the Company's
conversion from S-Corporation status to C-Corporation status and the
acquisitions noted above and (ii) or a pro forma basis as further adjusted
to give effect to the Offering and the application of the estimated net
proceeds therefrom.
24
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following table presents selected financial and operating data and
should be read in conjunction with the Company's Financial Statements and
related Notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein. The
selected balance sheet data as of December 31, 1995 and 1994, and September 30,
1994 and Statement of Operations data for the year ended December 31, 1995, the
three months ended December 31, 1994 and the year ended September 30, 1994 are
derived from the Company's financial statements which have been audited by Holtz
Rubenstein & Co., LLP, Certified Public Accountants. The selected balance sheet
data as of December 31, 1996 and Statement of Operations data for the year ended
December 31, 1996 are derived from the Company's financial statements which have
been audited by KPMG Peat Marwick LLP, Independent Certified Public Accountants.
The selected balance sheet data as of September 30, 1996, and 1997 have been
derived from the Company's unaudited financial statements, which in the opinion
of management, include all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of financial condition and results
of operations. The historical financial results of the Company are not
comparable from period to period because of the acquisition and sale of various
broadcasting properties by the Company during the periods covered.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED THREE MONTHS YEARS ENDED SEPTEMBER
SEPTEMBER 30, ENDED DECEMBER 31, 30,
--------------------------------- DECEMBER 31, ------------------------- -----------
1992(1) 1993 1994 1994 1995(2) 1996(3)(4) 1996(4)
----------- --------- --------- --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Gross revenues................. $ 257 $ 1,511 $ 2,267 $ 654 $ 5,655 $ 8,567 $ 6,296
Net revenues................... 233 1,383 2,074 604 5,225 7,944 5,870
Station operating expenses..... 373 2,325 2,326 687 7,185 12,253 9,726
Corporate, general and
administrative expenses...... -- -- -- -- 425 1,201 804
Depreciation and
amortization................. 74 622 524 113 798 1,388 867
Employment incentive........... -- -- -- -- -- -- --
Operating loss................. (215) (1,563) (776) (196) (3,183) (6,898) (5,527)
Gain on sale................... -- -- -- -- -- (6,608) (6,608)
Interest expense............... (4) 258 439 120 842 2,827 1,880
Net (loss)..................... (215) (1,807) (1,163) (298) (4,005) (3,098) (798)
Pro forma as reported net loss
per common share............. (.33)
Cash dividends per common
share........................
Pro forma as reported weighted
average shares
outstanding(8)............... 9,426
OTHER OPERATING DATA:
Broadcast cash flow(6)........... $ (140) $ (942) $ (252) $ (83) $ (1,960) $ (4,309) $ (3,856)
Operating cash flow.............. (324) (1,228) (1,007) (227) (2,942) (7,448) (5,793)
Investing cash flow.............. (4,248) (92) (23) (1) (3,883) (24,235) (29,867)
Financing cash flow.............. 4,616 1,296 1,066 172 7,779 30,851 34,779
<CAPTION>
1997(5)
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues................. $ 8,485
Net revenues................... 7,538
Station operating expenses..... 9,834
Corporate, general and
administrative expenses...... 1,104
Depreciation and
amortization................. 1,316
Employment incentive........... 3,713
Operating loss................. (8,429)
Gain on sale................... --
Interest expense............... 3,062
Net (loss)..................... (11,435)
Pro forma as reported net loss
per common share............. (1.21)
Cash dividends per common
share........................
Pro forma as reported weighted
average shares
outstanding(8)............... 9,426
OTHER OPERATING DATA:
Broadcast cash flow(6)........... $ (2,296)
Operating cash flow.............. (6,662)
Investing cash flow.............. (22,194)
Financing cash flow.............. 28,938
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------------------------------- ----------------------------------- --------------------
1992 1993 1994 1994 1995 1996 1996 1997
--------- --------- --------------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............. $ (129) $ 204 $ 606 $ 600 $ 1,442 $ 294 $ 308 $ 395
Net intangible assets........ 3,201 2,942 2,666 2,600 6,040 29,230 40,436 54,439
Total assets................. 4,587 4,037 4,044 3,863 9,433 38,963 44,660 60,996
Notes payable................ 3,291 4,923 6,028 6,219 13,477 12,544 12,343 13,163
Long-term debt............... -- -- -- -- -- 28,200 32,300 56,700
Stockholder's equity
(deficit).................. 784 (1,022) (2,185) (3,484) (5,821) (3,800) (1,502) (11,522)
</TABLE>
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
25
<PAGE>
- ------------------------------
(1) The financial statements for the 12 months ended December 31, 1995 include
three months (October, November and December 1994) of operations of Q
Broadcasting, Inc. that were included in the three months ended December 31,
1994 financial statements. Revenues and net income for the duplicate period
are $604 and $298, respectively.
(2) The Company acquired substantially all of the assets of WRGX-FM and WRKL-AM
effective December 31, 1994 and commenced operations on January 1, 1995. The
financial statements include the operations of these stations since January
1, 1995.
(3) The Company acquired substantially all of the assets of the Los Angeles
Stations and KWIZ-FM on May 30, 1996 and commenced operations of these
stations under a LMA on March 26, 1996. The financial statements include the
operations of these stations from commencement of the LMA period. KWIZ-FM
was sold on December 31, 1996. No gain or loss was recognized on the sale of
KWIZ-FM.
(4) The Company acquired WSTC-AM and WKHL-FM during 1992. The financial
statements include the operations of these stations from their date of
acquisition to May 30, 1996, the date on which they were sold. For the year
ended December 31, 1996, the gain on sale of stations represents the gain on
sale of WSTC-AM and WKHL-FM.
(5) The Company acquired substantially all of the assets of WWHB-FM on April 1,
1997 and WZVU-FM on June 5, 1997 and commenced operations of these stations
under a LMA during December 1996. WWHB-FM and WZVU-FM together with WRGX-FM
form Y-107 NY. The financial statements include the operations of Y-107 NY
since December 1996.
(6) Although not calculated in accordance with generally accepted accounting
principles, broadcast cash flow is widely used in the broadcast industry as
a measure of a broadcasting company's operating performance. Nevertheless,
the measure should not be considered in isolation or as a substitute for
operating loss, net loss, cash flows from operating activities or any other
measure for determining the Company's operating performance or liquidity
calculated in accordance with generally accepted accounting principles.
Broadcast cash flow is defined as operating loss plus depreciation and
amortization plus corporate general and administrative expenses, including
employment incentive.
(7) As of July 1, 1997, the Principal Stockholders transferred 68 shares of Old
Common Stock to the Company's Chief Executive Officer as an employment
incentive. The statement of operations for the nine months ended September
30, 1997 reflects an accounting charge of $3,713 relating to this award
which has been reflected as a capital contribution in Stockholders' Equity.
The charge represents the approximate fair market value of the stock
transferred for accounting purposes only and was estimated at 80% of the
assumed initial public offering price of $9.00 per share.
(8) Pro forma as reported weighted average shares outstanding is the sum of
9,375,520 shares outstanding immediately prior to the Offering (and after
the Equity Contribution and the Reclassification) plus 50,000 shares
relating to 150,000 stock options granted on December 1, 1997 with an
exercise price of $6.00 per share computed using the treasury stock approach
(assuming an initial public offering price of $9.00 per share).
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH "SELECTED
FINANCIAL AND OPERATING DATA" AND THE PRO FORMA FINANCIAL STATEMENTS OF THE
COMPANY, INCLUDING THE NOTES THERETO, AND THE OTHER FINANCIAL DATA APPEARING
ELSEWHERE IN THIS PROSPECTUS. CERTAIN INFORMATION INCLUDED HEREIN CONTAINS
STATEMENTS THAT CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SEE "CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS."
GENERAL
The Company was incorporated in August 1994 and commenced operations on
January 1, 1995, having acquired WRGX-FM, Briarcliff Manor, New York, and
WRKL-AM, New City, New York (together, the "Original New York Stations"), on
December 31, 1994. On May 30, 1996 the Company merged with Q Broadcasting, Inc.
("Q") in a transaction accounted for as a combination of entities under common
control. As a result of this merger the two entities are deemed to be combined
since inception (see notes to the financial statements included elsewhere in
this Prospectus). Q owned and operated the Q stations in Stamford, Connecticut,
from July 1992 up to the date of the combination with the Company. The Company
reports on the basis of a December 31 year-end and Q reported on the basis of a
September 30 year-end. As a result, the December 31, 1996 and 1995 financial
statements reflect the operations of Q on the basis of the eight month period
ended May 30, 1996 (the date of sale of the Q stations) and the 12 months ended
September 30, 1995, respectively.
The Q stations were operated in one facility, with one sales and support
staff. Their financial performance is combined for purposes of the discussions
that follow. Y-107 LA, Y-107 NY, WRKL-AM, and the stand-alone operations of
WRGX-FM were operated with separate staffs and facilities, therefore their
performance is separately identified.
Between March 26, 1996 and May 30, 1996, when the stations were acquired,
the Company operated the Los Angeles Stations and KWIZ-FM under a LMA. On March
26, all of the existing operations of the Los Angeles Stations were terminated,
and the Company debuted Y-107 LA under a modern rock format with new staffing
and no existing advertiser base. Although commencing with no revenues, Y-107 LA
revenues had surpassed all other Company revenues combined by November 1996.
During the LMA period, station operating expenses include significant LMA fees
and other reimbursed expenses to the seller. KWIZ-FM was sold on December 20,
1996.
On December 5, 1996, the Company commenced operation of WWZY-FM (formerly,
WZVU-FM), Long Branch, New Jersey, under a LMA, changing its format to country
music. On that date, WWXY-FM (formerly, WRGX-FM), Briarcliff Manor, New York,
which the Company had operated as a stand-alone FM since its acquisition on
January 1, 1995, changed format to broadcast Y-107 NY as a new country music
station with WWZY-FM. Furthermore, on December 30, 1996 the Company began
operating WWVY-FM (formerly, WWHB-FM), Hampton Bays, New York, under a LMA.
Since that date, the New York Stations have operated as Y-107 NY. Y-107 NY
retained certain advertisers and staff from all three of the previously
stand-alone stations. WWVY-FM and WWZY-FM were subsequently acquired on April 1,
1997 and June 5, 1997, respectively.
On August 8, 1997 the Company acquired WVVX-FM, Highland Park, Illinois, and
WJDK-FM, Morris, Illinois.
RESULTS OF OPERATIONS
The Company's financial results are dependent on a number of factors,
including the general strength of the local and national economies, local market
competition, the relative efficiency and effectiveness of radio broadcasting
compared to other advertising media, government regulation and policies and the
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Company's ability to provide popular programming. The performance of a radio
station group is customarily measured by its ability to generate broadcast cash
flow, calculated as station operating income or loss excluding depreciation and
amortization and corporate overhead. This measure, although widely used in the
broadcast industry as a measure of operating performance, is not calculated in
accordance with generally accepted accounting principles. Broadcast cash flow
should not be considered in isolation or as a substitute for operating income,
net income, cash flows from operating activities, or any other measure for
determining the Company's operating performance or liquidity calculated in
accordance with generally accepted accounting principles.
The Company's primary source of revenue is the sale of advertising. Total
revenue is determined by the number of advertisements aired by the station and
the advertising rates that the stations are able to charge. See
"Business--Advertising Sales."
Given the fact that the Company's strategy involves developing a brand new
metropolitan area radio station, the initial revenue base is zero and subject to
factors other than ratings and radio broadcasting seasonality. After the
start-up period, as is typical in the radio broadcasting industry, the Company's
first calendar quarter generally will produce the lowest revenues for the year,
and the fourth quarter generally will produce the highest revenues for the year.
The Company's operating results in any period may be affected by the incurrence
of advertising and promotion expenses that do not produce commensurate revenues
in the period in which the expenses are incurred.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
NET REVENUES in the nine months ended September 30, 1997 were $7,538,000 as
compared to $5,870,000 for the nine months ended September 30, 1996, an increase
of $1,668,000, or 28%. This increase was due primarily to an increase of
$4,021,000 in the net revenues of Y-107 LA in the 1997 period when compared to
the prior year and an increase of the Y-107 NY net revenues in the nine months
ended September 30, 1997 of $664,000, or 51%, compared to the net revenues of
the stand-alone WWXY-FM in the corresponding period of 1996. These increases in
net revenues were partially offset by (a) the absence of net revenues for the Q
stations and KWIZ-FM in the nine months ended September 30, 1997 compared to
$2,050,000 and $770,000 net revenues, respectively, for the nine months ended
September 30, 1996, and (b) the fact that WRKL-AM net revenues in the nine
months ended September 30, 1997 were down $248,000, or 21%, when compared to the
same period in 1996. The Y-107 LA increase was principally due to the fact that
(a) the 1997 net revenues include nine months of Y-107 LA operations, whereas
the 1996 net revenues include only six months of Y-107 LA operations, and (b)
the 1996 period net revenues were the first six months of operation of the Los
Angeles Stations which was commenced with no existing business. The Y-107 NY
increase reflects growth resulting from the commencement of the initial
broadcast of Y-107 NY in January 1997.
STATION OPERATING EXPENSES excluding depreciation and amortization in the
nine months ended September 30, 1997 were $9,834,000, as compared to $9,726,000
in the nine months ended September 30, 1996, an increase of $108,000, or 1.1%.
This small increase is due to the inclusion of the expenses of Y-107 LA and
Y-107 NY offset by the absence of operating expenses of the Q Stations. The
increase in Y-107 LA operating expenses reflects the fact that (a) the 1997
period station operating expenses represent nine months of operations as
compared to six months operations reported in the 1996 period, and (b) the six
month operations in the 1996 period were the first six months of operation of
the station, reflecting incomplete staffing and the absence of significant
marketing initiatives, offset by the expense of LMA fees and expenses of
$650,000 incurred in the same period in 1996. The increase in the Y-107 NY
operating expenses when compared to the prior year period operating expenses of
the stand-alone WWXY-FM are due to (a) $640,000 of non-recurring LMA fees and
expenses for WWZY-FM and WWVY-FM, (b) significantly increased advertising and
promotional expenditures incurred to launch Y-107 NY and (c) increased selling
and general and administrative expenses in developing the Y-107 NY
infrastructure.
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DEPRECIATION AND AMORTIZATION EXPENSES for the nine months ended September
30, 1997 were $1,316,000, as compared to $867,000 for the corresponding period
in the prior year, an increase of $449,000, or 52%. This increase was due
primarily to the amortization of intangibles and depreciation of capital assets
related to the acquired stations.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES for the nine months ended
September 30, 1997 were $1,104,000, as compared to $804,000 for the
corresponding period in the prior year, an increase of $300,000, or 37%. This
increase is primarily due to increases in administrative staff to support the
growth of the Company.
INTEREST EXPENSE for the nine months ended September 30, 1997 was $3,062,000
as compared to $1,880,000 for the corresponding period in the prior year, an
increase of $1,182,000, or 63%. This increase reflects borrowings under the
Existing Credit Facility made to fund the Company's acquisitions, and (b)
increased stockholders' loans throughout the 1997 period compared to the
corresponding period in 1996. In the nine months ended September 30, 1997 and
1996, the average outstanding total debt for the Company was $53,058,000 and
$28,585,000, respectively. The average rate of interest on the outstanding debt
was 7.7% and 8.8%, respectively.
NET LOSSES for the nine months ended September 30, 1997 were $11,435,000, as
compared to $798,000 for the corresponding period in the prior year. The
increase in the net loss of $10,637,000 is primarily attributable to (a) 1996
period gain of $6,608,000 on the sale of the Q stations, (b) higher interest
expense and depreciation and amortization expenses incurred as part of the radio
station acquisitions of the Company, and (c) a charge of $3,713,000 in the 1997
period relating to awards under an employment incentive arrangement offset by
the absence of the Q stations operations in 1997 and improvement in the Y-107 LA
performance.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET REVENUES in the year ended December 31, 1996 were $7,944,000 as compared
to $5,225,000 for the year ended December 31, 1995, an increase of $2,719,000,
or 52%. This increase was primarily due to (a) net revenues of $1,567,000 and
$1,106,000 from the Company's LMA operation and acquisition of the Los Angeles
Stations and KWIZ-FM, respectively, and (b) an increase in net revenues of
WRKL-AM of $320,000 for the year ended December 31, 1996 compared to the prior
year. This increase was partially offset by decreases in net revenues of the Q
stations of $237,000 due to their shorter period of operation and a small
decrease in net revenues of $36,000 at WRGX-FM.
STATION OPERATING EXPENSES excluding depreciation and amortization for the
year ended December 31, 1996 were $12,253,000, as compared to $7,185,000 in the
year ended December 31, 1995, an increase of $5,068,000, or 71%. This increase
was primarily due to (a) station operating expenses of $3,870,000 and $359,000
from the Company's LMA operation and acquisition of Y-107 LA and KWIZ-FM,
respectively, (b) an increase in WRKL-AM station operating expenses of $412,000
for the year ended December 31, 1996 compared to the prior year and (c) an
increase of $476,000 in the Q stations operating expenses. The 1996 Y-107 LA
operating costs of $3,870,000 include $650,000 of non-recurring LMA expenses
incurred during the two-month period ended May 30, 1996. The increased WRKL-AM
and Q stations operating costs in 1996 when compared to 1995 reflect significant
investments in sales, marketing, programming and administrative support to grow
the stations' ratings.
DEPRECIATION AND AMORTIZATION EXPENSES for the year ended December 31, 1996
were $1,388,000, as compared to $798,000 for the year ended December 31, 1995,
an increase of $590,000, or 74%. This increase was due primarily to the
amortization of intangibles and the depreciation of capital assets acquired
related to the Y-107 LA and KWIZ-FM acquisitions.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES for the year ended December
31, 1996 were $1,201,000, as compared to $425,000 for the year ended December
31, 1995, an increase of $776,000, or 182%. This
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increase is due to the establishment of a corporate staff during 1995 and early
1996 to support implementation of the Company's business plan.
INTEREST EXPENSE for the year ended December 31, 1996 was $2,827,000, as
compared to $842,000 for the year ended December 31, 1995, an increase of
$1,985,000, or 236%. This increase reflects (a) the initial borrowings of $31
million under the Existing Credit Facility made to fund, in part, the
acquisition of Y-107 LA and KWIZ-FM on May 30, 1996, and (b) increased
stockholders' loans throughout 1996 compared to 1995. In the year ended December
31, 1996 and 1995, the average outstanding total debt for the Company was
$37,026,000 and $11,390,000, respectively. The average rate of interest on the
outstanding debt was 7.6% and 7.4%, respectively.
NET LOSSES for the year ended December 31, 1996 were $3,098,000, as compared
to $4,005,000 for the year ended December 31, 1995, a decrease of $907,000, or
23%. The net decrease is primarily attributable to the gain on the sale by the Q
stations of $6,608,000 and increased net revenue, offset by (a) higher interest
expense and depreciation and amortization expenses incurred as part of the radio
station acquisitions of the Company, and (b) an increase in station operating
expenses as the Company reconfigured and developed the Los Angeles Stations.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1994
NET REVENUES in the year ended December 31, 1995 were $5,225,000 as compared
to $2,074,000 for the year ended September 30, 1994, an increase of $3,151,000,
or 152%. This increase was primarily due to (a) net revenues of $2,938,000 at
the Original New York Stations in the year ended December 31, 1995, and (b) an
increase in net revenues of $213,000 at the Q stations for the year ended
September 30, 1995 compared to the prior year.
STATION OPERATING EXPENSES, excluding depreciation and amortization for the
year ended December 31, 1995 were $7,185,000 as compared to $2,326,000 for the
year ended September 30, 1994, an increase of $4,859,000, or 209%. This increase
was primarily due to (a) station operating expenses of $4,075,000 at the Company
stations in the year ended December 31, 1995, and (b) an increase in station
operating expenses of $784,000 at the Q stations for the year ended September
30, 1995 compared to the prior year. The increased Q stations' operating
expenses reflect investments made to improve programming and marketing.
DEPRECIATION AND AMORTIZATION EXPENSE for year ended December 31, 1995 was
$798,000 as compared to $524,000 for the year ended September 30, 1994, an
increase of $274,000, or 52%. This increase was primarily due to the acquisition
of the Company stations on January 1, 1995.
CORPORATE, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended December
31, 1995 were $425,000, as compared to zero for the year ended September 30,
1994. This increase is due to the establishment of corporate resources for
programming, finance and engineering in 1995 to oversee the Company and Q
stations, and to commence implementation of the Company's business plan.
INTEREST EXPENSE for the year ended December 31, 1995 was $842,000 as
compared to $439,000 for the year ended September 30, 1994, an increase of
$403,000, or 92%. This increase was primarily due to increased interest on
stockholders' loans advanced to complete the acquisition of the Company stations
on January 1, 1995. In the years ended December 31, 1995 and 1994, the average
outstanding total debt for the Company was $11,390,000 and $5,476,000,
respectively. The average rate of interest for the outstanding debt was 7.4% and
8.0%.
NET LOSSES for the year ended December 31, 1995 were $4,005,000, as compared
to $1,163,000 for the year ended September 30, 1994, an increase of $2,842,000,
or 244%. The net loss increase is primarily attributable to (a) higher interest
expense and depreciation and amortization expenses incurred as part of the
Company stations' acquisition, and (b) an increase in station operating expenses
as the Company began operations of the Company stations, offset by an increase
in net revenues.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has reported net losses since inception primarily due to
broadcast cash flow deficits characteristic of the start up of Y-107 LA and
Y-107 NY, and depreciation and amortization charges relating to the Company's
acquisition of radio stations, as well as interest charges on its outstanding
debt. There can be no assurance that losses will not be incurred in the future.
See "Risk Factors--Limited History of Operations; Net Losses and Negative Cash
Flow from Operations; Expected Future Net Losses and Negative Cash Flow from
Operations." The Company believes that it will report significant operating
losses for the year ended December 31, 1997. In addition, because its properties
are in the early stages of development, the Company expects to generate
significant net losses as it continues to expand its presence in major markets.
Accordingly, the Company expects to generate consolidated net losses for the
foreseeable future. As a result, working capital needs have been met by
borrowings, including loans from the Principal Stockholders (which borrowings
are to be contributed to the capital of the Company immediately prior to the
consummation of the Offering) and borrowings under the Existing Credit Facility.
See "Risk Factors--Limited History of Operations; Net Losses and Negative Cash
Flow from Operations; Expected Future Net Losses and Negative Cash Flow from
Operations". The Company has entered into various employment contracts with
eleven individuals comprised of officers and senior management that provide for
minimum salaries and incentives based upon specified levels of performance. The
minimum payments under these contracts are $1,459,000 in 1997, $1,401,000 in
1998, $326,000 in 1999 and $182,000 in 2000.
The Company has never paid cash or stock dividends on shares of its Common
Stock. The Company will continue to report net losses throughout the start up
period for the Chicago Stations. Furthermore, it intends to retain future
earnings for use in its business and does not anticipate paying dividends on
shares of its Common Stock in the foreseeable future.
CASH FLOWS FROM OPERATING ACTIVITIES
In each of the years ended September 30, 1994, December 31, 1995 and 1996,
and in each of the nine-month periods ended September 30, 1996 and 1997, the
Company reported cash used in operations. In the year ended December 31, 1996
and the nine months ended September 30, 1996 these losses were predominantly due
to the funding of start-up operations at Y-107 LA, together with an increase in
interest expense in both periods, as borrowings under the Existing Credit
Facility were used to fund the Y-107 LA radio station acquisition. In the nine
months ended September 30, 1997, the deficit was predominantly due to the
start-up operating losses of Y-107 NY and increased interest expense for
borrowings under the Existing Credit Facility to finance the Y-107 LA and Y-107
NY radio station acquisitions.
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (excluding acquisitions of radio stations) were
$653,000 and $398,000 in the year ended December 31, 1996, and the nine months
ended September 30, 1997, respectively. These expenditures reflect the need to
upgrade and expand the studio and broadcast facilities, computer support
equipment, and to purchase promotional vehicles for the newly formed trimulcast
stations. The Company has no commitments for capital expenditures at September
30, 1997, but does anticipate capital expenditures to upgrade office and studio
facilities in the next twelve months.
Under the terms of the Credit Facility, the Company will have a $35.0
million revolving loan facility if the net proceeds of this Offering equal or
exceed $35.0 million; if the net proceeds of this Offering are less than $35.0
million, the amount of the revolving credit facility will be reduced
dollar-for-dollar to a minimum of $29.0 million (assuming the net proceeds of
the Offering are $33.0 million (using an initial offering price of $9.00, the
midpoint of the range of prices on the cover of this Prospectus), the amount of
the Credit Facility will be $33.0 million). The Credit Facility will mature on
the fifth anniversary of the closing of the Offering. At September 30, 1997, the
Company had $56.7 million outstanding under the Existing Credit Facility, $33.0
million of which will be repaid with the net proceeds of the Offering.
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Outstanding amounts under the Credit Facility will bear interest at an
applicable margin that will vary based upon the Company's ratio of debt to
EBITDA plus a rate based, at the option of the Company, on the participating
bank's prime rate (in which case the applicable margin will vary from .50% to
2.00%), or the London Interbank Borrowing Rate (in which case the applicable
margin will vary from 1.50% to 3.00%).
Chase's revolving credit commitment under the Credit Facility will be
reduced by 20% of the total commitment on the second, third and fourth
anniversary of the closing date and the remaining 40% on the fifth anniversary
of the closing date. On each April 30, commencing April 30, 1999, Chase's total
commitment amount under the Credit Facility will also be reduced by 50% of the
Company's excess cash flow (as defined in the Credit Facility) during the most
recently completed fiscal year, which reduction will be applied in inverse order
to the remaining scheduled reductions mentioned above. In addition, Chase's
commitment shall also be reduced upon receipt of certain net cash proceeds in
excess of specified amounts from the sale of assets of the Company which are not
applied to purchase additional assets, which reductions will be applied to the
remaining scheduled reductions mentioned above, ratably, in accordance with the
amounts of such scheduled reductions. The Company will pay fees of one half of
one percent per annum, on the aggregate unused portion of the facility. See
"Risk Factors--Substantial Leverage; Pledge of Assets; Covenants."
Substantially all of the Company's assets will be pledged to secure the
performance of the obligations of the Company under the Credit Facility.
The Credit Facility will contain certain financial and operational covenants
and other restrictions with which the Company must comply, including, among
others, limitations on capital expenditures, the incurrence of additional
indebtedness, restrictions on the use of borrowings, limitations on paying cash
dividends and redeeming or repurchasing capital stock of the Company, and
requirements to maintain certain financial ratios, including but not limited to,
minimum EBITDA for 1998 and each year thereafter, maximum total leverage,
minimum interest coverage and minimum fixed charge coverage. The Company is
currently in compliance with all covenants and other restrictions under the
Existing Credit Facility, and anticipates that it will meet the requirements of
the Credit Facility. See "Risk Factors--Substantial Leverage; Pledge of Assets;
Covenants."
The Credit Facility will contain customary events of default, including
material misrepresentations, payment defaults and default in the performance of
other covenants, certain bankruptcy defaults, events having a material and
adverse effect on the Company and revocation of any of the Company's broadcast
licenses. The Credit Facility will also provide that an event of default will
occur upon the occurrence of a "change of control" as defined in the Credit
Facility. For purposes of the Credit Facility, a change of control will occur
when (i) any person or group other than the Principal Stockholders and their
affiliates obtains the power to elect a majority of the Board of Directors, (ii)
the Company fails to own 100% of the capital stock of its subsidiaries owning
any of the FCC broadcast licenses, or when (iii) the Board of Directors does not
consist of a majority of continuing directors.
The Company is actively reviewing potential STMC, and other station
acquisition candidates. As of the date of this Prospectus, the Company has no
commitments for any such acquisitions. After giving effect to the Offering and
application of the net proceeds therefrom, the Company will have available
approximately $9.3 million of borrowing capacity under the Credit Facility,
which can be used for general corporate purposes, including financing these
acquisitions. Amounts available under the Credit Facility may not be sufficient
to support the Company's growth strategy and as a result the Company may require
additional debt or equity financing in order to acquire additional radio
stations and accomplish its long-term business strategies. There can be no
assurance any such financing will be available or available on acceptable terms.
In addition, because of the Company's substantial indebtedness, a significant
portion of the Company's broadcast cash flow is required for debt service.
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The Company anticipates that the net proceeds of the Offering, its available
borrowing capacity and its broadcast cash flow from operations will be
sufficient to finance its capital expenditure programs, as well as existing
operational and debt service requirements through December 31, 1998. Management
believes that its long term liquidity needs will be satisfied through a
combination of (i) the Company's successful implementation and execution of its
growth strategy to acquire and build a major market broadcast group; and (ii)
the Company's properties achieving positive operating results and cash flows
through revenue growth and control of operating expenses. If the Company is
unable to successfully implement its strategy, the Company may be required to
(i) obtain, in addition to the Offering, financing through public or private
sale of debt or equity securities of the Company or (ii) otherwise restructure
its capitalization.
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BUSINESS
GENERAL
The Company was formed in 1994 to acquire radio broadcast properties in or
adjacent to major metropolitan markets and utilize innovative engineering
techniques and low-cost, ratings-driven operating strategies to develop these
properties into successful metropolitan radio stations. In order to accomplish
this objective, the Company applies a variety of innovative broadcast
engineering techniques to the radio broadcast properties it acquires, including
STMC. STMC consists of acquiring two or more stations which broadcast on the
same frequency and simulcasting their signals to achieve broad coverage of a
targeted metropolitan market. In the future, the Company may apply STMC to first
adjacent frequencies. In addition to STMC, the Company intends to employ other
broadcast engineering techniques to enter major metropolitan markets at
attractive valuations. These engineering techniques include acquiring suburban
radio stations and moving the station's broadcast antenna closer to the
metropolitan area ("move-ins") and acquiring high-power stations adjacent to
major metropolitan markets and focusing such stations' broadcast signal into the
metropolitan area.
The Company's acquisition/engineering strategies enable it to provide near
seamless coverage of major metropolitan markets at a significantly lower
acquisition cost than typically required to acquire a major market Class B
station. The Company currently owns and operates STMC station combinations in
New York, Los Angeles and Chicago, the three largest radio markets in the United
States in terms of aggregate advertising revenues.
The Company is controlled by Stuart Subotnick, a general partner of
Metromedia Company, who will own, subsequent to the Offering, approximately 62%
of the Common Stock, representing 94% of the voting power of the Common Stock
(without giving effect to the exercise of any options to acquire shares of Class
A Common Stock).
The Company's first targeted market was Los Angeles where the Company
operates a three station combination, which broadcasts as Y-107 LA, featuring a
modern rock format on the 107.1-FM frequency. Y-107 LA consists of three
stations in the Los Angeles metropolitan area, KLYY-FM, KVYY-FM, and KSYY-FM.
Y-107 LA currently covers approximately 75% of the Arbitron diaries in the Los
Angeles MSA and will increase its coverage to over 90% as a result of an
increase in its transmission power pursuant to the FCC Power Increase, which the
Company plans to implement in the fourth quarter of 1997. The Company has
demonstrated the success of its strategy in Los Angeles where Y-107 LA has
consistently ranked as one of the top 5 most listened-to modern rock radio
stations in America over the past year, and has achieved a significant share of
1.3% in the 12+ category as of the summer 1997 Arbitron book. The Company has
successfully translated its strong listenership into significant revenues as
exemplified by the increase in its power ratio (defined as a station's share of
the aggregate radio market revenues divided by its Arbitron listenership share)
from 0.5 in the six month period ended December 1996 to 1.4 in the six month
period ended June 1997. The Los Angeles Stations were acquired by the Company in
May 1996 for a combined purchase price significantly lower than the reported
purchase prices of Class B stations in the Los Angeles MSA, as evidenced by
transactions consummated since the deregulation initiated by the passage of the
Telecom Act in 1996. See "--Business Strategy" below.
The Company recently completed the acquisitions of three stations in the New
York MSA, which collectively broadcast as Y-107 NY a country music format on the
107.1-FM frequency. Y-107 NY consists of WWVY-FM, WWXY-FM and WWZY-FM. Y-107 NY
commenced operations in January 1997 as the only country music station covering
the New York City market. Y-107 NY earned a 1.1% share in the 12+category as of
the summer 1997 Arbitron book. Y-107 NY currently covers approximately 75% of
the Arbitron diaries in the New York MSA and will increase its coverage to
approximately 90% as a result of an increase in its transmission power pursuant
to the FCC Power Increase, which the Company plans to implement by the end of
the first quarter of 1998 pending receipt of FCC approval. See "Risk Factors--
Regulatory Matters and Dependence on Licenses." The New York Stations were
acquired by the Company
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for a combined purchase price significantly lower than the reported purchase
prices of Class B stations in the New York MSA, as evidenced by transactions
consummated since the passage of the Telecom Act. See "--Business Strategy"
below.
In August 1997, the Company acquired two radio stations, WVVX-FM and
WJDK-FM, in the Chicago MSA. The acquisition of the Chicago Stations secures the
Company's presence in the top three radio markets in the United States, as
measured in terms of aggregate advertising revenues. The Chicago Stations will
broadcast on the 103.1-FM frequency. The Chicago Stations were acquired for a
combined purchase price which is significantly less than the reported purchase
prices of Class B stations in the Chicago MSA, as evidenced by transactions
consummated since the passage of the Telecom Act. See "-- Business Strategy"
below. The Chicago Stations currently cover approximately 70% of the Arbitron
diaries in the Chicago MSA and will increase their coverage to 90% as a result
of the planned increase in their transmission power pursuant to the FCC Power
Increase and other technical improvements, which the Company plans to implement
in the second quarter of 1998 pending receipt of FCC approval. See "Risk
Factors--Regulatory Matters and Dependence on Licenses." The Company has
selected an adult contemporary format for the Chicago Stations and expects to
formally begin broadcasting as a single station during the first quarter of
1998.
BUSINESS STRATEGY
The Company's objective is to achieve a significant presence in selected top
20 radio markets by acquiring radio broadcast properties in or adjacent to major
metropolitan markets and utilizing innovative engineering techniques and
low-cost, ratings-driven operating strategies to develop these properties into
successful metropolitan radio stations. The following are the key elements of
the Company's business strategy:
ENTER TOP-20 MARKETS WITH LOW CAPITAL INVESTMENT
The Company intends to utilize STMC and other innovative acquisition and
engineering strategies to gain low-cost entry into major metropolitan radio
markets and achieve market coverage, which the Company believes is equivalent to
the market coverage of Class B metropolitan stations.
- LOW ACQUISITION COST. Industry research indicates that the prices of Class
B radio stations in major MSAs have increased significantly since the
passage of the Telecom Act. The Company has created radio stations with an
Arbitron market coverage that the Company believes is equivalent to the
Arbitron market coverage of Class B radio stations in the three largest
radio markets, for a substantially lower capital investment. For example,
in the Los Angeles MSA, prices have ranged from $113.0 million to $312.0
million while the Company has created for $26.8 million a Los Angeles
station which, following the FCC Power Increase, will have an Arbitron
market coverage that the Company believes is equivalent to the Arbitron
market coverage of Class B radio stations in the Los Angeles MSA.
Similarly, in the New York MSA where prices have ranged from $83.5 million
to $286.0 million, the Company has created for $19.5 million a New York
station which, following the FCC Power Increase, will have an Arbitron
market coverage that the Company believes is equivalent to the Arbitron
market coverage of Class B radio stations in the New York MSA. In the
Chicago MSA, prices have ranged from $22.0 million to $225.0 million while
the Company has created for $10.6 million a Chicago station which,
following the FCC Power Increase and other technical improvements, will
have an Arbitron market coverage that the Company believes is equivalent
to the Arbitron market coverage of Class B radio stations in the Chicago
MSA. Based on the range of purchase prices in recently consummated
transactions as specified above, achieving entry into the top three radio
markets would have required an aggregate investment of between $218.5
million and $823.0 million, while the Company has entered these three
markets with an aggregate investment of approximately $56.9 million. All
of the foregoing information regarding price ranges of Class B stations
has been derived from published industry reports of
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sales of Class B radio stations in the MSAs where the Company operates.
The Company continues to explore similar opportunities in other attractive
top 20 markets and believes that there is potential to achieve low-cost
entry by using methods such as STMC, "move-ins" and acquisitions of high
power stations adjacent to major metropolitan markets.
- EFFECTIVE COVERAGE OF ARBITRON RATED METROPOLITAN MARKETS. The Company's
objective is to achieve coverage in excess of 90% of the Arbitron diaries
in its targeted MSAs, which the Company believes is equivalent to the
coverage typically provided by Class B radio stations in major
metropolitan markets. Class B radio stations are defined by the FCC as
those facilities whose signal is predicted to cover a regional urban area.
Accordingly, the Company bases its acquisition strategy primarily on the
location of Arbitron diaries. Furthermore, to enhance the Arbitron diary
coverage of a station, once acquired, the Company's experienced staff
tailors an engineering solution to optimize the Arbitron diary coverage of
each station. Equivalent Arbitron coverage is determined by comparing the
coverage of the Company's targeted STMC stations and typical Class B radio
stations located in the MSAs. This comparison considers the actual
received signal strength of the selected station(s) and the actual number
of Arbitron diaries covered that are predicted to receive a listenable
signal. The coverage of any one station compared to another station within
any MSA will vary due to locations of the transmitter, generally most
Class B radio stations within a targeted MSA will cover between 90% and
100% of the Arbitron diaries. See "Risk Factors--Risks Associated with the
Company's Strategy."
MAXIMIZE STATION PERFORMANCE
The Company seeks to maximize the operating performance of its stations by
employing a ratings-driven, cash flow-focused, operating strategy.
- MAXIMIZE STATION REVENUE. Based on an extensive market research study, the
Company carefully selects the format of the station to maximize
penetration of audience share and advertising revenues in that market. For
example, the Company believes that its carefully selected modern rock
format in Los Angeles and unique country music format in New York City
provide it with a competitive advantage and enhanced listenership in the
respective markets. The Company believes that its strong listenership has
translated into significant revenue as exemplified by the increase in its
power ratio from 0.5 in the six month period ended December 1996 to 1.4 in
the six month period ended June 1997 in the Los Angeles market.
- MAXIMIZE BROADCAST CASH FLOW. Another key aspect of the Company's
operating strategy will be to maximize its broadcast cash flow by
controlling its operating costs. The Company has not historically, and
does not intend at present, to expend the significant costs associated
with hiring highly compensated on-air personalities. The Company maintains
operating costs at a relatively low level and focuses on core programming
content to achieve high ratings.
STATION OPERATIONS
The Company currently owns station groups in Los Angeles, New York and
Chicago, the three largest markets in the United States in terms of aggregate
radio advertising revenues. Y-107 LA and Y-107 NY have each exhibited
significant increases in Arbitron ratings and net revenue since their respective
launches. The Company has selected an adult contemporary format for the Chicago
Stations and expects to formally begin broadcasting the Chicago Stations as a
single station in the first quarter of 1998.
LOS ANGELES
The Los Angeles market is the second largest Arbitron market in terms of
population and the largest in terms of aggregate radio market revenues in the
United States, with 1996 revenues of $540.0 million. Los Angeles is the first
market in which the Company implemented STMC, with its acquisitions of three
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radio stations for an aggregate purchase price of $26.8 million. Subsequent to
the planned increase in the power of one of the Los Angeles Stations pursuant to
the FCC Power Increase, which the Company expects to complete in the fourth
quarter of 1997, the Arbitron diary coverage of Y-107 LA will increase to over
90%. The Company believes that this coverage is substantially similar to the
Arbitron diary coverage of many of the highest-ranked Los Angeles Class B
stations. In addition to its coverage of the Los Angeles market, Y-107 LA covers
parts of the Ventura, Orange, Riverside-San Bernardino and San Diego markets.
The Company believes that identifying the appropriate format in a particular
market is crucial to the station's ability to achieve meaningful penetration of
the market's listening audience and aggregate advertising revenues. After
extensive research of the Los Angeles market, the Company launched a modern rock
format, as it believed that there was no comparable station that offered a
lively mix of modern rock music that primarily targets the important 25-54
demographic. The Company has demonstrated the success of its strategy in Los
Angeles where Y-107 LA has consistently ranked as one of the top 5 most
listened-to modern rock radio stations in America over the past year and has
achieved a significant share of 1.3% in the 12+ category as of the summer 1997
Arbitron book. The Company has successfully translated its strong listenership
into significant revenues as exemplified by the increase in its power ratio from
0.5 in the six month period ended December 1996 to 1.4 in the six month period
ended June 1997. Y-107 LA's cume (the estimated number of different persons who
listened to a station for a minimum of five minutes in a quarter-hour of a
reported daypart) grew from 50,000 to 574,500 in just 6 months.
The Company believes that to achieve Class B station equivalent Arbitron
coverage and broadcast quality requires extensive engineering expertise. In Los
Angeles, the Company uses several advanced techniques to achieve what the
Company believes to be substantially full coverage. In addition to the three
stations, the Company uses a booster located in the San Fernando Valley to
enhance its coverage of the market. The Company believes these engineering
solutions have resulted in significantly broader coverage than traditional
simulcasting.
NEW YORK
The New York MSA is the largest Arbitron market in terms of population and
the second largest in terms of aggregate radio market revenues in the United
States, with 1996 revenues of $507.2 million. From 1991 to 1996, radio
advertising revenue in the New York MSA grew from $349.0 million to $507.2
million, a compound annual growth rate of 7.8%. New York is the second market
which the Company entered with its acquisitions of three radio stations for an
aggregate purchase price of approximately $19.5 million. The Company has
implemented STMC in New York as well, and believes that it has created the
equivalent of a New York Class B station. Subsequent to the implementation of
the planned power increase of the New York Stations pursuant to the FCC Power
Increase, which the Company expects to complete by the end of the first quarter
of 1998 pending receipt of FCC approval, the Arbitron diary coverage of Y-107 NY
will increase to approximately 90%. See "Risk Factors--Regulatory Matters and
Dependence on Licenses." The Company believes that this coverage is
substantially similar to the Arbitron diary coverage of many of the
highest-ranked New York Class B stations.
Y-107 NY has an exclusive format presence in New York, as the Company
believes there are no other country music stations covering substantially all of
the New York MSA. Country music is traditionally a very strong 25-54 demographic
format, which routinely generates high power ratios relative to other formats.
As the only country music station covering substantially all of the New York
market, Y-107 NY's recognition and popularity was significantly enhanced
recently when the station broadcasted live the Garth Brooks concert in Central
Park in New York City. Y-107 NY commenced operations on January 1, 1997 and has
already earned a share of 1.1% in the 12+category as of the summer 1997 Arbitron
book. As in Los Angeles, the Company does not intend to incur the high costs
associated with highly compensated on-air personalities or mainstream syndicated
programming.
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The major technical enhancements planned for the New York operation are the
installation of a new digital audio delay system that will allow precise
adjustment of the audio delay between the transmitters to reduce received noise,
installation of new transmitting antennas that will be optimized to provide the
strongest signal possible over populated areas of the New York MSA and new
transmitters to accommodate the FCC Power Increase.
ADVERTISING SALES
The rates a station can charge are in large part dictated by the station's
ability to attract audiences in the demographic groups targeted by its
advertisers, as measured principally by Arbitron Radio Market Reports. The
Company believes that identifying the appropriate format in a particular market
is crucial to the station's ability to achieve meaningful penetration of the
listening audience of the market. In each market entered by the Company, an
extensive competitive analysis is performed to select the format with the
greatest audience and revenue potential.
Virtually all of the Company's revenues are generated from the sale of local
and national advertising for broadcast on its radio stations. The Company
believes that radio is one of the most efficient and cost-effective means for
advertisers to reach specific demographic groups. Advertising rates charged by
radio stations are based primarily on (i) a station's share of the audience in
the demographic groups targeted by advertisers, (ii) the number of stations in
the market competing for the same demographic groups, and (iii) the supply of
and demand for radio advertising time. Rates are generally highest during
morning and afternoon commuting hours.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station. The Company's stations strive to maximize revenue by
constantly managing the number of commercials available for sale and adjusting
prices based upon local market conditions. In the broadcasting industry, radio
stations often utilize trade (or barter) agreements to generate advertising time
sales in exchange for goods or services (such as travel and lodging) instead of
for cash. The Company minimizes its use of trade agreements. The Company
determines the number of advertisements broadcast hourly, which maximizes
available revenue dollars without jeopardizing listening levels. Although the
number of advertisements broadcast during a given time period varies, the total
number of advertisements broadcast on a particular station generally does not
vary significantly from year to year. As is typical of the radio broadcasting
industry, the Company's stations respond to changing demand for advertising
inventory by varying prices rather than by varying the target inventory level
for a particular station.
Most advertising contracts are short-term and run only for a few weeks.
Ninety percent of the Company's gross revenue is generated from local
advertising, which is sold primarily by a station's sales staff. To achieve
greater control over advertising dollars, the Company's sales force focuses on
establishing direct relationships with local advertisers. To generate national
advertising sales, the Company has recruited in-house staff to represent it in
the largest national sales markets of New York City, Boston, Philadelphia,
Chicago, Atlanta, Dallas, Detroit and San Francisco. This also helps to contain
commission costs as large national representative firms tend to have higher
commission rates than an in-house national sales representative.
COMPETITION
Radio broadcasting is a highly competitive business. Within their respective
markets, each of the Company's radio stations competes for audience share and
advertising revenue directly with other radio stations, as well as with other
media such as television, print media, billboards, compact discs and music
videos. There are a number of other better-capitalized companies competing in
the same geographic markets as the Company, many of which have greater financial
resources. In addition, recently the radio industry has experienced significant
consolidation which has resulted in several radio station groups that
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have a large number of radio stations throughout the United States and vastly
greater financial resources and access to capital than the Company.
The financial success of each of the Company's radio stations is dependent
principally upon its share of the overall radio advertising revenue within its
geographic market, its promotion and other expenses incurred to obtain that
revenue and the economic health of the geographic market. Radio advertising
revenues are, in turn, highly dependent upon audience share. Radio station
operators are subject to the possibility of another station changing programming
formats to compete directly for listeners and advertisers or launching an
aggressive promotional campaign in support of an already existing competitive
format. If a competitor, particularly one with substantial financial resources,
were to attempt to compete in either of these fashions, the broadcast cash flow
of the Company's affected station could decrease due to increased promotional
and other expenses and/or lower advertising revenues resulting from lower
ratings. There can be no assurance that any one of the Company's radio stations
will be able to maintain or increase its current audience ratings and radio
advertising revenue market share.
The Company will also face competition from other radio stations that
attempt to replicate the engineering techniques of the Company to cover a
metropolitan area and from stations that simply simulcast on the same or first
adjacent frequencies. While simulcasting has been employed by other broadcast
radio operators in the past, the primary purpose has been to reduce programming
costs for the individual stations. The Company believes that most broadcast
radio operators that have employed simulcasting have done so on different
frequencies. The Company believes that few operators have successfully used
simulcasting to effectively cover an entire MSA.
Radio broadcasting is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems or the introduction of DAB. DAB
may deliver by satellite or terrestrial means multi-channel, multi-format
digital radio services with sound quality equivalent to compact discs to
nationwide and regional audiences. The Company cannot predict the effect, if
any, that any such new technologies may have on the radio broadcasting industry.
RECENTLY COMPLETED RADIO STATION ACQUISITIONS
Since its incorporation in August 1994, the Company has acquired the assets
of ten radio stations and has disposed of one station. The following is a
summary of the acquisitions of radio stations which the Company has consummated
since its incorporation. All of these transactions were with non-affiliated
persons.
NEW YORK
In December 1994, the Company acquired the assets of radio station WRGX-FM
(now WWXY-FM), Briarcliff Manor, New York, from West-Land Communicators, Inc.
("West-Land") for a purchase price of $2.5 million and the issuance of a
promissory note in the amount of $1.0 million to West-Land. In April 1997, the
Company acquired the assets of radio station WWHB-FM (now WWVY-FM), Hampton
Bays, New York, from South Fork Broadcasting Corporation ("South Fork") for a
purchase price of $4.0 million. In June 1997, the Company acquired the assets of
radio station WZVU-FM (now WWZY-FM), Long Branch, New Jersey, including a radio
tower, a radio antenna and a building, from K&K Radio Broadcasting L.L.C. and
K&K Tower, L.L.C. for an aggregate purchase price of $12.0 million and certain
payments under existing leases of the building facilities. K&K Radio
Broadcasting, L.L.C., K&K Tower, L.L.C. and each of their controlling members
and the general manager of WZVU-FM entered into a covenant not to compete with
the Company for a period of three years. Also, in December 1994, the Company
acquired the assets of radio station WRKL-AM, New City, New York, from Rockland
Communicators, Inc. for a purchase price of $1.0 million. The Company intends to
dispose of this station.
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LOS ANGELES
In May 1996, the Company acquired four radio stations in the Los Angeles
area from Douglas Broadcasting, Inc. ("Douglas"). The Company acquired the
assets of radio station KMAX-FM (now KLYY-FM), Arcadia, California, KAXX-FM (now
KVYY-FM), Ventura, California, KBAX-FM (now KSYY-FM) Fallbrook, California, and
KWIZ-FM, Santa Ana, California, for an aggregate purchase price of $38.0
million. The Company also acquired FM Translator station K252BF, Temecula,
California, which rebroadcasts on 98.3 MHz the signal of KSYY-FM, and FM Booster
station KLYY-FM, Burbank, California, which boosts on 107.1 MHz the broadcast of
the signal of KLYY-FM. In December 1996, the Company sold radio station KWIZ-FM
to Liberman Broadcasting, Inc. for a price of $11.2 million.
CHICAGO
In August 1997, the Company acquired the assets of radio station WVVX-FM,
Highland Park, Illinois, from WVVX License, Inc., for a purchase price of $9.5
million. Douglas, WVVX, Inc. and WVVX License, Inc. agreed not to compete for a
period of eighteen months. In August 1997, the Company acquired the assets of
radio station WJDK-FM, Morris, Illinois, from DMR Media, Inc., for a purchase
price of $1.1 million. In addition, the Company agreed not to compete with DMR
Media, Inc.'s operations of radio station WCSJ-AM, Morris, Illinois, for a
period of five years.
PROPOSED RADIO STATION DISPOSITION
The Company intends to dispose of the assets of radio station WRKL-AM, New
City, New York. Completion of this disposition will be subject to certain
conditions, including receipt of FCC approval. There can be no assurance that
this disposition will be consummated.
EMPLOYEES
At September 30, 1997, the Company had approximately 106 full-time employees
and 87 part-time employees. Seven full-time employees of radio station WRKL-AM
are represented by a union. The Company believes that its relations with its
employees are good.
The Company employs several on-air personalities and generally enters into
employment agreements with certain of these personalities to protect its
interests in those relationships that it believes to be valuable. The loss of
certain of these personalities could result in a short term loss of audience
share but the Company does not believe that any such loss would have a material
adverse effect on the Company.
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and power of
stations; issues, renews, revokes and modifies station licenses; determines
whether to approve changes in ownership or control of station licenses;
regulates equipment used by stations; imposes regulations and takes other action
to prevent harmful interference between stations; adopts and implements
regulations and policies that directly or indirectly affect the ownership,
management, programming, operation and employment practices of stations; and has
the power to impose penalties for violations of its rules or the Communications
Act. In February 1996, Congress enacted the Telecommunications Act of 1996 (the
"Telecom Act") to amend the Communications Act. The Telecom Act, among other
measures, directed the FCC, which has since conformed its rules, to (a)
eliminate the national radio ownership limits; (b) increase the local radio
ownership limits as specified in the Telecom Act; (c) issue broadcast licenses
for periods of eight years; and (d) eliminate the opportunity for the filing of
competing applications against broadcast license renewal applications.
Congress, via the recently enacted Balanced Budget Act of 1997, authorized
the FCC for the first time to conduct auctions for the awarding of initial
broadcast licenses or construction permits for commercial radio and television
stations. To facilitate the settlement without auctions of already pending
mutually exclusive applications, Congress directed the FCC to waive existing
rules as necessary. While the Company
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is not a participant in any such proceeding, this recent action should result in
the awarding of construction permits for additional radio stations, some of
which might have the potential to compete with the Company's radio stations.
LICENSE GRANTS AND RENEWALS
The Communications Act provides that a broadcast license may be granted to
an applicant if the grant would serve the public interest, convenience and
necessity, subject to certain limitations referred to below. In making licensing
determinations, the FCC considers the legal, technical, financial and other
qualifications of the applicant, including compliance with the Communications
Act's limitations on alien ownership, compliance with various rules limiting
common ownership of broadcast, cable and newspaper properties, and the
"character" of the licensee and those persons holding "attributable" interests
in the licensee. Broadcast licenses are granted for specific periods of time
and, upon application, are renewable for additional terms. The Telecom Act
amended the Communications Act to provide that broadcast licenses be granted,
and thereafter renewed, for a term not to exceed eight years, if the FCC finds
that the public interest, convenience, and necessity would be served.
Generally, the FCC renews broadcast licenses without a hearing. The Telecom
Act amended the Communications Act to require the FCC to grant an application
for renewal of a broadcast license if: (1) the station has served the public
interest, convenience and necessity; (2) there have been no serious violations
by the licensee of the Communications Act or the rules and regulations of the
FCC; and (3) there have been no other violations by the licensee of the
Communications Act or the rules and regulations of the FCC which, taken
together, would constitute a pattern of abuse. Competing applications against
broadcast license renewal applications are therefore not entertained. The
Telecom Act provided that if the FCC, after notice and an opportunity for a
hearing, decides that the requirements for renewal have not been met and that no
mitigating factors warrant lesser sanctions, it may deny a renewal application.
Only thereafter may the FCC accept applications by third parties to operate on
the frequency of the former licensee. The Communications Act continues to
authorize the filing of petitions to deny against broadcast license renewal
applications during particular periods of time following the filing of renewal
applications. Petitions to deny can be used by interested parties, including
members of the public, to raise issues concerning the qualifications of the
renewal applicant.
The Company's Chicago Stations' broadcast licenses were renewed in 1996 and
will expire in 2003. The Los Angeles Stations' broadcast licenses were renewed
on November 25, 1997 and will expire on December 31, 2005. The New York
Stations' and WRKL-AM's broadcast licenses will expire on June 1, 1998. Renewal
applications are due on February 1, 1998, for the Company's New York Stations
and WRKL-AM. The Company does not anticipate any material difficulty in
obtaining license renewals for full terms in the future.
The action of the FCC or its staff granting a renewal application may be
reconsidered during specified time periods by the FCC or its staff on their own
motion or by request of the petitioner, and the petitioner may also appeal
within a certain period actions by the FCC to the U.S. Court of Appeals. If the
FCC does not, on its own motion, or upon a request by an interested party for
reconsideration or review, review a staff grant or its own action within the
applicable time periods, and if no further reconsideration, review or appeals
are sought within the applicable time periods, an action by the FCC or its staff
becomes a "Final Order."
LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL
The Communications Act prohibits the assignment of an FCC license or the
transfer of control of a corporation holding such a license without the prior
approval of the FCC. Applications to the FCC for such assignments or transfers
are subject to petitions to deny by interested parties and must satisfy
requirements similar to those for renewal and new station applicants. Many
transactions involving radio stations provide, as a waivable pre-condition to
closing, that the FCC consent to the transaction has become a "Final Order."
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OWNERSHIP RULES
Rules of the FCC limit the number and location of broadcast stations in
which one licensee (or any party with a control position or attributable
ownership interest therein) may have an attributable interest. The FCC, pursuant
to the Telecom Act, eliminated the previously existing "national radio ownership
rule." Consequently, there now is no limit imposed by the FCC to the number of
radio stations one party may own nationally.
The "local radio ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
attributable ownership interest. Pursuant to the Telecom Act, the FCC revised
its rules to set the local radio ownership limits as follows: (a) in markets
with 45 or more commercial radio stations, a party may own up to eight
commercial radio stations, no more than five of which are in the same service
(AM or FM); (b) in markets with 30-44 commercial radio stations, a party may own
up to seven commercial radio stations, no more than four of which are in the
same service; (c) in markets with 15-29 commercial radio stations, a party may
own up to six commercial radio stations, no more than four of which are in the
same service; and (d) in markets with 14 or fewer commercial radio stations, a
party may own up to five commercial radio stations, no more than three of which
are in the same service, provided that no party may own more than 50% of the
commercial stations in the market. FCC cross-ownership rules also prohibit one
party from having attributable interests in a radio station as well as in a
local television station or daily newspaper, although such limits are waived by
the FCC under certain circumstances. In addition, the FCC has a "cross interest"
policy that may prohibit a party with an attributable interest in one station in
a market from also holding either a "meaningful" non-attributable equity
interest (e.g., non-voting stock, voting stock, limited partnership interests)
or key management position in another station in the same market, or which may
prohibit local stations from combining to build or acquire another local
station. The FCC is presently evaluating its radio/television, radio/newspaper
and cross-interest rules and policies as well as policies governing attributable
ownership interests. The Company cannot predict whether the FCC will adopt any
changes in these policies or, if so, what the new policies will be or how they
might affect the Company.
ATTRIBUTION RULES
All holders of attributable interests must comply with, or obtain waivers
of, the FCC's multiple and cross-ownership rules. Under the current FCC rules,
an individual or other entity owning or having voting control of 5% or more of a
corporation's voting stock is considered to have an attributable interest in the
corporation and its stations, except that banks holding such stock in their
trust accounts, investment companies, and certain other passive interests are
not considered to have an attributable interest unless they own or have voting
control over 10% or more of such stock. The FCC is currently evaluating whether
to raise the foregoing benchmarks to 10% and 20%, respectively. An officer or
director of a corporation or any general partner of a partnership also is deemed
to hold an attributable interest in the media license. At present, when a single
shareholder holds a majority of the voting stock of a corporate licensee, the
FCC considers other shareholders, unless they are also officers or directors,
exempt from attribution. The FCC has asked for comments as to whether it should
continue the single majority shareholder exemption. Holders of non-voting stock
generally will not be attributed an interest in the issuing entity, and holders
of debt and instruments such as warrants, convertible debentures, options, or
other non-voting interests with rights of conversion to voting interests
generally will not be attributed such an interest unless and until such
conversion is effected. The FCC is currently considering whether it should
expand its attribution rules to reach certain of these interests in certain
circumstances. The Company cannot predict whether the FCC will adopt these or
any other proposals to change its attribution policies.
Under current FCC rules, any stockholder of the Company with 5% or more of
the outstanding votes (except for qualified institutional investors, for which
the 10% benchmark is applicable), will be considered to hold attributable
interests in the Company. Such holders of attributable interests must comply
with or obtain waivers of the FCC's multiple and cross-ownership rules. At
present, none of the attributable
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stockholders, officers and directors of the Company have any other media
interests besides those of the Company that implicate the FCC's multiple
ownership limits. In the event that the Company learns of a new attributable
stockholder and if such stockholder holds interests that exceed the FCC limits
on media ownership, under the Company's Amended and Restated Certificate of
Incorporation (as defined herein), the Board of Directors of the Company has the
corporate power to redeem stock of the Company's stockholders to the extent
necessary to be in compliance with FCC and Communications Act requirements,
including limits on media ownership by attributable parties.
The FCC will consider a radio station providing programming and sales on
another local radio station pursuant to a LMA to have an attributable ownership
interest in the other station for purposes of the FCC's radio multiple ownership
rules. In particular, a radio station is not permitted to enter into a LMA
giving it the right to program more than 15% of the broadcast time, on a weekly
basis, of another local radio station which it could not own under the FCC's
local radio ownership rules.
ALIEN OWNERSHIP LIMITS
Under the Communications Act, broadcast licenses may not be granted,
transferred or assigned to any corporation of which more than one-fifth of the
capital stock is owned of record or voted by non-U.S. citizens or foreign
governments or their representatives or by foreign corporations. Where the
corporation owning the license is controlled by another corporation, the parent
corporation cannot have more than one-fourth of the capital stock owned of
record or voted by Aliens, unless the FCC finds it in the public interest to
allow otherwise. The FCC has issued interpretations of existing law under which
these restrictions in modified form apply to other forms of business
organizations, including general and limited partnerships. The FCC also
prohibits a licensee from continuing to control broadcast licenses if the
licensee otherwise falls under Alien influence or control in a manner determined
by the FCC to be in violation of the Communications Act or contrary to the
public interest. At present, one of the Company's officers is known by the
Company to be an Alien and no other officers, directors or stockholders are
known to be Aliens. In the event that the Company learns that Aliens own,
control or vote stock in the Company in excess of the Communications Act limit,
under the Amended and Restated Certificate of Incorporation, the Board of
Directors of the Company has the corporate power to redeem stock of the
Company's stockholders to the extent necessary to be in compliance with FCC and
Communications Act requirements on alien ownership.
PROGRAMMING REQUIREMENTS
While the FCC has relaxed or eliminated many of its regulatory requirements
related to programming and content, radio stations are still required to
broadcast programming responsive to the problems, needs and interests of the
stations' service areas and must comply with various rules promulgated under the
Communications Act that regulate political broadcasts and advertisements,
sponsorship identifications, indecent programming and other matters. Affirmative
action requirements also exist. Failure to observe these or other FCC rules can
result in the imposition of monetary forfeitures, in the grant of a "short"
(less than full term) license term or, where there have been serious or a
pattern of violations, license revocation.
TECHNICAL AND INTERFERENCE RULES
FCC rules specify technical and interference requirements and parameters
that govern the signal strength and coverage area of radio stations, and which,
unless waived, must be complied with in order to obtain FCC consent to modify a
station's service area or other technical operations. The FCC allots specific FM
radio frequencies and class designations to particular communities of license.
The FM class designations, which vary by geographic location, include (in order
of increasing potential coverage area) Class A, B1, C3, B, C2, C1 and C. (The C
Class designations are generally not allocated to communities in the more
densely-populated regions of the United States, such as the Northeast and
California.) Each FM class has minimum and maximum power specifications and must
not cause interference to the protected
43
<PAGE>
service areas of other radio stations, domestic or international, operating on
the same or adjacent frequencies. Under FCC rules, a radio station must transmit
a minimum predicted signal strength to its allocated community of license, and
therefore must locate its transmitting antenna at a site providing such coverage
while also being within a specified power and height range for that station's
class designation, and at specified minimum distances from the transmitting
sites of nearby radio stations operating on the same or adjacent frequencies.
The combination of these requirements sets limits on the ability of a particular
radio station to relocate in certain directions and to increase signal coverage.
Stations may petition the FCC to change a particular station's community of
license and/or class, which changes are granted by the FCC when its service
priorities are met and conflicting reallotment proposals, if any, are resolved.
As to minimum distance separation requirements designed to afford interference
protection to other FM stations, the FCC rarely waives such specifications.
However, the FCC permits radio stations in certain circumstances to relocate to
a site not meeting the minimum distance separation rule when the station
demonstrates that the service contours of neighboring radio stations will be
protected from interference. Because STMC uses radio stations that operate on
the same or adjacent frequencies, the STMC stations' transmitting sites must be
sufficiently distant from each other to comply with the FCC's interference
protection guidelines, unless such stations are exempt from compliance by their
grandfathered status.
FCC POWER INCREASE
In most instances, changes to the technical specifications of radio
stations, such as increases in the power (effective radiated power, or "ERP")
and subsequent increased coverage area, may be made only after application to
the FCC, and grant by the FCC of a construction permit for the modification of
the station. The Company currently has pending applications before the FCC for
modifications of WRKL-AM, New City, New York, WWXY-FM, Briarcliff Manor, New
York, WWVY-FM, Hampton Bays, New York, and WWZY-FM, Long Branch, New Jersey. The
WRKL-AM modification application requests a "major" change in power, and as such
is subject to mutually exclusive applications. The FCC has not yet issued a
notice accepting the WRKL-AM modification application, which would also trigger
the deadline for the filing of any mutually exclusive applications. Such filings
would result in the delay and potential denial of the WRKL-AM modification
application, and the Company cannot predict the ultimate outcome of that
application. Similarly, the FCC has not yet issued a public notice accepting the
WWXY-FM, the WWVY-FM and the WWZY-FM modification applications for filing. The
WWXY-FM, the WWVY-FM and the WWZY-FM modification applications request increases
in the authorized power of the stations from the current equivalent 3 kilowatt
to maximum 6 kilowatt level permitted for the stations' FCC classification. The
Company withheld filing these applications while the FCC was considering changes
to its policy relating to modifications of "grandfathered short-spaced" FM
stations, such as WWXY-FM, WWVY-FM and WWZY-FM. Grandfathered short-spaced
stations are those that do not meet the current FCC's requirements for distance
separation of FM radio stations operating on the same or adjacent frequencies as
the stations were authorized before the adoption of the current rules. In the
past, power increases or relocations of such grandfathered stations often did
not comply with the FCC's current technical rules, and would be authorized by
the FCC only in limited circumstances. In August 1997, the FCC adopted a new
policy, which the Company believes will permit it to increase the power of its
radio stations to the maximum 6 kilowatt level (the "FCC Power Increase"). Until
the grant of the subject modification applications, the Company cannot be
certain that the new policy will serve to permit the increases in the Company's
coverage areas. There can be no assurance that the FCC will approve the
Company's modification applications. See "Risk Factors--Regulatory Matters and
Dependence on Licenses." KLYY-FM, Arcadia, California was granted a construction
permit by the FCC on October 23, 1997 to increase its ERP from its current 3
kilowatts to the maximum 6 kilowatts level permitted for the station's FCC
classification.
44
<PAGE>
AGREEMENTS WITH OTHER BROADCASTERS
Over the past several years a significant number of broadcast licensees,
including the Company, have entered into cooperative agreements with other
stations in their markets. One typical example is a local marketing agreement
("LMA") between two separately or co-owned stations, whereby the licensee of one
station programs substantial portions or all of the broadcast day on the other
licensee's station, subject to ultimate editorial and other controls being
exercised by the latter licensee, and sells advertising time during such program
segments for its own account. The FCC has held that LMAs do not per se
constitute a transfer of control and are not contrary to the Communications Act
provided that the licensee of the station maintains ultimate responsibility for
and control over operations of its broadcast station. As is the case of the
Company, typically the LMA is entered into in anticipation of the sale of the
station, with the proposed acquirer providing programming for the station while
the parties are awaiting the necessary regulatory approvals to the transaction.
The FCC's rules also prohibit a radio licensee from simulcasting more than
25% of its programming on other radio stations in the same broadcast service
(i.e., AM-AM or FM-FM), whether it owns both stations or operates one or both
through a LMA, where such stations serve substantially the same geographic area
as defined by the stations' principal community contours. The Company's stations
are not subject to this limitation.
PROPOSED REGULATORY CHANGES
The FCC has not yet formally implemented certain of the changes to its rules
necessitated by the Telecom Act. Moreover, the Congress and the FCC have 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, (i) affect the operation, programming, technical requirements,
ownership and profitability of the Company and its radio broadcast stations,
(ii) result in the loss of audience share and advertising revenues of the
Company's radio broadcast stations, (iii) affect the ability of the Company to
acquire additional radio broadcast stations or finance such acquisitions, (iv)
affect cooperative agreements and/or financing arrangements with other radio
broadcast licensees, (v) affect the Company's competitive position in
relationship to other advertising media in its markets, or (vi) affect the
Company's ability to exploit its unique technical capabilities and innovative
approach to acquiring and using radio broadcast stations. Such matters include,
for example, changes to the license authorization and renewal process; proposals
to revise the FCC's equal employment opportunity rules and other matters
relating to minority and female involvement in broadcasting; proposals to alter
the benchmarks or thresholds for attributing ownership interest in broadcast
media; proposals to change rules or policies relating to political broadcasting;
changes to technical and frequency allocation matters, including those relative
to the implementation of digital audio broadcasting on both a satellite and
terrestrial basis; proposals to restrict or prohibit the advertising of beer,
wine and other alcoholic beverages on radio; changes in the FCC's
cross-interest, multiple ownership, alien ownership and cross-ownership
policies; and proposals to limit the tax deductibility of advertising expenses
by advertisers.
Although the Company believes the foregoing discussion is sufficient to
provide the reader with a general understanding of all material aspects of FCC
regulations that affect the Company, it does not purport to be a complete
summary of all provisions of the Communications Act or FCC rules and policies.
Reference is made to the Communications Act, FCC rules and the public notices
and rulings of the FCC for further information.
PATENTS AND TRADEMARKS
The Company owns registered trademark rights for STMC and domestic trademark
registrations related to the business of the Company and does not own any
patents or patent applications. The Company does not believe that any of its
trademarks are material to its business or operations.
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<PAGE>
PROPERTIES/FACILITIES
The Company leases approximately 3,200 square feet in Hawthorne, New York,
where its corporate offices are located.
The type of properties required to support each of the Company's radio
stations includes offices, studios, transmitter sites, booster sites, translator
sites and antenna sites. The Company owns, leases or licenses the properties
required to operate its radio stations. The Company owns facilities for the New
York Stations in Long Branch (approximately 6,500 square feet) and for WRKL-AM
in Pomona (approximately 5,100 square feet). The Company leases or licenses
facilities for the Los Angeles Stations in Arcadia, Fallbrook (approximately 355
square feet), Los Angeles, Pasadena (approximately 4,896 square feet), Ventura
(approximately 758 square feet), Temecula and Burbank. The Company leases
facilities for the New York Stations in Hampton Bays (approximately 1,260 square
feet), Hawthorne, East Quoque and Westchester. The Company leases facilities for
the Chicago Stations in Highland Park (approximately 2,120 square feet) and
Morris. The Company considers its facilities to be suitable and of adequate
sizes for its current and intended purposes and does not anticipate any
difficulties in renewing those leases or licenses or in leasing or licensing
additional space, if required.
The Company owns substantially all its other equipment, consisting
principally of transmitting antennae, transmitters, studio equipment and general
office equipment. The Company owns towers in Long Branch, NJ, Highland Park, IL,
and Morris, IL. The towers, antennae and other transmission equipment used in
the Company's stations are generally in good condition.
The following table sets forth the location of the Company's principal
properties:
<TABLE>
<CAPTION>
LOCATION FACILITY
- --------------------------------------- ----------------------------------------------------
<S> <C>
Y107--LOS ANGELES
Arcadia, CA............................ FM tower(4)
Fallbrook, CA.......................... FM tower, studio, transmitter site(1)
Pasadena, CA........................... Studio, business offices(1)
Ventura, CA............................ FM tower(4), studio, transmitter site(1)
Temecula, CA........................... Translator site(1)
Burbank, CA............................ Booster site(1)
Los Angeles, CA........................ Booster site(1)
Y107--NEW YORK
Hampton Bays, NY....................... Business offices(1)
Hawthorne, NY.......................... Studio, corporate offices(1)
Long Branch, NJ........................ FM tower, studio(2)
Westchester, NY........................ FM tower(1)
East Quoque, NY........................ FM tower, transmitter site(1)
CHICAGO STATIONS
Highland Park, IL...................... FM tower(4), studio(1)
Morris, IL............................. Studio(1), FM tower, transmitter site(2)
WRKL-AM
Pomona, NY............................. Tower, studio(3)
</TABLE>
- -------------------
(1) Leased.
(2) Owned.
(3) Held for sale--See "--Proposed Station Disposition."
(4) Tower owned by the Company while the property is leased.
46
<PAGE>
LITIGATION
The Company is involved in litigation from time to time in the ordinary
course of its business. In management's opinion, the outcome of all pending
legal proceedings, individually and in the aggregate, will not have a material
adverse effect on the Company.
In December 1996, Mr. Kim Nguyen Son d.b.a. Khoa Ky Thuat Radio Station
filed an action before the Superior Court of the State of California for the
County of Orange for breach of contract against Liberman Broadcasting, Inc. and
Leonard D. Liberman (together, "Liberman") in connection with the cancellation
by the Company of four broadcasting contracts with Mr. Kim Nguyen Son for a
Vietnamese speaking radio show on KWIZ-FM, which cancellation was subsequently
confirmed by Liberman after its purchase of KWIZ-FM and the reformatting of the
radio station to Spanish language. In July, 1997, the plaintiff filed a second
amended complaint for damages for, among other things, (i) breach of contract
against the Company, Michael Kakoyiannis and Keith James and for (ii)
intentional interference with contract against Liberman, Jose Liberman, Mr.
Kakoyiannis and Mr. James. In his amended complaint, the plaintiff is asking for
compensatory damages in the amount of $500,000 plus interest and costs, as well
as punitive damages. The action against Mr. Kakoyiannis was dismissed in July,
1997. This litigation is set for trial on January 20, 1998 and the Company does
not believe that it will have a material adverse effect on its financial
condition and results of operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company as of December 2, 1997.
<TABLE>
<CAPTION>
NAME AGE OFFICE OR POSITION HELD
- ------------------------------------ ----------- ---------------------------------------------------------------------
<S> <C> <C>
Stuart Subotnick.................... 55 Chairman of the Board
Michael Kakoyiannis................. 55 Chief Executive Officer, President and Director
Anita Subotnick..................... 54 Director
Steven G. Blatter................... 31 Vice President--Programming
Alan D. Kirschner................... 46 Vice President--Engineering
Bryan Subotnick..................... 33 Executive Vice President--Corporate Development
Paul R. Thomson..................... 41 Vice President, Chief Financial Officer and Treasurer
Silvia Kessel....................... 47 Executive Vice President and Director (nominee)
Arnold L. Wadler.................... 54 Executive Vice President, Secretary and Director (nominee)
Leonard White....................... 58 Director (nominee)
</TABLE>
Each director is elected to serve until a successor is elected and qualified
or, if earlier, until the director's death, resignation or removal. Officers,
subject to the terms of their respective employment agreements, serve at the
pleasure of the Board of Directors. See "--Employment Agreements."
Set forth below is the background of each of the Company's executive
officers and directors.
STUART SUBOTNICK founded the Company in 1994 and has served as Chairman of
the Board of Directors since the Company's inception. Mr. Subotnick has spent
approximately 30 years at Metromedia Company ("Metromedia") (and its
predecessor) and together with long-time partner John W. Kluge, has overseen
Metromedia's investments in numerous media, entertainment and communications
businesses. Mr. Subotnick has served since 1996 as Vice Chairman, President and
Chief Executive Officer of Metromedia International Group, Inc. ("MIG"), an
international media and communications company that owns radio stations in
Eastern Europe and Russia. Mr. Subotnick has also served as Executive Vice
President of Metromedia and its predecessor for over five years. Metromedia and
its predecessor owned and operated radio stations, television stations, an
outdoor advertising business, and cellular telephone and paging operations
throughout the United States. Mr. Subotnick is also a director of Carnival
Cruise Lines, Inc., RDM Sports Group, Inc. ("RDM"), a diversified sporting goods
company and of Metromedia Fiber Network, Inc., a provider of high bandwidth,
fiber optic transmission capacity ("Metromedia Fiber"). Mr. Subotnick is married
to Anita Subotnick. Stuart and Anita Subotnick are the parents of Bryan
Subotnick.
MICHAEL KAKOYIANNIS founded the Company in 1994 and has served as Chief
Executive Officer, President and a Director of the Company since its inception.
Mr. Kakoyiannis has over 25 years of experience in the radio broadcasting
business in major metropolitan markets. Prior to joining the Company, Mr.
Kakoyiannis was Executive Vice President of the Westwood One Stations Group
("Westwood One"), which operated three stations in Los Angeles and New York:
WNEW-AM and WYNY-FM in New York and KQLZ-FM, known as "Pirate Radio," in Los
Angeles. Additionally, Mr. Kakoyiannis was Vice President and General Manager of
all three stations. Prior to his tenure at Westwood One, Mr. Kakoyiannis was an
Executive Vice President from 1986 to 1989 at Metropolitan Broadcasting, a
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<PAGE>
company that was owned by Metromedia and its predecessor, and controlled nine
stations that were generally located in major metropolitan markets.
ANITA SUBOTNICK founded the Company in 1994 and has been serving as a
Director since the Company's inception. Mrs. Subotnick has been a private
investor for more than the last five years.
STEVEN G. BLATTER has been serving as Vice President in charge of
Programming for the Company since 1995. Mr. Blatter served as Program Director
for the radio station WRGX(FM), which is owned by the Company, from 1993 to 1995
and as Director of Programming for MJI Broadcasting from 1991 to 1993. Mr.
Blatter served as Music Director for the radio station WYNY(FM) owned by
Westwood One Stations Group, from 1988 to 1991.
ALAN D. KIRSCHNER has been a Vice President of the Company since September
1997 and a Director of Engineering since July 1995. Mr. Kirschner has been
serving as radio technical consultant for AM and FM radio stations since 1972.
Mr. Kirschner served as Chief Engineer responsible for technical operations of
radio station WYNY owned by Broadcasting Partners, Inc. and Evergreen Media, in
New York from 1993 to 1995 and a Director of Engineering for Westwood One
Stations Group in New York from 1988 to 1993.
BRYAN SUBOTNICK has served as Executive Vice President--Corporate
Development of the Company since September 1997. Mr. Subotnick served as Vice
President of the Company from January 1997, and Director of Operations from May
1995 to December 1996. Prior to joining the Company, Mr. Subotnick was Vice
President and General Counsel of Papamarkou & Company, an international finance
and investment company, in 1995, and as a General Partner in the law firm of
Shanker & Subotnick, which specialized in entertainment law, from 1992 to 1994.
PAUL R. THOMSON has served as Vice President of the Company since September
1997 and as Chief Financial Officer of the Company since January 1996. Prior to
joining the Company, Mr. Thomson served as Corporate Controller of Herbalife
International, Inc. from 1993 to 1996, as Chief Financial Officer of Bernard
Salick Companies from 1992 to 1993 and as Controller--Radio Stations Group of
Westwood One, Inc. from 1989 to 1992. Prior to 1992, Mr. Thomson worked with
Price Waterhouse LLP for 12 years in London, Caracas and Los Angeles. He is a
certified public accountant and a member of the Institute of Chartered
Accountants in England and Wales.
SILVIA KESSEL is a nominee to be a Director of the Company and has served as
Executive Vice President of the Company since September 1997. Ms. Kessel has
served as Executive Vice President of Metromedia Fiber since October 1997, Chief
Financial Officer and Treasurer of MIG since 1995 and Executive Vice President
of MIG since 1996. In addition, Ms. Kessel served as Executive Vice President of
Orion Pictures Corporation ("Orion") from January 1993 through July 1997, Senior
Vice President of Metromedia since 1994 and President of Kluge & Company since
January 1994. Prior to that time, Ms. Kessel served as Senior Vice President and
a Director of Orion from June 1991 to November 1992 and Managing Director of
Kluge & Company from April 1990 to January 1994. Ms. Kessel is a member of the
Board of Directors of MIG, Metromedia Fiber and RDM.
ARNOLD L. WADLER is a nominee to be a Director of the Company and has served
as Executive Vice President and Secretary of the Company since September 1997.
Mr. Wadler has served as Director of Metromedia Fiber since July 1997, General
Counsel of Metromedia Fiber since August 1997, Secretary of Metromedia Fiber
since October 1997, Executive Vice President, General Counsel and Secretary of
MIG since August 29, 1996 and, from November 1, 1995 until that date, as Senior
Vice President, General Counsel and Secretary of MIG. In addition, Mr. Wadler
serves as a director of MIG and has served as a Director of Orion from 1991
until July 1997 and as Senior Vice President, Secretary and General Counsel of
Metromedia for over five years.
LEONARD WHITE is a nominee to be a Director of the Company. Mr. White is
currently a private investor. Mr. White served as President and Chief Executive
Officer of Orion from 1992 until 1997 and as
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<PAGE>
President and Chief Executive Officer of Orion Home Entertainment Corporation
from 1987 to 1992. Mr. White is also a Director of MIG, American Film
Technologies, Inc. and Metromedia Fiber.
BOARD; ELECTION OF DIRECTORS; AGREEMENTS REGARDING BOARD POSITIONS
From and after the Company's first annual meeting of stockholders, 25% of
the members of the Board of Directors of the Company will be elected by a
majority of the votes cast by holders of shares of Class A Common Stock, voting
as a separate class, at the annual meeting of stockholders and hold office until
their successors have been duly elected and qualified or until their death,
resignation or removal. Holders of shares of Class B Common Stock will vote as a
separate class to elect up to 75% of the Board of Directors. Directors may be
removed, with or without cause, only by the holders of the class of Common Stock
or series of Preferred Stock that, as of the date such removal is effected,
would be entitled to elect such directors at the next annual meeting of
stockholders. Vacancies in a directorship may be filled only by (a) the
remaining directors elected by holders of each class of Common Stock or series
of Preferred Stock that (x) elected such director and (y) as of the date such
vacancy is filled, would be entitled to elect such director at the next annual
meeting of the stockholders or (b) if there are no such remaining directors,
then by the vote of the holders of the class or classes of Common Stock or
series of Preferred Stock that, as of the date such vacancy is filled, would be
entitled to elect such director at the next annual meeting of stockholders,
voting as a separate class at a meeting, special or otherwise, of the holders of
Common Stock of such class or series of Preferred Stock. Within 90 days of the
consummation of the Offering, the Board of Directors will elect one additional
independent director to serve on the Board of Directors.
COMMITTEES OF THE BOARD
Within 90 days of the consummation of the Offering, the Board of Directors
will establish an Executive Committee, a Compensation Committee and an Audit
Committee. The Executive Committee will have all of the powers of the Board of
Directors in the management and affairs of the Corporation as provided under
Delaware laws. The Compensation Committee will make recommendations concerning
the salaries and incentive compensation of employees of and consultants to the
Company. The Audit Committee, a majority of which will be directors who are not
employees of the Company, will be responsible for reviewing the results and
scope of audits and other services provided by the Company's independent
auditors.
EXECUTIVE COMPENSATION
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Company for the year ended December
31, 1996 of the Chairman of the Board of
50
<PAGE>
Directors, the Chief Executive Officer of the Company and the other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------- ---------------
SALARY BONUS OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) SARS COMPENSATION ($)
- --------------------------------------------------- --------- --------- --------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Stuart Subotnick................................... 1996 $ -- $ -- $ -- $ --
Chairman of the Board
Michael Kakoyiannis................................ 1996 230,000 37,500 -- 8,000
Chief Executive Officer and President
Paul R. Thomson.................................... 1996 165,000 25,000 -- 8,400
Vice President and Chief Financial Officer
Steven G. Blatter.................................. 1996 160,000 27,500 -- 2,400
Vice President--Programming
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are officers, employees or affiliates of the Company receive
no compensation for their services as directors. Each director of the Company
who is not also an officer, employee or affiliate of the Company (an "outside
director") will be entitled to receive annual directors' fees of $20,000, plus
$1,200 for each Board of Directors meeting attended ($500 if attended
telephonically) and $500 for each committee meeting attended. Outside directors
will be eligible to participate in the 1997 Incentive Stock Plan pursuant to
which options to purchase 2,500 shares of Class A Common Stock will be granted
to each outside director immediately upon such director's initial election and
qualification for the Board of Directors. Options to purchase 2,500 shares of
Class A Common Stock will be granted annually on the day of each annual
stockholders' meeting. Each outside director will be eligible to receive options
to purchase a maximum of 25,000 shares of Class A Common Stock pursuant to the
1997 Incentive Stock Plan. Each option will have an exercise price equal to the
fair market value of a share of Class A Common Stock on the date of grant. All
such options granted to outside directors will be immediately exercisable.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Michael
Kakoyiannis, Paul R. Thomson, Steven G. Blatter and Alan D. Kirschner.
EMPLOYMENT AGREEMENT WITH MICHAEL KAKOYIANNIS
In connection with the consummation of the Offering, the Company will amend
the employment agreement of Mr. Kakoyiannis. As amended, Mr. Kakoyiannis'
employment agreement will terminate on December 31, 2000 and will provide Mr.
Kakoyiannis with a base salary of $300,000 a year. In addition to his base
salary, Mr. Kakoyiannis will also be entitled to an annual bonus as determined
by the Compensation Committee if certain performance targets have been met. Mr.
Kakoyiannis will be entitled to participate in all benefits generally made
available to senior executives of the Company. The Company will also cause a
term life insurance to be issued to Mr. Kakoyiannis for $2.0 million. Under his
employment agreement, Mr. Kakoyiannis will be entitled to receive 93,755 shares
of Class A Common Stock for every 20% increase in the average closing price of
the Class A Common Stock following the Offering (up to a maximum of 281,265
shares) provided that such price remains in effect for six consecutive months.
If Mr. Kakoyiannis earns these grants of shares of Class A Common Stock, the
Company will record future non-cash, compensation expense equal to the fair
value of such stock on the date of grant. If the fair value were based on exact
20% increments over the initial offering price of $9.00 per share (the mid-point
of the
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<PAGE>
range of prices set forth on the cover page of this Prospectus), future
compensation expense would be approximately $3.7 million. Under Mr. Kakoyiannis'
employment agreement, the Company is obligated to register the 281,265 shares of
Class A Common Stock that may be issued to Mr. Kakoyiannis with the Registration
Statement on Form S-8 that the Company intends to file with the Commission to
cover the shares of Class A Common Stock underlying options granted and to be
granted under the 1997 Incentive Stock Plan. If the Company terminates Mr.
Kakoyiannis' employment without cause, it will be obligated to pay him severance
payments in an amount equal to eighteen times his base monthly salary. In
addition, Mr. Kakoyiannis' employment-related benefits will continue for
eighteen months after his termination of employment. If Mr. Kakoyiannis'
employment is terminated for cause or disability, the Company will not be
obligated to make any severance payments or continue any benefits. Mr.
Kakoyiannis will be entitled to terminate his employment and to receive
severance payments upon the occurrence of a "change of control" of the Company
(as defined in Mr. Kakoyiannis' employment agreement). Following the termination
of his employment with the Company for any reason, Mr. Kakoyiannis will not,
during eighteen months thereafter, own, acquire or obtain any license for an AM
or FM radio station or render any services or advice to, or be engaged in any AM
or FM radio station within 75 miles of the transmitter of any radio station
owned or operated by the Company.
EMPLOYMENT AGREEMENT WITH PAUL R. THOMSON
In connection with the consummation of the Offering, the Company will amend
the employment agreement of Mr. Thomson. As amended, Mr. Thomson's employment
agreement will terminate on December 31, 1998. Mr. Thomson's employment
agreement will provide for an annual base salary of $175,000. Mr. Thomson's
salary will be increased to $187,500 in January 1998. Mr. Thomson will be
entitled to participate in all benefits generally made available to senior
executives of the Company and to receive annual bonus compensation as determined
by the Compensation Committee if certain performance targets have been met. Such
bonus compensation shall not exceed $30,000 for 1997 and $35,000 for 1998. If
the Company terminates Mr. Thomson's employment without cause or upon the
occurrence of a "change of control" (as defined in Mr. Thomson's employment
agreement), the Company will be obligated to make severance payments in an
amount equal to (i) twelve times Mr. Thomson's monthly base salary if such
termination or change of control occurs before January 1, 1998 or (ii) the
lesser of three monthly base salary or the base salary for the remaining months
of Mr. Thomson's employment under his employment agreement if such termination
or change of control occurs after January 1, 1998. Following the termination of
his employment with the Company for any reason, Mr. Thomson shall not serve in
any accounting or financial capacity for, or otherwise be involved in the
accounting and financial functions of any radio station with a rock-based format
within 50 miles of the transmitter of any of the Company's radio stations for a
period of six months following the termination of Mr. Thomson's employment
agreement.
EMPLOYMENT AGREEMENT WITH STEVEN G. BLATTER
In connection with the consummation of the Offering, the Company will amend
the employment agreement of Mr. Blatter. As amended, Mr. Blatter's employment
agreement will terminate on December 31, 1998. Mr. Blatter's employment
agreement will provide for an annual base salary of $165,000. Mr. Blatter's
salary will be increased to $181,500 in January 1998. Mr. Blatter will be
entitled to participate in all benefits generally made available to senior
executives of the Company and to receive semi-annual bonus compensation as
determined by the Compensation Committee if certain performance targets have
been met. Such semi-annual bonus compensation shall not exceed $13,750 for 1997
and $15,000 for 1998. If the Company terminates Mr. Blatter's employment
agreement without cause, the Company will be obligated to make severance
payments in an amount equal to (i) the remainder of Mr. Blatter's base salary
through December 31, 1998 if such termination occurs before January 1, 1998,
(ii) six times Mr. Blatter's base monthly salary if such termination occurs
after January 1, 1998 but before July 1, 1998, or (iii) the aggregate amount of
Mr. Blatter's monthly salary for the remaining term of his employment if the
termination occurs after July 1, 1998. If Mr. Blatter's employment agreement is
terminated following a
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"change of control" (as defined in Mr. Blatter's employment agreement), Mr.
Blatter will be entitled to one and one-half times his base monthly salary.
Following the termination of his employment with the Company for any reason, Mr.
Blatter shall not serve as Program Director, or otherwise be involved in the
programming of any radio station with a rock-based format within 50 miles of the
transmitter of any of the Company's radio stations for 180 days following the
termination of Mr. Blatter's employment agreement.
EMPLOYMENT AGREEMENT WITH ALAN D. KIRSCHNER
In connection with the consummation of the Offering, the Company will amend
the employment agreement of Mr. Kirschner. As amended, Mr. Kirschner's
employment agreement will terminate on December 31, 1998. Mr. Kirschner's
employment agreement will provide for an annual base salary of $110,000. Mr.
Kirschner will be entitled to participate in all benefits generally made
available to senior executives of the Company and to receive annual bonus
compensation as determined by the Compensation Committee if certain performance
targets have been met. Such bonus compensation shall not exceed $15,000. If Mr.
Kirschner's employment agreement is terminated without cause or upon Mr.
Kirschner's disability, the Company will be obligated to make severance payments
in an amount equal to six times Mr. Kirschner's base monthly salary. If Mr.
Kirschner's employment agreement is terminated upon a "change of control" (as
defined in Mr. Kirschner's employment agreement), the Company shall pay Mr.
Kirschner twelve times his monthly salary. Following the termination of his
employment with the Company for any reason, Mr. Kirschner shall not serve in any
engineering or technical capacity for, or otherwise be involved in the
engineering and technical functions of any radio station within 50 miles of the
transmitter of any of the Company's radio stations for 30 days following the
termination of Mr. Kirschner's employment agreement.
1997 STOCK INCENTIVE PLAN
The Big City Radio, Inc. 1997 Incentive Stock Plan (the "1997 Incentive
Stock Plan") was adopted by the stockholders of the Company and by the Board of
Directors on December 1, 1997. The following is a summary of the material
features contained in the 1997 Incentive Stock Plan.
The purpose of the 1997 Incentive Stock Plan is to give the Company a
significant advantage in retaining key employees, officers and directors, and to
provide an incentive to selected key employees, officers and directors of the
Company and its subsidiaries who have substantial responsibility in the
direction of the Company and its subsidiaries, and others whom the Committee (as
defined herein) determines provide substantial and important services to the
Company, to acquire a proprietary interest in the Company, to continue as
employees, officers and directors or in their other capacities, and to increase
their efforts on behalf of the Company.
TYPES OF AWARDS
The types of awards that may be granted pursuant to the 1997 Incentive Stock
Plan include (i) incentive stock options ("ISOs") and (ii) non-qualified stock
options ("NQSOs" and together with ISOs, "Stock Options" and "Awards"). ISOs are
intended to be treated as incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). NQSOs are, in
general, options which do not have the special income tax advantages associated
with ISOs.
Stock Option grants consist of the maximum number of ISOs that may be
granted to a particular grantee under applicable law with the balance, if any,
of the Stock Options being NQSOs.
ADMINISTRATION OF THE PLAN
The 1997 Incentive Stock Plan is currently administered by the Board of
Directors and will be administered by the Compensation Committee of the Board of
Directors (the "Committee") once formed. The Committee will consist of two or
more members of the Board of Directors each of whom shall be a
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"non-employee director" as defined under Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and an "outside director" as
defined under Section 162(m) of the Code, and the regulations and
interpretations thereunder. Members of the Committee will be eligible to receive
certain Awards (other than ISOs) under the 1997 Incentive Stock Plan.
Subject to the terms and conditions of the 1997 Incentive Stock Plan and the
formula awards for Independent Directors (as defined herein), the Committee is
authorized to grant Awards, to determine which employees, officers, directors or
other individuals may be granted Awards, to determine the type and number of
Awards to be granted, to determine the term of such Awards, to determine the
exercise price of any Award, to determine the terms of any agreement pursuant to
which Awards are granted, to interpret and construe the 1997 Incentive Stock
Plan, and to determine any other matters delegated to it under the 1997
Incentive Stock Plan or necessary for the proper administration of the 1997
Incentive Stock Plan.
SHARES OF CLASS A COMMON STOCK SUBJECT TO THE 1997 INCENTIVE STOCK PLAN
Subject to certain adjustments set forth in the 1997 Incentive Stock Plan,
the aggregate number of shares of the Class A Common Stock that may be the
subject of Awards under the 1997 Incentive Stock Plan is 700,000. The maximum
number of shares of Class A Common Stock available with respect to Awards
granted to any one grantee shall not exceed, in the aggregate, 100,000 shares.
Shares of Class A Common Stock granted under the 1997 Incentive Stock Plan may
either be authorized but unissued shares of Class A Common Stock not reserved
for any other purpose or shares of Class A Common Stock held in or acquired for
the treasury of the Company.
Shares of Class A Common Stock subject to an Award which terminates
unexercised may again be subject to an Award under the 1997 Incentive Stock
Plan. In addition, shares of Class A Common Stock surrendered to the Company in
payment of the exercise price or applicable taxes upon exercise of an Award may
also be used thereafter for additional Awards.
ELIGIBILITY
Any key employee, officer and director, including a director who is not an
employee and a director who serves on the Committee, of the Company and its
subsidiaries who has substantial responsibility in the direction of the Company
and its subsidiaries and anyone else whom the Committee determines provides
substantial and important services to the Company is eligible to receive Awards.
On December 1, 1997, the Board of Directors granted to each of Steven G.
Blatter, David J. Howard, Alan D. Kirschner, Sean O'Neill, Bryan Subotnick and
Paul R. Thomson Stock Options to purchase up to 25,000 shares (which represents
an aggregate of 150,000 shares) of Class A Common Stock at an exercise price of
$6.00 per share. All these Stock Options are exercisable immediately. The
Company will record a future non-cash charge of approximately $450,000 based on
an assumed initial public offering price of $9.00 per share (the midpoint of the
range of prices set forth on the cover page of this Prospectus) of Class A
Common Stock in the Offering. Also on December 1, 1997, the Board of Directors
granted to each of Steven G. Blatter, David J. Howard, Alan D. Kirschner, Sean
O'Neill, Bryan Subotnick, Paul R. Thomson, Silvia Kessel and Arnold Wadler Stock
Options to purchase up to 50,000 shares (which represents an aggregate of
400,000 shares) of Class A Common Stock at an exercise price per share equal to
the initial public offering price per share in the Offering, effective only
immediately prior to the consummation of the Offering. Once effective, these
Stock Options will become exercisable in five annual installments, as determined
by the Board of Directors.
Independent Directors who first serve on the Board of Directors shall be
entitled to receive Awards under the 1997 Incentive Stock Plan with respect to
2,500 shares of Common Stock, each having an exercise price equal to the fair
market value of a share of Class A Common Stock on the date of grant. For
purposes hereof, "Independent Directors" shall mean any member of the Board of
Directors who during his entire term as a director was not employed by the
Company and its subsidiaries, within the meaning of
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Section 424(f) of the Code, and who also satisfies the criteria for "outside
director" under Section 162(m) of the Code. On December 1, 1997, the Board of
Directors granted to Leonard White Stock Options to purchase up to 2,500 shares
of Class A Common Stock at an exercise price per share equal to the initial
public offering price per share in the Offering, effective only immediately
prior to the consummation of the Offering. Once effective, these Stock Options
will be immediately exercisable.
TERMS AND CONDITIONS OF STOCK OPTIONS
The exercise price of all ISOs granted under the 1997 Incentive Stock Plan
is not less than the fair market value of the Class A Common Stock on the date
of grant. The exercise price of all NQSOs granted under the 1997 Incentive Stock
Option Plan are determined by the Committee, although the initial awards will be
made at fair market value of the Class A Common Stock on the date of grant. The
term of each Stock Option granted under the 1997 Incentive Stock Plan are
determined by the Committee but will in no event be greater than ten years from
the date of grant.
With respect to ISOs granted to a grantee who owns stock possessing more
than 10% of the voting rights of the Company's outstanding capital stock on the
date of grant, the exercise price of the ISO shall be equal to 110% of the fair
market value of the Class A Common Stock subject to the ISO on the date of grant
and the ISO may not be exercisable more than five years after the date of grant.
Stock Options shall vest and become exercisable over a period of years as
determined by the Committee.
Upon the exercise of a Stock Option, the grantee must pay the exercise price
in cash. Notwithstanding the foregoing, at the discretion of the Committee, the
exercise price may be paid with shares of Class A Common Stock already owned by,
and in possession of, the grantee or with a combination of cash or shares of
Class A Common Stock.
The aggregate fair market value of the Class A Common Stock (determined on
the date of grant) for which ISOs granted under the 1997 Incentive Stock Plan
and any other plan of the Company or a subsidiary may be exercisable for the
first time by any grantee during any calendar year cannot exceed $100,000 or
such other amount as may be prescribed under the Code or applicable regulations
and rulings from time to time. To the extent that the aggregate fair market
value exceeds $100,000, such Stock Options will be treated as NQSOs.
ACCELERATION OF VESTING AND EXERCISABILITY
If a grantee's employment with the Company is terminated because of the
grantee's death, or the grantee's retirement on or after attaining age
sixty-five prior to the date of the Stock Option is by its terms exercisable,
the Stock Option shall be immediately exercisable (and the restrictions thereof,
if any, shall lapse) as of the date of the termination of the grantee's
employment, subject to the other terms of the 1997 Incentive Stock Plan.
Upon a Change in Control (as defined below), and at the sole discretion of
the Board of Directors, each holder of a Stock Option shall have the right to
exercise the Stock Option in full without regard to any waiting period,
installment period or other limitation or restriction thereon.
In general, under the 1997 Incentive Stock Plan, a "Change in Control" of
the Company shall be deemed to have occurred as of the first day any one or more
of the following four conditions have been satisfied: (i) any event whereby a
Person (as defined below) (other than (a) the Company or an affiliate, as
defined in the Exchange Act of the Company, or (b) any employee benefit plan or
trust sponsored or maintained by the Company or an affiliate, as defined in the
Exchange Act) (x) acquires 50% or more of the Company's outstanding voting
securities or (y) acquires (in one transaction or in a series of related
transactions) a subsidiary, business unit, segment or division of the Company as
defined by the Committee (provided, however, that in such event a Change in
Control shall be deemed to occur only with respect to
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employees of such subsidiary, business unit, segment or division and who cease
to be employees of the Company or any "affiliate" of the Company); (ii) a change
in the composition of the Board of Directors such that at any time a majority of
the Board of Directors shall not have been members of the Board of Directors for
twenty-four months; provided, however, that directors who were appointed or
nominated for election by at least two-thirds of the directors who were
directors at the beginning of such twenty-four month period (or deemed to be
such directors under this clause (ii)) shall be deemed to be directors at the
beginning of such twenty-four month period for the purposes of this clause (ii);
(iii) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or (iv) any consolidation or merger
of the Company, other than a merger or consolidation of the Company in which the
voting securities of the Company outstanding immediately prior thereto continue
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation. "Person" shall have the same
meaning as ascribed to such term in Section 3(a)(9) of the Exchange Act and used
in Section 13(d) thereof.
ADJUSTMENT PROVISIONS
The total number and character of shares of Class A Common Stock subject to
Awards and the number and character of shares of Class A Common Stock subject to
outstanding Awards and/or the exercise price of such shares will be
appropriately adjusted by the Committee if the shares of Class A Common Stock
are changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation (whether by reason
of merger, consolidation, recapitalization, reclassification, split, reverse
split, combination of shares, or otherwise). The Committee may also make
appropriate adjustments in the event of a merger, consolidation or other
transaction or event having a similar effect.
AMENDMENT AND TERMINATION OF THE 1997 INCENTIVE STOCK PLAN
Unless terminated earlier by action of the Board of Directors, the 1997
Incentive Stock Plan will terminate on the tenth anniversary of its adoption and
no additional grants under the 1997 Incentive Stock Plan will be made after that
date.
Except as provided below, the Board of Directors may amend or terminate the
1997 Incentive Stock Plan at any time. The 1997 Incentive Stock Plan may not
however be amended without the approval of the holders of a majority of the
outstanding voting stock of the Company (i) to decrease the minimum exercise
price for ISOs; (ii) to extend the term of the 1997 Incentive Stock Plan beyond
ten years, (iii) to extend the maximum terms of the Awards granted beyond ten
years, (iv) to withdraw the administration of the 1997 Incentive Stock Plan from
the Committee, (v) to change the class of eligible employees, officers,
directors and other grantees, (vi) to increase the aggregate number of shares of
Class A Common Stock which may be issued under the Plan, and (vii) to otherwise
require stockholder approval to comply with Rule 16b-3 under the Exchange Act or
any other applicable law, regulation, or listing requirement or to qualify for
an exemption or characterization that is deemed desirable by the Board of
Directors. Furthermore, no amendment or termination of the 1997 Incentive Stock
Plan shall, without the written consent of the grantee, alter the terms of
Awards already granted and such Stock Options shall remain in full force and
effect as if the 1997 Incentive Stock Plan had not been terminated.
MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
The Committee may, within the limitations of the 1997 Incentive Stock Plan,
modify, extend or renew outstanding Awards granted under the 1997 Incentive
Stock Plan, or accept the surrender of outstanding Awards and authorize the
granting of new Awards in substitution therefor. No modification may, without
the consent of the grantee, alter or impair any rights or obligations under any
Award theretofore granted to the grantee nor shall any modification adversely
affect the status of an ISO under Section 422 of the Code.
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TRANSFERABILITY OF AWARDS AND OTHER PROVISIONS
The rights of a grantee with respect to the Awards granted pursuant to the
1997 Incentive Stock Plan are not transferable other than by will or the laws of
descent and distribution and are exercisable, during the lifetime of the
grantee, only by the grantee or by the guardian or legal representative of the
grantee acting in a fiduciary capacity on behalf of the grantee under state law
or court supervision. An Award is not subject, in whole or in part, to
attachment, execution or levy of any kind.
RIGHTS UPON TERMINATION OF EMPLOYMENT
If the grantee dies while an employee or when no longer an employee but
while he or she still has the right to exercise an Award, the grantee's estate
shall have the right for a period of one year following the date of death to
exercise the Award to the extent such Award is exercisable and to the extent
such Award has not yet expired.
Upon a grantee's retirement from the Company or a subsidiary on or after
attaining age sixty-five the grantee shall have the right for a period of three
months following the date of retirement to exercise an Award to the extent such
Award is exercisable and to the extent such Award has not yet expired.
Upon a grantee's termination of employment from the Company or a subsidiary
on account of disability, the grantee or the legal representative of the
grantee, shall have the right for a period of one year following the date of
such termination to exercise an Award to the extent such award is exercisable
and to the extent such Award has not yet expired.
In the event the grantee's employment with the Company or a subsidiary is
terminated for any reason other than disability, death or retirement on or after
attaining age sixty-five, the grantee may exercise an Award within three months
after his or her termination of employment.
RIGHTS AS STOCKHOLDER
No grantee of any Stock Option has any rights as a stockholder with respect
to any shares of Class A Common Stock subject to his or her Stock Option prior
to the date on which he or she is recorded as the holder of such shares of Class
A Common Stock on the records of the Company.
RIGHT TO CONTINUED EMPLOYMENT
The 1997 Incentive Stock Plan is not a contract of employment, and the terms
of employment of any grantee shall not be affected in any way by the 1997
Incentive Stock Plan or related instruments except as specifically provided
therein. The establishment of the 1997 Incentive Stock Plan shall not be
construed as conferring any legal rights upon any grantee for a continuation of
employment, nor shall it interfere with the right of the Company or any
subsidiary to discharge any grantee and to treat him or her without regard to
the effect which such treatment might have upon him or her as a grantee.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 2, 1997, certain information
regarding the beneficial ownership of the Company's voting stock by (i) each of
the Company's directors (including nominees), (ii) each person believed by the
Company to own beneficially more than 5% of its outstanding voting stock, (iii)
each of the Company's Named Executive Officers and (iv) all executive officers
and directors of the Company as a group. Except as otherwise indicated, each
stockholder listed below has sole voting and investment power with respect to
shares beneficially owned by such person.
<TABLE>
<CAPTION>
AS ADJUSTED
PRO FORMA FOR FOR THE OFFERING(1)
THE ---------------------------------
RECLASSIFICATION PERCENT
------------------ OF
NUMBER PERCENT NUMBER PERCENT TOTAL
TITLE OF OF OF OF OF VOTING
NAME CLASS SHARES CLASS SHARES CLASS POWER(6)
- ----------------------------------------------------------- ------------ --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Stuart and Anita Subotnick................................. Class B 8,250,458 100.0% 8,250,458 100.0% 94.2%
c/o Metromedia Company Common Stock
215 East 67th Street
New York, New York 10021
Michael Kakoyiannis........................................ Class A 1,125,062 100.0% 1,125,062 21.5% 1.3%
c/o Big City Radio, Inc. Common Stock
11 Skyline Drive
Hawthorne, New York 10532
Silvia Kessel.............................................. -- * --(2) * *
Arnold L. Wadler........................................... -- * --(2) * *
Leonard White.............................................. -- * 2,500(3) * *
Steven G. Blatter.......................................... -- * 25,000(4) * *
Paul R. Thomson............................................ -- * 25,000(4) * *
All Directors and Executive Officers as a Group (8 1,125,062 100.0% 1,227,562(5) 23.5% *
persons)...............................................
</TABLE>
- ------------------------
* less than 1.0%
(1) The shares of Class B Common Stock are convertible into shares of Class A
Common Stock at the rate of one share of Class A Common Stock for each share
of Class B Common Stock and the holders of shares of Class B Common Stock
are entitled to 10 votes per share.
(2) Does not include 50,000 shares issuable upon exercise of options that will
become exercisable in five annual installments, as determined by the Board
of Directors.
(3) Includes 2,500 shares issuable upon exercise of options that are exercisable
within 60 days of December 2, 1997.
(4) Includes 25,000 shares issuable upon exercise of options that are currently
exercisable and does not include 50,000 shares issuable upon exercise of
options that will become exercisable in five annual installments, as
determined by the Board of Directors.
(5) Includes 102,500 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of December 2, 1997 and does not
include 300,000 shares issuable upon exercise of options that will become
exercisable in five annual installments, as determined by the Board of
Directors.
(6) Assuming that all the options granted under the 1997 Incentive Stock Plan
have not been exercised.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HISTORICAL TRANSACTIONS
On May 29, 1996, the Company was merged with Q Broadcasting, Inc., a
Delaware corporation owned by Mr. and Mrs. Subotnick, with the Company as the
surviving corporation. As a result of the merger, Mr. and Mrs. Subotnick each
received 216 shares of Old Common Stock.
On May 30, 1996, the Company entered into the Existing Credit Facility with
Chase and several other lenders pursuant to which Chase and such other lenders
agreed to make revolving credit loans to the Company from time to time until May
31, 2001 or earlier, as provided under the Existing Credit Facility. The payment
and performance by the Company under the Existing Credit Facility is guaranteed
by Stuart Subotnick under a Guarantee Agreement, dated as of May 30, 1996.
Simultaneously with the consummation of the Offering and the application or the
use of proceeds therefrom, Mr. Subotnick's guarantee will terminate.
In addition, pursuant to a Pledge Agreement, dated as of May 30, 1996 (the
"Old Pledge Agreement"), the Principal Stockholders each granted Chase a first
priority security interest in their shares of Old Common Stock and Mr.
Kakoyiannis granted Chase a second priority security interest in his shares of
Old Common Stock. In connection with the consummation of the Offering, the Old
Pledge Agreement will terminate.
The Principal Stockholders have made various loans to the Company in order
to finance the Company's radio station acquisitions and working capital
requirements. The loans from the Principal Stockholders bear interest at
variable rates not exceeding 8%, payable monthly, and aggregated approximately
$8.7 million of principal amount on May 30, 1996. In May 1996, in connection
with the merger of Q Broadcasting, Inc. with and into the Company, the Principal
Stockholders contributed $5.1 million principal amount of stockholders' loans to
Q Broadcasting, Inc. to the capital of Q Broadcasting, Inc. The Principal
Stockholders' outstanding loans to Q Broadcasting, Inc. and to the Company of
$11.7 million of aggregate principal amount were subordinated to the Existing
Credit Facility by a subordinated promissory note dated May 24, 1996. On
September 30, 1997, the loans from the Principal Stockholders aggregated
approximately $13.2 million of principal amount. Immediately prior to the
consummation of the Offering, the Principal Stockholders will contribute the
entire amount of their outstanding stockholders' loans to the capital of the
Company.
As of July 1, 1997, Mr. and Mrs. Subotnick transferred an aggregate of 68
shares of Old Common Stock to Mr. Kakoyiannis as an employment incentive.
Mr. Subotnick and Mr. Kakoyiannis entered into a Loan Agreement, dated as of
August 4, 1995, as amended, pursuant to which Mr. Subotnick made a loan to Mr.
Kakoyiannis as evidenced by a promissory note, dated August 4, 1995, in the
original principal amount of $500,000. This loan is secured by a first priority
security interest in favor of Mr. Subotnick in Mr. Kakoyiannis' shares of Old
Common Stock.
On December 1, 1997, the Board of Directors granted to each of Steven G.
Blatter, David J. Howard, Alan D. Kirschner, Sean O'Neill, Bryan Subotnick and
Paul R. Thomson Stock Options to purchase up to 25,000 shares (which represents
an aggregate of 150,000 shares) of Class A Common Stock at an exercise price of
$6.00 per share. Also on December 1, 1997, the Board of Directors granted to
each of Steven G. Blatter, David J. Howard, Alan D. Kirschner, Sean O'Neill,
Bryan Subotnick, Paul R. Thomson, Silvia Kessel and Arnold Wadler Stock Options
to purchase up to 50,000 shares (which represents an aggregate of 400,000
shares) of Class A Common Stock and granted to Leonard White Stock Options to
purchase up to 2,500 shares of Class A Common Stock, at an exercise price per
share equal to the initial public offering price per share in the Offering,
effective only immediately prior to the consummation of the Offering.
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TRANSACTIONS ENTERED INTO IN CONNECTION WITH THE OFFERING
RECLASSIFICATION
Immediately prior to the consummation of the Offering, the Company intends
to effect the Reclassification. Pursuant to the Reclassification, each share of
Old Common Stock outstanding or to be issued upon exercise of the stock options
granted under the 1997 Incentive Stock Plan will be reclassified into 7,610
shares of Class A Common Stock. Also in connection with the Offering, Mr. and
Mrs. Subotnick will exchange each share of Class A Common Stock held by them for
one share of Class B Common Stock. See "Description of Capital Stock" for a
description of the relative rights of holders of Class A Common Stock and Class
B Common Stock.
CONVERSION FROM S-CORPORATION INTO A C-CORPORATION
In connection with the consummation of the Offering, the Company will
convert from an S-Corporation to a C-Corporation.
CHANGE IN THE COMPANY'S FISCAL YEAR
In connection with the consummation of the Offering, the Company will change
its fiscal year-end from September 30 to December 31.
TERMINATION OF SHAREHOLDERS' AGREEMENT
In connection with the Offering, the Company, Mr. Kakoyiannis and the
Principal Stockholders will terminate an existing Shareholders' Agreement, dated
as of October 17, 1994, by and among the Company, the Principal Stockholders and
Mr. Kakoyiannis.
EQUITY CONTRIBUTION
Immediately prior to the consummation of the Offering, the Principal
Stockholders will either contribute the entire amount of certain outstanding
stockholders' loans made by them to the Company to the capital of the Company or
contribute cash in an amount sufficient to repay a portion of the outstanding
stockholders' loans made to the Company and will contribute the remaining
balance of such loans to the capital of the Company (all such outstanding
stockholders' loans aggregated $13.2 million as of September 30, 1997). See
"--Historical Transactions."
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DESCRIPTION OF CREDIT FACILITY
The Company has received a commitment letter from Chase to enter into the
Credit Facility. The Credit Facility will replace the Company's existing Credit
Agreement, dated as of May 30, 1996, as amended, among the Company, several
financial institutions and Chase, as agent (the "Existing Credit Facility").
Under the terms of the Credit Facility, the Company will have a $35.0
million reducing revolving loan facility if the net proceeds of the Offering
equal or exceed $35.0 million; if the net proceeds of the Offering are less than
$35.0 million, the amount of the revolving credit facility will be reduced
dollar-for-dollar to a minimum of $29.0 million (assuming the net proceeds of
the Offering are $33.0 million (using an initial offer price of $9.00, the
midpoint of the range of prices on the cover of this Prospectus), the amount of
the Credit Facility will be $33.0 million). The Credit Facility will mature on
the fifth anniversary of the closing of the Offering. Outstanding amounts under
the Credit Facility will bear interest at a rate based, at the option of the
Company, on the participating bank's prime rate, or the London Interbank
Borrowing Rate plus an applicable margin that will vary (from .5% to 2.00% for
prime rate loans and 1.50% to 3.00% for LIBOR loans). Chase's commitment under
the Credit Facility will be reduced by 20% on each of the second anniversary of
the closing date of the Offering and on the third and fourth anniversaries of
the closing date and the entire remaining amount will terminate on the fifth
anniversary of the closing date. In addition, on each April 30, commencing April
30, 1999, the total commitment amount will be reduced by 50% of the Company's
excess cash flow (as defined in the Credit Facility) during the most recently
completed fiscal year. In addition, Chase's commitment shall also be reduced
upon receipt of certain net cash proceeds in excess of specified amounts from
the sale of assets of the Company which are not applied to purchase additional
assets, which reductions will be applied to the remaining scheduled reductions
mentioned above, ratably, in accordance with the amounts of such scheduled
reductions. The Company will pay an unused commitment fee of .50% on undrawn
amounts under the Credit Facility.
The Credit Facility will contain certain financial and operational covenants
and other restrictions with which the Company must comply, including, among
others, limitations on capital expenditures, the incurrence of additional
indebtedness, restrictions on the use of borrowings, limitations on paying cash
dividends and redeeming or repurchasing capital stock of the Company, and
requirements to maintain certain financial ratios, including, but not limited
to, minimum EBITDA for 1998 and each year thereafter, maximum total leverage,
minimum interest coverage and minimum fixed charge coverage.
The Credit Facility will contain customary conditions precedent, including
consummation of this Offering and events of default, including material
misrepresentations, payment defaults and default in the performance of other
covenants, certain bankruptcy defaults, events having a material and adverse
effect on the Company and revocation of the any of the Company's broadcast
licenses. The Credit Facility will also provide that an event of default will
occur upon the occurrence of a "change of control" as defined in the Credit
Facility. For purposes of the Credit Facility, a change of control will occur
when (i) any person or group other than the Principal Stockholders and their
affiliates obtains the power to elect a majority of the Board of Directors, (ii)
the Company fails to own 100% of the capital stock of its subsidiaries owning
any of the FCC broadcast licenses, or when (iii) the Board of Directors does not
consist of a majority of continuing directors.
The Credit Facility will be secured by a first priority security interest in
favor of Chase in all tangible and intangible property and assets of the
Company. See "Risk Factors--Substantial Leverage; Pledge of Assets; Covenants."
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company will upon consummation of the
Reclassification consist of 120,000,000 shares of capital stock, of which
80,000,000 shares will have been designated as Class A Common Stock, 20,000,000
shares will have been designated as Class B Common Stock, and 20,000,000 shares
will have been designated as Preferred Stock, par value $.01 per share (the
"Preferred Stock"). Effective upon completion of the Offering, 5,125,062 shares
of Class A Common Stock will be issued and outstanding, 8,250,458 shares of
Class B Common Stock will be issued and outstanding and no shares of Preferred
Stock will be issued and outstanding. In addition, 8,250,458 shares of Class A
Common Stock will be reserved for issuance upon conversion of the Class B Common
Stock, 700,000 shares of Class A Common Stock will be reserved for issuance
under options that may be issued under the 1997 Incentive Stock Plan and 281,265
shares of Class A Common Stock will be reserved for issuance under Mr.
Kakoyiannis' employment agreement. Immediately prior to the consummation of the
Offering, there will be one holder of record of Class A Common Stock and two
holders of record of Class B Common Stock.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Amended and Restated
Certificate of Incorporation (the "Amended and Restated Certificate of
Incorporation") and Amended and Restated Bylaws (the "Bylaws"), copies of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part (the "Registration Statement").
COMMON STOCK
The shares of Class A Common Stock and Class B Common Stock are identical in
all respects, except for voting rights and certain conversion rights and
transfer restrictions with respect to the shares of the Class B Common Stock.
The number of authorized shares of any class or classes of capital stock of the
Company may be increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of the holders of a majority
of the voting power of the Common Stock of the Company entitled to vote
generally in the election of directors irrespective of the provisions of Section
242(b)(2) of the DGCL or any corresponding provisions hereinafter enacted.
VOTING RIGHTS
The holders of Class A Common Stock are entitled to one vote per share.
Holders of Class B Common Stock are entitled to ten votes per share. Holders of
all classes of Common Stock entitled to vote will vote together as a single
class on all matters presented to the stockholders for their vote or approval
except for the election and the removal of directors as described below and as
otherwise required by applicable law. In addition, with respect to the election
of directors, the Company's Amended and Restated Certificate of Incorporation
provides that holders of Class B Common Stock will vote as a separate class to
elect up to 75% of the members of the Company's Board of Directors. Stockholders
have no cumulative voting rights.
Directors may be removed, with or without cause, only by the holders of the
class of Common Stock or series of Preferred Stock that, as of the date such
removal is effected, would be entitled to elect such directors at the next
annual meeting of stockholders. Vacancies in a directorship may be filled only
by (a) the remaining directors elected by holders of each class of Common Stock
or series of Preferred Stock that (x) elected such director and (y) as of the
date such vacancy is filled, would be entitled to elect such director at the
next annual meeting of the stockholders or (b) if there are no such remaining
directors, then by the vote of the holders of the class or classes of Common
Stock or series of Preferred Stock, that, as of the date such vacancy is filled,
would be entitled to elect such director at the next annual meeting of
stockholders, voting as a separate class at a meeting, special or otherwise, of
the holders of Common Stock of such class or series of Preferred Stock.
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DIVIDENDS
Holders of Class A Common Stock and the Class B Common Stock are entitled to
receive dividends at the same rate if, as and when such dividends are declared
by the Board of Directors out of assets legally available therefor after payment
of dividends required to be paid on shares of Preferred Stock, if any. The
Company may not make any dividend or distribution to any holder of any class of
Common Stock unless simultaneously with such dividend or distribution the
Company makes the same dividend or distribution with respect to each outstanding
share of Common Stock regardless of class. In the case of a dividend or other
distribution payable in shares of a class of Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock, only shares
of Class A Common Stock may be distributed with respect to Class A Common Stock
and only shares of Class B Common Stock may be distributed with respect to Class
B Common Stock. Whenever a dividend or distribution, including distributions
pursuant to stock splits or divisions of the Common Stock, is payable in shares
of a class of Common Stock, the number of shares of each class of Common Stock
payable per share of such class of Common Stock shall be equal in number. In the
case of dividends or other distributions consisting of other voting securities
of the Company or of voting securities of any corporation which is a
wholly-owned subsidiary of the Company, the Company shall declare and pay such
dividends in three separate classes of such voting securities, identical in all
respects except that (i) the voting rights of each such security issued to the
holders of Class A Common Stock shall be one-tenth of the voting rights of each
such security issued to holders of Class B Common Stock, (ii) such security
issued to holders of Class B Common Stock shall convert into the security issued
to the holders of Class A Common Stock upon the same terms and conditions
applicable to the conversion of Class B Common Stock into Class A Common Stock
and shall have the same restrictions on transfer and ownership applicable to the
transfer and ownership of the Class B Common Stock, and (iii) with respect only
to dividends or other distributions of voting securities of any corporation
which is a wholly owned subsidiary of the Company, the respective voting rights
of each such security issued to holders of the Class A Common Stock and Class B
Common Stock with respect to the election of directors shall otherwise be as
comparable as is practicable to those of the Class A Common Stock and Class B
Common Stock. In the case of dividends or other distributions consisting of
securities convertible into, or exchangeable for, voting securities of the
Company or voting securities of any corporation which is a wholly owned
subsidiary of the Company, the Company shall provide that such convertible or
exchangeable securities and the underlying securities be identical in all
respects (including, without limitation, the conversion or exchange rate) except
that the underlying securities may have the same differences as they would have
if the Company issued voting securities of the Company or of a wholly owned
subsidiary rather than issuing securities convertible into, or exchangeable for,
such securities. The Company does not anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy."
RESTRICTIONS ON ADDITIONAL ISSUANCES AND TRANSFER
The Company may not issue or sell any shares of Class B Common Stock or any
securities (including, without limitation, any rights, options, warrants or
other securities) convertible into, or exchangeable or exercisable for, shares
of Class B Common Stock to any person or entity other than to the Principal
Stockholders, their affiliates or relatives (each, a "Permitted Holder").
Additionally, shares of Class B Common Stock may not be transferred, whether by
sale, assignment, gift, bequest, appointment or otherwise, to a person other
than to a Permitted Holder. Notwithstanding the foregoing (i) any Permitted
Holder may pledge his, her or its shares of Class B Common Stock to a financial
institution pursuant to a bona fide pledge of such shares as collateral security
for indebtedness due to the pledgee provided that such shares remain subject to
the transfer restrictions and that, in the event of foreclosure or other similar
action by the pledgee, such pledged shares of Class B Common Stock may only be
transferred to a Permitted Holder or converted into shares of Class A Common
Stock, as the pledgee may elect and (ii) the foregoing transfer restrictions
shall not apply in the case of a merger, consolidation or business combination
of the Company with or into another corporation in which all of the outstanding
shares of Common Stock and Preferred Stock of the Company regardless of class
are purchased by the acquiror.
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CONVERSION
Shares of Class A Common Stock have no conversion rights. Shares of Class B
Common Stock are convertible into shares of Class A Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of Class A Common Stock for each share of Class B Common
Stock converted. Additionally, at such time as any share of Class B Common Stock
ceases to be held by any of the Principal Stockholders, their affiliates or
relatives, such share of Class B Common Stock shall convert into a share of
Class A Common Stock. The Company covenants that (i) it will at all times
reserve and keep available out of its authorized but unissued shares of Class A
Common Stock, such number of shares of Class A Common Stock issuable upon the
conversion of all outstanding shares of Class B Common Stock, (ii) it will cause
any shares of Class A Common Stock issuable upon conversion of a share of Class
B Common Stock that require registration with or approval of any governmental
authority under federal or state law before such shares may be issued upon
conversion to be so registered or approved and (iii) it will use its best
efforts to list the shares of Class A Common Stock required to be delivered upon
conversion prior to such delivery upon such national securities exchange upon
which the outstanding Class A Common Stock is listed at the time of such
delivery.
RECLASSIFICATION AND MERGER
In the event of a reclassification or other similar transaction as a result
of which the shares of Class A Common Stock are converted into another security,
then a holder of Class B Common Stock will be entitled to receive upon
conversion the amount of such other security that the holder would have received
if the conversion occurred immediately prior to the record date of such
reclassification or other similar transaction. No adjustments in respect of
dividends will be made upon the conversion of any share of Class B Common Stock;
except if a share is converted subsequent to the record date for the payment of
a dividend or other distribution on shares of Class B Common Stock but prior to
such payment, then the registered holder of such share at the close of business
on such record date will be entitled to receive the dividend or other
distribution payable on such date regardless of the conversion thereof or the
Company's default in payment of the dividend due on such date.
In the event the Company enters into any consolidation, merger, combination
or other transaction in which shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then,
and in such event, the shares of each class of Common Stock will be exchanged
for or changed into either (i) the same amount of stock, securities, cash and/or
any other property, as the case may be, into which or for which each share of
any other class of Common Stock is exchanged for or changed into; provided that
if shares of Common Stock are exchanged for or into shares of capital stock,
such shares so exchanged for or changed into may differ to the extent and only
to the extent that the Class A Common Stock and the Class B Common Stock differ
as provided in the Company's Amended and Restated Certificate of Incorporation
or (ii) if holders of each class of Common Stock are to receive different
distributions of stock, securities, cash and/or any other property, an amount of
stock, securities, cash and/or property per share having a value, as determined
by an independent investment banking firm of national reputation selected by the
Board of Directors, equal to the value per share into which or for which each
share of any other class of Common Stock is exchanged or changed.
LIQUIDATION
In the event of a liquidation of the Company, after payment of the debts and
other liabilities of the Company and after making provision for the holders of
Preferred Stock, if any, the remaining assets of the Company will be
distributable ratably among the holders of the Class A Common Stock and Class B
Common Stock treated as a single class.
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OTHER PROVISIONS
Except as described below, the holders of the Class A Common Stock and Class
B Common Stock are not entitled to preemptive rights. None of the Class A Common
Stock or Class B Common Stock may be subdivided or combined in any manner unless
the other classes are subdivided or combined in the same proportion. The Company
may not make any offering of options, rights or warrants to subscribe for shares
of Class B Common Stock. If the Company makes an offering of options, rights or
warrants to subscribe for shares of any other class or classes of capital stock
(other than Class B Common Stock) to all holders of a class of Common Stock,
then the Company is required to simultaneously make an identical offering to all
holders of the other classes of Common Stock other than to any class the holders
of which, voting as a separate class, agree that such offering need not be made
to such class. All such options, rights or warrants offerings shall offer the
respective holders of Class A Common Stock and Class B Common Stock the right to
subscribe at the same rate per share. All outstanding shares of Common Stock
are, and all shares of Common Stock offered hereby when issued will be, upon
payment therefor, validly issued, fully paid and nonassessable.
The DGCL does not require stockholder approval for any issuance of
authorized shares of Common Stock. Such authorized and unissued shares may be
used for a variety of corporate purposes, including future public offerings to
raise additional capital or to facilitate corporate acquisitions. One of the
effects of the existence of unissued and unreserved shares of Common Stock may
be to enable the Board of Directors to issue shares to persons friendly to
current management, which issuance could render more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy consent or otherwise, and thereby protect the continuity of the Company's
current management and possibly deprive the stockholders of opportunities to
sell their shares of Common Stock at prices higher than prevailing market
prices.
At present there is no established trading market for the Class A Common
Stock.
The shares of the Class A Common Stock offered hereby have been approved for
listing on the AMEX under the symbol "YFM."
PREFERRED STOCK
The Board of Directors will have the authority, without any further action
by the stockholders of the Company, to issue from time to time shares of
Preferred Stock in one or more series and to fix the designations, preferences,
rights, qualifications, limitations and restrictions thereof, including voting
rights, dividend rights, dividend rates, conversion rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series. The issuance of Preferred Stock with voting rights could have an
adverse effect on the voting power of holders of Common Stock by increasing the
number of outstanding shares having voting rights. In addition, if the Board of
Directors authorizes Preferred Stock with conversion rights, the number of
shares of Common Stock outstanding could potentially be increased up to the
authorized amount. The issuance of Preferred Stock could decrease the amount of
earnings and assets available for distribution to holders of Common Stock. Any
such issuance could also have the effect of delaying, deterring or preventing a
change in control of the Company and may adversely affect the rights of holders
of Common Stock. The Board of Directors does not presently intend to issue any
additional shares of Preferred Stock.
DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
As a Delaware corporation, the Company is subject to the DGCL, including
Section 203. Section 203 of the DGCL prohibits certain transactions between a
Delaware corporation and an "interested stockholder," which is defined as a
person who, together with any affiliates or associates of such person,
beneficially owns, directly or indirectly, 15% or more of the outstanding voting
shares of a Delaware corporation. This provision prohibits certain business
combinations (defined broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate value in excess of 10% of the
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consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation) between an interested stockholder and a corporation for a period of
three years after the date the interested stockholder becomes an interested
stockholder, unless (i) prior to the date the interested stockholder becomes an
interested stockholder, the business combination or the transaction by which the
stockholder becomes an interested stockholder is approved by the corporation's
board of directors, (ii) upon consummation of the transaction which resulted in
the stockholder becoming an interested stockholder, such stockholder held at
least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (other than stock held by directors who are also officers
or by certain employee stock plans) or (iii) the business combination is
approved by a majority of the board of directors, and at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
66 2/3% of the outstanding voting stock that is not owned by the interested
stockholder. Mr. and Mrs. Subotnick are interested stockholders under the DGCL.
However since their acquisition of the Company's securities was approved in
advance by the Company's Board of Directors, they would not be prohibited from
engaging in a business combination with the Company.
In the event that the Company learns of a new attributable stockholder and
if such stockholder holds interests that exceed the FCC limits on media
ownership or if the Company learns that Aliens own, control or vote stock in the
Company in excess of the Communications Act limits, under the Amended and
Restated Certificate of Incorporation, the Board of Directors of the Company has
the corporate power to redeem stock of the Company's stockholders to the extent
necessary to be in compliance with FCC and Communications Act requirements. See
"Business--Federal Regulation of Radio Broadcasting."
The Amended and Restated Certificate of Incorporation and Bylaws include
certain provisions which are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and which may have
the effect of delaying, deterring or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved by
the Board of Directors. Such provisions may also render the removal of directors
and management more difficult.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The Bylaws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual or special meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 70 days nor more than 90 days prior to the meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 20 days or delayed by more than 70 days from such
anniversary date, notice by the stockholder to be timely must be received no
earlier than the close of business on the ninetieth day prior to such annual
meeting and not later than the close of business on the later of the seventieth
day prior to such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made. The Bylaws also
specify certain requirements for a stockholder's notice to be in proper written
form. These provisions may preclude some stockholders from bringing matters
before the stockholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting.
The Company's Amended and Restated Certificate of Incorporation provides
that to the fullest extent permitted by the DGCL, a director of the Company
shall be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director. Under current Delaware law, liability of
a director may not be limited (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(iii) in respect of certain unlawful dividend payments or stock redemptions or
repurchases and (iv) for any transaction from which the director derives an
improper personal benefit. The effect of the provisions of the Amended and
Restated Certificate of Incorporation and the Bylaws is to eliminate the rights
of the Company and its stockholders (through stockholders' derivative suits on
behalf
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of the Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek nonmonetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
In addition, the Amended and Restated Certificate of Incorporation and the
Bylaws provide that the Company shall indemnify its directors, officers,
employees and agents to the extent not prohibited by Delaware law.
In addition, prior to the completion of the Offering, the Company intends to
enter into agreements (the "Indemnification Agreements") with each of the
directors of the Company pursuant to which the Company will agree to indemnify
each such director against claims, liabilities, damages, expenses, losses,
costs, penalties or amounts paid in settlement (collectively, "Losses") incurred
by such director and arising out of his capacity as a director, executive
officer, employee and/or agent of the Company to the maximum extent permitted by
applicable law. In addition, such director or officer shall be entitled to an
advance of expenses to the maximum extent authorized or permitted by law to meet
the obligations indemnified against. The Indemnification Agreements will also
obligate the Company to purchase and maintain insurance for the benefit and on
behalf of its directors insuring against all liabilities that may be incurred by
such director in or arising out of his capacity as a director, officer, employee
and/or agent of the Company.
To the extent that the Board of Directors or the stockholders of the Company
may in the future wish to limit or repeal the ability of the Company to
indemnify directors, such repeal or limitation may not be effective as to
directors who are currently parties to the Indemnification Agreements, because
their rights to full protection will be contractually assured by the
Indemnification Agreements. It is anticipated that similar contracts may be
entered into, from time to time, with future directors and with executive
officers of the Company.
REGISTRATION RIGHTS
Under Mr. Kakoyiannis' employment agreement, the Company is obligated to
register the 281,265 shares of Class A Common Stock that may be issued to Mr.
Kakoyiannis with the registration statement on Form S-8 that the Company intends
to file with the Commission to cover the shares of Class A Common Stock
underlying outstanding options and options granted under the 1997 Incentive
Stock Plan.
In connection with the consummation of the Offering, the Company will enter
into registration rights agreements with Mr. Kakoyiannis and the Principal
Stockholders pursuant to which the Company will agree (subject to certain
limitations and under certain circumstances) to register for sale the shares of
Class A Common Stock held by Mr. Kakoyiannis on the date of this Prospectus and
the shares of Class A Common Stock that may be issued to the Principal
Stockholders upon conversion of the shares of Class B Common Stock issued to
them in the Reclassification.
Pursuant to these registration rights agreements, Mr. Kakoyiannis or the
Principal Stockholders may at any time after the Company qualifies to utilize a
Registration Statement on Form S-3 to register its shares of Class A Common
Stock, demand that the Company register their shares of Class A Common Stock
(assuming the Principal Stockholders have converted their shares of Class B
Common Stock into shares of Class A Common Stock) and, upon such demand, the
Company is required to use its best efforts to effect such registration. The
Company is not required to effect (i) more than three registrations in the
aggregate for Mr. Kakoyiannis and six registrations in the aggregate for the
Principal Stockholders, (ii) more than two such registrations within any six
month period for each of Mr. Kakoyiannis and the Principal Stockholders, (iii)
any such registration within six months after the effectiveness of a
registration statement by the Company offering its shares of Class A Common
Stock (other than a registration statement on Form S-8 with respect to an
employee benefit plan), or (iv) any such registration valued at less than $10.0
million based upon the then current market price or fair market value as
estimated by the Company's Board of Directors.
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Each time the Company proposes to file a registration statement to register
its securities (except for registration on Form S-4 or on Form S-8), the Company
will use its best efforts to effect the registration of shares requested by Mr.
Kakoyiannis or the Principal Stockholders provided that the amount of such
securities requested to be registered may be limited by the underwriters in an
underwritten offering based on such underwriters' determination that inclusion
of the total amount of shares of Class A Common Stock requested to be registered
would materially and adversely affect the success of the offering.
Promptly after completion of the Offering, the Company intends to file with
the Commission a registration statement on Form S-8, covering the shares of
Class A Common Stock underlying options granted or to be granted under the 1997
Incentive Stock Plan and the shares that may be issued to Mr. Kakoyiannis
pursuant to his employment agreement with the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock will be Chase
Mellon Shareholder Services, L.L.C.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the shares of Class A
Common Stock. Sales of a substantial amount of Class A Common Stock in the
public market, or the perception that such sales may occur, could adversely
affect the market price of the Class A Common Stock prevailing from time to time
in the public market and could impair the Company's ability to raise additional
capital through the sale of its equity securities in the future.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted securities from the
Company or any "affiliate" of the Company, as that term is defined under the
Securities Act, the holder is entitled to sell within any three-month period a
number of shares of Class A Common Stock that does not exceed the greater of 1%
of the then-outstanding shares of the Class A Common Stock or the average weekly
trading volume of shares of Class A Common Stock on all exchanges and reported
through the automated quotation system of a registered security association
during the four calendar weeks preceding the date on which notice of the sale is
filed with the Securities and Exchange Commission (the "Commission"). Sales
under Rule 144 are also subject to certain restrictions on the manner of sales,
notices, requirements and the availability of current public information about
the Company. If two years have elapsed since the date of acquisition of
restricted shares from the Company or from any "affiliate" of the Company, and
the holder thereof is deemed not to have been an affiliate of the Company at any
time during the 90 days preceding a sale, such person would be entitled to sell
such Class A Common Stock in the public market under Rule 144(k) without regard
to the volume limitations, manner of sale provisions, public information
requirements or notice requirements.
Upon completion of the Offering, the Company will have approximately
5,125,062 shares of Class A Common Stock outstanding (5,725,062 if the
Underwriters' overallotment option is exercised in full), including 4,000,000
shares of Class A Common Stock sold in the Offering (4,600,000 if the
Underwriters' overallotment option is exercised in full) and 1,125,062
"restricted" shares of Class A Common Stock.
The shares of Class A Common Stock offered in the Offering will be freely
tradeable without restriction or further registration under the Securities Act
by persons other than "affiliates" of the Company within the meaning of Rule
144. The holders of restricted shares generally will be entitled to sell these
shares in the public securities market without registration under the Securities
Act to the extent permitted by Rule 144 or any exemption under the Securities
Act. The Company has granted certain registration rights to Mr. Kakoyiannis for
all shares of Class A Common Stock held by him on the date of this Prospectus or
to be issued pursuant to his employment agreement with the Company and to the
Principal Stockholders with respect to all the shares of Class A Common Stock
that may be issued to them upon conversion of the shares of Class B Common Stock
issued to them in the Reclassification, only following the one year anniversary
of the effectiveness of this Offering. Registration of such shares under
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the Securities Act would result in such shares becoming available for sale by
non-affiliates in the public securities market without limitation, and by
affiliates, subject to the limitations of Rule 144, immediately upon the
effectiveness of such registration.
The Company and each of its executive officers, directors and certain
stockholders have entered into lock-up agreements with the Underwriters,
providing that, subject to certain exceptions, they will not, for a period of
180 days from the date of this Prospectus, offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any shares of Class A Common Stock
or any securities convertible into, or exercisable or exchangeable for, shares
of Class A Common Stock, file any registration statement with respect to any
shares of Class A Common Stock or any securities convertible into or exercisable
or exchangeable for shares of Class A Common Stock, or make any demand for, or
exercise any right with respect to the registration of any shares of Class A
Common Stock or any securities convertible into or exercisable or exchangeable
for shares of Class A Common Stock, without prior written consent of DLJ,
subject to certain exceptions. See "Underwriting."
Promptly after completion of the Offering, the Company intends to file with
the Commission a Registration Statement on Form S-8, covering the shares of
Class A Common Stock underlying options granted or to be granted under the 1997
Incentive Stock Plan and the shares that may be issued to Mr. Kakoyiannis
pursuant to his employment agreement with the Company. Such registration
statement will become effective immediately upon filing with the Commission. As
a result, the shares of Class A Common Stock so registered and acquired pursuant
to the 1997 Incentive Stock Plan or issued to Mr. Kakoyiannis under his
employment agreement will be available for sale by non-affiliates in the public
market without limitation and by affiliates, subject to the volume limitations
of Rule 144.
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UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement,
dated , 1997 (the "Underwriting Agreement"), between the Company and a
syndicate of underwriters named below (the "Underwriters"), for whom DLJ and
Furman Selz LLC are acting as representatives (the "Representatives"), the
Underwriters have severally and not jointly agreed to purchase from the Company
and the Company, has agreed to sell to them, the number of shares of Class A
Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
CLASS A
UNDERWRITERS SHARES
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........................................
Furman Selz LLC............................................................................
----------
Total................................................................................ 4,000,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Class A Common
Stock offered hereby are subject to approval of certain legal matters by counsel
and to certain other conditions. If any of the shares of Class A Common Stock
are purchased by the Underwriters pursuant to the Underwriting Agreement, all
such shares (other than shares of Class A Common Stock covered by the
over-allotment option described below) must be so purchased.
The Company has granted to the Underwriters an option, exercisable at any
time on or before 30 days after the date of this Prospectus, to purchase up to
an aggregate of 600,000 additional shares of Class A Common Stock at the initial
public offering price less the underwriting discounts and commissions, solely to
cover over-allotments. To the extent that the Underwriters exercise such option,
each of the Underwriters will be committed, subject to certain conditions, to
purchase a number of option shares of Class A Common Stock proportionate to such
Underwriter's initial commitment as indicated in the table above.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Company and its executive officers and directors, subject to certain
limited exceptions, have agreed not to offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Class A Common Stock or any
securities convertible into or exercisable or exchangeable for shares of Class A
Common Stock or, enter into any swap or other arrangement that transfers all or
a portion of the economic consequences associated with the ownership of any
shares of Class A Common Stock (regardless of whether any of the foregoing
transactions is to be settled by the delivery of Class A Common Stock, or such
other securities, in cash or otherwise) for a period of 180 days after the date
of this Prospectus without the prior written consent of DLJ. In addition, during
such period, without such prior written consent, and subject to certain limited
exceptions, the Company has also agreed not to file a registration statement
with respect to, and its executive officers and directors have agreed not to
make any demand for, or exercise any right with respect to, the registration of
any shares of Class A
70
<PAGE>
Common Stock or any securities convertible into or exercisable or exchangeable
for shares of Class A Common Stock.
At the request of the Company, the Underwriters have reserved up to 200,000
of the shares of Class A Common Stock offered hereby for sale at the public
offering price to certain directors, officers and employees of the Company. The
number of shares of Class A Common Stock available for sale to the general
public 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 basis as the other shares offered hereby. All
purchasers of such reserved shares will be required to enter into agreements
identical to those described in the immediately preceding paragraph restricting
the transferability of such shares for a period of 180 days after the date of
this Prospectus.
Prior to the Offering, there has been no established trading market for the
Class A Common Stock. The initial public offering price for the shares of Class
A Common Stock offered was determined by negotiation between the Company and the
Representatives. The factors considered in determining the initial public
offering price include the history of and the prospects for the industry in
which the Company competes, the past and present operations of the Company, the
historical results of operations of the Company, the prospects for future
earnings of the Company, the recent market prices of securities of generally
comparable companies and the general conditions of the securities markets at the
time of the Offering.
The Representatives have advised the Company that the Underwriters propose
to offer shares of Class A Common Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus and, through the
Representatives, to certain dealers at such price less a concession not in
excess of $ per share; that the Underwriters and such dealers may allow a
discount not in excess of $ per share on sales to certain other dealers; and
that, after the commencement of the initial public offering, the public offering
price and concession and discount to dealers may be changed by the
Representatives on behalf of the Underwriters. The Representatives have informed
the Company that they do not expect to confirm sales to accounts over which the
Underwriters exercise discretionary authority.
The shares of Class A Common Stock offered hereby have been approved for
inclusion on the AMEX, under the symbol "YFM."
In connection with Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Class A Common
Stock. Specifically, the Underwriters may over-allot the Offering, creating a
syndicate short position. The Underwriters may bid for and purchase shares of
Class A Common Stock in the open market to cover syndicate short positions or to
stabilize the price of the Class A Common Stock. In addition, the Underwriters
may reclaim selling concessions from other Underwriters in the Offering, if they
repurchase previously distributed shares of Class A Common Stock in syndicate
covering transactions, in stabilization transactions or otherwise. These
activities may stabilize or maintain the market price of the Class A Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities, and may end these activities at any time and will,
in any event, be discontinued 30 days after settlement of the Offering.
Other than in the United States, no action has been taken in any
jurisdiction by the Company or the Underwriters that would permit a public
offering of shares of Class A Common Stock in any jurisdiction where action for
that purpose is required. The shares of Class A Common Stock offered hereby may
not be offered or sold, directly or indirectly, and neither this Prospectus nor
any other offering material or advertisements in connection with the offer and
sale of the shares of Class A Common Stock may be distributed or published in or
from any jurisdiction, except under circumstances that will result in compliance
with applicable rules and regulations of any such jurisdiction. Persons into
whose possession this Prospectus comes are hereby advised to inform themselves
about and to observe any restrictions relating to the offering of shares of
Class A Common Stock and the distribution of this Prospectus. This
71
<PAGE>
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any shares of Class A Common Stock in any jurisdiction or in any
circumstances in which such an offer or solicitation is unlawful.
Certain of the Underwriters and their affiliates have provided from time to
time, and expect to provide in the future, commercial or investment banking
services to the Company and its affiliates, for which such Underwriters and
their affiliates have received and expect to receive customary fees and
commissions.
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby and
certain other legal matters in connection with the Class A Common Stock offered
hereby will be passed upon for the Company by Paul, Weiss, Rifkind, Wharton &
Garrison, New York, New York. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California.
EXPERTS
The financial statements of the Company and related schedule for the Company
as of December 31, 1996 and for the year then ended, the financial statements of
WZVU-FM as of December 31, 1996 and 1995 and for the years then ended and the
financial statements of WVVX as of December 31, 1996 and for the year then ended
have been included herein and in the Registration Statement in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of the Company and related schedules as of December
31, 1995 and for the year then ended and for the year-ended September 30, 1994
and for the three months ended December 31, 1994 appearing herein have been
audited by Holtz Rubenstein & Co., LLP, independent auditors as stated in their
report appearing elsewhere in the Registration Statement, and upon the authority
of said firm as experts in accounting and auditing.
CHANGE IN INDEPENDENT AUDITOR
Effective September 1996, following the merger of the Company with Q, the
Company appointed KPMG Peat Marwick LLP as successor independent auditor to
replace Holtz Rubenstein & Co., LLP. The decision to change the Company's
independent auditor was approved by the Board of Directors of the Company. The
former auditor's reports for fiscal year ended September 30, 1994, the three
months ended December 31, 1994 and the fiscal year ended December 31, 1995 are
included in this Prospectus.
Such reports do not contain an adverse opinion or a disclaimer of opinion or
qualifications or modifications as to uncertainty, audit scope or accounting
principles. There were no disagreements with the former auditor regarding any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure at the time of the change or with respect to the
Company's financial statements for fiscal 1994 and 1995. Prior to retaining KPMG
Peat Marwick LLP, the Company had not consulted with KPMG Peat Marwick LLP
regarding the application of accounting principles to a specified transaction,
either completed or proposed or the type of audit opinion that might be rendered
on the Company's financial statements in any matter that was either the subject
of a disagreement or a reportable event.
MARKET DATA AND CERTAIN DEFINITIONS
Unless otherwise indicated herein, all markets, audience ratings and
audience rankings have been derived for the indicated station or group of
stations from surveys of the indicated demographic group listening Monday
through Sunday, 6 a.m. to 12 midnight, based on the average of the survey
periods for
72
<PAGE>
the referenced year, as reported by Arbitron, Radio Market Report, The Arbitron
Company ("Arbitron"). Unless otherwise indicated herein, audience share data is
expressed as the "local" average quarter hour share for each indicated radio
station. A radio station's "local" audience share is derived by comparing the
radio station's average quarter hour share to the total average quarter hour
share for all stations listed as inside the MSA ("home-to-market" or "above the
line") by Arbitron. Average quarter hour share is the percentage of the
estimated number of persons who listened to a given radio station for a minimum
of five minutes within a quarter hour compared to the total number of persons
who listened to radio in the market within such quarter hour. The most recent
Arbitron survey utilized in this Prospectus is Summer 1997. Unless otherwise
indicated herein metro rank, market ranking by radio advertising revenue and
market radio advertising revenue have been obtained from Investing in Radio,
1997 Market Report-- Third Edition, BIA Publications Inc. Information regarding
radio station sales in each of the Company's markets has been obtained from
Duncan's American Radio, L.L.C., as set forth in the following publications: (i)
Duncan's Radio Market Guide 1996, (ii) American Radio, Fall 1996, (iii) Duncan's
Radio Market Guide 1997, (iv) American Radio, Winter 1997 and (v) American
Radio, Spring 1997.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus under the caption "Prospectus
Summary," "Risk Factors," "Business" and otherwise utilizing the phrases "will,"
"expects," "intends" and "contemplates" are "forward-looking" statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995),
including statements regarding, among other items, (i) the Company's growth
strategy, (ii) the Company's intention to acquire additional radio stations and
to enter additional markets, (iii) the Company's expectation of improving the
coverage areas of its radio stations and (iv) the Company's ability to
successfully implement its business strategy. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond the Company's control.
Actual results could differ materially from these forward-looking statements as
a result of, among other things, the facts described in "Prospectus Summary,"
"Risk Factors" and "Business" including, among others, (i) changes in the
competitive marketplace, including the introduction of new technologies or
formatting changes by the Company's competitors, (ii) changes in the regulatory
framework, (iii) changes in audience tastes and (iv) changes in the economic
conditions of local markets. Other factors which may materially affect actual
results include, among others, the following: general economic and business
conditions; industry capacity; demographic changes; changes in political, social
and economic conditions; and various other factors beyond the Company's control.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, there can be no
assurance that the forward-looking information contained in this Prospectus will
in fact transpire.
ADDITIONAL INFORMATION
The Company is not currently subject to the information requirements of the
Exchange Act. As a result of the Offering, the Company will be required to file
reports and other information with the Commission pursuant to the informational
requirements of the Exchange Act. The Company intends to furnish its
stockholders with annual reports containing consolidated financial statements
audited by independent certified public accountants and unaudited quarterly
reports.
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the securities offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus, which
is a part of the Registration Statement, omits certain information, exhibits,
schedules and undertakings set forth in the Registration Statement. For further
information pertaining to the Company and the securities offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
thereto. Statements contained in this Prospectus as to the contents or
provisions of any documents referred to herein are not necessarily complete, and
in each
73
<PAGE>
instance, reference is made to the copy of the document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
The Registration Statement may be inspected without charge at the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the
Registration Statement may be obtained from the Commission at prescribed rates
from the Public Reference Section of the Commission at such address and at the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048, and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. In addition, registration statements and certain other filings
made with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's site
on the Internet's World Wide Web, located at http://www.sec.gov.
74
<PAGE>
BIG CITY RADIO, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BIG CITY RADIO, INC. PAGE
---------
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors.............................. F-2
Report of Holtz Rubenstein & Co., LLP, Independent Auditors........................ F-3
Balance Sheets as of December 31, 1995 and 1996.................................... F-4
Statements of Operations for the year ended September 30, 1994, the three months
ended December 31, 1994 and the years ended December 31, 1995 and 1996........... F-5
Statements of Cash Flows for the year ended September 30, 1994, the three months
ended December 31, 1994 and the years ended December 31, 1995 and 1996........... F-6
Statement of Stockholders' Deficit................................................. F-7
Notes to Financial Statements...................................................... F-8
Balance Sheet as of December 31, 1996 and September 30, 1997 (unaudited)........... F-18
Statements of Operations for the nine month periods ended September 30, 1996 and
1997 (unaudited)................................................................. F-19
Statements of Cash Flows for the nine month periods ended September 30, 1996 and
1997 (unaudited)................................................................. F-20
Statement of Stockholders' deficit (unaudited)..................................... F-21
Notes to Financial Statements (unaudited).......................................... F-22
<CAPTION>
WZVU-FM
<S> <C>
Independent Auditors' Report....................................................... F-26
Balance Sheets as of December 31, 1995 and 1996 (audited) and May 31, 1997
(unaudited)...................................................................... F-27
Statements of Operations and Station Deficit for the years ended December 31, 1995
and 1996 (audited), for the five months ended May 31, 1996 and for the five
months ended May 31, 1997 (unaudited)............................................ F-28
Statements of Cash Flows for the years ended December 31, 1995 and 1996 (audited)
and for the five months ended May 31, 1996 and for the five months ended May 31,
1997 (unaudited)................................................................. F-29
Notes to Financial Statements...................................................... F-30
<CAPTION>
WVVX-FM, INC.
<S> <C>
Independent Auditors' Report....................................................... F-34
Balance Sheets as of December 31, 1996 (audited) and July 31, 1997 (unaudited)..... F-35
Statements of Operations for the period January 1, 1996 to June 13, 1996 (audited),
June 14, 1996 to December 31, 1996 (audited) and for the seven months ended July
31, 1997 (unaudited)............................................................. F-36
Statements of Cash Flows for the period January 1, 1996 to June 13, 1996 (audited),
June 14, 1996 to December 31, 1996 (audited) and for the seven months ended July
31, 1997 (unaudited)............................................................. F-37
Statement of Station Equity (Deficit) for the period January 1, 1996 to June 13,
1996 (audited), June 14, 1996 to December 31, 1996 (audited) and for the seven
months ended July 31, 1997 (unaudited)........................................... F-38
Notes to Financial Statements...................................................... F-39
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Big City Radio, Inc.:
We have audited the accompanying balance sheet of Big City Radio, Inc.
(formerly Odyssey Communications, Inc.) as of December 31, 1996, and the related
statements of operations, stockholders' deficit and cash flows for the year then
ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Big City Radio, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
New York, New York
September 10, 1997,
except as to note 1 which is
as of October 31, 1997
KPMG Peat Marwick LLP
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Big City Radio, Inc.:
We have audited the accompanying balance sheet of Big City Radio, Inc.
(formerly Odyssey Communications, Inc.) as of December 31, 1995 and the related
statements of operations, stockholders' deficit and cash flows for the years
ended December 31, 1995 and September 30, 1994 and the three months ended
December 31, 1994. 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 Big City Radio, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
years ended December 31, 1995 and September 30, 1994 and the three months ended
December 31, 1994, in conformity with generally accepted accounting principles.
Melville, New York
September 19, 1997
Holtz Rubenstein & Co., LLP
Certified Public Accountants
F-3
<PAGE>
BIG CITY RADIO, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31,
---------------------------- ------------
1995 1996 1996
------------- ------------- (NOTE 11)
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................................... $ 1,066,000 $ 234,000
Cash held in escrow (note 3)....................................... -- 500,000
Accounts receivable, net of allowance of $58,000 and $212,000 in
1995 and 1996, respectively...................................... 1,081,000 1,537,000
Prepaid expenses and other current assets.......................... 72,000 42,000
------------- -------------
Total current assets............................................. 2,219,000 2,313,000
Property and equipment, net (note 4)................................. 1,084,000 1,477,000
Intangibles, net (note 5)............................................ 6,040,000 29,230,000
Deferred financing fees.............................................. -- 473,000
Other assets......................................................... 90,000 36,000
Advance to purchase stations (note 3)................................ -- 5,434,000
------------- -------------
Total assets..................................................... $ 9,433,000 $ 38,963,000
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................................... $ 372,000 $ 830,000
Accrued expenses................................................... 370,000 454,000
Other current liabilities.......................................... 35,000 735,000
------------- -------------
Total current liabilities........................................ 777,000 2,019,000
Notes payable (note 6)............................................... 1,000,000 --
Long-term debt (note 7).............................................. -- 28,200,000
Notes payable to stockholders (note 8)............................... 13,477,000 12,544,000
------------- -------------
Total liabilities................................................ 15,254,000 42,763,000
Stockholders' deficit (note 11):
Common stock, $0.01 par value. Authorized 1,000 shares and 2,000
shares in 1995 and 1996, respectively; issued and outstanding 800
shares and 1,232 shares in 1995 and 1996, respectively -- -- 94,000
------------
------------
Additional paid-in capital......................................... 1,370,000 6,489,000 5,300,000
------------
------------
Accumulated deficit................................................ (7,191,000) (10,289,000) $ 0
------------- ------------- ------------
------------
Total stockholders' deficit...................................... (5,821,000) (3,800,000)
------------- -------------
Total liabilities and stockholders' deficit...................... $ 9,433,000 $ 38,963,000
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
BIG CITY RADIO, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, -----------------------------
1994 1994 1995 1996
------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Gross revenue........................................ $ 2,267,000 $ 654,000 $ 5,655,000 $ 8,567,000
Less: commissions and fees........................... 193,000 50,000 430,000 623,000
------------- ------------ ------------- --------------
Net revenue...................................... 2,074,000 604,000 5,225,000 7,944,000
Operating expenses:
Station operating expenses, excluding depreciation
and amortization................................. 2,326,000 687,000 7,185,000 12,253,000
Depreciation and amortization...................... 524,000 113,000 798,000 1,388,000
Corporate, general and administrative expenses..... -- -- 425,000 1,201,000
------------- ------------ ------------- --------------
Total operating expenses....................... 2,850,000 800,000 8,408,000 14,842,000
------------- ------------ ------------- --------------
Operating loss................................. (776,000) (196,000) (3,183,000) (6,898,000)
Other income (expenses):
Gain on sale of stations........................... -- -- -- 6,608,000
Interest expense, net (notes 6, 7 and 8)........... (439,000) (120,000) (842,000) (2,827,000)
Other, net......................................... 52,000 18,000 20,000 19,000
------------- ------------ ------------- --------------
Total other.................................... (387,000) (102,000) (822,000) 3,800,000
------------- ------------ ------------- --------------
Net loss....................................... $(1,163,000) $ (298,000) $ (4,005,000) $ (3,098,000)
------------- ------------ ------------- --------------
------------- ------------ ------------- --------------
Pro forma net loss per share......................... $ (0.33)
--------------
--------------
Pro forma weighted average shares outstanding (Note
11)................................................ 9,425,520
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BIG CITY RADIO, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED THREE MONTHS YEARS ENDED
SEPTEMBER ENDED DECEMBER 31,
30, DECEMBER 31, -----------------------
1994 1994 1995 1996
------------ ------------- ---------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,163,000) $ (298,000) $(4,005,000) $(3,098,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 524,000 113,000 798,000 1,388,000
Loss on abandonment................................... -- -- 150,000 --
Contributed services.................................. -- -- 20,000 --
Gain on sale of stations.............................. -- -- -- (6,608,000)
Changes in operating assets and liabilities net of
acquisitions:
(Increase) decrease in assets:
Accounts receivable............................. (369,000) 24,000 (429,000) (456,000)
Prepaid expenses and other current assets....... -- (9,000) (18,000) 30,000
Other assets.................................... (25,000) -- (33,000) 54,000
Increase (decrease) in liabilities:
Accounts payable................................ 14,000 (40,000) 302,000 458,000
Accrued expenses................................ 12,000 (17,000) 257,000 84,000
Other liabilities............................... -- -- 16,000 700,000
------------ ------------- ---------- -----------
Net cash used in operating activities......... (1,007,000) (227,000) (2,942,000) (7,448,000)
Cash flows from investing activities:
Purchase of property and equipment...................... (23,000) (1,000) (333,000) (653,000)
Cash paid for assets of radio stations acquired......... -- -- (3,550,000) (38,173,000)
Cash received for radio stations sold................... -- 20,025,000
Net advances to purchase stations....................... -- -- -- (5,434,000)
------------ ------------- ---------- -----------
Net cash used in investing activities........... (23,000) (1,000) (3,883,000) (24,235,000)
Cash flows from financing activities:
Loans from stockholders................................. 1,112,000 175,000 7,522,000 4,186,000
Drawdown on credit facility, net of fees paid of
$535,000 in May 1996.................................. -- -- -- 38,865,000
Repayment of Existing Credit Facility................... -- -- -- (11,200,000)
Repayment of note payable............................... -- -- -- (1,000,000)
Capital contributions................................... -- -- 350,000 --
Other................................................... (46,000) (3,000) (93,000) --
------------ ------------- ---------- -----------
Net cash provided by financing activities..... 1,066,000 172,000 7,779,000 30,851,000
------------ ------------- ---------- -----------
Change in cash and cash equivalents........... 36,000 (56,000) 954,000 (832,000)
Cash and cash equivalents at beginning of period.......... 20,000 56,000 56,000 1,066,000
Adjustment for duplicate three-month period............... 56,000
------------ ------------- ---------- -----------
Cash and cash equivalents at end of period................ $ 56,000 $ -- $1,066,000 $ 234,000
------------ ------------- ---------- -----------
------------ ------------- ---------- -----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
BIG CITY RADIO, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- --------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1993................. -- $ -- $ 1,000,000 $ (2,023,000) $ (1,023,000)
Net loss................................... -- -- -- (1,163,000) (1,163,000)
---------- --------- ------------- -------------- -------------
Balance at September 30, 1994.............. -- -- 1,000,000 (3,186,000) (2,186,000)
Net loss................................... -- -- -- (298,000) (298,000)
---------- --------- ------------- -------------- -------------
Balance at December 31, 1994............... -- -- 1,000,000 (3,484,000) (2,484,000)
Capital contribution....................... 800 -- 370,000 -- 370,000
Net loss................................... -- -- -- (4,005,000) (4,005,000)
Adjustment for change in fiscal year end
(note 2)................................. -- -- -- 298,000 298,000
---------- --------- ------------- -------------- -------------
Balance at December 31, 1995............... 800 -- 1,370,000 (7,191,000) (5,821,000)
Contribution of stockholders' loans to
equity................................... 432 -- 5,119,000 -- 5,119,000
Net loss................................... -- -- -- (3,098,000) (3,098,000)
---------- --------- ------------- -------------- -------------
Balance at December 31, 1996............... 1,232 $ -- $ 6,489,000 $ (10,289,000) $ (3,800,000)
---------- --------- ------------- -------------- -------------
---------- --------- ------------- -------------- -------------
Pro forma effect of Equity Contribution and
Reclassification......................... 9,375,288 94,000 $ 12,450,000 --
Reinstatement of deferred income taxes
relating to conversion to C-Corporation
status................................... -- (3,350,000)
Reclassification of accumulated deficit to
paid-in capital in connection with the
termination of S-Corporation status...... (13,639,000) 13,639,000
---------- --------- ------------- --------------
Pro forma balance at December 31, 1996..... 9,375,520 94,000 $ 5,300,000 $ 0
---------- --------- ------------- --------------
---------- --------- ------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BUSINESS
Big City Radio, Inc. (formerly Odyssey Communications, Inc.) ("Big City
Radio") was incorporated in Delaware on August 2, 1994 and commenced operations
on January 1, 1995. On May 30, 1996, Big City Radio merged with Q Broadcasting,
Inc. ("Q", and together with Big City Radio, the "Company") with Big City Radio
being the surviving company. Big City Radio and Q were owned 94% and 100% by
Stuart and Anita Subotnick (the "Principal Stockholders"). Accordingly, the
merger has been accounted for as a combination of entities under common control.
As a result, the combination of Big City Radio and Q was effected utilizing
historical costs.
The Company owns and operates radio broadcasting stations. As of December
31, 1996, the Company owned three FM stations in Southern California, KLYY-FM
Arcadia, KVYY-FM Ventura and KSYY-FM Fallbrook (programmed as "Y-107 LA"). In
the New York area, the Company owns two radio properties, WRGX-FM Westchester
County, New York, and WRKL-AM Rockland, New York (the "Original New York
Stations").
During November 1996, the Company contracted to acquire WZVU-FM Monmouth,
New Jersey, and WWHB-FM Hampton Bays, New York. During December 1996, both of
these stations commenced operations under the Company's management pursuant to
local marketing agreements ("LMAs"). WWHB-FM and WZVU-FM, together with WRGX-FM
Westchester, broadcast in the New York and New Jersey area as "Y-107 NY."
The accompanying financial statements have been prepared on a going-concern
basis which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. Since inception
the Company has not generated significant revenue, has incurred substantial
losses and has never generated positive cash flows from operations. The
Company's recent purchases and reformatting of radio stations in its markets are
currently contributing to the Company's losses. The Company believes that losses
will continue while the Company pursues its strategy of acquiring and developing
radio stations. The ability of the Company to continue as a going concern is
dependent upon: (a) the continued support of its stockholders; (b) additional
sources of financing; and (c) the Company's ability to generate positive cash
flows from operations. The Company has obtained a support letter from a
Principal Stockholder guaranteeing his financial support through the earlier of
a successful minimum initial public offering of $36,000,000 of equity securities
to the public or October 1, 1998.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
In connection with the merger discussed in note 1, Big City Radio and Q are
deemed to be combined since inception for financial reporting purposes. Big City
Radio reports on the basis of a December 31 year-end and Q reported on the basis
of a September 30 year-end. As a result, the December 31, 1995 and 1996
financial statements include the operations of Q on the basis of an eight month
period ended May 30, 1996 (the date of sale of the Q Stations) and twelve month
period ended September 30, 1995, respectively. Periods prior to January 1, 1995,
the commencement of Big City Radio operations, reflect the operations of Q on
the basis of a September 30 year-end. The Company has presented Q's operations
for the period October 1, 1994 to December 31, 1994 to transition from a
September 30 to a December 31 year-end.
The financial statements for the twelve months ended December 31, 1995
include three months of Q (October, November and December 1994) that were
included in the three month transition period ended
F-8
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 31, 1994. The net revenues and net loss for the three month duplicate
period are $604,000 and $298,000, respectively. The December 31, 1995
accumulated deficit has been adjusted to eliminate the duplication of the
October, November and December 1994 net losses.
(B) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets ranging from
5 to 7 years for transmission equipment, vehicles and furniture and office
equipment to 39 years for buildings.
(C) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," on January 1, 1996. This Statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial position results of operations, or liquidity.
(D) INTANGIBLE ASSETS
Intangible assets include the portion of the purchase price allocable to FCC
broadcast licenses, which are amortized over 40 years. Covenants not to compete
signed as part of station acquisition agreements, are amortized over the period
of the agreements, generally 3 years. Organization costs are amortized over 5
years.
It is the Company's policy to account for intangible assets at the lower of
amortized cost or fair market value. As part of an ongoing review of the
valuation and amortization of intangible assets, management assesses the
carrying value of the Company's intangible assets if facts and circumstances
suggest that they are impaired. If this review indicates that the intangibles
will not be recoverable as determined by a nondiscounted cash flow analysis over
the remaining amortization period, the carrying value of the Company's
intangibles will be reduced to their estimated realizable value. The Company has
determined that intangibles are fairly stated at December 31, 1996.
(E) DEFERRED FINANCING FEES
Deferred finance costs and loan origination fees incurred in connection with
the long-term debt (see note 7) are amortized over five years, the period of the
Existing Credit Facility.
(F) REVENUE RECOGNITION
Broadcasting revenue is recognized when commercials are aired. Net revenues
represent gross revenues less direct fees and commissions paid to independent
advertising agencies.
F-9
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) INCOME TAXES
The Company has elected to be treated as an S-Corporation for federal and
certain state income tax purposes. As an S-Corporation, the earnings and losses
of the Company are reported by the individual stockholders and the Company is
not responsible for federal or certain state income taxes. Accordingly, no
provision for income taxes is included in the accompanying financial statements.
The Company will terminate its S-Corporation election in connection with the
Offering discussed in note 11.
(H) 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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating the fair value
disclosures for financial instruments:
The carrying amounts reported in the balance sheets for cash, current
receivables, accounts payable and accrued expenses approximate fair value.
The carrying value of the long-term and stockholder debt, including the
current portion at December 31, approximates fair value because they are
floating rate instruments.
(J) BARTER TRANSACTIONS
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and a
liability are recorded at the fair market value of the goods or services
received. Barter revenue is recorded at the fair market value of the goods or
services received. Barter revenue is recorded and the liability is relieved when
the commercials are broadcast, and barter expense is recorded and the assets are
relieved when the goods or services are received or used.
(K) ADVERTISING
The Company charges advertising costs, as incurred, to expense. Advertising
costs amounted to $41,000, $320,000, and $550,000 for the year ended September
30, 1994, and the years ended December 31, 1995 and 1996, respectively. For the
three months ended December 31, 1994 advertising expense amounted to $28,000.
(3) ACQUISITIONS AND DISPOSITIONS
On November 22, 1996, the Company entered into an agreement to acquire the
assets of WWHB-FM Hampton Bays, New York, for a purchase price of $4,000,000. In
addition, on the same date, a letter of credit issued under the Existing Credit
Facility (see note 7) in the amount of $3,200,000 was delivered to the seller,
which was canceled upon consummation of the acquisition. Simultaneously with the
signing of the asset purchase agreement, the Company signed a LMA with the
seller under which it had the right to
F-10
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
program and sell advertising time on the station for a fee. The Company
exercised this right effective December 31, 1996 as part of its operation of
Y107-NY. The Company acquired WWHB-FM on April 1, 1997.
On November 7, 1996, the Company entered into an agreement to acquire the
assets of WZVU-FM Monmouth, New Jersey, for a purchase price of $12,000,000.
Upon execution of the asset purchase agreement, $5,434,000 was advanced to the
seller, under a loan agreement which bore interest at prime rate plus 2%,
collateralized by substantially all the assets of the seller and the Company
signed a LMA with the seller under which it has the right to program and sell
advertising time on the station for a fee. The Company exercised this right
effective December 5, 1996 when it commenced the operation of Y-107 NY. Revenue,
programming expenses and other reimbursable expenses pursuant to the LMA were
included in the accompanying financial statements from December 5, 1996 as have
LMA fees of approximately $131,000. The Company acquired WZVU-FM on June 5,
1997.
On May 30, 1996, the Company acquired substantially all of the assets of
KLYY-FM, Arcadia, KVYY-FM, Ventura, KSYY-FM, Fallbrook (the "Los Angeles
Stations"), and KWIZ-FM, Santa Ana, in a simultaneous purchase and multi-party,
tax-free exchange through the use of a third party serving as a "qualified
intermediary." The aggregate purchase price of the four stations was
approximately $38,000,000. The acquisitions were recorded using the purchase
method of accounting. In connection with the acquisition of the Los Angeles
Stations and KWIZ-FM, the Company borrowed $31,000,000 under the Existing Credit
Facility (see note 7). On December 20, 1996, the Company completed the sale of
KWIZ-FM, Santa Ana, California, for a sale price of $11,200,000 and
simultaneously paid down the Existing Credit Facility in the same amount. No
gain or loss was recorded in connection with the sale of KWIZ-FM.
Immediately before the simultaneous purchase and multi-party tax-free
exchange, Q was merged into Big City Radio (see note 1). Two Connecticut radio
stations (WSTC-AM and WKHL-FM), which comprised the sole operating assets of Q
(the "Q stations") were transferred to the acquirer of the Q stations for
$9,500,000, of which $500,000 was held in escrow until May 31, 1997.
Substantially all of the cash received from such acquirer plus cash provided by
Big City Radio was transferred by the "qualified intermediary" to the third
party disposing of the Los Angeles Stations in connection with the tax-free
exchange of the Q stations for the Los Angeles Stations and the purchase of the
assets of KWIZ-FM. For financial reporting purposes, the Company accounted for
the transfer of the Q stations as a sale and recorded a gain of $6,608,000. In
connection with the merger of Q and Big City Radio, the stockholders contributed
$5,119,000 of loans payable by the Company to equity and received 432 additional
shares of Common Stock.
The Company managed the operations of the Los Angeles Stations and KWIZ-FM
for a fee from March 26, 1996 up to the effective acquisition date under the
LMA. Revenue, programming expenses and other reimbursable expenses pursuant to
the LMA, including rent and utilities have been included in the accompanying
financial statements from March 26, 1996 as have LMA fees of approximately
$593,000. The acquisitions were recorded using the purchase method of
accounting. Management's estimate of the fair value of the Los Angeles Stations'
assets acquired exclusive of acquisition costs is as follows:
<TABLE>
<S> <C>
Fixed assets................................................... $ 437,000
FCC broadcast licenses......................................... 26,085,000
Covenant not to compete........................................ 68,000
</TABLE>
F-11
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
The fair value of the fixed assets acquired is determined by reference to
replacement value on an individual asset basis. The fair value of covenants not
to compete is determined by reference to the covenant agreement, and the
remaining purchase price is assigned to the FCC licenses.
Effective December 31, 1994, the Company acquired substantially all the
assets of WRGX-FM and WRKL-AM. The aggregate purchase price totaled $4,550,000,
consisting of cash of $3,550,000 and a note payable to the seller of $1,000,000
(see note 6). The acquisitions were recorded using the purchase method of
accounting. The accompanying financial statements include the results of
operations from January 1, 1995. The allocation of purchase price to the assets
acquired is as follows:
<TABLE>
<S> <C>
Fixed assets.................................................... $ 250,000
Land and building............................................... 250,000
FCC broadcast licenses.......................................... 3,300,000
Leasehold and tower............................................. 150,000
Covenant not to compete......................................... 600,000
</TABLE>
LMA fees paid are reflected in the accompanying statement of operations as
station operating expenses.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Land.............................................................. $ 50,000 $ 50,000
Building and improvements......................................... 200,000 236,000
Transmitter equipment............................................. 755,000 1,152,000
Furniture and office equipment.................................... 976,000 260,000
Vehicles.......................................................... 9,000 163,000
------------ ------------
1,990,000 1,861,000
Less: accumulated depreciation.................................... 906,000 384,000
------------ ------------
$ 1,084,000 $ 1,477,000
------------ ------------
------------ ------------
</TABLE>
Subsequent to December 31, 1995, the Company relocated its WRGX-FM tower,
resulting in a write-off of its initial acquisition cost allocated to the tower
of $150,000. This amount is included in other expenses, net, in the 1995
statement of operations.
(5) INTANGIBLES
Intangibles at December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
FCC broadcast licenses......................................... $ 6,000,000 $ 29,528,000
Covenants not to compete....................................... 1,050,000 668,000
Organizational costs........................................... 98,000 --
------------- -------------
7,148,000 30,196,000
Less: accumulated amortization................................. 1,108,000 966,000
------------- -------------
$ 6,040,000 $ 29,230,000
------------- -------------
------------- -------------
</TABLE>
F-12
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) NOTE PAYABLE
The note payable of $1,000,000 incurred in connection with the purchase of
the Original New York Stations (see note 3), was repaid on May 30, 1996 (see
note 7). Interest expense during the year ended December 31, 1996 amounted to
$25,000.
(7) LONG-TERM DEBT
On May 30, 1996, the Company entered into a credit agreement (the "Existing
Credit Facility") with The Chase Manhattan Bank. The Existing Credit Facility
provides revolving credit commitments in the form of loans and/or letters of
credit in an aggregate principal amount of $40 million. The Existing Credit
Facility is subject to various financial and nonfinancial covenants, including
limitations on additional indebtedness, liens, sale of assets, payment of
dividends and guarantee obligations. Most of the financial covenants are not
applicable until June 1998. A portion of the debt has been guaranteed by a
Principal Stockholder. For the first 18 months of the Existing Credit Facility,
the guaranteed portion was any amount above $13.5 million; and as a result of
certain amendments the guaranteed portion is based on a ratio of total debt to
cash flow. As part of subsequent amendments to the Existing Credit Facility (see
below), the guarantee now extends to all amounts outstanding under the Existing
Credit Facility.
Interest varies for the guaranteed and nonguaranteed portion and fluctuates
based on total debt to cash flow ratio (the "Ratio"). Interest for the
guaranteed debt is payable at the London Interbank Offered Rate ("LIBOR") plus
1.5% to 2.0% (based upon the Ratio); prime plus 0.5% to 1.0% (based upon the
Ratio); or a combination thereof as determined by the borrower. In addition,
there is a 1% increase in all rates related to the nonguaranteed portion of the
debt. The interest rates for the guaranteed and nonguaranteed portions as of and
for the year ended December 31, 1996 were 7.6% and 8.6%, respectively. Interest
expense on the Facility for the year ended December 31, 1996 was $1,794,000. In
addition, the Company has agreed to pay a commitment fee quarterly equal to 0.5%
per annum on the average unused available credit.
The total amount of the Existing Credit Facility is scheduled to reduce as
set forth below. Any additional borrowings would be due on May 31, 2001:
<TABLE>
<CAPTION>
AMOUNT OF
DATE REDUCTION
- ------------------------------------------------------------------------------- -------------
<S> <C>
May 31, 1998................................................................... $ 2,985,000
May 31, 1999................................................................... 5,970,000
May 31, 2000................................................................... 10,149,000
May 31, 2001................................................................... 9,096,000
-------------
$ 28,200,000
-------------
-------------
</TABLE>
The Existing Credit Facility is also scheduled to reduce within 90 days
following each year end by an amount equal to 75% of "Excess Cash Flows," as
defined in the credit agreement. The Existing Credit Facility reduces by the
amount of any net sales proceeds from the sale of any assets.
The Existing Credit Facility was subsequently amended on November 22, 1996
to temporarily increase to $42 million through December 20, 1996, after which it
reverted to $40 million following the sale of KWIZ-FM (see note 3). In addition,
the guaranteed amount has been increased to include any portion of the debt
exceeding $2,215,000 for the initial 18-month period. On May 13, 1997, the
Existing Credit Facility was amended to temporarily increase to $46 million
through October 31, 1997. On August 7, 1997, the
F-13
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) LONG-TERM DEBT (CONTINUED)
Existing Credit Facility was further amended to increase the Existing Credit
Facility to $58 million through December 31, 1997.
(8) NOTES PAYABLE TO STOCKHOLDERS
At December 31, 1996, the Company had $12,544,000 outstanding in notes
payable to stockholders at interest rates which fluctuated and ranged during the
year from 5.5% to 8% per annum for the year ended December 31, 1996. The notes
are subordinated to the Existing Credit Facility; however, under the
subordination provisions, the interest accruing on these notes is permitted to
be paid periodically, provided that the stockholders advance net proceeds to
cover such interest payments. Interest expense related to notes payable to
stockholders was $436,000, $781,000 and $1,033,000 at December 31, 1994, 1995
and 1996, respectively.
The stockholders have agreed not to call payment on these notes before July
1, 1998.
(9) COMMITMENTS
(A) LEASES
The Company leases studio and office space, transmitter tower sites and
office equipment under operating leases. Future minimum rental commitments for
the remainder of the operating leases are as follows:
<TABLE>
<S> <C>
1997............................................................ $ 351,000
1998............................................................ 269,000
1999............................................................ 205,000
2000............................................................ 183,000
2001............................................................ 171,000
Thereafter...................................................... 242,000
---------
$1,421,000
---------
---------
</TABLE>
Rent expense for the year ended September 30, 1994 and the years ended
December 31, 1995 and 1996 was approximately $186,000, $301,000, and $325,000,
respectively. For the three months ended December 31, 1994, rent expense
amounted to $55,000.
(B) EMPLOYMENT CONTRACTS
The Company has entered into various employment contracts with eleven
individuals comprised of officers and senior management that provide for minimum
salaries and incentives based upon specified levels of performance. The minimum
payments under these contracts are as follows:
<TABLE>
<S> <C>
1997............................................................ $1,459,000
1998............................................................ 1,401,000
1999............................................................ 326,000
2000............................................................ 182,000
2001 and thereafter............................................. --
---------
$3,368,000
---------
---------
</TABLE>
F-14
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(10) SUPPLEMENTARY INFORMATION--STATEMENT OF CASH FLOWS
The Company acquired vehicles during the year ended December 31, 1996
through issuances of notes payable amounting to $51,386.
Barter transactions resulted in sales of $315,000, $941,000 and $875,000,
and related expenses of $115,000, $951,000 and $962,000, for the years ended
September 30, 1994 and December 31, 1995 and 1996, respectively. For the three
months ended December 31, 1994 barter sales and related expense amounted to
$94,000 and $123,000.
Cash paid for interest during the years ended September 30, 1994 and
December 31, 1995, 1996 and the three months ended December 31, 1994 amounted to
$439,000, $781,000, $2,454,000 and $120,000, respectively.
The capitalization of the Company in January 1, 1995 was effected by the
contribution of $350,000 in cash equity funds and the payment on behalf of the
Company of legal and other start-up expenses of $20,000.
During the year ended December 31, 1996, the Principal Stockholders
contributed notes payable of $5,119,000 to the Company's capital.
(11) INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS (UNAUDITED)
(A) EQUITY CONTRIBUTION AND RECLASSIFICATION. Immediately prior to the
consummation of the offering of 4,000,000 shares of Class A Common Stock (the
"Offering"), the Principal Stockholders will either contribute the entire amount
of certain outstanding stockholders' loans made to the Company to the Company's
capital or contribute cash in an amount sufficient to repay a portion of the
outstanding stockholders' loans made to the Company and contribute the remaining
balance of such loans to the capital of the Company (all such outstanding
stockholders' loans aggregated $13.2 million as of September 30, 1997) (the
"Equity Contribution"). Simultaneously with the Equity Contribution, each share
of the Company's Common Stock, par value $.01 per share (the "Old Common
Stock"), will be reclassified into 7,610 shares of Class A Common Stock and the
Principal Stockholders will exchange each share of Class A Common Stock held by
them for one share of Class B Common Stock (the foregoing reclassification and
exchange is hereinafter referred to as the "Reclassification"). In addition, the
Company will convert from an S-Corporation to a C-Corporation.
(B) DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the
Company will upon consummation of the Equity Contribution and the
Reclassification consist of 120,000,000 shares of capital stock, par value $0.01
per share (the "Common Stock"), of which 80,000,000 shares have been designated
as Class A Common Stock and 20,000,000 shares have been designated as Class B
Common Stock. Effective upon completion of the Offering, 5,125,062 shares of
Class A Common Stock will be issued and outstanding and 8,250,458 shares of
Class B Common Stock will be issued and outstanding. In addition, 8,250,458
shares of Class A Common Stock will be reserved for issuance upon conversion of
the Class B Common Stock. Immediately prior to the consummation of the Offering,
there will be one holder of Class A Common Stock and two holders of Class B
Common Stock.
The shares of Class A Common Stock and Class B Common Stock are identical in
all respects, except for voting rights and certain conversion rights and
transfer restrictions in respect to the shares of the Class B Common Stock.
F-15
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(11) INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS (UNAUDITED) (CONTINUED)
The holders of Class A Common Stock are entitled to one vote per share.
Holders of Class B Common Stock are entitled to ten votes per share. Holders of
all classes of Common Stock entitled to vote will vote together as a single
class on all matters presented to the stockholders for their vote or approval
except for the election and removal of directors as described below and as
otherwise required by applicable law. In addition, with respect to the election
of directors, the Company's Amended and Restated Certificate of Incorporation
provides that holders of Class B Common Stock will vote as a separate class to
elect up to 75% of the members of the Company's Board of Directors. Stockholders
have no cumulative voting rights.
All pro forma per share amounts reflect the changes noted above.
(C) AMENDED CREDIT FACILITY. The Company has received a commitment letter
from a major financial institution to enter into the Credit Facility. The Credit
Facility will replace the Company's Existing Credit Facility (See note 6).
Under the terms of the Credit Facility, the Company will have a $35 million
revolving loan facility if the net proceeds of the Offering equal or exceed $35
million; the amount of the Credit Facility will be reduced dollar-for-dollar if
the net proceeds are less than $35 million to a minimum of $29 million. The
Credit Facility will mature on the fifth anniversary of the closing date of the
Offering. The Bank's committment under the Credit Facility will be reduced by
20% on the second anniversary of the closing date of the Offering and on the
third and fourth anniversaries of the closing date and the entire remaining
amount will terminate on the fifth anniversary of the closing date. Outstanding
amounts under the Credit Facility will bear interest at a rate based, at the
option of the Company, on the participating bank's prime rate, or the London
Interbank Borrowing Rate, plus an incremental rate.
The Credit Facility will contain certain financial and operational covenants
and other restrictions with which the Company must comply, including, among
others, limitations on capital expenditures, the incurrence of additional
indebtedness, restrictions on the use of borrowings, limitations on paying cash
dividends and redeeming or repurchasing capital stock of the Company, and
requirements to maintain certain financial ratios. The Company will also be
prohibited from making acquisitions without the prior consent of the Bank. All
of the Company's obligations under the Credit Facility will be secured by a
first priority security interest in all of the Company's tangible and intangible
property and assets.
The Credit Facility will contain customary events of default, including
material misrepresentations, payment defaults and default in the performance of
other covenants, certain bankruptcy defaults, events having a material and
adverse effect on the Company and revocation of any of the Company's broadcast
licenses.
(D) PRO FORMA AMOUNTS The unaudited pro forma amounts included in
accompanying balance sheet as of December 31, 1996 and the statement of
stockholders' deficit for the year ended December 31, 1996 reflect pro forma
adjustments which give effect to the Equity Contribution and Reclassification
immediately prior to the Offering and the conversion of the Company from
S-Corporation status to C-Corporation status.
The following is a description of the unaudited pro forma adjustments.
(1) The effect of the Equity Contribution and Reclassification.
F-16
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(11) INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS (UNAUDITED) (CONTINUED)
(2) Deferred tax liabilities of $3,350,000 will be reinstated as a result of
the Company's conversion to C-Corporation status.
(3) The $13,639,000 reduction of accumulated deficit represents the
reclassification of the deficit to paid-in capital in connection with the
termination of the S-Corporation status.
The number of shares of Existing Common Stock outstanding, which has been
used to calculate pro forma as reported net earnings per share, is the sum of
the 9,375,520 shares immediately prior to the Offering (and after the Equity
Contribution and Reclassification) plus 50,000 shares relating to 150,000 stock
options granted on December 1, 1997 with an exercise price of $6.00 per share
computed using the treasury stock approach (assuming an initial public offering
price of $9.00 per share). In accordance with Staff Accounting Bulletin No. 55
issued by the Securities and Exchange Commission, earnings per share data is not
presented for any period prior to the Company's most recent year end.
(E) EMPLOYMENT INCENTIVE. On July 1, 1997, the Principal Stockholders
transferred 68 shares of Old Common Stock to the Chief Executive Officer as an
employment incentive. The statement of operations for the nine month period
ended September 30, 1997 will reflect a charge of $3,713,000 relating to the
award. The charge represents the approximate fair market value of the stock
transferred and it has been reflected as a capital contribution in the
accompanying financial statements. The fair market value of the stock
transferred (approximately 516,000 shares after the Equity Contribution and
Reclassification) for accounting purposes only was estimated at 80% of the
assumed initial public offering price of $9.00 per share ($7.20 per share).
(F) STOCK OPTION PLAN. In connection with the consummation of the Offering
the Company intends to adopt the Big City Radio, Inc. 1997 Incentive Stock Plan
(the "1997 Incentive Stock Plan"). The following is a summary of the material
features of the 1997 Incentive Stock Plan.
The types of awards that may be granted pursuant to the 1997 Incentive Stock
Plan include (i) incentive stock options ("ISOs") and (ii) non-qualified stock
options ("NQSOs" and together with ISOs, "Stock Options" and "Awards").
Stock Option grants will consist of the maximum number of ISOs that may be
granted to a particular grantee under applicable law with the balance of the
Stock Options being NQSOs.
Subject to certain exceptions set forth in the 1997 Incentive Stock Plan,
the aggregate number of shares of the Class A Common Stock that may be the
subject of Awards under the 1997 Incentive Stock Plan is 700,000. The maximum
number of shares of Class A Common Stock available with respect to Awards
granted to any one grantee shall not exceed, in the aggregate, 100,000 shares.
Shares of Class A Common Stock granted under the 1997 Incentive Stock Plan may
either be authorized by unissued shares of Class A Common Stock not reserved for
any other purpose or shares of Class A Common Stock held in or acquired for the
treasury of the Company.
On December 1, 1997, options for purchase an aggregate of 150,000 shares of
Class A Common Stock were granted to certain officers and directors of the
Company, at an exercise price of $6.00 per share, and options for purchase an
aggregate of 402,500 shares of Class A Common Stock were granted to certain
officers and directors of the Company, to be effective only immediately prior to
the consummation of the Offering, at an exercise price per share equal to the
initial public offering price per share in the Offering.
F-17
<PAGE>
BIG CITY RADIO, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
ASSETS 1996 1997 1997
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash........................................................... $ 234,000 $ 316,000
Restricted cash................................................ 500,000 --
Accounts receivable, net of allowance of $212,000 and $312,000
in 1996 and 1997, respectively............................... 1,537,000 2,263,000
Prepaid expenses and other current assets...................... 42,000 471,000
-------------- --------------
Total current assets......................................... 2,313,000 3,050,000
Property and equipment, net (note 3)............................. 1,477,000 2,672,000
Intangibles, net (note 4)........................................ 29,230,000 54,439,000
Deferred financing fees.......................................... 473,000 563,000
Advances to purchase stations (note 2)........................... 5,434,000
Other assets..................................................... 36,000 272,000
-------------- --------------
Total assets................................................. $ 38,963,000 $ 60,996,000
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.................................. $ 830,000 $ 875,000
Accrued expenses.................................. 454,000 968,000
Other current liabilities......................... 735,000 812,000
----------- -----------
Total current liabilities....................... 2,019,000 2,655,000
Long-term debt (note 5)............................. 28,200,000 56,700,000
Notes payable to stockholders (note 6).............. 12,544,000 13,163,000
----------- -----------
Total liabilities............................... 42,763,000 72,518,000
Stockholders' deficit:
Common stock, $0.01 par value. Authorized 2,000
shares; issued and outstanding 1,232 shares
(9,375,520 issued and outstanding on a pro forma
basis).......................................... -- -- 94,000
-----------
-----------
Additional paid-in capital........................ 6,489,000 10,202,000 (1,803,000)
-----------
-----------
Accumulated deficit............................... (10,289,000) (21,724,000) $ 0
----------- ----------- -----------
-----------
Total stockholders' deficit..................... (3,800,000) (11,522,000)
----------- -----------
Total liabilities and stockholders' deficit..... $38,963,000 $60,996,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
BIG CITY RADIO, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Gross revenue..................................................................... $ 6,296,000 $ 8,485,000
Less: commissions and fees........................................................ 426,000 947,000
-------------- --------------
Net revenue....................................................................... 5,870,000 7,538,000
Operating expenses:
Station operating expenses excluding depreciation and amortization.............. 9,726,000 9,834,000
Depreciation and amortization................................................... 867,000 1,316,000
Corporate, general and administrative expenses.................................. 804,000 1,104,000
Employment incentive (note 8)................................................... -- 3,713,000
-------------- --------------
Total operating expenses...................................................... 11,397,000 15,967,000
-------------- --------------
Operating loss................................................................ (5,527,000) (8,429,000)
Other income (expenses):
Interest expense (notes 5 and 6)................................................ (1,880,000) (3,062,000)
Gain on sale of stations........................................................ 6,608,000 --
Other, net...................................................................... 1,000 56,000
-------------- --------------
Total other................................................................. 4,729,000 (3,006,000)
-------------- --------------
Net income (loss)............................................................. $ (798,000) $ (11,435,000)
-------------- --------------
-------------- --------------
Pro forma net income (loss) per share............................................. $ (1.21)
--------------
--------------
Pro forma weighted average shares outstanding..................................... 9,425,520
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
BIG CITY RADIO, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................... $ (798,000) $ (11,435,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................... 867,000 1,316,000
Gain on sale of stations........................................................ (6,608,000) --
Employment incentive............................................................ -- 3,713,000
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable......................................................... 22,000 (726,000)
Prepaid expenses and other current assets................................... 7,000 (429,000)
Other assets................................................................ 24,000 (236,000)
Increase (decrease) in liabilities:
Accounts payable.............................................................. 636,000 45,000
Accrued expenses.............................................................. 23,000 514,000
Other liabilities............................................................. 34,000 576,000
-------------- --------------
Net cash used in operating activities..................................... (5,793,000) (6,662,000)
Cash flows from investing activities:
Purchase of property and equipment.............................................. (519,000) (398,000)
Cash paid and advanced for assets of radio stations acquired.................... (38,173,000) (21,796,000)
Net cash received for radio station sold........................................ 8,825,000 --
-------------- --------------
Net cash used in investing activities..................................... (29,867,000) (22,194,000)
Cash flows from financing activities:
Loans from stockholders......................................................... 3,963,000 619,000
Drawdown on credit facility, net of fees paid of $535,000 and $181,000 in 1996
and 1997, respectively........................................................ 31,765,000 28,319,000
Repayment of note payable....................................................... (949,000) --
-------------- --------------
Net cash provided by financing activities................................. 34,779,000 28,938,000
-------------- --------------
Change in cash and cash equivalents............................................... (881,000) 82,000
Cash and cash equivalents at beginning of period.................................. 1,066,000 234,000
-------------- --------------
Cash and cash equivalents at end of period........................................ $ 185,000 $ 316,000
-------------- --------------
-------------- --------------
</TABLE>
See accompanying unaudited notes to financial statements.
F-20
<PAGE>
BIG CITY RADIO, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON
STOCK ADDITIONAL
----------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ --------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996............ 1,232 $ -- $ 6,489,000 $ (10,289,000) $ (3,800,000)
Capital contribution related to
employment incentive.................. -- -- 3,713,000 -- 3,713,000
Net loss................................ -- -- -- (11,435,000) (11,435,000)
------------ --------- -------------- -------------- --------------
Balance at September 30, 1997........... 1,232 $ -- $ 10,202,000 $ (21,724,000) $ (11,522,000)
------------ --------- -------------- -------------- --------------
------------ --------- -------------- -------------- --------------
Pro Forma effect of Equity Contribution
and Reclassification.................. 9,375,288 94,000 $ 13,069,000
Reinstatement of deferred income taxes
relating to C-Corporation status...... (3,350,000)
Reclassification of accumulated deficit
to paid-in capital in connection with
termination of S-Corporation status... (25,074,000) 25,074,000
------------ --------- -------------- -------------- --------------
Pro Forma balance at September 30,
1997.................................. 9,375,520 94,000 $ (1,803,000) $ -- (1,709,000)
------------ --------- -------------- -------------- --------------
------------ --------- -------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying interim financial statements include the accounts of Big
City Radio, Inc. (formerly Odyssey Communications, Inc.).
The accompanying financial statements have been prepared on a going-concern
basis which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. Since inception,
the Company has not generated significant revenue, has incurred substantial net
losses and has never generated positive cash flows from operations. The
Company's recent purchases and reformatting of radio stations in its markets is
currently contributing to the Company's losses. The Company believes that losses
will continue while the Company pursues its strategy of acquiring and developing
radio stations. The ability of the Company to continue as a going concern is
dependent upon: (a) the continued support of its stockholders, (b) additional
sources of financing, and (c) the Company's ability to generate positive cash
flows from operations. The Company has obtained a support letter from a
Principal Stockholder guaranteeing his financial support through the earlier of
a successful minimum initial public offering of $36,000,000 of equity securities
to the public or September 30, 1998.
The accompanying interim financial statements have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the latest audited financial
statements and related footnotes included elsewhere herein. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of
September 30, 1997, the results of its operations and its cash flows for the
nine month periods ended September 30, 1996 and 1997 have been included. The
results of operations for the interim periods are not necessarily indicative of
the results which may be realized for the full year.
(2) ACQUISITIONS
On June 5, 1997, the Company acquired substantially all of the assets of
WZVU-FM Monmouth, New Jersey, for a purchase price of $12,000,000. At that date
the sellers' loan payable to the Company in the amount of $5,434,000 plus
accrued interest of $103,000 was paid in full. The Company managed the
operations of WZVU-FM for a fee from December 5, 1996 up to the effective
acquisition date under a local marketing agreement ("LMA"). Revenue, programming
expenses and other reimbursable expenses pursuant to the LMA have been included
in the accompanying financial statements as have LMA fees of approximately
$415,000 from January 1, 1997 to June 5, 1997. Management's preliminary estimate
of the fair value of WZVU-FM assets acquired, exclusive of acquisition costs,
subject to further review and appraisal is as follows:
<TABLE>
<S> <C>
Fixed assets................................................... $ 833,000
FCC broadcast license.......................................... 11,157,000
Covenant not to compete........................................ 10,000
</TABLE>
F-22
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(2) ACQUISITIONS (CONTINUED)
The fair value of the fixed assets acquired is determined by reference to
replacement value on an individual asset basis. The fair value of the covenant
not to compete is determined by reference to the covenant agreement, and the
remaining purchase price is assigned to the FCC license.
On April 1, 1997, the Company acquired substantially all the assets of
WWHB-FM Hampton Bays, New York, for a purchase price of $4,000,000. The Company
managed the operations of WWHB-FM for a fee from December 31, 1996 up to the
effective acquisition date under a LMA. Revenue, programming expenses and other
reimbursable expenses pursuant to the LMA have been included in the accompanying
financial statements as have LMA fees of $165,000 from January 1, 1997 to April
1, 1997. Management's preliminary estimate of the fair value of WWHB-FM assets
acquired, exclusive of acquisition costs, subject to further review and
appraisal is as follows:
<TABLE>
<S> <C>
Fixed assets.................................................... $ 55,000
FCC broadcast license........................................... 3,795,000
Consulting agreement............................................ 150,000
</TABLE>
The fair value of the fixed assets acquired is determined by reference to
replacement value on an individual asset basis. The fair value of the consulting
agreement is determined by reference to the agreement, and the remaining
purchase price is assigned to the FCC license.
LMA fees are reflected in the accompanying financial statements as station
operating expenses.
On August 8, 1997 the Company acquired substantially all of the assets of
WVVX-FM Chicago for a purchase price of $9,500,000 and WJDK-FM Chicago for a
purchase price of $1,100,000. Management's preliminary estimate of the fair
value of the WVVX-FM and WJDK-FM assets acquired, subject to further review and
appraisal is as follows:
<TABLE>
<CAPTION>
WVVX-FM WJDK-FM
--------- -----------
Fixed assets, including land........................... 119,000 154,000
<S> <C> <C>
FCC broadcast license.................................. 9,381,000 946,000
</TABLE>
The fair value of the fixed assets and land acquired is determined by
reference to replacement value on an individual asset basis and comparable
property, respectively. The remaining purchase price is assigned to the FCC
license.
The following unaudited pro forma results of operations illustrate the
effect of the acquisition of WZVU-FM and WVVX-FM and assumes that the
acquisitions occurred at the beginning of each of the periods presented:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1997
--------- ----------
<S> <C> <C>
Net revenues..................................... $ 8,725 $ 8,573
Income (loss) from continuing operations......... (1,176) (13,551)
Pro forma loss per share......................... (0.09) (1.01)
</TABLE>
F-23
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(3) PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1997 is as follows:
<TABLE>
<S> <C>
Land............................................................ $ 377,000
Building and improvements....................................... 561,000
Transmitter equipment........................................... 1,789,000
Furniture and office equipment.................................. 406,000
Vehicles........................................................ 219,000
---------
3,352,000
Less: accumulated depreciation.................................. 680,000
---------
$2,672,000
---------
---------
</TABLE>
(4) INTANGIBLES
Intangible Assets at September 30, 1997 are as follows:
<TABLE>
<S> <C>
FCC broadcast licenses......................................................... $55,689,000
Covenants not to compete....................................................... 678,000
----------
Total intangible assets...................................................... 56,367,000
Less: accumulated amortization................................................. 1,928,000
----------
$54,439,000
----------
----------
</TABLE>
(5) LONG-TERM DEBT
The Existing Credit Facility was subsequently amended on August 7, 1997 (the
"fourth amendment") to temporarily increase it to $58 million through December
31, 1997 after which it reverts to $40 million. In addition, the guaranteed
amount has been increased to include all amounts outstanding.
(6) NOTES PAYABLE TO STOCKHOLDERS
At September 30, the Company had $13,163,000 outstanding in notes payable to
stockholders at interest rates which fluctuated and ranged from 5.5% to 8% per
annum for the nine months ended September 30, 1997. The notes are subordinated
to the Existing Credit Facility; however, under the subordination provisions,
the interest accruing on these notes is permitted to be paid periodically,
provided that the stockholders advance net proceeds to cover such interest
payments. Interest expense related to notes payable to stockholders was $444,000
and $619,000 for the nine months ended September 30, 1996 and 1997,
respectively.
The Principal Stockholders have agreed not to demand payment on these notes
before October 1, 1998.
(7) SUPPLEMENTARY INFORMATION--STATEMENT OF CASH FLOWS
Barter transactions resulted in sales of $740,000 and $555,000 and related
expenses of $835,000 and $515,000 for the nine months ended September 30, 1996
and 1997, respectively.
F-24
<PAGE>
BIG CITY RADIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(7) SUPPLEMENTARY INFORMATION--STATEMENT OF CASH FLOWS (CONTINUED)
Cash paid for interest during the nine months ended September 30, 1996 and
1997 amounted to $1,909,000 and $2,778,000, respectively.
During the nine months ended September 30, 1996, the Principal Stockholders
contributed notes payable of $5,119,000 to the Company's capital.
(8) EMPLOYMENT INCENTIVE
On July 1, 1997, the principal stockholders tranferred 68 shares of Old
Common Stock to the Chief Executive Officer as an employment incentive. The
statement of operations for the nine month period ended September 30, 1997
reflects a charge of $3,713,000 relating to the award. The charge represents the
approximate fair market value of the stock transferred and it has been reflected
as a capital contribution in the accompanying financial statements. The fair
market value of the stock transferred for accounting purposes only was estimated
at 80% of the assumed initial public offering price of $9.00 per share.
(9) STOCK OPTION PLAN
In connection with the consummation of the Offering the Company intends to
adopt the Big City Radio, Inc. 1997 Incentive Stock Plan (the "1997 Incentive
Stock Plan"). The following is a summary of the material features of the 1997
Incentive Stock Plan.
The types of awards that may be granted pursuant to the 1997 Incentive Stock
Plan include (i) incentive stock options ("ISOs") and (ii) non-qualified stock
options ("NQSOs" and together with ISOs, "Stock Options" and "Awards").
Stock Option grants will consist of the maximum number of ISOs that may be
granted to a particular grantee under applicable law with the balance of the
Stock Options being NQSOs.
Subject to certain exceptions set forth in the 1997 Incentive Stock Plan,
the aggregate number of shares of the Class A Common Stock that may be the
subject of Awards under the 1997 Incentive Stock Plan is 700,000. The maximum
number of shares of Class A Common Stock available with respect to Awards
granted to any one grantee shall not exceed, in the aggregate, 100,000 shares.
Shares of Class A Common Stock granted under the 1997 Incentive Stock Plan may
either be authorized by unissued shares of Class A Common Stock not reserved for
any other purpose or shares of Class A Common Stock held in or acquired for the
treasury of the Company.
On December 1, 1997, options to purchase an aggregate of 150,000 shares of
Class A Common Stock were granted to certain officers and directors of the
Company, at an exercise price of $6.00 per share, and options to purchase an
aggregate of 402,500 shares of Class A Common Stock were granted to certain
officers and directors of the Company, to be effective only immediately prior to
the consummation of the Offering, at an exercise price per share equal to the
initial public offering price per share in the Offering.
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members of K&K Broadcasting
We have audited the accompanying balance sheets of WZVU as of December 31,
1996 and 1995, and the related statements of operations and station deficit and
cash flows for the years then ended. 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 WZVU as of December 31, 1996
and 1995 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
October 21, 1997
F-26
<PAGE>
WZVU
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
ASSETS 1995 1996
-------------- ------------- MAY 31,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash.............................................................. $ 74,180 $ 36,739 $ 98,846
Accounts receivable:
Trade........................................................... 342,802 249,452 139,883
Big City Radio.................................................. -- 113,613 --
Other current assets.............................................. 118,559 14,914 19,536
-------------- ------------- -------------
Total current assets.......................................... 535,541 414,718 258,265
Property and equipment, net (note 4)................................ 876,909 911,553 874,354
Intangibles, net (note 5)........................................... 131,807 100,482 87,429
-------------- ------------- -------------
Total assets.................................................. 1,544,257 $ 1,426,753 $ 1,220,048
-------------- ------------- -------------
-------------- ------------- -------------
LIABILITIES AND STATION DEFICIT
Current liabilities:
Accounts payable.................................................. $ 36,906 $ 108,410 $ 89,699
Accrued expenses (Note 7)......................................... 497,637 568,680 199,948
Accrued interest expense (Note 6)................................. 8,207,156 -- 179,683
Notes payable to members (note 7)................................. 649,893 820,930 820,930
Notes payable to Big City Radio (note 6).......................... -- 5,433,687 5,433,687
Notes payable to Weiss Bros. and AT&T (Note 6).................... 5,578,444 -- --
Notes payable to banks (note 6)................................... 40,609 34,168 --
Other liabilities................................................. -- -- 12,959
-------------- ------------- -------------
Total current liabilities..................................... 15,010,645 6,965,875 6,736,906
Station deficit..................................................... (13,466,388) (5,539,122) (5,516,858)
-------------- ------------- -------------
Total liabilities and station deficit......................... $ 1,544,257 $ 1,426,753 $ 1,220,048
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
See accompanying notes to combined financial statements.
F-27
<PAGE>
WZVU
STATEMENTS OF OPERATIONS AND STATION DEFICIT
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM JANUARY 1,
YEAR YEAR JANUARY 1, 1997
ENDED ENDED 1996 THROUGH THROUGH
DECEMBER 31, DECEMBER 31, MAY 31, MAY 31,
1995 1996 1996 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Gross revenue................................... $ 2,891,032 $ 3,173,549 $ 1,177,715 $ 413,933
Less: commission and fees....................... 174,089 247,405 96,888 1,054
-------------- -------------- -------------- --------------
Net revenue..................................... 2,716,943 2,926,144 1,080,827 412,879
Operating expenses:
Station operating expenses, excluding
depreciation and amortization............... 995,106 1,044,024 382,582 91,986
Depreciation and amortization................. 182,275 140,642 62,464 51,094
Corporate general and administrative
expenses.................................... 1,427,016 1,650,991 525,930 219,608
Reimbursement of operating expenses under
LMA......................................... -- (27,169) -- (151,756)
-------------- -------------- -------------- --------------
Total operating expenses.................... 2,604,397 2,808,488 970,976 210,932
-------------- -------------- -------------- --------------
Operating income............................ 112,546 117,656 109,851 201,947
Other income (expenses)
Interest...................................... (2,666,378) (2,498,207) (1,022,274) (179,683)
Other, net.................................... (548) 29,325 3,750 --
-------------- -------------- -------------- --------------
Total other................................... (2,666,926) (2,468,882) (1,018,524) (179,683)
-------------- -------------- -------------- --------------
Loss before extraordinary item.............. (2,554,380) (2,351,226) (908,673) 22,264
Extraordinary item--forgiveness of debt (note
6)............................................ -- 10,278,492 -- --
-------------- -------------- -------------- --------------
Net income (loss)............................... $ (2,554,380) $ 7,927,266 $ (908,673) $ 22,264
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Station Deficit at beginning of period.......... $ (10,912,008) $ (13,466,388) $(13,466,388) $ (5,539,122)
-------------- -------------- -------------- --------------
Station Deficit at end of period................ $ (13,466,388) $ (5,539,122) $(14,375,061) $ (5,516,858)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
F-28
<PAGE>
WZVU
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED JANUARY 1, JANUARY 1,
DECEMBER 31, DECEMBER 31, 1996 THROUGH 1997 THROUGH
1995 1996 MAY 31, 1996 MAY 31, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income (loss)............................. $ (2,554,380) $ 7,927,266 $ (908,673) $ 22,264
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization............... 182,275 140,642 62,464 51,094
Forgiveness of debt......................... -- (10,278,492) -- --
Other....................................... 25,500 19,318 -- --
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable....................... 87,247 93,350 (16,455) 109,569
Other receivables......................... -- (113,613) -- 113,613
Other current assets...................... 2,972 99,887 33,509 (4,936)
Increase (decrease) in liabilities:
Accounts payable.......................... (25,506) 71,505 19,901 (18,711)
Accrued expenses.......................... 2,287,349 2,142,378 950,863 (173,118)
Notes payable to members.................. 423 168,587 -- --
-------------- -------------- -------------- --------------
Net cash provided by operating
activities.............................. 5,880 270,828 141,609 99,775
Cash flows from investing activities:
Purchase of property and equipment............ (23,388) (157,071) (122,530) (3,500)
Cash flows from financing activities:
Repayment of notes payable to Weiss Bros. and
AT&T........................................ -- (5,578,444) (65,000) --
Proceeds from notes payable to Big City Radio
payable..................................... -- 5,433,687 -- --
Payments to notes payable to banks............ (19,656) (6,441) (2,610) (34,168)
-------------- -------------- -------------- --------------
Net cash used in financing activities..... (19,656) (151,198) (67,610) (34,168)
-------------- -------------- -------------- --------------
Change in cash............................ (37,164) (37,441) (48,531) 62,107
Cash at beginning of period..................... 111,344 74,180 74,180 36,739
-------------- -------------- -------------- --------------
Cash at end of period........................... 74,180 $ 36,739 $ 25,649 $ 98,846
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
F-29
<PAGE>
WZVU
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
WZVU (the "Company") conducts radio broadcasting operations in New Jersey.
The principal source of revenue is derived from the sale of air time to
advertisers.
The Company is a radio station owned by K&K Broadcasting, L.L.C. ("K&K
Broadcasting"). The accompanying financial statements presents the results of
operations of the Company on a stand alone basis as K&K Broadcasting had no
corporate expenses.
During November 1996, K&K Broadcasting entered into an agreement to sell
substantially all of the assets and operations of the Company to Big City Radio,
Inc. (formerly Odyssey Communications, Inc.) ("Big City Radio") (see note 3).
In the opinion of management the unaudited combined financial statements as
of May 31, 1997 and for the five month periods ended May 31, 1997 and 1996
contained herein include all adjustments necessary for a fair presentation of
such statements. The general principles followed in preparing the financial
statements as of May 31, 1997 and 1996 are similar to those used in preparing
the audited financial statements as of December 31, 1996 and 1995.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets ranging from
31.5 years for buildings, and five to seven years for transmission equipment,
vehicles and furniture and office equipment.
(B) INTANGIBLES
Intangible assets include a broadcast license and goodwill which are
amortized over a 40 year period.
(C) IMPAIRMENT OF LONG-LIVE ASSETS AND LONG LIVED ASSETS TO BE DISPOSED OF
It is the Company's policy to account for long-lived intangible assets at
the lower of amortized cost or fair market value. As part of an ongoing review
of the valuation and amortization of long-lived intangible assets, management
assesses the carrying value of the Company's long-lived assets and intangible
assets if facts and circumstances suggest that they are impaired. If this review
indicates that the long-lived intangibles will not be recoverable as determined
by a nondiscounted cash flow analysis over the remaining amortization period,
the carrying value of the Company's long-lived assets and intangibles will be
reduced to their estimated realizable value.
(D) REVENUE RECOGNITION
Broadcasting revenue is recognized when commercials are aired. Net revenues
represent gross revenues less direct fees and commissions paid to independent
advertising agencies. Barter transactions are recorded at the estimated fair
value of the merchandise or services received. Barter revenue is recognized when
the commercial is aired and barter merchandise or services received are expensed
when used.
F-30
<PAGE>
WZVU
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) INCOME TAXES
For Federal and state income tax purpose, K&K Broadcasting is treated as a
partnership. Accordingly, no provision is made for income taxes, as income or
loss is included in the tax returns of the Members.
(F) 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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(G) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating the fair value
disclosures for financial instruments:
The carrying amounts reported in the balance sheets for cash, account
receivables, accounts payable and accrued expenses approximate fair value.
Management believes the carrying value of notes payable approximates its
fair value at December 31, 1995 and 1996.
(H) ADVERTISING
The Company charges advertising costs, as incurred, to expense. Advertising
costs amounted to $139,398, $128,781, $5,318, and $43,172 for the year ended
December 31, 1995 and 1996 and the five month periods ended May 31, 1997 and
1996, respectively.
(3) SALE OF WZVU
On November 7, 1996, K&K Broadcasting entered into an agreement to sell
substantially all of the assets of the Company to Big City Radio for
$12,000,000. At that date, Big City Radio advanced $5,434,000 of the purchase
price to the Company in the form of a loan (see note 7). Simultaneously, with
the signing of the agreement, the Company entered into a local marketing
agreement (LMA) with Big City Radio under which Big City Radio has the right to
program and sell advertising time on the station for a fee and reimburse the
Company for the station's operating costs. Monthly LMA fees, exclusive of
reimbursement of station's operating costs, range from $100,000 to a percentage
of earnings before interest, taxes, depreciation and amortization, as defined.
As of December 31, 1996 and May 31, 1997, the Company received LMA fees from Big
City Radio of $87,097 and $378,421, respectively. The station operated under the
LMA agreement from December 6, 1996 through June 5, 1997.
The Members of K&K Broadcasting also entered into a three year
covenant-not-compete.
F-31
<PAGE>
WZVU
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996 and May 31, 1997 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MAY 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Land............................................... $ 150,332 $ 150,332 $ 150,332
Building and improvements.......................... 609,247 710,307 710,307
Transmitter equipment.............................. 250,000 250,000 250,000
Furniture and office equipment..................... 724,143 769,301 772,801
Vehicles........................................... -- 3,750 3,750
------------ ------------ -----------
1,733,722 1,883,690 1,887,190
Less: accumulated depreciation..................... 856,813 972,137 1,012,836
------------ ------------ -----------
876,909 $ 911,553 $ 874,354
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
(5) INTANGIBLES
Intangibles at December 31, 1995 and 1996 and May 31, 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31, MAY 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
FCC broadcast licenses.............................. $ 300,644 $ 300,644 $ 300,644
Goodwill............................................ 50,441 50,441 50,441
------------ ------------ -----------
351,085 351,085 351,085
Less: accumulated amortization...................... 219,278 250,603 263,656
------------ ------------ -----------
131,807 $ 100,482 $ 87,429
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
(6) NOTES PAYABLE
At December 31, 1995, the Company had notes payable of $2,250,000 due
December 31, 1996 and $3,328,444 due March 31, 1998 to Weiss Bros. and AT&T,
respectively. The Weiss Bros. and AT&T notes payable bears interest at 25% and
prime plus 1.5%, respectively. The notes are collateralized by substantially all
of the Company's assets. Accrued interest at December 31, 1995 on the notes
payable was $8,207,156.
On November 7, 1996, concurrent with K&K Broadcasting entering into the
Asset Purchase Agreement with Big City Radio (as described in note 3), the
Company entered into a loan agreement with Big City Radio for approximately
$5,434,000. The loan bears interest at prime plus 2% and is collateralized by
substantially all of the Company's assets. Interest accrues beginning February
1, 1997. Interest expense as of May 31, 1997 was $179,683 (unaudited). The
proceeds from the loan were used to repay the outstanding notes payable at
December 31, 1995. Upon repayment of the notes payable, the noteholders forgave
the outstanding accrued interest on notes payable totaling $10,278,492. Accrued
interest forgiven has been reflected in the 1996 statement of operations as an
extraordinary item.
On June 5, 1997, the date of sale of the Company to Big City Radio, the note
payable to Big City Radio was repaid.
F-32
<PAGE>
WZVU
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) NOTES PAYABLE (CONTINUED)
During 1995 and 1996 and at May 31, 1997, the Company had a line of credit
with a commercial bank to borrow up to $100,000 at 10% interest. As of December
31, 1995 and 1996, total borrowings under the line of credit were $40,609 and
$34,168, respectively.
(7) NOTES PAYABLE TO MEMBERS
At December 31, 1995 and 1996 and May 31, 1997, the Company had $649,893,
$820,930 and $820,930, respectively, outstanding in notes payable to members of
K&K Broadcasting which are subordinated to the note payable to Big City Radio as
described in note 7. The notes payable to members were comprised of $390,012 and
$465,012, at December 31, 1995 and 1996, respectively, which bears interest at
7.5% and are due on demand. The remaining notes payable balance represents
accrued interest outstanding on this loan. Also, included in accrued expenses is
$338,750 and $428,750 at December 31, 1995 and 1996, respectively, of accrued
wages payable to one Member.
(8) EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) Defined Contribution Plan (Plan) in which all
full-time employees are eligible to participate. Under the terms of the Plan,
employees could contribute a percentage of their base pay up to the annual
Internal Revenue Service (IRS) limit. Employee contributions of up to 6% are
matched 50% by the Company.
For the year ended December 31, 1995 and 1996, total expense for the plan
amounted to $10,053 and $18,856, respectively. Effective December 31, 1996, the
Plan was terminated.
(9) SUPPLEMENTARY INFORMATION--STATEMENT OF CASH FLOWS
Barter transactions resulted in sales and related expenses of $531,946,
$452,158, $3,127 and $163,916 for the year ended December 31, 1995 and 1996 and
the five month periods ending May 31, 1997 and May 31, 1996, respectively.
During March 1995, K&K Broadcasting transferred to the Company net
liabilities of $731,000 in a non-cash transaction. These balances have been
included as an addition to station deficit.
F-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
WVVX:
We have audited the accompanying balance sheet of WVVX (the Company) as of
December 31, 1996 (Successor), and the related statements of operations, station
equity, and cash flows for the period January 1, 1996 to June 13, 1996
(Predecessor) and the period from June 14, 1996 to December 31, 1996
(Successor). 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WVVX as of December 31, 1996
(Successor), and the results of its operations and its cash flows for the period
January 1, 1996 to June 13, 1996 (Predecessor) and the period from June 14, 1996
to December 31, 1996 (Successor) in conformity with generally accepted
accounting principles.
As discussed in note 2 to the financial statements, on June 14, 1996, PAR
Radio Holdings, Inc., acquired Douglas Broadcasting, Inc. As a result of the
change in control, the financial information for the period after the change in
control is presented on a different cost basis than that for the period before
the change in control and, therefore, is not comparable.
KPMG Peat Marwick LLP
Oakland, CA
September 18, 1997
F-34
<PAGE>
WVVX
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1996 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
SUCCESSOR SUCCESSOR
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................................. $ 19,816 $ 31,957
Trade accounts receivable, less allowance for doubtful accounts of $10,122 in
1996 and $10,000 in 1997....................................................... 38,008 51,539
Prepaid expenses and other current assets........................................ 10,964 11,451
------------- -------------
Total current assets......................................................... 68,788 94,947
Property and equipment, net........................................................ 176,372 161,572
Intangible assets, net............................................................. 10,509,805 10,393,649
Allocated debt issuance costs...................................................... 204,627 177,948
------------- -------------
Total assets................................................................. $ 10,959,592 $ 10,828,116
------------- -------------
------------- -------------
LIABILITIES AND STATION EQUITY
Current liabilities:
Trade accounts payable........................................................... $ 18,910 $ 11,161
Accrued expenses................................................................. 47,120 35,209
------------- -------------
Total current liabilities.................................................... 66,030 46,370
Allocated long term debt........................................................... 2,728,700 2,728,700
Deferred income taxes.............................................................. 3,717,555 3,651,007
Station equity..................................................................... 4,447,307 4,402,039
------------- -------------
Total liabilities and station equity......................................... $ 10,959,592 $ 10,828,116
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-35
<PAGE>
WVVX
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, PERIOD FROM SEVEN
1996 JUNE 14, 1996 MONTHS
TO TO ENDED
JUNE 13, DECEMBER 31, JULY 31,
1996 1996 1997
------------ -------------- -----------
(PREDECESSOR) (SUCCESSOR) (SUCCESSOR)
(UNAUDITED)
<S> <C> <C> <C>
Net revenues....................................... $ 499,254 $ 638,012 $ 621,620
Operating expenses:
Station operating expenses....................... 179,241 219,432 255,493
Allocated corporate general and administrative
expenses....................................... 94,199 148,635 169,485
Depreciation and amortization.................... 151,747 154,611 168,777
------------ -------------- -----------
Total operating expenses..................... 425,187 522,678 593,755
------------ -------------- -----------
Operating income............................. 74,067 115,334 27,865
Allocated interest expense including amortization
of debt issuance costs......................... 150,559 192,265 231,063
Other expenses, net.............................. 7,988 8,242 --
------------ -------------- -----------
Loss before income taxes and extraordinary item.... (84,480) (85,173) (203,198)
Income tax benefit................................. 7,761 27,255 66,548
------------ -------------- -----------
Loss before extraordinary item..................... (76,719) (57,918) (136,650)
Extraordinary item--write-off debt issuance
costs.............................................. (92,676) -- --
------------ -------------- -----------
Net loss..................................... $ (169,395) $ (57,918) $(136,650)
------------ -------------- -----------
------------ -------------- -----------
</TABLE>
See accompanying notes to financial statements.
F-36
<PAGE>
WVVX
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 14, 1996
TO
DECEMBER 31,
PERIOD FROM 1996 SEVEN
JANUARY 1, -------------- MONTHS
1996 ENDED
TO SUCCESSOR JULY 31,
JUNE 13, 1997
1996 -----------
------------
(UNAUDITED)
PREDECESSOR SUCCESSOR
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (169,395) $ (57,918) $(136,650)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.................. 151,747 154,611 168,777
Write-off of debt issuance costs............... 92,676 -- --
Deferred income taxes.......................... (7,761) (27,255) (66,548)
Amortization of debt issuance costs............ 68,608 23,647 26,679
Changes in operating assets and liabilities:
Trade accounts receivable, net............... 27,200 (13) (13,531)
Prepaid expenses and other current assets.... (3,305) (6,271) (487)
Trade accounts payable....................... 1,197 (348) (7,749)
Accrued expenses............................. (98,499) 60,600 (11,911)
Deferred revenue............................. 67,983 (67,983) --
------------ -------------- -----------
Net cash provided by (used in) operating
activities............................. 130,451 79,070 (41,420)
Cash flows from investing activities:
Capital expenditures............................. -- (18,647) (37,821)
------------ -------------- -----------
Net cash used in investing activities.............. -- (18,647) (37,821)
Cash flows from financing activities:
Net cash transferred (to) from owners............ (134,881) (46,723) 91,382
------------ -------------- -----------
Net (decrease) increase in cash.................... (4,430) 13,700 12,141
Cash at beginning of period........................ 10,546 6,116 19,816
------------ -------------- -----------
Cash at end of period.............................. $ 6,116 $ 19,816 $ 31,957
------------ -------------- -----------
------------ -------------- -----------
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE>
WVVX
STATEMENT OF STATION EQUITY
<TABLE>
<CAPTION>
(PREDECESSOR)
- --------------------------------------------------------------------------------
<S> <C>
Balance as of January 1, 1996................................................... $ 409,197
Net loss........................................................................ (169,395)
Repayment of push-down debt by parent........................................... 2,179,489
Net cash transferred to owner................................................... (134,881)
---------
Balance as of June 13, 1996..................................................... $2,284,410
---------
---------
<CAPTION>
- -------------------------------------------------------------------------------------------
(SUCCESSOR)
- --------------------------------------------------------------------------------
<S> <C>
Balance subsequent to change in control as of June 14, 1996..................... $4,551,948
Net loss........................................................................ (57,918)
Net cash transferred to owner................................................... (46,723)
---------
Balance as of December 31, 1996................................................. 4,447,307
Net loss (unaudited)............................................................ (136,650)
Net contribution from owner (unaudited)......................................... 91,382
Balance as of July 31, 1997 (unaudited)......................................... $4,402,039
---------
---------
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE>
WVVX
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997 IS UNAUDITED).
(1) DESCRIPTION OF BUSINESS
OPERATIONS
WVVX (the "Company") conducts radio broadcasting operations in Chicago. The
principal source of revenue is derived from the Company selling block
programming time to users that have unique demands for time (such as foreign
language and religious programming).
The Company is dependent on its parent company for long-term funding and
also in respect of funding to meet cash flow requirements associated with its
operations. Consequently, the net change in amounts due to or from affiliated
radio stations are treated as contributions to or distributions from station
equity.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
For the period January 1, 1996 to June 13, 1996, the Company was owned by
Douglas Broadcasting, Inc. ("DBI") (Predecessor). On June 14, 1996, DBI was
acquired by Par Radio Holdings Inc. ("PRHI") (Successor) and was accounted for
under the purchase method of accounting. Accordingly, the statements of
operations and cash flows for the period January 1, 1996 to June 13, 1996
reflect the operations of the Company as a part of DBI (Predecessor) and the
balance sheet as of December 31, 1996 and the statements of operations and cash
flows for the periods subsequent to June 14, 1996 reflect the Company's
operation and financial position under the ownership of PRHI (Successor).
As a result of the change in control, the financial information for the
periods after the change in control is presented on a different cost basis than
that for the period before the change in control and, therefore, is not
comparable.
The accompanying financial statements include certain corporate general and
administrative expenses incurred on a consolidated basis by DBI for the period
January 1, 1996 to June 13, 1996 and PRHI for the period January 14, 1996 to
December 31, 1996 and the seven months ended July 31, 1997 and have been
allocated to the Company. Such allocations include corporate salaries, health
insurance, professional services and other corporate overhead expenses and are
included in general and administative expenses in the Company's statements of
operations. In management's opinion, the basis of allocation of such costs is
reasonable. However, the expenses allocated to the Company are not necessarily
representative of what the Company would have incurred on a stand alone basis.
Allocated costs are as follows:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM SEVEN
JANUARY 1, JUNE 14, 1996 MONTHS
1996 TO ENDED
TO DECEMBER 31, JULY 31,
JUNE 13, 1996 1996 1997
------------- -------------- -----------
PREDECESSOR SUCCESSOR SUCCESSOR
<S> <C> <C> <C>
Corporate salaries................ $ 59,182 $ 70,684 $ 94,153
Health insurance.................. 2,463 2,910 2,327
Professional services............. 6,946 8,209 20,492
Other corporate overheads......... 25,608 66,832 52,513
------------- -------------- -----------
$ 94,199 $ 148,635 $ 169,485
------------- -------------- -----------
------------- -------------- -----------
</TABLE>
F-39
<PAGE>
WVVX
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997 IS UNAUDITED).
Included in the financial statements is an allocation of interest expense,
including amortization of debt issuance costs for the period January 1, 1996 to
June 13, 1996 and for the period June 14, 1996 to December 31, 1996 and the
seven months ended July 31, 1997 based on the ratio of investment in WVVX to
total investments of the respective owners, in each period. For purposes of
these financial statements, the Company has been allocated a portion of the
total debt and the goodwill in connection with PRHI's acquisition of DBI. In
addition, as part of the acquisition of DBI by PRHI, DBI repaid its total debt
and the Company has been allocated a portion of the write-off of the debt
issuance costs.
Station operating expenses includes an allocation for salaries of WVVX
employees who provide services to a sister station. Approximately $7,000 per
month is allocated to the sister station based on proportional revenues.
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary for a fair presentation of
financial position, results of operations, and cash flows for the periods
presented. These adjustments consist of normal, recurring items. The results of
operations for any interim period are not necessarily indicative of results for
the full year.
(B) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets ranging
between 5 and 25 years.
(C) INTANGIBLE ASSETS
Included in intangible assets are goodwill and FCC licenses. Goodwill, which
represents the excess of cost of purchased companies over the fair value of
their net assets at the date of acquisition, and FCC licenses are amortized over
40 years.
(D) REVENUE RECOGNITION
Broadcasting revenue is recognized when the program or advertisement is
aired.
(E) INCOME TAXES
The Company accounts for income taxes using the asset and liability method,
under which deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(F) 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 at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
F-40
<PAGE>
WVVX
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997 IS UNAUDITED).
(3) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 1996
and July 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1996 1997
------------ -----------
<S> <C> <C>
(SUCCESSOR)
Transmitter equipment.............................................. $ 2,714 $ 3,111
Studio and technical equipment..................................... 32,012 32,012
Tower and antenna systems.......................................... 106,957 106,957
Office furniture and equipment..................................... 8,896 8,896
Production library................................................. 2,500 2,500
Other.............................................................. 35,545 35,545
------------ -----------
188,624 189,021
Less: accumulated depreciation and amortization.................... (12,252) (27,449)
------------ -----------
$ 176,372 $ 161,572
------------ -----------
------------ -----------
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets consisted of the following as of December 31, 1996 and
July 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1996 1997
------------ ------------
<S> <C> <C>
(SUCCESSOR)
Goodwill........................................................... $2,477,164 $ 2,477,164
FCC licenses....................................................... 8,175,000 8,175,000
Other.............................................................. -- 37,378
------------ ------------
10,652,164 10,689,542,
Less: accumulated amortization..................................... (142,359) (295,893)
------------ ------------
$10,509,805 $ 10,393,649
------------ ------------
------------ ------------
</TABLE>
(5) ALLOCATED LONG-TERM DEBT
Allocated long-term debt represents the Company's allocated share of a term
loan of $15,000,000 obtained by PRHI, which was used a fund a portion of the
purchase of the common stock of DBI.
Borrowings bear interest at the lender's prime rate plus 2.75% or at the
London Interbank Offering Rate ("LIBOR") plus 4%.
As of December 31, 1996, principal repayments on the term loan were due as
follows: $2,250,000 in 1999, $3,000,000 in 2000, $3,562,500 in 2001, $4,875,000
in 2002 and $1,312,500 in 2003.
At December 31, 1996 and July 31, 1997 the Parent Company was in technical
default of certain covenant compliance requirements, for which a waiver was
received from the lender. On August 15, 1997, an equity contribution by the
Parent Company's controlling owner was used to repay $6,000,000 of the
$15,000,000 outstanding.
(6) AMOUNTS DUE TO/FROM AFFILIATED STATIONS
Amounts due to or from affiliated radio stations have been included in
station equity and would have eliminated on consolidation in the combined
financial statements of Par Radio Holdings, Inc. for the period from June 14,
1996 to December 31, 1996.
F-41
<PAGE>
WVVX
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997 IS UNAUDITED).
(7) LEASE COMMITMENTS
The Company leases various facilities and equipment under noncancelable
operating leases expiring through 2002. Certain operating leases are renewable
at the end of the contract term. Future minimum lease payments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
1997.............................................................. $ 20,540
<S> <C>
1998.............................................................. 49,719
1999.............................................................. 50,611
2000.............................................................. 51,631
2001.............................................................. 52,665
Thereafter........................................................ 13,166
---------
$ 238,332
---------
---------
</TABLE>
Rent expense was approximately $51,173 and $31,950 for the year ended
December 31, 1996 and the seven months ended July 31, 1997, respectively.
(8) INCOME TAXES
Federal and state income taxes have been provided as if the Company filed a
separate tax return. On a stand alone basis the Company owes no current taxes
and any allocated income tax expenses (benefit) by DBI or PRHI have been
reflected in station equity as transfers to or contributions from owner.
The reconciliation of the income tax charge computed at the U.S. Federal
statutory income tax rate to the Company's effective income tax rate is as
follows:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 1, 1996 JUNE 14, 1996 SEVEN MONTHS
TO TO ENDED
JUNE 13, 1996 DECEMBER 31, 1996 JULY 31, 1997
----------------- ----------------- ---------------
PREDECESSOR SUCCESSOR SUCCESSOR
<S> <C> <C> <C>
Tax benefit at U.S. Federal statutory rate...... 34.0% 34.0% 34.0%
Expected state tax benefit...................... 2.5 2.5 5.9
Fully valued unutilized net operating losses.... (26.4) (3.6) (7.8)
Other........................................... (0.9) (0.9) (0.5)
----- --- ---
9.2% 32.0% 31.6%
----- --- ---
----- --- ---
</TABLE>
The net deferred income tax assets/liabilities result from tax effects of
temporary differences as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1996 1997
----------------- -------------
<S> <C> <C>
SUCCESSOR SUCCESSOR
Excess of book basis over tax basis of intangible assets........................ $ (3,900,268) $ (3,831,457)
Excess of book basis over tax basis of tangible assets.......................... (63,047) (59,002)
Other........................................................................... 245,760 239,452
----------------- -------------
$ 3,717,555 $ 3,651,007
----------------- -------------
----------------- -------------
</TABLE>
F-42
<PAGE>
WVVX
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SEVEN-MONTH PERIOD ENDED JULY 31, 1997 IS UNAUDITED).
(9) CONTINGENCIES
The Company is subject to routine claims and litigation incidental to its
business. The Company believes that the results of these matters will not have a
material adverse effect on the Company's financial condition.
(10) SUBSEQUENT EVENT
On August 7, 1997, PHI sold the assets and FCC license of the Company to Big
City Radio, Inc. (formerly Odyssey Communications, Inc.) for $9,500,000.
F-43
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 9
Use of Proceeds................................. 16
Dividend Policy................................. 16
Dilution........................................ 17
Capitalization.................................. 18
Pro Forma Financial Statements.................. 19
Selected Financial and Operating Data........... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 27
Business........................................ 34
Management...................................... 48
Principal Stockholders.......................... 58
Certain Relationships and Related
Transactions.................................. 59
Description of Credit Facility.................. 61
Description of Capital Stock.................... 62
Shares Eligible for Future Sale................. 68
Underwriting.................................... 70
Legal Matters................................... 72
Experts......................................... 72
Change in Independent Auditor................... 72
Market Data and Certain Definitions............. 72
Cautionary Note Regarding Forward-Looking
Statements.................................... 73
Additional Information.......................... 73
Index to Financial Statements................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
4,000,000 SHARES
[LOGO]
BIG CITY RADIO, INC.
CLASS A COMMON STOCK
-----------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, in connection with the issuance and distribution of
the securities registered hereby. All the amounts shown are estimates, except
for the Commission registration fee, the National Association of Securities
Dealers ("NASD") filing fee and the AMEX listing fee. All of the following fees
and expenses will be paid by the Company.
<TABLE>
<S> <C>
Commission registration fee....................................... $ 13,940
NASD filing fee................................................... 5,100
AMEX listing fee.................................................. 42,500
Printing and engraving expenses................................... 100,000
Legal fees and expenses........................................... 200,000
Accounting fees and expenses...................................... 100,000
Blue Sky fees and expenses (including counsel fees and
expenses)....................................................... --
Transfer Agent and Registrar fees and expenses.................... 15,000
Miscellaneous..................................................... 23,460
---------
Total......................................................... $ 500,000
---------
---------
</TABLE>
- ------------------------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 of the DGCL shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that the corporation may purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him or incurred by him in any such capacity or
II-1
<PAGE>
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under such Section 145 of the
DGCL.
Section 102(b)(7) of the DGCL provides that a corporation in its original
certificate of incorporation or an amendment thereto validly approved by
stockholders may eliminate or limit personal liability of members of its board
of directors or governing body for breach of a director's fiduciary duty.
However, no such provision may eliminate or limit the liability of a director
for breaching his duty of loyalty, failing to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was illegal, or obtaining an improper
personal benefit. A provision of this type has no effect on the availability of
equitable remedies, such as injunction or rescission, for breach of fiduciary
duty. The Company's Amended and Restated Certificate of Incorporation contains
such a provision.
The Company's Amended and Restated Certificate of Incorporation further
provides that the Company shall indemnify its officers and directors and, to the
extent authorized by the Board of Directors of the Company, employees and agents
of the Company, to the fullest extent permitted by and in the manner permissible
under the laws of the State of Delaware.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since its incorporation the Company has issued the following securities,
none of which have been registered under the Securities Act.
On October 17, 1994, the Company issued 360 shares of Old Common Stock to
each of Stuart Subotnick and Anita Subotnick for an aggregate capital
contribution of $350,000. On October 17, 1994, the Company issued 80 shares of
Old Common Stock to Michael Kakoyiannis in consideration for the contribution by
Mr. Kakoyiannis to the Company of his options to acquire all of the assets of
radio stations WRKL-AM and WWXY-FM.
On May 29, 1996, the Company issued 216 additional shares of Old Common
Stock to each of Stuart Subotnick and Anita Subotnick in connection with the
merger of Q Broadcasting, Inc. with and into the Company.
In connection with the consummation of this Offering, the Old Common Stock
will be reclassified into Class A Common Stock and Class B Common Stock and the
Principal Stockholders will exchange all their shares of Class A Common Stock
for a similar number of shares of Class B Common Stock.
Each of the foregoing transactions was effected without registration under
the Securities Act in reliance on the exemption from registration provided
pursuant to Section 3(a)(9) or Section 4(2) and Regulation D promulgated
thereunder.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Form of Amended and Restated Certificate of Incorporation of Big City Radio, Inc.
3.2* Form of Amended and Restated Bylaws of Big City Radio, Inc.
4.1* Specimen Class A Common Stock Certificate of Big City Radio, Inc.
5.1* Form of opinion of Paul, Weiss, Rifkind, Wharton & Garrison.
10.1* Big City Radio, Inc. 1997 Incentive Stock Plan.
10.2* Form of employment Agreement, between Big City Radio, Inc. and Michael Kakoyiannis.
10.3* Form of employment Agreement, between Big City Radio, Inc. and Paul R. Thomson.
10.4* Form of employment Agreement, between Big City Radio, Inc. and Steven G. Blatter.
10.5* Form of employment Agreement, between Big City Radio, Inc. and Alan D. Kirschner.
10.6** Agreement and Plan of Merger, dated May 20, 1996, between Q Broadcasting, Inc. and Odyssey
Communications, Inc.
10.7* Form of Amended and Restated Credit Agreement between Big City Radio, Inc. and The Chase Manhattan
Bank.
10.8* Form of Registration Rights Agreement between Big City Radio, Inc. and Michael Kakoyiannis.
10.9* Form of Registration Rights Agreement between Big City Radio, Inc. and the Principal Stockholders.
16.1** Letter re Change in Certifying Accountant from Holtz Rubenstein & Co., LLP
21.1* List of Subsidiaries of Big City Radio, Inc.
23.1* Consent of Paul, Weiss, Rifkind, Wharton & Garrison (contained in the opinion filed as Exhibit 5.1
hereto).
23.2* Consent of KPMG Peat Marwick LLP.
23.3* Consent of Holtz Rubenstein & Co., LLP.
23.4** Consent of Leonard White.
23.5** Consent of Silvia Kessel.
23.6** Consent of Arnold L. Wadler.
24.1** Power of Attorney (contained on signature page).
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
II-3
<PAGE>
(b) Financial Statement Schedules.
Schedule II--Combined Financial Statement Schedules Valuation and Qualifying
Accounts.
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 the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(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 a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(3) 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 3 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on December 16, 1997.
<TABLE>
<S> <C> <C>
BIG CITY RADIO, INC.
By: /s/ PAUL R. THOMSON
-----------------------------------------
Name: Paul R. Thomson
Title:Vice President and Chief
Financial Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to Registration Statement has been signed by the following
persons in the capacities indicated, on December 16, 1997.
<TABLE>
<CAPTION>
SIGNATURES TITLE OR CAPACITIES
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
*
------------------------------------------- Chairman of the Board of Directors
Stuart Subotnick
*
------------------------------------------- President, Chief Executive Officer and Director
Michael Kakoyiannis (Principal Executive Officer)
/s/ PAUL R. THOMSON
------------------------------------------- Vice President and Chief Financial Officer (Principal
Paul R. Thomson Financial and Accounting Officer)
*
------------------------------------------- Director
Anita Subotnick
*By: /s/ PAUL R. THOMSON
--------------------------------------
Paul R. Thomson
Attorney-in-fact
</TABLE>
II-5
<PAGE>
SCHEDULE II
BIG CITY RADIO, INC.
COMBINED FINANCIAL STATEMENT SCHEDULES VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OPERATING OTHER DEDUCTIONS/ END
OF PERIOD EXPENSES CHARGES WRITE-OFFS OF PERIOD
----------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Allowances for doubtful accounts, etc.
(deducted from current receivables):
Year ended September 30, 1993.................. $ -- $ 20,000 $ -- $ -- $ 20,000
----------- ------------- ---------- ------------ ----------
Year ended September 30, 1994.................. $ 20,000 $ 76,000 $ -- $ (41,000) $ 55,000
----------- ------------- ---------- ------------ ----------
----------- ------------- ---------- ------------ ----------
Quarter ended December 31, 1994................ $ 55,000 -- -- $ (1,000) $ 54,000
----------- ------------- ---------- ------------ ----------
Year ended December 31, 1995................... $ 54,000 $ 30,000 $ $ (26,000) $ 58,000
----------- ------------- ---------- ------------ ----------
----------- ------------- ---------- ------------ ----------
Year ended December 31, 1996................... $ 58,000 $ 190,000 $ $ (36,000) $ 212,000
----------- ------------- ---------- ------------ ----------
----------- ------------- ---------- ------------ ----------
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- --------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1* Form of Amended and Restated Certificate of Incorporation of Big City Radio, Inc.
3.2* Form of Amended and Restated Bylaws of Big City Radio, Inc.
4.1* Specimen Class A Common Stock Certificate of Big City Radio, Inc.
5.1* Form of opinion of Paul, Weiss, Rifkind, Wharton & Garrison.
10.1* Big City Radio, Inc. 1997 Incentive Stock Plan.
10.2* Form of Employment Agreement, between Big City Radio, Inc. and Michael Kakoyiannis.
10.3* Form of Employment Agreement, between Big City Radio, Inc. and Paul R. Thomson.
10.4* Form of Employment Agreement, between Big City Radio, Inc. and Steven G. Blatter.
10.5* Form of Employment Agreement, between Big City Radio, Inc. and Alan D. Kirschner.
10.6** Agreement and Plan of Merger, dated May 20, 1996, between Q Broadcasting, Inc. and Odyssey
Communications, Inc.
10.7* Form of Amended and Restated Credit Agreement between Big City Radio, Inc. and The Chase
Manhattan Bank.
10.8* Form of Registration Rights Agreement between Big City Radio, Inc. and Michael Kakoyiannis.
10.9* Form of Registration Rights Agreement between Big City Radio, Inc. and the Principal
Stockholders.
16.1** Letter re Change in Certifying Accountant from Holtz Rubenstein & Co., LLP
21.1* List of Subsidiaries of Big City Radio, Inc.
23.1* Consent of Paul, Weiss, Rifkind, Wharton & Garrison (contained in the opinion filed as
Exhibit 5.1 hereto).
23.2* Consent of KPMG Peat Marwick LLP.
23.3* Consent of Holtz Rubenstein & Co., LLP.
23.4** Consent of Leonard White.
23.5** Consent of Silvia Kessel.
23.6** Consent of Arnold L. Wadler.
24.1** Power of Attorney (contained on signature page).
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
<PAGE>
4,000,000 Shares
BIG CITY RADIO, INC.
Class A Common Stock
UNDERWRITING AGREEMENT
December __, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ LLC
As representatives of the Several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Big City Radio, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters") 4,000,000 shares (the "Firm Shares") of its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"). The Company also
proposes to issue and sell to the Underwriters not more than an additional
600,000 shares of its Class A Common Stock (the "Additional Shares"), if
requested by the Underwriters as provided in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares."
Section 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended
at the time it became effective, including the information (if any) deemed to
be part of the registration statement at the time of effectiveness pursuant
to Rule 430A under the Act, is hereinafter referred to as the "Registration
Statement;" and the prospectus in the form first used to confirm sales of
Shares is hereinafter referred to as the "Prospectus." If the Company has
filed or
<PAGE>
is required pursuant to the terms hereof to file a registration statement
pursuant to Rule 462(b) under the Act registering additional shares of Class A
Common Stock (a "Rule 462(b) Registration Statement"), then, unless otherwise
specified, any reference herein to the term "Registration Statement" shall be
deemed to include such Rule 462(b) Registration Statement.
Section 2. Agreements to Sell and Purchase and Lock-Up Agreements.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to
issue and sell, and each Underwriter agrees, severally and not jointly, to
purchase from the Company at a price per Share of $_______ (the "Purchase
Price") the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, the Additional Shares from the Company at
the Purchase Price. Additional Shares may be purchased solely for the purpose
of covering over-allotments made in connection with the offering of the Firm
Shares. The Underwriters may exercise their right to purchase Additional Shares
in whole or in part from time to time by giving written notice thereof to the
Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been received
(and, in any event, no earlier than the Closing Date (as hereinafter defined))
and (ii) no later than ten business days after such notice has been received.
If any Additional Shares are to be purchased, each Underwriter, severally and
not jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Class A Common Stock or any
securities convertible into or exercisable or exchangeable for shares of Class A
Common Stock
2
<PAGE>
or (ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any shares of
Class A Common Stock (regardless of whether any of the transactions described in
clause (i) or (ii) is to be settled by the delivery of shares of Class A Common
Stock or such other securities, in cash or otherwise), except to the
Underwriters pursuant to this Agreement, for a period of 180 days after the date
of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"). Notwithstanding the foregoing, during
such period (i) the Company may grant stock options pursuant to the Company's
1997 Incentive Stock Plan (the "Incentive Stock Plan") with respect to up to
[insert number] shares of Class A Common Stock, (ii) the Company may issue
shares of Class A Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof and (iii) the Company
may issue up to 281,265 shares of Class A Common Stock to Mr. Michael
Kakoyiannis pursuant to his employment agreement with the Company, as described
in the Registration Statement and the Prospectus. The Company also agrees not
to file any registration statement with respect to any shares of Class A Common
Stock or any option, warrant or right to purchase or otherwise transfer or
dispose of any shares of Class A Common Stock or any securities convertible into
or exercisable or exchangeable for shares of Class A Common Stock for a period
of 180 days after the date of the Prospectus without the prior written consent
of DLJ. Notwithstanding the foregoing, during such period, the Company may file
a registration statement on Form S-8 with respect to the shares of Class A
Common Stock that may be issued upon exercise of options granted or to be
granted under the Incentive Stock Plan and the 281,265 shares of Class A Common
Stock that may be issued to Mr. Kakoyiannis under his employment agreement with
the Company. The Company shall, prior to or concurrently with the execution of
this Agreement, deliver an agreement executed by each of the directors and
officers of the Company to the effect that such person will not, during the
period commencing on the date such person signs such agreement and ending 180
days after the date of the Prospectus, without the prior written consent of DLJ,
(A) engage in any of the types of transactions described in the first sentence
of this paragraph as if such person were bound in the same manner and to the
same extent as the Company is bound thereby or (B) make any demand for, or
exercise any right with respect to, the registration of any shares of Class A
Common Stock or any option, warrant or right to purchase or otherwise transfer
or dispose of any shares of Class A Common Stock or any securities convertible
into or exercisable or exchangeable for shares of Class A Common Stock.
Notwithstanding the foregoing, during such period, the Company may include the
281,265 shares of Class A Common Stock that may be issued to Mr. Kakoyiannis
under his employment agreement with the Company in the registration statement on
Form S-8 to be filed by
3
<PAGE>
the Company with respect to the shares of Class A Common Stock that may be
issued upon exercise of options granted or to be granted under the Incentive
Stock Plan.
Section 3. Terms of Public Offering. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their
respective portions of the Shares as soon after the execution and delivery of
this Agreement as in your judgment is advisable and (ii) initially to offer
the Shares upon the terms set forth in the Prospectus.
Section 4. Delivery and Payment. Delivery to the Underwriters of
and payment for the Firm Shares shall be made at 9:00 A.M., New York City
time, on December __, 1997 (the "Closing Date") at such place as you shall
designate. The Closing Date and the location of delivery of and payment for
the Firm Shares may be varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at such place as you shall
designate at 9:00 A.M., New York City time, on the date specified in the
applicable exercise notice given by you pursuant to Section 2 (an "Option
Closing Date"). Any such Option Closing Date and the location of delivery of
and payment for such Additional Shares may be varied by agreement between you
and the Company.
The Shares shall be (i) evidenced by one or more certificates
registered in the name of Cede & Co. and (ii) eligible for settlement through
the F.A.S.T. system of The Depository Trust Company.
Section 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, (iii)
when any amendment to the Registration Statement becomes effective, (iv) if
the Company is required to file a Rule 462(b) Registration Statement after
the effectiveness of this Agreement, when the Rule 462(b) Registration
Statement has become effective and (v) of the happening of any event during
the
4
<PAGE>
period referred to in Section 5(d) below which makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or which
requires any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish to you without charge originally signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits and documents incorporated therein by
reference, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of
each amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall
be satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5(d) below, not to file any
further amendment to the Registration Statement and not to make any amendment
or supplement to the Prospectus of which you shall not previously have been
advised or to which you shall reasonably object after being so advised; and,
during such period, to prepare and file with the Commission, promptly upon
your reasonable request, any amendment to the Registration Statement or
amendment or supplement to the Prospectus which may be necessary or advisable
in connection with the distribution of the Shares by you, and to use its best
efforts to cause any such amendment to the Registration Statement to become
promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business
day after the date of this Agreement and from time to time thereafter for
such period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or
a dealer, to furnish in New York City to each Underwriter and any dealer as
many copies of the Prospectus (and of any amendment or supplement to the
Prospectus) as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of
counsel for the Underwriters or counsel for the Company, it becomes necessary
to amend or
5
<PAGE>
supplement the Prospectus in order to make the statements therein, in the light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters or counsel for
the Company, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the statements in
the Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with applicable law, and to furnish to each Underwriter and to any
dealer as many copies thereof as such Underwriter or dealer may reasonably
request.
(f) Prior to any public offering of the Shares, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the Underwriters and by
dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation
in any jurisdiction in which it is not now so qualified or to take any action
that would subject it to general consent to service of process or taxation
other than as to matters and transactions relating to the Prospectus, the
Registration Statement, any preliminary prospectus or the offering or sale of
the Shares, in any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon
as practicable an earning statement covering the twelve-month period ending
December 31, 1998 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this
Agreement, to furnish to you as soon as available copies of all reports or
other communications furnished to the record holders of shares of Class A
Common Stock or furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed
and such other publicly available information concerning the Company or its
subsidiaries as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses
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incident to the performance of its obligations under this Agreement,
including: the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with
the preparation, printing, filing and distribution of the Registration
Statement (including financial statements and exhibits), any preliminary
prospectus, the Prospectus and all amendments and supplements to any of the
foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs
and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii)
all costs of printing or producing this Agreement and any other agreements or
documents in connection with the offering, purchase, sale or delivery of the
Shares, (iv) all expenses in connection with the registration or
qualification of the Shares for offer and sale under the securities or Blue
Sky laws of the several states and all costs of printing or producing any
Preliminary and Supplemental Blue Sky Memoranda in connection therewith
(including the filing fees and fees and disbursements of one counsel for the
Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and reasonable disbursements
of one counsel for the Underwriters in connection with the review and
clearance of the offering of the Shares by the National Association of
Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to
the Class A Common Stock and all costs and expenses incident to the listing
of the Shares on the American Stock Exchange (the "AMEX"), (vii) the cost of
printing certificates, if any, representing the Shares, (viii) the costs and
charges of any transfer agent, registrar and/or depositary and (ix) all other
costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section.
(j) To use its reasonable best efforts to list, subject to notice of
issuance, the Shares on the AMEX and to use its reasonable best efforts to
maintain the listing of the Shares on the AMEX for a period of three years
after the date of this Agreement.
(k) To use its reasonable best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Option Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the Shares.
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(l) If the Registration Statement at the time of the effectiveness
of this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so
covered in compliance with Rule 462(b) by 10:00 P.M., New York City time, on
the date of this Agreement and to pay to the Commission the filing fee for
such Rule 462(b) Registration Statement at the time of the filing thereof or
to give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
(m) On or prior to the Closing Date, (i) the Company shall have
converted all of its Common Stock, par value $.01 per share, into an
aggregate of 9,375,520 shares of Class A Common Stock, (ii) the Company shall
cause Mr. Stuart Subotnick to have contributed, to the Company's capital an
aggregate amount of not less than $13.2 million (either in the form of cash
or contribution of indebtedness of the Company owed to Mr. Subotnick), and
(iii) the Company shall cause Mr. Stuart Subotnick and Mrs. Anita Subotnick
to have converted an aggregate of 8,250,458 shares of Class A Common Stock
into an aggregate of 8,250,458 shares of Class B Common Stock, par value $.01
per share, of the Company. The transactions in clauses (i), (ii) and (iii)
of this Section 5(m) are hereinafter referred to as the "Recapitalization."
Section 6. Representations and Warranties of the Company. The
Company represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement; and
no stop order suspending the effectiveness of the Registration Statement is
in effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b)(i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended
through the date hereof, if applicable, will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) the
Registration Statement (other than any Rule 462(b) Registration Statement to
be filed by the Company after the effectiveness of this Agreement) and the
Prospectus comply and, as amended or supplemented through
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the date hereof, if applicable, will comply in all material respects with the
Act; (iii) if the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement and any amendments thereto, when they become effective
(A) will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (B) will comply in all material respects with the
Act; and (iv) the Prospectus does not contain and, as amended or supplemented
through the date hereof, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in any preliminary prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(d) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Prospectus and to own,
lease and operate its respective properties, and is duly qualified and is in
good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification, except where the failure to be so
qualified could not be reasonably expected to have a material adverse effect
on the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible or exchangeable securities, commitments of sale
or liens granted or
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issued by the Company or any of its subsidiaries relating to or entitling any
person to purchase or otherwise to acquire any shares of the capital stock of
the Company or any of its subsidiaries except as otherwise disclosed in the
Registration Statement.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, nonassessable and
not subject to any preemptive or similar rights; and the Shares have been
duly authorized and, when issued and delivered to the Underwriters against
payment therefor as provided by this Agreement, will be validly issued, fully
paid and nonassessable, and the issuance of such Shares will not be subject
to any preemptive or similar rights.
(g) All the outstanding shares of capital stock of each subsidiary
of the Company have been duly authorized and are validly issued, fully paid
and nonassessable and not subject to any preemptive or similar rights and are
owned, directly or indirectly, by the Company.
(h) The authorized capital stock of the Company conforms in all
material respects to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation
of its charter, by-laws or other constitutive documents or in default in the
performance of any obligation, agreement, covenant or condition contained in
any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or any of their respective property is
bound.
(j) This Agreement has been duly authorized, executed and delivered
by the Company.
(k) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with,
any court or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states), (ii) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws or other constitutive documents of the
Company or its subsidiaries or any indenture, loan agreement, mortgage, lease
or other agreement or instrument that is material to the
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Company and its subsidiaries, taken as a whole, to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over the Company or any
of its subsidiaries or any of their respective property or (iv) result in the
suspension, termination or revocation of any Authorization (as defined below) of
the Company or of any of its subsidiaries or any other impairment of the rights
of the holder of any such Authorization.
(l) There are no legal or governmental proceedings pending or, to
the Company's knowledge, threatened to which the Company or any of its
subsidiaries is or, to the Company's knowledge, could be a party or to which
any of their respective property is or, to the Company's knowledge, could be
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described; nor are there any statutes,
regulations, contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not so described or filed as required.
(m) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection
of human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("Environmental Laws") or any
provisions of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, could not reasonably be
expected to have a material adverse effect on the business, prospects,
financial condition or results of operation of the Company and its
subsidiaries, taken as a whole.
(n) The Company and its subsidiaries each possess such permits,
licenses, approvals, consents, and other authorizations (collectively,
"Government Licenses") issued by the appropriate federal, state, or local
regulatory agencies or bodies necessary to conduct the Company's and its
subsidiaries' respective business as it is currently operated and, except as
discussed in the Prospectus, as it is currently proposed to be conducted;
each of the Governmental Licenses are valid, in full force and effect, have
not been suspended, revoked, cancelled, or modified in any adverse way, and
are not subject to any conditions or requirements that are not generally
imposed by the relevant government bodies upon the holders of such
authorizations generally; to the Company's knowledge, except for proceedings
that affect the radio
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broadcasting industry generally and as described in the Prospectus, there is not
pending any application, petition, objection or other pleading with any
government body which questions the validity of or contests any of the
Governmental Licenses; no application, action, or proceeding is pending or, to
the Company's knowledge, threatened, that would permit, or after notice or lapse
of time or both would permit, any modification, revocation, suspension or
termination of any of the Governmental Licenses or may result in the revocation,
modification, non-renewal, suspension, or termination of any of the Governmental
Licenses, the issuance of a cease-and-desist order, or the imposition of any
administrative or judicial sanction with respect to any of the Governmental
Licenses; and the Company and each of its subsidiaries is in compliance with the
terms and conditions of all such Governmental Licenses, except where the failure
to so comply could not, singly or in the aggregate, be reasonably expected to
have a material adverse effect on the business, prospects, financial condition
or results of operations of the Company and its subsidiaries, taken as a whole.
(o) The Company and its subsidiaries each has such permits,
licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "Authorization") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws and the Communications
Act (as defined below), as are necessary to own, lease, license and operate
its respective properties and to conduct its business, except where the
failure to have any such Authorization or to make any such filing or notice
could not, singly or in the aggregate, be reasonably expected to have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
To the best of the Company's knowledge, each such Authorization is valid and
in full force and effect and the Company is in compliance with all the terms
and conditions thereof and with the rules and regulations of the authorities
and governing bodies having jurisdiction with respect thereto; and no event
has occurred (including, without limitation, the receipt of any notice from
any authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and no such Authorization contains any restrictions that,
singly or in the aggregate, are materially burdensome to the Company and its
subsidiaries, taken as a whole; except where such failure to be valid and in
full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction could not, singly or in the
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<PAGE>
aggregate, be reasonably expected to have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole.
(p) The execution, delivery and performance of this Agreement,
compliance by the Company with all the provisions hereof and the consummation
of the transactions contemplated hereby have not and will not (A) require any
consent, approval, authorization or other order of the Federal Communications
Commission the ("FCC") or (B) violate or conflict with the Communications Act
of 1934, as amended, and the rules and regulations of the FCC thereunder
(collectively called the "Communications Act") or rulings or court decrees
thereunder.
(q) To the best of the Company's knowledge, the operation of the
radio stations identified in the Registration Statement and the Prospectus
under the caption "Business" (collectively, the "Radio Stations") in the
manner and to the full extent now operated or proposed to be operated as
described in the Registration Statement and the Prospectus is in accordance
with the Authorizations issued by the FCC, the Communications Act and all
orders, rules and regulations of the FCC. To the best of the Company's
knowledge, no event has occurred which permits (nor has an event occurred
which with notice or lapse of time or both would permit) the revocation,
suspension or termination of the Authorizations issued by the FCC or which
might result in any other material impairment of the rights of the Company or
any of its subsidiaries therein or thereunder, and the Company and its
subsidiaries each is in compliance with all statutes, orders, rules or
regulation of the FCC relating to or affecting the broadcasting operations of
any of its Radio Stations.
(r) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities
and any potential liabilities to third parties) which could, singly or in the
aggregate, be reasonably expected to have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(s) KPMG Peat Marwick LLP are independent public accountants with
respect to the Company, WZFU-FM ("WZVU") and WVVX, Inc. ("WVVX") as required
by the Act. Holtz Rubenstein & Co., LLP are independent accountants with
respect to the Company as required by the Act.
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(t) The pro forma statements of the Company and the related notes
thereto set forth in the Registration Statement and the Prospectus (and in
each case, any amendment or supplement thereto) (i) have been prepared on a
basis consistent with the historical financial statements of the Company,
(ii) give effect to the assumptions used in the preparation thereof on a
reasonable basis and (iii) in good faith present fairly the historical and
proposed transactions contemplated therein. Such pro forma financial
statements have been prepared in accordance with the applicable requirements
of Rule 11-02 of Regulation S-X promulgated by the Commission. The other pro
forma financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any supplement or amendment
thereto) are, in all material respects, accurately presented and prepared on
a basis consistent with the pro forma financial statements.
(u) The Company and its subsidiaries each maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(v) The financial statements included in the Registration Statement
and the Prospectus (and any amendment or supplement thereto), together with
related schedules and notes, present fairly the financial position, results
of operations and changes in financial position of the Company, WZVU and WVVX
on the basis stated therein at the respective dates, as applicable, or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved;
the supporting schedules, if any, included or incorporated in the
Registration Statement (and any amendment or supplement thereto) present
fairly, in accordance with generally accepted accounting principles, the
information required to be stated therein; and the other financial and
statistical information and data set forth in the Registration Statement and
the Prospectus (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
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(w) All tax returns required to be filed by the Company or any of
its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith and other than those filings of which
the failure to file could not, singly or in the aggregate, be reasonably
expected to have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due or
claimed to be due from such entities have been paid, other than those being
contested in good faith and for which adequate reserves have been provided or
those currently payable without penalty or interest.
(x) The Company and each of its subsidiaries is not and, after
giving effect to the offering and sale of the Shares and the application of
the proceeds thereof as described in the Prospectus, will not be, an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
(y) Except (i) as provided under the Registration Rights Agreement
between the Company and Mr. Kakakoyiannis and between the Company and Mr. and
Mrs. Subotnick (collectively, the "Registration Rights Agreements"), (ii)
except as provided in Mr. Kakoyiannis' employment agreement with the Company
and (iii) with respect to the shares of Class A Common Stock that may be
issued upon exercise of options granted or to be granted under the Incentive
Stock Plan, there are no contracts, agreements or understandings between the
Company or any of its subsidiaries and any person granting such person the
right to require the Company or any of its subsidiaries to file a
registration statement under the Act with respect to any securities of the
Company or to require the Company or any of its subsidiaries to include any
securities of the Company or of any of its subsidiaries with the Shares
registered pursuant to the Registration Statement.
(z) Since the respective dates as of which information is given in
the Prospectus, other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there has not occurred any material adverse change or any development
involving a prospective material adverse change in the condition, financial
or otherwise, or the earnings, business, prospects, management or operations
of the Company or any of its subsidiaries, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Company
or any of its subsidiaries and (iii) neither the
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Company nor any of its subsidiaries has incurred any material liability or
obligation, direct or contingent.
(aa) Each certificate signed by any officer of the Company and
delivered to the Underwriters, or counsel for the Underwriters, pursuant to
the terms hereof shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.
(ab) The Company and each of its subsidiaries maintains insurance
covering its respective properties, operations, personnel and businesses.
Such insurance insures against such losses and risks as are reasonably
adequate in accordance with customary industry practice to protect the
Company, its subsidiaries and their respective business.
(ac) Each of the documents required to consummate the
Recapitalization have been duly authorized by the Company and as of the
Closing Date will have been duly executed, delivered, and, if necessary,
filed with the Secretary of State of the State of Delaware and with any other
applicable governmental body, and assuming the due authorization, execution
and delivery by the other parties thereto, will constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
each of their respective terms, except that enforcement thereof may be
limited by (i) applicable bankruptcy, fraudulent transfer, moratorium and
other laws affecting creditors' rights generally and (ii) general principles
of equity.
Section 7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, its directors, its officers and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages, liabilities and
judgments (including, without limitation, any legal or other expenses
incurred in connection with investigating or defending any matter, including
any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement thereto)
or any preliminary prospectus, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or
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judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Underwriter
furnished in writing to the Company by such Underwriter through you expressly
for use therein. The foregoing indemnity agreement with respect to any untrue
statement or omission from a preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
liabilities, claims, damages or expenses purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus as then amended or
supplemented (if the Company shall have furnished such Underwriter such amended
or supplemented Prospectus on a timely basis) was not sent or given by or on
behalf of the Underwriters to such person, if such was required by law, at or
prior to the written confirmation of the sale of such Shares to such person and
the untrue statement contained in or omission from such preliminary prospectus
was corrected in such Prospectus (or such Prospectus as amended or
supplemented).
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to such
Underwriter but only with reference to information relating to such
Underwriter furnished in writing to the Company by such Underwriter through
you expressly for use in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or Section
7(b) (the "indemnified party"), the indemnified party shall promptly notify
the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party shall assume the defense of
such action, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all reasonable fees and expenses of
such counsel, as incurred (except that in the case of any action in respect
of which indemnity may be sought pursuant to both Sections 7(a) and 7(b), the
Underwriter shall not be required to assume the defense of such action
pursuant to this Section 7(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of such
Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall
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be at the expense of the indemnified party unless (i) the employment of such
counsel shall have been specifically authorized in writing by the indemnifying
party, (ii) the indemnifying party shall have failed to assume the defense of
such action within a reasonable period of time or employ counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to any such
action (including any impleaded parties) include both the indemnified party and
the indemnifying party, and the indemnified party shall have been reasonably
advised by such counsel that a conflict may exist between the indemnified party
and the indemnifying party (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of the indemnified
party). In any such case, the indemnifying party shall not, in connection with
any one action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all indemnified parties and all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by DLJ, in the case of parties indemnified pursuant to
Section 7(a), and by the Company, in the case of parties indemnified pursuant to
Section 7(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than thirty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party), and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or
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payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause 7(d)(i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 7(d)(i) above but also the relative fault of the Company
on the one hand and the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other hand shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be
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entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7(d) are several in proportion to the respective number of Shares
purchased by each of the Underwriters hereunder and not jointly.
(e) The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available
to any indemnified party at law or in equity.
Section 8. Conditions of Underwriter's Obligations. The several
obligations of the Underwriters to purchase Shares under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall have been true and correct in all material respects
on the date of this Agreement and shall be true and correct in all material
respects on the Closing Date and, if applicable, on the Option Closing Date
with the same force and effect as if made on and as of the Closing Date and,
if applicable, on the Option Closing Date (except that such phrase "in all
material respects" shall be disregarded to the extent that any such
representation and warranty is qualified by "material," "material adverse
effect" or any similar terms or by any phrase using any of such terms).
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York
City time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date and, if applicable,
on the Option Closing Date, a certificate dated such date, signed by the
President of the Company and the Chief Financial Officer of the Company, in
their capacities as such officers of the Company, confirming the matters set
forth in Sections 6(z), 8(a) and 8(b) and that the Company has complied with
all of the agreements and satisfied all of the conditions herein contained
and required to be complied with or satisfied by the Company on or prior to
such date.
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(d) Since the respective dates as of which information is given in
the Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management, prospects, operations of the Company, (ii) there shall
not have been any change or any development involving a prospective change in
the capital stock or in the long-term debt of the Company and (iii) the
Company shall not have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause
8(d)(i), 8(d)(ii) or 8(d)(iii), in your judgment, is material and adverse
and, in your judgment, makes it impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date and on the Option
Closing Date, if applicable, an opinion (satisfactory to you and counsel for
the Underwriters), dated the Closing Date and on the Option Closing Date, if
applicable, of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the
Company, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has the corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectus and to
enter into and perform its obligations under this Agreement.
(iii) Based solely on a certificate of the Company's
transfer agent and after giving effect to the transactions
contemplated by this Agreement, [5,125,062]shares of Class A Common
Stock are issued and outstanding as of the Closing Date and
8,250,458 shares of Class B Common Stock, par value $.01 per share,
of the Company, are issued and outstanding as of the Closing Date,
and no other shares of capital stock of the Company are issued or
outstanding on the Closing Date.
(iv) The Shares have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and,
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when issued and delivered by the Company pursuant to this Agreement
against payment of the consideration set forth herein, will be
validly issued and fully paid and nonassessable.
(v) The issuance of the Shares is not subject to preemptive
or other similar rights arising by operation of law, under the
charter or by-laws of the Company or under any agreement listed or
set forth in the Registration Statement.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company.
(vii) The Registration Statement has been declared
effective under the Act; and, to such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has
been issued under the Act or proceedings therefor initiated or
threatened by the Commission.
(viii) The Registration Statement, including any
information included in accordance with Rule 430A promulgated under
the Act (the "430A Information") and the Prospectus, as of their
respective effective or issue dates (other than the financial
statements and supporting schedules included therein, as to which
such counsel need express no opinion) complied as to form in all
material respects with the requirements of the Act. In passing upon
the compliance as to form of the Registration Statement and
Prospectus, such counsel may assume that the statements made in the
Registration Statement and the Prospectus are complete and correct.
(ix) Neither the Company nor any of its subsidiaries is in
violation of its respective charter, by-laws or other constitutive
document and, to the best of such counsel's knowledge after due
inquiry, neither the Company nor any of its subsidiaries is in
default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the
Company and its subsidiaries, taken as a whole, to which the Company
or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or their respective property is bound.
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<PAGE>
(x) All descriptions in the Prospectus of the capital stock
of the Company and of contracts and other documents to which the
Company or its subsidiaries is a party are in all material respects
accurate and fair summaries thereof. To such counsel's knowledge,
there are no franchises, contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be
described or referred to in the Registration Statement or to be
filed as exhibits thereto other than those described or referred to
therein or filed as exhibits thereto and the descriptions thereof or
references thereto are correct in all material respects.
(xi) No authorization, approval, consent or order of any
court or governmental authority or agency under the laws of the
Federal government of the United States or the State of New York or
under the General Corporation Law of the State of Delaware (other
than those under the Act which have been obtained or made, or as may
be required under the securities or Blue Sky laws of the various
states or foreign jurisdictions or the National Association of
Securities Dealers, Inc., as to each of which such counsel need
express no opinion) is required in connection with the due
authorization, execution and delivery of this Agreement or for the
offering, issuance or sale of the Shares to the Underwriters.
(xii) The execution, delivery and performance of this
Agreement and compliance by the Company with its obligations under
this Agreement will not, to such counsel's knowledge, conflict with
or constitute a breach of, or default under or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries
pursuant to any contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, lease or any other agreement or
instrument listed as an exhibit to the Registration Statement
(except for such conflicts, breaches, defaults or liens, charges or
encumbrances that could not, singly or in the aggregate, be
reasonably expected to result in a material adverse effect on the
business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole), nor will such
action result in any violation of the provisions of the charter,
by-laws or other constitutive document of the Company or any of its
subsidiaries, or any applicable law, statute, rule or regulation of
the Federal
23
<PAGE>
government of the United States (including, but not limited to, the
FCC) or the State of New York or under the General Corporation Law
of the State of Delaware, or, to such counsel's knowledge, any
judgment, order, writ or decree of any government, government
instrumentality (including, but not limited to, the FCC) or court
having jurisdiction over the Company, any of its subsidiaries or any
of their respective properties, assets or operations except for such
violations of law, statute, rule, regulation, judgment, order, writ
or decree that could not be reasonably expected to result in a
material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(xiii) The Company and its subsidiaries each are not an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended.
(xiv) To such counsel's knowledge, except as provided under
the Registration Rights Agreements and Mr. Kakoyannis's employment
agreement with the Company, and except for the shares of Class A
Common Stock that may be issued upon exercise of options granted or
to be granted under the Incentive Stock Plan, there are no persons
with registration or other similar rights to have any securities
registered pursuant to the Registration Statement.
(xv) Such counsel shall state that they have participated
in the preparation of the Registration Statement and the Prospectus
and, although such counsel have not undertaken to investigate or
verify independently, did not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in
the Registration Statement or the Prospectus or any amendments or
supplements thereto, based upon such participation (and to relying
as to materiality to the extent such counsel deemed reasonable on
officers, employees and other representatives of the Company), no
facts have come to such counsel's attention that would lead them to
believe that the Registration Statement or any amendment thereto
(except for financial statements and schedules and other financial
or statistical data included therein or omitted therefrom, as to
which such counsel need make no statement), at the time the
Registration Statement became
24
<PAGE>
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, or any amendment or
supplement thereto (except for financial statements and schedules and other
financial or statistical data included therein or omitted therefrom, as to
which such counsel need make no statement), on the date the Prospectus was
issued or on the Closing Date, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(f) You shall have received, on the Closing Date, an opinion, dated
the Closing Date, of Hogan & Hartson, special radio communications counsel to
the Company, to the effect that:
(i) No authorization, approval, order, consent or filing
with the FCC on the part of the Company or its subsidiaries with
regard to any of the FCC Licenses (as defined below) is required in
connection with the Recapitalization or the issuance of the Shares
pursuant to this Agreement, other than such has been obtained or
filed and other than filings with the FCC required subsequent to the
consummation of the Recapitalization and the issuance and sale of
the Shares. The consummation of the Recapitalization and the
issuance and sale of the Shares pursuant to this Agreement, in each
case by the Company, do not violate applicable provisions of the
Communications Act or any published rules, regulations or policies
of the FCC thereunder.
(ii) A schedule to such counsel's opinion accurately and
completely lists all of the FCC licenses that have been issued to
and are held by the Company or its subsidiaries (the "FCC
Licenses"). Each of the FCC Licenses is valid and in full force and
effect on the Closing Date and is not subject to any conditions
(other than conditions generally applicable to radio stations of the
type described in the Registration Statement and the Prospectus).
To such counsel's knowledge, the FCC License constitute all of the
FCC authorizations, consents and approvals that are required for the
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<PAGE>
Company and its subsidiaries to carry on their broadcasting business
business as presently conducted.
(iii) Applications for renewals of the FCC Licenses of
[four] of the stations are pending at the FCC, as indicated on a
schedule to such counsel's opinion. To such counsel's knowledge,
there is no FCC order, judgment, decree, notice of apparent
liability or order of forfeiture, investigation or other proceeding
pending or threatened, by or before the FCC against the Company or
any of its subsidiaries that might result in revocation,
cancellation, suspension, now-renewal, or short-term renewal of the
FCC Licenses, except FCC rulemaking proceedings generally affecting
the radio broadcasting industry.
(g) You shall have received on the Closing Date, an opinion, dated
the Closing Date of Arnold L. Wadler, Vice President and Secretary of the
Company, to the effect that:
(i) To the best of his knowledge, Mr. Wadler does not know
of any legal or governmental proceeding pending or threatened to
which the Company or any of its subsidiaries is or could be a party
or to which any of their respective property is or could be subject
that is required to be described in the Registration Statement or
the Prospectus and is not so described, or of any statute,
regulation, contract or other document that is required to be
described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement that are not so
described or filed as required;
(ii) To the best of his knowledge the Company and its
subsidiaries each has such Authorizations of, and has made all
filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and
other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business,
except where the failure to have any such Authorization or to make
any such filing or notice could not, singly or in the aggregate, be
reasonably expected to have a material adverse effect on the
business, prospects, financial condition or results
26
<PAGE>
of operations of the Company and its subsidiaries, taken as a whole;
each such Authorization is valid and in full force and effect and
the Company and each of its subsidiaries is in compliance with all
the terms and conditions thereof and with the rules and regulations
of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both,
would result in any other impairment of the rights of the holder of
any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company; except where such
failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any
such restriction would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial
condition or results of operations of the Company;
(iii) To the best of his knowledge, neither the Company nor
any of its subsidiaries is in default in any respect in the
performance of any material contract, loan agreement, mortgage, deed
of trust, material lease or other material written contract or
agreement or of any respective order, award or decree of any court,
arbitrator or governmental or administrative body binding upon or
affecting it or by which any of its respective properties or assets
is bound or affected, except for defaults which could not reasonably
be expected to have a material adverse effect on the business,
prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(h) You shall have received on the Closing Date an opinion, dated
such date, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters, as to the matters referred to in Sections 8(e)(iv), 8(e)(vi)
and 8(e)(x) (first sentence only and then only with respect to the statements
under the caption "Description of the Common Stock").
(i) You shall have received letters on and as of the date hereof as
well as on and as of the Closing Date and, if applicable, the Option Closing
Date (in the latter case constituting an affirmation of the statements set
forth in the former), in form
27
<PAGE>
and substance satisfactory to you, from KPMG Peat Marwick LLP and Holtz
Rubenstein & Co. LLP, independent public accountants, with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(j) The Company shall have delivered to you the agreements specified
in Section 2 hereof which agreements shall be in full force and effect on the
Closing Date and, if applicable, the Option Closing Date.
(k) At the Closing Date and, if applicable, the Option Closing Date
the Shares shall have been approved for listing, subject to notice of
issuance, on the AMEX.
(l) The Company shall not have failed, on or prior to the Closing
Date and, if applicable, the Option Closing Date, to perform or comply with
any of the agreements herein contained and required to be performed or
complied with by the Company on or prior to such date. The several
obligations of the Underwriters to purchase any Additional Shares hereunder
are subject to the delivery to the Underwriters on the applicable Option
Closing Date of such documents as they may reasonably request with respect to
the good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such
Additional Shares.
(m) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date and, if applicable, the Option
Closing Date, prevent the issuance of the Shares; no injunction, restraining
order or order of any nature by a Federal or state court of competent
jurisdiction shall have been issued as of the Closing Date and, if
applicable, the Option Closing Date which would prevent the issuance of the
Shares; and on the Closing Date and, if applicable, the Option Closing Date,
no action, suit or proceeding shall be pending against, or, to the knowledge
of the Company, threatened against the Company or any of its subsidiaries,
before any court or arbitrator or any governmental body, agency or official
which, if adversely determined, would interfere with or adversely affect the
issuance of the Shares or could, singly or in the aggregate, reasonably be
expected to have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(n) The Recapitalization shall have been consummated.
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<PAGE>
Section 9. Effectiveness of Agreement and Termination. This
Agreement shall become effective upon the later of (i) the execution and
delivery of this Agreement by the parties hereto, (ii) the effectiveness of
the Registration Statement, and (iii) if a post-effective amendment is
required to be filed pursuant to Rule 430A under the Act, the effectiveness
of such post-effective amendment.
This Agreement may be terminated at any time on or prior to the
Closing Date or the Option Closing Date, if applicable, by you by written
notice to the Company if any of the following has occurred: (i) any outbreak
or escalation of hostilities or other national or international calamity or
crisis or change in economic conditions or in the financial markets of the
United States or elsewhere that, in DLJ's judgment, on behalf of the
Underwriters, is material and adverse and, in DLJ's judgment, on behalf of
the Underwriters, makes it impracticable or inadvisable to market the Shares
on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading generally in securities or other
instruments on the New York Stock Exchange, AMEX, the Chicago Board of
Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
enactment, publication, decree or other promulgation of any of the Federal or
state statute, regulation, rule or order of any court or other governmental
authority which in DLJ's opinion materially and adversely affects, or will
materially and adversely affect, singly or in the aggregate, the business,
prospects, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole, (v) any declaration of a banking
moratorium by any Federal or New York State authorities, (v) the taking of
any action by any Federal, state or local government or agency in respect of
its monetary or fiscal affairs which in DLJ's opinion has a material adverse
effect on the financial markets in the United States and would, in DLJ's
judgment, make it impracticable or inadvisable to market the Shares or to
enforce contracts for the sale of the Shares, or (vi) subsequent to the date
the Registration Statement is declared effective or the date of this
Agreement, any material adverse change on the business, prospects, financial
condition or results of operations of the Company occurs which, in DLJ's
judgment, makes it impracticable or inadvisable to market the Shares or to
enforce contracts for the sale of the Shares.
If on the Closing Date or on any Option Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase
the Firm Shares or Additional Shares, as the case may be, which it has or
they have agreed to purchase hereunder on such date, and the aggregate number
of Firm Shares or Additional Shares, as the case may be, which such
defaulting Underwriter or Underwriters
29
<PAGE>
agreed but failed or refused to purchase on such date is not more than
one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters; each
non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Firm Shares set forth on Schedule I bears to the total
number of Firm Shares which all the non-defaulting Underwriters have agreed
to purchase, or in such other proportion as you may specify, to purchase the
Firm Shares or Additional Shares, as the case may be, which the defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused
to purchase on such date; provided that in no event shall the number of Firm
Shares or Additional Shares, as the case may be, which any Underwriter has
agreed to purchase pursuant to Section 2 hereof be increased pursuant to this
Section 9 by any amount, without the written consent of such Underwriter. If
on the Closing Date or the Option Closing Date, as applicable, any
Underwriter shall fail or refuse to purchase the Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of such Firm Shares to be
purchased on such date by all of the Underwriters and arrangements
satisfactory to you and the Company for the purchase of such Firm Shares are
not made within 48 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter and the
Company except as provided in this Section 9. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date or the Option Date, as the case
may be, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. If, on any Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation
hereunder to purchase such Additional Shares or (ii) purchase not less than
the number of Additional Shares that such non-defaulting Underwriters would
have been obligated to purchase on such date in the absence of such default.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of any such Underwriter
under this Agreement.
Section 10. Miscellaneous. Notices given pursuant to any provision
of this Agreement shall be addressed as follows: (i) if to the Company, to
Big City Radio, Inc., 11 Skyline Drive, Hawthorne, New York, 10532,
Attention: President, with a copy to (which shall not constitute notice)
Paul, Weiss, Rifkind, Wharton &
30
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Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064,
Attention: James M. Dubin and further copy (which shall not constitute
notice) to Metromedia Company, One Meadowlands Plaza, East Rutherford, New
Jersey 07073-2137, Attention: Mr. Arnold L. Wadler and (ii) if to any
Underwriter, c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park Avenue, New York, New York 10172, Attention: Syndicate Department with
a copy to (which shall not constitute notice) Skadden, Arps, Slate, Meagher &
Flom LLP, 300 South Grand Avenue, Los Angeles, California 90071, Attention:
Nicholas P. Saggese, or in any case to such other address as the person to be
notified may have requested in writing.
The indemnity and contribution provisions and the other agreements,
representations, warranties and other statements of the Company and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of
and payment for the Shares, regardless of (i) any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter, the
officers or directors of any Underwriter any person controlling any
Underwriter, the Company, the officers or directors of the Company or any
person controlling the Company, (ii) acceptance of the Shares and payment for
them hereunder, and (iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 9), except pursuant to clause (vi) of the
second paragraph of Section 9, the Company agrees to reimburse the several
Underwriters for all reasonable and documented out-of-pocket expenses
(including the reasonable fees and disbursements of counsel) incurred by
them. Notwithstanding any termination of this Agreement, the Company shall
be liable for all expenses which it has agreed to pay pursuant to Section
5(i) hereof. The Company also agrees to reimburse the several Underwriters,
their directors and officers and any persons controlling any of the
Underwriters for any and all fees and expenses (including, without
limitation, the reasonable fees disbursements of one counsel) incurred by it
in connection with enforcing their rights hereunder (including, without
limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' directors and officers, and controlling
persons referred to herein, the Company's directors and the Company's
officers who sign the Registration Statement and their respective successors
and assigns, all as and to the extent provided in this
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Agreement, and no other person shall acquire or have any right or obligation
under or by virtue of this Agreement. The term "successors and assigns"
shall not include a purchaser of any of the Shares from any of the several
Underwriters merely because of such purchase.
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof.
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this
Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND
PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF
NEW YORK, THE BOROUGH OF MANHATTAN IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED
HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
32
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
BIG CITY RADIO, INC.
By:
-----------------------------------
Name:
Title:
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ, LLC
Acting on behalf of themselves and the several
Underwriters named in Schedule I
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
------------------------------
<PAGE>
SCHEDULE I
Number of
Firm Shares
Underwriter to be Purchased
- ----------- ---------------
Donaldson, Lufkin & Jenrette Securities Corporation
Furman Selz LLC
---------------
I-1
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BIG CITY RADIO, INC.
(Pursuant to Section 245 of
the General Corporation Law of the State of Delaware)
The undersigned President and Chief Executive Officer of Big City Radio,
Inc., a corporation organized and existing under the laws of the State of
Delaware (the "Corporation"), hereby certify as follows:
FIRST: The Corporation's present name is Big City Radio, Inc.
SECOND: The Corporation was originally incorporated under the name of K
Broadcasting, Inc., and its original Certificate of Incorporation
was filed with the Secretary of State of the State of Delaware on
August 2, 1994. A Certificate of Amendment of Certificate of
Incorporation Before Payment of Any Part of the Capital was filed
with the Secretary of State of the State of Delaware on August 29,
1994. A Certificate of Merger of Q Broadcasting Inc. and the
Corporation was filed with the Secretary of State of the State of
Delaware on May 29, 1996. A Certificate of Amendment to the
Certificate of Incorporation changing the name of the Corporation
from Odyssey Communications, Inc. to Big City Radio, Inc. was filed
with the Secretary of State of the State of Delaware on December 2,
1997.
THIRD: This Amended and Restated Certificate of Incorporation further amends
and restates the Certificate of Incorporation of the Corporation, as
heretofore amended and now in effect.
FOURTH: This Amended and Restated Certificate of Incorporation of the
Corporation was duly adopted pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware to read as follows:
1. NAME. The name of the corporation is Big City Radio, Inc.
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the
Corporation's registered office in the State of Delaware is 1013 Center Road,
Wilmington, Delaware 19805; and its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
3. PURPOSES. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "General Corporation Law").
<PAGE>
2
4. CAPITALIZATION.
4.1 AUTHORIZED CAPITAL STOCK. The total number of shares of
stock that the Corporation shall have the authority to issue is One Hundred and
Twenty Million (120,000,000) shares, consisting of (a) Eighty Million
(80,000,000) shares of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"); (b) Twenty Million (20,000,000) shares of Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"); and
(c) Twenty Million (20,000,000) shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock"), issuable in one or more series as hereinafter
provided. The Class A Common Stock and the Class B Common Stock shall
hereinafter collectively be called the "Common Stock." Immediately upon the
effectiveness of this Amended and Restated Certificate of Incorporation, each
share of Common Stock of the Corporation, par value $.01 per share, that is
issued and outstanding immediately prior to such effectiveness shall be changed
into and reclassified as Seven Thousand Six Hundred and Ten (7,610) shares of
Class A Common Stock (the "Reclassification"). Immediately upon completion of
the Reclassification, each share of Class A Common Stock that is owned of record
by Stuart Subotnick or Anita Subotnick shall be exchanged for one (1) share of
Class B Common Stock. The number of authorized shares of any class or classes
of capital stock of the Corporation may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the voting power of the stock of the Corporation
entitled to vote generally in the election of directors irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law or any
corresponding provision hereinafter enacted.
4.2 TERMS OF COMMON STOCK. All shares of Common Stock will be
identical in all respects and will entitle the holders thereof to the same
rights and privileges, except as otherwise provided herein.
(a) VOTING RIGHTS. The holders of shares of Common Stock
shall have the following voting rights:
(i) Each share of Class A Common Stock shall
entitle the holder thereof to one vote in person or by proxy on all matters
submitted to a vote of the stockholders of the Corporation.
(ii) Each share of Class B Common Stock shall
entitle the holder thereof to ten votes in person or by proxy on all
matters submitted to a vote of the stockholders of the Corporation.
(iii) Except for the election and the removal of
directors described below, and as otherwise required by applicable law, the
holders of shares of Common Stock shall vote together as one class on all
<PAGE>
3
matters submitted to a vote of stockholders of the Corporation (or, except
for the election or the removal of directors entitled to be elected by the
holders of Common Stock described below, if any holders of shares of
Preferred Stock are entitled to vote together with the holders of Common
Stock, as a single class with such holders of shares of Preferred Stock).
(iv) With respect to the annual election of
directors, the holders of Class B Common Stock shall be entitled, as a
separate class, to elect the number of directors nominated by the Class B
Nominating Committee (as defined in the Corporation's Amended and Restated
Bylaws (the "Bylaws")) determined by multiplying the total number of
directorships of the Corporation by .75, and rounding up any reminder. The
holders of Class A Common Stock and any holders of any series of Preferred
Stock, if entitled to vote for directors, shall be entitled, as a separate
class, to vote for any remaining directorships, such directors to be
nominated by the Class A Nominating Committee (as defined in the
Corporation's Bylaws).
(v) Directors may be removed, with or without
cause, only by the holders of the class or classes of Common Stock or
series of Preferred Stock that, as of the date such removal is effected,
would be entitled to elect such directorship at the next annual meeting of
stockholders. Vacancies in a directorship may be filled only by (a) the
remaining directors elected by holders of each class of Common Stock or
series of Preferred Stock that (x) elected such directorship and (y) as of
the date such vacancy is filled, would be entitled to elect such
directorship at the next annual meeting of stockholders or, (b) if there
are no such remaining directors, then by the vote of the holders of the
class or classes of Common Stock or series of Preferred Stock that, as of
the date such vacancy is filled, would be entitled to elect such
directorship at the next annual meeting of stockholders, voting as a
separate class at a meeting, special or otherwise, of the holders of Common
Stock of such class or classes or series of Preferred Stock.
(b) DIVIDENDS AND DISTRIBUTIONS. Subject to the
preferences applicable to Preferred Stock outstanding at any time, the holders
of shares of Common Stock shall be entitled to receive such dividends and other
distributions in cash, property or shares of stock of the Corporation as may be
declared thereon by the Board of Directors of the Corporation (the "Board of
Directors") from time to time out of assets or funds of the Corporation legally
available therefor; provided, that, subject to the provisions of this Section
4.2(b), the Corporation shall not pay dividends or make distributions to any
holders of any class of Common Stock unless simultaneously with such dividend or
distribution, as the case may be, the Company makes the same dividend or
distribution with respect to each outstanding share of Common Stock regardless
of class. In the case of dividends or other distributions payable in Class A
Common Stock or Class B Common Stock,
<PAGE>
4
including distributions pursuant to stock splits or divisions of Class A Common
Stock or Class B Common Stock which occur after the first date upon which the
Corporation has issued shares of either Class A Common Stock or Class B Common
Stock, only shares of Class A Common Stock shall be distributed with respect to
Class A Common Stock and only shares of Class B Common Stock shall be
distributed with respect to Class B Common Stock. Whenever a dividend or
distribution, including distributions pursuant to stock splits or divisions of
the Common Stock, is payable in shares of Class A Common Stock or Class B Common
Stock, the number of shares of each class of Common Stock payable per share of
such class of Common Stock shall be equal in number. In the case of dividends
or other distributions consisting of other voting securities of the Corporation
or of voting securities of any corporation which is a wholly-owned subsidiary of
the Corporation, the Corporation shall declare and pay such dividends in three
separate classes of such voting securities, identical in all respects, except
that (i) the voting rights of each such security paid to the holders of Class A
Common Stock shall be one-tenth of the voting rights of each such security paid
to the holders of Class B Common Stock, (ii) such security paid to the holders
of Class B Common Stock shall convert into the security paid to the holders of
Class A Common Stock upon the same terms and conditions then applicable to the
conversion of Class B Common Stock into Class A Common Stock and shall have the
same restrictions on transfer and ownership then applicable to the transfer and
ownership of the Class B Common Stock and (iii) with respect only to dividends
or other distributions of voting securities of any corporation which is a
wholly-owned subsidiary of the Corporation, the respective voting rights of each
such security paid to holders of Class A Common Stock and Class B Common Stock
with respect to the election of directors shall otherwise be as comparable as is
practicable to those of the Class A Common Stock and Class B Common Stock,
respectively. In the case of dividends or other distributions consisting of
securities convertible into, or exchangeable for, voting securities of the
Corporation or voting securities of another corporation which is a wholly-owned
subsidiary of the Corporation, the Corporation shall provide that such
convertible or exchangeable securities and the underlying securities be
identical in all respects (including, without limitation, the conversion or
exchange rate), except that (i) the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of Class A Common
Stock shall be one-tenth of the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of the Class B Common
Stock and (ii) such underlying securities paid to the holders of Class B Common
Stock shall convert into the underlying securities paid to the holders of
Class A Common Stock upon the same terms and conditions then applicable to the
conversion of Class B Common Stock into Class A Common Stock and shall have the
same restrictions on transfer and ownership then applicable to the transfer and
ownership of the Class B Common Stock.
(c) CONVERSION RIGHTS OF CLASS B COMMON STOCK.
<PAGE>
5
(i) Each holder of Class B Common Stock shall be
entitled to convert, at any time and from time to time, any or all of the
shares of such holder's Class B Common Stock on a one-for-one basis, into
the same number of fully paid and nonassessable shares of Class A Common
Stock. Such right shall be exercised by the surrender of the certificate
or certificates representing the shares of Class B Common Stock to be
converted to the Corporation at any time during normal business hours at
the principal executive offices of the Corporation or at the office of the
Transfer Agent for the Common Stock (the "Transfer Agent"), accompanied by
a written notice of the holder of such shares stating that such holder
desires to convert such shares, or a stated number of the shares
represented by such certificate or certificates, into an equal number of
shares of the Class A Common Stock, and (if so required by the Corporation
or the Transfer Agent) by instruments of transfer, in form satisfactory to
the Corporation and to the Transfer Agent, duly executed by such holder or
such holder's duly authorized attorney, and transfer tax stamps or funds
therefor, if required pursuant to Section 4.2(c)(v) of this Amended and
Restated Certificate of Incorporation.
(ii) As promptly as practicable following the surrender
for conversion of a certificate representing shares of Class B Common Stock
in the manner provided in Section 4.2(c)(i) and the payment in cash of any
amount required by the provisions of Section 4.2(c)(v), the Corporation
will deliver or cause to be delivered at the office of the Transfer Agent,
a certificate or certificates representing the number of full shares of
Class A Common Stock issuable upon such conversion, issued in such name or
names as such holder may direct. Such conversion shall be deemed to have
been effected immediately prior to the close of business on the date of the
receipt by the Corporation or the Transfer Agent, as the case may be, of
the certificate or certificates representing shares of Class B Common
Stock. Upon the date any such conversion is made or effected, all rights
of the holder of such shares as such holder shall cease, and the person or
persons in whose name or names the certificates or certificates
representing the shares of Class A Common Stock are to be issued shall be
treated for all purposes as having become the record holder or holders of
such shares of Class A Common Stock; provided, however, that if any such
surrender and payment, if any, under Section 4.2(c)(v) occurs on any date
when the stock transfer books of the Corporation shall be closed, the
person or persons in whose name or names the certificate or certificates
representing shares of Class A Common Stock are to be issued shall be
deemed the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which the
stock transfer books are open.
.
(iii) In the event of a reclassification or other
similar transaction as a result of which the shares of Class A Common Stock
are converted into another security, then a holder of Class B Common Stock
<PAGE>
6
shall be entitled to receive upon conversion of such shares the amount of
such security that such holder would have received if such conversion had
occurred immediately prior to the record date of such reclassification or
other similar transaction. No adjustments in respect of dividends shall be
made upon the conversion of any share of Class B Common Stock; provided,
however, that if a share of Class B Common Stock shall be converted
subsequent to the record date for the payment of a dividend or other
distribution on shares of Class B Common Stock but prior to such payment,
then the registered holder of such share at the close of business on such
record date shall be entitled to receive the dividend or other distribution
payable on such share of Class B Common Stock on such date notwithstanding
the conversion thereof or the Corporation's default in payment of the
dividend due on such date and will be deemed to have waived the right to
receive any dividend or other distribution on shares of Class A Common
Stock with a record date for the payment of such dividend or other
distribution that is prior to such conversion.
(iv) The Corporation covenants that it will at all
times reserve and keep available out of its authorized but unissued shares
of Class A Common Stock, solely for the purpose of issuance upon conversion
of the outstanding shares of Class B Common Stock, such number of shares of
Class A Common Stock that shall be issuable upon the conversion of all such
outstanding shares of Class B Common Stock; provided that, nothing
contained herein shall be construed to preclude the Corporation from
satisfying its obligations in respect of the conversion of the outstanding
shares of Class B Common Stock by delivery of purchased shares of Class A
Common Stock which are held in the treasury of the Corporation. The
Corporation covenants that if any shares of Class A Common Stock require
registration with or approval of any governmental authority under any
federal or state law before such shares of Class A Common stock may be
issued upon conversion of a share of Class B Common Stock, the Corporation
will cause such shares to be duly registered or approved, as the case may
be. The Corporation will use its best efforts to list the shares of
Class A Common Stock required to be delivered upon conversion prior to such
delivery upon each national securities exchange upon which the outstanding
Class A Common Stock is listed at the time of such delivery. The
Corporation covenants that all shares of Class A Common Stock that shall be
issued upon conversion of the shares of Class B Common Stock will, upon
issue, be validly issued, fully paid and nonassessable.
(v) The issuance of certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock shall be
made without charge to the holders of such shares for any stamp or other
similar tax in respect of such issuance; provided, however, that, if any
such certificate is to be issued in a name other than that of the holder of
the share or shares of Class B Common Stock converted, then the person or
<PAGE>
7
persons requesting the issuance thereof shall pay to the Corporation the
amount of any tax that may be payable in respect of any transfer involved
in such issuance or shall establish to the satisfaction of the Corporation
that such tax has been paid.
(vi) Shares of Class B Common Stock that are converted
into shares of Class A Common Stock as provided herein shall continue to be
authorized shares of Class B Common Stock and available for reissue by the
Corporation; provided, however, that no shares of Class B Common Stock
shall be reissued except as expressly permitted by Sections 4.2(b) and
4.2(d) of this Amended and Restated Certificate of Incorporation.
(d) STOCK SPLITS. The Corporation shall not in any manner
subdivide (by any stock split, stock dividend, reclassification,
recapitalization or otherwise) or combine (by reverse stock split,
reclassification, recapitalization or otherwise) the outstanding shares of one
class of Common Stock unless the outstanding shares of all classes of Common
Stock shall be proportionately subdivided or combined.
(e) OPTIONS, RIGHTS OR WARRANTS.
(i) The Corporation shall not make any offering of
options, rights or warrants to subscribe for shares of Class B Common
Stock. If the Corporation makes an offering of options, rights or warrants
to subscribe for shares of any other class or classes of capital stock
(other than Class B Common Stock) to all holders of a class of Common Stock
then the Corporation shall simultaneously make an identical offering to all
holders of the other classes of Common Stock (other than to any class of
Common Stock the holders of which, voting as a separate class, determine
that such offering need not be made to such class). All such options,
rights or warrants offerings shall offer the respective holders of Class A
Common Stock and Class B Common Stock the right to subscribe at the same
rate per share.
(ii) Subject to Sections 4.2(c)(iii) and 4.2(e)(i) of
this Amended and Restated Certificate of Incorporation, the Corporation
shall have the power to create and issue, whether or not in connection with
the issue and sale of any shares of stock or other securities of the
Corporation, rights or options entitling the holders thereof to purchase
from the Corporation any shares of its capital stock of any class or
classes at the time authorized (other than Class B Common Stock), such
rights or options to have such terms and conditions, and to be evidenced by
or in such instrument or instruments, as shall be approved by the Board of
Directors.
<PAGE>
8
(f) MERGERS, CONSOLIDATION, ETC. In the event that the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then, and in such
event the shares of each class of Common Stock shall be exchanged for or changed
into (1) the same amount of stock, securities, cash and/or any other property,
as the case may be, into which or for which each share of any other class of
Common Stock is exchanged or changed; provided, however, that if shares of
Common Stock are exchanged for or changed into shares of capital stock, such
shares so exchanged for or changed into may differ to the extent and only to the
extent that the Class A Common Stock and the Class B Common Stock differ as
provided herein or (2) if holders of each class of Common Stock are to receive
different distributions of stock, securities, cash and/or any other property, an
amount of stock, securities, cash and/or property per share of Common Stock of
such class having a value, as determined by an independent investment banking
firm of national reputation selected by the Board of Directors, equal to the
value per share into which or for which each share of any other class of Common
Stock is exchanged or changed.
(g) LIQUIDATION RIGHTS. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation, whether voluntary
or involuntary, after payment or provision for payment of the debts and other
liabilities of the Corporation and after making provision for the holders of
each series of Preferred Stock, if any, the remaining assets and funds of the
Corporation, if any, shall be divided among and paid ratably to the holders of
the shares of the Class A Common Stock and the Class B Common Stock treated as a
single class.
(h) NO PREEMPTIVE RIGHTS. Except as provided in Section
4.2(e) of this Amended and Restated Certificate of Incorporation, the holders of
shares of Common Stock are not entitled to any preemptive right to subscribe
for, purchase or receive any part of any new or additional issue of stock of any
class, whether now or hereafter authorized, or of bonds, debentures or other
securities convertible into or exchangeable for stock.
(i) TRANSFER OF CLASS B COMMON STOCK.
(i) No person may, directly or indirectly, sell
(whether by involuntary or judicial sale or otherwise), assign, transfer,
grant a security interest in, pledge, encumber, hypothecate, give (by
bequest, gift or appointment) or otherwise (voluntarily or by operation of
law) dispose of (collectively, "Transfer") any interest in his, her or its
shares of Class B Common Stock or in any shares of Class B Common Stock
held by such person for the benefit of or on the behalf of another person,
it being understood that the term Transfer shall not include the power to
vote or provide a consent with respect to his, her or its shares of Class B
Common Stock by proxy or otherwise, and the Corporation and the Transfer
Agent,
<PAGE>
9
shall not register the Transfer of such shares of Class B Common Stock,
except to the Corporation or a Class B Permitted Holder (as defined below);
provided, however, such restrictions on transfer shall not apply to a
merger, consolidation or business combination of the Corporation with or
into another corporation pursuant to which all of the outstanding shares of
each class of Common Stock and Preferred Stock of the Company is being
acquired. Any transfer of Class B Common Stock in violation of this
Section 4.2(i) shall be null and void AB INITIO, and the Corporation shall
not register such Transfer. For the purposes of this Article Four, a
"Class B Permitted Holder" shall include only the following persons: (i)
Stuart Subotnick, Anita Subotnick and their respective estates, guardians,
conservators or committees; (ii) each descendant of Stuart Subotnick or
Anita Subotnick (a "Subotnick Descendant") and their respective estates,
guardians, conservators or committees; (iii) each Subotnick Family
Controlled Entity (as defined below); and (iv) the trustees, in their
respective capacities as such, of each Subotnick Family Trust (as defined
below). The term "Subotnick Family Controlled Entity" means (i) any not-
for-profit corporation if at least a majority of its board of directors is
composed of Stuart Subotnick, Anita Subotnick and/or Subotnick Descendants;
(ii) any other corporation if at least a majority of the value of its
outstanding equity is owned by Class B Permitted Holders; (iii) any partnership
if at least a majority of the economic interest of its partnership interests is
owned by Class B Permitted Holders; and (iv) any limited liability or similar
company if at least a majority of the economic interest of the company is owned
by Class B Permitted Holders. The term "Subotnick Family Trust" includes
trusts the primary beneficiaries of which are Stuart Subotnick, Anita Subotnick,
Subotnick Descendants, Stuart or Anita Subotnick's siblings, spouses of
Subotnick Descendants and their respective estates, guardians, conservators or
committees and/or charitable organizations (collectively, "Subotnick
Beneficiaries"). For purposes of this provision, the primary beneficiaries of a
trust will be deemed to be Subotnick Beneficiaries if, under the maximum
exercise of discretion by the trustee in favor of persons who are not Subotnick
Beneficiaries, the value of the interests of such persons in such trust,
computed actuarially, is 50% or less. The factors and methods prescribed in
section 7520 of the Internal Revenue Code of 1986, as amended, on the date
hereof or from time to time as in effect, for use in ascertaining the value of
certain interests shall be used in determining a beneficiary's actuarial
interest in a trust for purposes of applying this provision. For purposes of
this provision, the actuarial value of the interest in a trust of any person in
whose favor a testamentary power of appointment may be exercised shall be deemed
to be zero. For purposes of this provision, in the case of a trust created by a
Subotnick Descendant, the actuarial value of the interest in such trust of any
person who may receive trust property only at the termination of the trust and
then only in the event that, at the termination of the trust, there are no
living issue of such Subotnick Descendant, shall be deemed to be zero.
<PAGE>
10
(ii) Notwithstanding anything to the contrary set
forth herein, any Class B Permitted Holder may pledge his, her or its
shares of Class B Common Stock to a financial institution pursuant to a
bona fide pledge of such shares as collateral security for indebtedness due
to the pledgee; provided, that, such shares shall remain subject to the
provisions of this Section 4.2(i). In the event of foreclosure or other
similar action by the pledgee, such pledged shares of Class B Common Stock
may only be transferred to a Class B Permitted Holder or converted into
shares of Class A Common Stock, as the pledgee may elect.
(iii) For purposes of this Section 4.2(i):
(1) the relationship of any person that is
derived by or through legal adoption shall be considered a natural
relationship;
(2) a minor who is a descendant of Stuart or
Anita Subotnick and for whom shares of Class B Common Stock are held
pursuant to a Uniform Gifts to Minors Act or similar law shall be
considered a Class B Permitted Holder and the custodian who is the
record holder of such shares shall not be considered the Class B
Permitted Holder of such shares;
(3) an incompetent stockholder who is a Class B
Permitted Holder but whose shares are owned or held by a guardian or
conservator shall be considered a Class B Permitted Holder of such
shares and such guardian or conservator who is the holder of such
shares shall not be considered the Class B Permitted Holder of such
shares;
(4) unless otherwise specified, the term "person"
means and includes natural persons, corporations, partnerships
(general or limited), unincorporated associations, firms, joint
ventures, trusts, limited liability companies and all other entities;
and
(5) except as provided in clauses (2) and (3)
above, for purposes of determining whether the holder of shares of
Class B Common Stock is a Class B Permitted Holder, the record holder
of such share shall be considered the holder; provided, however, that
if such record holder is a nominee, the holder for purposes of
determining whether the holder of shares of Class B Common Stock is a
Class B Permitted Holder shall be the first person in the chain of
ownership of such share of Class B Common Stock who is not holding
such share solely as a nominee.
<PAGE>
11
(j) CERTAIN AUTOMATIC CONVERSIONS OF CLASS B COMMON STOCK.
Subject to Section 4.2(i) of this Amended and Restated Certificate of
Incorporation, at such time as a person ceases to be a Class B Permitted Holder,
any and all shares of Class B Common Stock held by such person at such time
shall automatically convert prior to the close of business on the date such
person ceases to be a Class B Permitted Holder into shares of Class A Common
Stock, PROVIDED THAT, no conversion shall occur upon the pledge of a Class B
Permitted Holder's share of Class B Common Stock to a financial institution as
contemplated by and pursuant to Section 4.2(i)(ii) of this Amended and Restated
Certificate of Incorporation.
(k) RESTRICTIONS ON ISSUANCE. The Corporation shall not
issue or sell any shares of Class B Common Stock or any securities (including,
without limitation, any rights, options, warrants or other securities)
convertible, exchangeable or exercisable into shares of Class B Common Stock to
any person who is not a Class B Permitted Holder. Any issuance or sale of
shares of Class B Common Stock (or securities convertible into, or exchangeable
or exercisable for, shares of Class B Common Stock) in violation of this
Section 4.2(k) shall be null and void AB INITIO.
4.3 PREFERRED STOCK. Shares of Preferred Stock may be
issued from time to time in one or more series of any number of shares provided
that the aggregate number of shares issued and not canceled of any and all
series shall not exceed the total number of shares of Preferred Stock
hereinabove authorized. The Board of Directors is authorized, by resolution
adopted and filed in accordance with law, to provide for the issue of such
series of shares of Preferred Stock. Each series of shares of Preferred Stock:
(a) may have such voting powers, full or limited, or may be without voting
powers; provided, however, that, unless holders of at least seventy-five percent
(75%) of the outstanding shares of Class B Common Stock have approved the
issuance of such shares of Preferred Stock, the Board of Directors may not issue
any shares of Preferred Stock that have the right (i) to vote for the election
of directors under ordinary circumstances, or (ii) under any circumstances to
elect twenty-five percent (25%) or more of the directors of the Corporation
after giving effect to the directorships filled by the holders of such shares of
Preferred Stock; (b) may be subject to redemption at such time or times and at
such prices; (c) may be entitled to receive dividends (which may be cumulative
or non-cumulative) at such rate or rates, on such conditions and at such times,
and payable in preference to, or in such relation to, the dividends payable on
any other class or classes or series of stock; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the Corporation;
(e) may be made convertible into, or exchangeable for, shares of any other class
or classes or of any other series of the same or any other class or classes of
stock of the Corporation or such other corporation or other entity at such price
or prices or at such rates of exchange and with such adjustments; (f) may be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the
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12
Corporation or any subsidiary, upon the issue of any additional shares
(including additional shares of such series or of any other series) and upon the
payment of dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Corporation or any subsidiary of, any
outstanding shares of the Corporation; and (h) may have such other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, all as shall be stated in said resolution or resolutions
providing for the issue of such shares of such series of Preferred Stock. Any
of the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of any such series of Preferred Stock may be made
depended upon facts ascertainable outside of the resolution or resolutions
providing for the issue of such series of Preferred Stock adopted by the Board
of Directors pursuant to the authority vested in it by this Section 4.3,
provided that the manner in which such facts shall operate upon the voting
powers, designations, preferences, rights and qualifications, limitations or
restrictions of such series of Preferred Stock is clearly and expressly set
forth in the resolution or resolutions providing for the issue of such series of
Preferred Stock. The term "facts" as used in the next preceding sentence shall
have the meaning given to it in Section 151(a) of the General Corporation Law.
Shares of Preferred Stock of any series that have been redeemed or repurchased
by the Corporation (whether through the operation of a sinking fund or
otherwise) or that, if convertible or exchangeable, have been converted or
exchanged in accordance with their terms shall be retired and have the status of
authorized and unissued shares of Preferred Stock of the same series and may be
reissued as a part of the series of which they were originally a part or may,
upon the filing of an appropriate certificate with the Secretary of State of the
State of Delaware, be reissued as part of a new series of shares of Preferred
Stock to be created by resolution or resolutions of the Board of Directors or as
part of any other series of shares of Preferred Stock, all subject to the
conditions or restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issue of any
series of shares of Preferred Stock. Notwithstanding anything herein to the
contrary, in no event shall any series of shares of Preferred Stock be entitled
to vote together with any class of Common Stock with respect to the election of
any directors entitled to be elected by such class of Common Stock pursuant to
Section 4.2(a)(iv).
4.4 REDEMPTION. Notwithstanding any provision of this
Amended and Restated Certificate of Incorporation to the contrary, outstanding
shares of stock of the Corporation shall always be subject to redemption by the
Corporation, by action of the Board of Directors, if in the judgment of the
Board of Directors such action should be taken, pursuant to Section 151(b) of
the General Corporation Law or any other applicable provision of law, to the
extent necessary to prevent the loss or secure the reinstatement of any license
or franchise from any governmental agency held by the Corporation or any of its
subsidiaries, which license or franchise is conditioned upon some or all of the
holders of the Corporation's stock meeting prescribed qualifications and/or
restrictions. The terms and conditions of such redemption shall be as follows:
<PAGE>
13
(a) The redemption price of the shares to be redeemed
pursuant to this Section 4.4 shall be determined by the Board of Directors and
shall be at least equal to the lesser of (i) the Fair Market Value (as defined
below) or (ii) if such stock was purchased by such Disqualified Holder (as
defined below) within one year of the Redemption Date (as defined below), such
Disqualified Holder's purchase price for such shares;
(b) The redemption price of such shares may be paid in
cash, Redemption Securities (as defined below) or any combination thereof;
(c) If less than all the shares held by Disqualified
Holders are to be redeemed, the shares to be redeemed shall be selected in such
manner as shall be determined by the Board of Directors, which may include
selection first of the most recently purchased shares thereof, selection by lot
or selection in any other manner reasonably determined by the Board of
Directors;
(d) At least 30 days' written notice of the Redemption Date
shall be given to the record holders of the shares selected to be redeemed
(unless waived in writing by any such holder), provided that the Redemption Date
may be the date on which written notice shall be given to record holders if the
cash or Redemption Securities necessary to effect the redemption shall have been
deposited in trust for the benefit of such record holders and subject to
immediate withdrawal by them upon surrender of the stock certificates for their
shares to be redeemed;
(e) From and after the Redemption Date, any and all rights
of whatever nature, which may be held by the owners of shares selected for
redemption (including, without limitation, any rights to vote or participate in
dividends declared on stock of the same class or series as such shares), shall
cease and terminate and they shall thenceforth be entitled only to receive the
cash or Redemption Securities payable upon redemption; and
(f) Such other terms and conditions as the Board of
Directors shall reasonably determine.
For purposes of this Section 4.4:
(i) "Disqualified Holder" shall mean any holder of
shares of stock of the Corporation whose holding of such stock, either
individually or when taken together with the holding of shares of stock of
the Corporation by any other holders, may reasonably result, in the
judgement of the Board of Directors, in the loss of, or the failure to
secure the reinstatement of, any license or franchise from any governmental
agency held by the Corporation or any of its subsidiaries to conduct any
portion of the business of the Corporation or any of its subsidiaries.
<PAGE>
14
(ii) "Fair Market Value" of a share of the
Corporation's stock of any class or series shall mean the average Closing
Price for such a share for each of the 15 most recent days on which shares
of stock of such class or series shall have been traded on a national
securities exchange or nationally recognized over-the-counter market
preceding the day on which notice of redemption shall be given pursuant to
paragraph (d) of this Section 4.4; provided, however, that if shares of
stock of such class or series are not then traded on any national
securities exchange or nationally recognized over-the-counter market, "Fair
Market Value" shall be determined by the Board of Directors in good faith.
"Closing Price" on any day means the reported closing sales price or, in
case no such sale takes place, the average of the reported closing bid and
asked prices on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock is listed,
or, if such stock is not listed on any such exchange, the highest closing
sales price or bid quotations for such stock on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in
use, or if no such prices or quotations are available, the fair market
value on the day in question as determined by the Board of Directors.
(iii) "Redemption Date" shall mean the date fixed
by the Board of Directors for the redemption of any shares of stock of the
Corporation pursuant to this Section 4.4.
(iv) "Redemption Securities" shall mean any debt
or equity securities of the Corporation, any of its subsidiaries or any
other corporation, or any combination thereof, having such terms and
conditions as shall be approved by the Board of Directors and which,
together with any cash to be paid as part of the redemption price, in the
opinion of any nationally recognized investment banking firm selected by
the Board of Directors (which may be a firm which provides other investment
banking, brokerage or other services to the Corporation), has a value, at
the time notice of redemption is given pursuant to paragraph (d) of this
Section 4.4, at least equal to the price required to be paid pursuant to
paragraph (a) of this Section 4.4 (assuming, in the case of Redemption
Securities to be publicly traded, such Redemption Securities were fully
distributed and subject only to normal trading activity).
5. BOARD OF DIRECTORS.
5.1 NUMBER OF DIRECTORS. Initially, the number of Directors
shall be fixed at eight (8), consisting of six (6) directors to be designated by
the holders of Class B Common Stock and two (2) directors to be designated by
the holders of Class A Common Stock, and such number of Directors may be changed
from time to time by action of the stockholders or by action of the Board of
Directors. The members of the Board of Directors to be designated by the
holders of
<PAGE>
15
Class A Common Stock and Class B Common Stock, as the case may be, on the date
this Amended and Restated Certificate of Incorporation is filed with the
Secretary of State shall be determined by the Board of Directors by resolution.
Any vacancies shall be filed in accordance with the provisions of Section
4.2(a)(v) of this Amended and Restated Certificate of Incorporation. The use of
the phrase "Entire Board" refers to the total number of directors in office,
whether or not present at a meeting of the Board of Directors, but disregarding
vacancies.
5.2 POWERS OF THE BOARD OF DIRECTORS. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors selected as provided by law and this Amended and Restated Certificate
of Incorporation and the Bylaws. In furtherance, and not in limitation, of the
powers conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to:
(a) subject to Section 8 of this Amended and Restated
Certificate of Incorporation, adopt, amend, alter, change or repeal the Bylaws;
provided, however, that no Bylaws hereafter adopted shall invalidate any prior
act of the Corporation that would have been valid if such new Bylaws had not
been adopted;
(b) subject to the Bylaws as from time to time in effect,
determine the rules and procedures for the conduct of the business of the Board
of Directors and the management and direction by the Board of Directors of the
business and affairs of the Corporation, including the power to designate and
empower committees of the Board of Directors, to elect, or authorize the
appointment of, and empower officers and other agents of the Corporation, and to
determine the time and place of, the notice requirements for, and the manner of
conducting, Board of Directors' meetings, as well as other notice requirements
for, and the manner of taking, Board of Directors action; and
(c) exercise all such powers and do all such acts as may be
exercised or done by the Corporation, subject to the provisions of the General
Corporation Law, this Amended and Restated Certificate of Incorporation and the
Bylaws.
6. LIABILITY OF DIRECTORS.
6.1 LIMITATION OF LIABILITY. No director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that this provision
shall not eliminate or limit the liability of a director (a) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under section 174 of the General Corporation Law
or (d) for any transaction from which the director derived any improper personal
benefits. If the General Corporation Law is
<PAGE>
16
amended after approval by the stockholders of this article to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law, as so amended.
6.2 AMENDMENTS. Any repeal or modification of Section 6.1
hereof 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.
7. INDEMNIFICATION.
7.1 To the extent not prohibited by law, the Corporation shall
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or officers of the Corporation (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board of Directors at
any time specifies that such persons are entitled to the benefits of this
Section 7.
7.2 The Corporation shall, from time to time, reimburse or
advance to any director or officer or other person entitled to indemnification
hereunder the funds necessary for payment of expenses, including attorneys' fees
and disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; PROVIDED, HOWEVER, that, if required by
the General Corporation Law, such expenses incurred by or on behalf of any
director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses.
7.3 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 7
shall not
<PAGE>
17
be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Amended and Restated Certificate
of Incorporation, the By-laws, any agreement, any vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
7.4 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 7
shall continue as to a person who has ceased to be a director or officer (or
other person indemnified hereunder) and shall inure to the benefit of the
executors, administrators, legatees and distributees of such person.
7.5 The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of an Other Entity, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Section 7, the Bylaws or under Section 145 of the
General Corporation Law or any other provision of law.
7.6 The provisions of this Section 7 shall be a contract between
the Corporation, on the one hand, and each director and officer who serves in
such capacity at any time while this Section 7 is in effect and any other person
entitled to indemnification hereunder, on the other hand, pursuant to which the
Corporation and each such director, officer, or other person intend to be, and
shall be, legally bound. No repeal or modification of this Section 7 shall
affect any rights or obligations with respect to any state of facts then or
theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
7.7 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 7
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel and its stockholders) to have made a determination prior to the
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
<PAGE>
18
constitute a defense to the action or create a presumption that such person is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
7.8 Any director or officer of the Corporation serving in any
capacity in an Other Entity shall be deemed to be doing so at the request of the
Corporation.
7.9 Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Section 7 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the applicable Proceeding,
to the extent permitted by law, or on the basis of the applicable law in effect
at the time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the Corporation,
at the time indemnification or reimbursement or advancement of expenses is
sought; PROVIDED, HOWEVER, that if no such notice is given, the right to
indemnification or reimbursement or advancement of expenses shall be determined
by the law in effect at the time indemnification or reimbursement or advancement
of expenses is sought.
8. ADOPTION, AMENDMENT AND/OR REPEAL OF BYLAWS. The Board of
Directors may from time to time adopt, amend, alter, change or repeal the Bylaws
as set forth under Section 5.2(a) of this Amended and Restated Certificate of
Incorporation; PROVIDED, HOWEVER, that any Bylaws adopted, amended, altered or
changed by the Board of Directors may be amended, altered, changed or repealed,
and any Bylaws may be adopted, by the stockholders of the Corporation by vote of
a majority of the holders of shares of stock of the Corporation entitled to vote
in the election of directors of the Corporation.
9. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of
stockholders for any purpose may be called at any time by the Chairman, Vice
Chairman of the Board of Directors, by the President of the Corporation or by
the holders of at least thirty-three percent (33%) of the voting power of the
outstanding shares of Common Stock. Special meetings of stockholders shall be
held at such place or places within or without the State of Delaware and shall
from time to time be designated by the Board of Directors and stated in such
notice of meeting. At a special meeting of stockholders no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of meeting.
10. AMENDMENT AND/OR REPEAL OF AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION. From time to time any of the provisions of this Amended and
Restated Certificate of Incorporation may be amended, altered or repealed, and
other provisions
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19
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws and this
Amended and Restated Certificate of Incorporation, and all rights at any time
conferred upon the stockholders of the Corporation by this Amended and Restated
Certificate of Incorporation are granted subject to the provisions of this
Section 10.
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20
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation of the Corporation, which restates, integrates and amends the
provisions of the certificate of incorporation of the Corporation, and which was
duly approved pursuant to resolutions set forth in unanimous written consents
adopted by the Board of Directors of the Corporation and the holders of all of
the outstanding shares of stock of the Corporation in accordance with the
requirements of Sections 228, 242 and 245 of the General Corporation Law, has
been executed by Michael Kakoyiannis, acting in his capacity as President and
Chief Executive Officer for the Corporation, this __th day of December, 1997.
BIG CITY RADIO, INC.
By:
----------------------------------------
Name: Michael Kakoyiannis
Title: President and Chief Executive Officer
<PAGE>
AMENDED AND RESTATED BYLAWS
of
BIG CITY RADIO, INC.
(A Delaware Corporation)
________________________
ARTICLE 1
DEFINITIONS
As used in these Bylaws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "Bylaws" means these Amended and Restated Bylaws of the
Corporation, as amended, supplemented or restated from time to time.
1.5 "Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Corporation, as amended, supplemented or
restated from time to time.
1.6 "Chairman" means the Chairman of the Board of the Corporation.
1.7 "Chief Executive Officer" means the Chief Executive Officer of
the Corporation.
1.8 "Chief Operating Officer" means the Chief Operating Officer of
the Corporation.
1.9 "Class A Common Stock" has the meaning specified in Section
2.2.2.
1.10 "Class A Directors" has the meaning specified in Section 4.2.
1.11 "Class A Nomination Committee" has the meaning specified in
Section 4.2.
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2
1.12 "Class B Common Stock" has the meaning specified in Section 2.4.
1.13 "Class B Directors" has the meaning specified in Section 4.3.
1.14 "Class B Nominating Committee" has the meaning specified in
Section 4.3.
1.15 "Corporation" means Big City Radio, Inc.
1.16 "Directors" means directors of the Corporation.
1.17 "Entire Board" means all Directors in office, whether or not
present at a meeting of the Board, but disregarding vacancies.
1.18 "General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended from time to time.
1.19 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.20 "President" means the President of the Corporation.
1.21 "Secretary" means the Secretary of the Corporation.
1.22 "Stockholders" means stockholders of the Corporation.
1.23 "Treasurer" means the Treasurer of the Corporation.
1.24 "Vice Chairman" means the Vice Chairman of the Board.
1.25 "Vice President" means a Vice President of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of Stockholders shall be held
at the office of the Corporation or at such other place within or without the
State of Delaware as shall be specified or fixed in the notice of such meeting
or in the waiver of notice thereof.
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3
2.2 ANNUAL MEETING. A meeting of Stockholders shall be held annually
for the election of Directors and the transaction of other business as may
properly come before the meeting at such date and time as may be determined by
the Board and designated in the notice of meeting.
2.2.1 At any such annual meeting of Stockholders, only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been properly brought before the annual meeting of Stockholders
(A) by, or at the direction of, the Board or (B) by a Stockholder of the
Corporation who complies with the procedures set forth in this Section 2.2.1.
For business or a proposal to be properly brought before an annual meeting of
Stockholders by a Stockholder, the Stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
Stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the scheduled date of the annual meeting, regardless of
any postponement, deferral or adjournment of that meeting to a later date;
PROVIDED, HOWEVER, that if less than 70 days' notice or prior public disclosure
of the date of the annual meeting is given or made to Stockholders, notice by
the Stockholder to be timely must be so delivered or received not later than the
close of business on the 10th day following the earlier of (i) the day on which
such notice of the date of the meeting was mailed or (ii) the day on which such
public disclosure was made.
A Stockholder's notice to the Secretary shall set forth as to
each matter the Stockholder proposes to bring before an annual meeting of
Stockholders (i) a description, in 500 words or less, of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the Stockholder proposing such business and any other
Stockholders known by such Stockholder to be supporting such proposal, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such Stockholder on the date of such Stockholder's notice and by any other
Stockholders known by such Stockholder to be supporting such proposal on the
date of such Stockholder's notice, (iv) a description, in 500 words or less, of
any interest of the Stockholder in such proposal and (v) a representation that
the Stockholder is a holder of record of stock of the Corporation and intends to
appear in person or by proxy at the meeting to present the proposal specified in
the notice. Notwithstanding anything in these By-Laws or in the Certificate of
Incorporation to the contrary, no business shall be conducted at a meeting of
Stockholders except in accordance with the procedures set forth in this
Section 2.2.1.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that the business was not properly brought
before the meeting in accordance with the procedures prescribed by this
Section 2.2.1, and if he should so determine, he shall so declare to the meeting
and
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4
any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing, nothing in this Section 2.2.1 shall
be interpreted or construed to require the inclusion of information about any
such proposal in any proxy statement distributed by, at the direction of, or on
behalf of, the Board.
2.2.2 Nominations for election to the Board shall be made (i)
in the case of the Class A Directors, by the Class A Nominating Committee, and
(ii) in the case of the Class B Directors, by the Class B Nominating Committee.
In addition, nominations of persons for election to the Board as Class A
Directors may be made at an annual meeting of Stockholders or special meeting of
Stockholders called by the Board for the purpose of electing directors by any
holder of the Corporation's Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), entitled to vote for the election of directors at such
meeting who complies with the notice procedures set forth in this Section 2.2.2.
Such nominations shall be made pursuant to timely notice in writing to the
Secretary. To be timely, a Stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
60 days nor more than 90 days prior to the scheduled date of the meeting,
regardless of any postponement, deferral or adjournment of that meeting to a
later date; PROVIDED, HOWEVER, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to Stockholders, notice
by the Stockholder to be timely must be so delivered or received not later than
the close of business on the 10th day following the earlier of (i) the day on
which such notice of the date of the meeting was mailed or (ii) the day on which
such public disclosure was made.
A Stockholder's notice to the Secretary shall set forth (i) as to
each person whom the Stockholder proposes to nominate for election or reelection
as a director (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of stock of the Corporation which are beneficially owned by
such person on the date of such Stockholder's notice and (d) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, or any successor statute thereto (the "Exchange Act") (including,
without limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director, if elected); (ii) as to the
Stockholder giving the notice (a) the name and address, as they appear on the
Corporation's books, of such Stockholder and any other Stockholders known by
such Stockholder to be supporting such nominee(s), (b) the class and number of
shares of stock of the Corporation which are beneficially owned by such
Stockholder on the date of such Stockholder's notice and by any other
Stockholders known by such Stockholder to be supporting such nominee(s) on the
date of such Stockholder's notice, (c) a representation that the Stockholder is
a holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by
<PAGE>
5
proxy at the meeting to nominate the person or persons specified in the notice;
and (iii) a description of all arrangements or understandings between the
Stockholder and each nominee and other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
Stockholder.
Subject to the rights, if any, of the holders of any series of
Preferred Stock then outstanding, no person (other than persons nominated by or
at the direction of the Board, the Class A Nominating Committee or the Class B
Nominating Committee) shall be eligible for election as Director unless
nominated in accordance with the procedures set forth in this Section 2.2.2.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the procedures
prescribed by this Section 2.2.2, and, if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
2.3 DEFERRED MEETING FOR ELECTION OF DIRECTORS, ETC. If the annual
meeting of Stockholders for the election of Directors and the transaction of
other business is not held at such date and at such time as determined by
pursuant to Section 2.2 hereof, the Board shall call a meeting of Stockholders
for the election of Directors and the transaction of other business as soon
thereafter as convenient.
2.4 OTHER SPECIAL MEETINGS. A special meeting of Stockholders (other
than a special meeting for the election of Directors), unless otherwise
prescribed by statute or by the Certificate of Incorporation, may be called at
any time by the Board, the Chairman, the Vice Chairman, the President or the
holders of at least thirty-three percent (33%) of the combined voting power of
the Corporation's Class A Common Stock and Class B Common Stock, par value $.01
per share (the "Class B Common Stock"). At any special meeting of Stockholders,
only such business may be transacted as is related to the purpose or purposes of
such meeting set forth in the notice thereof given pursuant to Section 2.6
hereof or in any waiver of notice thereof given pursuant to Section 2.7 hereof.
2.5 FIXING RECORD DATE. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any adjournment thereof, (ii) unless otherwise provided in the Certificate of
Incorporation, to express consent to corporate action taken without a meeting or
(iii) to receive payment of any dividend or other distribution or allotment of
any rights, or to exercise any rights in respect of any change, conversion or
exchange of stock; or (b) any other lawful action, the Board may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date was adopted by the Board and which record date shall not
be (x) in the case of clause (a)(i) above, more than sixty nor less than
ten days before the date of such meeting, (y) in the case of clause (a)(ii)
above, more than 10 days after the date upon which the resolution fixing the
record date was adopted by the Board and (z) in the case of clause (a)(iii)
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6
or (b) above, more than sixty days prior to such action. If no such record date
is fixed:
2.5.1 the record date for determining Stockholders entitled
to notice of or 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;
2.5.2 the record date for determining Stockholders entitled
to express consent to corporate action in writing without a meeting (unless
otherwise provided in the Certificate of Incorporation), when no prior
action by the Board is required under the General Corporation Law, shall be
the first day 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
when prior action by the Board is required under the General Corporation
Law, the record date for determining Stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of
business on the date on which the Board adopts the resolution taking such
prior action; and
2.5.3 the record date for determining Stockholders for any
purpose other than those specified in Sections 2.5.1 and 2.5.2 shall be at
the close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of Stockholders entitled to notice of or to vote at any
meeting of Stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.
2.6 NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise provided
in Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute,
the Certificate of Incorporation or these Bylaws, Stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the meeting, to each
Stockholder entitled to notice of or to
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7
vote at such meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, with postage prepaid, directed to the
Stockholder at his or her address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice required by this Section 2.6
has been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been transacted
at the meeting as originally called. If, however, the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Stockholder of record entitled to vote at the meeting.
2.7 WAIVERS OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these Bylaws, a waiver thereof,
in writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Stockholders need be
specified in any written waiver of notice unless so required by statute, the
Certificate of Incorporation or these Bylaws.
2.8 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, or
cause to be prepared and made, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, the Stockholder's
agent, or attorney, at the Stockholder's expense, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten 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. The
Corporation shall maintain the Stockholder list in written form or in another
form capable of conversion into written form within a reasonable time. Upon the
willful neglect or refusal of the Directors to produce such a list at any
meeting for the election of Directors, they shall be ineligible for election to
any office at such meeting. The stock ledger shall be the only evidence as to
who are the Stockholders
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8
entitled to examine the stock ledger, the list of Stockholders or the books of
the Corporation, or to vote in person or by proxy at any meeting of
Stockholders.
2.9 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise
provided by any statute, the Certificate of Incorporation or these Bylaws, the
holders of one-third of all outstanding shares of stock entitled to vote at any
meeting of Stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of any business at such meeting. When a
quorum is once present to organize a meeting of Stockholders, it is not broken
by the subsequent withdrawal of any Stockholders. The holders of a majority of
the shares of stock present in person or represented by proxy at any meeting of
Stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; PROVIDED, HOWEVER, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.10 VOTING; PROXIES. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the Bylaws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the stocks
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of Stockholders (at which a
quorum was present to organize the meeting), all matters, except as otherwise
provided by statute or by the Certificate of Incorporation or by these Bylaws,
shall be decided by a majority of the votes cast at such meeting by the holders
of shares present in person or represented by proxy and entitled to vote
thereon, whether or not a quorum is present when the vote is taken. All
elections of Directors shall be by written ballot unless otherwise provided in
the Certificate of Incorporation. In voting on any other question on which a
vote by ballot is required by law or is demanded by any Stockholder entitled to
vote, the voting shall be by ballot. Each ballot shall be signed by the
Stockholder voting or the
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9
Stockholder's proxy and shall state the number of shares voted. On all other
questions, the voting may be VIVA VOCE. 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
such Stockholder by proxy. The validity and enforceability of any proxy shall
be determined in accordance with Section 212 of the General Corporation Law. A
Stockholder may revoke any proxy that is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by delivering a proxy in accordance with applicable law bearing a later
date to the Secretary.
2.11 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF
STOCKHOLDERS. The Board, in advance of any meeting of Stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate has been appointed
or is able to act at a meeting, the person presiding at the meeting may appoint,
and on the request of any Stockholder entitled to vote thereat shall appoint,
one or more inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall (a) ascertain the number of
shares outstanding and the voting power of each, (b) determine the shares
represented at the meeting and the validity of proxies and ballots, (c) count
all votes and ballots, (d) determine and retain for a reasonable period a record
of the disposition of any challenges made to any determination by the
inspectors, and (e) certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of their duties. Unless otherwise provided by the
Board, the date and time of the opening and the closing of the polls for each
matter upon which the Stockholders will vote at a meeting shall be determined by
the person presiding at the meeting and shall be announced at the meeting. No
ballot, proxies or votes, or any revocation thereof or change thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery of the State of Delaware upon application by a Stockholder shall
determine otherwise.
2.12 ORGANIZATION. At each meeting of Stockholders, the Chairman, or
in the absence of the Chairman, the Vice Chairman, or in the absence of the Vice
Chairman, the Chief Executive Officer, or in the absence of the Chief Executive
Officer, the President, or in the absence of the President, a Vice President,
and in case more than one Vice President shall be present, that Vice President
designated by the Board (or in the absence of any such designation, the most
senior Vice President, based on age, present), shall act as chairman of the
meeting. The Secretary, or in his or her absence, one of the Assistant
Secretaries, shall act as secretary of the meeting.
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10
In case none of the officers above designated to act as chairman or secretary of
the meeting, respectively, shall be present, a chairman or a secretary of the
meeting, as the case may be, shall be chosen by a majority of the votes cast at
such meeting by the holders of shares of capital stock present in person or
represented by proxy and entitled to vote at the meeting. The chairman of the
meeting shall be empowered to prescribe such rules for the conduct of any
meeting as he deems necessary or appropriate.
2.13 ORDER OF BUSINESS. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 WRITTEN CONSENT OF STOCKHOLDERS WITHOUT A MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return
receipt requested) 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. Every written consent shall bear the date of
signature of each Stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within
60 days of the earliest dated consent delivered in the manner required by this
Section 2.14, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation as aforesaid. 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.
ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. Except as otherwise provided in the Certificate
of Incorporation, the business and affairs of the Corporation shall be managed
by or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
Bylaws or applicable laws, as it may deem proper for the conduct of its meetings
and the management of the Corporation. In addition to the powers expressly
conferred by
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11
these Bylaws, the Board may exercise all powers and perform all acts that are
not required, by these Bylaws or the Certificate of Incorporation or by statute,
to be exercised and performed by the Stockholders.
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The number of Directors
shall be fixed initially at eight (8) and may thereafter be changed from time to
time by action of the Stockholders or by action of the Board. Directors need
not be Stockholders. Each Director shall hold office until a successor is
elected and qualified or until the Director's death, resignation or removal.
3.3 ELECTION. Directors shall, except as otherwise required by
statute, by the Certificate of Incorporation or by these Bylaws, be elected by a
plurality of the votes cast at a meeting of Stockholders (or Stockholders acting
by written consent) by the holders of shares entitled to vote in the election,
voting as a separate class.
3.4 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Unless otherwise
provided in the Certificate of Incorporation, newly created Directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board for any other reason, including the removal of Directors without
cause, may be filled only by (a) the affirmative votes of a majority of the
remaining directors elected by holders of each class of Common Stock or series
of Preferred Stock that (x) elected such directorship and (y) as of the date
such vacancy is filled, would be entitled to elect such directorship at the next
annual meeting of Stockholders or, (b) if there are no such remaining directors,
then by a plurality of the votes cast by the holders of the class or classes of
Common Stock or series of Preferred Stock that, as of the date such vacancy is
filled, would be entitled to elect such directorship at the next annual meeting
of Stockholders, voting as a separate class at a meeting, special or otherwise,
of the holders of Common Stock of such class or classes or series of Preferred
Stock. A Director elected to fill a vacancy shall be elected to hold office
until a successor is elected and qualified, or until the Director's earlier
death, resignation or removal.
3.5 RESIGNATION. Any Director may resign at any time by written
notice to the Corporation. Such resignation shall take effect at the time
therein specified, and, unless otherwise specified in such resignation, the
acceptance of such resignation shall not be necessary to make it effective.
3.6 REMOVAL. Unless otherwise provided in the Certificate of
Incorporation, and subject to the provisions of Section 141(k) of the General
Corporation Law, Directors may be removed with or without cause only by a
majority of the holders of the class or classes of Common Stock or series of
Preferred Stock that, as of the date such removal is effected, would be entitled
to elect such directorship at the next annual meeting of Stockholders.
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12
3.7 COMPENSATION. Each Director, in consideration of his or her
service as such, shall be entitled to receive from the Corporation such amount
per annum or such fees for attendance at Directors' meetings, or both, as the
Board may from time to time determine, together with reimbursement for the
reasonable out-of-pocket expenses, if any, incurred by such Director in
connection with the performance of his or her duties. Each Director who shall
serve as a member of any committee of Directors in consideration of serving as
such shall be entitled to such additional amount per annum or such fees for
attendance at committee meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in the performance of his or her
duties. Nothing contained in this Section 3.7 shall preclude any Director from
serving the Corporation or its subsidiaries in any other capacity and receiving
proper compensation therefor.
3.8 TIMES AND PLACES OF MEETINGS. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.9 ANNUAL MEETINGS. On the day when and at the place where the
annual meeting of Stockholders for the election of Directors is held, and as
soon as practicable thereafter, the Board may hold its annual meeting, without
notice of such meeting, for the purposes of organization, the election of
officers and the transaction of other business. The annual meeting of the Board
may be held at any other time and place specified in a notice given as provided
in Section 3.11 hereof for special meetings of the Board or in a waiver of
notice thereof.
3.10 REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.
3.11 SPECIAL MEETINGS. Special meetings of the Board may be called by
the Chairman, the Vice Chairman, the Chief Executive Officer, the President or
the Secretary or by any two or more Directors then serving on at least one day's
notice to each Director given by one of the means specified in Section 3.14
hereof other than by mail, or on at least three days' notice if given by mail.
Special meetings shall be called by the Chairman, the Vice Chairman, the Chief
Executive Officer, the President or the Secretary in like manner and on like
notice on the written request of any two or more of the Directors then serving.
3.12 TELEPHONE MEETINGS. Directors or members of any committee
designated by the Board may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications equipment
by
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13
means of which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting.
3.13 ADJOURNED MEETINGS. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.14 NOTICE PROCEDURE. Subject to Sections 3.11 and 3.17 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these Bylaws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by mail
addressed to such Director at such Director's address as it appears on the
records of the Corporation, with postage thereon prepaid, or by telegram, telex,
telecopy or similar means addressed as aforesaid.
3.15 WAIVER OF NOTICE. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these Bylaws, a waiver thereof,
in writing, signed by the person or persons entitled to said notice, whether
before or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by statute,
the Certificate of Incorporation or these Bylaws.
3.16 ORGANIZATION. At each meeting of the Board, the Chairman, or in
the absence of the Chairman, the Vice Chairman, or in the absence of the Vice
Chairman, the Chief Executive Officer, or in the absence of the Chief Executive
Officer, the President, or in the absence of the President, a chairman chosen by
a majority of the Directors present, shall preside. The Secretary shall act as
secretary at each meeting of the Board. In case the Secretary shall be absent
from any meeting of the Board, an Assistant Secretary shall perform the duties
of secretary at such meeting; and in the absence from any such meeting of the
Secretary and all Assistant Secretaries, the person presiding at the meeting may
appoint any person to act as secretary of the meeting.
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14
3.17 QUORUM OF DIRECTORS. The presence in person of a majority of the
Entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
3.18 ACTION BY MAJORITY VOTE. Except as otherwise expressly required
by statute, the Certificate of Incorporation or these Bylaws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such 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 or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
4.1 GENERAL. The Board may, by resolution passed by a vote of a
majority of the Entire Board, designate one or more committees, each committee
to consist of one or more Directors. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. If a member of a
committee shall be absent from any meeting, or disqualified from voting thereat,
the remaining member or members present and not disqualified from voting,
whether or not such member or members constitute a quorum, may, by a unanimous
vote, appoint another member of the Board to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board passed as aforesaid, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be impressed on all papers that may require it, but no such
committee shall have the power or authority of the Board in reference to
amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation under section 251 or section 252 of the General Corporation Law,
recommending to the Stockholders (a) the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, or (b) a dissolution
of the Corporation or a revocation of a dissolution, or amending the Bylaws of
the Corporation; and, unless the resolution designating it expressly so
provides, no such committee shall have the power and authority to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law.
Unless otherwise specified in the
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15
resolution of the Board designating a committee, at all meetings of such
committee a majority of the total number of members of the committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of the members of the committee present at any meeting at which there is a
quorum shall be the act of the committee. Each committee shall keep regular
minutes of its meetings. Unless the Board otherwise provides, each committee
designated by the Board may make, alter and repeal rules for the conduct of its
business. In the absence of such rules each committee shall conduct its
business in the same manner as the Board conducts its business pursuant to
Article 3 of these Bylaws.
4.2 CLASS A NOMINATING COMMITTEE. The Board, by resolution adopted by
a majority of the entire Board, shall designate not less than two (2) of the
Directors then in office to constitute a Class A Nominating Committee; PROVIDED,
that at least a majority of such directors must be Class A Directors. The Class
A Nominating Committee shall: (i) establish criteria and procedures for the
election of the Class A Directors; (ii) review management's evaluation of any
officers proposed for nomination as Class A Directors; (iii) review the
qualifications of and, when necessary and appropriate, interview candidates who
may be proposed for nomination as Class A Directors; (iv) recommend to the
Entire Board a slate of Class A Directors to be elected for the following year;
and (v) perform such other duties in connection with the selection, election, or
termination of the Class A Directors as the Board may request.
For purposes of the Certificate of Incorporation and these Bylaws the
term "Class A Directors" shall mean the Directors elected by the holders of the
Class A Common Stock and the term "Class A Nominating Committee" shall mean the
standing committee of the Board charged with nominating Class A Directors.
4.3 CLASS B NOMINATING COMMITTEE. The Board, by resolution adopted
by a majority of the entire Board, shall designate not less than two (2) of the
directors then in office to constitute a Class B Nominating Committee; PROVIDED,
that at least a majority of such directors must be Class B Directors. The Class
B Nominating Committee shall: (i) establish criteria and procedures for the
election of the Class B Directors; (ii) review management's evaluation of any
officers proposed for nomination as Class B Directors; (iii) review the
qualifications of and, when necessary and appropriate, interview candidates who
may be proposed for nomination as Class B Directors; (iv) recommend to the
Entire Board a slate of Class B Directors to be elected for the following year;
and (v) perform such other duties in connection with the selection, election, or
termination of the Class B Directors as the Board may request.
For the purposes of the Certificate of Incorporation and these Bylaws
the term "Class B Directors" shall mean the Directors elected by the holders of
the
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Class B Common Stock and the term "Class B Nominating Committee" shall mean the
standing committee of the Board charged with nominating Class B Directors.
4.4 EXECUTIVE COMMITTEE. The Board of Directors shall, by
resolution passed by majority of the Entire Board, designate two or more of
their number to constitute an Executive Committee to hold office at the pleasure
of the Board. The Executive Committee shall have reasonable access during normal
working hours to all significant information (including all books and records)
respecting the Corporation and its assets. Subject to the provisions of the
General Corporation Law, the Executive Committee shall have and may exercise all
of the powers of the Board of Directors in the management and affairs of
Corporation including, without limitation, the power and authority to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger in connection with the merger of the Corporation and any of
its subsidiaries.
ARTICLE 5
OFFICERS
5.1 POSITIONS. The officers of the Corporation shall be a President,
a Secretary, a Treasurer and such other officers as the Board may appoint,
including a Chairman, a Vice Chairman, a Chief Executive Officer, a Chief
Operating Officer, one or more Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers, who shall exercise such powers and perform
such duties as shall be determined from time to time by the Board. The Board
may designate one or more Vice Presidents as Executive Vice Presidents or Senior
Vice Presidents and may use descriptive words or phrases to designate the
standing, seniority or areas of special competence of the Vice Presidents
elected or appointed by it. Any number of offices may be held by the same
person unless the Certificate of Incorporation or these Bylaws otherwise
provide.
5.2 APPOINTMENT. The officers of the Corporation shall be chosen by
the Board at its annual meeting or at such other time or times as the Board
shall determine.
5.3 COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that the officer
is also a Director.
5.4 TERM OF OFFICE. Each officer of the Corporation shall hold
office for the term for which he or she is elected and until such officer's
successor is chosen and qualifies or until such officer's earlier death,
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. Such
<PAGE>
17
resignation shall take effect at the date of receipt of such notice or at such
later time as is therein specified, and, unless otherwise specified, the
acceptance of such resignation shall not be necessary to make it effective. The
resignation of an officer shall be without prejudice to the contract rights of
the Corporation, if any. Any officer elected or appointed by the Board may be
removed at any time, with or without cause, by vote of a majority of the Entire
Board. Any vacancy occurring in any office of the Corporation shall be filled
by the Board. The removal of an officer without cause shall be without
prejudice to the officer's contract rights, if any. The election or appointment
of an officer shall not of itself create contract rights.
5.5 FIDELITY BONDS. The Corporation may secure the fidelity of any
or all of its officers or agents by bond or otherwise.
5.6 CHAIRMAN. The Chairman, if one shall have been appointed, shall
be a Director and shall preside at all meetings of the Board at which he is
present and shall exercise such powers and perform such other duties as shall be
determined from time to time by the Board.
5.7 VICE CHAIRMAN. The Vice Chairman, if one shall have been
appointed, shall exercise such powers and perform such other duties as shall be
determined from time to time by the Board.
5.8 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall have general supervision over the business of the Corporation,
subject, however, to the control of the Board and of any duly authorized
committee of Directors. The Chief Executive Officer shall preside at all
meetings of the Stockholders and at all meetings of the Board at which the
Chairman (if there be one) or the Vice Chairman (if there be one) is not
present. The Chief Executive Officer may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts and other instruments except in
cases in which the signing and execution thereof shall be expressly delegated by
the Board or by these Bylaws to some other officer or agent of the Corporation
or shall be required by statute otherwise to be signed or executed and, in
general, the Chief Executive Officer shall perform all duties incident to the
office of Chief Executive Officer of a corporation and such other duties as may
from time to time be assigned to the Chief Executive Officer by the Board.
5.9 PRESIDENT. At the request of the Chief Executive Officer, or, in
the Chief Executive Officer's absence, at the request of the Board, the
President, if one shall have been appointed, shall perform all of the duties of
the Chief Executive Officer and, in so performing, shall have all the powers of,
and be subject to all restrictions upon, the Chief Executive Officer. The
President may sign and execute in the name of the Corporation deeds, mortgages,
bonds, contracts or other instruments, except in cases in which the signing and
execution thereof shall be
<PAGE>
18
expressly delegated by the Board or by these Bylaws to some other officer or
agent of the Corporation, or shall be required by statute otherwise to be signed
or executed, and the President shall perform such other duties as from time to
time may be assigned to the President by the Board or by the Chief Executive
Officer.
5.10 CHIEF OPERATING OFFICER. At the request of the Chief Executive
Officer, or, in the Chief Executive Officer's absence, at the request of the
Board, the Chief Operating Officer, if one shall have been appointed, shall
perform all of the duties of the Chief Executive Officer and, in so performing,
shall have all the powers of, and be subject to all restrictions upon, the Chief
Executive Officer. The Chief Operating Officer may sign and execute in the name
of the Corporation deeds, mortgages, bonds, contracts or other instruments,
except in cases in which the signing and execution thereof shall be expressly
delegated by the Board or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by statute otherwise to be signed or executed,
and the Chief Operating Officer shall perform such other duties as from time to
time may be assigned to the Chief Operating Officer by the Board or by the Chief
Executive Officer.
5.11 VICE PRESIDENTS. Any Vice President may sign and execute in the
name of the Corporation deeds, mortgages, bonds, contracts or other instruments,
except in cases in which the signing and execution thereof shall be expressly
delegated by the Board or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by statute otherwise to be signed or executed,
and each Vice President shall perform such other duties as from time to time may
be assigned to such Vice President by the Board, by the Chief Executive Officer
or by the President.
5.12 SECRETARY. The Secretary shall attend all meetings of the Board
and of the Stockholders and shall record all the proceedings of the meetings of
the Board and of the Stockholders in a book to be kept for that purpose, and
shall perform like duties for committees of the Board, when required. The
Secretary shall give, or cause to be given, notice of all special meetings of
the Board and of the Stockholders and shall perform such other duties as may be
prescribed by the Board or by the Chief Executive Officer, under whose
supervision the Secretary shall be. The Secretary shall have custody of the
corporate seal of the Corporation, and the Secretary, or an Assistant Secretary,
shall have authority to impress the same on any instrument requiring it, and
when so impressed the seal may be attested by the signature of the Secretary or
by the signature of such Assistant Secretary. The Board may give general
authority to any other officer to impress the seal of the Corporation and to
attest the same by such officer's signature. The Secretary or an Assistant
Secretary may also attest all instruments signed by the Chief Executive Officer,
the President or any Vice President. The Secretary shall have charge of all the
books, records and papers of the Corporation relating to its organization and
management, shall see that the reports, statements and other documents required
by statute are properly kept and filed and, in general, shall perform all duties
incident to the office
<PAGE>
19
of Secretary of a corporation and such other duties as may from time to time be
assigned to the Secretary by the Board, by the Chief Executive Officer or by the
President.
5.13 TREASURER. The Treasurer shall have charge and custody of, and
be responsible for, all funds, securities and notes of the Corporation; receive
and give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys and valuable effects in the name and to the
credit of the Corporation in such depositaries as may be designated by the
Board; against proper vouchers, cause such funds to be disbursed by checks or
drafts on the authorized depositaries of the Corporation signed in such manner
as shall be determined by the Board and be responsible for the accuracy of the
amounts of all moneys so disbursed; regularly enter or cause to be entered in
books or other records maintained for the purpose full and adequate account of
all moneys received or paid for the account of the Corporation; have the right
to require from time to time reports or statements giving such information as
the Treasurer may desire with respect to any and all financial transactions of
the Corporation from the officers or agents transacting the same; render to the
Chief Executive Officer or the Board, whenever the Chief Executive Officer or
the Board shall require the Treasurer so to do, an account of the financial
condition of the Corporation and of all financial transactions of the
Corporation; exhibit at all reasonable times the records and books of account to
any of the Directors upon application at the office of the Corporation where
such records and books are kept; disburse the funds of the Corporation as
ordered by the Board; and, in general, perform all duties incident to the office
of Treasurer of a corporation and such other duties as may from time to time be
assigned to the Treasurer by the Board, the Chief Executive Officer or by the
President.
5.14 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Board or by the Chief Executive Officer.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 EXECUTION OF CONTRACTS. The Board, except as otherwise provided
in these Bylaws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 LOANS. The Board may prospectively or retroactively authorize
the Chief Executive Officer or any other officer, employee or agent of the
<PAGE>
20
Corporation to effect loans and advances at any time for the Corporation from
any bank, trust company or other institution, or from any firm, corporation or
individual, and for such loans and advances the person so authorized may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, and, when authorized by the Board so to do,
may pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority
conferred by the Board may be general or confined to specific instances, or
otherwise limited.
6.3 CHECKS, DRAFTS, ETC. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 DEPOSITS. The funds of the Corporation not otherwise employed
shall be deposited from time to time to the order of the Corporation with such
banks, trust companies, investment banking firms, financial institutions or
other depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 CERTIFICATES REPRESENTING SHARES. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
Chief Executive Officer, the Chief Operating Officer or a Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and may be impressed with the seal of the Corporation or a facsimile
thereof. The signatures of the officers upon a certificate may be facsimiles,
if the certificate is countersigned by a transfer agent or registrar other than
the Corporation itself or its employee. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, such certificate may, unless otherwise
ordered by the Board, be issued by the Corporation with the same effect as if
such person were such officer, transfer agent or registrar at the date of issue.
7.2 TRANSFER OF SHARES. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on
<PAGE>
21
surrender of the certificate or certificates representing such shares of capital
stock properly endorsed for transfer and upon payment of all necessary transfer
taxes. Every certificate exchanged, returned or surrendered to the Corporation
shall be marked "Canceled," with the date of cancellation, by the Secretary or
an Assistant Secretary or the transfer agent of the Corporation. A person in
whose name shares of capital stock shall stand on the books of the Corporation
shall be deemed the owner thereof to receive dividends, to vote as such owner
and for all other purposes as respects the Corporation. No transfer of shares
of capital stock shall be valid as against the Corporation, its Stockholders and
creditors for any purpose, except to render the transferee liable for the debts
of the Corporation to the extent provided by law, until such transfer shall have
been entered on the books of the Corporation by an entry showing from and to
whom transferred.
7.3 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to
time maintain one or more transfer offices or agents and registry offices or
agents at such place or places as may be determined from time to time by the
Board.
7.4 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. The holder
of any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 RULES AND REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws or with
the Certificate of Incorporation, concerning the issue, transfer and
registration of certificates representing shares of its capital stock.
7.6 RESTRICTION ON TRANSFER OF STOCK. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like
<PAGE>
22
responsibility for the person or estate of the holder. Unless noted
conspicuously on the certificate representing such capital stock, a restriction,
even though permitted by Section 202 of the General Corporation Law, shall be
ineffective except against a person with actual knowledge of the restriction. A
restriction on the transfer or registration of transfer of capital stock of the
Corporation may be imposed either by the Certificate of Incorporation or by an
agreement among any number of Stockholders or among such Stockholders and the
Corporation. No restriction so imposed shall be binding with respect to capital
stock issued prior to the adoption of the restriction unless the holders of such
capital stock are parties to an agreement or voted in favor of the restriction.
7.7 DIVIDENDS, SURPLUS, ETC. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such amounts
and at such time or times as it, in its discretion, shall deem advisable
giving due consideration to the condition of the affairs of the
Corporation;
7.7.2 may use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any shares of capital
stock of the Corporation, or purchase warrants therefor, in accordance with
law, or any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.7.3 may set aside from time to time out of such surplus or
net profits such sum or sums as, in its discretion, it may think proper, as
a reserve fund to meet contingencies, or for equalizing dividends or for
the purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or
<PAGE>
23
officer of any other corporation or in a capacity with comparable authority or
responsibilities for any partnership, joint venture, trust, employee benefit
plan or other enterprise (an "Other Entity"), against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and
expenses (including attorneys' fees, disbursements and other charges). Persons
who are not Directors or officers of the Corporation (or otherwise entitled to
indemnification pursuant to the preceding sentence) may be similarly indemnified
in respect of service to the Corporation or to an Other Entity at the request of
the Corporation to the extent the Board at any time specifies that such persons
are entitled to the benefits of this Article 8.
8.2 ADVANCEMENT OF EXPENSES. The Corporation shall, from time to
time, reimburse or advance to any Director or officer or other person entitled
to indemnification hereunder the funds necessary for payment of expenses,
including attorneys' fees and disbursements, incurred in connection with any
Proceeding, in advance of the final disposition of such Proceeding; PROVIDED,
HOWEVER, that, if required by the General Corporation Law, such expenses
incurred by or on behalf of any Director or officer or other person may be paid
in advance of the final disposition of a Proceeding only upon receipt by the
Corporation of an undertaking, by or on behalf of such Director or officer (or
other person indemnified hereunder), to repay any such amount so advanced if it
shall ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
8.3 RIGHTS NOT EXCLUSIVE. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, the Certificate of
Incorporation, these Bylaws, any agreement, any vote of Stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8.4 CONTINUATION OF BENEFITS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the
<PAGE>
24
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article 8, the Certificate of Incorporation or
under section 145 of the General Corporation Law or any other provision of law.
8.6 BINDING EFFECT. The provisions of this Article 8 shall be a
contract between the Corporation, on the one hand, and each Director and officer
who serves in such capacity at any time while this Article 8 is in effect and
any other person entitled to indemnification hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be, and shall be legally bound. No repeal or modification of
this Article 8 shall affect any rights or obligations with respect to any state
of facts then or theretofore existing or thereafter arising or any proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
8.7 PROCEDURAL RIGHTS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board, its
independent legal counsel and its Stockholders) to have made a determination
prior to the commencement of such action that such indemnification or
reimbursement or advancement of expenses is proper in the circumstances nor an
actual determination by the Corporation (including its Board, its independent
legal counsel and its Stockholders) that such person is not entitled to such
indemnification or reimbursement or advancement of expenses shall constitute a
defense to the action or create a presumption that such person is not so
entitled. Such a person shall also be indemnified for any expenses incurred in
connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
8.8 SERVICE DEEMED AT CORPORATION'S REQUEST. Any Director or officer
of the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
8.9 ELECTION OF APPLICABLE LAW. Any person entitled to be
indemnified or to reimbursement or advancement of expenses as a matter of right
pursuant to this Article 8 may elect to have the right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding, to the extent permitted by law, or on
the basis of the applicable law in effect at the
<PAGE>
25
time such indemnification or reimbursement or advancement of expenses is sought.
Such election shall be made, by a notice in writing to the Corporation, at the
time indemnification or reimbursement or advancement of expenses is sought;
PROVIDED, HOWEVER, that if no such notice is given, the right to indemnification
or reimbursement or advancement of expenses shall be determined by the law in
effect at the time indemnification or reimbursement or advancement of expenses
is sought.
ARTICLE 9
BOOKS AND RECORDS
9.1 BOOKS AND RECORDS. There shall be kept at the principal office
of the Corporation correct and complete records and books of account recording
the financial transactions of the Corporation and minutes of the proceedings of
the Stockholders, the Board and any committee of the Board. The Corporation
shall keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
Stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
9.2 FORM OF RECORDS. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
9.3 INSPECTION OF BOOKS AND RECORDS. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
Stockholders for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
<PAGE>
26
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and may be changed,
by resolution of the Board.
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the Vice
Chairman, the Chief Executive Officer, the Chief Operating Officer, the
President, any Vice President, the Secretary or the Treasurer, or any one of
them, may execute and deliver on behalf of the Corporation proxies respecting
any and all shares or other ownership interests of any Other Entity owned by the
Corporation appointing such person or persons as the officer executing the same
shall deem proper to represent and vote the shares or other ownership interests
so owned at any and all meetings of holders of shares or other ownership
interests, whether general or special, and/or to execute and deliver consents
respecting such shares or other ownership interests; or any of the aforesaid
officers may attend any meeting of the holders of shares or other ownership
interests of such Other Entity and thereat vote or exercise any or all other
powers of the Corporation as the holder of such shares or other ownership
interests.
ARTICLE 13
EMERGENCY BYLAWS
Unless the Certificate of Incorporation provides otherwise, the
following provisions of this Article 13 shall be effective during an emergency,
which is defined as when a quorum of the Corporation's Directors cannot be
readily assembled because of some catastrophic event. During such emergency:
13.1 NOTICE TO BOARD MEMBERS. Any one member of the Board or any one
of the following officers: Chairman, Vice Chairman, Chief Executive Officer,
Chief Operating Officer, President, any Vice President, Secretary, or Treasurer,
may call a meeting of the Board. Notice of such meeting need be given only to
those Directors whom it is practicable to reach, and may be given in any
practical manner, including by publication and radio. Such notice shall be
given at least six hours prior to commencement of the meeting.
13.2 TEMPORARY DIRECTORS AND QUORUM. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in
<PAGE>
27
order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 ACTIONS PERMITTED TO BE TAKEN. The Board as constituted in
Section 13.2, and after notice as set forth in Section 13.1 may:
13.3.1 prescribe emergency powers to any officer of the
Corporation;
13.3.2 delegate to any officer or Director, any of the powers of
the Board;
13.3.3 designate lines of succession of officers and agents, in
the event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other convenient, helpful or necessary action to
carry on the business of the Corporation.
ARTICLE 14
AMENDMENTS
These Bylaws may be amended or repealed and new Bylaws may be adopted
by a vote of the holders of shares entitled to vote in the election of Directors
or by the Board. Any Bylaws adopted or amended by the Board may be amended or
repealed by the Stockholders entitled to vote thereon.
<PAGE>
BIG CITY RADIO, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CLASS A COMMON STOCK
CUSIP
THIS IS TO CERTIFY THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON
STOCK, $.01 PAR
VALUE PER SHARE, OF
BIG CITY RADIO, INC.
transferable on the books of the Corporation by the registered holder hereof in
person or by its duly authorized attorney, upon surrender of this certificate
properly endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Amended and Restated Certificate of
Incorporation, as amended, of the Corporation (a copy of which is on file with
the Transfer Agent) to all of which the holder of this certificate, by
acceptance hereof, assents.
This certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its authorized officers.
Dated:
SECRETARY
PRESIDENT
<PAGE>
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE>
EXHIBIT 5.1
[Paul, Weiss, Rifkind, Wharton & Garrison Letterhead]
December __, 1997
Big City Radio, Inc.
11 Skyline Drive
Hawthorne, New York 10532
Big City Radio, Inc.
Registration Statement on Form S-1
REGISTRATION NO. 333-36449
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-1, as the same
may be amended from time to time (the "Registration Statement"), filed by Big
City Radio, Inc., a Delaware corporation (the "Company"), with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder (the "Rules"), we
have been requested by the Company to render our opinion as to the legality of
the Company's 4,600,000 shares of Class A Common Stock, par value $0.01 per
share
<PAGE>
Big City Radio, Inc. 2
(the "Class A Common Stock"), offered by the Company (including up to 600,000
shares to be sold upon exercise of the Underwriters' over-allotment option),
registered for sale thereunder (collectively, the "Shares"). Capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Registration Statement.
In connection with the furnishing of this opinion, we have reviewed
the Registration Statement (including all amendments thereto), the form of the
Underwriting Agreement included as Exhibit 1.1 to the Registration Statement
(the "Underwriting Agreement"), originals, or copies certified or otherwise
identified to our satisfaction, of the Company's Amended and Restated
Certificate of Incorporation and Amended and Restated By-laws, each as in effect
on the date hereof, and records of certain of the Company's corporate
proceedings. We have also examined and relied upon representations as to
factual matters contained in certificates of officers of the Company, and have
made such other investigations of fact and law and have examined and relied upon
the originals, or copies certified or otherwise identified to our satisfaction,
of such documents, records, certificates or other instruments, and upon such
factual information otherwise supplied to us, as in our judgment are necessary
or appropriate to render the opinion expressed below. In addition, we have
assumed, without independent investigation, the genuineness of all signatures,
the enforceability of all documents against each party thereto, the authenticity
of all
<PAGE>
Big City Radio, Inc. 3
documents submitted to us as originals and the conformity to the original
documents of all documents submitted to us as certified, photostatic, reproduced
or conformed copies of valid existing agreements or other documents, the
authenticity of all such latter documents and the legal capacity of all
individuals who have executed any of the documents.
Based upon the foregoing, we are of the opinion that the Shares, when
issued, delivered and paid for as contemplated in the Registration Statement and
the Underwriting Agreement, will be duly authorized, validly issued, fully paid
and nonassessable.
Our opinion expressed above is limited to the General Corporation Law
of the State of Delaware. Please be advised that no member of this firm is
admitted to practice in the State of Delaware. Our opinion is rendered only
with respect to the laws, and the rules, regulations and orders thereunder,
which are currently in effect.
<PAGE>
Big City Radio, Inc. 4
We hereby consent to use of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" contained in the Prospectus included in the Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required by the Act or the Rules.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE>
Exhibit 10.1
BIG CITY RADIO, INC.
1997 INCENTIVE STOCK PLAN
-------------------------
1. PURPOSE. The purposes of the Big City Radio, Inc. Incentive Stock
Plan are, in general, to give the Company a significant advantage in retaining
key employees, officers and directors, and to provide an incentive to selected
key employees, officers and directors of the Company and its subsidiaries,
within the meaning of Code Section 424(f), who have substantial responsibility
in the direction of the Company and its subsidiaries, and others whom the Board
(or, following its appointment, the Committee) determines provide substantial
and important services to the Company, to acquire a proprietary interest in the
Company, to continue as employees, officers and directors or in their other
capacities, and to increase their efforts on behalf of the Company.
2. DEFINITIONS. Unless the context clearly indicates to the contrary,
the following terms, when used in the Plan, shall have the meanings set forth in
this Section 2.
"Act" shall mean the Securities Act of 1933, as amended from time to
time.
"Award" means any Option.
"Board" means the Board of Directors of the Company.
"Change in Control" means an event that shall be deemed to have
occurred as of the first day any one or more of the following have been
satisfied:
(a) any event whereby a Person (other than (i) the Company or an
affiliate, as defined in the Exchange Act, or (ii) any employee
benefit plan or trust sponsored or maintained by the Company or
an affiliate, as defined in the Exchange Act) (x) acquires 50% or
more of the Company's outstanding
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voting securities, or (y) acquires (in one transaction or in a
series of related transactions) a subsidiary, business unit,
segment or division of the Company as defined by the Board (or,
following its appointment, the Committee) (provided, however,
that in such event a Change in Control shall be deemed to occur
only with respect to employees of such subsidiary, business unit,
segment or division and who cease to be employees of the Company
or of any "affiliate" of the Company). For purposes of this
subsection an "affiliate" shall mean any member of the same
controlled group (as defined in Code Sections 414(b)-(o)
inclusive) with the Company. "Person" shall have the same meaning
as ascribed to such term in Section 3(a)(9) of the Exchange Act
and used in Section 13(d) thereof;
(b) a change in the composition of the Board such that at any time a
majority of the Board shall not have been members of the Board
for twenty-four (24) months; provided, however, that directors
who were appointed or nominated for election by at least
two-thirds of the directors who were directors at the beginning
of such twenty-four (24) month period (or deemed to be such
directors under this subparagraph) shall be deemed to be
directors at the beginning of such twenty-four (24) month period
for the purposes of this subparagraph;
(c) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; or
(d) any consolidation or merger of the Company, other than a merger
or consolidation of the Company in which the voting securities of
the Company
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outstanding immediately prior thereto continue to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 50% of the
combined voting power of the voting securities of the Company, or
such surviving entity, outstanding immediately after such merger
or consolidation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean the Committee described in Section 11 of the
Plan.
"Common Stock" shall mean $.01 par value common stock of the Company.
"Company" shall mean Big City Radio, Inc. or any successor company
thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" shall mean the closing price of publicly traded
Common Stock on the national securities exchange on which the Common Stock is
listed (if the Common Stock is so listed) or on the NASDAQ National Market
System (if the Common Stock is regularly quoted on the NASDAQ National Market
System), or, if not so listed or regularly quoted, the mean between the closing
bid and asked prices of publicly traded Common Stock in the over-the-counter
market, or, if such bid and asked prices shall not be available, as reported by
any nationally recognized quotation service selected by the Company, or as
determined by the Board (or, following its appointment, the Committee) in a
manner consistent with the provisions of the Code.
"Grantee" shall mean any key employee, officer or director of the
Company or a subsidiary of the Company, within the meaning of Code Section
424(f), as determined by the Board (or, following its appointment, the
Committee) who has substantial responsibility in the direction of the Company
and its subsidiaries, and anyone else whom the Board (or, following its
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appointment, the Committee) determines provides substantial and important
services to the Company who is granted an Award under the Plan.
"Incentive Stock Option" or "ISO" shall mean any stock option as
defined in Code Section 422.
"Independent Director" shall mean any member of the Board who during
his entire term as a director was not employed by the Company and its
subsidiaries within the meaning of Code Section 424(f), and who also satisfies
the criteria for "outside director" under Code Section 162(m).
"Non-Qualified Stock Option" or "NQSO" shall mean an option other than
an Incentive Stock Option.
"Option" shall mean ISOs and NQSOs, collectively.
"Plan" shall mean the Big City Radio, Inc. 1997 Incentive Stock Plan.
"Reporting Person" shall mean any person subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to equity
securities of the Company.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act, or any successor
thereto, that excepts transactions under employee benefit plans, as in effect
from time to time.
3. TYPES OF AWARDS. The Plan provides for Incentive Stock Options and
Non-Qualified Stock Options. Except as provided herein, a particular form of
Award may be granted either alone or in addition to other grants hereunder. The
provisions of the particular forms of grants need not be the same with respect
to each recipient.
ISOs may be awarded to employees of the Company and its subsidiaries,
within the meaning of Code Section 424(f), including employees who are officers
and directors, but shall not be issued to directors or others who are not
employees.
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NQSOs may be awarded to employees and directors, including directors
who are not employees of the Company and its subsidiaries, within the meaning of
Code Section 424(f), and including members of the Committee and anyone whom the
Board (or, following its appointment, the Committee) administering the Plan
pursuant to Section 11 determines provides substantial and important services to
the Company. Options will consist of the maximum number of ISOs that may be
issued to a Grantee under applicable law, with the balance (if any) of the
Options being NQSO's.
4. TERM OF PLAN.
(a) EFFECTIVE DATE. This Plan shall become effective as of the date
of adoption thereof by the Board; provided, however, that the Plan shall be
submitted for approval by the stockholders of the Company no earlier than twelve
(12) months prior to, and no later than twelve (12) months after, the date of
adoption of the Plan by the Board.
(b) TERMINATION DATE. This Plan shall terminate on the earliest of:
(i) The tenth anniversary of the effective date as determined
under this Section 4;
(ii) The date when all shares of the Common Stock reserved for
issuance under the Plan, shall have been acquired through
exercise of any Awards granted under the Plan; or
(iii) Such earlier date as the Board may determine.
Any Award outstanding under the Plan at the time of its termination shall remain
in effect in accordance with its terms and conditions and those of the Plan.
5. THE STOCK. Subject to adjustment as provided in Section 9, the
aggregate number of shares of Common Stock which may be issued under the Plan
shall be 92 shares; provided, however, that the maximum number of shares of
Common Stock available with respect to the
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Awards granted by the Board (or, following its appointment, the Committee) to
any one Grantee under the Plan, in the aggregate, shall not exceed 13.14. Such
number of shares of Common Stock may be set aside out of the authorized but
unissued shares of Common Stock not reserved for any other purpose or out of
shares of Common Stock held in or acquired for the treasury of the Company. The
Company, during the term of the Plan, will at all times reserve and keep
available such number of shares of Common Stock as shall be sufficient to
satisfy the requirements of the Plan. All or any shares of Common Stock
subjected under this Plan to an Award which, for any reason, terminates
unexercised as to such shares, may again be subjected to an Award under the
Plan. In addition to the foregoing, shares surrendered to the Company by, or on
behalf of, a Grantee in payment of the exercise price or applicable taxes upon
exercise may also be used thereafter for additional Awards.
6. STOCK OPTIONS.
(a) GRANTS. Options may be granted by the Committee at any time and
from time to time prior to the termination of the Plan or by the Board pending
the formation of the Committee. Each Option granted under the Plan shall be
evidenced by an agreement in a form approved by the Committee or by the Board
pending the formation of the Committee. The terms and conditions of such Option
agreement need not be identical with respect to each Grantee, but each Option
agreement will evidence on its face whether it is an ISO, a NQSO, or both. For
purposes of this Section, an Option shall be deemed granted on the date the
Board (or, following its appointment, the Committee) selects an individual to be
a Grantee, determines the number of shares to be issued pursuant to such Option
and specifies the terms and conditions of the Option. Except as hereinafter
provided, Options granted pursuant to the Plan shall be subject to the following
terms and conditions set forth in this Section 6. Independent Directors who
serve on the Board on the date this Plan is
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adopted shall be entitled to receive Awards under the Plan with respect to
shares of Common Stock, each having an exercise price equal to the Fair Market
Value of a share on the date of grant. Any other Independent Director who first
serves on the Board subsequent to the date the Plan was adopted shall be
entitled to receive Awards under the Plan, upon his initial election to the
Board, with respect to .3285151 shares of Common Stock, each having an exercise
price equal to the Fair Market Value of a share on the date of grant; and
thereafter, annually on the date of each annual stockholder's meeting, Awards
with respect to .3285151 shares of Common Stock (subject to an overall 3.2851511
shares of Common Stock limit), each having an exercise price equal to the Fair
Market Value of a share on the date of grant. All Options awarded to
Independent Directors shall be immediately exercisable.
(b) PRICE AND EXERCISE. The purchase price of the shares of Common
Stock upon exercise of an ISO shall be no less than the Fair Market Value of the
shares of Common Stock at the time of grant of an ISO; provided, however, if an
ISO is granted to a person owning either directly (or through application of the
attribution rules under Code Section 318) shares of Common Stock of the Company
possessing more than 10% of the total combined voting power of all classes of
shares of Common Stock of the Company as defined in Code Section 422 ("10%
Stockholder"), the purchase price shall be equal to 110% of the Fair Market
Value of the shares of Common Stock. The purchase price of the shares of Common
Stock upon exercise of a NQSO may be any price set by the Board (or, following
its appointment, the Committee).
The purchase price shall be paid in United States dollars in cash or
by certified or cashier's check payable to the order of the Company at the time
of purchase. At the discretion of the Board (or, following its appointment, the
Committee) the purchase price may be paid with: (i) shares of Common Stock
already owned by, and in the possession of, the Grantee; or (ii) any
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combination of United States dollars or shares of Common Stock of the Company.
Any required withholding tax shall be paid by the Grantee in full, in accordance
with the provisions of Section 12. Shares of Common Stock of the Company used
to satisfy the purchase price of an Option shall be valued at their Fair Market
Value. The purchase price shall be subject to adjustment, but only as provided
in Section 9 hereof.
Any vested Option may be exercised in full at one time by giving
written notice to the Company, which notice shall be signed and dated by the
Grantee and shall state the number of shares of Common Stock with respect to
which the Option is being exercised. The notice of the exercise of any Option
shall be accompanied by payment in full of the purchase price. If required by
the Company, such notice of exercise of an Option shall be accompanied by the
Grantee's written representation in accordance with Section 21. Upon such
demand, delivery of such representation prior to the delivery of any Common
Stock issued upon exercise of an Option shall be a condition precedent to the
right of the Grantee or such other person to purchase any shares of Common
Stock.
(c) VESTING. Options shall vest in accordance with the schedule
established for each Grantee; provided, however, that all Options awarded to a
Grantee shall vest immediately upon said Grantee's death or retirement as
defined herein. The Committee may accelerate the vesting schedule of any Award
other than in the event of a Change in Control. Prior to the formation of the
Committee the Board may accelerate the vesting schedule of any Award.
(d) ADDITIONAL RESTRICTIONS ON EXERCISE OF AN ISO. The aggregate
Fair Market Value of Common Stock (determined at the time an ISO is granted) for
which an ISO is exercisable for the first time by a Grantee during any calendar
year (under all plans of the Company and its subsidiaries or parent) shall not
exceed $100,000 or such other amount as may be prescribed under the Code or
applicable regulations and rulings from time to time. To the extent that the
aggregate
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Fair Market Value of Common Stock (determined at the time an ISO is granted)
with respect to Options designated as ISOs exercisable for the first time by a
Grantee during any calendar year (under all plans of the Company and its
subsidiaries or parent) exceeds $100,000, such Options shall be treated as
NQSOs. The foregoing shall be applied by taking Options into account in the
order in which they were granted.
(e) DURATION OF OPTIONS. Options may be granted for terms of up to
but not exceeding ten (10) years from the effective date the particular Option
is granted; provided, however, that an ISO granted to a 10% Stockholder may be
granted for a term not exceeding five (5) years from the effective date the
particular ISO is granted.
If the stockholders of the Company have not approved the adoption of
the Plan prior to the end of one (1) year from the date the Plan is approved by
the Board, any Option granted under the Plan prior to such date shall be null
and void and the Company shall rescind the issuance of any shares of Common
Stock issued upon the exercise of such Options by a Grantee prior to such date.
In the event of such rescission, the Company shall refund the price paid per
share of Common Stock by the Grantee upon exercise of the Options upon receipt
of the certificate representing such shares.
(f) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Board (or,
following its appointment, the Committee) may modify, extend or renew
outstanding Options granted under the Plan, or accept the surrender of
outstanding Options (up to the extent not theretofore exercised) and authorize
the granting of new Options in substitution therefor (up to the extent not
theretofore exercised). In addition to the limitations set forth in Section 15,
the Board (or, following its appointment, the Committee) shall not, however,
with respect to ISOs, modify any outstanding Award so as to specify a lower
Award price or accept the surrender of outstanding Awards and authorize the
granting of
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<PAGE>
new Awards in substitution therefor specifying a lower price. Notwithstanding
the foregoing or anything herein, no modification of an Award shall, without the
consent of the Grantee, alter or impair any rights or obligations under any
Award theretofore granted under the Plan nor shall any modification be made
which shall adversely affect the status of an ISO under Code Section 422;
provided, however, that any such provision shall remain in effect with respect
to other Awards, and there shall be no further effect on the Plan.
(g) OTHER TERMS AND CONDITIONS. Awards may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms, as
the Board (or, following its appointment, the Committee) shall deem appropriate.
7. TERMINATION OF EMPLOYMENT.
Upon the termination of a Grantee's employment with the Company, any
Award then held by such Grantee or Grantee's estate may only be exercised as
follows:
(a) RETIREMENT. If the Grantee's employment is terminated
because he or she has attained age 65, or in accordance with the age
specified in an employment agreement with a Grantee, he or she may
within three (3) months following such termination, exercise the Award
to the extent such Award is otherwise exercisable. However, in the
event of his or her death prior to the end of the three (3) month
period after the aforesaid termination of his or her employment, his
or her estate shall have the right to exercise the Award within one
(1) year (but in no event after the scheduled expiration of the term
of the Award) following such termination with respect to all or any
part of the stock subject thereto, to the extent such Award is
exercisable.
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<PAGE>
(b) DEATH. If the Grantee's employment with the Company is
terminated by death, his or her estate shall have the right to
exercise the Award within one (1) year (but in no event after the
scheduled expiration of the term of the Award) following such
termination with respect to all or any part of the stock subject
thereto, to the extent such Award is exercisable.
(c) DISABILITY. If the Grantee's employment with the Company is
terminated by disability, as defined in Code Section 22(e)(3), he or
she or his or her legal representative shall have the right for a
period of one (1) year (but in no event after the scheduled expiration
of the term of the Award) following the date of such termination of
employment to exercise any Award with respect to all or any part of
the stock subject thereto, to the extent such Award is exercisable.
(d) OTHER REASONS. If the Grantee's employment with the Company
is terminated for any reason other than those provided above under
"Retirement", "Death" or "Disability", the Grantee or Grantee's estate
in the event of his or her death shall have the right for a period of
three (3) months (but in no event after the scheduled expiration of
the term of the Award) following the date of such termination of
employment to exercise any Award, with respect to all or any part of
the stock subject thereto, to the extent such Award is exercisable.
All other Awards may be exercised within such other period of time as
determined by the Board (or, following its appointment, the Committee)
in its sole discretion.
For purposes of this Section 7, "termination of employment" shall mean
the termination of a Grantee's employment with the Company or a subsidiary or a
parent within the meaning of Code Section 424. A Grantee employed by a
subsidiary shall also be deemed to have
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a termination of employment if the subsidiary ceases to be a subsidiary of the
Company, and the Grantee does not immediately thereafter become an employee of
the Company or of a subsidiary or of a parent. A Grantee who is a member of the
Board but who is not also an employee of the Company shall be considered to have
terminated his or her employment at such time as he or she is no longer a member
of the Board. Any other Grantee who is not otherwise an employee of the Company
shall be considered to have terminated employment when substantial services, as
determined by the Committee, are no longer provided to the Company by the
Grantee.
Also for purposes of this Section 7, a Grantee's "estate" shall mean
his or her legal representatives upon his or her death or any person who
acquires the right to exercise an Award by reason of the Grantee's death. The
Board (or, following its appointment, the Committee) may in its discretion
require the transferee of a Grantee to supply it with written notice of the
Grantee's death or disability and to supply it with a copy of the will (in the
case of the Grantee's death) or such other evidence as the Board (or, following
its appointment, the Committee) deems necessary to establish the validity of the
transfer of an Option.
If a Grantee's employment with the Company is terminated after a
Change in Control, the provisions of Section 8 shall supersede the provisions of
this Section 7.
8. CHANGE IN CONTROL. In the event of a Change in Control and at the
sole discretion of the Board, each Grantee with an outstanding Option shall have
the right at any time thereafter to exercise the Option in full notwithstanding
any waiting period, installment period or other limitation or restriction in any
agreement or in the Plan.
9. ADJUSTMENT OF THE CHANGES IN THE STOCK.
(a) If, after the date of adoption of the Plan by the Board, the
Common Stock is reclassified into 7,610 shares of Class A common stock per share
of Common Stock, then the
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number of shares referenced in Sections 5 and 6 of the Plan, the number and
character of shares of Common Stock subject to outstanding Awards and/or the
exercise price of such shares will be appropriately adjusted.
(b) The total number and character of shares of Common Stock subject
to Awards, the number and character of shares of Common Stock subject to
outstanding Awards and/or the exercise price of such shares will be
appropriately adjusted by the Board (or, following its appointment, the
Committee) if the shares of Common Stock are changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
(other than as described in subsection (a)) or of another corporation (whether
by reason of merger, consolidation, recapitalization, reclassification, split,
reverse split, combination of shares, or otherwise. The Board (or, following
its appointment, the Committee) may also make appropriate adjustments in the
event of a merger, consolidation, or other transaction or event having a similar
effect.
(c) The Company shall not be required to issue any fractional shares
of Common Stock pursuant to the Plan. Fractional shares resulting from any
adjustment in Awards pursuant to this Section 9 may be settled in cash or
otherwise as the Board shall determine.
(d) Notice of any adjustment shall be given by the Company to each
holder of an Award which shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.
(e) If another corporation is merged into the Company or the Company
otherwise acquires another corporation, the Board may elect to assume under the
Plan any or all outstanding stock options or other awards granted by such
corporation under any stock option or other plan adopted by it prior to such
acquisition. Such assumptions shall be on such terms and conditions as the
Board (or, following its appointment, the Committee) may determine; provided,
however, that
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the awards as so assumed do not contain any terms, conditions or rights that are
inconsistent with the terms of this Plan. Unless otherwise determined by the
Board, such awards shall not be taken into account for purposes of the
limitations contained in Section 5 of the Plan.
10. TRANSFERABILITY OF AWARDS. An Award shall be transferable only by
will or the laws of descent and distribution and shall be exercisable during the
Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee under state law and court supervision. An Award is not subject, in
whole or in part, to attachment, execution or levy of any kind.
11. ADMINISTRATION.
(a) The Plan shall be initially administered by the Board until the
appointment of the Committee. The Plan shall thereafter be administered by the
Committee appointed by the Board which shall be composed of not less than two
(2) members of the Board, each of whom shall be a "Non-Employee Director" within
the meaning of Rule 16b-3 and an "outside director" within the meaning of
Proposed Treasury Regulation Section 1.162-27(e)(3) or such other regulations as
may be issued in proposed, temporary or final form under Code Section 162(m).
(b) The Board (or, following its appointment, the Committee) shall
act by a majority of its members at the time in office and eligible to vote on
any particular matter, and such action may be taken either by a vote at a
meeting or in writing without a meeting.
(c) Subject to the provisions of the Plan, the Board (or, following
its appointment, the Committee) shall from time to time and at its discretion
take the following actions:
(i) grant Awards;
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(ii) determine which employees, officers, directors and other
individuals performing substantial and important services
may be granted Awards under the Plan;
(iii) determine the type of awards to be granted;
(iv) determine the number of shares subject to each Award;
(v) determine the term of each Award granted under the Plan;
(vi) determine the date or dates on which the Award granted shall
be exercisable;
(vii) determine the exercise price of any Award granted;
(viii) determine the Fair Market Value of the Common Stock subject
to the Awards granted;
(ix) determine the terms of any agreement pursuant to which
Awards are granted;
(x) amend any such agreement with the consent of the Grantee;
(xi) extend the exercise period of any Award;
(xii) accelerate the vesting period of any Award except in the
event of a Change in Control;
(xiii) establish performance-based goals within the meaning of Code
Section 162(m);
(xiv) establish such procedures as it deems appropriate for a
recipient of an Award hereunder to designate a beneficiary
to whom any benefits payable in the event of his or her
death are to be made; and
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(xv) determine any other matters specifically delegated to it
under the Plan or necessary for the proper administration of
the Plan.
The Board (or, following its appointment, the Committee) shall also
have the final authority and discretion to interpret and construe the terms of
the Plan and of any Award granted and such interpretation and construction by
the Board (or, following its appointment, the Committee) shall be final, binding
and conclusive upon all persons including, without limitation, the Company,
stockholders of the Company or any subsidiary, the Plan, and all persons
claiming an interest in the Plan. Notwithstanding anything contained in this
Section 11 to the contrary, no term of the Plan relating to ISOs shall be
interpreted, nor shall any discretion or authority of the Board (or, following
its appointment, the Committee) be exercised, so as to disqualify the Plan under
Code Section 422 or, without the consent of the Grantee, to disqualify any ISO
under Code Section 422 or in a manner inconsistent with Rule 16b-3.
(d) No member of the Committee or director of the Board shall be
liable for any action, interpretation or construction made in good faith with
respect to the Plan or any Award granted hereunder.
12. TAX WITHHOLDING. It shall be a condition to the obligation of the
Company to deliver shares or securities of the Company upon exercise of an
Award, that the Grantee of such Award pay to the Company such amount as may be
requested by the Company for the purpose of satisfying any liability for such
withholding taxes. The Board (or, following its appointment, the Committee) may,
in its sole discretion, permit the Grantee of an Award, in accordance with any
applicable regulations of the authority issuing such regulations, to pay a
portion or all of the amount of such minimum required or additional permitted
withholding taxes in shares. At the Board's (or, following its appointment, the
Committee's) sole discretion, the Grantee shall be permitted to authorize the
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Company to withhold, or shall agree to surrender back to the Company, on or
about the date such withholding tax liability is determinable, shares previously
owned by such Grantee or a portion of the shares that were or otherwise would be
distributed to such Grantee pursuant to such Award having a Fair Market Value
equal to the amount of such required or permitted withholding taxes to be paid
in shares.
13. SECURITIES LAW REQUIREMENTS.
(a) No Award granted pursuant to this Plan shall be exercisable in
whole or in part, nor shall the Company be obligated to acquire or sell any
shares of Common Stock subject to any such Option, if such exercise, acquisition
and sale would, in the opinion of counsel for the Company, violate the Act (or
other federal or state statutes having similar requirements), as it may be in
effect at that time. In this regard, the Board (or, following its appointment,
the Committee) may demand the representations described in Sections 6(b) and 21.
(b) Each Award shall be subject to the further requirement that, if
at any time the Board (or, following its appointment, the Committee) shall
determine in its discretion that the listing or qualification of the shares of
Common Stock subject to such Award under any securities exchange requirements or
under any applicable law, or the consent or approval of any governmental
regulatory body, is necessary as a condition of, or in connection with, the
granting of such Award or the issue of shares thereunder, such Award may not be
exercised in whole or in part, unless such listing, qualification, consent or
approval shall have been affected or obtained free of any conditions not
acceptable to the Board.
(c) No person who acquires shares of Common Stock under the Plan may,
during any period of time that such person is an affiliate of the Company within
the meaning of the rules and regulations of the Securities and Exchange
Commission under the Act, sell such shares of
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Common Stock, unless such offer and sale is made (i) pursuant to an effective
registration statement under the Act, which is current and includes the shares
to be sold, or (ii) pursuant to an appropriate exemption from the registration
requirement of the Act, such as that set forth in Rule 144 promulgated under the
Act.
(d) With respect to any Reporting Person, transactions under the Plan
are intended to comply with all applicable conditions of Rule 16b-3. To the
extent any provision of the Plan or any action by an authority under the Plan
fails to so comply, such provision or action shall, without further action by
any person, be deemed to be automatically amended to the extent necessary to
effect compliance with Rule 16b-3, provided that if such provision or action
cannot be amended to effect such compliance, such provision or action shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
appropriate authority. Each Award to a Reporting Person under the Plan shall be
deemed issued subject to the foregoing qualification.
14. FOREIGN PARTICIPANTS.
In order to facilitate the making of an Award and to foster and
promote achievement of the purposes of the Plan, the Board (or, following its
appointment, the Committee) may provide for such special terms for Awards to
Grantees who are foreign nationals, or who are employed by the Company outside
of the United States of America, as the Board (or, following its appointment,
the Committee) may consider necessary or appropriate to accommodate differences
in local law, tax policy or custom. Moreover, the Board (or, following its
appointment, the Committee) may approve such supplements to, or amendments,
restatements or alternative versions of this Plan as in effect for any other
purpose, and the Secretary or other appropriate officer of the Company may
certify any such document as having been approved and adopted in the same manner
as the Plan; provided, however, that no such supplements, amendments,
restatements or alternative versions shall include
-18-
<PAGE>
any provisions that are inconsistent with the terms of the Plan, as then in
effect, unless the Plan could have been amended to eliminate the inconsistency
without further approval by the stockholders of the Company.
15. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may amend or terminate the Plan at any time, except that
approval of the holders of a majority of the outstanding voting stock of the
Company is required for amendments which:
(i) decrease the minimum exercise price for ISOs;
(ii) extend the term of the Plan beyond ten (10) years;
(iii) extend the maximum terms of the Awards granted hereunder beyond
ten (10) years;
(iv) withdraw the administration of the Plan from the Committee
appointed pursuant to Section 11;
(v) change the class of eligible employees, officers, directors and
other Grantees;
(vi) increase the aggregate number of shares of Common Stock which may
be issued pursuant to the provisions of the Plan;
(vii) otherwise require stockholder approval to comply with Rule 16b-3
or any other applicable law, regulation, or listing requirement
or to qualify for an exemption or characterization that is deemed
desirable by the Board.
Notwithstanding the foregoing, the Board may, without the need for
stockholders' approval, amend the Plan in any respect to qualify ISOs as
incentive stock options under Code Section 422.
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<PAGE>
No amendment or termination of the Plan shall, without the written
consent of the Grantee, alter the terms of Options already granted and such
options shall remain in full force and effect as if the Plan had not been
terminated.
Any Award that may be made pursuant to an amendment to the Plan that
shall have been adopted without the approval of the stockholders of the Company
shall be null and void as to persons subject to Section 16(a) of the Act if it
is subsequently determined that such approval was required in order for the Plan
to continue to satisfy the applicable conditions of Rule 16b-3.
Furthermore, technical or clarifying amendments shall be made by the
Committee, (following its appointment by the Board), and not by the Board.
16. NO OBLIGATION TO EXERCISE OPTION. The granting of an Award shall
impose no obligation upon the Grantee (or upon a transferee of a Grantee) to
exercise such Award.
17. NO LIMITATION ON RIGHTS OF THE COMPANY. The grant of any Award shall
not in any way affect the right or power of the Company to make adjustments,
reclassification, or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
18. PLAN NOT A CONTRACT OF EMPLOYMENT. The Plan is not a contract of
employment, and the terms of employment of any recipient of any Award hereunder
shall not be affected in any way by the Plan or related instruments except as
specifically provided therein. The establishment of the Plan shall not be
construed as conferring any legal rights upon any recipient of any Award
hereunder for a continuation of employment, nor shall it interfere with the
right of the Company or any subsidiary to discharge any recipient of any Award
hereunder and to treat him or her without regard to the effect which such
treatment might have upon him or her as the recipient of any Award hereunder.
-20-
<PAGE>
19. EXPENSES OF THE PLAN. All of the expenses of the Plan shall be paid
by the Company.
20. FUNDING. The Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall not
establish any fiduciary relationship between the Company and any Grantee or
other person. To the extent any person holds any rights by virtue of an Award
granted under the Plan, such rights shall be no greater than the rights of an
unsecured general creditor of the Company.
21. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything herein to
the contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates for shares of Common Stock pursuant to the exercise
of an Option, unless and until the Company is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all applicable
laws, regulations of governmental authority and the requirements of any exchange
upon which shares of Common Stock are traded including, without limitation, any
legends that are required on such stock certificates. The Company shall in no
event be obligated to register any securities pursuant to the Act (as now in
effect or as hereafter amended) or to take any other action in order to cause
the issuance and delivery of such certificates to comply with any such law,
regulation or requirement.
The Board (or, following its appointment, the Committee) may require,
as a condition of the issuance and delivery of such certificates and in order to
ensure compliance with such laws, regulations and requirements, that the
recipient of any Award hereunder make such covenants, agreements and
representations as the Board (or, following its appointment, the Committee), in
its sole discretion, deems necessary or desirable, including, without
limitation, a written representation from a stockholder that the stock is being
purchased for investment and not for distribution, acknowledging that such
shares have not been registered under the Act, as amended, and agreeing
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<PAGE>
that such shares may not be sold or transferred unless there is an effective
registration statement for them under the Act, or, in the opinion of counsel to
the Company, that such sale or transfer is not in violation of the Act.
22. EFFECT UPON OTHER COMPENSATION. Nothing contained herein shall
prevent the Company or any subsidiary from adopting other or additional
compensation arrangements for its employees or directors. The effect under any
other benefit plan of the Company of an inclusion in income by virtue of an
Award hereunder shall be determined under such other plan.
23. GRANTEE TO HAVE NO RIGHTS AS A STOCKHOLDER. No Grantee of any Option
shall have any rights as a stockholder with respect to any shares subject to his
or her Option prior to the date on which he or she is recorded as the holder of
such shares on the records of the Company. No Grantee of any Option shall have
the rights of a stockholder until he or she has paid in full the Option price.
24. NOTICE. Notice to the Company shall be deemed given if in writing and
mailed to Arnold Wadler, Esq., Metromedia Company, One Metromedia Plaza, East
Rutherford, New Jersey 07073, by first class, certified mail. Notice to the
Grantee or the Grantee's estate, if applicable, shall be given by registered
mail to such person's last known address.
25. GOVERNING LAW. Except to the extent preempted by federal law, this
Plan and all Option agreements entered into pursuant thereto shall be construed
and enforced in accordance with, and governed by, the laws of the State of New
York determined without regard to its conflict of law rules.
26. SUCCESSORS AND ASSIGNS. The Plan shall be binding on and inure to the
benefit of the Company and the employees to whom an Award is granted hereunder,
and such employees' heirs,
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<PAGE>
executors, administrators, legatees, trustees, personal representatives,
assignees and transferees (where permitted).
27. DELIVERY OF THE PLAN. A copy of this Plan shall be delivered to the
Secretary of the Company and shall be shown by him to each eligible person
making reasonable inquiry concerning it. A copy of this Plan shall also be
delivered to each Grantee at the time his or her Award is granted.
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<PAGE>
Annex A
-------
[OC ISOS - BOARD]
BIG CITY RADIO, INC.
--------------------
AGREEMENT (the "Agreement"), dated as of ________________, between Big
City Radio, Inc., a Delaware corporation with offices at 11 Skyline Drive,
Hawthorne, NY 10532 (the "Company"), and (Name) (the"Grantee").
The Board of Directors of the Company hereby grants to the Grantee,
effective as of the close of business on the date prior to the consummation of
the initial public offering of shares of Class A common stock (par value $0.01)
of the Company ("Common Stock"), an option to purchase all or any part of an
aggregate of (ISO) shares of Common Stock under the Big City Radio, Inc. 1997
Incentive Stock Plan (the "Incentive Stock Plan") at an exercise price of $____
per share (the "Incentive Stock Options"). The Incentive Stock Options are
intended to be incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
To evidence the Incentive Stock Options and to set forth the terms and
conditions as provided in the Incentive Stock Plan, the Company and the Grantee
hereby agree as follows:
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Incentive Stock Plan, as may be amended
from time to time.
<PAGE>
2. CONFIRMATION OF GRANT SUBJECT TO INCENTIVE STOCK PLAN
The Company hereby evidences and confirms its grant of the Incentive
Stock Options to the Grantee on the effective date set forth above. The
Incentive Stock Options shall be subject to all of the provisions of the
Incentive Stock Plan.
3. MEDIUM AND TIME OF PAYMENT
The exercise price of the Incentive Stock Options shall be payable in
United States dollars and may be paid in cash or by certified or cashier's check
payable to the order of the Company at the time of purchase. Notwithstanding
the foregoing, the Grantee may, at the discretion of the committee responsible
for the administration of the Plan (the "Committee"), pay the exercise price
with (i) shares of Common Stock of the Company already owned by, and in the
possession of, the Grantee, or (ii) any combination of United States dollars or
shares of Common Stock of the Company. Shares of Common Stock of the Company
used to satisfy the exercise price of Incentive Stock Options shall be valued at
their Fair Market Value, as determined under the Incentive Stock Plan.
4. TERM AND EXERCISE OF THE INCENTIVE STOCK OPTIONS
The Incentive Stock Options shall vest at a rate equal to 20% per
annum over a period of five (5) years beginning on the first anniversary date of
the date of grant. In the event of the Grantee's death or the Grantee's
retirement on or after attaining age sixty-five (65), the Incentive Stock
Options shall be immediately exercisable and otherwise subject to Section 7 of
the Incentive Stock Plan. Upon a Change in Control prior to the expiration of
five (5) years from the date of the Grant, the Incentive Stock Options shall be
immediately exercisable at the sole discretion of the Board.
-2-
<PAGE>
The vested Incentive Stock Options may be exercised by giving written
notice to the Company by first class, certified mail to Arnold L. Wadler, Esq.,
Executive Vice President, c/o Metromedia Company, One Metromedia Plaza, East
Rutherford, New Jersey 07073. Such notice shall be signed and dated by the
Grantee and shall state the number of shares of Common Stock of the Company with
respect to which the Incentive Stock Options are being exercised. Such notice
of exercise shall be accompanied by full payment of the exercise price.
5. ISSUANCE OF COMMON STOCK
Certificates for shares of Common Stock of the Company shall be issued
upon the exercise of the Incentive Stock Options only when all necessary actions
shall have been taken by the Company to render the Common Stock of the Company
when issued, validly issued, fully paid and non-assessable.
6. TRANSFERABILITY OF INCENTIVE STOCK OPTIONS
The Incentive Stock Options granted hereunder shall be exercisable
during the Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee. The Incentive Stock Options shall be transferable only by will or the
laws of descent and distribution and shall not be subject, in whole or in part,
to attachment, execution or levy of any kind.
7. RIGHTS IN THE EVENT OF TERMINATION OF
EMPLOYMENT FOR REASONS OTHER THAN DEATH AND RETIREMENT
The Grantee may exercise the Incentive Stock Options (that are
otherwise exercisable) only while an employee or within one (1) year after his
or her termination of employment on account of disability as defined in Code
Section 22(e)(3) to the extent the Grantee had the right to exercise the
Incentive Stock Options prior to his or her termination of
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<PAGE>
employment. In the event the Grantee's employment is terminated for any reason
other than disability, death or retirement on or after attaining age sixty-five
(65), the Grantee may exercise the Incentive Stock Options (that are otherwise
exercisable) within three (3) months after his or her termination of employment.
Such Incentive Stock Options may be exercised with respect to all or
any part of the shares subject thereto to the extent the right to purchase such
shares had accrued at the time of termination of employment.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH
If the Grantee dies while an employee, his or her estate shall have
the right for a period of one (1) year following the date of such death to
exercise the Incentive Stock Options to the extent such Incentive Stock Options
are exercisable and only to the extent the term of the Incentive Stock Options
has not yet expired.
9. RIGHTS IN THE EVENT OF THE GRANTEE'S RETIREMENT
The Grantee may exercise the Incentive Stock Options only while an
employee or within three (3) months following his or her retirement on or after
attaining age sixty-five (65) to the extent such Incentive Stock Options are
exercisable and only to the extent the term of the Incentive Stock Options has
not yet expired. In the event of the Grantee's death prior to the end of the
three (3) month period after retirement on or after attaining age
sixty-five (65), his or her estate shall have the right for a period of one (1)
year following the date of death to exercise the Incentive Stock Options to the
extent such Incentive Stock Options are exercisable and only to the extent the
term of the Incentive Stock Options has not yet expired.
-4-
<PAGE>
10. CERTAIN CORPORATE TRANSACTIONS
In the event of a change in the shares of Common Stock of the Company,
as presently constituted, in a transaction described in Section 9 of the
Incentive Stock Plan, the Incentive Stock Options shall be adjusted as described
in such Section 9 of the Incentive Stock Plan.
Notice of any adjustment shall be given by the Company to each holder
of the Incentive Stock Options which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Incentive Stock Plan.
Fractional shares resulting from any adjustment in the Incentive Stock
Options pursuant to Section 9 of the Incentive Stock Plan or this Section 10
shall be eliminated and the price per share of the remaining shares subject to
the Incentive Stock Options shall be adjusted accordingly.
11. NO LIMITATION ON RIGHTS OF THE COMPANY
The grant of the Incentive Stock Options shall not in any way affect
the right or power of the Company to make adjustments, reclassifications or
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
12. RIGHTS AS A STOCKHOLDER
The Grantee or a transferee of the Grantee shall have no rights as a
stockholder with respect to any shares subject to his or her Incentive Stock
Options prior to the date on which he or she is recorded as the holder of such
shares on the records of the Company following the exercise of the Incentive
Stock Options. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
-5-
<PAGE>
distributions or other rights for which the record date is prior to the date on
which the Grantee is recorded as the holder of such shares on the records of the
Company following the exercise of the Incentive Stock Options.
13. SECURITIES LAW REQUIREMENTS
No Incentive Stock Options granted pursuant to this Agreement shall be
exercisable, in whole or in part, nor shall the Company be obligated to
acquire/sell any shares of Common Stock of the Company subject to any such
Incentive Stock Options if such exercise, acquisition and sale would, in the
opinion of counsel for the Company, violate the Securities Act of 1933 (or other
federal or state statutes having similar requirements), as it may be in effect
at that time. Each Incentive Stock Option shall be subject to the further
requirement that, if at any time the Board of Directors shall determine in its
discretion that the listing or qualification of the shares of Common Stock of
the Company subject to such Incentive Stock Option under any securities exchange
requirements or under any applicable law, or the consent or approval of any
governmental regulatory body, is necessary as a condition of, or in connection
with, the granting of such Incentive Stock Option or the issuance of shares
thereunder, such Incentive Stock Option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board of Directors.
14. DISPOSITIONS OF COMMON STOCK
No disposition of shares of Common Stock of the Company covered by any
Incentive Stock Option shall be effective within two (2) years of the grant of
such Incentive Stock Option and within one (1) year of the exercise of such
Incentive Stock Option prior to thirty (30) days written notice by the Grantee
to the Committee of such transfer and the payment
-6-
<PAGE>
by such Grantee of any withholding taxes due as a result of such disposition.
All stock certificates issued pursuant to the exercise of the Incentive Stock
Option shall bear notice of this provision.
In addition, the Committee may, as a condition precedent to the
exercise of the Incentive Stock Options, require the Grantee to enter into such
agreements or to make such representations as may be required to make lawful
under the laws of the United States or any state the exercise of the Incentive
Stock Options and the ultimate disposition of the shares acquired by such
exercise.
15. TAX WITHHOLDING
It shall be a condition to the obligation of the Company to deliver
shares or securities of the Company upon exercise of an Incentive Stock Option,
that the Grantee pay to the Company such amount as may be requested by the
Company for the purpose of satisfying any liability for such withholding taxes.
Any grant issued under the Incentive Stock Plan may provide by the grant that
the Grantee may elect with the consent of the Committee and in accordance with
any applicable regulations of the authority issuing such regulations, to pay a
portion or all of the amount of such minimum required or additional permitted
withholding taxes in shares. In such event, the Grantee shall authorize the
Company to withhold, or shall agree to surrender back to the Company, on or
about the date such withholding tax liability is determinable, shares previously
owned by such Grantee or a portion of the shares that were or otherwise would be
distributed to such Grantee pursuant to such award having a Fair Market Value
equal to the amount of such required or permitted withholding taxes to be paid
in shares.
-7-
<PAGE>
16. NO OBLIGATION TO EXERCISE INCENTIVE STOCK OPTION
The granting of the Incentive Stock Options shall impose no obligation
upon the Grantee or a transferee of the Grantee to exercise the Incentive Stock
Options.
17. NO CONTRACT OF EMPLOYMENT
Neither the Incentive Stock Plan nor this Agreement is a contract of
employment, and the terms of employment of the Grantee shall not be affected in
any way by the Incentive Stock Plan or this Agreement except as specifically
provided therein. Neither the establishment of the Incentive Stock Plan nor the
execution of this Agreement shall be construed as conferring any legal rights
upon the Grantee for a continuation of employment, nor shall it interfere with
the right of the Company or any subsidiary to discharge the Grantee and to treat
him or her without regard to the effect which such treatment might have upon him
or her as a Grantee.
18. NOTICE
Notice to the Company shall be deemed given if in writing and mailed
to the Company at the address specified in Section 4 by first-class, certified
mail. Notice to the Grantee or the Grantee's estate, if applicable, shall be
given by registered mail to such person's last known address.
19. AMENDMENT OF AGREEMENT
The Committee may from time to time and at its discretion amend this
Agreement with the consent of the Grantee.
20. INTERPRETATION OF AGREEMENT
This Agreement and the Incentive Stock Options evidenced hereby are
subject to the terms of the Incentive Stock Plan. A copy of the Incentive Stock
Plan has been delivered, together with this Agreement, to the Grantee, receipt
of which is hereby acknowledged. In the
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<PAGE>
event of any conflict between the terms of the Incentive Stock Plan and of this
Agreement, the terms of the Incentive Stock Plan shall govern.
The Committee shall have the final authority and discretion to
interpret and construe the terms of the Incentive Stock Plan and of this
Agreement and any such interpretations and constructions by the Committee shall
be final, binding and conclusive upon all persons claiming an interest in the
Incentive Stock Plan. Notwithstanding the foregoing, no term of the Incentive
Stock Plan relating to Incentive Stock Options shall be interpreted, nor shall
any discretion or authority of the Committee be exercised, so as to disqualify
the Incentive Stock Plan under Code Section 422 or, without the consent of the
Grantee, to disqualify any Incentive Stock Options under Code Section 422 or in
a manner inconsistent with applicable securities laws.
No member of the Committee shall be liable for any action,
interpretation or construction made in good faith with respect to the Incentive
Stock Plan or this Agreement.
21. GOVERNING LAW
Except to the extent preempted by federal law, this Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, determined without regard to its conflict of law rules.
-9-
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have duly executed
this Agreement as of the date first written above.
BIG CITY RADIO, INC.
Dated: By:
-------------------- -------------------------------------
Attest:
- --------------------------
Secretary
Dated:
-------------------- ----------------------------------------
Grantee
-10-
<PAGE>
Annex B
-------
[OC NQSOS]
[2,500-BOARD]
BIG CITY RADIO, INC.
--------------------
AGREEMENT (the "Agreement"), dated as of _______________, between Big
City Radio, Inc., a Delaware corporation with offices at 11 Skyline Drive,
Hawthorne, NY 10532 (the "Company"), and (Name) (the "Grantee").
The Board of Directors of the Company hereby grants to the Grantee,
effective as of the close of business on the date prior to the consummation of
the initial public offering of shares of Class A common stock (par value $0.01)
of the Company (the "Common Stock") an option to purchase all or an aggregate of
2,500 shares of Common Stock under the Big City Radio, Inc. 1997 Incentive Stock
Plan (the "Incentive Stock Plan") at an exercise price of $____ per share (the
"Non-Qualified Stock Options"). The Non-Qualified Stock Options are not
intended to be incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
To evidence the Non-Qualified Stock Options, and to set forth the
terms and conditions as provided in the Incentive Stock Plan, the Company and
the Grantee hereby agree as follows:
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Incentive Stock Plan, as may be amended
from time to time.
<PAGE>
2. CONFIRMATION OF GRANT SUBJECT TO INCENTIVE STOCK PLAN
The Company hereby evidences and confirms its grant of the
Non-Qualified Stock Options to the Grantee on the effective date set forth
above. The Non-Qualified Stock Options shall be subject to all of the
provisions of the Incentive Stock Plan.
3. MEDIUM AND TIME OF PAYMENT
The exercise price of the Non-Qualified Stock Options shall be payable
in United States dollars and may be paid in cash or by certified or cashier's
check payable to the order of the Company at the time of purchase.
Notwithstanding the foregoing, the Grantee may, at the discretion of the
Committee, pay the exercise price with (i) shares of Common Stock of the Company
already owned by, and in the possession of, the Grantee, or (ii) any combination
of United States dollars or shares of Common Stock of the Company. Shares of
Common Stock of the Company used to satisfy the exercise price of Non-Qualified
Stock Options shall be valued at their Fair Market Value, as determined under
the Incentive Stock Plan.
4. TERM AND EXERCISE OF THE NON-QUALIFIED STOCK OPTIONS
On the date of grant, 100% of the Non-Qualified Stock Options shall
immediately vest. The Non-Qualified Stock Options may be exercised by giving
written notice to the Company by first class, certified mail to Arnold L.
Wadler, Esq., Executive Vice President, c/o Metromedia Company, One Metromedia
Plaza, East Rutherford, New Jersey 07073. Such notice shall be signed and dated
by the Grantee and shall state the number of shares of Common Stock of the
Company with respect to which the Non-Qualified Stock Options are being
exercised. Such notice of exercise shall be accompanied by full payment of the
exercise price.
-2-
<PAGE>
5. ISSUANCE OF COMMON STOCK
Certificates for shares of Common Stock of the Company shall be issued
upon the exercise of the Non-Qualified Stock Options only when all necessary
actions shall have been taken by the Company to render the Common Stock of the
Company when issued, validly issued, fully paid and non-assessable.
6. TRANSFERABILITY OF NON-QUALIFIED STOCK OPTIONS
The Non-Qualified Stock Options granted hereunder shall be exercisable
during the Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee. The Non-Qualified Stock Options shall only be transferable by will or
the laws of descent and distribution and shall not be subject, in whole or in
part, to attachment, execution or levy of any kind.
7. RIGHTS IN THE EVENT OF TERMINATION OF
EMPLOYMENT FOR REASONS OTHER THAN DEATH AND RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options (that are
otherwise exercisable) only while an employee or within one (1) year after his
or her termination of employment on account of disability as defined in Code
Section 22(e)(3) to the extent the Grantee had the right to exercise the
Non-Qualified Stock Options prior to his or her termination of employment. In
the event the Grantee's employment is terminated for any reason other than
disability, death or retirement on or after attaining age sixty-five (65), the
Grantee may exercise the Non-Qualified Stock Options (that are otherwise
exercisable) within three (3) months after his or her termination of employment.
-3-
<PAGE>
Such Non-Qualified Stock Options may be exercised with respect to all
or any part of the shares subject thereto to the extent the right to purchase
such shares had accrued at the time of termination of employment.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH
If the Grantee dies while an employee, his or her estate shall have
the right for a period of one (1) year following the date of such death to
exercise the Non-Qualified Stock Options to the extent such Non-Qualified Stock
Options are exercisable and only to the extent the term of the Non-Qualified
Stock Options has not yet expired.
9. RIGHTS IN THE EVENT OF THE GRANTEE'S RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options only while an
employee or within three (3) months following his or her retirement on or after
attaining age sixty-five (65) to the extent such Non-Qualified Stock Options are
exercisable and only to the extent the term of the Non-Qualified Stock Options
has not yet expired. In the event of the Grantee's death prior to the end of
the three (3) month period after retirement on or after attaining age
sixty-five (65), his or her estate shall have the right for a period of one (1)
year following the date of death to exercise the Non-Qualified Stock Options to
the extent such Non-Qualified Stock Options are exercisable and only to the
extent the term of the Non-Qualified Stock Options has not yet expired.
10. CERTAIN CORPORATE TRANSACTIONS
In the event of a change in the shares of Common Stock of the Company,
as presently constituted, in a transaction described in Section 9 of the
Incentive Stock Plan, the Non-Qualified Stock Options shall be adjusted as
described in such Section 9 of the Incentive Stock Plan.
-4-
<PAGE>
Notice of any adjustment shall be given by the Company to each holder
of the Non-Qualified Stock Options which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Incentive Stock Plan.
Fractional shares resulting from any adjustment in the Non-Qualified
Stock Options pursuant to Section 9 of the Incentive Stock Plan or this
Section 10 shall be eliminated and the price per share of the remaining shares
subject to the Non-Qualified Stock Options shall be adjusted accordingly.
11. NO LIMITATION ON RIGHTS OF THE COMPANY
The grant of the Non-Qualified Stock Options shall not in any way
affect the right or power of the Company to make adjustments, reclassifications
or changes in its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
12. RIGHTS AS A STOCKHOLDER
The Grantee or a transferee of the Grantee shall have no rights as a
stockholder with respect to any shares subject to his or her Non-Qualified Stock
Options prior to the date on which he or she is recorded as the holder of such
shares on the records of the Company following the exercise of the Non-Qualified
Stock Options. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date on which the
Grantee is recorded as the holder of such shares on the records of the Company
following the exercise of the Non-Qualified Stock Options.
-5-
<PAGE>
13. SECURITIES LAW REQUIREMENTS
No Non-Qualified Stock Options granted pursuant to this Agreement
shall be exercisable, in whole or in part, nor shall the Company be obligated to
acquire/sell any shares of Common Stock of the Company subject to any such
Non-Qualified Stock Options, if such exercise, acquisition and sale would, in
the opinion of counsel for the Company, violate the Securities Act of 1933 (or
other federal or state statutes having similar requirements), as it may be in
effect at that time. Each Non-Qualified Stock Option shall be subject to the
further requirement that, if at any time the Board of Directors shall determine
in its discretion that the listing or qualification of the shares of Common
Stock of the Company subject to such Non-Qualified Stock Option under any
securities exchange requirements or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the granting of such Non-Qualified Stock Option or the
issuance of shares thereunder, such Non-Qualified Stock Option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors.
14. DISPOSITIONS OF COMMON STOCK
The Committee may, as a condition precedent to the exercise of the
Non-Qualified Stock Options, require the Grantee to enter into such agreements
or to make such representations as may be required to make lawful under the laws
of the United States or any state the exercise of the Non-Qualified Stock
Options and the ultimate disposition of the shares acquired by such exercise.
-6-
<PAGE>
15. TAX WITHHOLDING
It shall be a condition to the obligation of the Company to deliver
shares or securities of the Company upon exercise of a Non-Qualified Stock
Option, that the Grantee pay to the Company such amount as may be requested by
the Company for the purpose of satisfying any liability for such withholding
taxes. Any grant issued under the Incentive Stock Plan may provide by the grant
that the Grantee may elect with the consent of the Committee and in accordance
with any applicable regulations of the authority issuing such regulations, to
pay a portion or all of the amount of such minimum required or additional
permitted withholding taxes in shares. In such event, the Grantee shall
authorize the Company to withhold, or shall agree to surrender back to the
Company, on or about the date such withholding tax liability is determinable,
shares previously owned by such Grantee or a portion of the shares that were or
otherwise would be distributed to such Grantee pursuant to such award having a
Fair Market Value equal to the amount of such required or permitted withholding
taxes to be paid in shares.
16. NO OBLIGATION TO EXERCISE NON-QUALIFIED STOCK OPTION
The granting of the Non-Qualified Stock Options shall impose no
obligation upon the Grantee or a transferee of the Grantee to exercise the
Non-Qualified Stock Options.
17. NO CONTRACT OF EMPLOYMENT
Neither the Incentive Stock Plan nor this Agreement is a contract of
employment, and the terms of employment of the Grantee shall not be affected in
any way by the Incentive Stock Plan or this Agreement except as specifically
provided therein. Neither the establishment of the Incentive Stock Plan nor the
execution of this Agreement shall be construed as conferring any legal rights
upon the Grantee for a continuation of employment, nor shall it interfere with
-7-
<PAGE>
the right of the Company or any subsidiary to discharge the Grantee and to treat
him or her without regard to the effect which such treatment might have upon him
or her as a Grantee.
18. NOTICE
Notice to the Company shall be deemed given if in writing and mailed
to the Company at the address specified in Section 4 by first-class, certified
mail. Notice to the Grantee or the Grantee's estate, if applicable, shall be
given by registered mail to such person's last known address.
19. AMENDMENT OF AGREEMENT
The Committee may from time to time and at its discretion amend this
Agreement with the consent of the Grantee.
20. INTERPRETATION OF AGREEMENT
This Agreement and the Non-Qualified Stock Options evidenced hereby
are subject to the terms of the Incentive Stock Plan. A copy of the Incentive
Stock Plan has been delivered, together with this Agreement, to the Grantee,
receipt of which is hereby acknowledged. In the event of any conflict between
the terms of the Incentive Stock Plan and of this Agreement, the terms of the
Incentive Stock Plan shall govern.
The Committee shall have the final authority and discretion to
interpret and construe the terms of the Incentive Stock Plan and of this
Agreement and any such interpretations and constructions by the Committee shall
be final, binding and conclusive upon all persons claiming an interest in the
Incentive Stock Plan. Notwithstanding the foregoing, no term of the Incentive
Stock Plan relating to the Non-Qualified Stock Options shall be interpreted, nor
shall any discretion or authority of the Committee be exercised, without the
consent of the Grantee, to disqualify any Non-Qualified Stock Options under
applicable securities laws.
-8-
<PAGE>
No member of the Committee shall be liable for any action,
interpretation or construction made in good faith with respect to the Incentive
Stock Plan or this Agreement.
21. GOVERNING LAW
Except to the extent preempted by federal law, this Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, determined without regard to its conflict of law rules.
IN WITNESS WHEREOF, the Company and the Grantee have duly executed
this Agreement as of the date first written above.
BIG CITY RADIO, INC.
Dated:________________ By:___________________________________
Attest:
______________________
Secretary
Dated:________________ ______________________________________
Grantee
-9-
<PAGE>
Annex C
-------
[OC ISOS - COMMITTEE]
BIG CITY RADIO, INC.
AGREEMENT (the "Agreement"), dated as of ________________, between Big
City Radio, Inc., a Delaware corporation with offices at 11 Skyline Drive,
Hawthorne, NY 10532 (the "Company"), and (Name) (the"Grantee").
The committee appointed by the Board of Directors of the Company (the
"Committee") responsible for the administration of the Big City Radio, Inc. 1997
Incentive Stock Plan (the"Incentive Stock Plan"), hereby grants to the Grantee,
effective on _______________, an option to purchase all or any part of an
aggregate of (ISO) shares of Class A common stock (par value $0.01) of the
Company ("Common Stock") under the Incentive Stock Plan at an exercise price of
$____ per share (the "Incentive Stock Options"). The Incentive Stock Options
are intended to be incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
To evidence the Incentive Stock Options and to set forth the terms and
conditions as provided in the Incentive Stock Plan, the Company and the Grantee
hereby agree as follows:
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Incentive Stock Plan, as may be amended
from time to time.
<PAGE>
2. CONFIRMATION OF GRANT SUBJECT TO INCENTIVE STOCK PLAN
The Company hereby evidences and confirms its grant of the Incentive
Stock Options to the Grantee on the effective date set forth above. The
Incentive Stock Options shall be subject to all of the provisions of the
Incentive Stock Plan.
3. MEDIUM AND TIME OF PAYMENT
The exercise price of the Incentive Stock Options shall be payable in
United States dollars and may be paid in cash or by certified or cashier's check
payable to the order of the Company at the time of purchase. Notwithstanding
the foregoing, the Grantee may, at the discretion of the Committee, pay the
exercise price with (i) shares of Common Stock of the Company already owned by,
and in the possession of, the Grantee, or (ii) any combination of United States
dollars or shares of Common Stock of the Company. Shares of Common Stock of the
Company used to satisfy the exercise price of Incentive Stock Options shall be
valued at their Fair Market Value, as determined under the Incentive Stock Plan.
4. TERM AND EXERCISE OF THE INCENTIVE STOCK OPTIONS
On the date of grant, ___% of the Incentive Stock Options shall
immediately vest. Thereafter, the Incentive Stock Options shall vest at a rate
equal to ___% per annum over a period of _______ (__) years beginning on the
first anniversary date of the date of grant. In the event of the Grantee's
death or the Grantee's retirement on or after attaining age sixty-five (65), the
Incentive Stock Options shall be immediately exercisable and otherwise subject
to Section 7 of the Incentive Stock Plan. Upon a Change in Control prior to the
expiration of _______ (__) years from the date of the Grant, the Incentive Stock
Options shall be immediately exercisable at the sole discretion of the Board.
-2-
<PAGE>
The vested Incentive Stock Options may be exercised by giving written
notice to the Company by first class, certified mail to Arnold L. Wadler, Esq.,
Executive Vice President, c/o Metromedia Company, One Metromedia Plaza, East
Rutherford, New Jersey 07073. Such notice shall be signed and dated by the
Grantee and shall state the number of shares of Common Stock of the Company with
respect to which the Incentive Stock Options are being exercised. Such notice
of exercise shall be accompanied by full payment of the exercise price.
5. ISSUANCE OF COMMON STOCK
Certificates for shares of Common Stock of the Company shall be issued
upon the exercise of the Incentive Stock Options only when all necessary actions
shall have been taken by the Company to render the Common Stock of the Company
when issued, validly issued, fully paid and non-assessable.
6. TRANSFERABILITY OF INCENTIVE STOCK OPTIONS
The Incentive Stock Options granted hereunder shall be exercisable
during the Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee. The Incentive Stock Options shall be transferable only by will or the
laws of descent and distribution and shall not be subject, in whole or in part,
to attachment, execution or levy of any kind.
7. RIGHTS IN THE EVENT OF TERMINATION OF
EMPLOYMENT FOR REASONS OTHER THAN DEATH AND RETIREMENT
The Grantee may exercise the Incentive Stock Options (that are
otherwise exercisable) only while an employee or within one (1) year after his
or her termination of employment on account of disability as defined in Code
Section 22(e)(3) to the extent the Grantee had the right to exercise the
Incentive Stock Options prior to his or her termination of
-3-
<PAGE>
employment. In the event the Grantee's employment is terminated for any reason
other than disability, death or retirement on or after attaining age sixty-five
(65), the Grantee may exercise the Incentive Stock Options (that are otherwise
exercisable) within three (3) months after his or her termination of employment.
Such Incentive Stock Options may be exercised with respect to all or
any part of the shares subject thereto to the extent the right to purchase such
shares had accrued at the time of termination of employment.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH
If the Grantee dies while an employee, his or her estate shall have
the right for a period of one (1) year following the date of such death to
exercise the Incentive Stock Options to the extent such Incentive Stock Options
are exercisable and only to the extent the term of the Incentive Stock Options
has not yet expired.
9. RIGHTS IN THE EVENT OF THE GRANTEE'S RETIREMENT
The Grantee may exercise the Incentive Stock Options only while an
employee or within three (3) months following his or her retirement on or after
attaining age sixty-five (65) to the extent such Incentive Stock Options are
exercisable and only to the extent the term of the Incentive Stock Options has
not yet expired. In the event of the Grantee's death prior to the end of the
three (3) month period after retirement on or after attaining age
sixty-five (65), his or her estate shall have the right for a period of one (1)
year following the date of death to exercise the Incentive Stock Options to the
extent such Incentive Stock Options are exercisable and only to the extent the
term of the Incentive Stock Options has not yet expired.
-4-
<PAGE>
10. CERTAIN CORPORATE TRANSACTIONS
In the event of a change in the shares of Common Stock of the Company,
as presently constituted, in a transaction described in Section 9 of the
Incentive Stock Plan, the Incentive Stock Options shall be adjusted as described
in such Section 9 of the Incentive Stock Plan.
Notice of any adjustment shall be given by the Company to each holder
of the Incentive Stock Options which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Incentive Stock Plan.
Fractional shares resulting from any adjustment in the Incentive Stock
Options pursuant to Section 9 of the Incentive Stock Plan or this Section 10
shall be eliminated and the price per share of the remaining shares subject to
the Incentive Stock Options shall be adjusted accordingly.
11. NO LIMITATION ON RIGHTS OF THE COMPANY
The grant of the Incentive Stock Options shall not in any way affect
the right or power of the Company to make adjustments, reclassifications or
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
12. RIGHTS AS A STOCKHOLDER
The Grantee or a transferee of the Grantee shall have no rights as a
stockholder with respect to any shares subject to his or her Incentive Stock
Options prior to the date on which he or she is recorded as the holder of such
shares on the records of the Company following the exercise of the Incentive
Stock Options. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
-5-
<PAGE>
distributions or other rights for which the record date is prior to the date on
which the Grantee is recorded as the holder of such shares on the records of the
Company following the exercise of the Incentive Stock Options.
13. SECURITIES LAW REQUIREMENTS
No Incentive Stock Options granted pursuant to this Agreement shall be
exercisable, in whole or in part, nor shall the Company be obligated to
acquire/sell any shares of Common Stock of the Company subject to any such
Incentive Stock Options if such exercise, acquisition and sale would, in the
opinion of counsel for the Company, violate the Securities Act of 1933 (or other
federal or state statutes having similar requirements), as it may be in effect
at that time. Each Incentive Stock Option shall be subject to the further
requirement that, if at any time the Board of Directors shall determine in its
discretion that the listing or qualification of the shares of Common Stock of
the Company subject to such Incentive Stock Option under any securities exchange
requirements or under any applicable law, or the consent or approval of any
governmental regulatory body, is necessary as a condition of, or in connection
with, the granting of such Incentive Stock Option or the issuance of shares
thereunder, such Incentive Stock Option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board of Directors.
14. DISPOSITIONS OF COMMON STOCK
No disposition of shares of Common Stock of the Company covered by any
Incentive Stock Option shall be effective within two (2) years of the grant of
such Incentive Stock Option and within one (1) year of the exercise of such
Incentive Stock Option prior to thirty (30) days written notice by the Grantee
to the Committee of such transfer and the payment
-6-
<PAGE>
by such Grantee of any withholding taxes due as a result of such disposition.
All stock certificates issued pursuant to the exercise of the Incentive Stock
Option shall bear notice of this provision.
In addition, the Committee may, as a condition precedent to the
exercise of the Incentive Stock Options, require the Grantee to enter into such
agreements or to make such representations as may be required to make lawful
under the laws of the United States or any state the exercise of the Incentive
Stock Options and the ultimate disposition of the shares acquired by such
exercise.
15. TAX WITHHOLDING
It shall be a condition to the obligation of the Company to deliver
shares or securities of the Company upon exercise of an Incentive Stock Option,
that the Grantee pay to the Company such amount as may be requested by the
Company for the purpose of satisfying any liability for such withholding taxes.
Any grant issued under the Incentive Stock Plan may provide by the grant that
the Grantee may elect with the consent of the Committee and in accordance with
any applicable regulations of the authority issuing such regulations, to pay a
portion or all of the amount of such minimum required or additional permitted
withholding taxes in shares. In such event, the Grantee shall authorize the
Company to withhold, or shall agree to surrender back to the Company, on or
about the date such withholding tax liability is determinable, shares previously
owned by such Grantee or a portion of the shares that were or otherwise would be
distributed to such Grantee pursuant to such award having a Fair Market Value
equal to the amount of such required or permitted withholding taxes to be paid
in shares.
-7-
<PAGE>
16. NO OBLIGATION TO EXERCISE INCENTIVE STOCK OPTION
The granting of the Incentive Stock Options shall impose no obligation
upon the Grantee or a transferee of the Grantee to exercise the Incentive Stock
Options.
17. NO CONTRACT OF EMPLOYMENT
Neither the Incentive Stock Plan nor this Agreement is a contract of
employment, and the terms of employment of the Grantee shall not be affected in
any way by the Incentive Stock Plan or this Agreement except as specifically
provided therein. Neither the establishment of the Incentive Stock Plan nor the
execution of this Agreement shall be construed as conferring any legal rights
upon the Grantee for a continuation of employment, nor shall it interfere with
the right of the Company or any subsidiary to discharge the Grantee and to treat
him or her without regard to the effect which such treatment might have upon him
or her as a Grantee.
18. NOTICE
Notice to the Company shall be deemed given if in writing and mailed
to the Company at the address specified in Section 4 by first-class, certified
mail. Notice to the Grantee or the Grantee's estate, if applicable, shall be
given by registered mail to such person's last known address.
19. AMENDMENT OF AGREEMENT
The Committee may from time to time and at its discretion amend this
Agreement with the consent of the Grantee.
20. INTERPRETATION OF AGREEMENT
This Agreement and the Incentive Stock Options evidenced hereby are
subject to the terms of the Incentive Stock Plan. A copy of the Incentive Stock
Plan has been delivered, together with this Agreement, to the Grantee, receipt
of which is hereby acknowledged. In the
-8-
<PAGE>
event of any conflict between the terms of the Incentive Stock Plan and of this
Agreement, the terms of the Incentive Stock Plan shall govern.
The Committee shall have the final authority and discretion to
interpret and construe the terms of the Incentive Stock Plan and of this
Agreement and any such interpretations and constructions by the Committee shall
be final, binding and conclusive upon all persons claiming an interest in the
Incentive Stock Plan. Notwithstanding the foregoing, no term of the Incentive
Stock Plan relating to Incentive Stock Options shall be interpreted, nor shall
any discretion or authority of the Committee be exercised, so as to disqualify
the Incentive Stock Plan under Code Section 422 or, without the consent of the
Grantee, to disqualify any Incentive Stock Options under Code Section 422 or in
a manner inconsistent with applicable securities laws.
No member of the Committee shall be liable for any action,
interpretation or construction made in good faith with respect to the Incentive
Stock Plan or this Agreement.
21. GOVERNING LAW
Except to the extent preempted by federal law, this Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, determined without regard to its conflict of law rules.
-9-
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have duly executed
this Agreement as of the date first written above.
BIG CITY RADIO, INC.
Dated:________________ By:___________________________________
Attest:
______________________
Secretary
Dated:________________ ______________________________________
Grantee
-10-
<PAGE>
Annex D
-------
[OC NQSOS]
[NON-CLASS A - BOARD]
BIG CITY RADIO, INC.
--------------------
AGREEMENT (the "Agreement"), dated as of December 1, 1997, between Big
City Radio, Inc., a Delaware corporation with offices at 11 Skyline Drive,
Hawthorne, NY 10532 (the "Company"), and (Name) (the "Grantee").
The Board of Directors of the Company hereby grants to the Grantee,
effective on December 1, 1997, an option under the Big City Radio, Inc. 1997
Incentive Stock Plan (the "Incentive Stock Plan") to purchase all or any part of
an aggregate of (NQSO) shares of common stock (par value $0.01) of the Company
(the "Common Stock") under the Incentive Stock Plan at an exercise price of
$____ per share (the "Non-Qualified Stock Options"). The Non-Qualified Stock
Options are not intended to be incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
To evidence the Non-Qualified Stock Options, and to set forth the
terms and conditions as provided in the Incentive Stock Plan, the Company and
the Grantee hereby agree as follows:
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Incentive Stock Plan, as may be amended
from time to time.
2. CONFIRMATION OF GRANT SUBJECT TO INCENTIVE STOCK PLAN
The Company hereby evidences and confirms its grant of the
Non-Qualified Stock Options to the Grantee on the effective date set forth
above. The Non-Qualified Stock Options shall be subject to all of the
provisions of the Incentive Stock Plan.
<PAGE>
3. MEDIUM AND TIME OF PAYMENT
The exercise price of the Non-Qualified Stock Options shall be payable
in United States dollars and may be paid in cash or by certified or cashier's
check payable to the order of the Company at the time of purchase.
Notwithstanding the foregoing, the Grantee may, at the discretion of the
committee responsible for the administration of the Plan (the "Committee"), pay
the exercise price with (i) shares of Common Stock of the Company already owned
by, and in the possession of, the Grantee, or (ii) any combination of United
States dollars or shares of Common Stock of the Company. Shares of Common Stock
of the Company used to satisfy the exercise price of Non-Qualified Stock Options
shall be valued at their Fair Market Value, as determined under the Incentive
Stock Plan.
4. TERM AND EXERCISE OF THE NON-QUALIFIED STOCK OPTIONS
On the date of grant, 100% of the Non-Qualified Stock Options shall
immediately vest. The vested Non-Qualified Stock Options may be exercised by
giving written notice to the Company by first class, certified mail to Arnold L.
Wadler, Esq., Executive Vice President, c/o Metromedia Company, One Metromedia
Plaza, East Rutherford, New Jersey 07073. Such notice shall be signed and dated
by the Grantee and shall state the number of shares of Common Stock of the
Company with respect to which the Non-Qualified Stock Options are being
exercised. Such notice of exercise shall be accompanied by full payment of the
exercise price.
5. ISSUANCE OF COMMON STOCK
Certificates for shares of Common Stock of the Company shall be issued
upon the exercise of the Non-Qualified Stock Options only when all necessary
actions shall have been taken by the Company to render the Common Stock of the
Company when issued, validly issued, fully paid and non-assessable.
-2-
<PAGE>
6. TRANSFERABILITY OF NON-QUALIFIED STOCK OPTIONS
The Non-Qualified Stock Options granted hereunder shall be exercisable
during the Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee. The Non-Qualified Stock Options shall only be transferable by will or
the laws of descent and distribution and shall not be subject, in whole or in
part, to attachment, execution or levy of any kind.
7. RIGHTS IN THE EVENT OF TERMINATION OF
EMPLOYMENT FOR REASONS OTHER THAN DEATH AND RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options (that are
otherwise exercisable) only while an employee or within one (1) year after his
or her termination of employment on account of disability as defined in Code
Section 22(e)(3) to the extent the Grantee had the right to exercise the
Non-Qualified Stock Options prior to his or her termination of employment. In
the event the Grantee's employment is terminated for any reason other than
disability, death or retirement on or after attaining age sixty-five (65), the
Grantee may exercise the Non-Qualified Stock Options (that are otherwise
exercisable) within three (3) months after his or her termination of employment.
Such Non-Qualified Stock Options may be exercised with respect to all
or any part of the shares subject thereto to the extent the right to purchase
such shares had accrued at the time of termination of employment.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH
If the Grantee dies while an employee, his or her estate shall have
the right for a period of one (1) year following the date of such death to
exercise the Non-Qualified Stock
-3-
<PAGE>
Options to the extent such Non-Qualified Stock Options are exercisable and only
to the extent the term of the Non-Qualified Stock Options has not yet expired.
9. RIGHTS IN THE EVENT OF THE GRANTEE'S RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options only while an
employee or within three (3) months following his or her retirement on or after
attaining age sixty-five (65) to the extent such Non-Qualified Stock Options are
exercisable and only to the extent the term of the Non-Qualified Stock Options
has not yet expired. In the event of the Grantee's death prior to the end of
the three (3) month period after retirement on or after attaining age
sixty-five (65), his or her estate shall have the right for a period of one (1)
year following the date of death to exercise the Non-Qualified Stock Options to
the extent such Non-Qualified Stock Options are exercisable and only to the
extent the term of the Non-Qualified Stock Options has not yet expired.
10. CERTAIN CORPORATE TRANSACTIONS
In the event of a change in the shares of Common Stock of the Company,
as presently constituted, in a transaction described in Section 9 of the
Incentive Stock Plan, the Non-Qualified Stock Options shall be adjusted as
described in such Section 9 of the Incentive Stock Plan.
Notice of any adjustment shall be given by the Company to each holder
of the Non-Qualified Stock Options which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Incentive Stock Plan.
Fractional shares resulting from any adjustment in the Non-Qualified
Stock Options pursuant to Section 9 of the Incentive Stock Plan or this
Section 10 shall be eliminated
-4-
<PAGE>
and the price per share of the remaining shares subject to the Non-Qualified
Stock Options shall be adjusted accordingly.
11. NO LIMITATION ON RIGHTS OF THE COMPANY
The grant of the Non-Qualified Stock Options shall not in any way
affect the right or power of the Company to make adjustments, reclassifications
or changes in its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
12. RIGHTS AS A STOCKHOLDER
The Grantee or a transferee of the Grantee shall have no rights as a
stockholder with respect to any shares subject to his or her Non-Qualified Stock
Options prior to the date on which he or she is recorded as the holder of such
shares on the records of the Company following the exercise of the Non-Qualified
Stock Options. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date on which the
Grantee is recorded as the holder of such shares on the records of the Company
following the exercise of the Non-Qualified Stock Options.
13. SECURITIES LAW REQUIREMENTS
No Non-Qualified Stock Options granted pursuant to this Agreement
shall be exercisable, in whole or in part, nor shall the Company be obligated to
acquire/sell any shares of Common Stock of the Company subject to any such
Non-Qualified Stock Options, if such exercise, acquisition and sale would, in
the opinion of counsel for the Company, violate the Securities Act of 1933 (or
other federal or state statutes having similar requirements), as it may be in
effect at that time. Each Non-Qualified Stock Option shall be subject to the
further
-5-
<PAGE>
requirement that, if at any time the Board of Directors shall determine in its
discretion that the listing or qualification of the shares of Common Stock of
the Company subject to such Non-Qualified Stock Option under any securities
exchange requirements or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary as a condition of, or in
connection with, the granting of such Non-Qualified Stock Option or the issuance
of shares thereunder, such Non-Qualified Stock Option may not be exercised in
whole or in part unless such listing, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board of Directors.
14. DISPOSITIONS OF COMMON STOCK
The Committee may, as a condition precedent to the exercise of the
Non-Qualified Stock Options, require the Grantee to enter into such agreements
or to make such representations as may be required to make lawful under the laws
of the United States or any state the exercise of the Non-Qualified Stock
Options and the ultimate disposition of the shares acquired by such exercise.
15. TAX WITHHOLDING
It shall be a condition to the obligation of the Company to deliver
shares or securities of the Company upon exercise of a Non-Qualified Stock
Option, that the Grantee pay to the Company such amount as may be requested by
the Company for the purpose of satisfying any liability for such withholding
taxes. Any grant issued under the Incentive Stock Plan may provide by the grant
that the Grantee may elect with the consent of the Committee and in accordance
with any applicable regulations of the authority issuing such regulations, to
pay a portion or all of the amount of such minimum required or additional
permitted withholding taxes in shares. In such event, the Grantee shall
authorize the Company to withhold, or shall agree
-6-
<PAGE>
to surrender back to the Company, on or about the date such withholding tax
liability is determinable, shares previously owned by such Grantee or a portion
of the shares that were or otherwise would be distributed to such Grantee
pursuant to such award having a Fair Market Value equal to the amount of such
required or permitted withholding taxes to be paid in shares.
16. NO OBLIGATION TO EXERCISE NON-QUALIFIED STOCK OPTION
The granting of the Non-Qualified Stock Options shall impose no
obligation upon the Grantee or a transferee of the Grantee to exercise the
Non-Qualified Stock Options.
17. NO CONTRACT OF EMPLOYMENT
Neither the Incentive Stock Plan nor this Agreement is a contract of
employment, and the terms of employment of the Grantee shall not be affected in
any way by the Incentive Stock Plan or this Agreement except as specifically
provided therein. Neither the establishment of the Incentive Stock Plan nor the
execution of this Agreement shall be construed as conferring any legal rights
upon the Grantee for a continuation of employment, nor shall it interfere with
the right of the Company or any subsidiary to discharge the Grantee and to treat
him or her without regard to the effect which such treatment might have upon him
or her as a Grantee.
18. NOTICE
Notice to the Company shall be deemed given if in writing and mailed
to the Company at the address specified in Section 4 by first-class, certified
mail. Notice to the Grantee or the Grantee's estate, if applicable, shall be
given by registered mail to such person's last known address.
19. AMENDMENT OF AGREEMENT
The Committee may from time to time and at its discretion amend this
Agreement with the consent of the Grantee.
-7-
<PAGE>
20. INTERPRETATION OF AGREEMENT
This Agreement and the Non-Qualified Stock Options evidenced hereby
are subject to the terms of the Incentive Stock Plan. A copy of the Incentive
Stock Plan has been delivered, together with this Agreement, to the Grantee,
receipt of which is hereby acknowledged. In the event of any conflict between
the terms of the Incentive Stock Plan and of this Agreement, the terms of the
Incentive Stock Plan shall govern.
The Committee shall have the final authority and discretion to
interpret and construe the terms of the Incentive Stock Plan and of this
Agreement and any such interpretations and constructions by the Committee shall
be final, binding and conclusive upon all persons claiming an interest in the
Incentive Stock Plan. Notwithstanding the foregoing, no term of the Incentive
Stock Plan relating to the Non-Qualified Stock Options shall be interpreted, nor
shall any discretion or authority of the Committee be exercised, without the
consent of the Grantee, to disqualify any Non-Qualified Stock Options under
applicable securities laws.
No member of the Committee shall be liable for any action,
interpretation or construction made in good faith with respect to the Incentive
Stock Plan or this Agreement.
21. GOVERNING LAW
Except to the extent preempted by federal law, this Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, determined without regard to its conflict of law rules.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have duly executed
this Agreement as of the date first written above.
BIG CITY RADIO, INC.
Dated:________________ By:___________________________________
Attest:
______________________
Secretary
Dated:________________ ______________________________________
Grantee
-9-
<PAGE>
Annex E
--------
[OC NQSOS]
[CLASS A - BOARD]
BIG CITY RADIO, INC.
--------------------
AGREEMENT (the "Agreement"), dated as of _______________, between Big
City Radio, Inc., a Delaware corporation with offices at 11 Skyline Drive,
Hawthorne, NY 10532 (the "Company"), and (Name) (the "Grantee").
The Board of Directors of the Company hereby grants to the Grantee,
effective as of the close of business on the date prior to the consummation of
the initial public offering of shares of Class A common stock (par value $0.01)
of the Company (the "Common Stock"), an option to purchase all or any part of an
aggregate of (NQSO) shares of Common Stock under the Big City Radio, Inc. 1997
Incentive Stock Plan (the "Incentive Stock Plan") at an exercise price of $____
per share (the "Non-Qualified Stock Options"). The Non-Qualified Stock Options
are not intended to be incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
To evidence the Non-Qualified Stock Options, and to set forth the
terms and conditions as provided in the Incentive Stock Plan, the Company and
the Grantee hereby agree as follows:
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Incentive Stock Plan, as may be amended
from time to time.
<PAGE>
2. CONFIRMATION OF GRANT SUBJECT TO INCENTIVE STOCK PLAN
The Company hereby evidences and confirms its grant of the
Non-Qualified Stock Options to the Grantee on the effective date set forth
above. The Non-Qualified Stock Options shall be subject to all of the
provisions of the Incentive Stock Plan.
3. MEDIUM AND TIME OF PAYMENT
The exercise price of the Non-Qualified Stock Options shall be payable
in United States dollars and may be paid in cash or by certified or cashier's
check payable to the order of the Company at the time of purchase.
Notwithstanding the foregoing, the Grantee may, at the discretion of the
committee responsible for the administration of the Plan (the "Committee"), pay
the exercise price with (i) shares of Common Stock of the Company already owned
by, and in the possession of, the Grantee, or (ii) any combination of United
States dollars or shares of Common Stock of the Company. Shares of Common Stock
of the Company used to satisfy the exercise price of Non-Qualified Stock Options
shall be valued at their Fair Market Value, as determined under the Incentive
Stock Plan.
4. TERM AND EXERCISE OF THE NON-QUALIFIED STOCK OPTIONS
The Non-Qualified Stock Options shall vest at a rate equal to 20% per
annum over a period of five (5) years beginning on the first anniversary date of
the date of grant. In the event of the Grantee's death or the Grantee's
retirement on or after attaining age sixty-five (65), the Non-Qualified Stock
Options shall be immediately exercisable and otherwise subject to Section 7 of
the Incentive Stock Plan. Upon a Change in Control prior to the expiration of
five (5) years from the date of the Grant, the Non-Qualified Stock Options shall
be immediately exercisable at the sole discretion of the Board.
-2-
<PAGE>
The vested Non-Qualified Stock Options may be exercised by giving
written notice to the Company by first class, certified mail to Arnold L.
Wadler, Esq., Executive Vice President, c/o Metromedia Company, One Metromedia
Plaza, East Rutherford, New Jersey 07073. Such notice shall be signed and dated
by the Grantee and shall state the number of shares of Common Stock of the
Company with respect to which the Non-Qualified Stock Options are being
exercised. Such notice of exercise shall be accompanied by full payment of the
exercise price.
5. ISSUANCE OF COMMON STOCK
Certificates for shares of Common Stock of the Company shall be issued
upon the exercise of the Non-Qualified Stock Options only when all necessary
actions shall have been taken by the Company to render the Common Stock of the
Company when issued, validly issued, fully paid and non-assessable.
6. TRANSFERABILITY OF NON-QUALIFIED STOCK OPTIONS
The Non-Qualified Stock Options granted hereunder shall be exercisable
during the Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee. The Non-Qualified Stock Options shall be transferable only by will or
the laws of descent and distribution and shall not be subject, in whole or in
part, to attachment, execution or levy of any kind.
7. RIGHTS IN THE EVENT OF TERMINATION OF
EMPLOYMENT FOR REASONS OTHER THAN DEATH AND RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options (that are
otherwise exercisable) only while an employee or within one (1) year after his
or her termination of employment on account of disability as defined in Code
Section 22(e)(3) to the extent the
-3-
<PAGE>
Grantee had the right to exercise the Non-Qualified Stock Options prior to his
or her termination of employment. In the event the Grantee's employment is
terminated for any reason other than disability, death or retirement on or after
attaining age sixty-five (65), the Grantee may exercise the Non-Qualified Stock
Options (that are otherwise exercisable) within three (3) months after his or
her termination of employment.
Such Non-Qualified Stock Options may be exercised with respect to all
or any part of the shares subject thereto to the extent the right to purchase
such shares had accrued at the time of termination of employment.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH
If the Grantee dies while an employee, his or her estate shall have
the right for a period of one (1) year following the date of such death to
exercise the Non-Qualified Stock Options to the extent such Non-Qualified Stock
Options are exercisable and only to the extent the term of the Non-Qualified
Stock Options has not yet expired.
9. RIGHTS IN THE EVENT OF THE GRANTEE'S RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options only while an
employee or within three (3) months following his or her retirement on or after
attaining age sixty-five (65) to the extent such Non-Qualified Stock Options are
exercisable and only to the extent the term of the Non-Qualified Stock Options
has not yet expired. In the event of the Grantee's death prior to the end of
the three (3) month period after retirement on or after attaining age
sixty-five (65), his or her estate shall have the right for a period of one (1)
year following the date of death to exercise the Non-Qualified Stock Options to
the extent such Non-Qualified Stock Options are exercisable and only to the
extent the term of the Non-Qualified Stock Options has not yet expired.
-4-
<PAGE>
10. CERTAIN CORPORATE TRANSACTIONS
In the event of a change in the shares of Common Stock of the Company,
as presently constituted, in a transaction described in Section 9 of the
Incentive Stock Plan, the Non-Qualified Stock Options shall be adjusted as
described in such Section 9 of the Incentive Stock Plan.
Notice of any adjustment shall be given by the Company to each holder
of the Non-Qualified Stock Options which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Incentive Stock Plan.
Fractional shares resulting from any adjustment in the Non-Qualified
Stock Options pursuant to Section 9 of the Incentive Stock Plan or this
Section 10 shall be eliminated and the price per share of the remaining shares
subject to the Non-Qualified Stock Options shall be adjusted accordingly.
11. NO LIMITATION ON RIGHTS OF THE COMPANY
The grant of the Non-Qualified Stock Options shall not in any way
affect the right or power of the Company to make adjustments, reclassifications
or changes in its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
12. RIGHTS AS A STOCKHOLDER
The Grantee or a transferee of the Grantee shall have no rights as a
stockholder with respect to any shares subject to his or her Non-Qualified Stock
Options prior to the date on which he or she is recorded as the holder of such
shares on the records of the Company following the exercise of the Non-Qualified
Stock Options. No adjustment shall be made for
-5-
<PAGE>
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date on which the Grantee is recorded as the holder of such shares on the
records of the Company following the exercise of the Non-Qualified Stock
Options.
13. SECURITIES LAW REQUIREMENTS
No Non-Qualified Stock Options granted pursuant to this Agreement
shall be exercisable, in whole or in part, nor shall the Company be obligated to
acquire/sell any shares of Common Stock of the Company subject to any such
Non-Qualified Stock Options, if such exercise, acquisition and sale would, in
the opinion of counsel for the Company, violate the Securities Act of 1933 (or
other federal or state statutes having similar requirements), as it may be in
effect at that time. Each Non-Qualified Stock Option shall be subject to the
further requirement that, if at any time the Board of Directors shall determine
in its discretion that the listing or qualification of the shares of Common
Stock of the Company subject to such Non-Qualified Stock Option under any
securities exchange requirements or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the granting of such Non-Qualified Stock Option or the
issuance of shares thereunder, such Non-Qualified Stock Option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors.
14. DISPOSITIONS OF COMMON STOCK
The Committee may, as a condition precedent to the exercise of the
Non-Qualified Stock Options, require the Grantee to enter into such agreements
or to make such representations as may be required to make lawful under the laws
of the United States or any state the exercise
-6-
<PAGE>
of the Non-Qualified Stock Options and the ultimate disposition of the shares
acquired by such exercise.
15. TAX WITHHOLDING
It shall be a condition to the obligation of the Company to deliver
shares or securities of the Company upon exercise of a Non-Qualified Stock
Option, that the Grantee pay to the Company such amount as may be requested by
the Company for the purpose of satisfying any liability for such withholding
taxes. Any grant issued under the Incentive Stock Plan may provide by the grant
that the Grantee may elect with the consent of the Committee and in accordance
with any applicable regulations of the authority issuing such regulations, to
pay a portion or all of the amount of such minimum required or additional
permitted withholding taxes in shares. In such event, the Grantee shall
authorize the Company to withhold, or shall agree to surrender back to the
Company, on or about the date such withholding tax liability is determinable,
shares previously owned by such Grantee or a portion of the shares that were or
otherwise would be distributed to such Grantee pursuant to such award having a
Fair Market Value equal to the amount of such required or permitted withholding
taxes to be paid in shares.
16. NO OBLIGATION TO EXERCISE NON-QUALIFIED STOCK OPTION
The granting of the Non-Qualified Stock Options shall impose no
obligation upon the Grantee or a transferee of the Grantee to exercise the
Non-Qualified Stock Options.
17. NO CONTRACT OF EMPLOYMENT
Neither the Incentive Stock Plan nor this Agreement is a contract of
employment, and the terms of employment of the Grantee shall not be affected in
any way by the Incentive Stock Plan or this Agreement except as specifically
provided therein. Neither the establishment of the Incentive Stock Plan nor the
execution of this Agreement shall be construed as conferring
-7-
<PAGE>
any legal rights upon the Grantee for a continuation of employment, nor shall it
interfere with the right of the Company or any subsidiary to discharge the
Grantee and to treat him or her without regard to the effect which such
treatment might have upon him or her as a Grantee.
18. NOTICE
Notice to the Company shall be deemed given if in writing and mailed
to the Company at the address specified in Section 4 by first-class, certified
mail. Notice to the Grantee or the Grantee's estate, if applicable, shall be
given by registered mail to such person's last known address.
19. AMENDMENT OF AGREEMENT
The Committee may from time to time and at its discretion amend this
Agreement with the consent of the Grantee.
20. INTERPRETATION OF AGREEMENT
This Agreement and the Non-Qualified Stock Options evidenced hereby
are subject to the terms of the Incentive Stock Plan. A copy of the Incentive
Stock Plan has been delivered, together with this Agreement, to the Grantee,
receipt of which is hereby acknowledged. In the event of any conflict between
the terms of the Incentive Stock Plan and of this Agreement, the terms of the
Incentive Stock Plan shall govern.
The Committee shall have the final authority and discretion to
interpret and construe the terms of the Incentive Stock Plan and of this
Agreement and any such interpretations and constructions by the Committee shall
be final, binding and conclusive upon all persons claiming an interest in the
Incentive Stock Plan. Notwithstanding the foregoing, no term of the Incentive
Stock Plan relating to the Non-Qualified Stock Options shall be interpreted,
-8-
<PAGE>
nor shall any discretion or authority of the Committee be exercised, without the
consent of the Grantee, to disqualify any Non-Qualified Stock Options under
applicable securities laws.
No member of the Committee shall be liable for any action,
interpretation or construction made in good faith with respect to the Incentive
Stock Plan or this Agreement.
21. GOVERNING LAW
Except to the extent preempted by federal law, this Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, determined without regard to its conflict of law rules.
IN WITNESS WHEREOF, the Company and the Grantee have duly executed
this Agreement as of the date first written above.
BIG CITY RADIO, INC.
Dated:________________ By:___________________________________
Attest:
______________________
Secretary
Dated:________________ ______________________________________
Grantee
-9-
<PAGE>
Annex F
--------
[OC NQSOS]
[CLASS A - COMMITTEE]
BIG CITY RADIO, INC.
--------------------
AGREEMENT (the "Agreement"), dated as of _______________, between Big
City Radio, Inc., a Delaware corporation with offices at 11 Skyline Drive,
Hawthorne, NY 10532 (the "Company"), and (Name) (the "Grantee").
The committee appointed by the Board of Directors of the Company (the
"Committee") responsible for the administration of the Big City Radio, Inc. 1997
Incentive Stock Plan (the "Incentive Stock Plan"), hereby grants to the Grantee,
effective on _______________, an option to purchase all or any part of an
aggregate of (NQSO) shares of Class A common stock (par value $0.01) of the
Company (the "Common Stock") under the Incentive Stock Plan at an exercise price
of $____ per share (the "Non-Qualified Stock Options"). The Non-Qualified Stock
Options are not intended to be incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
To evidence the Non-Qualified Stock Options, and to set forth the
terms and conditions as provided in the Incentive Stock Plan, the Company and
the Grantee hereby agree as follows:
1. DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Incentive Stock Plan, as may be amended
from time to time.
<PAGE>
2. CONFIRMATION OF GRANT SUBJECT TO INCENTIVE STOCK PLAN
The Company hereby evidences and confirms its grant of the
Non-Qualified Stock Options to the Grantee on the effective date set forth
above. The Non-Qualified Stock Options shall be subject to all of the
provisions of the Incentive Stock Plan.
3. MEDIUM AND TIME OF PAYMENT
The exercise price of the Non-Qualified Stock Options shall be payable
in United States dollars and may be paid in cash or by certified or cashier's
check payable to the order of the Company at the time of purchase.
Notwithstanding the foregoing, the Grantee may, at the discretion of the
Committee, pay the exercise price with (i) shares of Common Stock of the Company
already owned by, and in the possession of, the Grantee, or (ii) any combination
of United States dollars or shares of Common Stock of the Company. Shares of
Common Stock of the Company used to satisfy the exercise price of Non-Qualified
Stock Options shall be valued at their Fair Market Value, as determined under
the Incentive Stock Plan.
4. TERM AND EXERCISE OF THE NON-QUALIFIED STOCK OPTIONS
On the date of grant, ___% of the Non-Qualified Stock Options shall
immediately vest. Thereafter, the Non-Qualified Stock Options shall vest at a
rate equal to ___% per annum over a period of _______ (__) years beginning on
the first anniversary date of the date of grant. In the event of the Grantee's
death or the Grantee's retirement on or after attaining age sixty-five (65), the
Non-Qualified Stock Options shall be immediately exercisable and otherwise
subject to Section 7 of the Incentive Stock Plan. Upon a Change in Control
prior to the expiration of _______ (__) years from the date of the Grant, the
Non-Qualified Stock Options shall be immediately exercisable at the sole
discretion of the Board.
The vested Non-Qualified Stock Options may be exercised by giving
written notice to the Company by first class, certified mail to Arnold L.
Wadler, Esq., Executive Vice President, c/o Metromedia Company, One Metromedia
Plaza, East Rutherford, New Jersey 07073. Such notice shall be signed and dated
by the Grantee and shall state the number of shares of Common Stock of the
Company with respect to which the Non-Qualified Stock Options are being
exercised. Such notice of exercise shall be accompanied by full payment of the
exercise price.
-2-
<PAGE>
5. ISSUANCE OF COMMON STOCK
Certificates for shares of Common Stock of the Company shall be issued
upon the exercise of the Non-Qualified Stock Options only when all necessary
actions shall have been taken by the Company to render the Common Stock of the
Company when issued, validly issued, fully paid and non-assessable.
6. TRANSFERABILITY OF NON-QUALIFIED STOCK OPTIONS
The Non-Qualified Stock Options granted hereunder shall be exercisable
during the Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee. The Non-Qualified Stock Options shall only be transferable by will or
the laws of descent and distribution and shall not be subject, in whole or in
part, to attachment, execution or levy of any kind.
7. RIGHTS IN THE EVENT OF TERMINATION OF
EMPLOYMENT FOR REASONS OTHER THAN DEATH AND RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options (that are
otherwise exercisable) only while an employee or within one (1) year after his
or her termination of employment on account of disability as defined in Code
Section 22(e)(3) to the extent the
-3-
<PAGE>
Grantee had the right to exercise the Non-Qualified Stock Options prior to his
or her termination of employment. In the event the Grantee's employment is
terminated for any reason other than disability, death or retirement on or after
attaining age sixty-five (65), the Grantee may exercise the Non-Qualified Stock
Options (that are otherwise exercisable) within three (3) months after his or
her termination of employment.
Such Non-Qualified Stock Options may be exercised with respect to all
or any part of the shares subject thereto to the extent the right to purchase
such shares had accrued at the time of termination of employment.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH
If the Grantee dies while an employee, his or her estate shall have
the right for a period of one (1) year following the date of such death to
exercise the Non-Qualified Stock Options to the extent such Non-Qualified Stock
Options are exercisable and only to the extent the term of the Non-Qualified
Stock Options has not yet expired.
9. RIGHTS IN THE EVENT OF THE GRANTEE'S RETIREMENT
The Grantee may exercise the Non-Qualified Stock Options only while an
employee or within three (3) months following his or her retirement on or after
attaining age sixty-five (65) to the extent such Non-Qualified Stock Options are
exercisable and only to the extent the term of the Non-Qualified Stock Options
has not yet expired. In the event of the Grantee's death prior to the end of
the three (3) month period after retirement on or after attaining age
sixty-five (65), his or her estate shall have the right for a period of one (1)
year following the date of death to exercise the Non-Qualified Stock Options to
the extent such Non-Qualified Stock Options are exercisable and only to the
extent the term of the Non-Qualified Stock Options has not yet expired.
-4-
<PAGE>
10. CERTAIN CORPORATE TRANSACTIONS
In the event of a change in the shares of Common Stock of the Company,
as presently constituted, in a transaction described in Section 9 of the
Incentive Stock Plan, the Non-Qualified Stock Options shall be adjusted as
described in such Section 9 of the Incentive Stock Plan.
Notice of any adjustment shall be given by the Company to each holder
of the Non-Qualified Stock Options which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Incentive Stock Plan.
Fractional shares resulting from any adjustment in the Non-Qualified
Stock Options pursuant to Section 9 of the Incentive Stock Plan or this
Section 10 shall be eliminated and the price per share of the remaining shares
subject to the Non-Qualified Stock Options shall be adjusted accordingly.
11. NO LIMITATION ON RIGHTS OF THE COMPANY
The grant of the Non-Qualified Stock Options shall not in any way
affect the right or power of the Company to make adjustments, reclassifications
or changes in its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
12. RIGHTS AS A STOCKHOLDER
The Grantee or a transferee of the Grantee shall have no rights as a
stockholder with respect to any shares subject to his or her Non-Qualified Stock
Options prior to the date on which he or she is recorded as the holder of such
shares on the records of the Company following the exercise of the Non-Qualified
Stock Options. No adjustment shall be made for
-5-
<PAGE>
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date on which the Grantee is recorded as the holder of such shares on the
records of the Company following the exercise of the Non-Qualified Stock
Options.
13. SECURITIES LAW REQUIREMENTS
No Non-Qualified Stock Options granted pursuant to this Agreement
shall be exercisable, in whole or in part, nor shall the Company be obligated to
acquire/sell any shares of Common Stock of the Company subject to any such
Non-Qualified Stock Options, if such exercise, acquisition and sale would, in
the opinion of counsel for the Company, violate the Securities Act of 1933 (or
other federal or state statutes having similar requirements), as it may be in
effect at that time. Each Non-Qualified Stock Option shall be subject to the
further requirement that, if at any time the Board of Directors shall determine
in its discretion that the listing or qualification of the shares of Common
Stock of the Company subject to such Non-Qualified Stock Option under any
securities exchange requirements or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the granting of such Non-Qualified Stock Option or the
issuance of shares thereunder, such Non-Qualified Stock Option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors.
14. DISPOSITIONS OF COMMON STOCK
The Committee may, as a condition precedent to the exercise of the
Non-Qualified Stock Options, require the Grantee to enter into such agreements
or to make such representations as may be required to make lawful under the laws
of the United States or any state the exercise
-6-
<PAGE>
of the Non-Qualified Stock Options and the ultimate disposition of the shares
acquired by such exercise.
15. TAX WITHHOLDING
It shall be a condition to the obligation of the Company to deliver
shares or securities of the Company upon exercise of a Non-Qualified Stock
Option, that the Grantee pay to the Company such amount as may be requested by
the Company for the purpose of satisfying any liability for such withholding
taxes. Any grant issued under the Incentive Stock Plan may provide by the grant
that the Grantee may elect with the consent of the Committee and in accordance
with any applicable regulations of the authority issuing such regulations, to
pay a portion or all of the amount of such minimum required or additional
permitted withholding taxes in shares. In such event, the Grantee shall
authorize the Company to withhold, or shall agree to surrender back to the
Company, on or about the date such withholding tax liability is determinable,
shares previously owned by such Grantee or a portion of the shares that were or
otherwise would be distributed to such Grantee pursuant to such award having a
Fair Market Value equal to the amount of such required or permitted withholding
taxes to be paid in shares.
16. NO OBLIGATION TO EXERCISE NON-QUALIFIED STOCK OPTION
The granting of the Non-Qualified Stock Options shall impose no
obligation upon the Grantee or a transferee of the Grantee to exercise the
Non-Qualified Stock Options.
17. NO CONTRACT OF EMPLOYMENT
Neither the Incentive Stock Plan nor this Agreement is a contract of
employment, and the terms of employment of the Grantee shall not be affected in
any way by the Incentive Stock Plan or this Agreement except as specifically
provided therein. Neither the establishment of the Incentive Stock Plan nor the
execution of this Agreement shall be construed as conferring
-7-
<PAGE>
any legal rights upon the Grantee for a continuation of employment, nor shall it
interfere with the right of the Company or any subsidiary to discharge the
Grantee and to treat him or her without regard to the effect which such
treatment might have upon him or her as a Grantee.
18. NOTICE
Notice to the Company shall be deemed given if in writing and mailed
to the Company at the address specified in Section 4 by first-class, certified
mail. Notice to the Grantee or the Grantee's estate, if applicable, shall be
given by registered mail to such person's last known address.
19. AMENDMENT OF AGREEMENT
The Committee may from time to time and at its discretion amend this
Agreement with the consent of the Grantee.
20. INTERPRETATION OF AGREEMENT
This Agreement and the Non-Qualified Stock Options evidenced hereby
are subject to the terms of the Incentive Stock Plan. A copy of the Incentive
Stock Plan has been delivered, together with this Agreement, to the Grantee,
receipt of which is hereby acknowledged. In the event of any conflict between
the terms of the Incentive Stock Plan and of this Agreement, the terms of the
Incentive Stock Plan shall govern.
The Committee shall have the final authority and discretion to
interpret and construe the terms of the Incentive Stock Plan and of this
Agreement and any such interpretations and constructions by the Committee shall
be final, binding and conclusive upon all persons claiming an interest in the
Incentive Stock Plan. Notwithstanding the foregoing, no term of the Incentive
Stock Plan relating to the Non-Qualified Stock Options shall be interpreted,
-8-
<PAGE>
nor shall any discretion or authority of the Committee be exercised, without the
consent of the Grantee, to disqualify any Non-Qualified Stock Options under
applicable securities laws.
No member of the Committee shall be liable for any action,
interpretation or construction made in good faith with respect to the Incentive
Stock Plan or this Agreement.
21. GOVERNING LAW
Except to the extent preempted by federal law, this Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, determined without regard to its conflict of law rules.
IN WITNESS WHEREOF, the Company and the Grantee have duly executed
this Agreement as of the date first written above.
BIG CITY RADIO, INC.
Dated:________________ By:___________________________________
Attest:
______________________
Secretary
Dated:________________ ______________________________________
Grantee
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<PAGE>
Exhibit 10.2
BIG CITY RADIO, INC.
C/O METROMEDIA COMPANY
ONE MEADOWLANDS PLAZA
EAST RUTHERFORD, NEW JERSEY 07073
As of December , 1997
Mr. Michael Kakoyiannis
138 Cambridge Avenue
Garden City, New York 11530
Dear Michael:
When executed by you and by BIG CITY RADIO, INC., a Delaware
Corporation (the "Company"), this letter agreement (the "Agreement") shall amend
and restate in its entirety the letter agreement dated as of October 17, 1994,
as amended and supplemented, between you and the Company for your employment
with the Company, to read as follows:
1. (a) The Company hereby employs you as its President and Chief
Executive Officer for a term ending on December 31, 2000 (the "Term") or such
earlier time as your employment may be terminated by you or by the Company as
provided in this Agreement.
(b) The Company may terminate your employment for cause at any
time effective upon the date specified in a written notice of such termination
delivered to you. The term "for cause" shall mean and include, but shall not be
limited to, any of the following events:
(i) fraud, misappropriation or embezzlement of funds or
property by you involving (x) the Company, (y) any of the radio broadcast
stations that the Company may own from time to time (the "Stations"), or
(z) any Affiliated Company (as defined in paragraph 5 of this Agreement);
(ii) your [arrest or] conviction in any jurisdiction for any
crime which constitutes a felony, or which constitutes a misdemeanor that
involves fraud, moral turpitude or material loss to the Company, any
Station or any Affiliated Company, or their respective businesses or
reputations; provided, however, that if your employment is terminated based
on your arrest for any such crime and you are subsequently found to be not
guilty or all charges are dismissed for any such crime, your termination
shall be considered to have been made without cause and you shall be
entitled to the payments and benefits specified in paragraph 1(d) hereof;
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2
(iii) your misconduct in, or neglect of, the performance of
your duties and responsibilities hereunder, or your violation of any
specific lawful direction of the Board of Directors of the Company or its
Chairman of the Board of Directors;
(iv) your breach of any material provision of this Agreement
which breach continues uncured for a period of five (5) days after written
notice thereof is given to you by the Company.
(c) If you are unable to perform your duties hereunder by reason
of illness or disability, as determined by a doctor selected by the Company,
which inability continues for a period of ninety (90) consecutive days or more
or any ninety (90) days or more within any one hundred eighty (180) day period,
then at any time thereafter while such inability continues, the Company may
terminate your employment hereunder by giving you written notice thereof.
(d) The Company shall have the right, at any time, to terminate
your employment without cause, by providing written notice delivered to you at
least thirty (30) days prior to the effective date of such termination. If your
employment is terminated by the Company without cause, the Company shall pay you
a severance payment in an amount equal to eighteen times your base monthly
salary at the time of termination and, in addition, your employment-related
benefits shall continue until eighteen (18) months subsequent to the date of
your termination (such severance payment and employment-related benefits are
collectively referred to as "Severance Payments"). Upon mutual agreement of the
Company and you, Severance Payments due to you pursuant to this paragraph 1(d)
may be made in a lump sum at the time of termination. If your employment is
terminated by the Company for cause as defined in Section 1(b) above or
disability, the Company shall have no obligations to you for severance payments
or continuation of employment-related benefits. You shall receive the payments
in this paragraph 1(d) regardless of whether you obtain any other compensation
or benefits from the Company or any other employment.
(e) (i) If there is a Change of Control (as defined below) of
the Company, you shall have the right, at any time within ninety (90) days
following the occurrence of such Change of Control, to terminate your employment
hereunder, by written notice to the Company, effective upon the date specified
in such notice, for any reason or for no reason whatsoever. Upon a Change of
Control and your election to terminate your employment as provided herein, the
Company shall pay you as severance pay, an amount equal to the Severance
Payments. Fifty percent (50%) of the amounts payable to you under this section
1(e) (the "Change of Control Compensation") shall be payable in a lump sum to
you within thirty (30) days of the termination of your employment due to a
Change of Control hereunder, and the balance of such Change of Control
Compensation shall be payable in ten (10) equal and consecutive monthly
installments, commencing thirty (30) days after payment of the aforementioned
payment. Upon mutual agreement between the Company and
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3
you, all payments may be made in a lump sum within thirty (30) days of
termination of your employment. You shall have no obligation to mitigate the
Company's obligation to pay the Change of Control Compensation by offsetting
against such payment obligation any income received by you from other employment
following termination of your employment with the Company.
(ii) For purposes of this Agreement, a "Change of Control"
of the Company shall be deemed to have occurred (i) when all or substantially
all of the assets of the Company are sold, leased, exchanged or otherwise
transferred to any person or entity or group of persons or entities acting in
concert other that a Permitted Holder (as defined below) or a Wholly-Owned
Subsidiary (as defined below) of the Company, (ii) when the Company is merged or
consolidated with or into another entity with the effect that stockholders of
the Company immediately prior to such merger or consolidation hold less than 50%
of the combined voting power of the then outstanding securities of the surviving
entity of such merger or the entity resulting from such consolidation ordinarily
(and apart from rights arising under special circumstances) having the right to
vote in the election of directors,[ (iii) on the first day within any two-year
period on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors (as defined below)], or (iv) when any
person or entity or group of persons or entities acting in concert, other than
Permitted Holders, becomes the beneficial owner, directly or indirectly of more
than 50% of the combined voting power of the then outstanding securities of the
Company having the right to vote in the election of directors.
(iii) "Permitted Holder" shall include only the following
persons: (w) Stuart Subotnick, Anita Subotnick and their respective estates,
guardians, conservators or committees; (x) each descendant of Stuart Subotnick
or Anita Subotnick (a "Subotnick Descendant") and their respective estates,
guardians, conservators or committees; (y) each Subotnick Family Controlled
Entity (as defined below); and (z) the trustees, in their respective capacities
as such, of each Subotnick Family Trust (as defined below).
(iv) "Subotnick Family Controlled Entity" means (w) any
not-for-profit corporation if at least a majority of its board of directors is
composed of Stuart Subotnick, Anita Subotnick and/or Subotnick Descendants;
(x) any other corporation if at least a majority of the value of its outstanding
equity is owned by Permitted Holders; (y) any partnership if at least a majority
of the economic interest of its partnership interests is owned by Permitted
Holders; and (z) any limited liability or similar company if at least a majority
of the economic interest of the company is owned by Permitted Holders.
(v) "Subotnick Family Trust" includes trusts the primary
beneficiaries of which are Stuart Subotnick, Anita Subotnick, Subotnick
Descendants, Stuart or Anita Subotnick's siblings, spouses of Subotnick
Descendants
<PAGE>
4
and their respective estates, guardians, conservators or committees and/or
charitable organizations (collectively, "Subotnick Beneficiaries"). For
purposes of this provision, the primary beneficiaries of a trust will be deemed
to be Subotnick Beneficiaries if, under the maximum exercise of discretion by
the trustee in favor of persons who are not Subotnick Beneficiaries, the value
of the interests of such persons in such trust, computed actuarially, is 50% or
less. The factors and methods prescribed in section 7520 of the Internal
Revenue Code of 1986, as amended, for use in ascertaining the value of certain
interests shall be used in determining a beneficiary's actuarial interest in a
trust for purposes of applying this provision. For purposes of this provision,
the actuarial value of the interest in a trust of any person in whose favor a
testamentary power of appointment may be exercised shall be deemed to be zero.
For purposes of this provision, in the case of a trust created by a Subotnick
Descendant, the actuarial value of the interest in such trust of any person who
may receive trust property only at the termination of the trust and then only in
the event that, at the termination of the trust, there are no living issue of
such Subotnick Descendant, shall be deemed to be zero.
(vi) "Wholly-Owned Subsidiary" means any corporation,
limited liability company, partnership or other entity of which all the
outstanding voting securities or similar interests are owned by the Company or
any Wholly-Owned Subsidiary of the Company or by the Company and a Wholly-Owned
Subsidiary of the Company.
(vii) "Continuing Director" means, as of the date of any
determination, any member of the Board of Directors of the Company who (x) was a
member of such Board of Directors on the date of this Agreement or (y) was
nominated for election or elected to such Board of Directors with, or whose
election to such Board of Directors was approved by, the affirmative vote of a
majority of the Continuing Directors who were members of such Board of Directors
at the time of such nomination or election or (z) is a designee of the Permitted
Holders or their affiliates or was nominated by the Permitted Holders or their
affiliates or any designees of the Permitted Holders or their affiliates on the
Board of Directors.
(f) Upon commencement of your employment, your responsibilities
shall include but not be limited to overseeing the broadcast operations of all
radio properties in the Company, directing and implementing all necessary
procedures to improve the overall positioning of the Stations and enhancing the
consolidated cash flow of the Stations, provided however, that the Board of
Directors of the Company shall have the right to change your responsibilities,
or assign you additional responsibilities, commensurate with your position as
President and Chief Executive Officer. You shall devote your entire working
time and best efforts to the faithful performance of the duties to which you are
assigned during the term of your employment to the exclusion of all other
employment for yourself or for others or any business activities which conflict
or interfere with your performance of duties hereunder. The Company shall not
be obligated to utilize your services hereunder
<PAGE>
5
and its entire obligation to you shall be fulfilled by making all of the
payments and providing all of the benefits due to you under Section 2 of this
Agreement. Your performance of duties hereunder shall be subject to the
direction, supervision and control of the Board of Directors of the Company or
the Chairman of the Board of Directors. You agree to accept and perform without
further consideration the duties of such offices, directorships, membership of
any committee of the Board of Directors and titles to which you are selected or
named by the Company. You shall perform your duties at such locations and shall
perform all travel requested by the Board of Directors of the Company or its
Chairman of the Board of Directors or otherwise necessary in the performance of
your duties.
(g) During your employment with the Company and, upon
termination of your employment for any reason and thereafter for a period of
eighteen (18) months (collectively, the "Non-Competition Period"), you shall
not, without the prior written consent of the Board of Directors or the Chairman
of the Board of Directors, which consent may be withheld in their sole
discretion, directly or indirectly, own, acquire or seek to acquire or obtain
any license for an AM or FM radio station in the "Territory", or render any
services or advice to, or in any way be engaged in, any AM or FM radio station
in the "Territory". For purposes of this Agreement, the "Territory" means the
area within seventy-five (75) miles of the transmitter for any radio station
owned or operated by the Company [at any time during the Non-Competition
Period].
(h) You represent and warrant to the Company that you have full
power and authority to execute, deliver and perform this Agreement and that the
execution, delivery and performance by you will not result in the breach of or
default under any other agreement to which you are a party or by which you are
bound, including but not limited to any employment agreement, or agreement to
not compete with any other person or entity.
(i) The Company represents and warrants to you that it has full
power and authority to execute, deliver and perform this Agreement and that the
execution, delivery and performance by it will not result in the breach of or
default under any other agreement to which it is a party or by which it is
bound, including but not limited to any employment agreement, or agreement not
to compete with any other person or entity.
(j) You represent and warrant that to the best of your
knowledge, information and belief, neither you nor any person acting on your
behalf has accepted or agreed to accept, or paid or agreed to pay, any money,
service or any valuable consideration, as defined in Section 508 of the
Communications Act of 1934, as amended (the "Communications Act"), for the
broadcast of any matter contained in any program on the Stations. You further
covenant that during the Term hereof, you will not accept or agree to accept
(except from the Company) or pay or agree to pay any money, service or any
valuable consideration, as defined in Section 508 of the
<PAGE>
6
Communications Act, for the broadcast of any matter contained in any program on
the Stations.
2. (a) In consideration of and in full payment for the due and
faithful performance by you of your duties hereunder during your employment
pursuant to this Agreement the Company shall pay you and you agree to accept a
salary at the rate of three hundred thousand dollars ($300,000.00) per annum.
The Company shall pay your salary hereunder periodically on dates established by
the Company, but not less frequently than once a month. All payments under this
Agreement will be subject to all deductions and withholding required by law or
agreement of the parties.
(b) In addition to the salary payable to you hereunder, if the
"Consolidated Operating Cash Flow" of the Company for a calendar year should
exceed the levels specified in this Section 2(b), the Company shall pay you an
annual bonus as specified in this Section 2(b). "Consolidated Operating Cash
Flow" of the Company means operating revenue of the Company on a consolidated
basis less operating expenses, before depreciation, amortization, interest and
taxes, and excluding all extraordinary gains and losses. To determine the
annual bonus, if any, to be paid to you, the Consolidated Operating Cash Flow
for the calendar year then ended shall be compared to the consolidated budgeted
cash flow of the Company (the "Budgeted Cash Flow") for such year as shall be
determined for such year by the Board of Directors of the Company or any
compensation committee of the Board of Directors as the Board of Directors may
from time to time designate. If the Consolidated Operating Cash Flow for such
year is equal to at least ninety five percent (95%) but less than one hundred
percent (100%) of the Budgeted Cash Flow for such year, you shall be paid a
bonus of twenty thousand dollars ($20,000.00). If the Consolidated Operating
Cash Flow for such year is equal to one hundred percent (100%) or more of the
Budgeted Cash Flow for such year, you shall be paid a bonus of fifty thousand
dollars ($50,000.00), plus an additional bonus equal to fifty percent (50%) of
the amount by which the Consolidated Operating Cash Flow exceeds the Budgeted
Cash Flow for such year, provided that the maximum amount of the additional
bonus payable to you for a given calendar year shall not exceed twenty thousand
dollars ($20,000) and provided, further, that the total amount of bonus payments
(including additional bonus payments) payable to you for any given calendar year
shall not exceed seventy thousand dollars ($70,000). All bonus payments shall
be made no later than thirty (30) days following the completion of the annual
accounting closing of the Company's books. The Company shall make all
determinations of Consolidated Operating Cash Flow in accordance with GAAP,
which determinations will be final and binding. If your employment should
terminate prior to the end of a calendar year, your bonus payment for such year
shall be calculated based on the full calendar year, but you shall be paid on a
pro rata basis (i.e., a percentage determined by the number of days during the
final year of your employment with the Company in which you were employed
divided by the total number of days in such year).
<PAGE>
7
(c) (i) As further consideration of the due and faithful
performance by you of your duties hereunder, you will be entitled to receive
during your employment pursuant to this Agreement, 93,755 shares of Class A
Common Stock, par value $.01 per share, of the Company (the "Class A Common
Stock") for every 20% increase in the average Closing Price (as defined below)
of the Class A Common Stock over a period of six consecutive months on any
securities exchange or on the National Association of Securities Dealers, Inc.
Automated Quotations system (the "NASDAQ") or any other system on which the
Class A Common Stock is traded measured in the manner specified in clause (ii)
below; provided that in no event will you be entitled to receive more than
281,265 shares of Class A Common Stock in the aggregate pursuant to this Section
2(c). Any issuance of 93,755 shares of Class A Common Stock pursuant to this
provision shall be referred to herein as an "Award" and any share of Class A
Common Stock issued to you hereunder shall be referred to herein as an
"Incentive Security".
(ii) For purposes of this Agreement, the increase in the
average Closing Price of the Class A Common Stock shall be measured:
(x) first, on the last day of any six consecutive month
period from and after the effectiveness of the registration statement on Form
S-1 (File No. 333-36449) (the "Effective Date"), by comparing the average
Closing Price of the Class A Common Stock over such six consecutive month period
[with the Closing Price of the Class A Common Stock on the first day of trading
of such Class A Common Stock following the Effective Date].
(y) then, on the last day of any six consecutive month
period following the grant of any Award pursuant to clause (i) or this clause
(ii), by comparing the average Closing Price of the Class A Common Stock over
such six consecutive month period with the average Closing Price used as a basis
for the measurement of the increase in the last Award granted pursuant to clause
(i) or this clause (ii).
(iii) For purposes of this Agreement, the "Closing Price" on
any day means the reported closing sales price or, in the case no such sale
takes place, the average of the reported closing bid and asked prices on the
principal securities exchange on which such Class A Common Stock is listed, or
if such stock is not listed on any such exchange, the highest closing sales
price or bid quotations for such stock on the NASDAQ or any system then in use.
(iv) If there occurs any recapitalization, stock split,
reclassification or any other change of the Class A Common Stock of the Company,
or any consolidation or merger of the Company with or into another entity (other
than a merger or consolidation of the Company in which the Company is the
surviving entity and which does not result in any recapitalization, stock split,
reclassification or other change of its Class A Common Stock), then you will
thereafter be entitled to
<PAGE>
8
receive hereunder for each Incentive Security the same kind and amount of
securities (including shares of stock) or other assets, or both, which were
issuable or distributable to the holders of Class A Common Stock for each of
their shares of Class A Common Stock upon such recapitalization, stock split,
reclassification, consolidation, merger or other change in respect of that
number of Incentive Securities which you may be entitled to receive hereunder as
if such Incentive Securities had been issued immediately prior to such
recapitalization, reclassification, stock split, consolidation, merger or other
change; and, in any such case, appropriate adjustments (as determined in good
faith by the Board of Directors of the Company) shall be made to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably
practicable, in relation to any Incentive Securities which you may become
entitled to receive hereunder.
(v) You represent and warrant that the Incentive Securities
issuable to you pursuant to this Agreement will be received by you for your own
account and with no intention of distributing or reselling such securities or
any part thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state, without prejudice, however,
to your right at all times to sell or otherwise dispose of all or any part of
the Incentive Securities under an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), or under an exemption from such
registration available under the Act, and subject, nevertheless, to the
disposition of the Incentive Securities being at all times within your control.
If you should in the future decide to dispose of any of the Incentive
Securities, you understand and agree that you may do so only in compliance with
the Act and applicable state securities laws, as then in effect.
(vi) You agree to the imprinting of a legend on the
certificates representing the Incentive Securities to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS."
(vii) The Company agrees to include for registration the
Incentive Securities in any registration statement that it proposes to file
under the Act with respect to the shares of its Class A Common Stock that may be
issued pursuant to the Company's 1997 Incentive Stock Plan. The Company also
acknowledges that you are the owner of 1,125,062 shares of Class A Common Stock
that are entitled to certain registration rights pursuant to the Registration
Rights Agreement, dated the date hereof, between you, the Company and certain
stockholders named therein.
<PAGE>
9
(viii) Any required withholding tax payable on the Incentive
Securities will be paid by you. It shall be a condition to the obligation of
the Company to deliver any of the Incentive Securities that you pay to the
Company such amount as may be requested by the Company for the purpose of
satisfying any liability for such withholding taxes. The Company may, upon
the discretionary determination of the Compensation Committee of the Company
(or the Board of Directors in the absence of such committee), permit you, in
accordance with applicable regulations of the authority issuing such
regulations, to pay a portion or all of the amount of such minimum required
or additional permitted withholding taxes in Incentive Securities. At the
discretionary determination of the Compensation Committee (or the Board of
Directors in the absence of such committee), you shall be permitted to
authorize the Company to withhold, or shall agree to surrender back to the
Company, on or about the date such withholding tax liability is determinable,
Incentive Securities previously owned by you or a portion of the Incentive
Securities that were or otherwise would be distributed to you pursuant to
this Agreement, having an aggregate Closing Price equal to the amount of such
required or permitted withholding taxes to be paid in shares.
(d) You shall be entitled to reimbursement for reasonable and
necessary expenses incurred by you in connection with your employment, upon the
presentation of proper documentation therefore in accordance with the usual
procedures of the Company.
(e) During your employment with the Company you shall be
entitled to participate in and to receive benefits under and in accordance with
the provisions of any Company employee benefit plans, programs and arrangements
which may now or hereafter be available to senior executives of the Company, as
such plans, programs and arrangements may be in effect from time to time and for
which you qualify in accordance with the terms thereof. Except as otherwise
expressly provided herein, nothing contained herein is intended in any way to
obligate the Company to provide to you employee benefits of any description.
The Company shall have the sole and unlimited discretion to determine whether or
not to provide any employee benefits, and, if so, the nature, extent and costs
to the Company and/or employee of any employee benefits. In addition to the
foregoing, in the event of your death during the term of this agreement, your
rights and benefits under employee benefit plans shall be determined in
accordance with the terms and conditions of such plans.
(f) During your employment with the Company, the Company shall
provide directors' and officers' liability insurance, health and disability
insurance and medical coverage to you consistent with the programs provided to
other senior executives of the Company.
<PAGE>
10
(g) During your employment with the Company, provided that you
are insurable at a reasonable cost and that you cooperate in obtaining the
insurance policy, the Company shall cause a term life insurance policy for you
to be issued in the amount of two million dollars ($2,000,000), the beneficiary
of which you are free to designate in your sole discretion.
(h) During your employment with the Company you shall be
entitled to take periodic vacations with pay aggregating three (3) weeks per
calendar year, provided that the Company has approved the dates of such
vacations, which approval shall not be unreasonably withheld and provided,
further, that you shall not be permitted to accrue more than fifteen (15)
calendar vacation days until such time as you have used up one (1) vacation day.
Each time you reach the maximum accrual level of fifteen (15) days, you shall
not be permitted to accrue further vacation time until another vacation day has
been used. You shall also be entitled to take official Company holidays with
pay.
(i) During your employment with the Company the Company shall
pay for your leasing costs (including servicing, insurance and registration) for
a BMW 735iL or comparable automobile.
3. (a) For purposes of this agreement, "Invention" will mean
(i) any and all machines, apparatuses, compositions of matter, methods,
know-how, processes, designs, configurations, uses thereof, or writings of any
kind, discovered, conceived, developed, made or produced, or any improvement to
them, and will not be limited to the definition of any invention contained in
the United States patent laws; (ii) all matters subject to copyright protection
under United States copyright laws; (iii) all matters subject to trademark
protection under trademark laws of the United States or those of any state of
the United States or under common law of any jurisdiction within the United
States; and (iv) all matters subject to protection as trade secrets under the
laws or common law of any state of the United States or of the United States.
(b) You understand and agree that all Inventions, or patents,
trademarks, copyrights, trade secrets or any other rights relating to any of the
foregoing, which have or may have a material importance to the business of the
Company and which are conceived or made by you during your employment by the
Company, either alone or with others, are the sole and exclusive property of the
Company, whether or not they are conceived or made during your working time for
the Company, except to the extent generally known or knowable by persons
generally knowledgeable in the radio broadcasting field.
(c) You will immediately disclose to the Company any and all
improvements, discoveries, ideas and Inventions (whether or not patentable)
heretofore made (other than those which are the property of your previous
employers) or conceived by you while in the employ of the Company, or hereafter
made or
<PAGE>
11
conceived by you while in the employ of the Company, either alone or in
conjunction with others, whether or not made or conceived at the request or upon
the suggestion of the Company, whether or not resulting from any work done in
the course of your employment by the Company, and whether or not made or
conceived during or outside of the usual hours of employment or upon or not upon
any premises of the Company.
(d) You hereby assign and will hereafter assign to the Company
all present or future right, title and interest in and to all Inventions
referred to in subparagraphs (b) and (c) of this Section 3. You will not
disclose any such Inventions to any third party without the written consent of
the Company.
(e) At any time and from time to time during and after your
employment by the Company, on the request of the Company, without further
consideration you will: (i) Execute specific documents of assignment in favor
of the Company, or its nominee, of any of the Inventions covered by this
Agreement; (ii) Execute all papers and perform all acts the Company considers
necessary or advisable for the preparation, application, procurement,
maintenance, enforcement, and defense of patent applications and patents of the
United States or other jurisdictions of such Inventions, for the perfection or
enforcement of any trademarks, copyrights or trade secrets relating to such
Invention, and for the transfer of any interest you may have in such Inventions;
and (iii) execute any and all papers and comments which the Company considers to
be necessary to vest sole right, title and interest in the Company or its
nominee in and to the above Inventions, patent applications, patents, or any
trademarks or copyright or applications therefore relating thereto.
Notwithstanding the foregoing after the term of this Agreement, unless your
employment was terminated for cause, in which case you agree to do so without
any compensation, you will be entitled to reasonable compensation for more than
incidental time and effort required to be expended by you to fulfill your
responsibilities under clause (ii) of this Section 3(e). You will execute all
documents (including those referred to above) and do all other acts which the
Company considers to be necessary to assist in the preservation of all the
Company's interests in such Inventions.
(f) You have identified on Schedule A attached hereto a complete
list of all Inventions which have been made or conceived or first reduced to
practice by you alone or in conjunction with others prior to your employment by
the Company and which you desire to exclude from the operation of this
Agreement.
4. (a) For purposes of this agreement, "proprietary information"
will mean any information relating to the business, operations or personnel of
the Company (including any of the Company's affiliates for the purposes of the
confidentiality provision of this agreement) that has not previously been
publicly released by a duly authorized representative of the Company and will
include but will not be limited to such information encompassed in all drawings,
designs
<PAGE>
12
plans, proposals, marketing and sales plans, financial information, costs,
pricing information, customer information, personnel information and all
methods, concepts, or ideas used in and which have or may have a material
importance to the business of the Company.
(b) You will regard, to the best of your ability, preserve as
confidential all proprietary information that has been may be obtained by you
during your employment by the Company or otherwise, whether you have such
information in your memory or in writing or other physical form. You will
neither use for your benefit or purposes nor disclose to others any proprietary
information, either during the term of this Agreement or thereafter, except as
required by the conditions of your employment hereunder. This provision will
not apply to proprietary information which has been voluntarily disclosed to the
public by the Company, for the benefit of the Company or upon its express
authorization or has been independently developed and disclosed by others who
are not subject to any obligations of confidentiality to the Company.
(c) You will not remove from the premises of the Company or
elsewhere, except as an employee of the Company in pursuit of the business of
the Company, any documents or objects containing or reflecting any proprietary
information or any other property of the Company. You recognize that all such
documents and objects, whether developed by you or by someone else, are the
exclusive property of the Company. Upon termination of your employment
hereunder you will forthwith deliver up to the Company all proprietary
information, including, without limitation, all correspondence, accounts,
records and any other documents or property made or held by you or under your
control in relation to the business or affairs of the Company, and no copy of
any such proprietary information will be retained by you.
(d) Except for such information which has been previously
disclosed to the general public without breaching any confidentiality agreement,
under no circumstances and at no time, during or after the term of your
employment, will you, directly or indirectly, disclose, divulge, render or offer
any knowledge or information with respect to any proprietary information, except
in the course of the proper performance of your duties hereunder and you
acknowledge and agree that any and all such information will be received by you
in confidential capacity.
5. You agree to perform your duties in full compliance with all
laws, rules and regulations of any governmental authority applicable to the
Company and its business or to any Affiliated Company or its business, to the
extent you are engaged in business on behalf of an Affiliated Company, or to the
performance of your duties pursuant to this Agreement. For purposes of this
Agreement, "Affiliated Company" means, with respect to the Company, any other
person that, directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the Company.
<PAGE>
13
6. (a) You agree to comply with any and all the Company's policies,
regulations and procedures including but not limited to those which now or
hereafter may relate to the matters set forth in this Agreement. Periodically,
at the request of the Company, you also agree to execute and/or to respond
fully, truthfully, accurately and completely to all documents or questionnaires
as may be submitted to you in connection therewith.
(b) In the event of a breach or threatened breach by you of any
of the provisions of Sections 1(f), 1(g), 3, 4, 5, or 6(a) hereof, the Company
will be entitled to an injunction restraining you from the commission of such
breach, and any violation by you of any provision of any such sections will be
grounds for immediate termination of your employment hereunder for cause.
7. [The Company may assign this agreement and all its rights
hereunder.] You may not at any time assign this Agreement nor any right or
interest hereunder. Except as herein otherwise provided, this Agreement will be
binding upon and inure to the benefit of the parties hereto, your legal
representatives and the Company's successors and assigns.
8. Any notice required or permitted to be given hereunder to the
parties will be in writing and will be delivered personally to you or to any
Vice President of the Company, or duly mailed to the other party by prepaid
registered or certified mail, return receipt requested, or by courier service
providing delivery receipts. Such duly mailed notice will be deemed given three
(3) days after the date of dispatch. The address for mailed notices will be (a)
for you, the address set forth on the first page of this Agreement, and (b) for
the Company: c/o Metromedia Company, One Meadowlands Plaza, East Rutherford,
New Jersey 07073, Attention: General Counsel. Either party may notify the other
party in writing of a change of address by serving notice in the manner provided
in this paragraph.
9. If any provision of this Agreement or the application thereof
will for any reason be invalid or unenforceable, such provision will be limited
only to the extent necessary in the circumstances to make such provision valid
or enforceable and its partial or total invalidity or unenforceability will in
any event not affect the remaining provision of this Agreement, which will
continue in full force and effect.
10. THIS AGREEMENT WILL BE CONSTRUED ACCORDING TO THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE OF NEW YORK. THIS AGREEMENT CONSTITUTES THE ENTIRE UNDERSTANDING BETWEEN
THE PARTIES, CANCELS AND SUPERSEDES ALL PRIOR ORAL OR WRITTEN UNDER-STANDINGS
AND AGREEMENTS BETWEEN THE PARTIES HERETO AND CANNOT BE CHANGED OR TERMINATED
ORALLY BUT ONLY BY AN INSTRUMENT IN WRITING SIGNED BY BOTH PARTIES HERETO.
<PAGE>
14
11. The covenants, representations and warranties of this Agreement
will survive its execution, delivery and performance, and all accrued
obligations will survive its termination.
If this is in accordance with your understanding, kindly so indicate
by signing the enclosed copy of this letter in the space provided below and
returning the same to the undersigned.
Very truly yours,
BIG CITY RADIO, INC.
By:
-----------------------------------
Name: Stuart Subotnick
Title: Chairman
ACCEPTED AND AGREED TO:
By:
---------------------------
Michael Kakoyiannis
Date:
-------------------------
<PAGE>
15
SCHEDULE A
----------
INVENTIONS
None
<PAGE>
Exhibit 10.3
Big City Radio, Inc.
11 Skyline Drive
Hawthorne, New York 10532
As of December __, 1997
Mr. Paul R. Thomson
2259 North Holliston Avenue
Altadena, CA 91001
Dear Paul:
When executed by you and by Big City Radio, Inc. (f/k/a Odyssey
Communications, Inc.), a Delaware corporation (the "Company"), this letter
agreement (the "Agreement") shall amend and restate in its entirety the letter
agreement dated as of January 1, 1996 (the "Prior Agreement"), between you and
the Company for your employment with the Company, to read as follows:
1. (a) The Company hereby employs you as its Chief Financial Officer
for a term ending on December 31, 1998 or such earlier time as may be terminated
by you or by the Company as provided in this Agreement.
(b) The Company can terminate your employment for cause at any time
effective upon the date set forth in written notice of such termination
delivered to you in the manner provided in this Agreement. The term "for cause"
shall mean and include, but shall not be limited to, any of the following
events:
(i) fraud, misappropriation or embezzlement of funds or
property by you involving (x) the Company, (y) any of the radio stations
owned or operated by the Company or any Affiliated Company (as defined in
paragraph 5 of this Agreement) during the term of this Agreement (the
"Stations"), or (z) any Affiliated Company;
<PAGE>
(ii) your indictment or conviction in any jurisdiction for any
crime which constitutes a felony, or which constitutes a misdemeanor that
involves fraud, moral turpitude or material loss to the Company, any of the
Station, or any Affiliated Company or their respective businesses or
reputations;
(iii) your misconduct in, or neglect of, the performance of
your duties and responsibilities hereunder, or your violation of any specific
direction of the Board of Directors of the Company (the "Board of Directors"),
the Chairman of the Board of the Directors, or the President or his or her
designee;
(iv) your breach of the agreements and covenants set forth in
paragraphs 1(d), (e), (f), (g) or (h), or 3, 4, 5, 6 or 7 of this Agreement; or
(v) your breach of any other material provision of this
Agreement which breach continues uncured for a period of fifteen (15) days
after written notice thereof is given to you by the Company.
(c) If you are unable to perform your duties hereunder by reason of
illness or disability, as determined by a physician selected by the Company,
which inability continues for a period of ninety (90) consecutive days or more
or any ninety (90) days or more within any one hundred eighty (180) day period,
then while such inability continues, the Company can terminate your employment
hereunder by giving you written notice thereof. In addition to the foregoing,
the Company's obligations for payments and benefits provided to you pursuant to
this Agreement will terminate upon your death.
(d) The Company shall have the right, at any time, to terminate your
employment without "cause" (as such term is used herein), by providing written
notice delivered to you at least thirty (30) days prior to the effective date of
such termination. If your employment is terminated by the Company without cause
effective prior to January 1, 1998, the Company shall pay you, in equal monthly
installments from and after the date of termination through the expiration of
the "Non-Competition Period" (as defined in paragraph 1 (g) hereof) a severance
payment in an amount equal to twelve (12) times your base monthly salary in
effect on the date of termination. If such termination shall
<PAGE>
be effective on or after January 1, 1998, your severance payment, which shall be
payable in equal monthly installments from and after the date of termination
through the expiration of the "Non-Competition Period" (as defined in paragraph
1(g) hereof) shall equal the aggregate amount of your base monthly salary for
the lesser of three (3) months or for the remaining term of your employment
pursuant to this Agreement.
(e) (i) If there is a Change of Control (as defined below) of the
Company, you shall have the right, at any time within ninety (90) days
following the occurrence of such Change of Control, to terminate your
employment hereunder, by written notice to the Company, effective upon the
date specified in such notice, for any reason or for no reason whatsoever.
Upon a Change of Control and your election to terminate your employment as
provided herein effective prior to January 1, 1998, the Company shall pay you
a severance payment in an amount equal to twelve (12) times your base monthly
salary in effect on the date of termination. If such termination shall be
effective on or after January 1, 1998, your severance payment shall equal the
aggregate amount of your base monthly salary for the lesser of three (3)
months or for the remaining term of your employment pursuant to this
Agreement. Fifty percent (50%) of the amounts payable to you under this
section 1(e) (the "Change of Control Compensation") shall be payable in a
lump sum to you within thirty (30) days of the termination of your employment
due to a Change of Control hereunder, and the balance of such Change of
Control Compensation shall be payable in ten (10) equal and consecutive
monthly installments, commencing thirty (30) days after payment of the
aforementioned payment. Upon mutual agreement between the Company and you,
all payments may be made in a lump sum within thirty (30) days of termination
of your employment. You shall have no obligation to mitigate the Company's
obligation to pay the Change of Control Compensation by offsetting against
such payment obligation any income received by you from other employment
following termination of your employment with the Company.
(ii) For purposes of this Agreement, a "Change of Control" of
the Company shall be deemed to have occurred (i) when all or substantially
all of the assets of the Company are sold, leased, exchanged or otherwise
transferred to any person or entity or group of persons or entities acting in
concert other than a Permitted Holder (as defined below) or a Wholly-Owned
Subsidiary (as defined below) of the Company, (ii) when the Company is merged
or consolidated with or into another entity with the effect that stockholders
of the Company immediately prior to such merger or consolidation hold less
than 50% of the combined voting power of the then outstanding securities of
the surviving entity of such merger or the entity resulting from such
consolidation ordinarily
<PAGE>
(and apart from rights arising under special circumstances) having the right
to vote in the election of directors, (iii) on the first day within any
two-year period on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors (as defined below), or (iv) when
any person or entity or group of persons or entities acting in concert other
than Permitted Holders becomes the beneficial owner, directly or indirectly,
of more than 50% of the combined voting power of the then outstanding
securities of the Company having the right to vote in the election of
directors.
(iii) "Permitted Holder" shall include only the following
persons: (w) Stuart Subotnick, Anita Subotnick and their respective estates,
guardians, conservators or committees; (x) each descendant of Stuart
Subotnick or Anita Subotnick (a "Subotnick Descendant") and their respective
estates, guardians, conservators or committees; (y) each Subotnick Family
Controlled Entity (as defined below); and (z) the trustees, in their
respective capacities as such, of each Subotnick Family Trust (as defined
below).
(iv) "Subotnick Family Controlled Entity" means (w) any
not-for-profit corporation if at least a majority of its board of directors
is composed of Stuart Subotnick, Anita Subotnick and/or Subotnick
Descendants; (x) any other corporation if at least a majority of the value of
its outstanding equity is owned by Permitted Holders; (y) any partnership if
at least a majority of the economic interest of its partnership interests is
owned by Permitted Holders; and (z) any limited liability or similar company
if at least a majority of the economic interest of the company is owned by
Permitted Holders.
(v) "Subotnick Family Trust" includes trusts the primary
beneficiaries of which are Stuart Subotnick, Anita Subotnick, Subotnick
Descendants, Stuart or Anita Subotnick's siblings, spouses of Subotnick
Descendants and their respective estates, guardians, conservators or
committees and/or charitable organizations (collectively, "Subotnick
Beneficiaries"). For purposes of this provision, the primary beneficiaries
of a trust will be deemed to be Subotnick Beneficiaries if, under the
maximum exercise of discretion by the trustee in favor of persons who are not
Subotnick Beneficiaries, the value of the interests of such persons in such
trust, computed actuarially, is 50% or less. The factors and methods
prescribed in section 7520 of the Internal Revenue Code of 1986, as amended,
for use in ascertaining the value of certain interests shall be used in
determining a beneficiary's actuarial interest in a trust for purposes of
applying this provision. For purposes of this provision, the actuarial value
of the interest in a trust
<PAGE>
of any person in whose favor a testamentary power of appointment may be
exercised shall be deemed to be zero. For purposes of this provision, in the
case of a trust created by a Subotnick Descendant, the actuarial value of the
interest in such trust of any person who may receive trust property only at
the termination of the trust and then only in the event that, at the
termination of the trust, there are no living issue of such Subotnick
Descendant, shall be deemed to be zero.
(vi) "Wholly-Owned Subsidiary" means any corporation, limited
liability company, partnership or other entity of which all the outstanding
voting securities or similar interests are owned by the Company or any
Wholly-Owned Subsidiary of the Company or by the Company and a Wholly-Owned
Subsidiary of the Company.
(vii) "Continuing Director" means, as of the date of any
determination, any member of the Board of Directors of the Company who (x)
was a member of such Board of Directors on the date of this Agreement or (y)
was nominated for election or elected to such Board of Directors with, or
whose election to such Board of Directors was approved by, the affirmative
vote of a majority of the Continuing Directors who were members of such Board
of Directors at the time of such nomination or election or (z) is a designee
of the Permitted Holders or their affiliates or was nominated by the
Permitted Holders or their affiliates or any designees of the Permitted
Holders or their affiliates on the Board of Directors.
(f) Your duties shall include without limitation on-going
evaluation of the Company's, any Affiliated Companies' and all Stations'
current accounting and financial activities and accounting and financial
personnel; structuring, implementation, execution, monitoring and management
of accounting and financial programs, policies and activities for the
Stations; accounting and financial management assistance to the Board of
Directors, the President and to General Managers at each of the Company and
all Stations and to the Company and its employees, agents and contractors;
development of Business Plans and Budgets for the Company, any Affiliated
Company and for the Stations, which will be subject to approval by the
Company in its sole and absolute discretion. Notwithstanding the foregoing,
the Company will have the right to change your responsibilities, or assign to
you additional responsibilities, commensurate with your position as Chief
Financial Officer for the Company, any Affiliated Company and the Stations.
You will devote your entire working time and best efforts to the faithful
performance of the duties to which you are assigned during the term of your
employment to the exclusion of all other employment for yourself or for
others or any business activities
5
<PAGE>
which conflict or interfere with your performance of duties hereunder. Your
performance of duties hereunder will be subject to the direction and control
of the Board of Directors, the Chairman of the Board of Directors, the
President and the General Manager of the Stations or his or her designee. You
will perform your duties at such other locations and will perform all travel
requested by the Board of Directors, the Chairman of the Board of Directors
or the President or otherwise necessary in the performance of your duties.
(g) In addition to the prohibition on other employment set forth
in paragraph 1(f), upon termination of your employment "for cause" or
"without cause" or by reason of your resignation or pursuant to paragraph
1(c) hereof or by reason of a Change of Control, and thereafter for 180 days
after the date of such termination (the "Non-Competition Period"), you shall
not, without the prior written consent of the Company, which consent the
Company may withhold in its sole and absolute discretion, serve in any
accounting or financial capacity for, or otherwise be involved in the
accounting and financial functions of any radio station with a "rock-based"
format (as such term is generally understood in the broadcast industry) in
the "Territory". For purposes of this Agreement, the "Territory" means the
area within fifty (50) miles of the transmitter of any radio station owned or
operated by the Company and any Affiliated Company at any time during the
Non-Competition Period In the event that the Company consents to your
rendering services in connection with the accounting and financial functions
of any radio stations during the Non-Competition Period, the Company will be
relieved of its obligation to pay any severance to you pursuant to paragraphs
1(d) and 1(e) hereof. In addition, to the foregoing, you agree that during
such Non-Competition Period you will not solicit, hire or endeavor to solicit
or hire any person employed by the Company.
(h) You represent and warrant to the Company that you have full
power and authority to execute, deliver and perform this Agreement and that
the execution, delivery and performance by you will not result in the breach
of or default under any other agreement to which you are a party or by which
you are bound, including but not limited to any employment agreement or
agreement to not compete with any other person or entity.
2. (a) In consideration of and in full payment for the due and
faithful performance by you of your duties and obligations hereunder, during
your employment pursuant to this Agreement the Company will pay you and you
agree to accept a salary at the rate of $175,000.00 per annum during the
period January 1, 1997 through December 31, 1997 ("Year 1"); and $187,500.00
per annum during the period January 1, 1998 through
6
<PAGE>
December 31, 1998 ("Year 2"). The Company will pay your salary hereunder
periodically in accordance with Company policy, but not less frequently than
once per month
(b) In addition to the salary payable to you hereunder, the
Company shall pay bonuses to you as follows:
(i) For Year 1 the Company shall pay to you an annual bonus of
$30,000.00, payable by February 28, 1998. For Year 2 the Company shall pay
to you an annual bonus of $35,000.00, payable by February 28, 1999.
(ii) In order to qualify for any of the foregoing bonuses (1)
you must have been continuously employed by the Company at the end of each
calendar period for which the bonus is payable and (2) where applicable, the
budgeted amounts set forth in the local sales Business Plans and Budgets for
the Radio Stations must have been achieved as determined by the Compensation
Committee of the Company or the Board of Directors pending the formation of
the Compensation Committee in its sole and absolute discretion.
(c) All payments made to you pursuant to this Agreement will be
subject to all deductions and withholding required by law or agreement of the
parties.
(d) You will be entitled to reimbursement for reasonable and
necessary expenses incurred by you in connection with your employment, upon
approval in advance from the Company and presentation of proper documentation
for all expenses in accordance with the usual procedures of the Company.
(d) During your employment with the Company you will be entitled
to participate in and to receive benefits under and in accordance with the
provisions of any Company employee benefit plans, programs and arrangements
which may now or hereafter be available to senior executives of the Company,
as such plans, programs and arrangements may be in effect from time to time
and which are applicable to you and for which you qualify under and pursuant
to such plans. In addition to the foregoing, in the event of your death
during the term of this Agreement, your rights and benefits under
7
<PAGE>
employee benefit plans shall be determined in accordance with the terms and
conditions of such plans. Nothing contained herein shall require the Company
to initiate or maintain any employee benefit plans, and the terms and
conditions of any such plans shall be determined by the Company in its sole
discretion.
(e) During your employment with the Company you shall be entitled
to take periodic vacations with pay aggregating three (3) weeks per calendar
year, provided that the Company has approved the dates of such vacations,
which approval shall not be unreasonably withheld and provided, further, that
you shall not be permitted to accrue more than fifteen (15) calendar vacation
days until such time as you have used up one (1) vacation day. Each time you
reach the maximum accrual level of fifteen (15) days, you shall not be
permitted to accrue further vacation time until another vacation day has been
used. You shall also be entitled to take official Company holidays with pay.
(f) During your employment with the Company, the Company in its
sole discretion will either (i) provide and automobile to you at the
Company's expense (including payment of insurance and maintenance costs but
excluding gasoline or other operating expenses and income taxes payable by
you hereunder) which is owned or leased by the Company at its expense or (ii)
the Company shall pay to you an automobile allowance of $700.00 per month.
The benefits provided to you in this paragraph 2(f) are subject to tax as
provided in the Internal Revenue Code of 1986, as amended, and shall be
reported by you as taxable income in accordance therewith.
(g) During your employment with the Company you shall be provided
with a cellular phone and beeper to be used by you solely for business
purposes and the Company shall pay for all charges relating to business use
of such phone and beeper, provided that you have presented proper
documentation therefor to the Company in accordance with the usual procedures
of the Company for all charges relating to your personal use of such phone
and beeper.
3. (a) For purposes of this Agreement, "Invention" will mean (i) any
and all machines, apparatuses, compositions of matter, methods, know-how,
processes, designs, configurations, uses thereof, or writings of any kind,
discovered, conceived, developed, made or produced, or any improvement to
them, and will not be limited to the definition of any invention contained in
the United States patent laws; (ii) all matters subject to copyright
8
<PAGE>
protection under United States copyright laws; (iii) all matters subject to
trademark protection under trademark laws of the United States those of any
state of the United States or under common law of any jurisdiction within the
United States; and (iv) all matters subject to protection as trade secrets
under the laws or common law of any state of the United States or of the
United States.
(b) You understand and agree that all Inventions, or patents,
trademarks, copyrights, trade secrets or any other rights relating to any of
the foregoing, which have or may have a material importance to the business
of the Company and which are conceived or made by you during your employment
by the Company, either alone or with others, are the sole and exclusive
property of the Company, whether or not they are conceived or made during
your working time for the Company, except to the extent generally known or
knowable by persons generally knowledgeable in the radio broadcasting field.
(c) You will immediately disclose to the Company any and all
improvements, discoveries, ideas and Inventions (whether or not patentable)
heretofore made (other than those which are the property of your previous
employers) or conceived by you while in the employ of the Company, or
hereafter made or conceived by you while in the employ of the Company, either
alone or in conjunction with others, whether or not made or conceived at the
request or upon the suggestion of the Company, whether or not resulting from
any work done in the course of your employment by the Company, and whether or
not made or conceived during or outside of the usual hours of employment or
upon or not upon any premises of the Company.
(d) You hereby assign and will hereafter assign to the Company all
present or future right, title and interest in and to all Inventions referred
to in subparagraphs (b) and (c) of this paragraph 3. You will not disclose
any such Inventions to any third party without the written consent of the
Company.
(e) At any time and from time to time during and after your
employment by the Company, on the request of the Company, without further
consideration you will: (i) Execute specific documents of assignment in favor
of the Company, or its nominee, of any of the Inventions covered by this
Agreement; (ii) Execute all papers and perform all acts the Company considers
necessary or advisable for the preparation, application, procurement,
maintenance, enforcement, and defense of patent applications and patents of
the United States or other jurisdictions of such Inventions, for the
perfection or
9
<PAGE>
enforcement of any trademarks, copyrights or trade secrets relating to such
Invention, and for the transfer of any interest you may have in such
Inventions; and (iii) Execute any and all papers and documents which the
Company considers to be necessary to vest sole right, title and interest in
the Company or its nominee in and to the above Inventions, patent
applications, patents, or any trademarks or copyright or applications
therefor relating thereto. Notwithstanding the foregoing, after the term of
this Agreement, unless your employment was terminated for cause, in which
case you agree to do so without any compensation, you will be entitled to
reasonable compensation for more than incidental time and effort required to
be expended by you to fulfill your responsibilities under clause (ii). You
will execute all documents (including those referred to above) and do all
other acts which the Company considers to be necessary to assist in the
preservation of all the Company's interests in such Inventions.
(f) You are hereby notified and by your signature to this
Agreement acknowledge that you understand that the provisions of this
paragraph 3 above do not apply to an Invention which fully qualifies under
the provisions of Section 2970 of the California Labor Code, which states as
follows:
Any provision in an employment agreement which provides that an
employee shall assign or offer to assign any of his or her rights in
an invention to his or her employer shall not apply to an invention
for which no equipment, supplies, facility, or trade secret
information of the employer was used and which was developed
entirely on the employee's own time, and (a) which does not relate
(1) to the business of the employer or (2) to the employee's actual
or demonstrably anticipated research or development, or (b) which
does not result from any work performed by the employee for the
employer. Any provision which purports to apply to such an invention
is to that event against the public policy of this state and is to
that extent void and unenforceable.
(g) You have identified on Exhibit A attached hereto a complete
list of all Inventions which have been made or conceived or first reduced to
practice by you alone or in conjunction with others prior to your employment
by the Company and which you desire to exclude from the operation of
paragraph 3 of this Agreement.
10
<PAGE>
4. (a) For purposes of this Agreement, "proprietary information" will
mean any information relating to the business, operations or personnel of the
Company (including but not limited to the Stations and any Affiliated
Company for the purposes of the confidentiality provisions of this Agreement)
that has not previously been publicly released by a duly authorized
representative of the Company and will include but will not be limited to
such information encompassed in all drawings, designs plans, proposals,
marketing and sales plans, financial information, costs, pricing
information, customer information, personnel information, programming,
promotion, engineering strategies and all methods, concepts, or ideas used in
and which have or may have a material importance to the business of the
Company.
(b) You will regard, and to the best of your ability, preserve as
confidential all proprietary information that has been or may be obtained by
you during your employment by the Company or otherwise, whether you have such
information in your memory or in writing or other physical form. You will
neither use for your benefit or purposes nor disclose to others any
proprietary information, either during the term of this Agreement or
thereafter, except as required by the conditions of your employment
hereunder. This provision will not apply to proprietary information which
has been voluntarily disclosed to the public by the Company for the benefit
of the Company or upon its express authorization or has been independently
developed and disclosed by others who are not subject to any obligations of
confidentiality to the Company.
(c) You will not remove from the premises of the Company or
elsewhere, except as an employee of the Company in pursuit of the business of
the Company, any documents or objects containing or reflecting any
proprietary information or any other property of the Company. You recognize
that all such documents and objects, whether developed by you or by someone
else, are the exclusive property of the Company. Upon termination of your
employment hereunder you will forthwith deliver up to the Company all
proprietary information, including, without limitation, all correspondence,
accounts, records and any other documents or property made or held by you or
under your control in relation to the business or affairs of the Company, and
no copy of any such proprietary information will be retained by you.
(d) Except for such information which has been previously
disclosed to the general public without breaching any confidentiality
agreement, under no circumstances and at no time, during or after the term of
your employment, will you, directly or indirectly, disclose, divulge, render
or offer any knowledge or information with respect to any
11
<PAGE>
proprietary information, except in the course of the proper performance of
your duties hereunder and you acknowledge and agree that any and all such
information will be received by you in confidential capacity.
5. (a) You agree to perform your duties in full compliance with all
laws, rules and regulations of any governmental authority applicable to the
Company and its business or to any Affiliated Company or its business, to the
extent you are engaged in business on behalf of an Affiliated Company, or to
the performance of your duties pursuant to this Agreement. For purposes of
this Agreement, "Affiliated Company" means, with respect to the Company, any
other person that, directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the Company.
(b) You represent and warrant that to the best of your knowledge,
information and belief, neither you nor any person acting on your behalf has
accepted or agreed to accept, or paid or agreed to pay any money, service or
any valuable consideration, as defined in Section 508 of the Communications
Act of 1934, as amended, for the broadcast of any matter contained in any
program on any Station. You further covenant that during your employment, you
will not accept or agree to accept (excepting from the Company) or pay or
agree to pay any money, service or valuable consideration, as defined in
Section 508 of the Communications Act of 1934, as amended, for the broadcast
of any matter contained in any program on any Station. You will not make or
promise to make or accept any payments or transfer of value which have the
purpose or effect of public or commercial bribery, acceptance of or
acquiescence in extortion, kickbacks or other unlawful or improper means of
obtaining business for the Company or any Affiliated Company. This paragraph
5(b) shall not prohibit normal and customary business entertainment or the
giving of business mementos of nominal value.
6. (a) You agree to comply with any and all of the Company's
policies, regulations and procedures including but not limited to those which
now or hereafter may relate to the matters set forth in this Agreement,
provided such policies, regulations and procedures are reasonably consistent
with the material terms of this Agreement. Periodically, at the request of
the Company, you also agree to execute and/or to respond fully, truthfully,
accurately and completely to all documents or questionnaires as may be
submitted to you in connection therewith.
(b) In the event of a breach or threatened breach by you of any of
the provisions of paragraphs 1(g), 3, 4, 5, 6(a) or 7 hereof, the Company
will be entitled to an injunction (without posting a bond or other security)
restraining you from the commission
12
<PAGE>
of such breach. In addition to the foregoing, any violation by you of any
provision of any such paragraphs will be grounds for immediate termination of
your employment hereunder for cause, and, without limiting any right, claim
or remedy the Company has or may have pursuant to this Agreement or at law or
equity, the Company will be relieved of its obligation to pay any severance
to you pursuant to paragraphs 1(d) or 1(e) hereof.
7. The Company may assign this Agreement and all its rights
hereunder. You may not at any time assign this Agreement nor any right or
interest hereunder. Except as herein otherwise provided, this Agreement will
be binding upon and inure to the benefit of the parties hereto, your legal
representatives and the Company's successors and assigns.
8. Any notice required or permitted to be given hereunder will be
in writing and will be delivered personally to you, or duly mailed to the
other party by prepaid registered or certified mail, return receipt
requested, or by courier service providing delivery receipts or by facsimile
transmission with document reception of transmission. Such duly mailed notice
will be deemed given two (2) days after the date of dispatch or twenty-four
(24) hours after the time of facsimile transmission, such time being
determined by the local time of the recipient. The address for mailed notices
will be (a) for you, the addressset forth on the first page of this
Agreement, and (b) for the Company: c/o Metromedia Company, One Meadowlands
Plaza, East Rutherford, New Jersey 07073, Attention: General Counsel. The
numbers for facsimile transmission will be the number contained in the
Company's records for you and 914-592-4356 and the copy to 201-531-2803 for
the Company. Either party may notify the other party in writing of a change
of address by serving notice in the manner provided in this Section.
9. If any provision of this Agreement or the application thereof
will for any reason be invalid or unenforceable, such provision will be
limited only to the extent necessary in the circumstances to make such
provision valid or enforceable and its partial or total invalidity or
unenforceability will in any event not affect the remaining provisions of
this Agreement, which will continue in full force and effect.
10. This Agreement will be construed according to the laws of the
State of California applicable to agreements made and to be performed within
the State of California. This Agreement constitutes the entire understanding
between the parties, cancels and supersedes all prior oral or written
understandings and agreements between
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the parties hereto including without limitation the Prior Agreement and
cannot be changed or terminated orally but only by an instrument in writing
signed by both parties hereto.
11. The covenants, representations and warranties of this
Agreement will survive its execution, delivery and performance, and all
accrued obligations will survive its termination.
14
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If this is in accordance with your understanding, kindly so indicate by
signing the enclosed copy of this letter in the space provided below and
returning the same to the undersigned.
Very truly yours,
Big City Radio, Inc.
By: ________________________
Michael Kakoyiannis
President
ACCEPTED AND AGREED TO:
__________________________
Paul R. Thomson
Date: ____________________
15
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Exhibit A
None.
<PAGE>
Exhibit 10.4
Big City Radio, Inc.
11 Skyline Drive
Hawthorne, New York 10532
As of December __, 1997
Mr. Steven Blatter
315 East 81st Street, Apt. 3 FW
New York, New York 10028
Dear Steve:
When executed by you and by Big City Radio, Inc. (f/k/a Odyssey
Communications, Inc.), a Delaware corporation (the "Company"), this letter
agreement (the "Agreement") shall amend and restate in its entirety the
letter agreement dated as of January 1, 1996 (the "Prior Agreement"), between
you and the Company for your employment with the Company, to read as follows:
1. (a) The Company hereby employs you as its Vice President of
Programming of all radio stations owned and/or operated by the Company or any
Affiliated Company (as defined in paragraph 5 of this Agreement) during the
term of this Agreement (together, the "Stations") for a term ending on
December 31, 1998.
(b) The Company can terminate your employment for cause at any
time effective upon the date set forth in written notice of such termination
delivered to you no later than ninety (90) days after the applicable "cause"
has occurred. The term "for cause" shall mean and include, but shall not be
limited to, any of the following events:
(i) fraud, misappropriation or embezzlement of funds or
property by you involving (x) the Company, (y) any of the Stations, or any
(z) Affiliated Company;
(ii) your indictment or conviction in any jurisdiction for any
crime which constitutes a felony, or which constitutes a misdemeanor that
involves fraud, moral turpitude or material loss to the Company, any of the
Stations, or any Affiliated Company or their respective businesses or
reputations;
(iii) your intentional misconduct in, or neglect of, the
performance of your duties and responsibilities hereunder, or your
intentional violation of any specific direction of the Board of Directors of
the Company (the "Board of Directors"), the Chairman of the Board of
Directors, the President or his or her designee;
(iv) your breach of the agreements and covenants set forth in
paragraphs 1(e), (f), (g) or (h) or 3, 4, 5, 6 or 7 of this Agreement; or
(v) your breach of any other material provision of this
Agreement which breach continues uncured for a period of fifteen (15) days
after written notice thereof is given to you by the Company.
(c) If you are unable to perform your duties hereunder by reason
of illness or disability, as determined by a physician selected by the
Company, which inability continues for a period of ninety (90) consecutive
days or more or any ninety (90) days or more within any one hundred eighty
(180) day period, then while such inability continues, the Company can
terminate your employment hereunder by giving you written notice thereof. In
addition to the foregoing, the Company's obligations for payments and
benefits provided to you pursuant to this agreement will terminate upon your
death.
(d) The Company shall have the right, at any time, to terminate
your employment without "cause" (as such term is used herein), by providing
written notice delivered to you at least thirty (30) days prior to the
effective date of such termination. If your employment is terminated by the
Company without cause effective prior to January 1, 1998, the Company shall
pay you, in equal monthly installments from and after the date of termination
through the expiration of the "Non-Competition
<PAGE>
Period" (as defined in paragraph 1(g) hereof) a severance payment in an
amount equal to the remainder of your base salary otherwise payable from the
date of termination through December 31, 1998. If such termination shall be
effective on or after January 1, 1998, but before July 1, 1998, the Company
shall pay you, in equal monthly installments from and after the date of
termination through the expiration of the "Non-Competition Period" (as
defined in paragraph 1(g) hereof) at the time of such termination, a
severance payment in an amount equal to six (6) times your base monthly
salary at the time of termination. If such termination shall be effective on
or after July 1, 1998, your severance payment, which shall be payable in
equal monthly installments from and after the date of termination through the
expiration of the "Non-Competition Period" (as defined in paragraph 1(g)
hereof) shall equal the aggregate amount of your monthly salary for the
remaining term of your employment. If your employment is terminated by the
Company for cause, the Company shall have no obligation to you for severance
payments.
(e) (i) If there is a Change of Control (as defined below) of the
Company, you shall have the right, at any time within thirty (30) days
following the occurrence of such Change of Control, to terminate your
employment hereunder, by written notice to the Company, effective upon the
date specified in such notice, for any reason or for no reason whatsoever.
Upon a Change of Control and your election to terminate your employment as
provided herein, the Company shall pay you a severance payment in an amount
equal to one and one-half (11/2) times your base monthly salary in effect on
the date of termination ("Change of Control Severance"), payable to you in a
lump sum within ten (10) days after the effective date of termination. In
addition to the foregoing, if the Company terminates your employment by
written notice delivered to you as provided herein within thirty (30) days
following the occurrence of a Change of Control, then the Company will pay to
you the Change of Control Severance within ten (10) days after the effective
date of termination.
(ii) For purposes of this Agreement, a "Change of Control" of the
Company shall be deemed to have occurred (i) when all or substantially all
of the assets of the Company are sold, leased, exchanged or otherwise
transferred to any person or entity or group of persons or entities acting in
concert other than a Permitted Holder (as defined below) or a Wholly-Owned
Subsidiary (as defined below) of the Company, (ii) when the Company is merged
or consolidated with or into another entity with the effect that stockholders
of the Company immediately prior to such merger or consolidation hold less
than 50% of the combined voting power of the then outstanding securities of
the surviving entity of such merger or the entity resulting from such
consolidation ordinarily (and apart from rights arising under special
circumstances) having the right to vote in the election of directors, (iii)
on the first day within any two-year period on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors
(as defined below), or (iv) when any person or entity or group of persons or
entities acting in concert other than Permitted Holders becomes the
beneficial owner, directly or indirectly, of more than 50% of the combined
voting power of the then outstanding securities of the Company having the
right to vote in the election of directors.
(iii) "Permitted Holder" shall include only the following persons:
(w) Stuart Subotnick, Anita Subotnick and their respective estates,
guardians, conservators or committees; (x) each descendant of Stuart
Subotnick or Anita Subotnick (a "Subotnick Descendant") and their respective
estates, guardians, conservators or committees; (y) each Subotnick Family
Controlled Entity (as defined below); and (z) the trustees, in their
respective capacities as such, of each Subotnick Family Trust (as defined
below).
(iv) "Subotnick Family Controlled Entity" means (w) any
not-for-profit corporation if at least a majority of its board of directors
is composed of Stuart Subotnick, Anita Subotnick and/or Subotnick
Descendants; (x) any other corporation if at least a majority of the value of
its outstanding equity is owned by Permitted Holders; (y) any partnership if
at least a majority of the economic interest of its partnership interests is
owned by Permitted Holders; and (z) any
2
<PAGE>
limited liability or similar company if at least a majority of the economic
interest of the company is owned by Permitted Holders.
(v) "Subotnick Family Trust" includes trusts the primary
beneficiaries of which are Stuart Subotnick, Anita Subotnick, Subotnick
Descendants, Stuart or Anita Subotnick's siblings, spouses of Subotnick
Descendants and their respective estates, guardians, conservators or
committees and/or charitable organizations (collectively, "Subotnick
Beneficiaries"). For purposes of this provision, the primary beneficiaries
of a trust will be deemed to be Subotnick Beneficiaries if, under the
maximum exercise of discretion by the trustee in favor of persons who are not
Subotnick Beneficiaries, the value of the interests of such persons in such
trust, computed actuarially, is 50% or less. The factors and methods
prescribed in section 7520 of the Internal Revenue Code of 1986, as amended,
for use in ascertaining the value of certain interests shall be used in
determining a beneficiary's actuarial interest in a trust for purposes of
applying this provision. For purposes of this provision, the actuarial value
of the interest in a trust of any person in whose favor a testamentary power
of appointment may be exercised shall be deemed to be zero. For purposes of
this provision, in the case of a trust created by a Subotnick Descendant, the
actuarial value of the interest in such trust of any person who may receive
trust property only at the termination of the trust and then only in the
event that, at the termination of the trust, there are no living issue of
such Subotnick Descendant, shall be deemed to be zero.
(vi) "Wholly-Owned Subsidiary" means any corporation, limited
liability company, partnership or other entity of which all the outstanding
voting securities or similar interests are owned by the Company or any
Wholly-Owned Subsidiary of the Company or by the Company and a Wholly-Owned
Subsidiary of the Company.
(vii) "Continuing Director" means, as of the date of any
determination, any member of the Board of Directors of the Company who (x)
was a member of such Board of Directors on the date of this Agreement or (y)
was nominated for election or elected to such Board of Directors with, or
whose election to such Board of Directors was approved by, the affirmative
vote of a majority of the Continuing Directors who were members of such Board
of Directors at the time of such nomination or election or (z) is a designee
of the Permitted Holders or their affiliates or was nominated by the
Permitted Holders or their affiliates or any designees of the Permitted
Holders or their affiliates on the Board of Directors.
(f) Your responsibilities will include (i) continuing duties as Program
Director of the Company's station WRGX-FM ("X-107") and (ii) additional
duties as Vice President-Programming for all of the Stations. Your duties
will include without limitation on-going evaluation of all Stations' current
programming and programming personnel; structuring, implementation and
execution, monitoring and management of programming formats for all Stations;
assistance to General Managers, Program Directors and programming personnel
at each of the Stations; development of Programming Business Plans for each
Station, which will be subject to approval by the Company in its sole and
absolute discretion, and which will include research, Arbitron ratings goals,
management and monitoring tools, development of on-air talent and positioning
of each Station. Notwithstanding the foregoing, the Company will have the
right to change your responsibilities, or assign to you additional
responsibilities, commensurate with your position as Program Director of
X-107 and Vice President-Programming for all of the Stations. You will
devote your entire working time and best efforts to the faithful performance
of the duties to which you are
3
<PAGE>
assigned during the term of your employment to the exclusion of all other
employment for yourself or for others or any business activities which
conflict or interfere with your performance of duties hereunder. Your
performance of duties hereunder will be subject to the direction and control
of the Board of Directors, the Chairman of the Board of Directors, the
President of the Company or his or her designee. You will perform your duties
at such other locations and will perform all travel requested by the Board of
Directors, the Chairman of the Board of Directors, or the President of the
Company or otherwise necessary in the performance of your duties.
(g) In addition to the prohibition on other employment set forth
in paragraph 1(e), upon termination of your employment "for cause" or
"without cause" or by reason of your resignation or pursuant to paragraph
1(c) or paragraph 1(e) hereof, and thereafter for a period of 180 days (the
"Non-Competition Period"), you shall not, without the prior written consent
of the Company, which consent the Company may withhold in its sole and
absolute discretion, serve as Program Director of, or otherwise be involved
in the programming of, any radio station with a "rock-based" format (as such
term is generally understood in the broadcast industry) in the "Territory".
For purposes of this Agreement, the "Territory" means the area within fifty
(50) miles of the transmitter of any of the Stations. In the event that the
Company consents to your rendering services in connection with the
programming of radio stations during the Non-Competition Period, the Company
will be relieved of its obligation to pay any severance to you pursuant to
paragraph 1(d) or paragraph 1(e) hereof.
(h) You represent and warrant to the Company that you have full
power and authority to execute, deliver and perform this agreement and that
the execution, delivery and performance by you will not result in the breach
of or default under any other agreement to which you are a party or by which
you are bound, including but not limited to any employment agreement or
agreement to not compete with any other person or entity.
2. (a) In consideration of and in full payment for the due and
faithful performance by you of your duties and obligations hereunder, during
your employment pursuant to this agreement the Company will pay you and you
agree to accept a salary at the rate of $165,000.00 per annum during the
period January 1, 1997 through December 31, 1997 ("Year 1") and $181,500.00
per annum during the period January 1, 1998 through December 31, 1998 ("Year
2"). The Company will pay your salary hereunder periodically in accordance
with their current Company policy, but not less frequently than once per
month. All payments made to you pursuant to this agreement will be subject
to all deductions and withholding required by law or agreement of the parties.
(b) In addition to the salary payable to you hereunder, the
Company paid or shall pay you a bonus of up to $13,750.00 semiannually for
Year 1, payable by July 15, 1997 and January 15, 1998, and up to $15,000.00
semiannually for Year 2, payable by July 15, 1998 and January 15, 1999;
provided in each case that (i) you have been continuously employed by the
Company at the end of each calendar period for which the bonus is payable and
(ii) you fulfill the goals and objectives set forth in the Programming
Business Plans for the Stations, including without limitation ratings, shares
and rankings in their respective markets for the Stations. The goals and
objectives and their achievement will be determined by the Compensation
Committee of the Company or the Board of Directors pending the formation of
the Compensation Committee in its sole and absolute discretion.
4
<PAGE>
(c) You will be entitled to reimbursement for reasonable and
necessary expenses incurred by you in connection with your employment, upon
approval in advance from the Company and presentation of proper documentation
for all expenses in accordance with the usual procedures of the Company.
(d) During your employment with the Company you will be entitled
to participate in and to receive benefits under and in accordance with the
provisions of any Company employee benefit plans, programs and arrangements
which may now or hereafter be available to senior executives of the Company,
as such plans, programs and arrangements may be in effect from time to time
and which are applicable to you and for which you qualify under and pursuant
to such plans. In addition to the foregoing, in the event of your death
during the term of this agreement, your rights and benefits under employee
benefit plans shall be determined in accordance with the terms and conditions
of such plans.
(e) The Company intends to implement a key employee executive
equity participation program. If such a program is implemented and if the
Company determines in its sole discretion that you qualify for such a
program, you will be entitled to participate therein in accordance with such
determination.
(f) During your employment with the Company, the Company shall
provide health and disability insurance and medical coverage to you
consistent with the program provided to other employees of the Company in
commensurate positions of employment.
(g) During your employment with the Company you shall be entitled
to take periodic vacations with pay aggregating three (3) weeks per calendar
year, provided that the Company has approved the dates of such vacations,
which approval shall not be unreasonably withheld and provided, further, that
you shall not be permitted to accrue more than fifteen (15) calendar vacation
days until such time as you have used up one (1) vacation day. Each time you
reach the maximum accrual level of fifteen (15) days, you shall not be
permitted to accrue further vacation time until another vacation day has been
used. You shall also be entitled to take official Company holidays with pay.
(h) During your employment with the Company you shall be provided
with, at the Company's expense (including payment of insurance and
maintenance costs), the use of an automobile which is owned or leased by the
Company. In addition, the Company shall pay you a One Hundred Thirty
($130.00) Dollars per week allowance for gasoline and garage expenses for
such automobile. The benefits provided to you in this paragraph 2(h) are
subject to tax as provided in the Internal Revenue Code of 1986, as amended,
and shall be reported by you as taxable income in accordance therewith.
(i) During your employment with the Company you shall be provided
with a cellular phone and beeper to be used by you solely for business
purposes and the Company shall pay for all charges relating to business use
of such phone and beeper, provided that you have presented proper
documentation therefor to the Company in accordance with the usual procedures
of the Company for all charges relating to your personal use of such phone
and beeper.
3. (a) For purposes of this agreement, "Invention" will mean (i) any
and all
5
<PAGE>
machines, apparatuses, compositions of matter, methods, know-how, processes,
designs, configurations, uses thereof, or writings of any kind, discovered,
conceived, developed, made or produced, or any improvement to them, and will
not be limited to the definition of any invention contained in the United
States patent laws; (ii) all matters subject to copyright protection under
United States copyright laws; (iii) all matters subject to trademark
protection under trademark laws of the United States those of any state of
the United States or under common law of any jurisdiction within the United
States; and (iv) all matters subject to protection as trade secrets under the
laws or common law of any state of the United States or of the United States.
(b) You understand and agree that all Inventions, or patents,
trademarks, copyrights trade secrets or any other rights relating to any of
the foregoing, which have or may have a material importance to the business
of the Company and which are conceived or made by you during your employment
by the Company, either alone or with others, are the sole and exclusive
property of the Company, whether or not they are conceived or made during
your working time for the Company, except to the extent generally known or
knowable by persons generally knowledgeable in the radio broadcasting field.
(c) You will immediately disclose to the Company any and all
improvements, discoveries, ideas and Inventions (whether or not patentable)
heretofore made (other than those which are the property of your previous
employers) or conceived by you while in the employ of the Company, or
hereafter made or conceived by you while in the employ of the Company, either
alone or in conjunction with others, whether or not made or conceived at the
request or upon the suggestion of the Company, whether or not resulting from
any work done in the course of your employment by the Company, and whether or
not made or conceived during or outside of the usual hours of employment or
upon or not upon any premises of the Company.
(d) You hereby assign and will hereafter assign to the Company all
present or future right, title and interest in and to all Inventions referred
to in subparagraphs (b) and (c) of this paragraph 3. You will not disclose
any such Inventions to any third party without the written consent of the
Company.
(e) At any time and from time to time during and after your
employment by the Company, on the request of the Company, without further
consideration you will: (i) Execute specific documents of assignment in
favor of the Company, or its nominee, of any of the Inventions covered by
this agreement; (ii) Execute all papers and perform all acts the Company
considers necessary or advisable for the preparation, application,
procurement, maintenance, enforcement, and defense of patent applications and
patents of the United States or other jurisdictions of such Inventions, for
the perfection or enforcement of any trademarks, copyrights or trade secrets
relating to such Invention, and for the transfer of any interest you may have
in such Inventions; and (iii) execute any and all papers and comments which
the Company considers to be necessary to vest sole right, title and interest
in the Company or its nominee in and to the above Inventions, patent
applications, patents, or any trademarks or copyright or applications
therefore relating thereto. Notwithstanding the foregoing, after the term of
this agreement, unless your employment was terminated for cause, in which
case you agree to do so without any compensation, you will be entitled to
reasonable compensation for more than incidental time and effort required to
be expended by you to fulfill your responsibilities under clause (ii). You
will execute all documents (including those referred to above) and do all
other acts which the Company considers to be necessary to assist
6
<PAGE>
in the preservation of all the Company's interests in such Inventions.
(f) You have identified on Exhibit A attached hereto a complete
list of all Inventions which have been made or conceived or first reduced to
practice by you alone or in conjunction with others prior to your employment
by the Company and which you desire to exclude from the operation of
paragraph 3 of this agreement.
4. (a) For purposes of this agreement, "proprietary information" will
mean any information relating to the business, operations or personnel of the
Company (including but not limited to the Stations and any Affiliated Company
for the purposes of the confidentiality provision of this agreement) that has
not previously been publicly released by a duly authorized representative of
the Company and will include but will not be limited to such information
encompassed in all drawings, designs plans, proposals, marketing and sales
plans, financial information, costs, pricing information, customer
information, personnel information, programming, promotion, engineering
strategies and all methods, concepts, or ideas used in and which have or may
have a material importance other business of the Company.
(b) You will regard, to the best of your ability, preserve as
confidential all proprietary information that has been or may be obtained by
you during your employment by the Company or otherwise, or whether you have
such information in your memory or in writing or other physical form. You
will neither use for your benefit or purposes nor disclose to others any
proprietary information, either during the term of this agreement or
thereafter, except as required by the conditions of your employment
hereunder. This provision will not apply to proprietary information which
has been voluntarily disclosed to the public by the Company for the benefit
of the Company or upon its express authorization or has been independently
developed and disclosed by others who are not subject to any obligations of
confidentiality to the Company.
(c) You will not remove from the premises of the Company or
elsewhere, except as an employee of the Company in pursuit of the business of
the Company, any documents or objects containing or reflecting any
proprietary information or any other property of the Company. You recognize
that all such documents and objects, whether developed by you or by someone
else, are the exclusive property of the Company. Upon termination of your
employment hereunder you will forthwith deliver up to the Company all
proprietary information, including, without limitation, all correspondence,
accounts, records and any other documents or property made or held by you or
under your control in relation to the business or affairs of the Company, and
no copy of any such proprietary information will be retained by you.
(d) Except for such information which has been previously
disclosed to the general public without breaching any confidentiality
agreement, under no circumstances and at no time, during or after the term of
your employment, will you, directly or indirectly, disclose, divulge, render
or offer any knowledge or information with respect to any proprietary
information, except in the course of the proper performance of your duties
hereunder and you acknowledge and agree that any and all such information
will be received by you in confidential capacity.
5. (a) You agree to perform your duties in full compliance with all
laws, rules and regulations of any governmental authority applicable to the
Company and its business or to any Affiliated Company or its business, to the
extent you are engaged in business on behalf of an
7
<PAGE>
Affiliated Company, or to the performance of your duties pursuant to this
agreement. For purposes of this Agreement, "Affiliated Company" means, with
respect to the Company, any other person that, directly or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with the Company.
(b) You represent and warrant that to the best of your knowledge,
information and belief, neither you nor any person acting on your behalf has
accepted or agreed to accept, or paid or agreed to pay any money, service or
any valuable consideration, as defined in Section 507 of the Communications
Act of 1934, as amended, for the broadcast of any matter contained in any
program on any Station. You further covenant that during your employment,
you will not accept or agree to accept (excepting from the Company) or pay or
agree to pay any money, service or valuable consideration, as defined in
Section 507 of the Communications Act of 1934, as amended, for the broadcast
of any matter contained in any program on any Station. You will not make or
promise to make or accept any payments or transfer of value which have the
purpose or effect of public or commercial bribery, acceptance of or
acquiescence in extortion, kickbacks or other unlawful or improper means of
obtaining business for the Company or any Affiliated Company. This Section
5(b) shall not prohibit normal and customary business entertainment or the
giving of business mementos of nominal value.
6. (a) You agree to comply with any and all of the Company's
policies, regulations and procedures including but not limited to those which
now or hereafter may relate to the matters set forth in this agreement,
provided such policies, regulations and procedures are reasonably consistent
with the material terms of this agreement. Periodically, at the request of
the Company, you also agree to execute and/or to respond fully, truthfully,
accurately and completely to all documents or questionnaires as may be
submitted to you in connection therewith.
(b) In the event of a breach or threatened breach by you of any of
the provisions paragraphs 1(g), 3, 4, 5, 6(a) or 7 hereof, the Company will
be entitled to an injunction (without posting a bond or other security)
restraining you from the commission of such breach. In addition to the
foregoing, any violation by you of any provision of any such paragraphs will
be grounds for immediate termination of your employment hereunder for cause,
and, without limiting any right, claim or remedy the Company has or may have
pursuant to this agreement or at law or equity, the Company will be relieved
of its obligation to pay any severance to you pursuant to paragraph 1(d)
hereof.
7. The Company may assign this agreement and all its rights hereunder,
to any Company Affiliate or to a purchaser of all or substantially all of
Company's stock or assets. You may not at any time assign this agreement nor
any right or interest hereunder. Except as herein otherwise provided, this
agreement will be binding upon and inure to the benefit of the parties
hereto, your legal representatives and the Company's successors and assigns.
8. Any notice required or permitted to be given hereunder will be in
writing and will be delivered personally to you, or duly mailed to the other
party by prepaid registered or certified mail, return receipt requested, or
by courier service providing delivery receipts or by facsimile transmission
with document reception of transmission. Such duly mailed notice will be
deemed given two (2) days after the date of dispatch or twenty-four (24)
hours after the time of facsimile transmission, such time being determined by
the local time of the recipient. The address
8
<PAGE>
for mailed notices will be (a) for you, the address set forth on the first
page of this Agreement with a "courtesy" copy of all notices to
_______________, Esq., ___________________________________, and (b) for the
Company: c/o Metromedia Company, One Meadowlands Plaza, East Rutherford, New
Jersey 07073, Attention: General Counsel. The numbers for facsimile
transmission will be the number contained in the Company's records for you
and 914-592-4356 and the copy to 201-531-2803 for the Company. Either party
may notify the other party in writing of a change of address by serving
notice in the manner provided in this Section.
9. If any provision of this Agreement or the application thereof will for
any reason by invalid or unenforceable, such provision will be limited only to
the extent necessary in the circumstances to make such provision valid or
enforceable and its partial or total invalidity or unenforceability will in any
event not affect the remaining provision of this Agreement, which will continue
in full force and effect.
10. THIS AGREEMENT WILL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE OF NEW YORK. THIS AGREEMENT CONSTITUTES THE ENTIRE UNDERSTANDING
BETWEEN THE PARTIES, CANCELS AND SUPERSEDES ALL PRIOR ORAL OR WRITTEN
UNDERSTANDINGS AND AGREEMENTS BETWEEN THE PARTIES HERETO INCLUDING WITHOUT
LIMITATION THE PRIOR AGREEMENT AND CANNOT BE CHANGED OR TERMINATED ORALLY BUT
ONLY BY AN INSTRUMENT IN WRITING SIGNED BY BOTH PARTIES HERETO.
11. The covenants, representations and warranties of this agreement will
survive its execution, delivery and performance, and all accrued obligations
will survive its termination.
If this is in accordance with your understanding, kindly so indicate by
signing the enclosed copy of this letter in the space provided below and
returning the same to the undersigned.
Very truly yours,
Big City Radio, Inc.
By: ___________________________
Michael Kakoyiannis
President
ACCEPTED AND AGREED TO:
_____________________________
Steven Blatter
Date:_________________________
9
<PAGE>
Exhibit A
None.
<PAGE>
Exhibit 10.5
Big City Radio, Inc.
11 Skyline Drive
Hawthorne, New York 10532
As of December __, 1997
Mr. Alan Kirschner
20 Estate Drive
Sussex, New Jersey 07461
Dear Alan:
When executed by you and by Big City Radio, Inc. (f/k/a Odyssey
Communications, Inc.), a Delaware corporation (the "Company"), this letter
agreement (the "Agreement") shall amend and restate in its entirety the
letter agreement dated as of July 20, 1996 (the "Prior Agreement"), as
amended, between you and the Company for your employment with the Company, to
read as follows:
1. (a) The Company hereby employs you as its Director of Engineering
for a term ending December 31, 1998 or such earlier time as it may be
terminated by you or by the Company as provided in this Agreement.
(b) The Company can terminate your employment for cause at any time
effective upon the date set forth in written notice of such termination
delivered to you in the manner provided in this Agreement. The term "for
cause" shall mean and include, but shall not be limited to, any of the
following events:
(i) fraud, misappropriation or embezzlement of funds or
property by you involving (x) the Company, (y) any of the radio stations
owned or operated by the Company or any Affiliated Company (as defined
in paragraph 5 of this Agreement) during the term of this Agreement (the
"Stations") or (z) any Affiliated Company;
(ii) your arrest, indictment or conviction in any jurisdiction
for any crime which constitutes a felony, or which constitutes a
misdemeanor that involves fraud, moral turpitude or material loss to the
Company, any Station, or any Affiliated Company or their respective
businesses or reputations;
(iii) your misconduct in, or neglect of, the performance of
your duties and responsibilities hereunder, or your violation of any
specific direction of the Board of Directors of the Company (the "Board
of Directors"), the Chairman of the Board of Directors, the President of
the Company or his designee;
(iv) your breach of the agreements and covenants set forth in
paragraphs 1(f), (g) or (h), or 3, 4, 5, 6 or 7 of this Agreement; or
<PAGE>
(v) your breach of any other material provision of this
Agreement which breach continues uncured for a period of fifteen (15)
days after written notice thereof is given to you by the Company.
(c) If you are unable to perform your duties hereunder by reason of
illness or disability, as determined by your physician and, at the
election of the Company, confirmed by a physician selected by the
Company, which inability continues for a period of ninety (90)
consecutive days or more or any ninety (90) days or more within any one
hundred eighty (180) day period, then while such inability continues,
the Company can terminate your employment hereunder by giving you
written notice thereof and paying to you upon termination a lump sum
equal to six (6) times your base monthly salary in effect on the date of
termination. In addition to the foregoing, the Company's obligations for
payments and benefits provided to you pursuant to this Agreement will
terminate upon your death.
(d) The Company shall have the right, at any time, to terminate your
employment without "cause" (as such term is used herein), by providing
written notice delivered to you at least thirty (30) days prior to the
effective date of such termination. If your employment is terminated by
the Company without cause, the Company shall pay to you an amount equal
to six (6) times your base monthly salary in effect on the date of
termination, payable to you in a lump sum upon termination. If your
employment is terminated by the Company for cause, or if your employment
is terminated by you, the Company shall have no obligation to you for
severance payments.
(e) (i) If there is a Change of Control (as defined below) of the
Company, you shall have the right, at any time within ninety (90) days
following the occurrence of such Change of Control, to terminate your
employment hereunder, by written notice to the Company, effective upon
the date specified in such notice, for any reason or for no reason
whatsoever. Upon a Change of Control and your election to terminate
your employment as provided herein, the Company shall pay you a
severance payment in an amount equal to twelve (12) times your base
monthly salary in effect on the date of termination, payable to you in a
lump sum upon termination.
(ii) For purposes of this Agreement, a "Change of Control" of
the Company shall be deemed to have occurred (i) when all or
substantially all of the assets of the Company are sold, leased,
exchanged or otherwise
<PAGE>
transferred to any person or entity or group of persons or entities
acting in concert other than a Permitted Holder (as defined below) or a
Wholly-Owned Subsidiary (as defined below) of the Company, (ii) when the
Company is merged or consolidated with or into another entity with the
effect that stockholders of the Company immediately prior to such merger
or consolidation hold less than 50% of the combined voting power of the
then outstanding securities of the surviving entity of such merger or
the entity resulting from such consolidation ordinarily (and apart from
rights arising under special circumstances) having the right to vote in
the election of directors, (iii) on the first day within any two-year
period on which a majority of the members of the Board of Directors of
the Company are not Continuing Directors (as defined below), or (iv)
when any person or entity or group of persons or entities acting in
concert other than Permitted Holders becomes the beneficial owner,
directly or indirectly, of more than 50% of the combined voting power of
the then outstanding securities of the Company having the right to vote
in the election of directors.
(iii) "Permitted Holder" shall include only the following
persons: (w) Stuart Subotnick, Anita Subotnick and their respective
estates, guardians, conservators or committees; (x) each descendant of
Stuart Subotnick or Anita Subotnick (a "Subotnick Descendant") and their
respective estates, guardians, conservators or committees; (y) each
Subotnick Family Controlled Entity (as defined below); and (z) the
trustees, in their respective capacities as such, of each Subotnick
Family Trust (as defined below).
(iv) "Subotnick Family Controlled Entity" means (w) any
not-for-profit corporation if at least a majority of its board of
directors is composed of Stuart Subotnick, Anita Subotnick and/or
Subotnick Descendants; (x) any other corporation if at least a majority
of the value of its outstanding equity is owned by Permitted Holders;
(y) any partnership if at least a majority of the economic interest of
its partnership interests is owned by Permitted Holders; and (z) any
limited liability or similar company if at least a majority of the
economic interest of the company is owned by Permitted Holders.
(v) "Subotnick Family Trust" includes trusts the primary
beneficiaries of which are Stuart Subotnick, Anita Subotnick, Subotnick
Descendants, Stuart or Anita Subotnick's siblings, spouses of Subotnick
Descendants and their respective estates, guardians, conservators or
committees and/or charitable organizations (collectively, "Subotnick
Beneficiaries"). For purposes of this provision, the primary
beneficiaries of a trust will be deemed to be Subotnick Beneficiaries
if, under the maximum exercise of discretion by the trustee in favor of
persons who are not Subotnick Beneficiaries, the value of the interests
of such persons in such trust, computed actuarially, is 50% or less.
The factors and methods prescribed in section 7520 of the Internal
Revenue Code of 1986, as amended, for use in ascertaining the value of
certain interests shall be used in determining a beneficiary's actuarial
interest in a trust for purposes of applying this provision. For
purposes of this provision, the actuarial value of the interest in a
trust of any person in whose favor a testamentary power of appointment
may be exercised shall be deemed to be zero. For purposes of this
provision, in the case of a trust created by a Subotnick Descendant, the
actuarial value of the interest in such trust of any person who may
receive trust property only at the termination of the trust and then
only in the event that, at the termination of the trust, there are no
living issue of such Subotnick Descendant, shall be deemed to be zero.
<PAGE>
(vi) "Wholly-Owned Subsidiary" means any corporation, limited
liability company, partnership or other entity of which all the
outstanding voting securities or similar interests are owned by the
Company or any Wholly-Owned Subsidiary of the Company or by the Company
and a Wholly-Owned Subsidiary of the Company.
(vii) "Continuing Director" means, as of the date of any
determination, any member of the Board of Directors of the Company who
(x) was a member of such Board of Directors on the date of this
Agreement or (y) was nominated for election or elected to such Board of
Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing
Directors who were members of such Board of Directors at the time of
such nomination or election or (z) is a designee of the Permitted
Holders or their affiliates or was nominated by the Permitted Holders or
their affiliates or any designees of the Permitted Holders or their
affiliates on the Board of Directors.
(f) Your duties shall include without limitation overseeing the
technical facilities of the Company and any Affiliated Company;
directing and implementing all necessary procedures to improve the
facilities, the antenna system, coverage and day-to-day maintenance of
the Stations during the term of this Agreement; advising the Company and
any Affiliated Company as to the technical feasibility of acquisition
properties while meeting all requirements and rules of the Federal
Communications Commission; and developing annual budgets, monthly
reports and attending weekly department head meetings of the Stations on
an intermittent basis. Notwithstanding the foregoing, the Board of
Directors will have the right to change your responsibilities, or assign
to you additional responsibilities, commensurate with your position as
the Company's Director of Engineering. You will devote your entire
working time and best efforts to the faithful performance of the duties
to which you are assigned during the term of your employment to the
exclusion of (i) all other employment for yourself or for others or any
business activities which conflict or interfere with your performance of
duties hereunder and (ii) all other employment for yourself or for
others or any business activities which do not conflict with or
interfere with your performance of duties hereunder except with the
prior written consent of the Company, which consent will not be
unreasonably withheld. You will be working with the General Managers,
Program Directors and other managers of the Stations but your
performance of duties hereunder will be subject to the direction and
control of the Board of Directors, the Chairman of the Board of
Directors, the President of the Company or his designee. You will be
based in Westchester County, New York, or another location
<PAGE>
in the metropolitan New York area. You will perform your duties at such
other locations and will perform all travel reasonably requested by the
Board of Directors, the Chairman of the Board of Directors, the
President of the Company or his designee or otherwise necessary in the
performance of your duties. If the Board of Directors, the Chairman of
the Board of Directors, the President of the Company or his designee
requires you to be based in a location outside the metropolitan New York
area and such location is not mutually agreeable, you shall have the
right to require the Company to terminate this Agreement "without cause"
and the terms of section 1(d) hereof will apply.
(g) In addition to the prohibition on other employment set
forth in paragraph 1(f), upon termination of your employment "for cause"
or "without cause" or by reason of your resignation or pursuant to
paragraph 1(c) hereof, and thereafter for thirty (30) days after the
date of such termination (the "Non-Competition Period"), you shall not,
without the prior written consent of the Company, which consent the
Company may withhold in its sole and absolute discretion, serve in any
engineering or technical capacity for, or otherwise be involved in the
engineering and technical functions of any radio station in the
"Territory". For purposes of this Agreement, the "Territory" means the
area within fifty (50) miles of the transmitter of any radio station
owned or operated by the Company and any Affiliated Company during the
Non-Competition Period. In the event that the Company consents to your
rendering services in connection with the engineering and technical
functions of any radio stations during the Non-Competition Period, the
Company will be relieved of its obligation to pay any severance or other
payments to you pursuant to paragraph 1(d) or 1(e) hereof. In addition,
to the foregoing, you agree that for a period of 180 days after the
termination of your employment, you will not solicit, hire or endeavor
to solicit or hire any person employed by the Company.
(h) You represent and warrant to the Company that you have full
power and authority to execute, deliver and perform this Agreement and
that the execution, delivery and performance by you will not result in
the breach of or default under any other agreement to which you are a
party or by which you are bound, including but not limited to any
employment agreement or agreement to not compete with any other person
or entity.
2. (a) In consideration of and in full payment for the due and faithful
performance by you of your duties and obligations hereunder, during your
employment pursuant to this Agreement the Company will pay you and you agree to
accept a salary at the rate of $110,000.00 per annum. The Company will pay
your salary hereunder in accordance with Company policy.
(b) In addition to the salary payable to you hereunder, the Company
may, at its sole discretion, pay a discretionary bonus to you of up to
$15,000.00 based on an annual management performance review by the Compensation
Committee of the Company or the Board of Directors, pending the formation of a
Compensation Committee.
<PAGE>
(c) All payments made to you pursuant to this Agreement will be
subject to all deductions and withholding required by law or agreement of the
parties.
(d) You will be entitled to reimbursement for reasonable and
necessary expenses incurred by you in connection with your employment, upon
approval in advance from the Company and presentation of proper documentation
for all expenses in accordance with the usual procedures of the Company.
(e) During your employment with the Company you will be entitled
to participate in and to receive benefits under and in accordance with the
provisions of any Company employee benefit plans, programs and arrangements
which may now or hereafter be available to senior executives of the Company,
as such plans, programs and arrangements may be in effect from time to time
and which are applicable to you and for which you qualify under and pursuant
to such plans. In addition to the foregoing, in the event of your death
during the term of this Agreement, your rights and benefits under employee
benefit plans shall be determined in accordance with the terms and conditions
of such plans. Nothing contained herein shall require the Company to initiate
or maintain any employee benefit plans, and the terms and conditions of any
such plans shall be determined by the Company in its sole discretion.
(f) During your employment with the Company you shall be entitled
to take periodic vacations with pay aggregating three (3) weeks during each
calendar year (prorated for any partial calendar year during the term of this
Agreement based on your employment during such year), provided that the
Company has approved the dates of such vacations, which approval shall not be
unreasonably withheld and provided, further, that you shall not be permitted
to accrue more than fifteen (15) calendar vacation days until such time as
you have used up one (1) vacation day. Each time you reach the maximum
accrual level of fifteen (15) days, you shall not be permitted to accrue
further vacation time until another vacation day has been used. You shall
also be entitled to five (5) paid personal days during each calendar year
(prorated for any partial calendar year during the term of this Agreement
based on your employment during such year). You shall also be entitled to
take official Company holidays with pay.
(g) During your employment with the Company, the Company will
provide a 4-wheel drive vehicle to you at the Company's expense (including
payment of insurance and maintenance costs but excluding gasoline or other
<PAGE>
operating expenses and income taxes payable by you hereunder) which is owned
or leased by the Company at its expense. The benefits provided to you in
this paragraph 2(g) are subject to tax as provided in the Internal Revenue
Code of 1986, as amended, and shall be reported by you as taxable income in
accordance therewith.
3. (a) For purposes of this Agreement, "Invention" will mean (i) any
and all machines, apparatuses, compositions of matter, methods, know-how,
processes, designs, configurations, uses thereof, or writings of any kind,
discovered, conceived, developed, made or produced, or any improvement to
them, and will not be limited to the definition of any invention contained in
the United States patent laws; (ii) all matters subject to copyright
protection under United States copyright laws; (iii) all matters subject to
trademark protection under trademark laws of the United States, those of any
state of the United States or under common law of any jurisdiction within the
United States; and (iv) all matters subject to protection as trade secrets
under the laws or common law of any state of the United States or of the
United States, including, without limitation, the Company's Synchronized
Total Marketing Concept (the "STMC").
(b) You understand and agree that all Inventions, or patents,
trademarks, copyrights or trade secrets relating to the radio, television or
broadcasting field, including, without limitation, the STMC, or any other
rights relating to any of the foregoing, which have or may have a material
importance to the business of the Company and which are conceived or made by
you during your employment by the Company, either alone or with others, are
the sole and exclusive property of the Company, whether or not they are
conceived or made during your working time for the Company, except to the
extent generally known or knowable by persons generally knowledgeable in the
radio broadcasting field.
(c) You will immediately disclose to the Company any and all
improvements, discoveries, ideas and Inventions (whether or not patentable)
relating to the radio, television or broadcasting field, including, without
limitation, the STMC, heretofore made (other than those which are the
property of your previous employers) or conceived by you while in the employ
of the Company, or hereafter made or conceived by you while in the employ of
the Company, either alone or in conjunction with others, whether or not made
or conceived at the request or upon the suggestion of the Company, whether or
not resulting from any work done in the course of your employment by the
Company, and whether or not made or conceived during or outside of the usual
hours of employment or upon or not upon any premises of the Company.
(d) You hereby assign and will hereafter assign to the Company all
present or future right, title and interest in and to all Inventions referred
to in subparagraphs (b) and (c) of this paragraph 3. You will not disclose
any such Inventions to any third party without the written consent of the
Company.
(e) At any time and from time to time during and after your
employment by the Company, at the request of the Company, without further
consideration you will: (i) execute specific documents of assignment in favor
of the
<PAGE>
Company, or its nominee, of any of the Inventions covered by this Agreement;
(ii) execute all papers and perform all acts the Company considers necessary or
advisable for the preparation, application, procurement, maintenance,
enforcement, and defense of patent applications and patents of the United States
or other jurisdictions of such Inventions, for the perfection or enforcement of
any trademarks, copyrights or trade secrets relating to such Inventions, and for
the transfer of any interest you may have in such Inventions; and (iii) execute
any and all papers and documents which the Company considers to be necessary to
vest sole right, title and interest in the Company or its nominee in and to the
above Inventions, patent applications, patents, or any trademarks or copyrights
or applications therefor relating thereto. Notwithstanding the foregoing, after
the term of this Agreement, unless your employment was terminated for cause, in
which case you agree to do so without any compensation, you will be entitled to
reasonable compensation for more than incidental time and effort required to be
expended by you to fulfill your responsibilities under clause (ii). You will
execute all documents (including those referred to above) and do all other acts
which the Company considers to be necessary to assist in the preservation of all
the Company's interests in such Inventions.
(f) You have identified on Exhibit A attached hereto a complete list of
all Inventions which have been made or conceived or first reduced to practice by
you alone or in conjunction with others prior to your employment by the Company
and which you desire to exclude from the operation of paragraph 3 of this
Agreement.
4. (a) For purposes of this Agreement, "proprietary information" will
mean any information relating to the business, operations or personnel of the
Company (including but not limited to the Stations and any Affiliated Company
for the purposes of the confidentiality provisions of this Agreement) that has
not previously been publicly released by a duly authorized representative of the
Company and will include but will not be limited to such information encompassed
in all drawings, designs, plans, proposals, marketing and sales plans, financial
information, costs, pricing information, customer information, personnel
information, programming, promotion, engineering strategies and all methods,
concepts, or ideas used in and which have or may have a material importance to
the business of the Company including, without limitation, the STMC.
<PAGE>
(b) You will agree, to the best of your ability, to preserve as
confidential all proprietary information that has been or may be obtained by you
during your employment by the Company or otherwise, whether you have such
information in your memory or in writing or other physical form. You will
neither use for your benefit or purposes nor disclose to others any proprietary
information, either during the term of this Agreement or thereafter, except as
required by the conditions of your employment hereunder. This provision will
not apply to proprietary information which has been voluntarily disclosed to the
public by the Company for the benefit of the Company or upon its express
authorization or has been independently developed and disclosed by others who
are not subject to any obligations of confidentiality to the Company.
(c) You will not remove from the premises of the Company or
elsewhere, except as an employee of the Company in pursuit of the business of
the Company, any documents or objects containing or reflecting any proprietary
information or any other property of the Company. You recognize that all such
documents and objects, whether developed by you or by someone else, are the
exclusive property of the Company. Upon termination of your employment
hereunder you will forthwith deliver up to the Company all proprietary
information, including, without limitation, all correspondence, accounts,
records and any other documents or property made or held by you or under your
control in relation to the business or affairs of the Company, and no copy of
any such proprietary information will be retained by you.
(d) Except for such information which has been previously disclosed
to the general public without breaching any confidentiality agreement, under no
circumstances and at no time, during or after the term of your employment, will
you, directly or indirectly, disclose, divulge, render or offer any knowledge or
information with respect to any proprietary information, except in the course of
the proper performance of your duties hereunder and you acknowledge and agree
that any and all such information will be received by you in a confidential
capacity.
5. (a) You agree to perform your duties in full compliance with
all laws, rules and regulations of any governmental authority applicable to the
Company and its business or to any Affiliated Company or its business, to the
extent you are engaged in business on behalf of an Affiliated Company, or to the
performance of your duties pursuant to this Agreement. For purposes of this
Agreement, "Affiliated Company" means, with respect to the Company, any other
person that, directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the Company.
(b) You represent and warrant that to the best of your
knowledge, information and belief, neither you nor any person acting on your
behalf has accepted or agreed to accept, or paid or agreed to pay any money,
service or any valuable consideration, as defined in Section 508 of the
Communications Act of 1934, as amended, for the broadcast of any matter
contained in any program on any Station. You further covenant that during your
employment, you will not accept or agree to accept (excepting from the Company)
or pay or agree to pay any money, service or valuable consideration, as defined
in Section 508 of the Communications Act of 1934, as amended, for the broadcast
of any matter contained in any program on any Station. You will not make or
promise to make or accept any payments or transfer of value which have the
purpose or effect of public or commercial bribery, acceptance of or
<PAGE>
acquiescence in extortion, kickbacks or other unlawful or improper means of
obtaining business for the Company or any Affiliated Company. This paragraph
5(b) shall not prohibit normal and customary business entertainment or the
giving of business mementos of nominal value.
6. (a) You agree to comply with any and all of the Company's
policies, regulations and procedures including but not limited to those which
now or hereafter may relate to the matters set forth in this Agreement, provided
such policies, regulations and procedures are reasonably consistent with the
material terms of this Agreement. Periodically, at the request of the Company,
you also agree to execute and/or to respond fully, truthfully, accurately and
completely to all documents or questionnaires as may be submitted to you in
connection therewith.
(b) In the event of a breach or threatened breach by you of any
of the provisions of paragraphs 1(g), 3, 4, 5, 6(a) or 7 hereof, the Company
will be entitled to an injunction (without posting a bond or other security)
restraining you from the commission of such breach. In addition to the
foregoing, any violation by you of any provision of any such paragraphs will be
grounds for immediate termination of your employment hereunder for cause, and,
without limiting any right, claim or remedy the Company has or may have pursuant
to this Agreement or at law or equity, the Company will be relieved of its
obligation to pay any severance or other payments to you pursuant to paragraph
1(d) or 1(e) hereof.
7. The Company may assign this Agreement and all its rights hereunder.
You may not at any time assign this Agreement nor any right or interest
hereunder. Except as herein otherwise provided, this Agreement will be binding
upon and inure to the benefit of the parties hereto, your legal representatives
and the Company's successors and assigns.
8. Any notice required or permitted to be given hereunder will be in
writing and will be delivered personally to you, or duly mailed to the other
party by prepaid registered or certified mail, return receipt requested, or by
courier service providing delivery receipts or by facsimile transmission with
document reception of transmission. Such duly mailed notice will be deemed given
two (2) days after the date of dispatch or twenty-four (24) hours after the time
of facsimile transmission, such time being determined by the local time of the
recipient. The address for mailed notices will be (a) for you, the address set
forth on the first page of this Agreement and (b) for the
<PAGE>
Company: c/o Metromedia Company, One Meadowlands Plaza, East Rutherford, New
Jersey 07073, Attention: General Counsel. The numbers for facsimile transmission
will be the number contained in the Company's records for you and 914-592-4356
and the copy to 201-531-2803 for the Company. Either party may notify the other
party in writing of a change of address by serving notice in the manner provided
in this Section.
9. If any provision of this Agreement or the application thereof will for
any reason be invalid or unenforceable, such provision will be limited only to
the extent necessary in the circumstances to make such provision valid or
enforceable and its partial or total invalidity or unenforceability will in any
event not affect the remaining provisions of this Agreement, which will continue
in full force and effect.
10. This Agreement will be construed according to the laws of the State of
New York applicable to agreements made and to be performed within the State of
New York. This Agreement constitutes the entire understanding between the
parties, cancels and supersedes all prior oral or written understandings and
agreements between the parties hereto including without limitation the Prior
Agreement and cannot be changed or terminated orally but only by an instrument
in writing signed by both parties hereto.
11. The covenants, representations and warranties of this Agreement will
survive its execution, delivery and performance, and all accrued obligations
will survive its termination.
<PAGE>
If this is in accordance with your understanding, kindly so indicate by
signing the enclosed copy of this letter in the space provided below and
returning the same to the undersigned.
Very truly yours,
Big City Radio, Inc.
By: ________________________
Michael Kakoyiannis
President
ACCEPTED AND AGREED TO:
__________________________
Alan Kirschner
Date:____________________
<PAGE>
Exhibit A
None.
<PAGE>
Exhibit 10.7
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
among
BIG CITY RADIO, INC.
The Several Lenders
from Time to Time Parties Hereto
and
The Chase Manhattan Bank,
as Agent
Dated as of December __, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 15
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS. . . . . . . . . . . . . . . . . 15
2.1 Revolving Credit Commitments. . . . . . . . . . . . . . . . . . . . 15
2.2 Procedure for Revolving Credit Borrowing. . . . . . . . . . . . . . 16
2.3 Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Termination or Reduction of Commitments . . . . . . . . . . . . . . 16
2.5 Repayment of Loans; Evidence of Debt. . . . . . . . . . . . . . . . 17
2.6 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . . . 18
2.7 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . 18
2.8 Conversion and Continuation Options . . . . . . . . . . . . . . . . 19
2.9 Minimum Amounts and Maximum Number of Tranches. . . . . . . . . . . 19
2.10 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . 20
2.11 Computation of Interest and Fees . . . . . . . . . . . . . . . . . 20
2.12 Inability to Determine Interest Rate . . . . . . . . . . . . . . . 21
2.13 Pro Rata Treatment and Payments. . . . . . . . . . . . . . . . . . 21
2.14 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.15 Requirements of Law. . . . . . . . . . . . . . . . . . . . . . . . 22
2.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.17 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.18 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . 26
2.19 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 26
3.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . 26
3.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.3 Corporate Existence; Compliance with Law. . . . . . . . . . . . . . 27
3.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . 27
3.5 No Legal Documents Bar. . . . . . . . . . . . . . . . . . . . . . . 28
3.6 No Material Litigation. . . . . . . . . . . . . . . . . . . . . . . 28
3.7 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.8 Ownership of Property; Liens. . . . . . . . . . . . . . . . . . . . 28
3.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 29
3.10 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . 29
3.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.12 Federal Regulations. . . . . . . . . . . . . . . . . . . . . . . . 29
3.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.14 Investment Company Act; Other Regulations. . . . . . . . . . . . . 30
3.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.16 Purpose of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.17 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 30
3.18 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.19 FCC Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 32
4.1 Conditions to Initial Extensions of Credit. . . . . . . . . . . . . 32
4.2 Conditions to Each Extension of Credit. . . . . . . . . . . . . . . 35
-i-
<PAGE>
Page
SECTION 5. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 36
5.1 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 36
5.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . 37
5.3 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . 37
5.4 Conduct of Business and Maintenance of Existence. . . . . . . . . . 38
5.5 Maintenance of Property; Insurance. . . . . . . . . . . . . . . . . 38
5.6 Inspection of Property; Books and Records; Discussions. . . . . . . 38
5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.8 Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . 39
5.9 Assignments of Leases . . . . . . . . . . . . . . . . . . . . . . . 39
5.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 41
6.1 Financial Condition Covenants . . . . . . . . . . . . . . . . . . . 41
6.2 Limitation on Indebtedness. . . . . . . . . . . . . . . . . . . . . 42
6.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . 43
6.4 Limitation on Guarantee Obligations . . . . . . . . . . . . . . . . 44
6.5 Limitation on Fundamental Changes . . . . . . . . . . . . . . . . . 44
6.6 Limitation on Sale of Assets. . . . . . . . . . . . . . . . . . . . 44
6.7 Limitation on Leases. . . . . . . . . . . . . . . . . . . . . . . . 44
6.8 Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . 45
6.9 Limitation on Capital Expenditures. . . . . . . . . . . . . . . . . 45
6.10 Limitation on Investments, Loans and Advances. . . . . . . . . . . 45
6.11 Limitation on Optional Payments and Modifications of Debt
Instruments or Agreements . . . . . . . . . . . . . . . . . . . . . 45
6.12 Limitation on Transactions with Affiliates . . . . . . . . . . . . 46
6.13 Limitation on Sales and Leasebacks . . . . . . . . . . . . . . . . 46
6.14 Limitation on Changes in Fiscal Year . . . . . . . . . . . . . . . 46
6.15 Limitation on Negative Pledge Clauses. . . . . . . . . . . . . . . 46
6.16 Limitation on Lines of Business and Local Marketing and Sales
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.17 Restrictions on Member and License Subsidiaries. . . . . . . . . . 46
SECTION 7. EVENTS OF DEFAULT . . . . . . . . . 47
SECTION 8. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . . 51
8.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . . . 51
8.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.6 Non-Reliance on Agent and Other Lenders . . . . . . . . . . . . . . 52
8.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.8 Agent in Its Individual Capacity. . . . . . . . . . . . . . . . . . 53
8.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . 54
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . 55
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<PAGE>
Page
9.4 Survival of Representations and Warranties. . . . . . . . . . . . . 55
9.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . 55
9.6 Successors and Assigns; Participations and Assignments. . . . . . . 56
9.7 Termination of Agreements . . . . . . . . . . . . . . . . . . . . . 58
9.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.10 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.12 Submission To Jurisdiction; Waivers. . . . . . . . . . . . . . . . 59
9.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.14 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 60
-iii-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December __, 1997,
among BIG CITY RADIO, INC.(formerly known as Odyssey Communications, Inc.), a
Delaware corporation (the "BORROWER"), the several banks and other financial
institutions from time to time parties to this Agreement (the "LENDERS") and The
Chase Manhattan Bank, a New York banking corporation, as agent for the Lenders
hereunder (in such capacity, the "AGENT").
WHEREAS, the Borrower, the Agent, and the lenders parties thereto (the
"EXISTING LENDERS") are parties to the Credit Agreement, dated as of May 30,
1996 (as amended and waived to the date hereof, the "EXISTING CREDIT
AGREEMENT"), pursuant to which the Existing Lenders made loans to the Borrower
to enable the Borrower to consummate acquisitions of radio stations, to repay
Indebtedness, and for other corporate purposes; and
WHEREAS, the Borrower intends to consummate a registered initial public
offering of up to 35% of the common shares of the Borrower (the "IPO"); and
WHEREAS, the Borrower has requested that the Agent and the Lenders amend
and restate the Existing Credit Agreement to, INTER ALIA, refinance and extend
the Revolving Credit Commitments under the Existing Credit Agreement and for
working capital and general corporate purposes; and
WHEREAS, the Agent and the Lenders are willing to so amend and restate the
Existing Credit Agreement, but only on the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, effective as of the Closing Date, the parties hereto
hereby amend and restate the Existing Credit Agreement as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "PRIME RATE" shall mean the rate of interest per
annum publicly announced from time to time by the Agent as its prime rate
in effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by The Chase
Manhattan Bank in connection with extensions of credit to debtors); "BASE
CD RATE" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the numerator of which is one and
the denominator of which is one minus the C/D Reserve Percentage and (b)
the C/D Assessment Rate; "THREE-MONTH SECONDARY CD RATE" shall
<PAGE>
mean, for any day, the secondary market rate for three-month certificates
of deposit reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank
of New York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it; and
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it. Any change in the ABR due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective as of the opening of business on the effective day of
such change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate, respectively.
"ABR LOANS": Loans the rate of interest applicable to which is based
upon the ABR.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"AGENT": The Chase Manhattan Bank, together with its affiliates, as
the arranger of the Commitments and as the agent for the Lenders under this
Agreement and the other Loan Documents.
"AGREEMENT": this Amended and Restated Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"APPLICABLE MARGIN": the rate per annum set forth in the table below
opposite the ratio of Total Debt to EBITDA then in effect. Such Applicable
Margin shall be in effect
<PAGE>
3
for the period beginning the second Business Day following the date on
which the Responsible Officer's certificate provided pursuant to subsection
5.2(b) is delivered to the Lenders and ending on the first Business Day
following the date on which the next such Responsible Officer's certificate
is delivered to the Lenders; PROVIDED, that, if for any reason the
Responsible Officer's certificate required by subsection 5.2(b) is not
delivered in accordance with such subsection to the Lenders, the ratio of
Total Debt to EBITDA shall, for purposes of determining the Applicable
Margin, be deemed to be greater than or equal to 5.0 to 1 for each day
during the period from and including the day such Responsible Officer's
certificate was required to be delivered pursuant to subsection 5.2(b) to
the day such Responsible Officer's certificate is so delivered; and
PROVIDED, FURTHER, that for the period from and including the Closing Date
to the first Business Day following the date on which the Borrower is
required to deliver the Responsible Officer's certificate pursuant to
subsection 5.2(b) for the fiscal quarter ending March 31, 1998, the ratio
of Total Debt to EBITDA shall, for purposes of determining Applicable
Margin, be deemed to be greater than or equal to 5.0 to 1.
------------------------------------------------------------
Total Debt/
EBITDA ABR + LIBOR +
------------------------------------------------------------
> or equal to 5.0X 2.00% 3.00%
> or equal to 4.0X, < 5.0X 1.50% 2.50%
> or equal to 3.0X, < 4.0X 1.00% 2.00%
< 3.0X 0.50% 1.50%
------------------------------------------------------------
"ASSIGNEE": as defined in subsection 9.6(c).
"ASSIGNMENT OF LEASES": any Assignment of Lease executed at any time
by the Borrower or any Subsidiary in favor of the Agent for the benefit of
the Lenders in form and substance reasonably satisfactory to the Agent as
the same may be amended, supplemented or otherwise modified from time to
time.
"AVAILABLE COMMITMENT": as to any Lender, at any time, an amount
equal to the excess, if any, of (a) the amount of such Lender's Commitment
over (b) the aggregate principal amount of all Loans made by such Lender
then outstanding.
"BOARD": the Board of Governors of the Federal Reserve System (or any
successor thereto).
"BORROWER": as defined in the recitals hereto.
<PAGE>
4
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.2 as a date on which the Borrower requests the Lenders to make
Loans hereunder.
"BUSINESS": as defined in subsection 3.17(b).
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of
deposit and eurodollar time deposits with maturities of one year or less
from the date of acquisition and overnight bank deposits of any Lender or
of any commercial bank having capital and surplus in excess of
$500,000,000, (c) repurchase obligations of any Lender or of any commercial
bank satisfying the requirements of clause (b) of this definition, having a
term of not more than 30 days with respect to securities issued or fully
guaranteed or insured by the United States Government, (d) commercial paper
of a domestic issuer rated at least A-2 by S&P or P-2 by Moody's, (e)
securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the
United States, by any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at
least A by S&P or A by Moody's, (f) securities with maturities of one year
or less from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the requirements of
clause (b) of this definition or (g) shares of money market mutual or
similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition.
"C/D ASSESSMENT RATE": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member
of the Bank Insurance Fund maintained by the FDIC classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
Section 327.3(d) (or any successor provision) to the FDIC
<PAGE>
5
(or any successor) for the FDIC's (or such successor's) insuring time
deposits at offices of such institution in the United States.
"C/D RESERVE PERCENTAGE": for any day as applied to any ABR Loan,
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non-personal time deposits in Dollars having a maturity of
30 days or more.
"CHASE": The Chase Manhattan Bank.
"CLOSING DATE": the date on which the conditions precedent set forth
in subsection 4.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document.
"COMMITMENT": as to any Lender, the obligation of such Lender to make
Loans to the Borrower hereunder in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule I, as such amount may be reduced from time to time in
accordance with the provisions of this Agreement.
"COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage
which such Lender's Commitment bears to the aggregate Commitments (or, at
any time after the Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such Lender's Loans then
outstanding bears to the aggregate principal amount of all Loans then
outstanding).
"COMMITMENT PERIOD": the period from and including the Closing Date
to but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"COMMONLY CONTROLLED ENTITY": any trade or business, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414 of the
Code.
"COMMUNICATIONS ACT": the Communications Act of 1934, as amended.
<PAGE>
6
"CONSOLIDATED FIXED CHARGES": for any period the sum of:
(a) Net Cash Interest Expense;
(b) Debt Service; and
(c) Consolidated Lease Expense, determined without duplication of
items included in Net Cash Interest Expense, in each case of the Borrower
on a consolidated basis.
"CONSOLIDATED LEASE EXPENSE": for any period, the aggregate amount of
fixed and contingent rentals payable by the Borrower, determined on a
consolidated basis in accordance with GAAP, for such period with respect to
leases of real and personal property.
"CONSOLIDATED NET INCOME": for any period, net income of the
Borrower, determined on a consolidated basis in accordance with GAAP.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"DEBT SERVICE": with respect to the Borrower for any period, the sum
of Net Cash Interest Expense for such period and scheduled principal
amortization or commitment reductions of Total Debt (including unborrowed
revolving credit commitments) for such period, whether or not made.
"DEFAULT": any of the events specified in Section 7, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"EBITDA": with respect to the Borrower for any period, the sum of (a)
the net income of the Borrower for such period PLUS, to the extent deducted
in computing such net income, the sum of (i) income tax expense, (ii)
interest expense (including deferred interest expense), (iii) depreciation
and amortization expense, (iv) any extraordinary losses and (v) any expense
items with respect to acquisitions by the Borrower or any of its Affiliates
of radio stations, and MINUS to the extent added in computing such net
income, (i) any interest income and (ii) any extraordinary gains, all as
determined with respect to the Borrower on a consolidated basis in
accordance with GAAP.
<PAGE>
7
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability
or standards of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the
rate at which Chase is offered Dollar deposits at or about 10:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of its Eurodollar Loan to be outstanding during such Interest
Period.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EVENT OF DEFAULT": any of the events specified in Section 7,
PROVIDED that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
<PAGE>
8
"EXCESS CASH FLOW": for any fiscal year of the Borrower, EBITDA for
such fiscal year, LESS the sum of (a) Debt Service of the Borrower for such
fiscal year, (b) capital expenditures paid in cash by the Borrower during
such fiscal year and (c) taxes paid in cash by the Borrower.
"EXISTING CREDIT AGREEMENT": as defined in the recitals hereto.
"EXISTING LENDERS": as defined in the recitals hereto.
"EXISTING LOANS": as defined in subsection 2.1(b).
"FCC": the Federal Communications Commission or any successor to the
functions and powers thereof.
"FCC LICENSES": with respect to any radio station owned or operated
by the Borrower or any Subsidiary, all FCC licenses, permits and approvals
necessary for the lawful operation of such radio station.
"FCC RULES": as defined in subsection 3.19.
"FDIC": the Federal Deposit Insurance Corporation.
"FINAL ORDERS": with respect to the assignment of any FCC License or
transfer of control over an FCC License from one Person to another, an
order by the FCC consenting to such assignment or transfer, in the case of
a pro forma assignment or transfer of control not involving a substantial
change in ownership or control, when effective and, in the case of all
other assignments or transfers of control, when the time for administrative
or judicial review has expired and the time for the filing of any protest,
request for stay, petition for rehearing, or appeal has expired and no
protest, request for stay, petition for rehearing or appeal is pending.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"FORESTRY SERVICE LICENSE": the license in respect of the right to
operate the radio transmitter located on that certain parcel of land
situated within the Angeles National Forest.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial,
<PAGE>
9
regulatory or administrative functions of or pertaining to government.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by
a note, bond, debenture or similar instrument, (c) all obligations of such
Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances or Letters of Credit issued or created for the
account of such Person and (e) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST EXPENSE": for any period, the amount of interest expense on
the Total Debt of the Borrower for such period, determined on a
consolidated basis in accordance with GAAP.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each
March, June, September and December, (b) as to any Eurodollar Loan having
an Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Agent not less
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10
than three Business Days prior to the last day of the then current Interest
Period with respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(i) if any Interest Period pertaining to a Eurodollar Loan
would otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date or such date of
final payment, as the case may be; and
(iii) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of a calendar month.
"IPO": as defined in the recitals hereto.
"LANDLORD'S CONSENT": A Landlord's Consent executed at any time by a
landlord in respect of any leased property subject to any Assignment of
Lease, in form and substance reasonably satisfactory to the Agent, as the
same may be amended, supplemented or otherwise amended from time to time.
"LICENSES": as defined in subsection 3.19.
"LICENSE SUBSIDIARY": any wholly-owned sole purpose Subsidiary Loan
Party of the Borrower formed for the exclusive purpose of holding FCC
Licenses pursuant to organizational documents reasonably satisfactory to
the Agent.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any Financing Lease having substantially the same economic effect as
any of the foregoing).
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11
"LOAN": any loan made by any Lender pursuant to this Agreement
including any Existing Loan.
"LOAN DOCUMENTS": this Agreement, any Notes and the Security
Documents.
"LOAN PARTIES": the Borrower and any of its Subsidiaries which is a
party to a Loan Document.
"LOANS": as defined in subsection 2.1.
"LOCAL MARKETING AND SALES AGREEMENT": as to any Person, all
agreements to which such Person is a party pursuant to which such Person
has the right to direct the programming with respect to a radio station
(and related FCC License) owned by another Person and/or pursuant to which
such Person has the right to sell advertising in connection with a radio
station (and related FCC License) owned by another Person.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Agent or the Lenders hereunder or thereunder.
"MATERIAL ENVIRONMENTAL AMOUNT": an amount finally determined by
legal process or executed settlement agreement to be payable by the
Borrower in excess of $1,000,000 for remedial costs, compliance costs,
compensatory damages, punitive damages, fines, penalties or any combination
thereof.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MEMBER": the collective reference to [Metro Market Broadcasting,
Inc.] and any other wholly-owned Subsidiary Loan Party of the Borrower
which is a member in, or partner of, any License Subsidiary.
"MOODY'S": Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
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12
"NET CASH INTEREST EXPENSE": with respect to the Borrower for any
period, the sum of interest in respect of Total Debt paid by the Borrower
in cash during such period, MINUS all interest earnings received by the
Borrower in cash during such period, in each case determined on a
consolidated basis in accordance with GAAP.
"NET CASH PROCEEDS": with respect to the sale, transfer or other
disposition of any assets of the Borrower or any Subsidiary, 100% of the
cash proceeds of such sale, transfer or other disposition (including when
received, any such proceeds, the payment of which is deferred) and any
portion of the purchase price deposited in an escrow account pursuant to
the relevant acquisition agreement (the "ESCROW AMOUNT") net of (i)
attorneys' fees, accountants' fees, investment banking fees, survey costs,
title insurance premiums, and related search and recording charges,
transfer taxes, deed or mortgage recording taxes, required debt payments
(other than pursuant hereto), other customary expenses and brokerage,
consultant and other customary fees actually incurred in connection
therewith (other than such amounts payable to Affiliates) (ii) any portion
of the Escrow Amount retained by the purchaser of any Station pursuant to a
final determination under the relevant acquisition agreement and (iii)
taxes paid or payable by the Borrower or any Subsidiary as a result
thereof.
"NON-EXCLUDED TAXES": as defined in subsection 2.16.
"NOTE": as defined in subsection 2.5(e).
"OBLIGATIONS": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans or any Notes and all
other obligations and liabilities of the Borrower to the Agent or to the
Lenders, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, this Agreement, any Notes or the other Loan
Documents and any other document made, delivered or given in connection
therewith or herewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all reasonable fees and disbursements of counsel to the
Agent or to the Lenders that are required to be paid by the Borrower
pursuant to the terms of this Agreement) or otherwise.
"OPERATING AGREEMENT": with respect to any FCC License held by a
License Subsidiary, an agreement in form and
<PAGE>
13
substance reasonably satisfactory to the Agent between such License
Subsidiary and the Borrower providing for the Borrower to (a) operate such
FCC License and (b) in its own name, perform or cause to be performed and
to satisfy all obligations or requirements arising under or relating to
such FCC License.
"PARTICIPANT": as defined in subsection 9.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PROPERTIES": as defined in subsection 3.17.
"REGISTER": as defined in subsection 9.6(d).
"REGULATIONS G, T, U, AND X": Regulations G, T, U, and X of the Board
as in effect from time to time.
"REINVESTMENT AMOUNT": as defined in subsection 2.5(d).
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615.
"REQUIRED LENDERS": at any time, Lenders the Commitment Percentages
of which aggregate more than 50%.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
<PAGE>
14
"RESPONSIBLE OFFICER": the chief executive officer and the president
of the Borrower or, with respect to financial matters, the chief financial
officer of the Borrower.
"SECURITY AGREEMENT": the Amended and Restated Security Agreement to
be executed by the Borrower, a form of which is attached as Exhibit G, as
the same may be amended, supplemented or otherwise modified from time to
time.
"SECURITY DOCUMENTS": the collective reference to the Security
Agreement and, from and after its execution and delivery, any Assignment of
Lease.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"S&P": Standard and Poor's Ratings Services.
"STATIONS": any of the radio stations now owned or operated by or
hereafter acquired or operated by the Borrower or any of its Subsidiaries.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"TERMINATION DATE": December __, 2002.
"TOTAL DEBT": with respect to the Borrower at any time, (a) all
Indebtedness of the Borrower and its Subsidiaries MINUS, (b) all cash and
Cash Equivalents owned by the Borrower and its Subsidiaries free and clear
of any Liens (other than Liens to secure Indebtedness of the Borrower).
"TRANSFEREE": as defined in subsection 9.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.
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15
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to
the Borrower not defined in subsection 1.1 and accounting terms partly
defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
(the "LOANS") to the Borrower from time to time during the Commitment Period in
an aggregate principal amount at any one time outstanding which does not exceed
the amount of such Lender's Commitment. During the Commitment Period the
Borrower may use the Commitments by borrowing, prepaying the Loans in whole or
in part, and reborrowing, all in accordance with the terms and conditions
hereof.
(b) The Borrower acknowledges and confirms that the Existing Lenders
have made revolving credit loans to it under the Existing Credit Agreement
(such revolving credit loans, the "EXISTING LOANS"). The Borrower hereby
represents, warrants, agrees, covenants and reaffirms that: (i) it has no
(and it permanently and irrevocably waives, and releases the Agent and the
Existing Lenders from, any, to the extent arising on or prior to the
Closing Date) defense, setoff, claim or counterclaim against the Agent or
any Existing Lender in regard to its Obligations in respect of such
Existing Loans and (ii) reaffirms its obligation to pay such Existing Loans
in accordance with the terms and provisions of this Agreement and the other
Loan Documents.
(c) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans or (iii) a combination thereof, as determined by the Borrower and
notified to the Agent in accordance with subsections 2.2 and 2.9, PROVIDED
that no Loan shall be made as a Eurodollar Loan after the day that is one
month prior to the Termination Date.
<PAGE>
16
2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may
borrow under the Commitments during the Commitment Period on any Business Day,
PROVIDED that the Borrower shall give the Agent irrevocable notice (which notice
must be received by the Agent prior to 10:00 A.M., New York City time, (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Loans are to be initially Eurodollar Loans or (b) one Business Day
prior to the requested Borrowing Date, otherwise), specifying (i) the amount to
be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the amount of such
Loan and the length of the initial Interest Period therefor. Each borrowing
under the Commitments shall be in an amount equal to (x) in the case of ABR
Loans, $100,000 or a whole multiple thereof (or, if the then Available
Commitments are less than $100,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $500,000 or a whole multiple of $100,000 in excess thereof.
Upon receipt of any such notice from the Borrower, the Agent shall promptly
notify each Lender thereof. Each Lender will make the amount of its pro rata
share of each borrowing available to the Agent for the account of the Borrower
at the office of the Agent specified in subsection 9.2 prior to 11:00 A.M., New
York City time, on the Borrowing Date requested by the Borrower in funds
immediately available to the Agent. Such borrowing will then be made available
to the Borrower by the Agent crediting the account of the Borrower on the books
of such office with the aggregate of the amounts made available to the Agent by
the Lenders and in like funds as received by the Agent.
2.3 COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
account of each Lender a commitment fee for the period from and including the
date hereof to the Termination Date, computed at the rate of 1/2 of 1% per annum
on the average daily amount of the Available Commitment of such Lender during
the period for which payment is made; payable quarterly in arrears on the last
day of each March, June, September and December and on the Termination Date or
such earlier date as the Commitments shall terminate as provided herein,
commencing on the first of such dates to occur after the date hereof.
2.4 TERMINATION OR REDUCTION OF COMMITMENTS. (a) The Borrower shall
have the right, upon not less than five Business Days' notice to the Agent, to
terminate the Commitments or, from time to time, to reduce the amount of the
Commitments. Any such reduction shall be in an amount equal to $100,000 or a
whole multiple thereof and shall reduce permanently the Commitments then in
effect.
(b) The total amount of the Commitments on the Closing Date shall be
an amount equal to [$35,000,000]. This amount and shall be reduced on each
of the dates specified below by the amount set forth opposite such date:
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17
DATE AMOUNT OF REDUCTION
---- -------------------
December __, 1999 [7,000,000
December __, 2000 7,000,000
December __, 2001 7,000,000
December __, 2002 14,000,000]
(c) On each April 30 commencing April 30, 1999, the total amount of
the Commitments shall be reduced by an amount equal to 50% of the Excess
Cash Flow for the immediately prior fiscal year-ended December 31. Such
reductions shall be applied to the remaining scheduled reductions under (b)
above in inverse order.
(d) The total amount of the Commitments shall be reduced to the extent
of any Net Cash Proceeds received by the Borrower or any Subsidiary upon
any sale, transfer or other disposition of assets after the Closing Date
permitted hereunder in excess of (i) $________ in total for the fiscal
years of the Borrower ending December 31, 1997 and December 31, 1998 and
(ii) $________ in the aggregate for each fiscal year of the Borrower
thereafter, except for those Net Cash Proceeds utilized within 90 days of
such sale, transfer or other disposition to acquire like assets (the
"REINVESTMENT AMOUNT"). To the extent that any Reinvestment Amount shall
not be so utilized within 90 days of such sale, transfer or other
disposition the portion not so utilized shall be treated as Net Cash
Proceeds and on the last day of such 90 day period applied in the manner
specified in this paragraph. Such reductions shall be applied to the
remaining scheduled reductions under (b) above ratably in accordance with
the amounts of such scheduled reductions.
2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby
unconditionally promises to pay to the Agent for the account of each Lender the
then unpaid principal amount of each Loan of such Lender on the Termination Date
(or such earlier date on which the Loans become due and payable pursuant to
Section 7). The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 2.10.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from each Loan of such Lender from time to time, including
the amounts of principal and interest payable and paid to such Lender from
time to time under this Agreement.
(c) The Agent shall maintain the Register pursuant to subsection
9.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Loan made
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18
hereunder, the Type thereof and each Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become
due and payable from the Borrower to each Lender hereunder and (iii) both
the amount of any sum received by the Agent hereunder from the Borrower and
each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.5(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans
made to such Borrower by such Lender in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, upon the request to the Agent by any
Lender, the Borrower will execute and deliver to such Lender a promissory
note of the Borrower evidencing the Loans of such Lender, substantially in
the form of Exhibit A with appropriate insertions as to date and principal
amount (a "NOTE").
2.6 OPTIONAL PREPAYMENTS. The Borrower may, on the last day of any
Interest Period with respect thereto, in the case of Eurodollar Loans, or at any
time and from time to time, in the case of ABR Loans, prepay the Loans, in whole
or in part, without premium or penalty, upon at least four Business Days'
irrevocable notice to the Agent, specifying the date and amount of prepayment
and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each. Upon
receipt of any such notice the Agent shall promptly notify each Lender thereof.
If any such notice is given, the amount specified in such notice shall be due
and payable on the date specified therein, together with any amounts payable
pursuant to subsection 2.17.
2.7 MANDATORY PREPAYMENTS. (a) The Borrower shall immediately prepay
the Loans made to it to the extent the aggregate principal amount of such Loans
outstanding at any time exceeds the total amount of the Commitments to the
Borrower as reduced pursuant to subsection 2.4.
(b) Unless the Borrower indicates otherwise, the mandatory
prepayments pursuant to this subsection 2.7 shall first be used to prepay
the ABR Loans made to the Borrower and second to prepay the Eurodollar
Loans made to the Borrower in the order in which such Eurodollar Loans
become due.
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19
(c) The provisions of subsection 2.17 shall apply to all mandatory
prepayments pursuant to this subsection 2.7.
2.8 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the Agent
at least two Business Days' prior irrevocable notice of such election, PROVIDED
that any such conversion of Eurodollar Loans may only be made on the last day of
an Interest Period with respect thereto. The Borrower may elect from time to
time to convert ABR Loans to Eurodollar Loans by giving the Agent at least three
Business Days' prior irrevocable notice of such election. Any such notice of
conversion to Eurodollar Loans shall specify the length of the initial Interest
Period or Interest Periods therefor. Upon receipt of any such notice the Agent
shall promptly notify each Lender thereof. All or any part of outstanding
Eurodollar Loans and ABR Loans may be converted as provided herein, PROVIDED
that (i) no Loan may be converted into a Eurodollar Loan when any Event of
Default has occurred and is continuing and the Agent has or the Required Lenders
have determined that such a conversion is not appropriate and (ii) no Loan may
be converted into a Eurodollar Loan after the date that is one month or 30 days,
respectively, prior to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower
giving notice to the Agent, in accordance with the applicable provisions of
the term "Interest Period" set forth in subsection 1.1, of the length of
the next Interest Period to be applicable to such Loans, PROVIDED that no
Eurodollar Loan may be continued as such (i) when any Event of Default has
occurred and is continuing and the Agent has or the Required Lenders have
determined that such a continuation is not appropriate or (ii) after the
date that is one month or 30 days prior to the Termination Date (in the
case of continuations of Loans) and PROVIDED, FURTHER, that if the Borrower
shall fail to give such notice or if such continuation is not permitted
such Loans shall be automatically converted to ABR Loans on the last day of
such then expiring Interest Period.
2.9 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $500,000 or a
whole multiple of $100,000 in excess thereof. In no event shall there be more
than 5 Eurodollar Tranches outstanding at any time.
2.10 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to
<PAGE>
20
the Eurodollar Rate determined for such day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR plus the Applicable Margin.
(c) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), the principal of the Loans and any
such overdue interest, commitment fee or other amount shall bear interest
at a rate per annum which is (x) in the case of principal, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions
of this subsection plus 2% or (y) in the case of any such overdue interest,
commitment fee or other amount, the rate described in paragraph (b) of this
subsection plus 2%, in each case from the date of such non-payment until
such overdue principal, interest, commitment fee or other amount is paid in
full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
2.11 COMPUTATION OF INTEREST AND FEES. (a) Commitment fees and,
whenever it is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed; and, otherwise, interest shall be calculated on the basis
of a 360-day year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR, the Eurocurrency Reserve Requirements, shall become effective
as of the opening of business on the day on which such change becomes effective.
The Agent shall as soon as practicable notify the Borrower and the Lenders of
the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest error. The Agent
shall, at the request of the Borrower, deliver to the Borrower a statement
showing the quotations used by the Agent in determining any interest rate
pursuant to subsection 2.10(a).
2.12 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period:
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21
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Agent shall have received notice from the Required Lenders
that the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as ABR Loans, (y) any Loans that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be converted to
or continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrower have the right to convert ABR
Loans to Eurodollar Loans.
2.13 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee hereunder and any reduction of the Commitments of the Lenders
shall be made pro rata according to the respective Commitment Percentages of the
Lenders. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans shall be made pro rata according to the
respective outstanding principal amounts of the Loans then held by the Lenders.
All payments (including prepayments) to be made by the Borrower hereunder,
whether on account of principal, interest, fees or otherwise, shall be made
without set off or counterclaim and shall be made prior to 12:00 Noon, New York
City time, on the due date thereof to the Agent, for the account of the Lenders,
at the Agent's office specified in subsection 9.2, in Dollars and in immediately
available funds. The Agent shall distribute such payments to the Lenders
promptly upon receipt in like funds as received. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.
(b) Unless the Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make the amount that would
constitute its Commitment Percentage of such borrowing available to the
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22
Agent, the Agent may assume that such Lender is making such amount
available to the Agent, and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is not made available to the Agent by the required time on the
Borrowing Date therefor, such Lender shall pay to the Agent, on demand,
such amount with interest thereon at a rate equal to the daily average
Federal Funds Effective Rate [(as defined in the Section 1.1 definition of
"ABR")] for the period until such Lender makes such amount immediately
available to the Agent. A certificate of the Agent submitted to any Lender
with respect to any amounts owing under this subsection shall be conclusive
in the absence of manifest error. If such Lender's Commitment Percentage
of such borrowing is not made available to the Agent by such Lender within
three Business Days of such Borrowing Date, the Agent shall also be
entitled to recover such amount with interest thereon at the rate per annum
applicable to ABR Loans hereunder, on demand, from the Borrower.
2.14 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 2.17.
2.15 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, any Application or any Eurodollar Loan
made by it, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by subsection 2.16
and changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar
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23
requirement against assets held by, deposits or other liabilities in or for
the account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate hereunder;
or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof shall have the
effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder to a
level below that which such Lender or such corporation could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
the Borrower shall promptly pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower (with a
copy to the Agent) of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to
this subsection submitted by such Lender to the Borrower (with a copy to
the Agent) shall be conclusive in the absence of manifest error. The
agreements in this subsection shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable
hereunder.
2.16 TAXES. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by
<PAGE>
24
any Governmental Authority, excluding (i) any taxes imposed by jurisdictions
outside of the United States of America, (ii) any taxes imposed by the United
States or any political subdivision thereof by means of withholding at the
source, if and to the extent that such taxes shall be in effect and shall be
applicable on the date hereof, to payments to be made to such lender, existing
taxes on the date hereof and (iii) any net income taxes and franchise taxes
(imposed in lieu of net income taxes), imposed on the Agent or any Lender as a
result of a present or former connection between the Agent or such Lender and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or any Note). If any such non-excluded taxes, levies, imposts,
duties, charges, fees deductions or withholdings ("NON-EXCLUDED TAXES") are
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under any Note, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement,
PROVIDED, HOWEVER, that the Borrower shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of the United
States of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or other required documentary evidence,
the Borrower shall indemnify the Agent and the Lenders for any incremental
taxes, interest or penalties that may become payable by the Agent or any Lender
as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may be;
<PAGE>
25
(ii) deliver to the Borrower and the Agent two further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 9.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
2.17 INDEMNITY. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which
is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Bank on such amount by placing such amount on deposit
for a comparable period
<PAGE>
26
with leading banks in the interbank eurodollar market. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
2.18 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes
any demand for payment under subsection 2.15 or 2.16(a), or if any adoption or
change of the type described in subsection 2.15 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 2.15 or
2.16(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 2.15.
2.19 CERTAIN FEES. On the dates provided therein, the Borrower agrees
to pay to the Agent for its own account the fees set forth in the Fee Letter,
dated December 1, 1997 between the Borrower and Chase.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and
to make the Loans, the Borrower hereby represents and warrants to the Agent and
each Lender that:
3.1 FINANCIAL CONDITION. (a) The audited balance sheet of the
Borrower as at December 31, 1996 and the related statements of income and of
cash flows for the fiscal year ended on such date, reported on by KPMG Peat
Marwick LLP, copies of which have heretofore been furnished to each Lender, are
complete and correct and present fairly the consolidated financial condition of
the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their cash flows for the fiscal
year then ended.
(b) The unaudited consolidated balance sheet of the Borrower and its
consolidated subsidiaries as at September 30, 1997 and the related
unaudited consolidated statements of income and of cash flows for the nine
month period ended on such date, certified by a Responsible Officer, copies
of which have heretofore been furnished to each Lender, are complete and
correct and present fairly the consolidated financial condition of the
Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows
for the nine month period then ended (subject to normal year-end audit
adjustments).
All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP
<PAGE>
27
applied consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). The Borrower did not have, at the date of the most recent balance
sheet referred to above, any contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange transaction,
which is not reflected in the foregoing statements or in the notes thereto.
During the period from December 31, 1996 to and including the date hereof, there
has been no sale, transfer or other disposition by the Borrower of any material
part of its business or property and no purchase or other acquisition of any
business or property (including any capital stock of any other Person) material
in relation to the financial condition of the Borrower at December 31, 1996.
3.2 NO CHANGE. (a) Since December 31, 1996 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, and (b) during the period from December 31, 1996 to and
including the date hereof no dividends or other distributions have been
declared, paid or made upon the Capital Stock of the Borrower nor has any of the
Capital Stock of the Borrower been redeemed, retired, purchased or otherwise
acquired for value by the Borrower.
3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Borrower and each
of its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the corporate or
other power and authority, and the legal right, to own and operate its property,
to lease the property it operates as lessee and to conduct the business in which
it is currently engaged, (c) is duly qualified as a foreign corporation or other
entity and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, have a Material Adverse Effect.
3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Borrower and each Subsidiary has the corporate or other power and authority, and
the legal right, to make, deliver and perform the Loan Documents to which it is
a party and, in the case of the Borrower, to borrow hereunder and has taken all
necessary corporate or other action to authorize the borrowings on the terms and
conditions of this Agreement and any Notes and to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents to which any Loan
Party is a party other than
<PAGE>
28
the consents of landlords to the collateral assignments of leases pursuant to
the Assignments of Leases. This Agreement has been, and each other Loan
Document to which any Loan Party is a party will be, duly executed and delivered
on behalf of such Loan Party. This Agreement constitutes, and each other Loan
Document to which any Loan Party is a party when executed and delivered will
constitute, a legal, valid and binding obligation of such Loan Party enforceable
against such Loan Party in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
3.5 NO LEGAL DOCUMENTS BAR. The execution, delivery and performance
of the Loan Documents to which any Loan Party is a party, the borrowings
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law or Contractual Obligation of such Loan Party and will not result in, or
require, the creation or imposition of any Lien (other than those Liens created
or imposed pursuant to the Loan Documents) on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation.
3.6 NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower or any Subsidiary, threatened by or against the
Borrower or any Subsidiary or against any of their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, or (b) which could reasonably be
expected to have a Material Adverse Effect.
3.7 NO DEFAULT. No Loan Party is in default under or with respect to
any of its Contractual Obligations in any respect which could reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
3.8 OWNERSHIP OF PROPERTY; LIENS. The Borrower and its Subsidiaries
have good record and marketable title in fee simple to, or a valid leasehold
interest in, all their real property, and good title to, or a valid leasehold
interest in, all their other property, and none of such property is subject to
any Lien except as permitted by subsection 6.3.
3.9 INTELLECTUAL PROPERTY. The Borrower and its Subsidiaries own, or
are licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of their business as currently
conducted except for those the failure to own or license which could not have a
Material Adverse Effect (the "INTELLECTUAL PROPERTY"). No claim has been
asserted and is pending by any
<PAGE>
29
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does the
Borrower or any of its Subsidiaries know of any valid basis for any such claim.
The use of such Intellectual Property by the Borrower and its Subsidiaries does
not infringe on the rights of any Person, except for such claims and
infringements that, in the aggregate, do not have a Material Adverse Effect.
3.10 NO BURDENSOME RESTRICTIONS. No Requirement of Law or Contractual
Obligation of the Borrower or any of its Subsidiaries could reasonably be
expected to have a Material Adverse Effect.
3.11 TAXES. The Borrower and its Subsidiaries have filed or caused to
be filed all tax returns which, to the knowledge of the Borrower, are required
to be filed and has paid all taxes shown to be due and payable on said returns
or on any assessments made against it or any of its property and all other
taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or such Subsidiary); no tax Lien has been filed, and, to
the knowledge of the Borrower and its Subsidiaries, no claim is being asserted,
with respect to any such tax, fee or other charge.
3.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulations G, T, U or X as now and
from time to time hereafter in effect. If requested by any Lender or the Agent,
the Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form G-1 or FR Form
U-1 referred to in said Regulation G or U, as the case may be.
3.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits. Neither the Borrower nor any Commonly Controlled
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30
Entity has had a complete or partial withdrawal from any Multiemployer Plan, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
3.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Borrower is not
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X) which limits its ability to incur
Indebtedness.
3.15 SUBSIDIARIES. All of the Subsidiaries of the Borrower at the
date hereof are listed on Schedule 3.15 to this Agreement.
3.16 PURPOSE OF LOANS. The proceeds of the loans shall be used by the
Borrower to refinance the Existing Loans, and for working capital purposes in
the ordinary course of business.
3.17 ENVIRONMENTAL MATTERS.
(a) The facilities and properties owned, leased or operated by the
Borrower and its Subsidiaries (the "PROPERTIES") do not contain, and have
not previously contained, any Materials of Environmental Concern in amounts
or concentrations which (i) constitute or constituted a violation of, or
(ii) could reasonably be expected to give rise to liability under, any
Environmental Law except in either case insofar as such violation or
liability, or any aggregation thereof, is not reasonably likely to result
in the payment of a Material Environmental Amount.
(b) The Properties and all operations at the Properties are in
compliance, and, to the Borrower's knowledge, have in the last 5 years been
in compliance (provided that, in the case of any Properties acquired in the
last 5 years, such knowledge is based, for the period prior to such
acquisition on the representations made to the Borrower by the Person from
which the Properties were acquired), with all applicable Environmental
Laws, and there is no contamination at, under or about the Properties or
violation of any Environmental Law with respect to the Properties or the
business operated by the Borrower (the "BUSINESS") which could materially
interfere with the continued operation of the Properties or materially
impair the fair saleable value of the owned properties thereof.
<PAGE>
31
(c) The Borrower has not received any notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to
any of the Properties or the Business, nor does the Borrower have knowledge
or reason to believe that any such notice will be received or is being
threatened except insofar as such notice or threatened notice, or any
aggregation thereof, does not involve a matter or matters that is or are
reasonably likely to result in the payment of a Material Environmental
Amount.
(d) To the Borrower's knowledge (provided that, in the case of any
Properties acquired in the last 5 years, such knowledge is based, for the
period prior to such acquisition on the representations made to the
Borrower by the Person from which the Properties were acquired), materials
of Environmental Concern have not been transported or disposed of from the
Properties in violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under, any Environmental
Law, nor have any Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any of the Properties in
violation of, or in a manner that could reasonably be expected to give rise
to liability under, any applicable Environmental Law except insofar as any
such violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably likely to result in the payment of a
Material Environmental Amount.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower is or will be named as a party with
respect to the Properties or the Business, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under
any Environmental Law with respect to the Properties or the Business except
insofar as such proceeding, action, decree, order or other requirement, or
any aggregation thereof, is not reasonably likely to result in the payment
of a Material Adverse Amount.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related
to the operations of the Borrower in connection with the Properties or
otherwise in connection with the Business, in violation of or in amounts or
in a manner that could reasonably give rise to liability under
Environmental Laws except insofar as any such violation or liability
referred to in this paragraph, or any aggregation thereof, is not
reasonably likely to result in the payment of a Material Environmental
Amount.
<PAGE>
32
3.18 SOLVENCY. (a) The assets of the Borrower at their fair valuation
exceed the liabilities of the Borrower, including contingent liabilities; (b)
the capital of the Borrower is not unreasonably small to conduct the business of
the Borrower; and (c) the Borrower has the ability to pay the Loans made to it
and its obligation under the other Loan Documents and its other debts arising in
the normal course of business as such debts mature and does not intend to, or
believe that it will, incur debt beyond its ability to pay as such debts mature.
3.19 FCC MATTERS. Each Loan Party has duly and timely filed all
material filings which are required to be filed by it under the Communications
Act, and is in all material respects in substantial compliance with the
Communications Act, including, without limitation, Section 310 thereof, and the
rules and regulations of the FCC relating thereto (the "FCC RULES") except as
set forth on Schedule 3.19. Each Loan Party is qualified to control, and the
Borrower is qualified to be, a broadcast licensee under the Communications Act
and the FCC Rules. Schedule 3.19 lists all of the FCC Licenses and all other
material permits, authorizations and licenses of any Governmental Authorities
granted or assigned to the Loan Parties in connection with the operation of the
radio stations owned by the Loan Parties (collectively, the "LICENSES"), and
such Licenses are the only material authorizations, licenses and permits
necessary for the conduct of the businesses of the Loan Parties as of the date
hereof. All of such Licenses are issued in the name of, or have been validly
assigned to, the Borrower or a License Subsidiary and are validly issued and in
full force and effect, and the Loan Parties have fulfilled and performed all of
their obligations with respect thereto and have full power and authority to
operate thereunder, and all consents to the assignment of the Licenses or the
transfer of control of the radio stations which are owned by the Loan Parties on
the date hereof by Final Orders of the FCC.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO INITIAL EXTENSIONS OF CREDIT. The effectiveness of
this amendment and restatement is subject to the satisfaction, immediately prior
to or concurrently with such effectiveness on the Closing Date, of the following
conditions precedent:
(a) LOAN DOCUMENTS. The Agent shall have received (i) this Agreement,
executed and delivered by a duly authorized officer of the Borrower, with a
counterpart for each Lender, (ii) for the account of each Lender requesting
the same, a Note conforming to the requirements hereof and executed by a
duly authorized officer of the Borrower, and (iii) the Security Agreement
executed and delivered by a duly authorized officer of each Loan Party,
with a counterpart or a conformed copy for each Lender.
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33
(b) CONSUMMATION OF THE IPO. (i) Immediately prior to the
consummation of the IPO, Mr. Stuart Subotnick and Mrs. Anita Subotnick
shall contribute the entire amount of certain outstanding stockholders'
loans made to the Borrower [$13.2 million at September 30, 1997] to the
Borrower's capital (the "EQUITY CONTRIBUTION"); (ii) simultaneously with
the Equity Contribution each share of the Borrower's Common Stock, par
value $.01 per share (the "OLD COMMON STOCK") shall be reclassified into
[7,610] shares of Class A Common Stock and Mr. Stuart Subotnick and Mrs.
Anita Subotnick shall exchange each share of Class A Common Stock held by
them for one share of Class B Common Stock (the foregoing reclassification
and exchange is hereinafter referred to as the "RECLASSIFICATION"); and
(iii) the IPO, in which the Borrower receives a minimum of [$29,000,000] in
Net Proceeds from the sale of no more than 35% of the Company's common
equity, shall have been consummated.
(c) RELATED AGREEMENTS. The Agent shall have received, with a copy
for each Lender, true and correct copies, certified as to authenticity by
the Borrower, of such other documents or instruments as may be reasonably
requested by the Agent, including, without limitation, a copy of any debt
instrument, security agreement or other material contract to which the
Borrower may be a party.
(d) CLOSING CERTIFICATE. The Agent shall have received, with a
counterpart for each Lender, a certificate of the Borrower, dated the
Closing Date, substantially in the form of Exhibit B, with appropriate
insertions and attachments, satisfactory in form and substance to the
Agent, executed by the President or any Vice President and the Secretary or
any Assistant Secretary of the Borrower.
(e) PROCEEDINGS OF THE EACH LOAN PARTY. The Agent shall have
received, with a counterpart for each Lender, a copy of the resolutions, in
form and substance satisfactory to the Agent, of the Board of Directors of
each Loan Party (or Member in the case of a Loan Party which is a limited
liability company or partnership) authorizing (i) the execution, delivery
and performance of this Agreement and the other Loan Documents to which it
is a party, (ii) the borrowings contemplated hereunder and (iii) the
granting by it of the Liens created pursuant to the Security Documents,
certified by the Secretary or an Assistant Secretary of such Loan Party (or
Member in the case of a Loan Party which is a limited liability company or
partnership) as of the Closing Date, which certificate shall be in form and
substance satisfactory to the Agent and shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded.
(f) INCUMBENCY CERTIFICATE. The Agent shall have received, with a
counterpart for each Lender, a Certificate
<PAGE>
34
of each Loan Party (or Member in the case of a Loan Party which is a
limited liability company or partnership), dated the Closing Date, as to
the incumbency and signature of the officers of each Loan Party (or Member
in the case of a Loan Party which is a limited liability company or
partnership) executing any Loan Document satisfactory in form and substance
to the Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of such Loan Party (or Member in the
case of a Loan Party which is a limited liability company or partnership).
(g) CORPORATE DOCUMENTS. The Agent shall have received, with a
counterpart for each Lender, true and complete copies of the certificate of
incorporation and by-laws or other organizational documents of each Loan
Party, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary of the such Loan Party
(or Member in the case of a Loan Party which is a limited liability company
or partnership).
(h) CONSENTS, LICENSES AND APPROVALS. The Agent shall have received,
with a counterpart for each Lender, a certificate of a Responsible Officer
of the Borrower (i) attaching copies of all consents, authorizations and
filings referred to in subsection 3.19, and (ii) stating that such
consents, licenses and filings are in full force and effect, and each such
consent, authorization and filing shall be in form and substance
satisfactory to the Agent.
(i) FEES. The Agent shall have received the fees to be received on
the Closing Date referred to in subsection 2.19.
(j) LEGAL OPINIONS. The Agent shall have received, with a counterpart
for each Lender, the following executed legal opinions:
(i the executed legal opinion of Paul, Weiss, Wharton,
Rifkind & Garrison, counsel to the Borrower, substantially in the form
of Exhibit C-1;
(ii the executed legal opinion of Hogan & Hartson, special
communications counsel to the Borrower with respect to regulatory
matters, substantially in the form of Exhibit C-2.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Agent may reasonably
require;
(k) ACTIONS TO PERFECT LIENS. The Agent shall have received evidence
in form and substance satisfactory to it that all filings, recordings,
registrations and other
<PAGE>
35
actions, including, without limitation,(i) the filing of duly executed
financing statements on form UCC-1 and (ii) receipt of the certificates
representing the certificated securities pledged pursuant to the Security
Agreement, together with an undated stock power (or other appropriate
instrument of transfer) for each such certificate executed in blank by a
duly authorized officer of the pledgor thereof, necessary or, in the
opinion of the Agent, desirable to perfect the Liens created by the
Security Documents shall have been completed.
(l) LIEN SEARCHES. The Agent shall have received the results of a
recent search by a Person satisfactory to the Agent, of the Uniform
Commercial Code, judgement and tax lien filings which may have been filed
with respect to personal property of the Borrower and the Subsidiaries and
the results of such search shall be satisfactory to the Agent.
(m) INSURANCE. The Agent shall have received evidence in form and
substance satisfactory to it that all of the requirements of Section 5._ of
the Security Agreement shall have been satisfied.
(n) PREPAYMENT OF EXISTING CREDIT AGREEMENT. All Loans outstanding
under the Existing Credit Agreement (together with accrued interest
thereon) in excess of the Commitments hereunder and all accrued and unpaid
fees under the Existing Credit Agreement shall have been paid or repaid.
(o) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Agent, and the Agent
shall have received such other documents and legal opinions in respect of
any aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
4.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Borrower and the other Loan Parties in or pursuant
to the Loan Documents shall be true and correct in all material respects on
and as of such date as if made on and as of such date.
<PAGE>
36
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date thereof that the conditions contained in
this subsection have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any other amount is owing to any Lender or the Agent hereunder or
under any other Loan Document, the Borrower shall, and (except in the case of
Sections 5.1 and 5.2) cause each Subsidiary to:
5.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the consolidated balance
sheet of the Borrower as at the end of such year and the related
consolidated statements of income and retained earnings and of cash flows
for such year, setting forth in each case in comparative form the figures
for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by KPMG Peat Marwick LLP or other independent certified public
accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower as at the end of such quarter and the related unaudited
consolidated statements of income and retained earnings and of cash flows
of the Borrower for such quarter and the portion of the fiscal year through
the end of such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
<PAGE>
37
5.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 5.1(a) and (b), a certificate of a Responsible
Officer stating that to the best of such Responsible Officer's knowledge,
the Borrower during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in
this Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate;
(c) not later than thirty days prior to the end of each fiscal year of
the Borrower, a copy of the projections by the Borrower of the operating
budget and cash flow budget of the Borrower for the succeeding fiscal year,
such projections to be accompanied by a certificate of a Responsible
Officer to the effect that such projections have been prepared on the basis
of sound financial planning practice and that such Responsible Officer has
no reason to believe they are incorrect or misleading in any material
respect;
(d) within five days after the same are sent, copies of all financial
statements which the Borrower sends to its stockholders, and within five
days after the same are filed, copies of all financial statements and
reports which the Borrower may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental Authority;
and
(e) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
5.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or such Subsidiary.
<PAGE>
38
5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, have a Material Adverse Effect.
5.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in the same or a
similar business; and furnish to each Lender, upon written request, full
information as to the insurance carried.
5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and with its
independent certified public accountants.
5.7 NOTICES. Promptly give notice to the Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any Subsidiary or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or any Subsidiary and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any
Subsidiary in which the amount involved is $1,000,000 or more and not
covered by insurance or in which injunctive or similar relief is sought;
(d) any filing with the FCC constituting or relating to any challenge
to the validity of any FCC License or the transfer thereof to the Borrower
or any Subsidiary;
<PAGE>
39
(e) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan; and
(f) any other development or event which could reasonably be expected
to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
5.8 ENVIRONMENTAL LAWS. Comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws except to the extent that failure to do so could not be reasonably expected
to have a Material Adverse Effect.
(a) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental Laws except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not be reasonably expected to have a
Material Adverse Effect.
5.9 ASSIGNMENTS OF LEASES. Use all commercially reasonable efforts to
effectuate the due execution and delivery of Assignments of Leases in respect of
any real property leased by the Borrower or any Subsidiary and used in the
transmission or broadcasting of radio signals by any of the Stations (except
that the Forestry Service License shall not be assigned pursuant to an
Assignment of Leases or any other agreement) and related Landlord's Consent
within 180 days of the Closing Date or if later, date of entering or acquisition
of such lease. Upon execution, the Borrower shall furnish any (i) Assignments
of Leases, executed and delivered by a duly authorized officer of the Borrower,
and (ii) Landlords Consents, executed and delivered
<PAGE>
40
by duly authorized representatives of the parties thereto, to the Agent, with a
conformed copy for each Lender.
5.10 FURTHER ASSURANCES. (a) From time to time hereafter, the
Borrower will execute and deliver, or will cause to be executed and delivered,
such additional instruments, certificates or documents, and will take all such
actions, as the Agent may reasonably request, for the purposes of implementing
or effectuating the provisions of this Agreement and the other Loan Documents,
or of more fully perfecting or renewing the rights of the Agent and the Lenders
with respect to the Collateral (or with respect to any additions thereto or
replacements or proceeds thereof or with respect to any other property or assets
hereafter acquired by the Borrower which may be deemed to be part of the
Collateral) pursuant hereto or thereto. Upon the exercise by the Agent or any
Lender of any power, right, privilege or remedy pursuant to this Agreement or
the other Loan Documents which requires any consent, approval, recording,
qualification or authorization of any Governmental Authority, including, without
limitation, the FCC, the Borrower will execute and deliver, or will cause the
execution and delivery of, all applications, certifications, instruments and
other documents and papers that the Agent or such Lender may be required to
obtain from the Borrower for such governmental consent, approval, recording,
qualification or authorization.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary, promptly upon the request of the Agent: (i) execute and
deliver to the Agent, for the benefit of the Lenders, such amendments or
supplements to the Security Agreement as the Agent shall deem necessary or
advisable to grant to the Agent, for the benefit of the Lenders, a Lien on the
Capital Stock of such Subsidiary which is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Agent any certificates representing such
Capital Stock, together with undated stock powers executed and delivered in
blank by a duly authorized officer of the Borrower or such Subsidiary, as the
case may be, (iii) cause such new Subsidiary (A) to become a party to the
Security Agreement pursuant to documentation which is in form and substance
reasonably satisfactory to the Agent, and (B) to take all actions necessary or
advisable to cause the Lien created by the Security Agreement to be duly
perfected in accordance with all applicable Requirements of Law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be requested by the Agent and (iv) if requested by the Agent, deliver to the
Agent legal opinions relating to the matters described in clauses (i), (ii) and
(iii) immediately preceding, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Agent.
(c) Notwithstanding anything herein or in the Security Agreement to
the extent this Agreement or any other Loan Document purports to require any
Loan Party to grant to the Agent, on
<PAGE>
41
behalf of the Lenders, a security interest in the FCC Licenses of any Loan Party
now owned or hereafter acquired, as the case may be, the Agent, on behalf of the
Lenders, shall only have a security interest in such FCC Licenses at such times
and to the extent that a security interest in such licenses is permitted under
applicable law. Notwithstanding anything to the contrary contained herein or in
the other Loan Documents, the Agent will not take any action pursuant to this
Agreement or any other Loan Document that would constitute or result in any
assignment of any FCC License or any change of control of any Loan Party without
first obtaining the prior approval of the FCC or other state or Governmental
Authority, if, under the then existing law, such assignment of any FCC License
or change of control would require the prior approval of the FCC or other state
or Governmental Authority. Prior to the exercise by the Agent of any power,
right, privilege or remedy pursuant to this Agreement which requires any
consent, approval, recording, qualification or authorization of any Governmental
Authority or instrumentality, the Borrower will execute and deliver, or will
cause the execution and delivery of, all applications, certificates, instruments
and other documents and papers that the Agent may be required to obtain for such
governmental consent, approval, recording, qualification or authorization.
Without limiting the generality of the foregoing, the Borrower will use its best
efforts upon the reasonable request of the Agent to assist in obtaining from the
appropriate governmental authorities the necessary consents and approvals, if
any, for the assignment or transfer of such authorizations, licenses and permits
to the Agent or its designee upon or following acceleration of the payment of
the Loans in accordance with the provisions hereof.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, or any other amount is owing to any Lender or the Agent hereunder or
under any other Loan Document, the Borrower shall not, and (except with respect
to subsection 6.1) not permit any of its Subsidiaries to, directly or
indirectly:
6.1 FINANCIAL CONDITION COVENANTS.
(a) MINIMUM EBITDA. Permit for any period of four consecutive fiscal
quarters ending during any "Test Period" set forth below an EBITDA for such
period to be less than the amount set forth opposite such Test Period below:
Test Period Amount
----------- ------
______, 199_-______, 199_ ______
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42
(b) TOTAL DEBT TO EBITDA. Permit for any period of four consecutive
fiscal quarters ending during any "Test Period" set forth below the ratio of (i)
Total Debt outstanding at the end of such period to (ii) EBITDA for such period
to be greater than the ratio set forth opposite such Test Period below:
Test Period Ratio
----------- -----
_______, 199_-____, 199_ ______
_______, 199_-thereafter ______
(c) EBITDA TO INTEREST EXPENSE. Permit for any period of four
consecutive fiscal quarters ending during any "Test Period" set forth below the
ratio of (i) EBITDA for such period to (ii) Interest Expense for such period to
be less than the ratio set forth opposite such Test Period below:
Test Period Ratio
----------- -----
_______, 199_-____, 199_ ______
_______, 199_-____, 199_ ______
_______, 199_-thereafter ______
(d) NET INCOME TO FIXED CHARGES. Permit for any period of four
consecutive fiscal quarters ending during any "Test Period" set forth below the
ratio of (i) the sum of Consolidated Net Income for such period plus income
taxes deducted in determining such Consolidated Net Income plus Consolidated
Fixed Charges for such period to (ii) Consolidated Fixed Charges for such period
to be less than the ratio set forth opposite such Test Period below:
Test Period Ratio
----------- -----
______, 199_-______, 199_ ______
______, 199_-thereafter ______
6.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement;
(b) Indebtedness of the Borrower incurred to finance the acquisition
of fixed or capital assets (whether pursuant to a loan, a Financing Lease
or otherwise) in an aggregate principal amount not exceeding as to the
Borrower $2,000,000 at any time outstanding;
(c) current liabilities of the Borrower (other than for borrowed
money) incurred in the ordinary course of their business and in accordance
with customary trade practices; and
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43
(d) additional Indebtedness of the Borrower not exceeding $__________
in aggregate principal amount at any one time outstanding.
6.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, PROVIDED that adequate reserves with
respect thereto are maintained on the books of the Borrower in conformity
with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower;
(f) Liens securing Indebtedness of the Borrower permitted by
subsection 7.2(b) incurred to finance the acquisition of fixed or capital
assets, PROVIDED that (i) such Liens shall be created substantially
simultaneously with the acquisition of such fixed or capital assets, (ii)
such Liens do not at any time encumber any property other than the property
financed by such Indebtedness, (iii) the amount of Indebtedness secured
thereby is not increased and (iv) the principal amount of Indebtedness
secured by any such Lien shall at no time exceed 75% of the original
purchase price of such property at the time it was acquired; and
(g) Liens created pursuant to the Security Documents; and
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44
(h) Liens (not otherwise permitted hereunder) which secure obligations
not exceeding (as to the Borrower and all Subsidiaries) $____________ in
aggregate amount at any time outstanding.
6.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except Guarantee Obligations (a)
pursuant to the Loan Agreements or (b) in existence on the date hereof and
listed on Schedule 6.4.
6.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business.
6.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, except:
(a) the sale or other disposition of property in the ordinary course
of business;
(b) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the
compromise or collection thereof;
(c) the sale of the assets together with the related liabilities
constituting radio station WRKL-AM, PROVIDED the Net Cash Proceeds are
applied in accordance with subsection 2.4(d); and
(d) the sale of other assets in aggregate amount not to exceed
$____________ [in any twelve month period], PROVIDED the Net Cash Proceeds
are applied in accordance with subsection 2.4(d).
6.7 LIMITATION ON LEASES. Permit lease expense (determined in
accordance with GAAP) for any fiscal year of the Borrower to exceed $750,000.
6.8 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other than
dividends payable solely in common stock of the Borrower) on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of the Borrower or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in
<PAGE>
45
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of the Borrower or any Subsidiary.
6.9 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make (by
way of the acquisition of securities of a Person or otherwise) any expenditure
in respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) except for
expenditures in the ordinary course of business not exceeding, in the aggregate
for the Borrower during any of the fiscal periods of the Borrower set forth
below, the amount set forth opposite such fiscal period below:
Fiscal Period Amount
------------- ------
The two Fiscal years ending
___________, 199_ __________
Each Fiscal year ending
thereafter __________
6.10 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) the acquisition of the assets (and related liabilities)
constituting a radio station (including the right to hold and operate all
related Licenses issued by the FCC) for aggregate consideration not to
exceed $__________ [in any twelve month period]; and
(d) investments in the Loan Parties.
6.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS OR AGREEMENTS. (a) Make any optional payment or prepayment on or
redemption or purchase of any Indebtedness (other than the Loans), or (b) amend,
modify or change, or consent or agree to any amendment, modification or change
to any of the terms of any such Indebtedness (other than any such amendment,
modification or change which would extend the maturity or reduce the amount of
any payment of principal thereof or which would reduce the rate or extend the
date for payment of interest thereon).
6.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any
<PAGE>
46
purchase, sale, lease or exchange of property or the rendering of any service,
with any Affiliate unless such transaction is (a) otherwise permitted under this
Agreement, (b) in the ordinary course of the Borrower's business and (c) upon
fair and reasonable terms no less favorable to the Borrower, than it would
obtain in a comparable arm's length transaction with a Person which is not an
Affiliate.
6.13 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or any Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or any Subsidiary.
6.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Borrower to end on a day other than December 31.
6.15 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement, other than this Agreement, which prohibits or limits the
ability of the Borrower or any Subsidiary to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired.
6.16 LIMITATION ON LINES OF BUSINESS AND LOCAL MARKETING AND SALES
AGREEMENTS. (a) Enter into any business, except for those businesses in which
the Borrower is engaged on the date of this Agreement or which are directly
related thereto or (b) without the consent of the Required Lenders, enter into
any Local Marketing and Sales Agreement.
6.17 RESTRICTIONS ON MEMBER AND LICENSE SUBSIDIARIES. (a)Permit any
FCC License to be held by any Person other than a License Subsidiary 90 days
after the later of the Closing Date or acquisition of such FCC License.
(b) Permit any FCC License held by any License Subsidiary not to be
the subject of an Operating Agreement or amend any Operating Agreement
without the consent of the Agent.
(c) Permit any Member to engage in any activity or business or have
any employees or incur any Indebtedness or Contractual Obligations or grant
any Liens other than (i) activities and obligations incidental to its
membership or partnership interest in a License Subsidiary or (ii) pursuant
to the Loan Documents.
(d) Permit any License Subsidiary to engage in any activity or
business or have any employees or incur any
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47
Indebtedness or Contractual Obligations or grant any Liens other than (i)
activities or obligations incidental to its holding of FCC Licenses and the
related Operating Agreement or (ii) pursuant to the Loan documents.
(e) (i) permit any License Subsidiary or Member to fail to satisfy
customary corporate or other applicable formalities, including the holding
of regular board of directors' and shareholders' or other required meetings
and the maintenance of offices and records, (ii) permit any bank account of
any License Subsidiary or any Member to be commingled with any bank account
of the Borrower or any of its other Subsidiaries, (iii) any financial
statements distributed to any creditors of the Borrower or any of its other
Subsidiaries to fail to clearly establish the separateness of the Members
and the License Subsidiaries from the Borrower and its other Subsidiaries,
and (iv) take, and not permit any Member or any License Subsidiary to take,
any action, or conduct its affairs in a manner, which is likely to result
in the corporate existence of any Member or of any License Subsidiary being
ignored, or in the assets and liabilities of any Member or of any License
Subsidiary being substantively consolidated with those of the Borrower or
any of its other Subsidiaries in a bankruptcy, reorganization or other
insolvency proceeding.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms thereof or hereof; or the Borrower shall fail
to pay any interest on any Loan, or any other amount payable hereunder,
within five days after any such interest or other amount becomes due in
accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
or any other Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any covenant contained in Section 5 of the
Security Agreement; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement
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48
contained in this Agreement or any other Loan Document (other than as
provided in paragraphs (a) through (c) of this Section), and such default
shall continue unremedied for a period of 30 days; or
(e) The Borrower or any other Loan Party shall, unless waived by the
Lender in each instance, (i) default in any payment of principal of or
interest of any Indebtedness (other than the Loans) or in the payment of
any Guarantee Obligation, beyond the period of grace (not to exceed 30
days), if any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created, if the aggregate amount
of the Indebtedness and/or Guarantee Obligations in respect of which such
default or defaults shall have occurred is at least $1,000,000; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee Obligation (or a trustee or agent on behalf of such holder
or holders) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; or
(f) (i) The Borrower or any other Loan Party shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any other Loan Party shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any other Loan Party any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against the Borrower
or any other Loan Party any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or
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49
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Borrower or any other Loan Party shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or
any other Loan Party shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any other Loan Party involving in the aggregate a liability
(not paid or fully covered by insurance) of $1,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 60 days from the entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any reason, to
be in full force and effect, or the Borrower or any other Loan Party which
is a party to any of the Security Documents shall so assert or (ii) the
Lien created by any of the Security Documents shall cease to be enforceable
and of the same effect and priority purported to be created thereby; or
(j) The Borrower shall lose, fail to keep in force, suffer the
termination or revocation or nonrenewal of, or
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50
terminate, forfeit or suffer an amendment to any FCC License at any time
owned by it which in any such case would have a Material Adverse Effect; or
(k)(i) Any Person or "group" (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended) other than Stuart
Subotnick and his heirs (A) shall have acquired beneficial ownership of 20%
or more of any outstanding class of Capital Stock having ordinary voting
power in the election of directors of the Borrower or (B) shall obtain the
power (whether or not exercised) to elect a majority of the Borrower's
directors or (ii) the Borrower shall fail to own, directly or indirectly,
free and clear of all Liens (other than pursuant to the Security Documents)
100% of the Capital Stock of any License Subsidiary or Member or (iii) the
Board of Directors of the Borrower shall not consist of a majority of
Continuing Directors; "CONTINUING DIRECTORS" shall mean the directors of
the Borrower on the Closing Date and each other director, if such other
director's nomination for election to the Board of Directors of the
Borrower is recommended by a majority of the then Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions may
be taken: (i) with the consent of the Required Lenders, the Agent may, or upon
the request of the Required Lenders, the Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Required Lenders,
the Agent may, or upon the request of the Required Lenders, the Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement to be due and payable
forthwith, whereupon the same shall immediately become due and payable. Except
as expressly provided above in this Section, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
SECTION 8. THE AGENT
8.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the
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51
Agent by the terms of this Agreement and the other Loan Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
8.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
8.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of the Borrower or any other Loan Party to perform its
obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower or any other Loan Party.
8.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent. The Agent
shall be fully justified in failing or refusing
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52
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.
8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders; PROVIDED that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
8.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower or any other Loan Party, shall be
deemed to constitute any representation or warranty by the Agent to any Lender.
Each Lender represents to the Agent that it has, independently and without
reliance upon the Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and the other Loan Parties and
made its own decision to make its Loans hereunder and enter into this Agreement.
Each Lender also represents that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigation as it
deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the other
Loan Parties. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent shall
not have any duty or responsibility to
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53
provide any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
8.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with their Commitment Percentages immediately prior to
such date), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Loans) be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; PROVIDED that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Loans and all
other amounts payable hereunder.
8.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Agent were not the Agent hereunder and
under the other Loan Documents. With respect to the Loans made by it, the Agent
shall have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not the
Agent, and the terms "Lender" and "Lenders" shall include the Agent in its
individual capacity.
8.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 10 days'
notice to the Lenders. If the Agent shall resign as Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or
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54
further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Loans. After any retiring Agent's
resignation as Agent, the provisions of this Section 8 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Agent may, from time to time, (a) enter into with the Borrower or the other Loan
Parties written amendments, supplements or modifications hereto and to the other
Loan Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Borrower or the other Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders or the Agent, as the case may
be, may specify in such instrument, any of the requirements of this Agreement or
the other Loan Documents or any Default or Event of Default and its
consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, or reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date of
any payment thereof or increase the amount or extend the expiration date of any
Lender's Commitment, in each case without the consent of each Lender affected
thereby, or (ii) amend, modify or waive any provision of this subsection or
reduce the percentage specified in the definition of Required Lenders or
Required Lenders, or consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement and the other Loan
Documents or release all or substantially all of the Collateral, in each case
without the written consent of all the Lenders, or (iii) amend, modify or waive
any provision of Section 8 without the written consent of the then Agent. Any
such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Agent shall be restored to their
former positions and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon.
9.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in
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55
writing (including by facsimile transmission) and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made (a) in the case
of delivery by hand, when delivered, (b) in the case of delivery by mail, three
days after being deposited in the mails, postage prepaid, or (c) in the case of
delivery by facsimile transmission, when sent and receipt has been confirmed,
addressed as follows in the case of the Borrower and the Agent, and as set forth
in Schedule I in the case of the other parties hereto, or to such other address
as may be hereafter notified by the respective parties hereto:
The Borrower: Big City Radio, Inc.
11 Skyline Drive
Hawthorne, New York 10532
Attention: Mr. Michael Kakoyiannis,
President
Fax: 914-592-4356
with a copy to: Arnold L. Wadler, Esq.
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, New Jersey 07073-2137
Fax: 201-531-2803
The Agent: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: [Archie Rigopoulis]
Fax: 212-622-0136
PROVIDED that any notice, request or demand to or upon the Agent or the Lenders
pursuant to subsection 2.2, 2.4, 2.6, 2.8 or 2.13 shall not be effective until
received.
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
9.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or
reimburse the Agent for all its
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56
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Agent, (b) to pay or
reimburse each Lender and the Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel to each Lender and of
counsel to the Agent, (c) to pay, indemnify, and hold each Lender and the Agent
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the other
Loan Documents and any such other documents, and (d) to pay, indemnify, and hold
each Lender and the Agent harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower or any of the Properties (all the foregoing in this
clause (d), collectively, the "indemnified liabilities"), PROVIDED, that the
Borrower shall have no obligation hereunder to the Agent or any Lender with
respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Agent or any such Lender or (ii) legal proceedings
commenced against the Agent or any such Lender by any security holder or
creditor thereof arising out of and based upon rights afforded any such security
holder or creditor solely in its capacity as such. The agreements in this
subsection shall survive repayment of the Loans and all other amounts payable
hereunder.
9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Agent and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial lending
business and in accordance with applicable law, at any time sell to one or more
banks or other entities
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57
("PARTICIPANTS") participating interests in any Loan owing to such Lender, any
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Loan Documents, and the Borrower and the Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents. The
Borrower agrees that if amounts outstanding under this Agreement are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, PROVIDED that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in subsection 9.6 as
fully as if it were a Lender hereunder. The Borrower also agrees that each
Participant shall be entitled to the benefits of subsections 2.15, 2.16 and 2.17
with respect to its participation in the Commitments and the Loans outstanding
from time to time as if it was a Lender; PROVIDED that, in the case of
subsection 2.16, such Participant shall have complied with the requirements of
said subsection and PROVIDED, FURTHER, that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial lending
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of the
Agent and the Borrower (which shall not, in either case, be unreasonably
withheld), to an additional bank or financial institution ("an ASSIGNEE") all or
any part of its rights and obligations under this Agreement and the other Loan
Documents pursuant to an Assignment and Acceptance, substantially in the form of
Exhibit D, executed by such Assignee, such assigning Lender (and, in the case of
an Assignee that is not then a Lender or an affiliate thereof, by the Agent) and
delivered to the Agent for its acceptance and recording in the Register of the
aggregate principal amount of the Loans and the aggregate amount of the
Available Commitment of all the Lenders then outstanding (or such lesser amount
as may be agreed to by the Borrower and the Agent). Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment
<PAGE>
58
and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto).
(d) The Agent, on behalf of the Borrower, shall maintain at the
address of the Agent referred to in subsection 9.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "REGISTER") for the recordation
of the names and addresses of the Lenders and the Commitment of, and principal
amount of the Loans owing to, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Lenders may (and, in the case of any Loan or other
obligation hereunder not evidenced by a Note, shall) treat each Person whose
name is recorded in the Register as the owner of a Loan or other obligation
hereunder as the owner thereof for all purposes of this Agreement and the other
Loan Documents, notwithstanding any notice to the contrary. Any assignment of
any Loan or other obligation hereunder not evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Agent) together with payment to
the Agent of a registration and processing fee of $3,500, the Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all
financial information in such Lender's possession concerning the Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute
<PAGE>
59
assignments and that such provisions do not prohibit assignments creating
security interests, including, without limitation, any pledge or assignment by a
Lender of any Loan or Note to any Federal Reserve Bank in accordance with
applicable law.
9.7 TERMINATION OF AGREEMENTS. In connection with this amended and
restated credit agreement, the following agreements shall be terminated
effective as of the Closing Date:
(a) the existing Guarantee, dated as of May 30th, 1996, by Mr. Stuart
Subotnick in favor of The Chase Manhattan Bank (formerly known as "Chemical
Bank") and among Odyssey, the Agent and the Lenders;
(b) the existing Pledge Agreement, dated as of May 30th, 1996, by Mr.
Stuart Subotnick, Mrs. Anita Subotnick, Mr. Michael Kakoyiannis in favor of The
Chase Manhattan Bank (formerly known as "Chemical Bank"), as Agent, among
Odyssey, the Agent and the Lenders;
(c) the existing Bailment and Pledge Agreement, dated as of May 30th,
1996, by Mr. Stuart Subotnick in favor of The Chase Manhattan Bank (formerly
known as "Chemical Bank") for the Lenders parties to the Existing Credit
Agreement, dated as of May 30th, 1996, among Odyssey, the Agent and the
Lenders.
9.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Agent.
9.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Agent and the Lenders with respect
to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
60
9.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 9.2 or at such other
address of which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
9.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between
Agent and Lenders, on one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the
<PAGE>
61
transactions contemplated hereby among the Lenders or among the Borrower
and the Lenders.
9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE>
62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
BIG CITY RADIO, INC.
By:
------------------------------
Title:
THE CHASE MANHATTAN BANK,
as Agent and as a Lender
By:
------------------------------
Title:
<PAGE>
1
SCHEDULE I
The Chase Manhattan Bank $35,000,000
270 Park Avenue
New York, New York 10017
Attention:
Facsimile number: ( )
<PAGE>
SCHEDULE 3.15
[Subsidiaries]
<PAGE>
SCHEDULE 3.19
[FCC Licenses and Permits]
<PAGE>
SCHEDULE 6.4
[Guarantee Obligations]
<PAGE>
EXHIBIT A TO
CREDIT AGREEMENT
[FORM OF NOTE]
$_________________ New York, New York
______________ __, 1996
FOR VALUE RECEIVED, the undersigned, Big City Radio, Inc., a Delaware
subchapter S corporation (the "BORROWER"), hereby unconditionally promises to
pay to the order of (the "LENDER") at the office of The
Chase Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in
lawful money of the United States of America and in immediately available
funds, on the Termination Date the principal amount of (a)
DOLLARS ($ ), or, if less, (b) the aggregate unpaid principal amount of
all Loans made by the Lender to the Borrower pursuant to subsection 2.1 of the
Credit Agreement, as hereinafter defined. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount hereof
from time to time outstanding at the rates and on the dates specified in
subsections 2.8 and 2.10 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, type and amount of each Loan
made pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof, each continuation thereof, each conversion of
all or a portion thereof to another Type and, in the case of Eurodollar Loans,
the length of each Interest Period with respect thereto. Each such endorsement
shall constitute PRIMA FACIE evidence of the accuracy of the information
endorsed. The failure to make any such endorsement shall not affect the
obligations of the Borrower in respect of such Loan.
This Note (a) is one of the Notes referred to in the Credit Agreement dated
as of May 24, 1996 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among the Borrower, the Lender, the other banks
and financial institutions from time to time parties thereto and The Chase
Manhattan Bank, as agent, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole or
in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
the guarantee were granted and the rights of the holder of this Note in respect
thereof.
<PAGE>
2
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
Big City Radio, Inc.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
Schedule A
to Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
Amount Amount of ABR Loans Unpaid Principal
Converted to Amount of Principal of Converted to Balance Notation
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Made By
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
- -------------- ------------------- -------------- ------------------------- ------------------- ------------------- ---------------
</TABLE>
<PAGE>
Schedule B
to Notes
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
Amount Converted Amount of Principal Amount of Eurodollar Unpaid Principal
Amount of to Eurodollar of Eurodollar Loans Loans Converted to Balance of Notation
Date Eurodollar Loans Loans Repaid ABR Loans Eurodollar Loans Made By
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
- -------------- ------------------- ----------------- --------------------- -------------------- ------------------- ---------------
</TABLE>
<PAGE>
EXHIBIT B TO
CREDIT AGREEMENT
CLOSING CERTIFICATE
Pursuant to subsection 5.1(b),(c),(d),(i),(j),(k),(l) and (m) of the
Credit Agreement, dated as of May , 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among Big City
Radio, Inc. (the "BORROWER"), the Lenders parties thereto and The Chase
Manhattan Bank, as agent, the undersigned, Michael Kakoyiannis, President of
the Borrower hereby certifies that:
1. Unless otherwise defined herein, terms which are defined in the
Credit Agreement and used herein are so used as so defined;
2. The representations and warranties (i) set forth in the Credit
Agreement and the other Loan Documents or which are contained in any
certificate, document or financial or other statement furnished pursuant to or
in connection with any of the foregoing and (ii) made by the Borrower are true
and correct in all material respects on and as of the date hereof with the same
effect as if made on the date hereof, except for any representation and warranty
which is expressly made as of an earlier date, which representation and warranty
is true and correct in all material respects as of such earlier date;
3. Immediately prior to and immediately after the making of any
extension of credit requested to be made on the date hereof, no Default or Event
of Default will have occurred and will be continuing under the Credit Agreement;
4. Attached hereto as EXHIBIT A are copies of all consents,
authorizations and filings referred to in subsection 4.20 of the Credit
Agreement; and such consents, licenses and filings are in full force and effect;
5. The sale of the Q Stations by Q Broadcasting and the purchase
thereof by Commodore pursuant to the Q Asset Purchase Documents is consummated
as of the Closing Date; the Q Merger pursuant to the Q Merger Documents is
consummated as of the Closing Date; all transactions contemplated by each of the
Q Merger Documents and the Q Asset Purchase Documents are consummated as of the
Closing Date (without waiver of, or any forbearance to exercise any rights with
respect to, any material term or provision of the Q Merger Documents or the Q
Asset Purchase Documents); and attached hereto as EXHIBIT B are all the
documents delivered in connection with the Q Merger Documents and the Q Asset
Purchase Documents.
6. The assets to be placed in and subsequently distributed from the
Financial Intermediary's Account pursuant to the Financial Intermediary
Agreement is so placed and distributed as of the Closing Date; all transactions
contemplated by the Financial
<PAGE>
2
Intermediary Agreement are consummated as of the Closing Date (without waiver
of, or any forbearance to exercise any rights with respect to, any material term
or provision of the Financial Intermediary Agreement); and attached hereto as
EXHIBIT C are copies of all documents delivered in connection with the Financial
Intermediary Agreement.
7. The Acquisitions are consummated as of the Closing Date; all
transactions contemplated by the Acquisition Agreements are consummated as of
the Closing Date (without waiver of, or any forbearance to exercise any rights
with respect to, any material term or provision of the Acquisition Agreements);
and attached hereto as EXHIBIT D are copies of all the documents delivered in
connection with the Acquisition Agreements.
8. ___________ is and at all times since ___________ has been the
duly elected and qualified [Assistant] Secretary of the Borrower and the
signature set forth on the signature line of such officer below is such
officer's true and genuine signature; and the undersigned [Assistant] Secretary
of the Borrower hereby certifies as follows:
(a) There are no liquidation or dissolution proceedings pending or to
my knowledge threatened against the Borrower nor has any other event
occurred affecting or threatening the existence of the Borrower; and
(b) The Borrower is duly organized and validly existing under the
laws of the jurisdiction of its organization;
(c) Attached hereto as EXHIBIT E is a true and complete copy of the
resolutions duly adopted by the Board of Directors of the Borrowers on
_______________; such resolutions have not in any way been rescinded
or modified and have been in full force and effect since their
adoption to and including the date hereof and are now in full force
and effect; such resolutions are the only corporate proceedings of the
Borrower now in force relating to or affecting the matters referred to
therein; attached hereto as EXHIBIT F is a true and complete copy of
the By-laws of the Borrower as in effect on the date such corporate
resolutions were adopted through the date hereof; and attached hereto
as EXHIBIT G is a true and complete copy of the Certificate of
Incorporation of the Borrower as in effect on the date such corporate
resolutions were adopted through the date hereof;
(d) The persons listed on Schedule I hereto are now duly elected and
qualified officers of the Borrower, holding the offices indicated next
to their respective names, and such officers have held such offices
with the Borrower since _____________ to and including the date
hereof, and the signatures appearing opposite their respective names
are copies of the true and genuine signatures of such officers, and
each of such officers is duly authorized to execute and deliver on
behalf of the Borrower the Credit Agreement and any other Loan
Documents to which the Borrower is a party.
<PAGE>
3
IN WITNESS WHEREOF, the undersigned have hereunto set our names.
----------------------------- ------------------------------
Name: Name:
Title: President Title: [Assistant] Secretary
Date: May __, 1996
<PAGE>
4
SCHEDULE I TO CLOSING CERTIFICATE
---------------------------------
NAME OFFICE SIGNATURE
Michael Kakoyiannis President ______________________
[Any other officers signing?]
<PAGE>
EXHIBIT C-1 TO
AMENDED AND RESTATED CREDIT AGREEMENT
[FORM OF OPINION OF COUNSEL TO BORROWER]
___________ __, 1997
The Chase Manhattan Bank, as Agent
270 Park Avenue
New York, New York 10017
And each of the Lenders identified in the Amended
and Restated Credit Agreement referred to below
We have acted as counsel to Big City Radio, Inc., a Delaware
subchapter S corporation (the "BORROWER"), in connection with (a) the Amended
and Restated Credit Agreement, dated as of __________ __, 1997 (the "CREDIT
AGREEMENT"), among the Borrower, the lenders parties thereto (the "LENDERS") and
The Chase Manhattan Bank, as agent for the Lenders (in such capacity, the
"AGENT"), and (b) the Notes and the other Loan Documents referred to in the
Credit Agreement.
The opinions expressed below are furnished to you pursuant to
subsection 4.1(j)(i) of the Credit Agreement. Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
In arriving at the opinions expressed below,
(a) we have examined and relied on the originals, or copies certified
or otherwise identified to our satisfaction, of each of (1) the Credit Agreement
and (2) the Notes dated the date hereof and (3) the other Loan Documents listed
on SCHEDULE 1 attached hereto (the Credit Agreement and the Notes and such other
documents being hereinafter referred to collectively as the "TRANSACTION
DOCUMENTS");
(b) we have examined unfiled copies of the financing statements listed
on SCHEDULE 2 (collectively, the "FINANCING STATEMENTS") naming the Borrower as
Debtor and the Agent as Secured Party and describing the Collateral (as defined
in the Security Agreement) as to which security interests may be perfected by
filing under the Uniform Commercial Code of the States listed on SCHEDULE 2 (the
"FILING COLLATERAL"), which we understand will be filed in the filing offices
listed on SCHEDULE 2 (the "FILING OFFICES"); and
<PAGE>
2
(c) we have examined such corporate documents and records of the
Borrower and such other instruments and certificates of public officials,
officers and representatives of the Borrower and other Persons as we have deemed
necessary or appropriate for the purposes of this opinion.
In arriving at the opinions expressed below, we have made such
investigations of law, in each case as we have deemed appropriate as a basis for
such opinions.
In rendering the opinions expressed below, we have assumed, with your
permission, without independent investigation or inquiry, (a) the authenticity
of all documents submitted to us as originals, (b) the genuineness of all
signatures on all documents that we examined and (c) the conformity to authentic
originals of documents submitted to us as certified, conformed or photostatic
copies.
When our opinions expressed below are stated "to the best of our
knowledge," we have made reasonable and diligent investigation of the subject
matters of such opinions and have no reason to believe that there exist any
facts or other information that would render such opinions incomplete or
incorrect.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Borrower (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority and the legal right to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged and (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the failure to be so
qualified could not, in the aggregate, have a Material Adverse Effect.
2. The Borrower has the corporate power and authority, and the legal
right, to make, deliver and perform its obligations under the Credit Agreement
and each of the other Transaction Documents to which it is a party and to borrow
under the Credit Agreement. The Borrower has taken all necessary corporate
action to authorize the borrowings on the terms and conditions of the Credit
Agreement and the other Transaction Documents to grant the security interests
contemplated by the Security Documents to which it is a party and to authorize
the execution, delivery and performance of the Credit Agreement and the other
Transaction Documents to which it is a party. Except for (a) consents,
authorizations, approvals, notices and filings which have been obtained, made or
waived and are in full force and effect, and (b) the filings and recordings
described on SCHEDULE 2 attached hereto, no consent or authorization of,
approval by, notice to, filing with or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings under the Credit Agreement or with the execution, delivery,
performance, validity or enforceability of the Credit Agreement and the other
Transaction Documents or the perfection of the security interests created by the
Security Documents.
<PAGE>
3
3. Each of the Credit Agreement and the other Transaction Documents to
which the Borrower is a party has been duly executed and delivered on behalf of
the Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
4. The execution and delivery of the Credit Agreement and the other
Transaction Documents to which the Borrower is a party, the performance by the
Borrower of its obligations thereunder, the consummation of the transactions
contemplated thereby, the compliance by the Borrower with any of the provisions
thereof, the borrowings under the Credit Agreement and the use of proceeds
thereof, all as provided therein, (a) will not violate, or constitute a default
under, any Requirement of Law or, to the best of our knowledge, any Contractual
Obligations of the Borrower and (b) will not result in, or require, the creation
or imposition of any Lien on any of its or their respective properties or
revenues, except the security interests created pursuant to the Security
Documents.
5. To the best of our knowledge, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or
threatened by or against the Borrower or against any of its properties or
revenues (a) with respect to the Credit Agreement or any of the other
Transaction Documents, or (b) which could reasonably be expected to have a
Material Adverse Effect.
6. To the best of our knowledge, the Borrower is not in default under or
with respect to any Contractual Obligations in any respect which could
reasonably be expected to have a Material Adverse Effect.
7. The Borrower is not an "investment company," or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended. The Borrower is not subject to regulation under any Federal or
state statute or regulation (other than Regulation X of the Board of Governors
of the Federal Reserve System) which limits its ability to incur Indebtedness.
8. SCHEDULE 3 attached hereto sets forth, as of the date hereof, the
number of authorized, issued and outstanding shares of each class of the
Borrower's capital stock, the names and record owners of such shares and the
number of shares owned of record by each of such owners. To the best of our
knowledge, there are no outstanding subscriptions, options, warrants, calls,
rights (including preemptive rights) or any other agreements or commitments of
any nature with respect to the capital stock of the Borrower.
9. (a) The provisions of the Security Agreement create in favor of the
Agent a legal, valid and enforceable security interest in the Collateral (as
defined in the Security Agreement).
(b) The Agent upon filing of the Financing Statements in the Filing
Offices will have a perfected security interest in the Filing Collateral.
<PAGE>
4
Our opinions set forth in paragraphs 3 and 9 above are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
We are members of the bar of the State of New York and we express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, the General Corporate Law of the State of Delaware, the Uniform
Commercial Code of California and New York and the Federal laws of the United
States of America.
Very truly yours,
<PAGE>
SCHEDULE 1
TRANSACTION DOCUMENTS
The Security Agreement, dated as of _____________________, 1997,
executed by the Borrower in favor of the Agent.
[The Assignment of Leases, dated as of __________________, 1997,
executed by the Borrower in favor of the Agent and the Lenders].
<PAGE>
SCHEDULE 2
FINANCING STATEMENTS
STATE FILING OFFICE
----- -------------
California
New York
<PAGE>
SCHEDULE 3
BORROWER'S CAPITAL STOCK
<PAGE>
EXHIBIT C-2 TO
AMENDED AND RESTATED CREDIT AGREEMENT
[FORM OF OPINION OF SPECIAL COUNSEL TO BORROWER]
December __, 1997
The Chase Manhattan Bank, as Agent
270 Park Avenue
New York, New York 10017
And each of the Lenders parties to the
Credit Agreement referred to below
We have acted as special regulatory counsel to BIG CITY RADIO, INC., a
Delaware corporation (the "BORROWER"), in connection with (a) the Amended and
Restated Credit Agreement, dated as of December __, 1997 (the "CREDIT
AGREEMENT"), among the Borrower, the lenders parties thereto (the "LENDERS") and
The Chase Manhattan Bank, as agent for the Lenders (in such capacity, the
"AGENT"), and (b) the Notes and the other Loan Documents referred to in the
Credit Agreement.
The opinions expressed below are furnished to you pursuant to subsection
4.1(j)(ii) of the Credit Agreement. Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
In arriving at the opinions expressed below,
(a) we have examined and relied on the originals, or copies certified or
otherwise identified to our satisfaction, of each of (1) the Credit Agreement
and (2) the Notes dated the date hereof and (3) the other Loan Documents listed
on SCHEDULE 1 attached hereto (the Credit Agreement and the Notes and such other
documents being hereinafter referred to collectively as the "TRANSACTION
DOCUMENTS");
(b) we have reviewed the relevant provisions of the Communications Act of
1934, as amended, 47 U.S.C. Section 151 et seq. (the "COMMUNICATIONS ACT") and
the rules and regulations of the Federal Communications Commission (the "FCC")
and such administrative and judicial decisions as we have deemed pertinent.
<PAGE>
The Chase Manhattan Bank, as Agent 2 December __, 1997
In rendering the opinions expressed below, we have assumed, with your
permission, without independent investigation or inquiry, (a) the authenticity
of all documents submitted to us as originals, (b) the genuineness of all
signatures on all documents that we examined (other than those of the Borrower
and officers of the Borrower and (c) the conformity to authentic originals of
documents submitted to us as certified, conformed or photostatic copies.
Based upon and subject to the foregoing, we are of the opinion that no
consent or authorization of the FCC, and no filing with the FCC, is required by
the Borrower or any party to the Transaction Documents in connection with (i)
the execution, delivery, performance or enforcement of the Transaction Documents
or the borrowings contemplated by the Transaction Documents or (ii) the
perfection of any security interest under the Transaction Documents. These
opinions are subject to the following qualifications:
(1) Under currently applicable law, security interests in licenses issued
by the FCC are invalid. Because Section 5.10(c) of the Credit
Agreement provides that the Agent, on behalf of the Lenders, shall
only have a security interest in the FCC Licenses at such times and to
the extent that a security interest in such licenses is permitted
under applicable law, the Loan Documents must be construed, consistent
with current FCC requirements, as not currently creating a security
interest in the FCC Licenses.
(2) To the extent that performance under or enforcement of any of the Loan
Documents includes a transfer of voting rights in any entity that
holds an FCC License or controls an FCC Licensee, or operation of any
of Stations by a party other than the Borrower, or any other action
that would constitute an assignment of any of the FCC Licenses or a
transfer of control of the entities that currently hold those
licenses, prior FCC approval of such assignment of license or transfer
of control would be required.
(3) If the provisions of Section of the Security Agreement are intended
to give the Agent authority to sign FCC applications or other filings
on behalf of the Borrower, those provisions are inconsistent with
current FCC regulations and any such signature would not currently be
recognized as effective by the FCC.
(4) FCC regulations require that certain contracts and agreements relating
to ownership and control of broadcast licensees be filed with the FCC
within 30 days of their execution. Pursuant to those regulations, it
is our opinion that the Transaction Documents must be filed with the
FCC within 30 days of execution.
This opinion letter is specifically limited to matters relating to the
Communications Act and the rules and regulations of the FCC, all as currently in
effect.
Very truly yours,
<PAGE>
SCHEDULE 1
TRANSACTION DOCUMENTS
The Amended and Restated Security Agreement, dated as of December __,
1997, executed by the Borrower in favor of the Agent.
<PAGE>
EXHIBIT D TO
AMENDED AND RESTATED CREDIT AGREEMENT
[FORM OF
ASSIGNMENT AND ACCEPTANCE]
Reference is made to the Amended and Restated Credit Agreement, dated
as of ___________ __ , 1997 (as amended, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among Big City Radio, Inc. (the
"BORROWER"), the Lenders named therein and The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the "AGENT"). Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "ASSIGNOR") and the
Assignee identified on Schedule l hereto (the "ASSIGNEE") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "ASSIGNED INTEREST") in and to the Assignor's rights and obligations under
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"ASSIGNED FACILITY"; collectively, the "ASSIGNED FACILITIES"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any other obligor or the performance or
observance by the Borrower or any other obligor of any of their respective
obligations under the Credit Agreement or any other Loan Document or any other
instrument or document furnished pursuant hereto or thereto; and (c) attaches
any Notes held by it evidencing the Assigned Facilities and (i) requests that
the Agent, upon request by the Assignee, exchange the attached Notes for a new
Note or Notes payable to the Assignee and (ii) if the Assignor has retained any
interest in the Assigned Facility, requests that the Agent exchange the attached
Notes for a new Note or Notes payable to the Assignor, in each case in amounts
which reflect the assignment being made hereby (and after giving effect to any
other assignments which have become effective on the Effective Date).
<PAGE>
2
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (d) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agent by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
2.17(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "EFFECTIVE
DATE"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance by it and recording by the Agent pursuant
to the Credit Agreement, effective as of the Effective Date (which shall not,
unless otherwise agreed to by the Agent, be earlier than five Business Days
after the date of such acceptance and recording by the Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to the Effective Date and to the
Assignee for amounts which have accrued subsequent to the Effective Date. The
Assignor and the Assignee shall make all appropriate adjustments in payments by
the Agent for periods prior to the Effective Date or with respect to the making
of this assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor:_____________________________________
Name of Assignee:_____________________________________
Effective Date of Assignment:_________________________
Credit Principal
Facility Assigned Amount Assigned Commitment Percentage Assigned(1)
- ----------------- --------------- ---------------------------------
$___________ __.___________%
[Name of Assignee] [Name of Assignor]
By: By:
---------------------------- ----------------------------
Title: Title:
Accepted: Consented To:
THE CHASE MANHATTAN BANK, (2) Big City Radio, Inc.(3)
as Administrative Agent
By: By:
---------------------------- ----------------------------
Title: Title:
- -------------------------
(1) Calculate the Commitment Percentage that is assigned to at least 15 decimal
places and show as a percentage of the aggregate commitments of all
Lenders.
(2) The Administrative Agent's consent as well as acceptance is required when
the Assignee is not a Lender or an Affiliate thereof.
(3) The Borrower's consent is required where the Assignee is not a Lender or
any Affiliate thereof.
<PAGE>
EXHIBIT E
TO CREDIT AGREEMENT
================================================================================
AMENDED AND RESTATED SECURITY AGREEMENT
made by
BIG CITY RADIO, INC.
and certain of its Subsidiaries
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of December , 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 5
SECTION 2. GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Right of Contribution . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 No Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Amendments, etc. with respect to the Borrower Obligations . . . . . 6
2.5 Guarantee Absolute and Unconditional. . . . . . . . . . . . . . . . 7
2.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . 8
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 9
4.1 Representations in Credit Agreement . . . . . . . . . . . . . . . . 9
4.2 Title; No Other Liens . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Perfected First Priority Liens. . . . . . . . . . . . . . . . . . . 9
4.4 Chief Executive Office. . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Inventory and Equipment . . . . . . . . . . . . . . . . . . . . . . 9
4.6 Farm Products . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Pledged Securities. . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Investment Property . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Covenants in Credit Agreement . . . . . . . . . . . . . . . . . . . 11
5.2 Delivery of Instruments and Chattel Paper . . . . . . . . . . . . . 11
5.3 Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . . . 11
5.4 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Maintenance of Perfected Security Interest; Further Documentation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Changes in Locations, Name, etc.. . . . . . . . . . . . . . . . . . 12
5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Pledged Securities. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 14
i
<PAGE>
Page
SECTION 6. REMEDIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 15
6.1 Certain Matters Relating to Receivables . . . . . . . . . . . . . . 15
6.2 Communications with Obligors; Grantors Remain Liable. . . . . . . . 15
6.3 Pledged Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Proceeds to be Turned Over To Administrative Agent. . . . . . . . . 17
6.5 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Code and Other Remedies . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8 Waiver; Deficiency. . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . 19
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc . . . . 19
7.2 Duty of Administrative Agent. . . . . . . . . . . . . . . . . . . . 21
7.3 Execution of Financing Statements . . . . . . . . . . . . . . . . . 21
7.4 Authority of Administrative Agent . . . . . . . . . . . . . . . . . 21
SECTION 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Amendments in Writing . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 No Waiver by Course of Conduct; Cumulative Remedies . . . . . . . . 22
8.4 Enforcement Expenses; Indemnification . . . . . . . . . . . . . . . 22
8.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 22
8.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.8 Section Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.9 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.11 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . 23
8.12 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.13 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . 24
8.14 Additional Grantors . . . . . . . . . . . . . . . . . . . . . . . . 24
8.15 Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULES
Schedule 1 Notice of Addresses of Guarantors
Schedule 2 Description of Pledged Securities
Schedule 3 Filings and Other Actions Required to Perfect Security Interests
Schedule 4 Location of Jurisdiction of Organization and Chief Executive Office
Schedule 5 Location of Inventory and Equipment
Schedule 6 Copyrights and Copyright Licenses; Patents and Patent Licenses;
Trademarks and Trademark Licenses
Annex 1 to Amended and Restated Security Agreement
ii
<PAGE>
DRAFT
Last Revised 12/5/97
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement"), dated as
of December, 1997, made by each of the signatories hereto (together with any
other entity that may become a party hereto as provided herein, the "GRANTORS"),
in favor of THE CHASE MANHATTAN BANK, as Administrative Agent (in such capacity,
the "ADMINISTRATIVE AGENT") for the banks and other financial institutions (the
"LENDERS") from time to time parties to the Credit Agreement, dated as of May
30, 1996 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among Big City Radio, Inc. (the "BORROWER"), the Lenders
and the Administrative Agent.
W I T N E S E T H:
WHEREAS, the Borrower entered into the original Credit Agreement dated
May 30, 1996, and the original Security Agreement dated May 30, 1996;
WHEREAS, the original Credit Agreement was amended and restated on
December
, 1997 in order to finance the Borrower's initial public offering (the "IPO");
WHEREAS, it is a condition precedent [pursuant] to the amended and
restated Credit Agreement ("the "EXISTING CREDIT AGREEMENT"), that the Borrower
and each other Grantor enter into this Agreement;
WHEREAS, pursuant to the Existing Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of companies
that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrower to make valuable transfers
to one or more of the other Grantors in connection with the operation of their
respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrower under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
<PAGE>
2
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Amended and Restated Security Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"BORROWER OBLIGATIONS": the collective reference to the unpaid
principal of and interest on the Loans and all other obligations and
liabilities of the Borrower (including, without limitation, interest
accruing at the then applicable rate provided in the Credit Agreement after
the maturity of the Loans and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to the
Administrative Agent or any Lender [(or, in the case of any Hedge Agreement
referred to below, any Affiliate of any Lender)], whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, this Agreement, the other Loan Documents [or any
Hedge Agreement entered into by the Borrower with any Lender (or any
Affiliate of any Lender)] or any other document made, delivered or given in
connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by the Borrower pursuant to the terms of any of the foregoing
agreements).
"COLLATERAL": as defined in Section 3.
"COLLATERAL ACCOUNT": any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.
"COPYRIGHTS": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in SCHEDULE 6), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.
"COPYRIGHT LICENSES": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
SCHEDULE 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
<PAGE>
3
"GENERAL INTANGIBLES": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to
such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); PROVIDED, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"GRANTORS": as defined in the recitals hereto.
"GUARANTOR OBLIGATIONS": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Loan Document to which such
Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"GUARANTORS": the collective reference to each Grantor other than the
Borrower.
["HEDGE AGREEMENTS": as to any Person, all interest rate swaps, caps
or collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.]
"INTELLECTUAL PROPERTY": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.
<PAGE>
4
"INTERCOMPANY NOTE": any promissory note evidencing loans made by any
Grantor to any of its Subsidiaries.
"ISSUERS": the collective reference to each issuer of a Pledged
Security.
"NEW YORK UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"OBLIGATIONS": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"PATENTS": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in SCHEDULE
6, and (iii) all rights to obtain any reissues or extensions of the
foregoing.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in SCHEDULE 6.
"PLEDGED NOTES": all promissory notes listed on SCHEDULE 2, all
Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business).
"PLEDGED SECURITIES": the collective reference to the Pledged Notes
and the Pledged Stock.
"PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, shall include, without limitation,
all dividends or other income from the Pledged Securities, collections
thereon or distributions or payments with respect thereto.
"RECEIVABLE": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"SECURITIES ACT": the Securities Act of 1933, as amended.
<PAGE>
5
"TRADEMARKS": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, and (ii) the
right to obtain all renewals thereof.
"TRADEMARK LICENSE": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing referred to
in SCHEDULE 6.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 GUARANTEE. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee
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6
contained in this Section 2 shall have been satisfied by payment in full and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrower may be free from any Borrower
Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Administrative
Agent or any Lender from the Borrower, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid in
full and the Commitments are terminated.
2.2 RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.
2.3 NO SUBROGATION. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the Borrower on
account of the Borrower Obligations are paid in full and the Commitments are
terminated. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Borrower Obligations shall not
have been paid in full, such amount shall be held by such Guarantor in trust for
the Administrative Agent and the Lenders, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative Agent in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Administrative Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured, in such
order as the Administrative Agent may determine.
2.4 AMENDMENTS, ETC. WITH RESPECT TO THE BORROWER OBLIGATIONS. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
continued, and the Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to
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7
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
Lender, and the Credit Agreement and the other Loan Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Administrative
Agent (or the Required Lenders or all Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Lender for the
payment of the Borrower Obligations may be sold, exchanged, waived, surrendered
or released. Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Borrower Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
2.5 GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon the guarantee contained in this Section 2 or acceptance
of the guarantee contained in this Section 2; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Borrower and
any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 2.
Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity or enforceability of the Credit Agreement or any other Loan
Document, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Administrative Agent or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on or otherwise pursue such rights and remedies as it may
have against the Borrower, any other Guarantor or any other Person or against
any collateral security or guarantee for the Borrower Obligations or any right
of offset with respect thereto, and any failure by the Administrative Agent or
any Lender to make any such demand, to pursue such other rights or remedies or
to collect any payments from the Borrower, any other Guarantor or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent or
any Lender against any Guarantor. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
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8
2.6 REINSTATEMENT. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 PAYMENTS. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the Administrative Agent, for the ratable benefit of the
Lenders, a security interest in all of the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest
(collectively, the "COLLATERAL"), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor's Obligations and, in the case of the
Borrower, confirms and reaffirms its grant of Collateral under the Loan
Documents:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Investment Property
(k) all Pledged Securities;
(l) all books and records pertaining to the Collateral; and
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9
(m) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrower thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
4.1 REPRESENTATIONS IN CREDIT AGREEMENT. In the case of each
Guarantor, the representations and warranties set forth in subsection 3 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Administrative Agent and each Lender
shall be entitled to rely on each of them as if they were fully set forth
herein, PROVIDED that each reference in each such representation and warranty to
the Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed
to be a reference to such Guarantor's knowledge.
4.2 TITLE; NO OTHER LIENS. Except for the security interest granted
to the Administrative Agent for the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Grantor owns each item of the Collateral free and clear
of any and all Liens or claims of others. No financing statement or other
public notice with respect to all or any part of the Collateral is on file or of
record in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of the Lenders, pursuant to this
Agreement or as are permitted by the Credit Agreement.
4.3 PERFECTED FIRST PRIORITY LIENS. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on SCHEDULE 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed form) will constitute valid perfected security
interests in all of the Collateral in favor of the Administrative Agent, for the
ratable benefit of the Lenders, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for [(i)] unrecorded Liens permitted by the
Credit Agreement which have priority over the Liens on the Collateral by
operation of law [and (ii) Liens described on SCHEDULE 9].
4.4 CHIEF EXECUTIVE OFFICE. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on SCHEDULE 4.
4.5 INVENTORY AND EQUIPMENT. On the date hereof, the Inventory and
the Equipment (other than mobile goods) are kept at the locations listed on
SCHEDULE 5.
4.6 FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
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10
4.7 PLEDGED SECURITIES. (a) The shares of Pledged Stock pledged by
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement.
4.8 RECEIVABLES. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) None of the obligors on any Receivables is a Governmental
Authority.
(c) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.
4.9 INTELLECTUAL PROPERTY. (a) SCHEDULE 6 lists all Intellectual
Property owned by such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and does not
infringe upon the intellectual property rights of any other Person.
(c) Except as set forth in SCHEDULE 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property.
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11
4.10 INVESTMENT PROPERTY. To the extent not included in the Pledged
Securities, valid perfected security interests exist in all of such Grantor's
Investment Property.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full and the Commitments shall have
terminated:
5.1 COVENANTS IN CREDIT AGREEMENT. In the case of each Guarantor,
such Guarantor shall take, or shall refrain from taking, as the case may be,
each action that is necessary to be taken or not taken, as the case may be, so
that no Default or Event of Default is caused by the failure to take such action
or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.
5.2 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
5.3 MAINTENANCE OF INSURANCE. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Administrative
Agent and (ii) insuring such Grantor, the Administrative Agent and the Lenders
against liability for personal injury and property damage relating to such
Inventory, Equipment and Vehicles, such policies to be in such form and amounts
and having such coverage as may be reasonably satisfactory to the Administrative
Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
during the month of [May] in each calendar year and such supplemental reports
with respect thereto as the Administrative Agent may from time to time
reasonably request.
5.4 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books
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12
of such Grantor and such proceedings could not reasonably be expected to result
in the sale, forfeiture or loss of any material portion of the Collateral or any
interest therein.
5.5 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION.
(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.3 and shall defend such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
5.6 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not, except
upon [30] days' prior written notice to the Administrative Agent and delivery to
the Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to SCHEDULE 5 showing any additional
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on SCHEDULE 5;
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.7 NOTICES. Such Grantor will advise the Administrative Agent and
the Lenders promptly, in reasonable detail, of:
(a)any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b)of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
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13
5.8 PLEDGED SECURITIES. (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in addition to, in substitution of, as
a conversion of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
such Grantor will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
6.3(c) and 6.7 shall apply to it, MUTATIS MUTANDIS, with respect to all actions
that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the
Pledged Securities issued by it.
5.9 RECEIVABLES. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii)
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14
release, wholly or partially, any Person liable for the payment of any
Receivable, (iv) allow any credit or discount whatsoever on any Receivable or
(v) amend, supplement or modify any Receivable in any manner that could
adversely affect the value thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.
5.10 INTELLECTUAL PROPERTY. (a) Such Grantor (either itself or
through licensees) will (i) continue to use each material Trademark on each and
every trademark class of goods applicable to its current line as reflected in
its current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain as in the past the quality of products and services offered under such
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless the Administrative Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby such
Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the Copyrights may become invalidated or otherwise impaired.
Such Grantor will not (either itself or through licensees) do any act whereby
any material portion of the Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Administrative Agent and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and
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15
deliver, and have recorded, any and all agreements, instruments, documents, and
papers as the Administrative Agent may request to evidence the Administrative
Agent's and the Lenders' security interest in any Copyright, Patent or Trademark
and the goodwill and general intangibles of such Grantor relating thereto or
represented thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
SECTION 6. REMEDIAL PROVISIONS
6.1 CERTAIN MATTERS RELATING TO RECEIVABLES. (a) The Administrative
Agent shall at any time after the occurrence and during the continuance of an
Event of Default have the right to make test verifications of the Receivables in
any manner and through any medium that it reasonably considers advisable, and
each Grantor shall furnish all such assistance and information as the
Administrative Agent may require in connection with such test verifications. At
any time and from time to time, upon the Administrative Agent's request and at
the expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to collect
such Grantor's Receivables, subject to the Administrative Agent's direction and
control, and the Administrative Agent may curtail or terminate said authority at
any time after the occurrence and during the continuance of an Event of Default.
If required by the Administrative Agent at any time after the occurrence and
during the continuance of an Event of Default, any payments of Receivables, when
collected by any Grantor, (i) shall be forthwith (and, in any event, within two
Business Days) deposited by such Grantor in the exact form received, duly
indorsed by such Grantor to the Administrative Agent if required, in a
Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section 6.5, and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(c) At the Administrative Agent's request, each Grantor shall deliver
to the Administrative Agent all original and other documents evidencing, and
relating to, the agreements and
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16
transactions which gave rise to the Receivables, including, without limitation,
all original orders, invoices and shipping receipts.
6.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Receivables.
(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables that the Receivables have been assigned to
the Administrative Agent for the ratable benefit of the Lenders and that
payments in respect thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Receivables to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Receivable (or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Administrative Agent or any Lender
of any payment relating thereto, nor shall the Administrative Agent or any
Lender be obligated in any manner to perform any of the obligations of any
Grantor under or pursuant to any Receivable (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
6.3 PLEDGED STOCK. (a) Unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given notice to the
relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities; PROVIDED, HOWEVER, that
no vote shall be cast or corporate right exercised or other action taken which,
in the Administrative Agent's reasonable judgment, would impair the Collateral
or which would be inconsistent with or result in any violation of any provision
of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Administrative Agent may determine, and (ii)
any or all of the Pledged Securities shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise
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17
and (y) any and all rights of conversion, exchange and subscription and any
other rights, privileges or options pertaining to such Pledged Securities as if
it were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Securities upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any Issuer, or upon the exercise by any
Grantor or the Administrative Agent of any right, privilege or option pertaining
to such Pledged Securities, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
6.4 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT. In addition
to the rights of the Administrative Agent and the Lenders specified in Section
6.1 with respect to payments of Receivables, if an Event of Default shall occur
and be continuing, all Proceeds received by any Grantor consisting of cash,
checks and other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a
Collateral Account (or by such Grantor in trust for the Administrative Agent and
the Lenders) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.
6.5 APPLICATION OF PROCEEDS. At such intervals as may be agreed upon
by the Borrower and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent's
election, the Administrative Agent may apply all or any part of Proceeds held in
any Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the
Administrative Agent to the Borrower or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full and the Commitments shall have
terminated shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive the same.
6.6 CODE AND OTHER REMEDIES. If an Event of Default shall occur and
be continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New
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18
York UCC or any other applicable law. Without limiting the generality of the
foregoing, the Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Administrative Agent or any Lender
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor's premises
or elsewhere. The Administrative Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 6.6, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Administrative Agent may elect, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
New York UCC, need the Administrative Agent account for the surplus, if any, to
any Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
6.7 REGISTRATION RIGHTS. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings
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19
statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.
6.8 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a)
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, without notice to or assent by such Grantor, to do any or all of
the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the
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20
payment of moneys due under any Receivable or with respect to any other
Collateral and file any claim or take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys
due under any Receivable or with respect to any other Collateral whenever
payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6
or 6.7, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct;(2) ask for or demand, collect, and receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;(3)
sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral;(4) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral;(5) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral;(6) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith,
give such discharges or releases as the Administrative Agent may deem
appropriate;(7) assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Copyright, Patent or Trademark
pertains), throughout the world for such term or terms, on such conditions,
and in such manner, as the Administrative Agent shall in its sole
discretion determine; and (8) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative
Agent's option and such Grantor's expense, at any time, or from time to
time, all acts and things which the Administrative Agent deems necessary to
protect, preserve or realize upon the Collateral and the Administrative
Agent's and the Lenders' security interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor
might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
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21
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply with, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the Credit Agreement, from the date
of payment by the Administrative Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely to
protect the Administrative Agent's and the Lenders' interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
7.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of
the New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
7.4 AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full
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22
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 8. MISCELLANEOUS
8.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with subsection 9.1 of the Credit Agreement.
8.2 NOTICES. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 9.2 of the Credit Agreement; PROVIDED that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on SCHEDULE 1.
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION. (a) Each Guarantor agrees
to pay or reimburse each Lender and the Administrative Agent for all its costs
and expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the fees and disbursements of counsel [(including
the allocated fees and expenses of in-house counsel)] to each Lender and of
counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent the
Borrower would be required to do so pursuant to subsection 9.5 of the Credit
Agreement.
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23
(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; PROVIDED
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.7 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.8 SECTION HEADINGS. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
8.9 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.11 SUBMISSION TO JURISDICTION; WAIVERS. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
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24
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
8.12 ACKNOWLEDGEMENTS. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Grantors and the Lenders.
8.13 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.14 ADDITIONAL GRANTORS. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to subsection 5.10 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.15 RELEASES. (a) At such time as the Loans and the other
Obligations shall have been paid in full, the Commitments have been terminated,
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At
the request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
<PAGE>
25
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Administrative Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrower, a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Subsidiary Guarantor shall be sold, transferred or
otherwise disposed of in a transaction permitted by the Credit Agreement[;
PROVIDED that the Borrower shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Subsidiary Guarantor and the terms
of the sale or other disposition in reasonable detail, including the price
thereof and any expenses in connection therewith, together with a certification
by the Borrower stating that such transaction is in compliance with the Credit
Agreement and the other Loan Documents].
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
[NAME OF GRANTOR]
By:
------------------------------
Title:
<PAGE>
SCHEDULE 1
NOTICE ADDRESSES OF GUARANTORS
Big City Radio, Inc.
11 Skyline Drive
Hawthorne, New York 10532
Attention:
Facsimile number: ( )
<PAGE>
SCHEDULE 2
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
Issuer Class of Stock Stock Certificate No. No. of Shares
------ -------------- --------------------- -------------
Big City Radio, Inc. A 4,000,000
PLEDGED NOTES:
Issuer Payee Principal Amount
------ ----- ----------------
<PAGE>
SCHEDULE 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
-------------------------------
Financing Statement to be filed in the following offices of:
Secretary of State of the State of New York
County Clerk of Westchester County
Secretary of State of the State of California
Patent and Trademark Filings
----------------------------
None.
Actions with Respect to Pledged Stock
-------------------------------------
----------
Other Actions
-------------
Administrative Agent to take possession, for the ratable benefit
of the Lenders, of all certificates of the Pledged Securities.
<PAGE>
SCHEDULE 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
GRANTOR LOCATION
-------- --------
<PAGE>
SCHEDULE 5
LOCATION OF INVENTORY AND EQUIPMENT
GRANTOR LOCATIONS
------- ---------
<PAGE>
SCHEDULE 6
COPYRIGHTS AND COPYRIGHT LICENSES
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
Annex 1 to
Amended and Restated Security Agreement
ASSUMPTION AGREEMENT, dated as of December __, 1997, made by _____________,
a ____________ corporation (the "ADDITIONAL GRANTOR"), in favor of THE CHASE
MANHATTAN BANK, as administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT") for the banks and other financial institutions (the "LENDERS") parties
to the Credit Agreement referred to below. All capitalized terms not defined
herein shall have the meaning ascribed to them in such Credit Agreement.
W I T N E S E T H :
- - - - - - - - -
WHEREAS, ________________________ (the "BORROWER"), the Lenders and
the Administrative Agent have entered into a Credit Agreement, dated as of [May
30, 1996] (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT");
WHEREAS, in connection with the Credit Agreement, the Borrower and
certain of its Affiliates (other than the Additional Grantor) have entered into
the Amended and Restated Security Agreement, dated as of December , 1997 (as
amended, supplemented or otherwise modified from time to time, the "GUARANTEE
AND COLLATERAL AGREEMENT") in favor of the Administrative Agent for the benefit
of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to
become a party to the Amended and Restated Security Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Amended and Restated
Security Agreement;
NOW, THEREFORE, IT IS AGREED:
1. AMENDED AND RESTATED SECURITY AGREEMENT. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 8.15 of the Amended and Restated Security Agreement, hereby becomes a
party to the Amended and Restated Security Agreement as a Grantor thereunder
with the same force and effect as if originally named therein as a Grantor and,
without limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The information set forth
in Annex 1-A hereto is hereby added to the information set forth in Schedules
____________ to the Amended and Restated Security Agreement. The Additional
Grantor hereby represents and warrants that each of the representations and
warranties contained in Section 4 of the Amended and Restated Security Agreement
is true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
------------------------------------
Name:
Title:
<PAGE>
Exhibit 10.8
================================================================================
REGISTRATION RIGHTS AGREEMENT
Between
BIG CITY RADIO, INC.
and
THE STOCKHOLDER NAMED HEREIN
----------------------------------------------------
Class A Common Stock, par value $.01 per share
----------------------------------------------------
Dated as of December __, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Registration on Request.. . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Piggy-Back Registration . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Preparation; Reasonable Investigation.. . . . . . . . . . . . . . . . 6
1.5. Conditions to Obligations of the Company. . . . . . . . . . . . . . . 6
1.6. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.7 Underwritten Offerings. . . . . . . . . . . . . . . . . . . . . . . .10
2. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3. Rule 144 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . .13
4. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . .13
5. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
6. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7. Investment Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
8. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . .14
9. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
12. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . .15
13. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of December __,
1997, between Big City Radio, Inc., a Delaware corporation (the "Company"), and
Michael Kakoyiannis (the "Stockholder"). Capitalized terms used herein but not
otherwise defined shall have the meanings given them in Section 2 of this
Agreement.
WHEREAS, in connection with the initial public offering by the Company
of its shares of Class A Common Stock, par value $.01 per share (the "Class A
Common Stock"), the shares of Common Stock, par value $.01 per share, held by
the Stockholder were reclassified into shares of Class A Common Stock (the
"Shares");
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. REGISTRATION RIGHTS
1.1. REGISTRATION ON REQUEST.
(a) REQUEST. At any time after the Company qualifies to
utilize a Registration Statement on Form S-3 to register its shares of Class A
Common Stock, upon the written request of the Stockholder that the Company
effect the registration under the Securities Act of all or part of the
Stockholder's Registrable Securities, the Company promptly will give written
notice of such requested registration (the "Registration Notice") to the
Principal Stockholders, and thereupon the Company will use its best efforts to
effect, at the earliest possible date, the registration under the Securities
Act, including by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested in such request (but only if the Company is then
eligible to use such a shelf registration), of (i) the Registrable Securities
which the Company has been so requested to register by the Stockholder, and
(ii) all other Registrable Securities which the Company has been requested to
register by the Principal Stockholders thereof (such holders together with the
Stockholder hereinafter are referred to as the "Selling Holders") by written
request given to the Company within 10 days after the giving of the Registration
Notice by the Company, all to the extent requisite to permit the disposition of
the Registrable Securities so to be registered.
(b) REGISTRATION STATEMENT FORM. Registrations under this
Section 1.1 shall be on such appropriate registration form of the Commission as
shall be reasonably selected by the Company in consultation with the Selling
Holders.
(c) EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this Section 1.1 shall not be deemed to have been effected
until such time as a registration statement with respect thereto has become
effective and
<PAGE>
2
remained effective in compliance with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement and all of such Registrable Securities have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement.
(d) SELECTION OF UNDERWRITERS. If a majority of the
Selling Holders of all Registrable Securities to be covered by a registration so
elects, the offering of such Registrable Securities pursuant to this Section 1.1
shall be in the form of an underwritten offering. The underwriter or
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be a firm or firms of nationally recognized standing
selected by all of the Selling Holders of the Registrable Securities to be
included in such registration and shall be reasonably acceptable to the Company,
it being agreed that Donaldson, Lufkin & Jenrette Securities Corporation is
reasonably acceptable to the Company.
(e) PRIORITY IN REQUESTED REGISTRATION. If the managing
underwriter of an underwritten offering shall advise the Company in writing or
if the Company determines in good faith based upon the advice of its financial
advisor for any offering which is not underwritten (and in each such case the
Company shall promptly advise each Selling Holder of Registrable Securities
requesting registration of such advice) that, in the underwriter's or the
Company's opinion, as the case may be, the total number of Registrable
Securities requested to be included in such registration exceeds the number of
Registrable Securities that can be sold in such offering without adversely
affecting the market for the Company's securities or the price that may be
obtained in such offering, to the extent the underwriter or the Company, as the
case may be, determines that certain of the Registrable Securities requested to
be registered by the Selling Holders must be excluded, they shall be excluded
pro rata among each of the Selling Holders requesting such registration on the
basis of the estimated aggregate gross proceeds to be received by such Selling
Holders from the sale of their Registrable Securities. To the extent
Registrable Securities requested to be registered are excluded from the offering
pursuant to the immediately preceding sentence, the holders of such Registrable
Securities shall have the right to one additional demand registration pursuant
to this Section 1.1.
(f) LIMITATIONS ON REGISTRATION ON REQUEST.
Notwithstanding anything in this Section 1.1 to the contrary (except as provided
in Section 1.1(f)), in no event will the Company be required to effect pursuant
to this Section 1.1, (i) in the aggregate, more than three (3) registrations,
(ii) more than two (2) registrations within any six (6) month period, (iii) any
registration within six (6) months after the effectiveness of a registration
statement by the Company offering its shares of Class A Common Stock (other than
a registration statement on Form S-8 with respect to an employee benefit plan),
or (iv) any registration valued at less than $10,000,000 based upon the then
current market price or fair market values as
<PAGE>
3
estimated by the Company's Board of Directors, in good faith, based upon the
advice of the Company's underwriter in the case of an underwritten offering, or
the Company's financial advisor for any offering which is not underwritten.
(g) EXPENSES. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this
Section 1.1.
1.2. PIGGY-BACK REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. Except in
connection with exclusive registration rights of a holder of securities which
are not the Registrable Securities, if the Company at any time proposes to file
a registration statement to register any of its securities under the Securities
Act (except for registration on Form S-4 or S-8 or any successor or similar
forms), whether or not for sale for its own account, it will each such time give
prompt written notice to the Stockholder of its intention to do so and of such
Stockholder's rights under this Section 1.2. Upon the written request of the
Stockholder (which request shall specify the amount of Registrable Securities
intended to be disposed of by the Stockholder) made as promptly as practicable
and in any event within 20 days after the receipt of any such notice, the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Stockholder thereof. No registration effected
under this Section 1.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 1.1.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter of any underwritten offering shall advise the Stockholder in writing
that in its opinion the total amount of securities including Registrable
Securities requested to be included in such registration exceeds the number of
securities including Registrable Securities that can be sold in such offering
without adversely affecting the market for the Company's securities or the price
that may be obtained in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can
reasonably be expected to be sold in (or during the time of) such offering, (i)
first, all securities proposed by the Company to be sold for its own account,
(ii) then, Registrable Securities requested to be included in such registration
by the Stockholder pursuant to this Agreement, pro rata among the Stockholders
on the basis of the estimated aggregate gross proceeds from the sale thereof,
and (iii) finally, other securities to be sold by holders, pro rata among all
sellers on the basis of the estimated aggregate gross proceeds from the sale
thereof.
(c) EXPENSES. The Company will pay all Registration
Expenses in connection with any registration effected pursuant to this
Section 1.2.
<PAGE>
4
1.3. REGISTRATION PROCEDURES. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 1.1 and 1.2, the Company will, as
expeditiously as possible:
(a) subject to Section 1.5 hereof, prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement or as may be reasonably requested by the
Selling Holders, until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement;
(b) furnish to each seller of Registrable Securities
covered by such registration statement, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits) and such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request;
(c) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of the
United States of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (ii) to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and (iii) to take
any other action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by such sellers, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subdivision
(c) be obligated to be so qualified, subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(d) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or authorities as
may be necessary in the opinion of counsel to the Company and counsel to the
Selling Holders to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
<PAGE>
5
(e) subject to Section 1.5 hereof, promptly notify each
seller of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances under which they were
made, and at the request of any such seller promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to each such seller of Registrable Securities a
copy of any amendment or supplement to such registration statement or
prospectus; and
(g) use its best efforts to list all Registrable Securities
covered by such registration statement on the NYSE, the AMEX or such other
national securities exchange on which Registrable Securities of the same class
and, if applicable, series, covered by such registration statement are then
listed or on the National Association of Securities Dealers Automated Quotations
System, Inc. ("NASDAQ") if the Registrable Securities are quoted on NASDAQ.
The Company may (i) require the Selling Holders to furnish the Company such
information regarding such sellers and the distribution of such securities as
the Company may from time to time reasonably request in writing and (ii) require
the Selling Holders to agree to comply with the Securities Act and the Exchange
Act in connection with the registration and distribution of the Registrable
Securities.
Notwithstanding the foregoing, if any such registration or comparable
statement refers to any holder by name or otherwise as the holder of any
securities of the Company and in its sole and exclusive judgment such holder is
or might be deemed to be a controlling person of the Company, such holder shall
have the right to require the insertion therein of language, in form and
substance reasonably satisfactory to such holder and the Company, to the effect
that the holding by such
<PAGE>
6
holder of such securities is not to be construed as a recommendation by such
holder of the investment quality of the Company's securities covered thereby and
that such holding does not imply that such holder will assist in meeting any
future financial requirements of the Company.
The Stockholder agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in subdivision (e) of this Section 1.3, the Stockholder
will forthwith discontinue such Stockholder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until the Stockholder's receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (e) of this Section 1.3 and, if
so directed by the Company, will promptly deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
holder's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
1.4 PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company (i) shall give a representative
holder designated in writing to the Company by the Selling Holders (the
"Representative") and counsel and accountants designated by the Representative
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, (ii) shall give each of them such
reasonable access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of the Representative and such counsel or accountants, to conduct a
reasonable investigation within the meaning of the Securities Act and (iii)
shall promptly notify the Representative and its counsel of any stop order
issued or threatened by the Commission and promptly take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
1.5. CONDITIONS TO OBLIGATIONS OF THE COMPANY. It shall be a
condition precedent to the obligation of the Company to take any action pursuant
to this Agreement in respect of the shares of Class A Common Stock which are to
be registered at the request of the Stockholder that such Stockholder shall
furnish to the Company such information regarding the securities held by such
Stockholder and the intended method of disposition thereof as the Company shall
reasonably request and as shall be required in connection with the action taken
by the Company.
Notwithstanding any provision in this Agreement to the contrary, if
the Board of Directors of the Company determines in its reasonable judgment, at
the time it receives a Registration Notice, that (i) there shall be an adverse
effect on a then contemplated public offering of the Company's securities,
(ii) the registration and
<PAGE>
7
offering would interfere with any material financing, acquisition, corporate
reorganization or other material corporate transaction or development involving
the Company that is pending or imminent, (iii) the disclosures that would be
required to be made by the Company in connection with such registration would be
materially harmful to the Company because of transactions then being considered
by, or other events then concerning, the Company, or (iv) registration at the
time would require the inclusion of pro forma or other information, which
requirement the Company is reasonably unable to comply with without incurring
material expense, and the Company promptly gives each Selling Holder, in the
case of any registration statement referred to in Section 1.1, notice of that
determination (it being understood, however, that in any such event, the Company
shall use all reasonable efforts to minimize the length of the postponement),
then the Company may defer the filing of the registration statement which is
required to effect any registration pursuant to this Section 1.5 for a
reasonable period of time, but not in excess of [90] calendar days; PROVIDED,
that the Company may not exercise the holdback rights set forth in this
Section 1.5 more frequently than every 3 months. If the Company shall so
postpone the filing of a registration statement, the Stockholder, in the case of
any registration statement referred to in Section 1.1, shall have the right to
withdraw his Registration Notice by giving written notice to the Company within
30 days after the receipt of the notice of the postponement and, in the event of
the withdrawal, the Registration Notice that was withdrawn shall not be deemed
to have been made.
1.6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Sections 1.1 and 1.2, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, and their respective directors,
officers, partners, shareholders, employees and affiliates against any losses,
claims, damages or liabilities, joint or several, to which such seller or
underwriter or any such director, officer, partner, shareholder, employee,
affiliate or controlling person may become subject under the Securities Act or
otherwise, including, without limitation, the fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and the
<PAGE>
8
Company will reimburse each such seller or underwriter and each such director,
officer, partner, shareholder, employee, affiliate and controlling Person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; PROVIDED, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any such seller or any such director, officer, employee,
affiliate, partner or controlling person and shall survive the transfer of such
securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 1.6) the Company, and each director, officer, employee and shareholder
of the Company and each other Person, if any, who participates as an underwriter
in the offering or sale of such securities and each other Person who controls
the Company or any such underwriter within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement of a material
fact contained in or any omission or alleged omission to state therein a
material fact in any such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by or on behalf of such seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; PROVIDED, HOWEVER, that
the liability of such indemnifying party under this Section 1.6(b) shall be
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer, employee, shareholder or controlling
person and shall survive the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 1.6,
such indemnified party will, if a claim in respect thereof is to be made against
an
<PAGE>
9
indemnifying party, give written notice to the latter of the commencement of
such action; PROVIDED, HOWEVER, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 1.6, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; PROVIDED, HOWEVER,
that if the indemnified party reasonably believes it is advisable for it to be
represented by separate counsel because there exists a conflict of interest
between its interests and those of the indemnifying party with respect to such
claim, or there exist defenses available to such indemnified party which may not
be available to the indemnifying party, or if the indemnifying party shall fail
to assume responsibility for such defense, the indemnified party may retain
counsel satisfactory to it and the indemnifying party shall pay all fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld or delayed. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or which requires action other than the payment of money by the
indemnifying party. Each indemnified party shall furnish such information
regarding itself or the claim in question as an indemnifying party may
reasonably request in writing and as shall be reasonably requested in connection
with the defense of such claim and litigation resulting therefrom.
(d) CONTRIBUTION. If the indemnification provided for in
this Section 1.6 shall for any reason be held by a court of competent
jurisdiction to be unavailable to an indemnified party under subparagraph (a) or
(b) hereof in respect of any loss, claim, damage or liability, or any action in
respect thereof, then, in lieu of the amount paid or payable under subparagraph
(a) or (b) hereof, the indemnified party and the indemnifying party under
subparagraph (a) or (b) hereof shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement in
connection with the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations (the relative fault of the Company and such prospective
sellers to be determined by reference to, among other things, whether the untrue
or
<PAGE>
10
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or such
prospective sellers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission) or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law; in such proportion as shall be appropriate to reflect the
relative benefits received by the Company and such prospective sellers from the
offering of the securities covered by such registration statement. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. Such prospective sellers'
obligations to contribute as provided in this subparagraph (d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint and no prospective seller
shall be liable under this subparagraph (d) for any amount in excess of the
proceeds received by the seller in the offering giving rise to the liability
hereunder. In addition, no Person shall be obligated to contribute hereunder
any amounts in payment for any settlement of any action or claim effected
without such Person's consent, which consent shall not be unreasonably withheld
or delayed.
(e) OTHER INDEMNIFICATION. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
Section 1.6 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law, rule or
regulation of any governmental authority other than the Securities Act.
(f) INDEMNIFICATION PAYMENTS. The indemnification and
contribution required by this Section 1.6 shall be made by prompt periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred.
1.7 UNDERWRITTEN OFFERINGS
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 1.1, the Company will use its
best efforts to enter into an underwriting agreement with such underwriters for
such offering, such agreement to be reasonably satisfactory in form and
substance to such holders, the Company and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 1.6. The
holders of the Registrable Securities proposed to be sold by such underwriters
will reasonably cooperate with the Company in the negotiation of the
underwriting agreement. Such holders of Registrable Securities to
<PAGE>
11
be sold by such underwriters shall be parties to such underwriting agreement and
may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. Any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution or any other representations required by applicable law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 1.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the
Stockholder and subject to the provisions of Section 1.2(b), use its best
efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by the Stockholder among the securities of the
Company to be distributed by such underwriters. The Stockholder shall be party
to the underwriting agreement between the Company and such underwriters and may,
at his option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for his benefit and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to his
obligations. The Stockholder shall not be required to make any representations
or warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding the Stockholder, the
Stockholder's Registrable Securities and the Stockholder's intended method of
distribution or any other representations required by applicable law.
(c) If, in connection with any underwritten offering of
Registrable Securities, any seller of Registrable Securities disapproves of the
terms of any such underwriting, it may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least fifteen (15) days
prior to the effective date of the registration statement effecting the
registration of such Registrable Securities. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from the
registration.
2. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"AMEX" means the American Stock Exchange, Inc.
"COMMISSION" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
<PAGE>
12
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such successor federal statute.
"NYSE" means the New York Stock Exchange, Inc.
"PERSON" means any individual, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency, department or political
subdivision thereof) or other entity of any kind.
"PRINCIPAL STOCKHOLDER" means Stuart or Anita Subotnick.
"REGISTRABLE SECURITIES" means (i) the Shares, (ii) any other
shares of Class A Common Stock owned by any Principal Stockholder and (iii) any
Related Registrable Securities. As to any particular Registrable Securities,
once issued such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred, and
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent public distribution of
them shall not, in the opinion of counsel to the holders (or in the opinion of
counsel to the Company, which opinion is reasonably satisfactory to the
holders), require registration of them under the Securities Act, or (d) they
shall have ceased to be outstanding.
"REGISTRATION EXPENSES" means all costs, fees and expenses
incident to the Company's performance of or compliance with Section 1,
including, without limitation, all registration, filing and NASD fees, all fees
and expenses of complying with securities or blue sky laws, all printing
expenses, and delivery expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (excluding any underwriting discounts or commissions or transfer
taxes with respect to the Registrable Securities and the fees and disbursements
of more than one counsel and one accountant for the holders of the Registrable
Securities).
"REGISTRATION NOTICE" is defined in Section 1.1.
"RELATED REGISTRABLE SECURITIES" means any securities of the
Company issued or issuable with respect to the Shares by way of a dividend or
stock
<PAGE>
13
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"SECURITIES ACT" means the Securities Act of 1933, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such successor federal statute.
"SELLING HOLDER" is defined in Section 1.1.
"SHARES" is defined in the Whereas clause of this Agreement.
3. RULE 144 AND RULE 144A. The Company shall take all actions
reasonably necessary to enable the Stockholder to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, (b) Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or (c) any similar rules or regulations hereafter
adopted by the Commission, including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of the Stockholder, the Company will deliver to
such Stockholder a written statement as to whether it has complied with such
requirements.
4. AMENDMENTS AND WAIVERS. This Agreement may not be amended,
modified or supplemented, except with the written consent of the Company and the
Stockholder.
5. NOTICES. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, reputable
courier service or personal delivery to the following addresses (or at such
other address for a party as shall be specified by like notice):
(1) if to the Stockholder
c/o Big City Radio, Inc.
11 Skyline Drive
Hawthorne, NY 10532
Telecopy: (914) 592-4356
(2) if to the Company, to any Vice President at
Big City Radio, Inc.
<PAGE>
14
11 Skyline Drive
Hawthorne, NY 10532
Telecopy: (914) 592-4356
with a copy to:
Metromedia Company
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
Telecopy: (201) 531-2803
Attention: Arnold L. Wadler
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one business day after being
sent by reputable courier service; five business days after being deposited in
the mail, postage prepaid, if mailed; and when receipt is acknowledged, if
telecopied.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and assigns and, with respect to the
Stockholder, any holder of any Registrable Securities, subject to the provisions
respecting the minimum number of shares of Registrable Securities required in
order to be entitled to certain rights, or to take certain actions, contained
herein.
7. INVESTMENT ONLY. The Stockholder hereby represents and warrants
to the Company that he has acquired the Shares for investment only, his own
account and not for resale or distribution. The Stockholder further
acknowledges that the Shares are being issued pursuant to an exemption from
registration under the Securities Act and agrees not to sell or otherwise
dispose of the Shares in any transaction which, in the reasonable opinion of
Company's counsel, would be in violation of the Securities Act. The Stockholder
acknowledges that a legend appears on the certificates for the Shares reflecting
the foregoing restriction and hereby consents to the Company's maintaining "stop
transfer" instructions with its transfer agent with respect thereto.
8. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
9. REMEDIES. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and
<PAGE>
15
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
10. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended and understood that all of the rights and
privileges of the Stockholder shall be enforceable to the fullest extent
permitted by law.
11. ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
12. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
<PAGE>
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
BIG CITY RADIO, INC.
By:
---------------------------------------
Name:
Title:
------------------------------------------
Michael Kakoyiannis
<PAGE>
Exhibit 10.9
================================================================================
REGISTRATION RIGHTS AGREEMENT
Between
BIG CITY RADIO, INC.
and
THE STOCKHOLDERS NAMED HEREIN
-----------------------------------------------------
Class A Common Stock, par value $.01 per share
-----------------------------------------------------
Dated as of December __, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1. Registration on Request.. . . . . . . . . . . . . . . . . . . . . . .1
1.2. Piggy-Back Registration . . . . . . . . . . . . . . . . . . . . . . .3
1.4. Preparation; Reasonable Investigation.. . . . . . . . . . . . . . . .6
1.5. Conditions to Obligations of the Company. . . . . . . . . . . . . . .6
1.6. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.7. Underwritten Offerings. . . . . . . . . . . . . . . . . . . . . . . 10
2. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. Rule 144 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7. Investment Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . 14
9. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 15
12. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . 15
13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of December __,
1997, between Big City Radio, Inc., a Delaware corporation (the "Company"),
Stuart Subotnick and Anita Subotnick (together, the "Stockholders").
Capitalized terms used herein but not otherwise defined shall have the meanings
given them in Section 2 of this Agreement.
WHEREAS, in connection with the initial public offering by the Company
of its shares of Class A Common Stock, par value $.01 per share (the "Class A
Common Stock"), the shares of Common Stock, par value $.01 per share, held by
the Stockholders were reclassified into shares of Class B Common Stock, par
value $01 per share, convertible at any time into an equivalent number of shares
of Class A Common Stock (the "Shares");
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. REGISTRATION RIGHTS
1.1. REGISTRATION ON REQUEST.
(a) REQUEST. At any time after the Company qualifies to
utilize a Registration Statement on Form S-3 to register its shares of Class A
Common Stock, upon the written request of the Stockholders that the Company
effect the registration under the Securities Act of all or part of the
Stockholders' Registrable Securities, the Company promptly will give written
notice of such requested registration (the "Registration Notice") to the
Executive, and thereupon the Company will use its best efforts to effect, at the
earliest possible date, the registration under the Securities Act, including by
means of a shelf registration pursuant to Rule 415 under the Securities Act if
so requested in such request (but only if the Company is then eligible to use
such a shelf registration), of (i) the Registrable Securities which the Company
has been so requested to register by the Stockholders, and (ii) all other
Registrable Securities which the Company has been requested to register by the
Executive thereof (such holder together with the Stockholders hereinafter are
referred to as the "Selling Holders") by written request given to the Company
within 10 days after the giving of the Registration Notice by the Company, all
to the extent requisite to permit the disposition of the Registrable Securities
so to be registered.
(b) REGISTRATION STATEMENT FORM. Registrations under this
Section 1.1 shall be on such appropriate registration form of the Commission as
shall be reasonably selected by the Company in consultation with the Selling
Holders.
(c) EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this Section 1.1 shall not be deemed to have been effected
until such time as a registration statement with respect thereto has become
effective and
<PAGE>
2
remained effective in compliance with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement and all of such Registrable Securities have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement.
(d) SELECTION OF UNDERWRITERS. If a majority of the
Selling Holders of all Registrable Securities to be covered by a registration so
elects, the offering of such Registrable Securities pursuant to this Section 1.1
shall be in the form of an underwritten offering. The underwriter or
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be a firm or firms of nationally recognized standing
selected by all of the Selling Holders of the Registrable Securities to be
included in such registration and shall be reasonably acceptable to the Company,
it being agreed that Donaldson, Lufkin & Jenrette Securities Corporation is
reasonably acceptable to the Company.
(e) PRIORITY IN REQUESTED REGISTRATION. If the managing
underwriter of an underwritten offering shall advise the Company in writing or
if the Company determines in good faith based upon the advice of its financial
advisor for any offering which is not underwritten (and in each such case the
Company shall promptly advise each Selling Holder of Registrable Securities
requesting registration of such advice) that, in the underwriter's or the
Company's opinion, as the case may be, the total number of Registrable
Securities requested to be included in such registration exceeds the number of
Registrable Securities that can be sold in such offering without adversely
affecting the market for the Company's securities or the price that may be
obtained in such offering, to the extent the underwriter or the Company, as the
case may be, determines that certain of the Registrable Securities requested to
be registered by the Selling Holders must be excluded, they shall be excluded
pro rata among each of the Selling Holders requesting such registration on the
basis of the estimated aggregate gross proceeds to be received by such Selling
Holders from the sale of their Registrable Securities. To the extent
Registrable Securities requested to be registered are excluded from the offering
pursuant to the immediately preceding sentence, the holders of such Registrable
Securities shall have the right to one additional demand registration pursuant
to this Section 1.1.
(f) LIMITATIONS ON REGISTRATION ON REQUEST.
Notwithstanding anything in this Section 1.1 to the contrary (except as provided
in Section 1.1(f)), in no event will the Company be required to effect pursuant
to this Section 1.1, (i) in the aggregate, more than six (6) registrations, (ii)
more than two (2) registrations within any six (6) month period, (iii) any
registration within six (6) months after the effectiveness of a registration
statement by the Company offering its shares of Class A Common Stock (other than
a registration statement on Form S-8 with respect to an employee benefit plan),
or (iv) any registration valued at less than $10,000,000 based upon the then
current market price or fair market values as
<PAGE>
3
estimated by the Company's Board of Directors, in good faith based upon the
advice of the Company's underwriter in the case of an underwritten offering, or
the Company's financial advisor for any offering which is not underwritten.
(g) EXPENSES. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this
Section 1.1.
1.2. PIGGY-BACK REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. Except in
connection with exclusive registration rights of a holder of securities which
are not the Registrable Securities, if the Company at any time proposes to file
a registration statement to register any of its securities under the Securities
Act (except for registration on Form S-4 or S-8 or any successor or similar
forms), whether or not for sale for its own account, it will each such time give
prompt written notice to the Stockholders of its intention to do so and of such
Stockholders' rights under this Section 1.2. Upon the written request of the
Stockholders (which request shall specify the amount of Registrable Securities
intended to be disposed of by the Stockholders) made as promptly as practicable
and in any event within 20 days after the receipt of any such notice, the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Stockholders thereof. No registration effected
under this Section 1.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 1.1.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter of any underwritten offering shall advise the Stockholders in
writing that in its opinion the total amount of securities including Registrable
Securities requested to be included in such registration exceeds the number of
securities including Registrable Securities that can be sold in such offering
without adversely affecting the market for the Company's securities or the price
that may be obtained in such offering then the Company will include in such
registration, to the extent of the number which the Company is so advised can
reasonably be expected to be sold in (or during the time of) such offering, (i)
first, all securities proposed by the Company to be sold for its own account,
(ii) then, Registrable Securities requested to be included in such registration
by the Stockholders pursuant to this Agreement, pro rata among the Stockholders
on the basis of the estimated aggregate gross proceeds from the sale thereof,
and (iii) finally, other securities to be sold by holders, pro rata among all
sellers on the basis of the estimated aggregate gross proceeds from the sale
thereof.
(c) EXPENSES. The Company will pay all Registration
Expenses in connection with any registration effected pursuant to this
Section 1.2.
<PAGE>
4
1.3. REGISTRATION PROCEDURES. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 1.1 and 1.2, the Company will, as
expeditiously as possible:
(a) subject to Section 1.5 hereof, prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement or as may be reasonably requested by the
Selling Holders, until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement;
(b) furnish to each seller of Registrable Securities
covered by such registration statement, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits) and such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request;
(c) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of the
United States of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (ii) to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and (iii) to take
any other action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by such sellers, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subdivision
(c) be obligated to be so qualified, subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(d) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or authorities as
may be necessary in the opinion of counsel to the Company and counsel to the
Selling Holders to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
<PAGE>
5
(e) subject to Section 1.5 hereof, promptly notify each
seller of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances under which they were
made, and at the request of any such seller promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to each such seller of Registrable Securities a
copy of any amendment or supplement to such registration statement or
prospectus; and
(g) use its best efforts to list all Registrable Securities
covered by such registration statement on the NYSE, the AMEX or such other
national securities exchange on which Registrable Securities of the same class
and, if applicable, series, covered by such registration statement are then
listed or on the National Association of Securities Dealers Automated Quotations
System, Inc. ("NASDAQ") if the Registrable Securities are quoted on NASDAQ.
The Company may (i) require the Selling Holders to furnish the Company such
information regarding such sellers and the distribution of such securities as
the Company may from time to time reasonably request in writing and (ii) require
the Selling Holders to agree to comply with the Securities Act and the Exchange
Act in connection with the registration and distribution of the Registrable
Securities.
Notwithstanding the foregoing, if any such registration or comparable
statement refers to any holder by name or otherwise as the holder of any
securities of the Company and in its sole and exclusive judgment such holder is
or might be deemed to be a controlling person of the Company, such holder shall
have the right to require the insertion therein of language, in form and
substance reasonably satisfactory to such holder and the Company, to the effect
that the holding by such
<PAGE>
6
holder of such securities is not to be construed as a recommendation by such
holder of the investment quality of the Company's securities covered thereby and
that such holding does not imply that such holder will assist in meeting any
future financial requirements of the Company.
The Stockholders agree by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in subdivision (e) of this Section 1.3, the Stockholders
will forthwith discontinue such Stockholders' disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until the Stockholders' receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (e) of this Section 1.3 and, if
so directed by the Company, will promptly deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
holders' possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
1.4 PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company (i) shall give a representative
holder designated in writing to the Company by the Selling Holders (the
"Representative") and counsel and accountants designated by the Representative
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, (ii) shall give each of them such
reasonable access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of the Representative and such counsel or accountants, to conduct a
reasonable investigation within the meaning of the Securities Act and (iii)
shall promptly notify the Representative and its counsel of any stop order
issued or threatened by the Commission and promptly take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
1.5. CONDITIONS TO OBLIGATIONS OF THE COMPANY. It shall be a
condition precedent to the obligation of the Company to take any action pursuant
to this Agreement in respect of the shares of Class A Common Stock which are to
be registered at the request of the Stockholders that such Stockholders shall
furnish to the Company such information regarding the securities held by such
Stockholders and the intended method of disposition thereof as the Company shall
reasonably request and as shall be required in connection with the action taken
by the Company.
Notwithstanding any provision in this Agreement to the contrary, if
the Board of Directors of the Company determines in its reasonable judgment, at
the time it receives a Registration Notice, that (i) there shall be an adverse
effect on a then contemplated public offering of the Company's securities,
(ii) the registration and
<PAGE>
7
offering would interfere with any material financing, acquisition, corporate
reorganization or other material corporate transaction or development involving
the Company that is pending or imminent, (iii) the disclosures that would be
required to be made by the Company in connection with such registration would be
materially harmful to the Company because of transactions then being considered
by, or other events then concerning, the Company, or (iv) registration at the
time would require the inclusion of pro forma or other information, which
requirement the Company is reasonably unable to comply with without incurring
material expense, and the Company promptly gives each Selling Holder, in the
case of any registration statement referred to in Section 1.1, notice of that
determination (it being understood, however, that in any such event, the Company
shall use all reasonable efforts to minimize the length of the postponement),
then the Company may defer the filing of the registration statement which is
required to effect any registration pursuant to this Section 1.5 for a
reasonable period of time, but not in excess of [90] calendar days; PROVIDED,
that the Company may not exercise the holdback rights set forth in this
Section 1.5 more frequently than every 3 months. If the Company shall so
postpone the filing of a registration statement, the Stockholders, in the case
of any registration statement referred to in Section 1.1, shall have the right
to withdraw their Registration Notice by giving written notice to the Company
within 30 days after the receipt of the notice of the postponement and, in the
event of the withdrawal, the Registration Notice that was withdrawn shall not be
deemed to have been made.
1.6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Sections 1.1 and 1.2, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, and their respective directors,
officers, partners, shareholders, employees and affiliates against any losses,
claims, damages or liabilities, joint or several, to which such seller or
underwriter or any such director, officer, partner, shareholder, employee,
affiliate or controlling person may become subject under the Securities Act or
otherwise, including, without limitation, the fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and the
<PAGE>
8
Company will reimburse each such seller or underwriter and each such director,
officer, partner, shareholder, employee, affiliate and controlling Person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; PROVIDED, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any such seller or any such director, officer, employee,
affiliate, partner or controlling person and shall survive the transfer of such
securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 1.6) the Company, and each director, officer, employee and shareholder
of the Company and each other Person, if any, who participates as an underwriter
in the offering or sale of such securities and each other Person who controls
the Company or any such underwriter within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement of a material
fact contained in or any omission or alleged omission to state therein a
material fact in any such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by or on behalf of such seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; PROVIDED, HOWEVER, that
the liability of such indemnifying party under this Section 1.6(b) shall be
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer, employee, shareholder or controlling
person and shall survive the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 1.6,
such indemnified party will, if a claim in respect thereof is to be made against
an
<PAGE>
9
indemnifying party, give written notice to the latter of the commencement of
such action; PROVIDED, HOWEVER, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 1.6, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; PROVIDED, HOWEVER,
that if the indemnified party reasonably believes it is advisable for it to be
represented by separate counsel because there exists a conflict of interest
between its interests and those of the indemnifying party with respect to such
claim, or there exist defenses available to such indemnified party which may not
be available to the indemnifying party, or if the indemnifying party shall fail
to assume responsibility for such defense, the indemnified party may retain
counsel satisfactory to it and the indemnifying party shall pay all fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld or delayed. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or which requires action other than the payment of money by the
indemnifying party. Each indemnified party shall furnish such information
regarding itself or the claim in question as an indemnifying party may
reasonably request in writing and as shall be reasonably requested in connection
with the defense of such claim and litigation resulting therefrom.
(d) CONTRIBUTION. If the indemnification provided for in
this Section 1.6 shall for any reason be held by a court of competent
jurisdiction to be unavailable to an indemnified party under subparagraph (a) or
(b) hereof in respect of any loss, claim, damage or liability, or any action in
respect thereof, then, in lieu of the amount paid or payable under subparagraph
(a) or (b) hereof, the indemnified party and the indemnifying party under
subparagraph (a) or (b) hereof shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement in
connection with the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations (the relative fault of the Company and such prospective
sellers to be determined by reference to, among other things, whether the untrue
or
<PAGE>
10
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or such
prospective sellers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission) or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law; in such proportion as shall be appropriate to reflect the
relative benefits received by the Company and such prospective sellers from the
offering of the securities covered by such registration statement. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. Such prospective sellers'
obligations to contribute as provided in this subparagraph (d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint and no prospective seller
shall be liable under this subparagraph (d) for any amount in excess of the
proceeds received by the seller in the offering giving rise to the liability
hereunder. In addition, no Person shall be obligated to contribute hereunder
any amounts in payment for any settlement of any action or claim effected
without such Person's consent, which consent shall not be unreasonably withheld
or delayed.
(e) OTHER INDEMNIFICATION. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
Section 1.6 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law, rule or
regulation of any governmental authority other than the Securities Act.
(f) INDEMNIFICATION PAYMENTS. The indemnification and
contribution required by this Section 1.6 shall be made by prompt periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred.
1.7 UNDERWRITTEN OFFERINGS
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 1.1, the Company will use its
best efforts to enter into an underwriting agreement with such underwriters for
such offering, such agreement to be reasonably satisfactory in form and
substance to such holders, the Company and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 1.6. The
holders of the Registrable Securities proposed to be sold by such underwriters
will reasonably cooperate with the Company in the negotiation of the
underwriting agreement. Such holders of Registrable Securities to
<PAGE>
11
be sold by such underwriters shall be parties to such underwriting agreement and
may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. Any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution or any other representations required by applicable law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 1.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the
Stockholders and subject to the provisions of Section 1.2(b), use its best
efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by the Stockholders among the securities of
the Company to be distributed by such underwriters. The Stockholders shall be
party to the underwriting agreement between the Company and such underwriters
and may, at his option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
their benefit and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement be conditions precedent
to their obligations. The Stockholders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
Stockholders, the Stockholders' Registrable Securities and the Stockholders'
intended method of distribution or any other representations required by
applicable law.
(c) If, in connection with any underwritten offering of
Registrable Securities, any seller of Registrable Securities disapproves of the
terms of any such underwriting, it may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least fifteen (15) days
prior to the effective date of the registration statement effecting the
registration of such Registrable Securities. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from the
registration.
2. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"AMEX" means the American Stock Exchange, Inc.
"COMMISSION" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
<PAGE>
12
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such successor federal statute.
"EXECUTIVE" means Mr. Michael Kakoyiannis.
"NYSE" means the New York Stock Exchange, Inc.
"PERSON" means any individual, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency, department or political
subdivision thereof) or other entity of any kind.
"REGISTRABLE SECURITIES" means (i) the Shares, (ii) any other
shares of Class A Common Stock owned by the Executive and (iii) any Related
Registrable Securities. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred, and
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent public distribution of
them shall not, in the opinion of counsel to the holders (or in the opinion of
counsel to the Company, which opinion is reasonably satisfactory to the
holders), require registration of them under the Securities Act, or (d) they
shall have ceased to be outstanding.
"REGISTRATION EXPENSES" means all costs, fees and expenses
incident to the Company's performance of or compliance with Section 1,
including, without limitation, all registration, filing and NASD fees, all fees
and expenses of complying with securities or blue sky laws, all printing
expenses, and delivery expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (excluding any underwriting discounts or commissions or transfer
taxes with respect to the Registrable Securities and the fees and disbursements
of more than one counsel and one accountant for the holders of the Registrable
Securities).
"REGISTRATION NOTICE" is defined in Section 1.1.
"RELATED REGISTRABLE SECURITIES" means any securities of the
Company issued or issuable with respect to the Shares by way of a dividend or
stock
<PAGE>
13
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"SECURITIES ACT" means the Securities Act of 1933, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such successor federal statute.
"SELLING HOLDER" is defined in Section 1.1.
"SHARES" is defined in the Whereas clause of this Agreement.
3. RULE 144 AND RULE 144A. The Company shall take all actions
reasonably necessary to enable the Stockholders to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, (b) Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or (c) any similar rules or regulations hereafter
adopted by the Commission, including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of the Stockholders, the Company will deliver to
such Stockholders a written statement as to whether it has complied with such
requirements.
4. AMENDMENTS AND WAIVERS. This Agreement may not be amended,
modified or supplemented, except with the written consent of the Company and the
Stockholders.
5. NOTICES. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, reputable
courier service or personal delivery to the following addresses (or at such
other address for a party as shall be specified by like notice):
(1) if to the Stockholders
c/o Kluge & Company
215 East 67th Street
New York, NY 10021
Telecopy: (212) 606-4337
(2) if to the Company, to any Vice President at
<PAGE>
14
Big City Radio, Inc.
11 Skyline Drive
Hawthorne, NY 10532
Telecopy: (914) 592-4356
with a copy to:
Metromedia Company
One meadowlands Plaza
East Rutherford, NJ 07073-2137
Attention: Arnold L. Wadler
Telecopy: (201) 531-2803
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one business day after being
sent by reputable courier service; five business days after being deposited in
the mail, postage prepaid, if mailed; and when receipt is acknowledged, if
telecopied.
6. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and, with respect to the
Company, its respective successors and assigns and, with respect to the
Stockholders, any holder of any Registrable Securities, subject to the
provisions respecting the minimum number of shares of Registrable Securities
required in order to be entitled to certain rights, or to take certain actions,
contained herein.
7. INVESTMENT ONLY. The Stockholders hereby represent and warrant
to the Company that they have acquired the Shares for investment only, their own
account and not for resale or distribution. The Stockholders further
acknowledge that the Shares are being issued pursuant to an exemption from
registration under the Securities Act and agree not to sell or otherwise dispose
of the Shares in any transaction which, in the reasonable opinion of Company's
counsel, would be in violation of the Securities Act. The Stockholders
acknowledge that a legend appears on the certificates for the Shares reflecting
the foregoing restriction and hereby consent to the Company's maintaining "stop
transfer" instructions with its transfer agent with respect thereto.
8. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
9. REMEDIES. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and
<PAGE>
15
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
10. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended and understood that all of the rights and
privileges of the Stockholders shall be enforceable to the fullest extent
permitted by law.
11. ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
12. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
<PAGE>
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
BIG CITY RADIO, INC.
By:
---------------------------------------
Name:
Title:
------------------------------------------
Stuart Subotnick
------------------------------------------
Anita Subotnick
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF BIG CITY RADIO, INC.
Big City Radio-LA, L.L.C., a Delaware limited liability company
Big City Radio-CHI, L.L.C., a Delaware limited liability company
Big City Radio-NYC, L.L.C., a Delaware limited liability company
WRKL Rockland Radio, L.L.C., a Delaware limited liability company
Odyssey Traveling Billboards, Inc., a Delaware corporation
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Big City Radio, Inc.:
The audit referred to in our report dated September 10, 1997, except as to
Note 1, which is as of October 31, 1997, included the related financial
statement schedule as of December 31, 1996, and for the year then ended,
included in the registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein related to the audits
of Big City Radio, Inc., WZVU and WVVX and to the reference to our firm under
the headings "Summary Financial and Operating Data," "Selected Financial and
Operating Data" and "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
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KPMG Peat Marwick LLP
New York, New York
December 16, 1997
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EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
AND REPORT ON SCHEDULES
We consent to the inclusion in this Registration Statement of Big City
Radio, Inc. on Form S-1 of our report dated September 19, 1997, on our audits of
the financial statements of Big City Radio, Inc. and to the references to our
firm under the captions "Selected Financial and Operating Data" and "Experts".
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Big City Radio, Inc.
listed in Item 27.1. This financial statement schedule is the responsibility of
the Corporation's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ HOLTZ RUBENSTEIN & CO., LLP
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HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
December 16, 1997
