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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) June 23, 1999
SFX ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-14993 13-3977880
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
650 MADISON AVENUE
16TH FLOOR
NEW YORK, NEW YORK 10022
(Address, including zip code, of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 838-3100
No Change
-------------------------------------------------------------
(Former name or former address, if changed since last report)
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SFX ENTERTAINMENT, INC.
ITEM 5. OTHER EVENTS.
Reference is made to the press release of SFX Entertainment, Inc.
("SFX"), dated June 23, 1999, attached hereto as Exhibit 99.1 and incorporated
by reference. The press release announces that SFX is soliciting consents to
amend the indentures under which its outstanding 9 1/8% Senior Subordinated
Notes were issued. The pertinent portions of the Consent Solicitation
Statements prepared in connection therewith are filed as exhibits to this
Report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
C. Exhibits.
Description Exhibit
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Press Release dated June 23, 1999 99.1
Consent Solicitation Statement dated 99.2
June 23, 1999 relating to SFX's 9-1/8%
Senior Subordinated Notes due February
1, 2008
Consent Solicitation Statement dated 99.3
June 23, 1999 relating to SFX's 9-1/8%
Senior Subordinated Notes due December
1, 2008
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SFX ENTERTAINMENT, INC.
Dated: June 23, 1999 By: /s/ Howard J. Tytel
---------------------------------
Name: Howard J. Tytel
Title: Executive Vice President,
General Counsel and Member of
the Office of the Chairman
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EXHIBIT INDEX
Description Exhibit
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Press Release dated June 23, 1999 99.1
Consent Solicitation Statement dated 99.2
June 23, 1999 relating to SFX's 9-1/8%
Senior Subordinated Notes due February
1, 2008
Consent Solicitation Statement dated 99.3
June 23, 1999 relating to SFX's 9-1/8%
Senior Subordinated Notes due December
1, 2008
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PRESS RELEASE
For further information:
Timothy J. Klahs
Director, Investor Relations
SFX Entertainment, Inc.
(212) 833-0315
FOR IMMEDIATE RELEASE
SFX ENTERTAINMENT, INC. ANNOUNCES CONSENT SOLICITATION
NEW YORK, June 23, 1999 -- SFX Entertainment, Inc. (NYSE: SFX) today announced
that it is soliciting consents to amend the indentures under which its 9 1/8%
Senior Subordinated Notes due February 1, 2008 (CUSIP Number 784178 AC9) and its
9 1/8% Senior Subordinated Notes due December 1, 2008 (CUSIP Number 784178 AE5)
(collectively, the "Notes") were issued.
The consent solicitation commenced today and will expire at 5:00 p.m., New York
City time, on July 7, 1999, unless extended (the "Expiration Date"). Only
holders of Notes as of 5:00 p.m., New York City time, on June 22, 1999, will be
eligible to consent. The consent solicitation requires that consents from at
least a majority of the aggregate principal amount of each series of Notes
outstanding be received and not revoked. The purpose of the consent solicitation
is to modify certain covenants to provide SFX with greater flexibility to pursue
its operating strategy.
Only those holders of Notes who have delivered, and not revoked, consents prior
to the Expiration Date will be entitled to receive a consent fee of $10 in cash
for each $1,000 principal amount of Notes held by such holders. The payment of
the consent fee is conditioned upon the proposed amendments becoming operative.
Questions regarding the solicitation should be directed to Lehman Brothers, the
solicitation agent, at 800-438-3242. Requests for copies of the solicitation
materials should be directed to Georgeson & Company, Inc., the information
agent, at 800-223-2064.
* * *
SFX Entertainment is the world's largest diversified promoter, producer and
venue operator for live entertainment events. SFX owns, partially or entirely,
and/or operates the largest network of venues in the country used principally
for music concerts and other live entertainment events. SFX has 82 venues
including 16 amphitheaters in all of the top 10 markets and owns or operates
venues in 31 of the top 50 markets overall. SFX also develops and manages
touring Broadway shows, selling subscription series in 38 markets that maintain
active touring schedules. Through its large number of venues, its strong market
presence and the long operating histories of the businesses it has acquired, SFX
operates an integrated franchise that promotes and produces a broad variety of
live entertainment events locally, regionally and nationally. Pro forma for all
completed and pending acquisitions, during 1998, approximately 37 million people
attended approximately 13,200 events
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promoted and/or produced by SFX, including over 6,250 music concerts, 5,800
theatrical shows, over 800 family entertainment shows and over 350 specialized
motor sports shows. In addition, SFX is a leading fully-integrated sports
marketing and management company specializing in the representation of athletes
and broadcasters, integrated event management, television programming and
production and marketing consulting services in the sports, news and other
entertainment industries.
* * *
This press release includes foward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Because these statements apply to future events, they are
subject to risks and uncertainties that could cause actual results to differ
materially, including the company's absence of combined operating history and
potential inability to integrate acquired businesses, need for additional
financing, high degree of leverage, granting of rights to acquire certain
portions of the company's operations, variable economic conditions and consumer
tastes, risks associated with conducting business in foreign jurisdictions,
regulatory risks and restrictions imposed by existing debt and future payment
obligations. Important factors that could cause actual results to differ
materially are described in the company's reports on Forms 10-K and 10-Q and
other filings with the Securities and Exchange Commission.
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CONSENT SOLICITATION STATEMENT
SFX ENTERTAINMENT, INC.
SOLICITATION OF CONSENTS TO PROPOSED AMENDMENTS
WITH RESPECT TO THE INDENTURE GOVERNING ITS
$350,000,000 AGGREGATE PRINCIPAL AMOUNT OF
9 1/8% SENIOR SUBORDINATED NOTES DUE FEBRUARY 1, 2008, SERIES B
CUSIP NUMBER: 784178 AC9
CONSENT PAYMENT: $10 PER $1,000 AGGREGATE PRINCIPAL AMOUNT
RECORD DATE: 5:00 P.M., NEW YORK CITY TIME, ON JUNE 22, 1999
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SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS CONSENT SOLICITATION
STATEMENT, SFX ENTERTAINMENT, INC. ("SFX") WILL ACCEPT ALL PROPERLY COMPLETED,
EXECUTED AND DATED CONSENTS (AS DEFINED HEREIN) RECEIVED BY THE DEPOSITORY (AND
NOT REVOKED) PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON JULY 7, 1999, (AS SUCH
TIME AND DATE MAY BE EXTENDED, THE "EXPIRATION DATE"), FROM HOLDERS (AS DEFINED
HEREIN) OF RECORD ON JUNE 22, 1999 OF SFX'S 9 1/8% SENIOR SUBORDINATED NOTES DUE
FEBRUARY 1, 2008, SERIES B (THE "NOTES"). AS SOON AS PRACTICABLE AFTER THE
OPERATIVE DATE (AS DEFINED HEREIN), SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH HEREIN, SFX WILL PAY TO HOLDERS IN RESPECT OF SUCH CONSENTS A CASH
PAYMENT OF $10 PER $1,000 PRINCIPAL AMOUNT OF NOTES TO WHICH SUCH CONSENT
RELATES. SFX WILL NOT BE OBLIGATED TO ACCEPT ANY CONSENTS RECEIVED AFTER THE
EXPIRATION DATE. CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE EFFECTIVE
DATE (AS DEFINED HEREIN).
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SFX Entertainment, Inc., a Delaware corporation ("SFX" or the "Company"),
hereby solicits the consent (the "Consent") of the registered holders
("Holders") as of June 22, 1999 (the "Record Date") of its 9 1/8% Senior
Subordinated Notes due February 1, 2008, Series B (the "Notes") to amendments
(the "Proposed Amendments") of certain provisions of the Indenture dated as of
February 11, 1998, as amended by Supplemental Indentures Nos. 1 through 13 (as
amended and supplemented on or prior to the date hereof, the "Indenture"),
among SFX, the Guarantors (as defined in the Indenture) and The Chase Manhattan
Bank, as trustee (the "Trustee"), pursuant to which the Notes were issued.
Upon the terms and subject to the conditions set forth in this Consent
Solicitation Statement (this "Statement"), the related form of Consent and
instructions thereto ("Consent Form") and any supplemental materials attached
hereto or provided prior to the Expiration Date (which, collectively,
constitute the "Consent Solicitation"), promptly after the Operative Date, SFX
will pay a cash payment to each Holder who delivers a properly completed and
executed Consent Form equal to $10 per $1,000 principal amount of Notes (the
"Consent Payment") for which Consents are received and not revoked prior to the
Expiration Date. SFX is not obligated, and does not intend, to accept Consents
from any Holders after 5:00 p.m., New York City time, on July 7, 1999.
Accordingly, Consents received by the Depository after such date will not be
accepted and Holders of such Notes will not receive the Consent Payment.
Pursuant to the terms of the Indenture, the Proposed Amendments require
the written Consent from Holders of not less than a majority in aggregate
principal amount of the outstanding Notes (the "Required Consents"). The
Proposed Amendments constitute a single proposal and a consenting Holder must
consent to the Proposed Amendments as an entirety and may not consent
selectively. Immediately upon receipt of the Required Consents, SFX intends to
deliver to the Trustee an officers' certificate confirming the receipt of the
Required Consents, whereupon SFX, the Guarantors and the Trustee will execute a
supplemental indenture (the "Supplemental Indenture") containing the Proposed
Amendments. The time and date on which the Supplemental Indenture is executed
is hereinafter referred to as the "Effective Date." However, the Supplemental
Indenture will provide that the Proposed Amendments will become operative only
upon delivery by SFX of an officers' certificate to the Trustee stating that
the Conditions have been satisfied. The date on which the Effective Date shall
have occurred and SFX has delivered an officers' certificate to the Trustee
stating that the Conditions have been satisfied is hereinafter referred to as
the "Operative Date."
CONSENTS SHOULD BE SENT TO THE DEPOSITORY AT THE ADDRESS SET FORTH ON THE
FINAL PAGE OF THIS CONSENT SOLICITATION STATEMENT. UNDER NO CIRCUMSTANCES
SHOULD ANY HOLDER DELIVER ANY NOTES.
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FOR FURTHER INFORMATION RELATING TO THE SOLICITATION, PLEASE TELEPHONE
EITHER THE SOLICITATION AGENT OR THE INFORMATION AGENT AT THE TELEPHONE NUMBERS
SET FORTH ON THE BACK COVER OF THIS CONSENT SOLICITATION STATEMENT. TO OBTAIN
ADDITIONAL COPIES OF THIS CONSENT SOLICITATION STATEMENT, PLEASE CONTACT THE
INFORMATION AGENT.
------------------
The Solicitation Agent for the Consent Solicitation is:
LEHMAN BROTHERS
The date of this Consent Solicitation Statement is June 23, 1999.
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AVAILABLE INFORMATION ABOUT SFX
SFX is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and files periodic
reports, registration statements and other information with the Securities and
Exchange Commission (the "Commission") relating to its business, financial
condition and other matters. Such reports, registration statements and other
information should be available for inspection at the public reference
facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located
at 7 World Trade Center, New York, New York 10048 and at Citicorp Center, 500
West Madison Street (Suite 1400), Chicago, Illinois 60661. You may obtain
copies from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Please call the Commission at
1-800-SEC-0330 for more information on the public reference rooms. The
Commission also maintains a Web site at http://www.sec.gov which contains SFX's
reports, registration statements and proxy and information statements and other
information.
Statements made in this Consent Solicitation Statement concerning the
provisions of any contract, agreement or other document referred to herein
constitute accurate summaries of the provisions of such document which are
material to such statements, but such statements do not purport to be complete.
With respect to each such statement concerning a contract, agreement or other
document filed with the Commission, reference is made to such filing for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
[This Section Omitted from Filing]
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that is or is deemed to be incorporated by
reference herein) modifies or supersedes the previous statement. Any statement
so modified or superseded will not be deemed to constitute a part hereof except
as so modified or superseded.
This Consent Solicitation Statement incorporates documents by reference
that are not presented herein or delivered herewith. These documents (other
than exhibits to the documents unless the exhibits are specifically
incorporated by reference herein) are available, without charge, upon oral or
written request by any person to whom this Consent Solicitation Statement has
been delivered, from SFX Entertainment, Inc., 650 Madison Avenue, New York, New
York 10022, Attention: Timothy Klahs, Director of Investor Relations, telephone
number (212) 407-9126. In order to ensure timely delivery of the documents, any
request should be made as soon as possible. SFX will deliver the requested
documents by first class mail or other equally prompt means as soon as
practicable after receipt of the request.
You should rely only on the information contained or incorporated by
reference in this Consent Solicitation Statement. We have not authorized anyone
to provide you with information that is different from what is contained in
this Consent Solicitation Statement. This Consent Solicitation Statement is
dated June 23, 1999. You should not assume that the information contained in
this Consent Solicitation Statement is accurate as of any date other than the
date hereof.
No person has been authorized to give any information or to make any
representations, other than those contained in this Consent Solicitation
Statement. If given or made, such information or representation cannot be
relied upon as having been authorized by SFX, Lehman Brothers, Inc. (the
"Solicitation Agent"), Georgeson & Company, Inc. (the "Information Agent") or
ChaseMellon Shareholder Services, L.L.C. (the "Depository"). SFX is not aware
of any jurisdiction in which the making of the Consent Solicitation is not in
compliance with applicable law. If SFX becomes
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aware of any jurisdiction in which the making of the Consent Solicitation would
not be in compliance with applicable law, it will make a good faith effort to
comply with such law. If, after such good faith effort, it cannot comply with
any such law, Consents will not be solicited from Holders residing in such
jurisdictions. In any jurisdiction where the securities, blue sky or other laws
require the Consent Solicitation to be made by a licensed broker or dealer, the
Consent Solicitation will be deemed to be made on behalf of SFX by the
Solicitation Agent or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
The Consent Solicitation is being made to all Holders. A beneficial owner
of Notes (other than a DTC Participant) registered in the name of a nominee
must either (i) instruct the relevant Holder to deliver a Consent on its behalf
or (ii) obtain a written proxy from such Holder if such beneficial owner
desires to deliver a Consent in respect of such Notes. Holders must deliver
(and not revoke) Requisite Consents to approve the Proposed Amendments. For
purposes of the foregoing calculation, any Notes held by SFX or any of its
affiliates will not be counted as outstanding. As of the date of this Consent
Solicitation Statement, the aggregate principal amount of Notes outstanding is
$350.0 million none of which are held by SFX or any of its affiliates.
The Consent should be sent to the Depository, not to SFX or the
Solicitation Agent. In no event should a Holder tender or deliver Notes.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
SFX believes that certain statements contained in this Consent
Solicitation Statement or incorporated by reference in this Consent
Solicitation Statement are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 and are considered
prospective. The following statements are or may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995:
o statements before, after or including the words "may," "will,"
"could," "should," "believe," "expect," "future," "potential,"
"anticipate," "intend," "plan," "estimate" or "continue" or the
negative or other variations of these words; and
o other statements about matters that are not historical facts.
SFX may be unable to achieve future results covered by the
forward-looking statements. The statements are subject to risks, uncertainties
and other factors that could cause actual results to differ materially from the
future results that the statements express or imply. The specific risks and
uncertainties that could materially affect SFX's future results include SFX's
absence of combined operating history and potential inability to integrate
acquired businesses, need for additional financing, high degree of leverage,
granting of rights to acquire certain portions of SFX's operations, variable
economic conditions and consumer tastes, risks associated with conducting
business in foreign jurisdictions, regulatory risks and restrictions imposed by
existing debt and future payment obligations. Other important factors that
could cause actual results to differ materially are described in SFX's filings
with the Securities and Exchange Commission. In particular, please refer to the
statements made under the caption entitled "Risk Factors" in SFX's Annual
Report on Form 10-K for the year ended December 31, 1998. Please do not put
undue reliance on these forward-looking statements, which speak only as of the
date of this Consent Solicitation Statement.
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THE CONSENT SOLICITATION
TERMS OF THE CONSENT SOLICITATION
If (i) the Requisite Consents are received, (ii) SFX, the Guarantors and
the Trustee execute a supplemental indenture (the "Supplemental Indenture")
containing the Proposed Amendments, (iii) the Conditions (described below) are
satisfied and (iv) the Proposed Amendments become operative as set forth
herein, then SFX will pay to each Holder delivering prior to the Expiration
Date the enclosed form of consent (the "Consent") to the Depository (provided
such Consent is not revoked) a one-time cash payment in the amount of $10 for
each $1,000 in principal amount of the Notes as to which such Consent is given
(the "Consent Payment"). Only Holders of record as of 5:00 p.m., New York City
time, on June 22, 1999 (the "Record Date") may submit a Consent. Holders that
do not properly or timely consent to the Proposed Amendments, or whose Consent
is revoked, will not receive a Consent Payment with respect thereto, even
though the Proposed Amendments, if they become operative, will be binding upon
them. A duly executed Consent (unless revoked as herein provided) shall bind
the Holders executing the same and any subsequent registered holder or
transferee of the Notes to which such Consent relates. However, a Consent may
be revoked at any time prior to the Effective Date (as defined herein) by the
Holder of the Notes to which such Consent relates or any subsequent record
holder of those Notes in the manner described herein.
The term "Holder" shall mean a registered holder of Notes as reflected in
the records of the Trustee as of the Record Date. SFX anticipates that The
Depository Trust Company ("DTC"), as nominee holder of the Notes, will execute
an omnibus proxy which will authorize its participants ("DTC Participants") to
consent with respect to the Notes held by it and held in the name of Cede & Co.
as specified on the DTC position listing as of the Record Date. In such case,
all references to Holder shall, unless otherwise specified, include DTC
Participants.
The delivery of a Consent to the Proposed Amendments will not affect a
Holder's right to sell or transfer the Notes. Only Holders of record as of the
Record Date may submit a Consent.
Upon receipt of the Requisite Consents (which may occur prior to the
Expiration Date), SFX, the Guarantors and the Trustee will execute the
Supplemental Indenture. The date and time at which the Supplemental Indenture
is executed is referred to herein as the "Effective Date." However, the
Supplemental Indenture will provide that the Proposed Amendments will become
operative only upon delivery by SFX of an officers' certificate to the Trustee
stating that the Conditions have been satisfied. The date on which the
Effective Date shall have occurred and SFX has delivered an officers'
certificate to the Trustee stating that the Conditions have been satisfied is
referred to herein as the "Operative Date." Holders delivering Consents
received after the Effective Date but prior to the Expiration Date will
nonetheless be entitled to receive the Consent Payment as soon as practicable
after the Operative Date. If the Requisite Consents are not received by the
Depository by 5:00 p.m., New York City time, on the Expiration Date, then SFX,
in its sole discretion, may elect to extend the Expiration Date, from time to
time, as herein provided, in which case all such Consents shall remain valid
(subject to revocation as herein provided) until the date and time to which the
Expiration Date is so extended.
SFX expressly reserves the right (i) to extend the Expiration Date, from
time to time, (ii) to terminate the Consent Solicitation at any time prior to
the Operative Date for any reason (whether or not the Requisite Consents have
been received) and (iii) to amend, at any time or from time to time, the terms
of the Consent Solicitation. Any such extension of the Expiration Date shall be
effective if SFX gives oral or written notice thereof to the Depository no
later than 9:00 a.m. (and, if such notice is given orally, followed by written
notice to the Depository (given by facsimile or otherwise) no later than 2:00
p.m.), New York City time, on the first business day following any previously
announced Expiration Date. Any termination or amendment of the Consent
Solicitation shall be effective upon written notice thereof from SFX to the
Depository. As promptly as practicable following any such extension,
termination or amendment, notice thereof shall be given by SFX to each Holder
in writing or by press release to the Dow Jones News Service.
CONDITIONS TO CONSENT SOLICITATION
Concurrently with the solicitation of Consents to the Proposed Amendments,
SFX is soliciting the consent (the "Tranche B Consent Solicitation") of the
registered holders of its 9 1/8% Senior Subordinated Notes due December 1, 2008
(the "Tranche B Notes") to certain amendments of the Indenture governing the
Tranche B Notes (the "Tranche B Indenture"). The terms and provisions of the
Tranche B Indenture are substantially similar to the Indenture and the proposed
amendments to the Tranche B Indenture are substantially the same as the
Proposed Amendments. As of June 22, 1999, there were $200 million aggregate
principal amount of Tranche B Notes outstanding.
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Notwithstanding any other provision of the Consent Solicitation, SFX's
obligation to accept and pay for Consents validly tendered pursuant to the
Consent Solicitation is subject to and conditioned upon (i) receipt of the
Required Consents prior to the Expiration Date and the execution by SFX, the
Guarantors and the Trustee of the Supplemental Indenture, (ii) receipt of the
required consents from the registered holders of the Tranche B Notes prior to
the expiration date of the Tranche B Consent Solicitation and the execution of
the supplemental indenture to the Tranche B Indenture by the parties thereto,
(iii) receipt of all governmental and third-party consents and approvals
required in connection with the Consent Solicitation and the adoption of the
Proposed Amendments, including, without limitation, the consent of the lenders
under SFX's senior credit facility and (iv) the absence of any law or
regulation, injunction, action or other proceeding (pending or threatened)
which (in the case of any action or proceeding, if adversely determined) would
make unlawful or invalid or enjoin the implementation of the Proposed
Amendments or the entering into of the Supplemental Indenture. The foregoing
conditions (the "Conditions") are for the sole benefit of SFX and may be
asserted regardless of the circumstances giving rise to any such condition
(including any action or inaction by SFX). The foregoing rights will not be
deemed a waiver of any other right and each right will be deemed and ongoing
right which may be asserted at any time and from time to time.
The Consent Solicitation may be abandoned by SFX at any time prior to the
Operative Date for any reason (including, without limitation, if any of the
Conditions are not satisfied), in which case all Consents will be voided and no
Consent Payments will be made.
CONSENT PROCEDURES
Holders who desire to consent to the Proposed Amendments should so
indicate by marking the appropriate box on the Consent included herewith, and
completing, signing, dating and delivering the same to the Depository in the
manner set forth below. However, if none of the boxes on the Consent is
checked, but the Consent is otherwise properly completed, signed, dated and
delivered, the Holder will be deemed to have consented to the Proposed
Amendments.
Consents executed by the registered Holder of Notes should be executed in
exactly the same manner as the name(s) appear(s) on the Notes. If Notes to
which a Consent relates are held by two or more joint Holders, all such Holders
should sign the Consent. If a Consent is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
registered holder acting in a fiduciary or representative capacity, such person
should so indicate when signing and should submit to the Depository appropriate
evidence (satisfactory to SFX) of such person's authority to so act, along with
the Consent. If Notes are registered in different names, separate Consents must
be executed by each such registered holder. Consents by DTC Participants whose
Notes are registered in the name of Cede & Co. should be signed in the manner
in which their names appear on the position listing of Cede & Co. with respect
to the Notes.
Subject to the terms and conditions set forth in this Consent Solicitation
Statement, SFX will accept all properly completed and executed Consents
received by the Depository (and not subsequently revoked) prior to 5:00 p.m.,
New York City time, on the Expiration Date. All questions as to the validity,
form, eligibility (including the time of receipt) and acceptance of Consents
and revocations will be resolved by SFX in its sole discretion, whose
determination shall be final and binding, subject only to the review and
approval of the Depository with respect to proof of execution and ownership.
SFX reserves the right to reject any and all Consents not validly given or the
acceptance of which could, in the opinion of SFX or its counsel, be unlawful.
SFX also reserves the right (subject to such review and approval of the
Depository) to waive any defects, irregularities or conditions of delivery as
to particular Consents. Unless waived, all such defects and irregularities must
be cured prior to the Expiration Date, and any Consent with such a defect or
irregularity will not be deemed to have been properly given until so cured or
waived. Neither SFX, the Depository nor any other person shall be under any
duty to give notification of any such defects or irregularities, nor shall any
of them incur any liability for failure to give such notification. SFX's
interpretation of the terms and conditions of this Consent Solicitation shall
be conclusive and binding. After the Operative Date, all Holders, including
non-consenting holders and all subsequent holders, of the Notes will become
bound by the Proposed Amendments.
REVOCATION OF CONSENTS
Pursuant to Section 9.04 of the Indenture, Consents with respect to the
Proposed Amendments may be revoked by a Holder of the Notes to which such
Consent relates or by any subsequent registered holder of those Notes if the
Depository receives the notice of revocation before the Effective Date.
Consents may not be revoked on or after the Effective Date. Notices of
revocation must be completed, signed, dated and delivered to the Depository
(accompanied by such proxy or other required documents) in the same manner as
would be required for a Consent.
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SOLICITATION AGENT, INFORMATION AGENT AND DEPOSITORY
SFX has retained Lehman Brothers as Solicitation Agent in connection with
the Consent Solicitation. The Solicitation Agent will solicit Consents and will
respond to inquiries of Holders. The Solicitation Agent will receive a
customary fee for its services in connection with the Consent Solicitation and
reimbursement for reasonable out-of-pocket expenses, including counsel's fees.
SFX and the Guarantors have agreed to indemnify the Solicitation Agent against
certain liabilities and expenses, including liabilities under the securities
laws, in connection with the Consent Solicitation.
SFX has retained Georgeson & Company, Inc. as Information Agent in
connection with the Consent Solicitation. The Information Agent will distribute
the Consent Solicitation Statement and the Consent Form, respond to inquiries
and receive a customary fee for such services. Requests for additional copies
of this Consent Solicitation Statement or the Consent Form may be directed to
the Information Agent at its address and/or telephone number set forth on the
back cover page of this Consent Solicitation Statement.
SFX has retained ChaseMellon Shareholder Services, L.L.C. as Depository in
connection with the Consent Solicitation. The Depository will receive, collect
and tabulate Consents and make the Consent Payments on behalf of SFX promptly
after the Operative Date. The Depository will receive a customary fee for such
services and reimbursement for reasonable out-of-pocket expenses.
Brokers, dealers, commercial banks, trust companies and other nominees
will be reimbursed for their reasonable out-of-pocket expenses incurred in
forwarding copies of this Consent Solicitation Statement and related documents
to the beneficial owners of Notes. All such fees and expenses will be paid by
SFX.
BACKGROUND OF COMPANY
General
SFX is the world's largest diversified promoter, producer and venue
operator for live entertainment events. Our major areas of focus within the
live entertainment industry include music, theater (primarily touring Broadway
shows), sports and family entertainment. In addition, we are a leading
fully-integrated sports marketing and management company specializing in the
representation of athletes and broadcasters, integrated event management,
television programming and production and marketing consulting services. We
own, partially or entirely, and/or operate under lease or exclusive booking
arrangements, the largest network of venues used principally for music concerts
and other live entertainment events in the United States, with 82 venues in 31
of the top 50 markets, including 16 amphitheaters in the top 10 markets. We
also develop and manage touring Broadway shows, selling subscription series in
38 markets.
We have benefited from significant growth in the live entertainment
industry over the last several years. We believe that our ability to provide
integrated services as a promoter, producer, venue operator and manager of live
entertainment events will encourage wider use of our venues by performers. We
also believe that this ability will allow us to capture a greater percentage of
revenues generated by those events and may contribute to the overall growth of
the live entertainment industry.
During 1998, giving pro forma effect to all completed acquisitions,
approximately 37 million people attended 13,200 events promoted and/or produced
by SFX, including approximately 6,250 music concerts, 5,800 theatrical shows,
over 800 family entertainment shows and over 350 specialized motor sports
shows.
Our core business is the promotion and production of live entertainment events,
most significantly for concert and other music performances in venues owned
and/or operated by SFX and in third-party venues. As a promoter, we typically:
o market events and tours;
o sell tickets;
o provide or otherwise rent event venues; and
o arrange for local production services, such as stage, set, sound and
lighting.
As a producer, we:
o create tours for music concerts, theatrical events, specialized motor
sports and other events;
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o develop and manage Broadway touring theatrical shows; and
o develop specialized motor sports and other live entertainment events
SFX also represents over 650 professional athletes and broadcasters for
contract and marketing services. In addition, SFX's event marketing programs
demonstrated products to over 10 million people in 1998.
Operating Strategy
Our principal objectives are to maximize revenue and cash flow growth
opportunities by owning and/or operating leading live entertainment venues,
being a leading promoter and producer of live entertainment events and a
leading provider of talent representation services. Our specific strategies
including the following:
o OWN AND/OR OPERATE LEADING LIVING ENTERTAINMENT VENUES IN NATION'S
TOP 50 MARKETS
We currently own and/or operate venues in 31 of the top 50 markets in the
United States and intend to pursue additional live entertainment venues in the
top 50 markets. We believe this will enhance our ability to secure access to a
large aggregate audience; book events on a national scale; and encourage wider
use of our venues by performers.
o EXPAND FOREIGN OPERATIONS
The live entertainment industry outside the United States is highly
fragmented, with little, if any, integration of services. Event promotion,
production, sponsorship and management is typically done at a local level by
small operators. We believe that the expansion of our international operations,
primarily in the promotion and production of live entertainment events, will
provide significant opportunities for future growth. In particular, we believe
that this expansion would allow us to capture a greater percentage of revenues
generated by international music tours and provide numerous ancillary revenue
opportunities, such as sponsorships, concessions and merchandise. We also
believe that the expansion of our foreign operations will provide us with
better access to local talent, which we can then promote on an international
basis, as well as additional outlets for the live entertainment events we
produce, promote or manage in the United States. Initially, we intend to focus
primarily on acquisition opportunities in Western Europe.
o MAXIMIZE ANCILLARY REVENUE OPPORTUNITIES
We intend to pursue revenue sources related to our live entertainment
business. We believe that these related revenue sources generally have higher
margins than promotion and production revenues. These revenue sources include:
-- the sale of corporate sponsorships, naming and other rights,
concessions and merchandise;
-- the sale of rights to advertise to our large aggregate national
audience;
-- the development of associated intellectual property rights; and
-- the development of Internet opportunities, including affinity clubs,
through the creation of a common SFX web site.
We recently agreed to sell naming rights for several of our existing
venues, and have the opportunity to sell naming rights to a majority of our
remaining venues. We also recently entered into more than 30 national
sponsorships covering national tours arranged by SFX or for the exploitation of
our national network of venues. The majority of these sponsorships are for
clients who are either new to SFX or to the entertainment industry in general.
We believe significant opportunities remain available for various types of
sponsorships.
o EXPLOIT SYNERGIES OF THE ACQUIRED BUSINESSES
We plan to maximize revenues by exploiting the synergies of our various
businesses and those resulting from the consolidation of venue ownership and
our expanding overall size.
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o INCREASE USE OF VENUES; DIVERSIFICATION ACTS AND VENUES
Typically, venue operators do not utilize their venues for many of the
dates available for live entertainment events in any given season. We believe
that we will be able to increase the utilization of our venues through our
ability to affect scheduling on a nationwide basis; our local knowledge,
relationships and expertise; and our presentation of a diverse range of acts
and events.
o INNOVATIVE EVENT MARKETING
We plan to use innovative event marketing to increase admissions,
sponsorship and advertising revenues and to develop ticketing strategies more
accurately reflecting demand, resulting in increased overall attendance and
increases in both lower priced and premium priced tickets. In addition, we
believe that we can increase the profitability of our venues by offering
premium ticket packages.
o STRICT COST CONTROLS; NATIONALLY COORDINATED BOOKING, MARKETING &
ACCOUNTING
We will continue to impose strict financial reporting and cost controls
on all of our businesses. In addition, we intend to complete the implementation
of a national booking system, an integrated marketing team and a centralized
accounting system to take advantage of significant economies of scale.
o PURSUE COMPLEMENTARY ACQUISITION OPPORTUNITIES
We intend to continue to pursue attractive acquisition opportunities in
the highly fragmented live entertainment business, both in the United States
and internationally. Through consolidation, we expect to be better able to
address what we believe is a growing desire among performers and talent agents
to deal with fewer, more sophisticated promoters.
THE PROPOSED AMENDMENTS
Set forth below is a brief description of the Proposed Amendments to the
Indenture for which Consents are being sought pursuant to the Consent
Solicitation. A full description of the Proposed Amendments is set forth on
Annex I hereto. The Proposed Amendments constitute a single proposal and a
consenting Holder must consent to the Proposed Amendments as an entirety and
may not consent selectively. The Proposed Amendments will be embodied in an
amendment to the Indenture in the form set forth in the Supplemental Indenture
which will become operative on the Operative Date. Thereafter, the Proposed
Amendments will be binding on all Holders whether or not such Holder has
delivered a Consent.
Only Holders as of the Record Date can consent to the Proposed
Amendments. Pursuant to the terms of the Indenture, the Proposed Amendments
require the written Consent from Holders of not less than a majority in
aggregate principal amount of the outstanding Notes.
The summaries of provisions of the Indenture and the proposed
modifications thereto set forth below are qualified in their entirety by
reference to the full and complete terms contained in the Indenture and the
proposed form of Supplemental Indenture. Capitalized terms used herein and not
otherwise defined in this Consent Solicitation Statement have the same meanings
as set forth in the Indenture. Holders may obtain copies of the Indenture and
the proposed form of Supplemental Indenture without charge from the Depository.
The proposed Amendments to the Indenture are as follows:
GUARANTOR (AMENDMENT TO SECTION 1.01 (DEFINITIONS -- Guarantor)). The
Indenture defines "Guarantor" to mean each of SFX's current and future domestic
Restricted Subsidiaries that executes a Subsidiary Guarantee and its respective
successors and assigns (emphasis added). We would like to clarify that any
Restricted Subsidiary that executes a Subsidiary Guarantee, whether foreign or
domestic, would constitute a "Guarantor" under the Indenture. While SFX is not
required to cause its foreign Restricted Subsidiaries to become Guarantors, and
generally does not intend to do so in the future, to the extent a Restricted
Subsidiary is or becomes a Guarantor in the future, such Restricted Subsidiary
should be treated as any other Guarantor under the Indenture.
PERMITTED INVESTMENTS (AMENDMENT TO SECTION 1.01 (DEFINITIONS --
PERMITTED INVESTMENTS)). Section 4.07 of the Indenture (Restricted Payments)
currently limits the ability of SFX and its Restricted Subsidiaries to make
"Restricted Investments." The Indenture defines "Restricted Investments" to
mean "an Investment other than a Permitted Investment." The term "Permitted
Investment" is generally defined to include, among other things, Investments in
a Guarantor or in a Person engaged in a Permitted Business that, as a result of
any such Investment, becomes a Guarantor.
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We are proposing to change the definition of Permitted Investments to generally
allow Investments in our Restricted Subsidiaries or in any Person engaged in a
Permitted Business that, as a result of any such Investment, becomes a
Restricted Subsidiary, regardless of whether the Restricted Subsidiary is a
Guarantor. BECAUSE THE INDENTURE GENERALLY REQUIRES ALL DOMESTIC RESTRICTED
SUBSIDIARIES OF SFX TO BECOME GUARANTORS, THE PRIMARY SIGNIFICANCE OF THE
PROPOSED AMENDMENT IS THAT IT WOULD ALLOW SFX TO MAKE INVESTMENTS IN FOREIGN
RESTRICTED SUBSIDIARIES WITHOUT REQUIRING THEM TO BECOME GUARANTORS. The
Investments could take the form of loans, capital contributions, the purchase
of equity or debt securities, the transfer of assets or other forms of
investments.
The primary purpose of this proposal is to permit SFX to take advantage
of attractive acquisition opportunities outside the United States and to
provide financing and operating flexibility. SFX is currently pursuing
additional acquisitions, including acquisitions of foreign companies. However,
it has not entered into any definitive agreements with respect to such
acquisitions, and there can be no assurance that it will do so.
DEBT INCURRENCE COVENANT (AMENDMENT TO SECTION 4.09 -- INCURRENCE OF
INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK). Section 4.09 of the Indenture
limits, among other things, the ability of SFX and its Subsidiaries to incur
Indebtedness or issue shares of Disqualified Stock. The restrictions in the
covenant do not apply to certain items of specified "Permitted Debt" and the
covenant allows SFX (but not its Subsidiaries) to incur Indebtedness so long as
(i) no Default or Event of Default has occurred and is continuing and (ii)
SFX's Debt to Cash Flow Ratio after giving pro forma effect to the incurrence
of such Indebtedness or the issuance of such Disqualified Stock is no greater
than certain specified levels. The Proposed Amendment would accomplish two
principal objectives. The provision permitting SFX to incur Indebtedness or
issue Disqualified Stock so long as it satisfied the specified Debt to Cash
Flow Ratio test would be amended to also permit Restricted Subsidiaries to
incur Indebtedness or issue preferred stock under the existing Ratio test. In
addition, the Permitted Debt provision would be modified to, among other
things, permit Restricted Subsidiaries to be direct borrowers under the Credit
Facilities and to allow any Restricted Subsidiary to guarantee the Indebtedness
of SFX or any other Restricted Subsidiary. NEITHER AMENDMENT WOULD INCREASE THE
DEBT INCURRENCE CAPACITY CURRENTLY PERMITTED UNDER THE INDENTURE.
The primary purpose of this proposal is to provide SFX with the
flexibility to finance its operations, including foreign operations, in the
most efficient manner possible. In the event SFX significantly expands its
foreign operations, it would likely seek to enter into Credit Facilities that
provide for, among other things, foreign subsidiary borrowings and
multicurrency availability. SFX is currently pursuing foreign acquisition
opportunities and has had discussions with its lenders regarding the terms of a
multicurrency credit facility involving multiple subsidiaries as co-borrowers.
However, it has not entered into definitive agreements with respect to any such
acquisitions or any financing proposal, and there can be no assurance that it
will do so.
TRANSACTIONS WITH AFFILIATES COVENANT (AMENDMENT TO SECTION 4.11 --
TRANSACTIONS WITH AFFILIATES). Section 4.11 of the Indenture generally treats
transactions between SFX and/or any of its Restricted Subsidiaries and joint
venture entities as "Affiliate Transactions," simply by virtue of the fact that
SFX has a significant direct or indirect equity interest in such entities. As a
result, before undertaking such transactions, SFX may be required to deliver
officers' certificates to the Trustee and obtain fairness opinions from
independent accounting, appraisal or investment banking firms. These
requirements can be administratively burdensome and, in some cases, costly. We
would like to exclude from this covenant transactions between us and a joint
venture entity that is considered to be an Affiliate solely because it is
"controlled" by SFX. Transactions between us and entities in which our
officers, directors or controlling stockholders have a 10% or greater equity
interest will continue to be subject to the provisions of the Affiliate
Transactions covenant.
SFX believes that the proposed change would significantly reduce SFX's
compliance costs without reducing the Holders' covenant protection, since SFX's
management already has a strong incentive to ensure that such transactions are
performed on arms-length terms.
SUBSIDIARY OWNERSHIP COVENANT (AMENDMENT TO SECTION 4.17 -- ISSUANCES
AND SALES OF EQUITY INTERESTS IN RESTRICTED SUBSIDIARIES). Section 4.17 of the
Indenture (i) limits the ability of SFX to transfer, sell or otherwise dispose
of Equity Interests of any Restricted Subsidiary (unless such transfer, sale or
other disposition is of all the Equity Interests in such Restricted Subsidiary)
and (ii) restricts the ability of any Restricted Subsidiary to issue its Equity
Interests. SFX proposes that this covenant be deleted. SFX believes that the
covenant's significant restrictions on the creation of Restricted Subsidiaries
that are not wholly-owned may interfere with the implementation of SFX's
operating strategy, particularly with respect to foreign acquisitions and
Internet opportunities. In certain foreign jurisdictions, for example, local
partners
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may be required or highly desirable. In addition, SFX believes that the ability
to co-invest in new ventures with experienced management or others may expand
SFX's business opportunities and provide SFX with a greater ability to align
the interests of operating personnel with the success of the ventures they
operate.
Notwithstanding the deletion of Section 4.17, the Holders of the Notes
would continue to have the protection of Section 4.09 (Incurrence of
Indebtedness and Issuance of Preferred Stock) and Section 4.10 (Asset Sales).
Specifically, the issue or sale by SFX or any of its Subsidiaries of Equity
Interests of any of SFX's Restricted Subsidiaries would continue to constitute
an "Asset Sale" under the Indenture, subject to the fair value and use of
proceeds provisions of Section 4.09, and the issuance of preferred stock by a
Restricted Subsidiary would be subject to satisfaction of the Debt to Cash Flow
Ratio in Section 4.09. In addition, if SFX were to sell or otherwise dispose of
Equity Interests of any Subsidiary such that, after giving effect to any such
sale or disposition, such person were no longer a Subsidiary of SFX, SFX will
be deemed to have made an Investment equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of, which would be
subject to the provisions of Section 4.07 (Restricted Payments).
CERTAIN SIGNIFICANT CONSIDERATIONS
IN ADDITION TO THE OTHER INFORMATION DESCRIBED ELSEWHERE AND
INCORPORATED BY REFERENCE HEREIN, HOLDERS OF NOTES SHOULD CONSIDER THAT IF THE
PROPOSED AMENDMENTS BECOME EFFECTIVE, HOLDERS OF NOTES WILL NO LONGER BE
ENTITLED TO THE BENEFITS OF THOSE PROVISIONS APPLICABLE TO SFX THAT WILL HAVE
BEEN MODIFIED BY THE PROPOSED AMENDMENTS. SFX CAN PROVIDE NO ASSURANCES THAT
THE PROPOSED AMENDMENTS, IF APPROVED, WILL NOT ADVERSELY AFFECT THE MARKET
PRICE OF THE NOTES OR INCREASE THE CREDIT RISKS WITH RESPECT TO SFX.
THE PROPOSED AMENDMENTS WOULD PROVIDE SFX WITH GREATER FLEXIBILITY TO
EXPAND ITS OPERATIONS INTERNATIONALLY, INCLUDING THROUGH THE ACQUISITION OF
FOREIGN COMPANIES. INTERNATIONAL OPERATIONS ARE SUBJECT TO CERTAIN RISKS
INHERENT IN DOING BUSINESS ABROAD, INCLUDING:
o EXPOSURE TO LOCAL ECONOMIC CONDITIONS;
o CURRENCY EXCHANGE RATE FLUCTUATIONS AND CURRENCY CONTROLS;
o WITHHOLDING AND OTHER TAXES ON REMITTANCES AND OTHER PAYMENTS BY
SUBSIDIARIES; AND
o INVESTMENT RESTRICTIONS OR REQUIREMENTS.
THERE CAN BE NO ASSURANCES THAT THE RISKS OUTLINED ABOVE, OR OTHER RISKS
INHERENT IN DOING BUSINESS ABROAD, WILL NOT HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION.
MISCELLANEOUS
SFX is not aware of any jurisdiction in which the making of the Consent
Solicitation is not in compliance with applicable law. If SFX becomes aware of
any jurisdiction in which the making of the Consent Solicitation would not be
in compliance with applicable law, SFX will make a good faith effort to comply
with such law. If, after such good faith effort, SFX cannot comply with any
such law, the Consent Solicitation will not be made to (nor will Consents be
accepted from or on behalf of) Holders residing in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF SFX NOT CONTAINED IN THIS CONSENT SOLICITATION
STATEMENT OR IN THE CONSENT FORM AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of the material U.S. federal income tax
consequences of the Proposed Amendments and the receipt of the Consent Payment
to Beneficial Owners (as defined below) and is for general information only. It
is based upon provisions of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), the applicable Treasury Regulations promulgated and proposed
thereunder (the "Regulations"), judicial authority and current administrative
rulings and practice, all of which are subject to change, possibly on a
retroactive basis. This discussion does not purport to address all aspects of
U.S. federal income taxation that may be relevant to particular Beneficial
Owners in light of their individual circumstances or to certain types of
Beneficial Owners subject to special treatment under the Code (for example,
insurance companies, tax-exempt organizations, financial institutions, brokers
or dealers in securities, foreign corporations, non-resident alien individuals
and certain U.S. expatriates), nor does it discuss any aspect of state, local
or non-U.S. taxation or estate and gift tax considerations. Further, except as
otherwise expressly indicated, this discussion only deals with Beneficial
Owners who are United States persons and assumes that the Notes are held as
"capital assets" within the meaning of Section 1221 of the Code. For these
purposes, a "United States person" means a person who or which is (i) an
individual who is a citizen or resident of the United States for U.S. federal
income tax purposes, (ii) a corporation, partnership or other entity created or
organized under the laws of the United States or any political subdivision
thereof, (iii) an estate, the income of which is subject to U.S. federal income
tax regardless of its source, (iv) a "United States trust" (as defined below),
or (v) a person whose income or gain with respect to the Notes is otherwise
subject to U.S. federal income tax as net income. A "United States trust" means
any trust, if, and only if, (x) a court within the United States is able to
exercise primary supervision over the administration of the trust and (y) one
or more trustees which are United States persons have the authority to control
all substantial decisions of the trust.
For purposes of this discussion, the term "Beneficial Owner" means each
person treated as an owner of Notes for federal income tax purposes
RECEIPT OF CONSENT PAYMENT
Although there is no authority directly on point, SFX intends to treat
the Consent Payment for federal income tax purposes as a fee paid to Holders
that grant consents pursuant to the Consent Solicitation. If such treatment is
respected, a Holder would be required to recognize ordinary income for federal
income tax purposes in an amount equal to the Consent Payment to which it is
entitled, when the Consent Payment is received or accrued, in accordance with
its method of accounting.
MODIFICATION OF DEBT INSTRUMENT
Under federal tax law, certain "significant" modifications to a debt
instrument will result in a deemed exchange of the original debt instrument for
a new debt instrument. Such a deemed exchange would be a taxable event (unless
a nonrecognition provision of the Code applied).
The Regulations provide that a modification of a debt instrument that
adds, deletes or alters customary accounting or financial covenants is not a
significant modification. However, the Regulations further provide that a
change in the yield of a debt instrument is a significant modification under
the Regulations if the yield of the modified instrument, determined by taking
into account the Consent Payment made to the issuer or holder as consideration
for the modification (and any prior consent payment paid to the Holder as
consideration for prior modifications), varies from the yield on the unmodified
instrument (determined as of the date of the modification) by more than the
greater of 1/4 of one percent (25 basis points) or 5 percent of the annual
yield of the unmodified instrument.
Although the matter is not free from doubt, SFX currently believes that
the payment of the Consent Payment may cause a "significant modification" of
the Notes if, taking into account the Consent Payment paid to the Beneficial
Owners of the Notes as consideration for their Consent, the change in the yield
of such Notes is significant under the Regulations. In such case, the payment
of the Consent Payment in respect of the Notes will result in a deemed exchange
of the Notes for federal income tax purposes by Beneficial Owners of such Notes
that receive such Consent Payment.
To the extent that the payment of the Consent Payment in respect of
Notes results in a deemed exchange of such Notes for federal income tax
purposes, such exchange would be a taxable transaction unless such deemed
exchange
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constitutes a tax-free recapitalization. SFX currently intends to take the
position that both the Notes, prior to modification, and the Notes, as modified
by the Proposed Amendments and payment of the Consent Payment, are "securities"
for federal income tax purposes, and, accordingly, such deemed exchange will
constitute a tax-free recapitalization for purposes of the Code. Under this
treatment, Beneficial Owners of such Notes will not recognize gain or loss upon
such deemed exchange. Instead, Beneficial Owners will have an adjusted tax
basis and holding period in the Notes, as modified, equal to the adjusted tax
basis and holding period in the Notes prior to such modification.
There is no assurance that, if challenged by the U.S. Internal Revenue
Service (the "IRS"), SFX's recapitalization position will be upheld. If such
deemed exchange of the Notes is held to be a taxable exchange, Beneficial
Owners of the Notes generally will recognize gain or loss equal to the
difference of the fair market value of the Notes and the adjusted tax basis of
such Notes. This gain or loss generally will be a long-term capital gain or
loss if the Beneficial Owner has held the relevant Notes for more than one
year, and any gain will be ordinary income to the extent such gain reflects
market discount on such Notes that has not already been subject to federal
income tax.
If the adoption of the Proposed Amendments were treated as a
constructive exchange and the fair market value of the Notes, as modified by
the Proposed Amendments, is less than their principal amount, such Notes
generally would be issued with original issue discount equal to such difference
(subject to a de minimus exception). The foregoing assumes that the Notes are
"publicly traded," as such term is defined for purposes of the provisions of
the Code and Regulations relating to original issue discount. Such original
issue discount would be includible in the income of a Beneficial Owner on a
constant yield-to-maturity basis over the remaining life of the Notes; however,
such inclusions of original issue discount would be reduced, if a Beneficial
Owner's adjusted tax basis in the Notes exceeds their fair market value on the
date of the constructive exchange, to the extent of the accrual of such excess
on a constant yield basis.
Beneficial Owners of Notes should be aware that no ruling has been
requested from the IRS regarding the tax consequences of the Proposed
Amendments or payment of the Consent Payment, and no assurance can otherwise be
given that the tax treatment described above will be accepted by the IRS.
Beneficial Owners of Notes are strongly urged to consult with their tax
advisors as to the tax consequences of the Proposed Amendments and receipt of
the Consent Payment, including the consequences of any resulting taxable
exchange to Beneficial Owners.
BACKUP WITHHOLDING
The receipt of the Consent Payment by a Beneficial Owner may be subject
to backup withholding at the rate of 31% unless such Beneficial Owner (1) is a
corporation or comes within certain other exempt categories and demonstrates
this fact, or (2) provides on a properly executed substitute Form W-9 (included
as part of the Consent Form) a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. Any
amount withheld under these rules will be credited against the Beneficial
Owner's U.S. federal income tax liability. If backup withholding results in an
overpayment of U.S. federal income taxes, a refund may be obtained from the IRS
provided the required information is furnished. A Beneficial Owner who does not
provide its correct taxpayer identification number may be subject to penalties
imposed by the IRS.
CONSEQUENCES TO NON-U.S. HOLDERS
Although it is unclear whether United States federal withholding tax is
applicable to the payment of a Consent Payment to Non-U.S. Holders, SFX intends
to withhold tax from the Consent Payment paid to such Non-U.S. Holders at a
rate of 30% unless (i) such Non-U.S. Holder is engaged in the conduct of a
trade or business in the United States to which the receipt of the Consent
Payment is effectively connected and provides a properly executed IRS Form 4224
or (ii) a tax treaty between the United States and the country of residence of
the Non-U.S. Holder eliminates or reduces the withholding on other income and
such Non-U.S. Holder provides a properly executed IRS Form 1001. Non-U.S.
Holders should consult their own tax advisors regarding the availability of a
refund of any United States withholding tax.
THE FOREGOING SUMMARY INCLUDED HEREIN IS NECESSARILY FOR GENERAL
INFORMATION ONLY. BENEFICIAL OWNERS OF NOTES ARE URGED TO CONSULT WITH THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF PAYMENT OF THE
CONSENT PAYMENT AND THE ADOPTION OF THE PROPOSED AMENDMENTS, INCLUDING THE
APPLICABILITY OF STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX LAWS.
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ANNEX I
TO CONSENT SOLICITATION STATEMENT
PROPOSED AMENDMENTS
The Proposed Amendments would modify the definition of "Guarantor" and
"Permitted Investments," and Sections 4.09 and 4.11 of the Indenture and delete
Section 4.17 of the Indenture, in each case as indicated below (language to be
deleted is stricken and language to be added is printed in bold face
type [capitalized] and underlined):
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 1.01 (DEFINITIONS --
GUARANTOR) WILL BE AMENDED AS FOLLOWS:
"Guarantor" means each of the Company's current and future [Begin
Strikethrough]domestic[End Strikethrough] Restricted Subsidiaries that executes
a Subsidiary Guarantee in accordance with the provisions of this Indenture, and
its respective successors and assigns.
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 1.01 (DEFINITIONS --
PERMITTED INVESTMENTS) WILL BE AMENDED AS FOLLOWS:
"Permitted Investments" means (i) any Investment in the Company or in a
[Begin Strikethrough]Guarantor[End Strikethrough] RESTRICTED SUBSIDIARY OF THE
COMPANY; (ii) any Investment in Cash Equivalents; (iii) any Investment by the
Company or any Restricted Subsidiary of the Company in a Person engaged in a
Permitted Business, if (a) as a result of, or concurrently with, such
Investment such Person becomes a [Begin Strikethrough]Guarantor[End
Strikethrough] RESTRICTED SUBSIDIARY OF THE COMPANY or (b) as a result of, or
concurrently with, such Investment such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a [Begin
Strikethrough]Guarantor[End Strikethrough] RESTRICTED SUBSIDIARY OF THE
COMPANY; or (c) the Company or a [Begin Strikethrough]Guarantor[End
Strikethrough] RESTRICTED SUBSIDIARY OF THE COMPANY has entered into a binding
agreement to acquire such Person or all or substantially all of the assets of
such Person, which agreement is in effect on the date of such Investment, and
such Person becomes a [Begin Strikethrough]Guarantor[End Strikethrough]
RESTRICTED SUBSIDIARY OF THE COMPANY or such transaction is consummated, AS
APPLICABLE, in each case within 180 days of the date of such Investment; (iv)
any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof; (v) any obligations or shares of Capital Stock
received in connection with or as a result of a bankruptcy, workout or
reorganization of the issuer of such obligations or shares of Capital Stock;
(vi) any Investment received involuntarily; (vii) any acquisition of assets
solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (viii) any Investment made under the Pace
Acquisition Facility pursuant to the Pace Agreement as in effect on the date
hereof; (ix) Investments owned by any of the Acquired Businesses as of the date
such Acquired Business is acquired; (x) other Investments in Persons engaged in
Permitted Businesses (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (x) that are at the time
outstanding, not to exceed 5% of Total Tangible Assets; (xi) the consummation
of the Pending Acquisitions; (xii) the Meadows Repurchase and the Series E
Preferred Repurchase; provided that the Company receives either (x) a cash
payment from Broadcasting or Broadcasting Buyer or an Affiliate thereof at or
prior to the date of the Broadcasting Merger at least equal to the aggregate
amount expended by the Company in the Meadows Repurchase and the Series E
Preferred Repurchase less $3.0 million or (y) an increase in favor of the
Company in the Working Capital Adjustment (including the avoidance of a
decrease) contemplated by the Merger Agreement in an amount at least equal to
the aggregate amount expended by the Company in the Meadows Repurchase and the
Series E Preferred Repurchase less $3.0 million or (z) any combination thereof
adding up to an amount at least equal to the aggregate amount expended by the
Company in the Meadows Repurchase and the Series E Preferred Repurchase less
$3.0 million; and (xiii) other Investments in any Person (measured on the date
each such Investment was made and without giving effect to subsequent changes
in value), when taken together with all other Investments made pursuant to this
clause (xiii) that are at the time outstanding, not to exceed $4.0 million.
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 4.09 (INCURRENCE OF
INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK) WILL BE AMENDED AS FOLLOWS:
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED
STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively "incur") any Indebtedness (including Acquired Debt) or issue
any shares of Disqualified Stock and will not permit any of its Subsidiaries to
issue any shares of preferred stock; provided, however, that, so long as no
Default or Event of Default has occurred and is continuing, the Company may
incur Indebtedness (including Acquired Debt) or issue shares of
I-1
<PAGE>
Disqualified Stock and the [Begin Strikethrough]Guarantors may issue shares of
preferred stock[End Strikethrough] COMPANY'S RESTRICTED SUBSIDIARIES MAY INCUR
INDEBTEDNESS (INCLUDING ACQUIRED DEBT) OR ISSUE SHARES OF PREFERRED STOCK IF,
in each case, the Company's Debt to Cash Flow Ratio at the time of incurrence
of such Indebtedness or the issuance of such Disqualified Stock or preferred
stock, as the case may be, after giving pro forma effect to such incurrence or
issuance as of such date and to the use of the proceeds therefrom as if the
same had occurred at the beginning of the most recently ended four full fiscal
quarter period of the Company for which internal financial statements are
available, would have been no greater than (a) 7.0 to 1.0, if such incurrence
or issuance is prior to December 31, 1999 or (b) 6.0 to 1.0 thereafter.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following (collectively, "Permitted Debt"):
(i) the incurrence by the Company [Begin Strikethrough](and the
guarantee thereof by Guarantors)[End Strikethrough] AND/OR THE COMPANY'S
RESTRICTED SUBSIDIARIES of Indebtedness and Letters of Credit under one or
more Credit Facilities in an aggregate principal amount at any time
outstanding not to exceed $400.0 million (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and the Guarantors thereunder), less the aggregate amount
of all repayments, optional or mandatory, of the principal of any term
Indebtedness under a Credit Facility that have been made since the date
hereof and less the aggregate amount of all commitment reductions of any
revolving Indebtedness under a Credit Facility pursuant to clause (i) of
the third paragraph of Section 4.10 hereof;
(ii) the incurrence by the Company and the guarantee thereof by the
Guarantors of Indebtedness represented by the Notes and the Subsidiary
Guarantees;
(iii) the incurrence by the Company and its Restricted Subsidiaries
of the Existing Indebtedness;
(iv) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financing
or purchase money obligations, in each case incurred for the purposes of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Restricted Subsidiary, in an aggregate amount not to
exceed $5.0 million at any time outstanding, including all Permitted
Refinancing Debt incurred pursuant to clause (v) below to refund, replace
or refinance any Indebtedness pursuant to this clause (iv);
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted by
this Indenture to be incurred by the first paragraph of this Section 4.09,
or by clauses (ii), (iii), (iv), (v), (vii) or (x) of this paragraph;
(vi) the incurrence of Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (a) if the
Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full of all Obligations
with respect to the Notes and (b) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary, and any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary, shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(viii) the guarantee by the Company or any of the [Begin
Strikethrough]Guarantors[End Strikethrough] ITS RESTRICTED SUBSIDIARIES of
Indebtedness that was permitted to be incurred by another provision of
this Section 4.09;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (ix);
(x) the issuance of preferred stock by the Company pursuant to the
Contemporary Agreement, as in effect on the date of this Indenture; and
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<PAGE>
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
at any time outstanding, including all Permitted Refinancing Indebtedness
incurred pursuant to clause (v) above to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xi), not to exceed $10.0
million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
will be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant.
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 4.11 (TRANSACTIONS WITH
AFFILIATES) WILL BE AMENDED AS FOLLOWS:
SECTION 4.11. TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (OTHER THAN A PERSON THAT IS AN AFFILIATE SOLELY BY REASON OF
THE COMPANY OR ANY RESTRICTED SUBSIDIARY OF THE COMPANY OWNING AN EQUITY
INTEREST IN SUCH PERSON OR OTHERWISE CONTROLLING SUCH PERSON) (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction
is on terms that are no less favorable to the Company or such Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the members of the Board of Directors that
are disinterested as to such Affiliate Transaction and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the
fairness to the Company of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing; provided that (1) any employment agreement entered into by, and any
compensation paid by, the Company or any of its Restricted Subsidiaries, in
each case, approved by the Compensation Committee, (2) transactions between or
among the Company and/or its Restricted Subsidiaries, (3) fees and compensation
paid to members of the Board of Directors of the Company and of its Restricted
Subsidiaries in their capacity as such, to the extent such fees and
compensation are reasonable, customary and consistent with past practices and
the issuance of shares of the Company to the Directors who were holders of
options or stock appreciation rights in Broadcasting as of the Spin-Off record
date, whether or not vested, (4) fees and compensation paid to, and indemnity
provided on behalf of, officers, directors or employees of the Company or any
of its Restricted Subsidiaries, as determined by the Board of Directors of the
Company or of any such Restricted Subsidiary, to the extent such fees and
compensation are reasonable, customary and consistent with past practices, (5)
the transactions specifically contemplated by the Merger Agreement, the
agreements relating to the Pending Acquisitions or by instruments referred to
in any such agreements, in each case, as the same are in effect on the date
hereof, (6) the Spin-Off Transactions, (7) the transactions specifically
contemplated by the Delsener/Slater Employment Agreements, in each case as in
effect on the date hereof, (8) the Meadows Repurchase and the Series E
Preferred Repurchase; provided that the Company receives either (x) a cash
payment from Broadcasting or Broadcasting Buyer or an Affiliate thereof at or
prior to the date of the Broadcasting Merger at least equal to the aggregate
amount expended by the Company in the Meadows Repurchase and the Series E
Preferred Repurchase less $3.0 million or (y) an increase in favor of the
Company in the Working Capital Adjustment (including the avoidance of a
decrease) contemplated by the Merger Agreement in an amount at least equal to
the aggregate amount expended by the Company in the Meadows Repurchase and the
Series E Preferred Repurchase less $3.0 million or (z) any combination thereof
adding up to an amount at least equal to the aggregate amount expended by the
Company in the Meadows Repurchase and the Series E Preferred Repurchase less
$3.0 million; and (9) any Restricted Payment that is permitted by the
provisions of Section 4.07 hereof, in each case, shall not be deemed to be
Affiliate Transactions.
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IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 4.17 (ISSUANCES AND SALES OF
EQUITY INTERESTS IN RESTRICTED SUBSIDIARIES) WILL BE DELETED AS FOLLOWS:
SECTION 4.17. [Begin Strikethrough]ISSUANCES AND SALES OF EQUITY INTERESTS IN
RESTRICTED SUBSIDIARIES:[End Strikethrough]
[Begin Strikethrough]The Company (i) shall not, and shall not permit any
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Restricted Subsidiary of the
Company to any Person (other than the Company or a Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Restricted Subsidiary and
(b) the Net Cash Proceeds, if any, from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with Section 4.10 hereof, and
(ii) will not permit any Restricted Subsidiary of the Company to issue any of
its Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Restricted Subsidiary of the Company except as permitted pursuant
to Section 4.09 hereof.[End Strikethrough] [RESERVED]
I-4
<PAGE>
HOLDERS WHO WISH TO CONSENT SHOULD DELIVER, BY REGULAR MAIL, AIR COURIER,
MESSENGER OR FAX, THEIR PROPERLY COMPLETED, EXECUTED AND DATED CONSENT FORMS TO
THE DEPOSITORY IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN AND
THEREIN. ALL FACSIMILE TRANSMISSIONS MUST BE FOLLOWED BY DELIVERY OF ORIGINALLY
EXECUTED CONSENTS. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CONSENTS,
IS AT THE ELECTION AND RISK OF THE HOLDER. THE ADDRESS OF THE DEPOSITORY IS AS
FOLLOWS:
By Regular Mail:
ChaseMellon Shareholder Services, L.L.C.
Post Office Box 3301
South Hackensack, New Jersey 07606
Attention: Reorganization Department
By Hand Delivery:
ChaseMellon Shareholder Services, L.L.C.
120 Broadway, 13th Floor
New York, New York 10271
Attention: Reorganization Department
By Overnight Courier:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road-Mail Drop-Reorg
Ridgefield Park, New Jersey 07660
Attention: Reorganization Department
Facsimile Transmission: Confirm Facsimile Only:
(201) 296-4293 (201) 296-4860
(Originally executed consents must follow)
SFX HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS SOLICITATION OF CONSENTS OTHER THAN AS
SET FORTH HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SFX. THE DELIVERY OF THIS
CONSENT SOLICITATION STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AFTER THE DATE HEREOF.
Any question or requests for assistance or additional copies of this
Consent Solicitation Statement or the Consent may be directed to the
Information Agent at its telephone number and location set forth below. You may
also contact your broker, dealer, commercial bank or trust company or other
nominee for assistance covering the Consent Solicitation.
INFORMATION AGENT:
[GEORGESON & COMPANY INC. LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
Holders Call Toll Free: (800) 223-2064
SOLICITATION AGENT:
LEHMAN BROTHERS
3 World Financial Center
200 Vesey Street, 9th Floor
New York, New York 10285
Collect: (212) 528-7581
Toll Free: (800) 438-3242
Attention: Hyonwoo Shin
<PAGE>
CONSENT SOLICITATION STATEMENT
SFX ENTERTAINMENT, INC.
SOLICITATION OF CONSENTS TO PROPOSED AMENDMENTS
WITH RESPECT TO THE INDENTURE GOVERNING ITS
$200,000,000 AGGREGATE PRINCIPAL AMOUNT OF
9 1/8% SENIOR SUBORDINATED NOTES DUE DECEMBER 1, 2008
CUSIP NUMBER: 784178 AE5
CONSENT PAYMENT: $10 PER $1,000 AGGREGATE PRINCIPAL AMOUNT
. RECORD DATE: 5:00 P.M., NEW YORK CITY TIME, ON JUNE 22, 1999
------------------
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS CONSENT
SOLICITATION STATEMENT, SFX ENTERTAINMENT, INC. ("SFX") WILL ACCEPT ALL
PROPERLY COMPLETED, EXECUTED AND DATED CONSENTS (AS DEFINED HEREIN) RECEIVED BY
THE DEPOSITORY (AND NOT REVOKED) PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON
JULY 7, 1999, (AS SUCH TIME AND DATE MAY BE EXTENDED, THE "EXPIRATION DATE"),
FROM HOLDERS (AS DEFINED HEREIN) OF RECORD ON JUNE 22, 1999 OF SFX'S 9 1/8%
SENIOR SUBORDINATED NOTES DUE DECEMBER 1, 2008 (THE "NOTES"). AS SOON AS
PRACTICABLE AFTER THE OPERATIVE DATE (AS DEFINED HEREIN), SUBJECT TO THE TERMS
AND CONDITIONS SET FORTH HEREIN, SFX WILL PAY TO HOLDERS IN RESPECT OF SUCH
CONSENTS A CASH PAYMENT OF $10 PER $1,000 PRINCIPAL AMOUNT OF NOTES TO WHICH
SUCH CONSENT RELATES. SFX WILL NOT BE OBLIGATED TO ACCEPT ANY CONSENTS RECEIVED
AFTER THE EXPIRATION DATE. CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE
EFFECTIVE DATE (AS DEFINED HEREIN).
------------------
SFX Entertainment, Inc., a Delaware corporation ("SFX" or the "Company"),
hereby solicits the consent (the "Consent") of the registered holders
("Holders") as of June 22, 1999 (the "Record Date") of its 9 1/8% Senior
Subordinated Notes due December 1, 2008 (the "Notes") to amendments (the
"Proposed Amendments") of certain provisions of the Indenture dated as of
November 25, 1998, as amended by supplemental indentures dated as of January
13, 1999 and June 21, 1999 (as amended and supplemented on or prior to the date
hereof, the "Indenture"), among SFX, the Guarantors (as defined in the
Indenture) and The Chase Manhattan Bank, as trustee (the "Trustee"), pursuant
to which the Notes were issued.
Upon the terms and subject to the conditions set forth in this Consent
Solicitation Statement (this "Statement"), the related form of Consent and
instructions thereto ("Consent Form") and any supplemental materials attached
hereto or provided prior to the Expiration Date (which, collectively,
constitute the "Consent Solicitation"), promptly after the Operative Date, SFX
will pay a cash payment to each Holder who delivers a properly completed and
executed Consent Form equal to $10 per $1,000 principal amount of Notes (the
"Consent Payment") for which Consents are received and not revoked prior to the
Expiration Date. SFX is not obligated, and does not intend, to accept Consents
from any Holders after 5:00 p.m., New York City time, on July 7, 1999.
Accordingly, Consents received by the Depository after such date will not be
accepted and Holders of such Notes will not receive the Consent Payment.
Pursuant to the terms of the Indenture, the Proposed Amendments require
the written Consent from Holders of not less than a majority in aggregate
principal amount of the outstanding Notes (the "Required Consents"). The
Proposed Amendments constitute a single proposal and a consenting Holder must
consent to the Proposed Amendments as an entirety and may not consent
selectively. Immediately upon receipt of the Required Consents, SFX intends to
deliver to the Trustee an officers' certificate confirming the receipt of the
Required Consents, whereupon SFX, the Guarantors and the Trustee will execute a
supplemental indenture (the "Supplemental Indenture") containing the Proposed
Amendments. The time and date on which the Supplemental Indenture is executed
is hereinafter referred to as the "Effective Date." However, the Supplemental
Indenture will provide that the Proposed Amendments will become operative only
upon delivery by SFX of an officers' certificate to the Trustee stating that
the Conditions have been satisfied. The date on which the Effective Date shall
have occurred and SFX has delivered an officers' certificate to the Trustee
stating that the Conditions have been satisfied is hereinafter referred to as
the "Operative Date."
CONSENTS SHOULD BE SENT TO THE DEPOSITORY AT THE ADDRESS SET FORTH ON THE
FINAL PAGE OF THIS CONSENT SOLICITATION STATEMENT. UNDER NO CIRCUMSTANCES
SHOULD ANY HOLDER DELIVER ANY NOTES.
------------------
FOR FURTHER INFORMATION RELATING TO THE SOLICITATION, PLEASE TELEPHONE
EITHER THE SOLICITATION AGENT OR THE INFORMATION AGENT AT THE TELEPHONE NUMBERS
SET FORTH ON THE BACK COVER OF THIS CONSENT SOLICITATION STATEMENT. TO OBTAIN
ADDITIONAL COPIES OF THIS CONSENT SOLICITATION STATEMENT, PLEASE CONTACT THE
INFORMATION AGENT.
------------------
The Solicitation Agent for the Consent Solicitation is:
LEHMAN BROTHERS
The date of this Consent Solicitation Statement is June 23, 1999.
<PAGE>
AVAILABLE INFORMATION ABOUT SFX
SFX is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and files periodic
reports, registration statements and other information with the Securities and
Exchange Commission (the "Commission") relating to its business, financial
condition and other matters. Such reports, registration statements and other
information should be available for inspection at the public reference
facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located
at 7 World Trade Center, New York, New York 10048 and at Citicorp Center, 500
West Madison Street (Suite 1400), Chicago, Illinois 60661. You may obtain
copies from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Please call the Commission at
1-800-SEC-0330 for more information on the public reference rooms. The
Commission also maintains a Web site at http://www.sec.gov which contains SFX's
reports, registration statements and proxy and information statements and other
information.
Statements made in this Consent Solicitation Statement concerning the
provisions of any contract, agreement or other document referred to herein
constitute accurate summaries of the provisions of such document which are
material to such statements, but such statements do not purport to be complete.
With respect to each such statement concerning a contract, agreement or other
document filed with the Commission, reference is made to such filing for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
[This Section Omitted from Filing]
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that is or is deemed to be incorporated by
reference herein) modifies or supersedes the previous statement. Any statement
so modified or superseded will not be deemed to constitute a part hereof except
as so modified or superseded.
This Consent Solicitation Statement incorporates documents by reference
that are not presented herein or delivered herewith. These documents (other
than exhibits to the documents unless the exhibits are specifically
incorporated by reference herein) are available, without charge, upon oral or
written request by any person to whom this Consent Solicitation Statement has
been delivered, from SFX Entertainment, Inc., 650 Madison Avenue, New York, New
York 10022, Attention: Timothy Klahs, Director of Investor Relations, telephone
number (212) 407-9126. In order to ensure timely delivery of the documents, any
request should be made as soon as possible. SFX will deliver the requested
documents by first class mail or other equally prompt means as soon as
practicable after receipt of the request.
You should rely only on the information contained or incorporated by
reference in this Consent Solicitation Statement. We have not authorized anyone
to provide you with information that is different from what is contained in
this Consent Solicitation Statement. This Consent Solicitation Statement is
dated June 23, 1999. You should not assume that the information contained in
this Consent Solicitation Statement is accurate as of any date other than the
date hereof.
No person has been authorized to give any information or to make any
representations, other than those contained in this Consent Solicitation
Statement. If given or made, such information or representation cannot be
relied upon as having been authorized by SFX, Lehman Brothers, Inc. (the
"Solicitation Agent"), Georgeson & Company, Inc. (the "Information Agent") or
ChaseMellon Shareholder Services, L.L.C. (the "Depository"). SFX is not aware
of any jurisdiction in which the making of the Consent Solicitation is not in
compliance with applicable law. If SFX becomes
2
<PAGE>
aware of any jurisdiction in which the making of the Consent Solicitation would
not be in compliance with applicable law, it will make a good faith effort to
comply with such law. If, after such good faith effort, it cannot comply with
any such law, Consents will not be solicited from Holders residing in such
jurisdictions. In any jurisdiction where the securities, blue sky or other laws
require the Consent Solicitation to be made by a licensed broker or dealer, the
Consent Solicitation will be deemed to be made on behalf of SFX by the
Solicitation Agent or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
The Consent Solicitation is being made to all Holders. A beneficial
owner of Notes (other than a DTC Participant) registered in the name of a
nominee must either (i) instruct the relevant Holder to deliver a Consent on
its behalf or (ii) obtain a written proxy from such Holder if such beneficial
owner desires to deliver a Consent in respect of such Notes. Holders must
deliver (and not revoke) Requisite Consents to approve the Proposed Amendments.
For purposes of the foregoing calculation, any Notes held by SFX or any of its
affiliates will not be counted as outstanding. As of the date of this Consent
Solicitation Statement, the aggregate principal amount of Notes outstanding is
$200.0 million none of which are held by SFX or any of its affiliates.
The Consent should be sent to the Depository, not to SFX or the
Solicitation Agent. In no event should a Holder tender or deliver Notes.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
SFX believes that certain statements contained in this Consent
Solicitation Statement or incorporated by reference in this Consent
Solicitation Statement are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 and are considered
prospective. The following statements are or may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995:
o statements before, after or including the words "may," "will,"
"could," "should," "believe," "expect," "future," "potential,"
"anticipate," "intend," "plan," "estimate" or "continue" or the
negative or other variations of these words; and
o other statements about matters that are not historical facts.
SFX may be unable to achieve future results covered by the forward-looking
statements. The statements are subject to risks, uncertainties and other
factors that could cause actual results to differ materially from the future
results that the statements express or imply. The specific risks and
uncertainties that could materially affect SFX's future results include SFX's
absence of combined operating history and potential inability to integrate
acquired businesses, need for additional financing, high degree of leverage,
granting of rights to acquire certain portions of SFX's operations, variable
economic conditions and consumer tastes, risks associated with conducting
business in foreign jurisdictions, regulatory risks and restrictions imposed by
existing debt and future payment obligations. Other important factors that
could cause actual results to differ materially are described in SFX's filings
with the Securities and Exchange Commission. In particular, please refer to the
statements made under the caption entitled "Risk Factors" in SFX's Annual
Report on Form 10-K for the year ended December 31, 1998. Please do not put
undue reliance on these forward-looking statements, which speak only as of the
date of this Consent Solicitation Statement.
3
<PAGE>
THE CONSENT SOLICITATION
TERMS OF THE CONSENT SOLICITATION
If (i) the Requisite Consents are received, (ii) SFX, the Guarantors and
the Trustee execute a supplemental indenture (the "Supplemental Indenture")
containing the Proposed Amendments, (iii) the Conditions (described below) are
satisfied and (iv) the Proposed Amendments become operative as set forth
herein, then SFX will pay to each Holder delivering prior to the Expiration
Date the enclosed form of consent (the "Consent") to the Depository (provided
such Consent is not revoked) a one-time cash payment in the amount of $10 for
each $1,000 in principal amount of the Notes as to which such Consent is given
(the "Consent Payment"). Only Holders of record as of 5:00 p.m., New York City
time, on June 22, 1999 (the "Record Date") may submit a Consent. Holders that
do not properly or timely consent to the Proposed Amendments, or whose Consent
is revoked, will not receive a Consent Payment with respect thereto, even
though the Proposed Amendments, if they become operative, will be binding upon
them. A duly executed Consent (unless revoked as herein provided) shall bind
the Holders executing the same and any subsequent registered holder or
transferee of the Notes to which such Consent relates. However, a Consent may
be revoked at any time prior to the Effective Date (as defined herein) by the
Holder of the Notes to which such Consent relates or any subsequent record
holder of those Notes in the manner described herein.
The term "Holder" shall mean a registered holder of Notes as reflected
in the records of the Trustee as of the Record Date. SFX anticipates that The
Depository Trust Company ("DTC"), as nominee holder of the Notes, will execute
an omnibus proxy which will authorize its participants ("DTC Participants") to
consent with respect to the Notes held by it and held in the name of Cede & Co.
as specified on the DTC position listing as of the Record Date. In such case,
all references to Holder shall, unless otherwise specified, include DTC
Participants.
The delivery of a Consent to the Proposed Amendments will not affect a
Holder's right to sell or transfer the Notes. Only Holders of record as of the
Record Date may submit a Consent.
Upon receipt of the Requisite Consents (which may occur prior to the
Expiration Date), SFX, the Guarantors and the Trustee will execute the
Supplemental Indenture. The date and time at which the Supplemental Indenture
is executed is referred to herein as the "Effective Date." However, the
Supplemental Indenture will provide that the Proposed Amendments will become
operative only upon delivery by SFX of an officers' certificate to the Trustee
stating that the Conditions have been satisfied. The date on which the
Effective Date shall have occurred and SFX has delivered an officers'
certificate to the Trustee stating that the Conditions have been satisfied is
referred to herein as the "Operative Date." Holders delivering Consents
received after the Effective Date but prior to the Expiration Date will
nonetheless be entitled to receive the Consent Payment as soon as practicable
after the Operative Date. If the Requisite Consents are not received by the
Depository by 5:00 p.m., New York City time, on the Expiration Date, then SFX,
in its sole discretion, may elect to extend the Expiration Date, from time to
time, as herein provided, in which case all such Consents shall remain valid
(subject to revocation as herein provided) until the date and time to which the
Expiration Date is so extended.
SFX expressly reserves the right (i) to extend the Expiration Date, from
time to time, (ii) to terminate the Consent Solicitation at any time prior to
the Operative Date for any reason (whether or not the Requisite Consents have
been received) and (iii) to amend, at any time or from time to time, the terms
of the Consent Solicitation. Any such extension of the Expiration Date shall be
effective if SFX gives oral or written notice thereof to the Depository no
later than 9:00 a.m. (and, if such notice is given orally, followed by written
notice to the Depository (given by facsimile or otherwise) no later than 2:00
p.m.), New York City time, on the first business day following any previously
announced Expiration Date. Any termination or amendment of the Consent
Solicitation shall be effective upon written notice thereof from SFX to the
Depository. As promptly as practicable following any such extension,
termination or amendment, notice thereof shall be given by SFX to each Holder
in writing or by press release to the Dow Jones News Service.
CONDITIONS TO CONSENT SOLICITATION
Concurrently with the solicitation of Consents to the Proposed
Amendments, SFX is soliciting the consent (the "Tranche A Consent
Solicitation") of the registered holders of its 9 1/8% Senior Subordinated
Notes due February 1, 2008, Series B (the "Tranche A Notes") to certain
amendments of the Indenture governing the Tranche A Notes (the "Tranche A
Indenture"). The terms and provisions of the Tranche A Indenture are
substantially similar to the Indenture and the proposed amendments to the
Tranche A Indenture are substantially the same as the Proposed Amendments. As
of June 22, 1999, there were $350 million aggregate principal amount of Tranche
A Notes outstanding.
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Notwithstanding any other provision of the Consent Solicitation, SFX's
obligation to accept and pay for Consents validly tendered pursuant to the
Consent Solicitation is subject to and conditioned upon (i) receipt of the
Required Consents prior to the Expiration Date and the execution by SFX, the
Guarantors and the Trustee of the Supplemental Indenture, (ii) receipt of the
required consents from the registered holders of the Tranche A Notes prior to
the expiration date of the Tranche A Consent Solicitation and the execution of
the supplemental indenture to the Tranche A Indenture by the parties thereto,
(iii) receipt of all governmental and third-party consents and approvals
required in connection with the Consent Solicitation and the adoption of the
Proposed Amendments, including, without limitation, the consent of the lenders
under SFX's senior credit facility, and (iv) the absence of any law or
regulation, injunction, action or other proceeding (pending or threatened)
which (in the case of any action or proceeding, if adversely determined) would
make unlawful or invalid or enjoin the implementation of the Proposed
Amendments or the entering into of the Supplemental Indenture. The foregoing
conditions (the "Conditions") are for the sole benefit of SFX and may be
asserted regardless of the circumstances giving rise to any such condition
(including any action or inaction by SFX). The foregoing rights will not be
deemed a waiver of any other right and each right will be deemed and ongoing
right which may be asserted at any time and from time to time.
The Consent Solicitation may be abandoned by SFX at any time prior to
the Operative Date for any reason (including, without limitation, if any of the
Conditions are not satisfied), in which case all Consents will be voided and no
Consent Payments will be made.
CONSENT PROCEDURES
Holders who desire to consent to the Proposed Amendments should so
indicate by marking the appropriate box on the Consent included herewith, and
completing, signing, dating and delivering the same to the Depository in the
manner set forth below. However, if none of the boxes on the Consent is
checked, but the Consent is otherwise properly completed, signed, dated and
delivered, the Holder will be deemed to have consented to the Proposed
Amendments.
Consents executed by the registered Holder of Notes should be executed
in exactly the same manner as the name(s) appear(s) on the Notes. If Notes to
which a Consent relates are held by two or more joint Holders, all such Holders
should sign the Consent. If a Consent is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
registered holder acting in a fiduciary or representative capacity, such person
should so indicate when signing and should submit to the Depository appropriate
evidence (satisfactory to SFX) of such person's authority to so act, along with
the Consent. If Notes are registered in different names, separate Consents must
be executed by each such registered holder. Consents by DTC Participants whose
Notes are registered in the name of Cede & Co. should be signed in the manner
in which their names appear on the position listing of Cede & Co. with respect
to the Notes.
Subject to the terms and conditions set forth in this Consent
Solicitation Statement, SFX will accept all properly completed and executed
Consents received by the Depository (and not subsequently revoked) prior to
5:00 p.m., New York City time, on the Expiration Date. All questions as to the
validity, form, eligibility (including the time of receipt) and acceptance of
Consents and revocations will be resolved by SFX in its sole discretion, whose
determination shall be final and binding, subject only to the review and
approval of the Depository with respect to proof of execution and ownership.
SFX reserves the right to reject any and all Consents not validly given or the
acceptance of which could, in the opinion of SFX or its counsel, be unlawful.
SFX also reserves the right (subject to such review and approval of the
Depository) to waive any defects, irregularities or conditions of delivery as
to particular Consents. Unless waived, all such defects and irregularities must
be cured prior to the Expiration Date, and any Consent with such a defect or
irregularity will not be deemed to have been properly given until so cured or
waived. Neither SFX, the Depository nor any other person shall be under any
duty to give notification of any such defects or irregularities, nor shall any
of them incur any liability for failure to give such notification. SFX's
interpretation of the terms and conditions of this Consent Solicitation shall
be conclusive and binding. After the Operative Date, all Holders, including
non-consenting holders and all subsequent holders, of the Notes will become
bound by the Proposed Amendments.
REVOCATION OF CONSENTS
Pursuant to Section 9.04 of the Indenture, Consents with respect to the
Proposed Amendments may be revoked by a Holder of the Notes to which such
Consent relates or by any subsequent registered holder of those Notes if the
Depository receives the notice of revocation before the Effective Date.
Consents may not be revoked on or after the Effective Date. Notices of
revocation must be completed, signed, dated and delivered to the Depository
(accompanied by such proxy or other required documents) in the same manner as
would be required for a Consent.
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SOLICITATION AGENT, INFORMATION AGENT AND DEPOSITORY
SFX has retained Lehman Brothers as Solicitation Agent in connection
with the Consent Solicitation. The Solicitation Agent will solicit Consents and
will respond to inquiries of Holders. The Solicitation Agent will receive a
customary fee for its services in connection with the Consent Solicitation and
reimbursement for reasonable out-of-pocket expenses, including counsel's fees.
SFX and the Guarantors have agreed to indemnify the Solicitation Agent against
certain liabilities and expenses, including liabilities under the securities
laws, in connection with the Consent Solicitation.
SFX has retained Georgeson & Company, Inc. as Information Agent in
connection with the Consent Solicitation. The Information Agent will distribute
the Consent Solicitation Statement and the Consent Form, respond to inquiries
and receive a customary fee for such services. Requests for additional copies
of this Consent Solicitation Statement or the Consent Form may be directed to
the Information Agent at its address and/or telephone number set forth on the
back cover page of this Consent Solicitation Statement.
SFX has retained ChaseMellon Shareholder Services, L.L.C. as Depository
in connection with the Consent Solicitation. The Depository will receive,
collect and tabulate Consents and make the Consent Payments on behalf of SFX
promptly after the Operative Date. The Depository will receive a customary fee
for such services and reimbursement for reasonable out-of-pocket expenses.
Brokers, dealers, commercial banks, trust companies and other nominees
will be reimbursed for their reasonable out-of-pocket expenses incurred in
forwarding copies of this Consent Solicitation Statement and related documents
to the beneficial owners of Notes. All such fees and expenses will be paid by
SFX.
BACKGROUND OF COMPANY
General
SFX is the world's largest diversified promoter, producer and venue
operator for live entertainment events. Our major areas of focus within the
live entertainment industry include music, theater (primarily touring Broadway
shows), sports and family entertainment. In addition, we are a leading
fully-integrated sports marketing and management company specializing in the
representation of athletes and broadcasters, integrated event management,
television programming and production and marketing consulting services. We
own, partially or entirely, and/or operate under lease or exclusive booking
arrangements, the largest network of venues used principally for music concerts
and other live entertainment events in the United States, with 82 venues in 31
of the top 50 markets, including 16 amphitheaters in the top 10 markets. We
also develop and manage touring Broadway shows, selling subscription series in
38 markets.
We have benefited from significant growth in the live entertainment
industry over the last several years. We believe that our ability to provide
integrated services as a promoter, producer, venue operator and manager of live
entertainment events will encourage wider use of our venues by performers. We
also believe that this ability will allow us to capture a greater percentage of
revenues generated by those events and may contribute to the overall growth of
the live entertainment industry.
During 1998, giving pro forma effect to all completed acquisitions,
approximately 37 million people attended 13,200 events promoted and/or produced
by SFX, including approximately 6,250 music concerts, 5,800 theatrical shows,
over 800 family entertainment shows and over 350 specialized motor sports
shows.
Our core business is the promotion and production of live entertainment
events, most significantly for concert and other music performances in venues
owned and/or operated by SFX and in third-party venues. As a promoter, we
typically:
o market events and tours;
o sell tickets;
o provide or otherwise rent event venues; and
o arrange for local production services, such as stage, set, sound and
lighting.
As a producer, we:
o create tours for music concerts, theatrical events, specialized
motor sports and other events;
o develop and manage Broadway touring theatrical shows; and
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o develop specialized motor sports and other live entertainment events
SFX also represents over 650 professional athletes and broadcasters for
contract and marketing services. In addition, SFX's event marketing programs
demonstrated products to over 10 million people in 1998.
Operating Strategy
Our principal objectives are to maximize revenue and cash flow growth
opportunities by owning and/or operating leading live entertainment venues,
being a leading promoter and producer of live entertainment events and a
leading provider of talent representation services. Our specific strategies
including the following:
o OWN AND/OR OPERATE LEADING LIVING ENTERTAINMENT VENUES IN NATION'S
TOP 50 MARKETS
We currently own and/or operate venues in 31 of the top 50 markets in the
United States and intend to pursue additional live entertainment venues in the
top 50 markets. We believe this will enhance our ability to secure access to a
large aggregate audience; book events on a national scale; and encourage wider
use of our venues by performers.
o EXPAND FOREIGN OPERATIONS
The live entertainment industry outside the United States is highly
fragmented, with little, if any, integration of services. Event promotion,
production, sponsorship and management is typically done at a local level by
small operators. We believe that the expansion of our international operations,
primarily in the promotion and production of live entertainment events, will
provide significant opportunities for future growth. In particular, we believe
that this expansion would allow us to capture a greater percentage of revenues
generated by international music tours and provide numerous ancillary revenue
opportunities, such as sponsorships, concessions and merchandise. We also
believe that the expansion of our foreign operations will provide us with
better access to local talent, which we can then promote on an international
basis, as well as additional outlets for the live entertainment events we
produce, promote or manage in the United States. Initially, we intend to focus
primarily on acquisition opportunities in Western Europe.
o MAXIMIZE ANCILLARY REVENUE OPPORTUNITIES
We intend to pursue revenue sources related to our live entertainment
business. We believe that these related revenue sources generally have higher
margins than promotion and production revenues. These revenue sources include:
-- the sale of corporate sponsorships, naming and other rights,
concessions and merchandise;
-- the sale of rights to advertise to our large aggregate national
audience;
-- the development of associated intellectual property rights; and
-- the development of Internet opportunities, including affinity clubs,
through the creation of a common SFX web site.
We recently agreed to sell naming rights for several of our existing
venues, and have the opportunity to sell naming rights to a majority of our
remaining venues. We also recently entered into more than 30 national
sponsorships covering national tours arranged by SFX or for the exploitation of
our national network of venues. The majority of these sponsorships are for
clients who are either new to SFX or to the entertainment industry in general.
We believe significant opportunities remain available for various types of
sponsorships.
o EXPLOIT SYNERGIES OF THE ACQUIRED BUSINESSES
We plan to maximize revenues by exploiting the synergies of our various
businesses and those resulting from the consolidation of venue ownership and
our expanding overall size.
o INCREASE USE OF VENUES; DIVERSIFICATION ACTS AND VENUES
Typically, venue operators do not utilize their venues for many of the
dates available for live entertainment events in any given season. We believe
that we will be able to increase the utilization of our venues through our
ability to affect scheduling on a nationwide basis; our local knowledge,
relationships and expertise; and our presentation of a diverse range of acts
and events.
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o INNOVATIVE EVENT MARKETING
We plan to use innovative event marketing to increase admissions,
sponsorship and advertising revenues and to develop ticketing strategies more
accurately reflecting demand, resulting in increased overall attendance and
increases in both lower priced and premium priced tickets. In addition, we
believe that we can increase the profitability of our venues by offering
premium ticket packages.
o STRICT COST CONTROLS; NATIONALLY COORDINATED BOOKING, MARKETING &
ACCOUNTING
We will continue to impose strict financial reporting and cost controls
on all of our businesses. In addition, we intend to complete the implementation
of a national booking system, an integrated marketing team and a centralized
accounting system to take advantage of significant economies of scale.
o PURSUE COMPLEMENTARY ACQUISITION OPPORTUNITIES
We intend to continue to pursue attractive acquisition opportunities in
the highly fragmented live entertainment business, both in the United States
and internationally. Through consolidation, we expect to be better able to
address what we believe is a growing desire among performers and talent agents
to deal with fewer, more sophisticated promoters.
THE PROPOSED AMENDMENTS
Set forth below is a brief description of the Proposed Amendments to the
Indenture for which Consents are being sought pursuant to the Consent
Solicitation. A full description of the Proposed Amendments is set forth on
Annex I hereto. The Proposed Amendments constitute a single proposal and a
consenting Holder must consent to the Proposed Amendments as an entirety and
may not consent selectively. The Proposed Amendments will be embodied in an
amendment to the Indenture in the form set forth in the Supplemental Indenture
which will become operative on the Operative Date. Thereafter, the Proposed
Amendments will be binding on all Holders whether or not such Holder has
delivered a Consent.
Only Holders as of the Record Date can consent to the Proposed
Amendments. Pursuant to the terms of the Indenture, the Proposed Amendments
require the written Consent from Holders of not less than a majority in
aggregate principal amount of the outstanding Notes.
The summaries of provisions of the Indenture and the proposed
modifications thereto set forth below are qualified in their entirety by
reference to the full and complete terms contained in the Indenture and the
proposed form of Supplemental Indenture. Capitalized terms used herein and not
otherwise defined in this Consent Solicitation Statement have the same meanings
as set forth in the Indenture. Holders may obtain copies of the Indenture and
the proposed form of Supplemental Indenture without charge from the Depository.
The proposed Amendments to the Indenture are as follows:
GUARANTOR (AMENDMENT TO SECTION 1.01 (DEFINITIONS -- GUARANTOR)). The
Indenture defines "Guarantor" to mean each of SFX's current and future domestic
Restricted Subsidiaries that executes a Subsidiary Guarantee and its respective
successors and assigns (emphasis added). We would like to clarify that any
Restricted Subsidiary that executes a Subsidiary Guarantee, whether foreign or
domestic, would constitute a "Guarantor" under the Indenture. While SFX is not
required to cause its foreign Restricted Subsidiaries to become Guarantors, and
generally does not intend to do so in the future, to the extent a Restricted
Subsidiary is or becomes a Guarantor in the future, such Restricted Subsidiary
should be treated as any other Guarantor under the Indenture.
PERMITTED INVESTMENTS (AMENDMENT TO SECTION 1.01 (DEFINITIONS --
PERMITTED INVESTMENTS)). Section 4.07 of the Indenture (Restricted Payments)
currently limits the ability of SFX and its Restricted Subsidiaries to make
"Restricted Investments." The Indenture defines "Restricted Investments" to
mean "an Investment other than a Permitted Investment." The term "Permitted
Investment" is generally defined to include, among other things, Investments in
a Guarantor or in a Person engaged in a Permitted Business that, as a result of
any such Investment, becomes a Guarantor. We are proposing to change the
definition of Permitted Investments to generally allow Investments in our
Restricted Subsidiaries or in any Person engaged in a Permitted Business that,
as a result of any such Investment, becomes a Restricted Subsidiary of ours,
regardless of whether the Restricted Subsidiary is a Guarantor. BECAUSE THE
INDENTURE GENERALLY REQUIRES ALL DOMESTIC RESTRICTED SUBSIDIARIES OF SFX TO
BECOME GUARANTORS, THE PRIMARY SIGNIFICANCE OF THE
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PROPOSED AMENDMENT IS THAT IT WOULD ALLOW SFX TO MAKE INVESTMENTS IN FOREIGN
RESTRICTED SUBSIDIARIES WITHOUT REQUIRING THEM TO BECOME GUARANTORS. The
Investments could take the form of loans, capital contributions, the purchase
of equity or debt securities, the transfer of assets or other forms of
investments.
The primary purpose of this proposal is to permit SFX to take advantage
of attractive acquisition opportunities outside the United States and to
provide financing and operating flexibility. SFX is currently pursuing
additional acquisitions, including acquisitions of foreign companies. However,
it has not entered into any definitive agreements with respect to such
acquisitions, and there can be no assurance that it will do so.
DEBT INCURRENCE COVENANT (AMENDMENT TO SECTION 4.09 -- INCURRENCE OF
INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK). Section 4.09 of the Indenture
limits, among other things, the ability of SFX and its Subsidiaries to incur
Indebtedness or issue shares of Disqualified Stock. The restrictions in the
covenant do not apply to certain items of specified "Permitted Debt" and the
covenant allows SFX (but not its Subsidiaries) to incur Indebtedness so long as
(i) no Default or Event of Default has occurred and is continuing and (ii)
SFX's Debt to Cash Flow Ratio after giving pro forma effect to the incurrence
of such Indebtedness or the issuance of such Disqualified Stock is no greater
than certain specified levels. The Proposed Amendment would accomplish two
principal objectives. The provision permitting SFX to incur Indebtedness or
issue Disqualified Stock so long as it satisfied the specified Debt to Cash
Flow Ratio test would be amended to also permit Restricted Subsidiaries to
incur Indebtedness or issue preferred stock under the existing Ratio test. In
addition, the Permitted Debt provision would be modified to, among other
things, permit Restricted Subsidiaries to be direct borrowers under the Credit
Facilities and to allow any Restricted Subsidiary to guarantee the Indebtedness
of SFX or any other Restricted Subsidiary. NEITHER AMENDMENT WOULD INCREASE THE
DEBT INCURRENCE CAPACITY CURRENTLY PERMITTED UNDER THE INDENTURE.
The primary purpose of this proposal is to provide SFX with the
flexibility to finance its operations, including foreign operations, in the
most efficient manner possible. In the event SFX significantly expands its
foreign operations, it would likely seek to enter into Credit Facilities that
provide for, among other things, foreign subsidiary borrowings and
multicurrency availability. SFX is currently pursuing foreign acquisition
opportunities and has had discussions with its lenders regarding the terms of a
multicurrency credit facility involving multiple subsidiaries as co-borrowers.
However, it has not entered into definitive agreements with respect to any such
acquisitions or any financing proposal, and there can be no assurance that it
will do so.
TRANSACTIONS WITH AFFILIATES COVENANT (AMENDMENT TO SECTION 4.11 --
TRANSACTIONS WITH AFFILIATES). Section 4.11 of the Indenture generally treats
transactions between SFX and/or any of its Restricted Subsidiaries and joint
venture entities as "Affiliate Transactions," simply by virtue of the fact that
SFX has a significant direct or indirect equity interest in such entities. As a
result, before undertaking such transactions, SFX may be required to deliver
officers' certificates to the Trustee and obtain fairness opinions from
independent accounting, appraisal or investment banking firms. These
requirements can be administratively burdensome and, in some cases, costly. We
would like to exclude from this covenant transactions between us and a joint
venture entity that is considered to be an Affiliate solely because it is
"controlled" by SFX. Transactions between us and entities in which our
officers, directors or controlling stockholders have a 10% or greater equity
interest will continue to be subject to the provisions of the Affiliate
Transactions covenant.
SFX believes that the proposed change would significantly reduce SFX's
compliance costs without reducing the Holders' covenant protection, since SFX's
management already has a strong incentive to ensure that such transactions are
performed on arms-length terms.
SUBSIDIARY OWNERSHIP COVENANT (AMENDMENT TO SECTION 4.17 -- ISSUANCES
AND SALES OF EQUITY INTERESTS IN RESTRICTED SUBSIDIARIES). Section 4.17 of the
Indenture (i) limits the ability of SFX to transfer, sell or otherwise dispose
of Equity Interests of any Restricted Subsidiary (unless such transfer, sale or
other disposition is of all the Equity Interests in such Restricted Subsidiary)
and (ii) restricts the ability of any Restricted Subsidiary to issue its Equity
Interests. SFX proposes that this covenant be deleted. SFX believes that the
covenant's significant restrictions on the creation of Restricted Subsidiaries
that are not wholly-owned may interfere with the implementation of SFX's
operating strategy, particularly with respect to foreign acquisitions and
Internet opportunities. In certain foreign jurisdictions, for example, local
partners may be required or highly desirable. In addition, SFX believes that
the ability to co-invest in new ventures with experienced management or others
may expand SFX's business opportunities and provide SFX with a greater ability
to align the interests of operating personnel with the success of the ventures
they operate.
Notwithstanding the deletion of Section 4.17, the Holders of the Notes
would continue to have the protection of Section 4.09 (Incurrence of
Indebtedness and Issuance of Preferred Stock) and Section 4.10 (Asset Sales).
Specifically, the
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issue or sale by SFX or any of its Subsidiaries of Equity Interests of any of
SFX's Restricted Subsidiaries would continue to constitute an "Asset Sale"
under the Indenture, subject to the fair value and use of proceeds provisions
of Section 4.09, and the issuance of preferred stock by a Restricted Subsidiary
would be subject to satisfaction of the Debt to Cash Flow Ratio in Section
4.09. In addition, if SFX were to sell or otherwise dispose of Equity Interests
of any Subsidiary such that, after giving effect to any such sale or
disposition, such person were no longer a Subsidiary of SFX, SFX will be deemed
to have made an Investment equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of, which would be subject to
the provisions of Section 4.07 (Restricted Payments).
CERTAIN SIGNIFICANT CONSIDERATIONS
IN ADDITION TO THE OTHER INFORMATION DESCRIBED ELSEWHERE AND
INCORPORATED BY REFERENCE HEREIN, HOLDERS OF NOTES SHOULD CONSIDER THAT IF THE
PROPOSED AMENDMENTS BECOME EFFECTIVE, HOLDERS OF NOTES WILL NO LONGER BE
ENTITLED TO THE BENEFITS OF THOSE PROVISIONS APPLICABLE TO SFX THAT WILL HAVE
BEEN MODIFIED BY THE PROPOSED AMENDMENTS. SFX CAN PROVIDE NO ASSURANCES THAT
THE PROPOSED AMENDMENTS, IF APPROVED, WILL NOT ADVERSELY AFFECT THE MARKET
PRICE OF THE NOTES OR INCREASE THE CREDIT RISKS WITH RESPECT TO SFX.
THE PROPOSED AMENDMENTS WOULD PROVIDE SFX WITH GREATER FLEXIBILITY TO
EXPAND ITS OPERATIONS INTERNATIONALLY, INCLUDING THROUGH THE ACQUISITION OF
FOREIGN COMPANIES. INTERNATIONAL OPERATIONS ARE SUBJECT TO CERTAIN RISKS
INHERENT IN DOING BUSINESS ABROAD, INCLUDING:
o EXPOSURE TO LOCAL ECONOMIC CONDITIONS;
o CURRENCY EXCHANGE RATE FLUCTUATIONS AND CURRENCY CONTROLS;
o WITHHOLDING AND OTHER TAXES ON REMITTANCES AND OTHER PAYMENTS BY
SUBSIDIARIES; AND
o INVESTMENT RESTRICTIONS OR REQUIREMENTS.
THERE CAN BE NO ASSURANCES THAT THE RISKS OUTLINED ABOVE, OR OTHER RISKS
INHERENT IN DOING BUSINESS ABROAD, WILL NOT HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION.
MISCELLANEOUS
SFX is not aware of any jurisdiction in which the making of the Consent
Solicitation is not in compliance with applicable law. If SFX becomes aware of
any jurisdiction in which the making of the Consent Solicitation would not be
in compliance with applicable law, SFX will make a good faith effort to comply
with such law. If, after such good faith effort, SFX cannot comply with any
such law, the Consent Solicitation will not be made to (nor will Consents be
accepted from or on behalf of) Holders residing in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF SFX NOT CONTAINED IN THIS CONSENT SOLICITATION
STATEMENT OR IN THE CONSENT FORM AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of the material U.S. federal income tax
consequences of the Proposed Amendments and the receipt of the Consent Payment
to Beneficial Owners (as defined below) and is for general information only. It
is based upon provisions of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), the applicable Treasury Regulations promulgated and proposed
thereunder (the "Regulations"), judicial authority and current administrative
rulings and practice, all of which are subject to change, possibly on a
retroactive basis. This discussion does not purport to address all aspects of
U.S. federal income taxation that may be relevant to particular Beneficial
Owners in light of their individual circumstances or to certain types of
Beneficial Owners subject to special treatment under the Code (for example,
insurance companies, tax-exempt organizations, financial institutions, brokers
or dealers in securities, foreign corporations, non-resident alien individuals
and certain U.S. expatriates), nor does it discuss any aspect of state, local
or non-U.S. taxation or estate and gift tax considerations. Further, except as
otherwise expressly indicated, this discussion only deals with Beneficial
Owners who are United States persons and assumes that the Notes are held as
"capital assets" within the meaning of Section 1221 of the Code. For these
purposes, a "United States person" means a person who or which is (i) an
individual who is a citizen or resident of the United States for U.S. federal
income tax purposes, (ii) a corporation, partnership or other entity created or
organized under the laws of the United States or any political subdivision
thereof, (iii) an estate, the income of which is subject to U.S. federal income
tax regardless of its source, (iv) a "United States trust" (as defined below),
or (v) a person whose income or gain with respect to the Notes is otherwise
subject to U.S. federal income tax as net income. A "United States trust" means
any trust, if, and only if, (x) a court within the United States is able to
exercise primary supervision over the administration of the trust and (y) one
or more trustees which are United States persons have the authority to control
all substantial decisions of the trust.
For purposes of this discussion, the term "Beneficial Owner" means each
person treated as an owner of Notes for federal income tax purposes
RECEIPT OF CONSENT PAYMENT
Although there is no authority directly on point, SFX intends to treat
the Consent Payment for federal income tax purposes as a fee paid to Holders
that grant consents pursuant to the Consent Solicitation. If such treatment is
respected, a Holder would be required to recognize ordinary income for federal
income tax purposes in an amount equal to the Consent Payment to which it is
entitled, when the Consent Payment is received or accrued, in accordance with
its method of accounting.
MODIFICATION OF DEBT INSTRUMENT
Under federal tax law, certain "significant" modifications to a debt
instrument will result in a deemed exchange of the original debt instrument for
a new debt instrument. Such a deemed exchange would be a taxable event (unless
a nonrecognition provision of the Code applied).
The Regulations provide that a modification of a debt instrument that
adds, deletes or alters customary accounting or financial covenants is not a
significant modification. However, the Regulations further provide that a
change in the yield of a debt instrument is a significant modification under
the Regulations if the yield of the modified instrument, determined by taking
into account the Consent Payment made to the issuer or holder as consideration
for the modification (and any prior consent payment paid to the Holder as
consideration for prior modifications), varies from the yield on the unmodified
instrument (determined as of the date of the modification) by more than the
greater of 1/4 of one percent (25 basis points) or 5 percent of the annual
yield of the unmodified instrument.
Although the matter is not free from doubt, SFX currently believes that
the payment of the Consent Payment may cause a "significant modification" of
the Notes if, taking into account the Consent Payment paid to the Beneficial
Owners of the Notes as consideration for their Consent, the change in the yield
of such Notes is significant under the Regulations. In such case, the payment
of the Consent Payment in respect of the Notes will result in a deemed exchange
of the Notes for federal income tax purposes by Beneficial Owners of such Notes
that receive such Consent Payment.
To the extent that the payment of the Consent Payment in respect of Notes
results in a deemed exchange of such Notes for federal income tax purposes,
such exchange would be a taxable transaction unless such deemed exchange
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<PAGE>
constitutes a tax-free recapitalization. SFX currently intends to take the
position that both the Notes, prior to modification, and the Notes, as modified
by the Proposed Amendments and payment of the Consent Payment, are "securities"
for federal income tax purposes, and, accordingly, such deemed exchange will
constitute a tax-free recapitalization for purposes of the Code. Under this
treatment, Beneficial Owners of such Notes will not recognize gain or loss upon
such deemed exchange. Instead, Beneficial Owners will have an adjusted tax
basis and holding period in the Notes, as modified, equal to the adjusted tax
basis and holding period in the Notes prior to such modification.
There is no assurance that, if challenged by the U.S. Internal Revenue
Service (the "IRS"), SFX's recapitalization position will be upheld. If such
deemed exchange of the Notes is held to be a taxable exchange, Beneficial
Owners of the Notes generally will recognize gain or loss equal to the
difference of the fair market value of the Notes and the adjusted tax basis of
such Notes. This gain or loss generally will be a long-term capital gain or
loss if the Beneficial Owner has held the relevant Notes for more than one
year, and any gain will be ordinary income to the extent such gain reflects
market discount on such Notes that has not already been subject to federal
income tax.
If the adoption of the Proposed Amendments were treated as a
constructive exchange and the fair market value of the Notes, as modified by
the Proposed Amendments, is less than their principal amount, such Notes
generally would be issued with original issue discount equal to such difference
(subject to a de minimus exception). The foregoing assumes that the Notes are
"publicly traded," as such term is defined for purposes of the provisions of
the Code and Regulations relating to original issue discount. Such original
issue discount would be includible in the income of a Beneficial Owner on a
constant yield-to-maturity basis over the remaining life of the Notes; however,
such inclusions of original issue discount would be reduced, if a Beneficial
Owner's adjusted tax basis in the Notes exceeds their fair market value on the
date of the constructive exchange, to the extent of the accrual of such excess
on a constant yield basis.
Beneficial Owners of Notes should be aware that no ruling has been
requested from the IRS regarding the tax consequences of the Proposed
Amendments or payment of the Consent Payment, and no assurance can otherwise be
given that the tax treatment described above will be accepted by the IRS.
Beneficial Owners of Notes are strongly urged to consult with their tax
advisors as to the tax consequences of the Proposed Amendments and receipt of
the Consent Payment, including the consequences of any resulting taxable
exchange to Beneficial Owners.
BACKUP WITHHOLDING
The receipt of the Consent Payment by a Beneficial Owner may be subject
to backup withholding at the rate of 31% unless such Beneficial Owner (1) is a
corporation or comes within certain other exempt categories and demonstrates
this fact, or (2) provides on a properly executed substitute Form W-9 (included
as part of the Consent Form) a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. Any
amount withheld under these rules will be credited against the Beneficial
Owner's U.S. federal income tax liability. If backup withholding results in an
overpayment of U.S. federal income taxes, a refund may be obtained from the IRS
provided the required information is furnished. A Beneficial Owner who does not
provide its correct taxpayer identification number may be subject to penalties
imposed by the IRS.
CONSEQUENCES TO NON-U.S. HOLDERS
Although it is unclear whether United States federal withholding tax is
applicable to the payment of a Consent Payment to Non-U.S. Holders, SFX intends
to withhold tax from the Consent Payment paid to such Non-U.S. Holders at a
rate of 30% unless (i) such Non-U.S. Holder is engaged in the conduct of a
trade or business in the United States to which the receipt of the Consent
Payment is effectively connected and provides a properly executed IRS Form 4224
or (ii) a tax treaty between the United States and the country of residence of
the Non-U.S. Holder eliminates or reduces the withholding on other income and
such Non-U.S. Holder provides a properly executed IRS Form 1001. Non-U.S.
Holders should consult their own tax advisors regarding the availability of a
refund of any United States withholding tax.
THE FOREGOING SUMMARY INCLUDED HEREIN IS NECESSARILY FOR GENERAL
INFORMATION ONLY. BENEFICIAL OWNERS OF NOTES ARE URGED TO CONSULT WITH THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF PAYMENT OF THE
CONSENT PAYMENT AND THE ADOPTION OF THE PROPOSED AMENDMENTS, INCLUDING THE
APPLICABILITY OF STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX LAWS.
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ANNEX I
TO CONSENT SOLICITATION STATEMENT
PROPOSED AMENDMENTS
The Proposed Amendments would modify the definitions of "Guarantor" and
"Permitted Investments," Section 4.09 and Section 4.11 of the Indenture and
delete Section 4.17 of the Indenture as indicated below (language to be deleted
is stricken and language to be added is printed in bold face type [capitalized]
and underlined):
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 1.01 (DEFINITIONS --
GUARANTOR) WILL BE AMENDED AS FOLLOWS:
"Guarantor" means each of the Company's current and future [Begin
Strikethrough]domestic[End Strikethrough] Restricted Subsidiaries that executes
a Subsidiary Guarantee in accordance with the provisions of this Indenture, and
its respective successors and assigns.
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 1.01 (DEFINITIONS --
PERMITTED INVESTMENTS) WILL BE AMENDED AS FOLLOWS:
"Permitted Investments" means (i) any Investment in the Company or in a
[Begin Strikethrough]Guarantor[End Strikethrough] RESTRICTED SUBSIDIARY OF THE
COMPANY; (ii) any Investment in Cash Equivalents; (iii) any Investment by the
Company or any Restricted Subsidiary of the Company in a Person engaged in a
Permitted Business, if (a) as a result of, or concurrently with, such Investment
such Person becomes a [Begin Strikethrough]Guarantor[End Strikethrough]
RESTRICTED SUBSIDIARY OF THE COMPANY or (b) as a result of, or concurrently
with, such Investment such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a [Begin Strikethrough]Guarantor[End
Strikethrough] RESTRICTED SUBSIDIARY OF THE COMPANY; or (c) the Company or a
[Begin Strikethrough]Guarantor[End Strikethrough] RESTRICTED SUBSIDIARY OF THE
COMPANY has entered into a binding agreement to acquire such Person or all or
substantially all of the assets of such Person, which agreement is in effect on
the date of such Investment, and such Person becomes a [Begin
Strikethrough]Guarantor[End Strikethrough] RESTRICTED SUBSIDIARY OF THE COMPANY
or such transaction is consummated, AS APPLICABLE, in each case within 180 days
of the date of such Investment; (iv) any Restricted Investment made as a result
of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with Section 4.10 hereof; (v) any obligations or
shares of Capital Stock received in connection with or as a result of a
bankruptcy, workout or reorganization of the issuer of such obligations or
shares of Capital Stock; (vi) any Investment received involuntarily; (vii) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (viii) any Investment made under
the Pace Acquisition Facility pursuant to the Pace Agreement as in effect on the
date hereof; (ix) Investments owned by any of the Acquired Businesses as of the
date such Acquired Business is acquired; (x) other Investments in Persons
engaged in Permitted Businesses (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (x) that are at
the time outstanding, not to exceed 5% of Total Tangible Assets; (xi) the
consummation of the Pending Acquisitions; (xii) the Meadows Repurchase and the
Series E Preferred Repurchase; provided that the Company receives either (x) a
cash payment from Broadcasting or Broadcasting Buyer or an Affiliate thereof at
or prior to the date of the Broadcasting Merger at least equal to the aggregate
amount expended by the Company in the Meadows Repurchase and the Series E
Preferred Repurchase less $3.0 million or (y) an increase in favor of the
Company in the Working Capital Adjustment (including the avoidance of a
decrease) contemplated by the Merger Agreement in an amount at least equal to
the aggregate amount expended by the Company in the Meadows Repurchase and the
Series E Preferred Repurchase less $3.0 million or (z) any combination thereof
adding up to an amount at least equal to the aggregate amount expended by the
Company in the Meadows Repurchase and the Series E Preferred Repurchase less
$3.0 million; and (xiii) other Investments in any Person (measured on the date
each such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (xiii) that are at the time outstanding, not to exceed $4.0 million.
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 4.09 (INCURRENCE OF
INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK) WILL BE AMENDED AS FOLLOWS:
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively "incur") any Indebtedness (including Acquired Debt) or issue
any shares of Disqualified Stock and will not permit any of its Subsidiaries to
issue any shares of preferred stock; provided, however, that, so long as no
Default or Event of Default has occurred and is continuing, the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock and the [Begin Strikethrough]Guarantors may issue shares of preferred
stock[End Strikethrough] COMPANY'S RESTRICTED SUBSIDIARIES MAY INCUR
INDEBTEDNESS (INCLUDING ACQUIRED DEBT) OR ISSUE SHARES OF PREFERRED STOCK if,
in each case, the Company's Debt to Cash
I-1
<PAGE>
Flow Ratio at the time of incurrence of such Indebtedness or the issuance of
such Disqualified Stock or preferred stock, as the case may be, after giving
pro forma effect to such incurrence or issuance as of such date and to the use
of the proceeds therefrom as if the same had occurred at the beginning of the
most recently ended four full fiscal quarter period of the Company for which
internal financial statements are available, would have been no greater than
(a) 7.0 to 1.0, if such incurrence or issuance is prior to December 31, 1999 or
(b) 6.5 to 1.0 thereafter.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following (collectively, "Permitted Debt"):
(i) the incurrence by the Company [Begin Strikethrough](and the
guarantee thereof by Guarantors)[End Strikethrough] AND/OR THE COMPANY'S
RESTRICTED SUBSIDIARIES of Indebtedness and Letters of Credit under one or
more Credit Facilities in an aggregate principal amount at any time
outstanding not to exceed $400.0 million (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and the Guarantors thereunder), less the aggregate amount
of all repayments, optional or mandatory, of the principal of any term
Indebtedness under a Credit Facility that have been made since the date
hereof and less the aggregate amount of all commitment reductions of any
revolving Indebtedness under a Credit Facility pursuant to clause (i) of
the third paragraph of Section 4.10 hereof;
(ii) the incurrence by the Company and the guarantee thereof by the
Guarantors of Indebtedness represented by the Notes and the Subsidiary
Guarantees;
(iii) the incurrence by the Company and its Restricted Subsidiaries
of the Existing Indebtedness;
(iv) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financing
or purchase money obligations, in each case incurred for the purposes of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Restricted Subsidiary, in an aggregate amount not to
exceed $5.0 million at any time outstanding, including all Permitted
Refinancing Debt incurred pursuant to clause (v) below to refund, replace
or refinance any Indebtedness pursuant to this clause (iv);
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted by
this Indenture to be incurred by the first paragraph of this Section 4.09,
or by clauses (ii), (iii), (iv), (v), (vii) or (x) of this paragraph;
(vi) the incurrence of Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (a) if the
Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full of all Obligations
with respect to the Notes and (b) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary, and any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary, shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(viii) the guarantee by the Company or any of [Begin Strikethrough]
the Guarantors[End Strikethrough] ITS RESTRICTED SUBSIDIARIES of
Indebtedness that was permitted to be incurred by another provision of
this Section 4.09;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (ix);
(x) the issuance of preferred stock by the Company pursuant to the
Contemporary Agreement, as in effect on the date of this Indenture;
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
at any time outstanding, including all Permitted Refinancing Indebtedness
incurred pursuant to clause (v) above to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xi), not to exceed $10.0
million.
I-2
<PAGE>
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
will be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant.
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 4.11 (TRANSACTIONS WITH
AFFILIATES) WILL BE AMENDED AS FOLLOWS:
SECTION 4.11. TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (OTHER THAN A PERSON THAT IS AN AFFILIATE SOLELY BY REASON OF
THE COMPANY OR ANY RESTRICTED SUBSIDIARY OF THE COMPANY OWNING AN EQUITY
INTEREST IN SUCH PERSON OR OTHERWISE CONTROLLING SUCH PERSON) (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction
is on terms that are no less favorable to the Company or such Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the members of the Board of Directors that
are disinterested as to such Affiliate Transaction and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the
fairness to the Company of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing; provided that (1) any employment agreement entered into by, and any
compensation paid by, the Company or any of its Restricted Subsidiaries, in
each case, approved by the Compensation Committee, (2) transactions between or
among the Company and/or its Restricted Subsidiaries, (3) fees and compensation
paid to members of the Board of Directors of the Company and of its Restricted
Subsidiaries in their capacity as such, to the extent such fees and
compensation are reasonable, customary and consistent with past practices and
the issuance of shares of the Company to the Directors who were holders of
options or stock appreciation rights in Broadcasting as of the Spin-Off record
date, whether or not vested, (4) fees and compensation paid to, and indemnity
provided on behalf of, officers, directors or employees of the Company or any
of its Restricted Subsidiaries, as determined by the Board of Directors of the
Company or of any such Restricted Subsidiary, to the extent such fees and
compensation are reasonable, customary and consistent with past practices, (5)
the transactions specifically contemplated by the Merger Agreement, the
agreements relating to the Pending Acquisitions or by instruments referred to
in any such agreements, in each case, as the same are in effect on the date
hereof, (6) the Spin-Off Transactions, (7) the transactions specifically
contemplated by the Delsener/Slater Employment Agreements, in each case as in
effect on the date hereof, (8) the Meadows Repurchase and the Series E
Preferred Repurchase; provided that the Company receives either (x) a cash
payment from Broadcasting or Broadcasting Buyer or an Affiliate thereof at or
prior to the date of the Broadcasting Merger at least equal to the aggregate
amount expended by the Company in the Meadows Repurchase and the Series E
Preferred Repurchase less $3.0 million or (y) an increase in favor of the
Company in the Working Capital Adjustment (including the avoidance of a
decrease) contemplated by the Merger Agreement in an amount at least equal to
the aggregate amount expended by the Company in the Meadows Repurchase and the
Series E Preferred Repurchase less $3.0 million or (z) any combination thereof
adding up to an amount at least equal to the aggregate amount expended by the
Company in the Meadows Repurchase and the Series E Preferred Repurchase less
$3.0 million; and (9) any Restricted Payment that is permitted by the
provisions of Section 4.07 hereof, in each case, shall not be deemed to be
Affiliate Transactions.
I-3
<PAGE>
IF THE PROPOSED AMENDMENTS ARE ADOPTED, SECTION 4.17 (ISSUANCES AND
SALES OF EQUITY INTERESTS IN RESTRICTED SUBSIDIARIES) WILL BE DELETED AS
FOLLOWS:
SECTION 4.17.[Begin Strikethrough]ISSUANCES AND SALES OF EQUITY INTERESTS IN
RESTRICTED SUBSIDIARIES.[End Strikethrough]
[Begin Strikethrough]The Company (i) shall not, and shall not permit any
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Restricted Subsidiary of the
Company to any Person (other than the Company or a Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Restricted Subsidiary and
(b) the Net Cash Proceeds, if any, from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with Section 4.10 hereof, and
(ii) will not permit any Restricted Subsidiary of the Company to issue any of
its Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Restricted Subsidiary of the Company except as permitted pursuant
to Section 4.09 hereof.[End Strikethrough] [RESERVED]
I-4
<PAGE>
HOLDERS WHO WISH TO CONSENT SHOULD DELIVER, BY REGULAR MAIL, AIR
COURIER, MESSENGER OR FAX, THEIR PROPERLY COMPLETED, EXECUTED AND DATED CONSENT
FORMS TO THE DEPOSITORY IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN
AND THEREIN. ALL FACSIMILE TRANSMISSIONS MUST BE FOLLOWED BY DELIVERY OF
ORIGINALLY EXECUTED CONSENTS. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING CONSENTS, IS AT THE ELECTION AND RISK OF THE HOLDER. THE ADDRESS OF
THE DEPOSITORY IS AS FOLLOWS:
By Regular Mail:
ChaseMellon Shareholder Services, L.L.C.
Post Office Box 3301
South Hackensack, New Jersey 07606
Attention: Reorganization Department
By Hand Delivery:
ChaseMellon Shareholder Services, L.L.C.
120 Broadway, 13th Floor
New York, New York 10271
Attention: Reorganization Department
By Overnight Courier:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road-Mail Drop-Reorg
Ridgefield Park, New Jersey 07660
Attention: Reorganization Department
Facsimile Transmission: Confirm Facsimile Only:
(201) 296-4293 (201) 296-4860
(Originally executed consents must follow)
SFX HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS SOLICITATION OF CONSENTS OTHER THAN AS
SET FORTH HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SFX. THE DELIVERY OF THIS
CONSENT SOLICITATION STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AFTER THE DATE HEREOF.
Any question or requests for assistance or additional copies of this
Consent Solicitation Statement or the Consent Form may be directed to the
Information Agent at its telephone number and location set forth below. You may
also contact your broker, dealer, commercial bank or trust company or other
nominee for assistance covering the Consent Solicitation.
INFORMATION AGENT:
[GEORGESON & COMPANY INC. LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
Holders Call Toll Free: (800) 223-2064
SOLICITATION AGENT:
LEHMAN BROTHERS
3 World Financial Center
200 Vesey Street, 9th Floor
New York, New York 10285
Collect: (212) 528-7581
Toll Free: (800) 438-3242
Attention: Hyonwoo Shin
