As filed with the Securities and Exchange Commission on June 25, 1996
Registration No. 333-
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SFX BROADCASTING, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 4832 13-3649750
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Classification Identification No.)
Code Number)
150 EAST 58TH STREET, 19TH FLOOR
NEW YORK, NEW YORK 10155
(212) 407-9191
(Address, including zip code, and telephone number,
Including area code, of registrant's principal executive offices)
--------------------------------------
ROBERT F.X. SILLERMAN, CHIEF EXECUTIVE OFFICER
150 EAST 58TH STREET, 19TH FLOOR
NEW YORK, NEW YORK 10155
(212) 407-9191
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------------------
COPIES TO:
JOHN J. HENTRICH, ESQ.
BAKER & MCKENZIE
THE WELLS FARGO PLAZA
TWELFTH FLOOR
101 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
(619) 236-1441
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Approximate date of commencement of proposed sale of the Securities to
the public: As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
<PAGE>
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==============================================================================================================
Proposed Maximum
Aggregate Offering Amount of
Title of Each Class of Securities to be Registered Price Registration Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6 1/2% Series D Cumulative Convertible Exchangeable
Preferred Stock due May 31, 2007................................. $149,500,000(1) $51,551.72
6 1/2% Convertible Subordinated Exchange Notes due 2007.......... NA (2)
Class A Common Stock, par value $.01 per share................... NA (2)
Total............................................................ $149,500,000(1) $51,551.72
================================================================= ============================ ===============
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
based upon the $50 offering price at which each of the 2,990,000
shares of 6 1/2% Series D Cumulative Convertible Exchangeable
Preferred Stock due May 31, 1997 (the "Series D Preferred Stock")
were initially sold.
(2) No additional consideration will be received by the registrant for
the issuance of the 6 1/2% Convertible Subordinated Notes due 2007
(the "Exchange Notes") upon exchange of the Series D Preferred Stock
or upon the issuance of the shares of Class A Common Stock, par
value $.01 per share ("Class A Common Stock") upon conversion of the
Series D Preferred Stock or the Exchange Notes and, accordingly, no
additional registration fee is required in respect of the Exchange
Notes or such shares of Class A Common Stock pursuant to Rule 457(i).
--------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION , ACTING PURSUANT TO
SAID SECTION 8(A), MAY DETERMINE.
=============================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This propsectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION,
DATED JUNE 25, 1996 PROSPECTUS
[LOGO]
2,990,000 SHARES OF 6 1/2% SERIES D CUMULATIVE CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK DUE MAY 31, 2007, $149,500,000 IN AGGREGATE PRINCIPAL
AMOUNT OF 6 1/2% CONVERTIBLE SUBORDINATED EXCHANGE NOTES DUE 2007 AND
3,285,113 SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
This Prospectus relates to (i) 2,990,000 shares of 6 1/2% Series D
Cumulative Convertible Exchangeable Preferred Stock due May 31, 2007 (the
"Series D Preferred Stock") of SFX Broadcasting, Inc., a Delaware corporation
(the "Company"), (ii) $149,500,000 in aggregate principal amount of 6 1/2%
Convertible Subordinated Exchange Notes due 2007 (the "Exchange Notes") of the
Company issuable to the holders of the Series D Preferred Stock upon exchange
of the Series D Preferred Stock and (iii) 3,285,113 shares of Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), of the Company
issuable to the holders of the Series D Preferred Stock or the Exchange Notes
upon conversion of such securities, which amount is subject to adjustment
pursuant to the anti-dilution provisions of such securities. The shares of
Series D Preferred Stock were originally issued by the Company to Goldman,
Sachs & Co., Lehman Brothers Inc. and BT Securities Corporation (collectively,
the "Initial Purchasers") and were subsequently resold by the Initial
Purchasers to qualified institutional buyers in reliance on Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act"), and to a
limited number of institutional investors that are accredited investors within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
The shares of Series D Preferred Stock are, and the Exchange Notes
are eligible for, trading in the Private Offerings, Resales and Trading
through Automated Linkages (PORTAL) market of the National Association of
Securities Dealers, Inc. On June 24, 1996, the last reported sales price of
the Class A Common Stock, which is traded on the Nasdaq National Market under
the symbol "SFXBA," was $37.75 per share.
The shares of Series D Preferred Stock, the Exchange Notes and the
shares of Class A Common Stock (collectively, the "Securities") offered hereby
have been registered for sale by the Selling Securityholders (as defined
herein) and may be offered by the Selling Securityholders from time to time in
transactions on PORTAL or, as to the Class A Common Stock, on the Nasdaq
National Market, in negotiated transactions or a combination of such methods
of sale, in each such case, at fixed prices which may be changed, at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. The Selling Securityholders may effect such
transactions by selling Securities to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Securityholders and/or purchasers of
Securities for whom such broker-dealers may act as agents or to whom they sell
as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). The specific securities to be
sold, the name of the Selling Securityholder, the public offering price, the
names of any such agent, dealer or underwriter, and any applicable commission
or discount with respect to any particular offer will be set forth in an
accompanying Prospectus Supplement. See "Selling Securityholders" and "Plan of
Distribution."
None of the proceeds from the sale of the Securities will be received
by the Company. The Company has agreed, among other things, to bear all
expenses (other than expenses incurred by any holder of Securities, including
fees and expenses of counsel and other advisors retained by such holder, in
excess of $30,000.00 in the aggregate) in connection with the registration and
sale of the Securities covered by this Prospectus.
(continued on the next page)
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
INVESTORS IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, SEE
"RISK FACTORS," COMMENCING ON PAGE 10.
<PAGE>
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE
-----------------------------
The date of this Prospectus is , 1996.
- 4 -
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement (the "Registration Statement") on
Form S-3 under the Securities Act for the registration of the Securities
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in exhibits and
schedules to the Registration Statement as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Securities offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, and the financial
statements and notes filed as a part thereof. Statements made in this
Prospectus concerning the contents of any contract, agreement or other
document filed with the Commission as an exhibit are not necessarily complete.
With respect to each such contract, agreement or other document filed with the
Commission as an exhibit, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. The reports, proxy statements and other information filed
by the Company with the Commission pursuant to the informational requirements
of the Exchange Act may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at 7
World Trade Center, New York, New York 10048 and the Northwestern Atrium
Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In the event the Company is not required to be subject
to the reporting requirements of the Exchange Act in the future, the Company
has agreed that, for so long as any Series D Preferred Stock or Exchange Notes
remain outstanding, it will furnish to the applicable trustee or transfer
agent and the holders of the Series D Preferred Stock or Exchange Notes, as
applicable, and file with the Commission (unless the Commission will not
accept such a filing) (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company was required to file such forms, including a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all reports that
would be required to be filed with the Commission on Form 8-K if the Company
was required to file such reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with
the Commission, are hereby incorporated by reference in this Prospectus and
made a part hereof:
(i) the Company's Annual Report on Form 10-K for the year
ended December 31, 1995;
(ii) the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996; and
(iii) the Company's Current Reports on Form 8-K filed on April 19,
1996, May 8, 1996, May 9, 1996, May 24, 1996, May 30, 1996
and on June 21, 1996, respectively.
All documents and reports subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of Securities shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statements so modified or superseded,
except as so modified or superseded, shall not be deemed to constitute a part
of this Prospectus.
- 5 -
<PAGE>
THIS PROSPECTUS INCORPORATES THE DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM CYNTHIA A. BOND, 150 EAST 58TH STREET, 19TH FLOOR, NEW YORK, NEW
YORK 10155, TELEPHONE (212) 407-9191. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR
TO THE DATE ON WHICH A FINAL INVESTMENT DECISION IS TO BE MADE.
THE COMPANY
The Company, founded in 1992, currently owns and operates, provides
programming to or sells advertising on behalf of 22 radio stations in eight
markets. Upon consummation of the Acquisitions and the Dispositions (as
defined herein), the Company will own and operate, provide programming to or
sell advertising on behalf of 69 radio stations (53 FM and 16 AM stations
located in 23 markets) and will be one of the largest companies in terms of
the number of stations in the United States exclusively devoted to radio
broadcasting. The Company will be diverse in terms of format and geographic
markets and will own and operate, provide programming to or sell advertising
on behalf of two or more stations in 20 of these markets. The Company's
principal executive offices are located at 150 East 58th Street, 19th Floor,
New York, New York 10155, and its telephone number at such offices is
(212) 407-9191.
Certain capitalized terms used herein have the meanings assigned to them
in the Glossary appearing on pages 59 and 60 in this Prospectus. As used in this
Prospectus, except where the context otherwise requires, the "Company" refers to
SFX Broadcasting, Inc., a Delaware corporation, and its subisdiaries, after
giving effect to the Acquisitions and the Dispositions. The timing and
completion of the Acquisitions and the Dispositions are subject to a number of
conditions, certain of which are beyond the Company's ccontrol, and there can be
no assurance that such transactions will be approved by the Federal
Communications Commission (the "FCC") or completed on the terms described herein
or at all. Investors should consider carefully the information set forth under
"Risk Factors."
PENDING ACQUISITIONS AND DISPOSITIONS
In November 1995, the Company entered into an agreement to acquire
Liberty Broadcasting, Incorporated which owns and operates, provides
programming to or sells advertising on behalf of 14 FM and six AM radio
stations located in six markets: Washington, DC/Baltimore, Maryland;
Nassau-Suffolk, New York; Providence, Rhode Island; Hartford, Connecticut;
Albany, New York and Richmond, Virginia (the "Liberty Acquisition").
On May 1, 1996, the Company entered into an agreement to sell three of the
Liberty Stations operating in the Washington, DC/Baltimore, Maryland market
(the "Washington Dispositions").
In February 1996, the Company entered into an agreement to acquire
from Prism Radio Partners L.P. substantially all of the assets used in the
operation of ten FM and six AM radio stations (the "Prism Stations") located
in five markets: Louisville, Kentucky; Jacksonville, Florida; Raleigh, North
Carolina; Tucson, Arizona and Wichita, Kansas (the "Prism Acquisition"). In
April 1996, the Company entered into two separate agreements to sell three of
the Prism Stations operating in the Louisville, Kentucky market (the
"Louisville Dispositions").
In April 1996, the Company entered into an agreement and plan of
merger pursuant to which it has agreed to acquire Multi-Market Radio, Inc.
("MMR") (the "MMR Merger"), which owns and operates, provides programming to
or sells advertising on behalf of 16 FM radio stations and one AM radio
station located in seven markets: New Haven, Connecticut;
Springfield/Northampton, Massachusetts; Daytona Beach, Florida; Augusta,
Georgia; Biloxi, Mississippi; Little Rock, Arkansas and Myrtle Beach, South
Carolina. MMR has entered into agreements to acquire WKSS-FM, Hartford,
Connecticut (the "MMR Hartford Acquisition"), and WMYB-FM, Myrtle Beach, South
Carolina (the "MMR Myrtle Beach Acquisition"), and to sell WRXR-FM and
WKBG-FM, both operating in Augusta, Georgia, and has entered into a
non-binding letter of intent to sell KOLL-FM, Little Rock, Arkansas to
Triathlon Broadcasting Company ("Triathlon") (collectively, the "MMR
Dispositions"). Except where the context otherwise requires, the term "MMR
Merger" as used herein gives effect to the MMR Hartford Acquisition, the MMR
Myrtle Beach Acquisition and the consummation of the MMR Dispositions. In
addition, MMR is currently negotiating the termination of a joint sales
agreement with respect to WCHZ-FM, Augusta, Georgia, and the termination of an
acquisition agreement and a local marketing agreement with respect to WAEG-FM
and WAEJ-FM, both operating in Augusta, Georgia. The MMR Hartford Acquisition,
the MMR Myrtle Beach Acquisition and the MMR Dispositions are anticipated to
be completed prior to the consummation of the MMR Merger. MMR was organized in
1992 by Robert F.X. Sillerman, Chief Executive Officer and controlling
stockholder of the Company, Michael G. Ferrel and Howard J. Tytel, a Director
and Executive Vice President of the Company. Mr. Sillerman owns a substantial
equity interest in MMR which will be exchanged for common stock of the Company
upon the consummation of the MMR Merger.
- 6 -
<PAGE>
Pursuant to four separate agreements, the Company has agreed to
acquire substantially all of the assets of WROQ-FM, Greenville, South
Carolina, WJDX-FM, WSTZ-FM and WZRX-AM, each operating in Jackson,
Mississippi, WTRG-FM and WRDU-FM, both operating in Raleigh, North Carolina,
and WMFR-AM, WMAG-FM and WTCK-AM, each operating in Greensboro, North
Carolina, and, pursuant to a separate agreement, has an option, which it
intends to exercise, to acquire WHSL-FM, operating in Greensboro, North
Carolina (collectively, the "Additional Acquisitions"). In addition, the
Company has entered into an agreement to exchange radio station KRLD-AM,
operating in Dallas, Texas, and the Texas State Networks for radio station
KKRW-FM, Houston, Texas (the "Houston Exchange"), and has entered into a
non-binding letter of intent to sell radio station KTCK-AM, operating in
Dallas, Texas (the "Dallas Disposition").
The Liberty Acquisition, the Prism Acquisition, the MMR Merger, the
Additional Acquisitions and the Houston Exchange are referred to herein
collectively as the "Acquisitions." The Washington Dispositions, the
Louisville Dispositions and the Dallas Disposition are referred to herein
collectively as the "Dispositions."
RECENT TRANSACTIONS
Note Offering, Preferred Stock Offering and New Credit Agreement. On
May 31, 1996, the Company consummated a private placement of $450.0 million in
aggregate principal amount of its 10 3/4% Senior Subordinated Notes due 2006
(the "Note Offering") and $149.5 million in aggregate amount (the "Preferred
Stock Offering") of its 6 1/2% Series D Cumulative Convertible Preferred Stock
due May 31, 2007 (the "Series D Preferred Stock"). In addition, the Company
has received a commitment from its lender to increase amounts available under
its senior credit facility from $50.0 million to $150.0 million and expects to
enter into a definitive credit agreement (the "New Credit Agreement") with
respect to such facility. There can be no assurance, however, that the Company
will be able to enter into the New Credit Agreement on a timely basis or at
all. The private placement of the Senior Subordinated Notes and the Preferred
Stock are herein referred to as the Financing.
Agreement with SCMC. In April 1996, the Company and Sillerman
Communications Management Corporation ("SCMC"), a corporation controlled by
Mr. Sillerman, entered into an agreement to terminate SCMC's financial
consulting services to the Company in exchange for the cancellation of certain
indebtedness owing from SCMC to the Company and the grant to SCMC of warrants
to purchase common stock of the Company (the "SCMC Termination Agreement").
Pursuant to such agreement, SCMC has also assigned to the Company its rights
to receive certain fees payable by MMR and Triathlon, a publicly-traded radio
company of which affiliates of Mr. Sillerman own a substantial non-voting
equity interest and which operates in small and medium-sized markets in the
Midwest and the West, for services that SCMC provides in connection with
consulting agreements between SCMC and such companies. In addition, pursuant to
the SCMC Termination Agreement, SCMC has agreed to continue to provide financial
consulting services to MMR (until completion of the MMR Merger) and to Triathlon
at SCMC's expense.
Tender Offer and Consent Solicitation. On May 31, 1996, the Company
also purchased for cash (the "Tender Offer") $79,406,000 in principal amount of
its 11 3/8% Senior Subordinated Notes due 2000 (the "Old Notes") and finalized a
related solicitation of consents to modify certain terms of the indenture under
which the Old Notes were issued (the "Old Indenture"). Currently $594,000 in
principal amount of the Old Notes remain outstanding.
Management. On June 19, 1996, the company entered into an Amended and
Restated Agreement with R. Steven Hicks, the President, Chief Executive Officer
and Chief Operating Officer of the Company (the "Amended Hicks Agreement") which
supersedes the agreement entered into between the Company and Mr. Hicks on April
15, 1996 (the "Hicks Agreement"). Pursuant to the Amended Hicks Agreement, Mr.
Hicks, among other things, resigned as an officer and director of the Company
and the Company repurchased all of Mr. Hicks' securities of the Company. In
addition, Mr. Hicks agreed not to compete with the Company for the period of
approximately one year with the Company or MMR in any market in which the
Company or MMR currently owns, operates, provides programming to or sells
advertising on behalf of radio stations and any eight additional market sin
which the Company or MMR has entered into agreements to purchase one or more
radio stations on or before the consummation of the MMR Merger. Pursuant to the
Amended Hicks Agreement, the Company paid Mr. Hicks an aggregate amount of $18.7
million and agreed to forgive on June 19, 1999 a $2.0 million loan to Mr. Hicks,
plus accrued and unpaid interest of $0.3 million, if Mr. Hicks has complied with
certain provisions of the agreement. Upon the resignation of Mr. Hicks, Robert
F.X. Sillerman resumed the position of the sole Chief Executive Officer of the
Company and D. Geoffrey Armstrong, the interim Chief Financial Officer of the
Company, was appointed the Chief Operating Officer. In addition, the Company
entered into an agreement effective as of June 24, 1996 with Thomas P. Benson
pursuant to which Mr. Benson was appointed the Vice President of Financial
Affairs. Pursuant to the agreement the Company agreed to appoint Mr. Benson as
the Chief Financial Officer upon the resignation by Mr. Armstrong as the Chief
Financial Officer. The Company anticipates that Mr. Armstrong will resign as the
Chief Financial Officef of the Company upon the consummation of the merger with
MMR.
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<PAGE>
The Acquisitions, the Dispositions, the Financing, the Tender Offer
and the implementation of each of the SCMC Termination Agreement, the Hicks
Agreement and the Armstrong Agreement are collectively referred to hereinafter
as the "Transactions."
SUMMARY OF TERMS OF SERIES D PREFERRED STOCK
Dividends................ Dividends per share on the Series D Preferred
Stock of $0.8125 per quarter are payable in cash
quarterly in arrears on February 28, May 31, August
31 and November 30 of each year. The first dividend
payment of $0.8125 per share of Series D Preferred
Stock will be payable on August 31, 1996.
Accumulated unpaid dividends bear interest at the
rate of 6 1/2% per annum.
Liquidation Rights....... Upon any liquidation, dissolution or winding up of
the affairs of the Company or reduction or decrease
in its capital stock resulting in a distribution of
assets to the holders of any class or series of the
Company's Common Stock, the Series D Preferred
Stock has a Liquidation Preference of $50 per share
plus accrued and unpaid dividends and Liquidated
Damages (if any) to the date fixed for liquidation,
dissolution, winding up or reduction or decrease in
capital stock, before any distribution is made on
any Junior Securities (as defined herein),
including, without limitation, Common Stock of the
Company. See "Description of Series D Preferred
Stock and Exchange Notes-- Liquidation Rights."
Ranking.................. The Series D Preferred Stock ranks senior in right
of payment to every other class or series of
capital stock of the Company as to dividends and
upon liquidation, dissolution or winding up of the
Company.
Conversion Rights........ Each share of Series D Preferred Stock is
convertible at the option of the Holder thereof
into 1.0987 shares of Class A Common Stock of the
Company (subject to adjustments in certain events)
at any time prior to the close of business on the
maturity date, unless previously redeemed or
repurchased. In the event that an insufficient
number of shares of Class A Common Stock are
available for issuance upon conversion of any
shares of Series D Preferred Stock or the Company
is restricted by FCC rules from issuing shares of
Class A Common Stock upon conversion of any shares
of Series D Preferred Stock, the Company will be
required to pay to the Holder of each share of
Series D Preferred Stock seeking to convert such
share an amount per share of Class A Common Stock
in cash equal to 110% of the Current Market Price
of the Class A Common Stock as of the date of such
conversion. See "Description of Series D Preferred
Stock and Exchange Notes-- Conversion Rights."
Mandatory Redemption...... The Series D Preferred Stock issubject to
mandatory redemption on May 31, 2007 at the
Liquidation Preference thereof plus accrued and
unpaid dividends and Liquidated Damages, if any,
to the redemption date.
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<PAGE>
Optional Redemption....... The Series D Preferred Stock is redeemable, in
whole or in part, at the option of the Company
at any time on or after June 1, 1999 at the
redemption prices set forth herein plus accrued
and unpaid dividends, if any, to the redemption
date.
Exchange Rights.......... On any Dividend Payment Date, the Company may, at
its option, exchange all but not less than all of
the outstanding shares of Series D Preferred Stock
for the Exchange Notes upon payment of all
accrued and unpaid dividends. Holders of Series D
Preferred Stock will receive Exchange Notes in an
aggregate principal amount equal to the Liquidation
Preference of such shares. The Exchange Notes will
be issued pursuant to the Exchange Note Indenture
and will be subordinate to the prior payment in
full of all Senior Debt (as defined herein),
whether outstanding on the date of the Exchange
Note Indenture or thereafter incurred. As of March
31, 1996, the aggregate amount of Senior Debt
outstanding, calculated on a pro forma basis giving
effect to the Transactions and the Financing was
approximately $450.0 million. The Exchange Notes
will contain substantially the same terms,
covenants and conditions as the Series D Preferred
Stock, including conversion rights and redemption
terms. In addition, the Exchange Note Indenture
will contain certain Event of Default provisions.
The Exchange Notes will not be guaranteed by any of
the Company's subsidiaries.
Change of Control........ Upon a Change of Control (as defined herein), the
Holders of the Series D Preferred Stock have the
right, subject to certain conditions and
restrictions, to require the Company to repurchase
all or any part of their shares of Series D
Preferred Stock at a purchase price of 101% of the
Liquidation Preference thereof, plus accrued and
unpaid dividends to the repurchase date in cash.
The Company may satisfy its repurchase obligation
through the issuance of shares of Class A Common
Stock (valued at 95% of the Current Market Price of
the Class A Common Stock).
Voting Rights............ The Holders of Series D Preferred Stock have no
voting rights except as required by law and as
specified in the Certificate of Designations. Upon
the Company's failure to meet certain obligations
to Holders of the Series D Preferred Stock, the
Holders of Series D Preferred Stock will be
entitled to elect two additional members to the
Company's Board of Directors.
Certain Covenants........ The Certificate of Designations, Preferences and
Relative, Participating, Optional and other Special
Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof (the
"Certificate of Designations") setting forth the
terms of the Series D Preferred Stock contains
certain covenants that will, among other things,
limit the ability of the Company and its
subsidiaries to engage in transactions with their
affiliates.
Risk Factors............. See "Risk Factors" for a discussion of certain
factors that should be considered in evaluating an
investment in the Series D Preferred Stock.
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<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to
fixed charges and ratio of earnings to combined fixed charges and preferred
stock dividends for each of the five fiscal years ended December 31, 1995 and
the three-month period ended March 31, 1996.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months
----------------------- Ended
1991 1992 1993 1994 1995 March 31, 1996
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges -- -- -- 1.4x -- --
Ratio of earnings to combined fixed -- -- -- 1.3x -- --
charges and preferred stock dividends
</TABLE>
For purposes of computing the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock dividends,
"earnings" consists of earnings before income taxes and fixed charges. "Fixed
charges and preferred stock dividends" consists of interest on all
indebtedness, amortization of deferred financing costs and preferred stock
dividends. "Fixed charges" consists of interest on all indebtedness and
amortization of deferred financing costs. Earnings were insufficient to cover
fixed charges by $985,000, $4,396,000, $14,919,000, $2,208,000 and $4,232,000
during the three months ended March 31, 1996 and the years ended December 31,
1995, 1993, 1992 and 1991, respectively. Earnings were insufficient to cover
combined fixed charges and preferred stock dividends by $1,121,000,
$4,687,000, $15,476,000, $2,593,000 and $4,534,000 during the three months
ended March 31, 1996 and the years ended December 31, 1995, 1993, 1992 and
1991, respectively.
RISK FACTORS
An investment in the Securities offered hereby involves a high degree
of risk. Prospective investors should consider carefully, in addition to the
other information contained in this Prospectus, the following factors in
connection with an investment in the Securities offered hereby. Many of the
statements in this Prospectus are forward-looking in nature and, accordingly,
whether they prove to be accurate is subject to many risks and uncertainties.
The actual results that the Company achieves may differ materially from any
forward-looking statements in this Prospectus. Factors that could cause or
contribute to such differences include, but are not limited to, those
discussed below and those contained elsewhere in this Prospectus and in the
documents incorporated herein by reference.
RISKS RELATED TO THE ACQUISITIONS AND THE DISPOSITIONS
Consummation of each of the Acquisitions and the Dispositions is
subject to a number of closing conditions, certain of which are beyond the
Company's control. In particular, consummation of each of the Acquisitions and
the Dispositions is dependent upon the prior approval by the FCC of the
assignments or transfers of control of operating licenses issued by the FCC
and the continued operating performance of the stations to be acquired or
disposed such that there is no material adverse change in such stations that
would prevent consummation of any such transactions. Furthermore, as a result
of the Recent Legislation, certain of the Acquisitions and the Dispositions
may be subject to antitrust review by the Federal Trade Commission and the
U.S. Department of Justice, Antitrust Division (the "Antitrust Agencies"),
even if approved by the FCC, and there can be no assurance that the Antitrust
Agencies will approve such Acquisitions and Dispositions. In addition, the
consummation of the MMR Merger is also dependent upon the transaction being
approved by the stockholders of each of the Company and MMR and also requires
the approval of the holders of certain indebtedness of MMR and the approval of
the Antitrust Agencies. The failure to satisfy such conditions would permit
the parties thereto to refuse to consummate the respective Acquisitions and
Dispositions. Certain of the Dispositions are evidenced by non-binding letters
of intent and there can be no assurance that a definitive agreement will be
executed on the terms described herein or at all.
- 10 -
<PAGE>
In a complaint dated April 18, 1996, Paul Pops, who purports to be a
stockholder of MMR, brought suit in the Supreme Court of the State of New York
against MMR, each of the directors of MMR, the Company and Robert F.X.
Sillerman seeking to enjoin the MMR Merger or, in the alternative, seeking
monetary damages. The suit alleges that the consideration to be paid to the
MMR stockholders in the MMR Merger is unfair and grossly inadequate. The suit
also alleges that in connection with entering into the MMR Merger Agreement
(as defined herein), the directors of MMR violated their fiduciary duties to
MMR and its stockholders and that the Company aided and abetted such
violation. The plaintiff is seeking to have his suit certified as a class
action representing the interests of the stockholders of MMR. The Company
believes, and the Company has been advised by MMR that it believes the suit
to be without substantial merit and intends to vigorously defend the action.
As a result of the foregoing, there can be no assurance as to when the
Acquisitions or the Dispositions will be consummated or that they will be
consummated on the terms described herein or at all. Furthermore, the Company
cannot predict whether the consummation of the Acquisitions or the
Dispositions will conform to the assumptions used in the preparation of the
Unaudited Pro Forma Condensed Combined Financial Statements incorporated
herein by reference. In analyzing the Unaudited Pro Forma Condensed Combined
Financial Statements and information contained herein, prospective investors
should consider that the Acquisitions or the Dispositions may not be
consummated at all or on the terms described herein, and that the Acquisitions
or the Dispositions, if consummated, may be subject to substantial delay. In
the event the Dispositions are not completed in a timely manner, the Company
may be required to seek additional financing. There can be no assurance that
such financing will be available to the Company on commercially acceptable
terms, if at all. In the event that the Acquisitions are not consummated due
to a material breach by the Company, the Company may lose deposits in the
aggregate amount of approximately $12.3 million. In the event that the Company
fails to consummate the Liberty Acquisition and the MMR Merger is terminated,
the Company will be required, except in certain circumstances, to pay $3.5
million to MMR. In addition, the Company will be required to pay MMR $1.0
million in the event that the majority of the combined voting power of the
Company votes with respect to, but does not vote in favor of, the MMR Merger.
RISKS ASSOCIATED WITH INTEGRATION OF THE STATIONS TO BE ACQUIRED
The Company's plans with respect to the radio stations to be acquired
in the Acquisitions involve, to a substantial degree, strategies to increase
net revenue while at the same time reducing operating expenses, as well as the
implementation of a new regional management structure and a modified senior
management team. Although the Company believes that its strategies are
reasonable, there can be no assurance that it will be able to implement its
plans without delay or that, when implemented, its efforts will result in the
increased Broadcast Cash Flow or other benefits currently anticipated by the
Company. In addition, there can be no assurance that the Company will not
encounter unanticipated problems or liabilities in connection with the
implementation of the new management changes or the operation of the radio
stations to be acquired in the Acquisitions. The integration of such stations
into the Company will require substantial attention from members of the
Company's senior management, which will limit the amount of time such members
have available to devote to the Company's existing operations.
SUBSTANTIAL LEVERAGE; INABILITY TO SERVICE OBLIGATIONS
The Company has incurred and will incur a significant amount of
indebtedness. As of March 31, 1996, the Company's indebtedness would have been
approximately $450.6 million on a pro forma basis after giving effect to the
Transactions. In addition, subject to the restrictions in the New Credit
Agreement, the Old Indenture and the Indenture governing the Company's 10 3/4%
Senior Subordinated Notes (the "Indenture"), the Company may incur additional
indebtedness from time to time to finance acquisitions, for capital
expenditures or for other purposes. See "--Expansion Strategy; Need for
Additional Funds. "For the year ended December 31, 1995 and the three months
ended March 31, 1996, on a pro forma basis after giving effect to the Recent
Acquisitions and the Transactions (other than the MMR Merger), as if all such
transactions had occurred on January 1, 1995, the Company's earnings would have
been insufficient to cover its fixed charges by $24.3 million and $7.7 million,
respectively, and would have been insufficient to cover its combined fixed
charges and preferred stock dividends by $34.3 million and $10.3 million,
respectively. In addition, for the year ended December 31, 1995 and the three
months ended March 31, 1996, on a pro forma basis after giving effect to the
Recent Acquisitions and the Transactions, as if all such transactions had
occurred on January
- 11 -
<PAGE>
1, 1995, the Company's earnings would have been insufficient to cover its
fixed charges by $19.0 million and $6.6 million, respectively, and would have
been insufficient to cover its combined fixed charges and preferred stock
dividends by $29.0 million and $9.2 million, respectively.
The degree to which the Company is leveraged could have material
consequences to the Company and the holders of the Company's securities,
including, but not limited to, the following: (i) the Company's ability to
obtain additional financing in the future for acquisitions, working capital,
capital expenditures, general corporate or other purposes may be impaired,
(ii) a substantial portion of the Company's cash flow from operations will be
dedicated to the payment of the principal and interest on its debt and
dividends on the Series D Preferred Stock and will not be available for other
purposes, (iii) certain of the Company's borrowings may be at variable rates
of interest, which could result in higher interest expense in the event of
increases in interest rates and (iv) the agreements governing the Company's
long-term debt will contain restrictive financial and operating covenants, and
the failure by the Company to comply with such covenants could result in an
event of default under the applicable instruments, which could permit
acceleration of the debt under such instrument and in some cases acceleration
of debt under other instruments that contain cross-default or
cross-acceleration provisions. Certain of the Company's competitors operate on
a less leveraged basis, and thus have significantly greater operating and
financial flexibility, than the Company. See "Description of Series D
Preferred Stock and Exchange Notes."
The Company's ability to make scheduled payments of principal of, or to
pay interest on or to refinance, its debt (including the Old Notes and the
Notes), to make dividend payments on or Conversion Payments (as defined
herein) with respect to the Series D Preferred Stock and to redeem the Series
B Preferred Stock depends on its future financial performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors beyond its control, as well as the
success of the radio stations to be acquired and the integration of such
stations into the Company's operations. Based upon the Company's current level
of operations and anticipated improvements, management believes that cash flow
from operations, together with the net proceeds of the Financing, the
Dispositions, the MMR Dispositions, the exercise of the MMR Class A Warrants
and available borrowings under the New Credit Agreement, will be adequate to
meet the Company's anticipated future requirements for working capital,
capital expenditures and scheduled payments of interest on its debt and to
make dividend payments on the Series D Preferred Stock and to redeem the
Series B Preferred Stock. There can be no assurance that the Dispositions and
the exercise of the MMR Class A Warrants will occur or that the Company's
business will generate sufficient cash flow from operations, that anticipated
improvements in operating results will be achieved or that future working
capital borrowings will be available in an amount sufficient to enable the
Company to service its debt, to make dividend payments on or Conversion
Payments with respect to the Series D Preferred Stock, to redeem the Series B
Preferred Stock or to make necessary capital or other expenditures. The
Company may be required to refinance the Old Notes and the Notes or the
aggregate liquidation preference of the Series D Preferred Stock prior to
their respective maturities. There can be no assurance that the Company will
be able to raise additional capital through the sale of securities, the
disposition of radio stations or otherwise for any such refinancing.
LIMITATIONS ON THE ABILITY TO CONVERT SERIES D PREFERRED STOCK
The issuance of shares of Class A Common Stock, including those
issuable upon conversions of shares of Series D Preferred Stock or the
Exchange Notes, that would cause Robert F.X. Sillerman not to hold directly
voting stock of the Company representing more than 50% of the total voting
power of the Company would require the Company to seek and obtain the prior
consent of the FCC. The Company intends to seek such consent at such time as
it may be required. The Certificate of Designations provides that the Company
will use its best efforts to secure all necessary consents and approvals, if
any, and take all other commercially reasonable steps to permit conversion of
the Series D Preferred Stock. On the date hereof, the Company will be able to
issue shares of Class A Common Stock upon conversion of approximately 78.0% of
the Series D Preferred Stock or the Exchange Notes without reducing Mr.
Sillerman's directly-held voting power in the Company to 50% or less. Although
the Company has no reason to believe that the FCC would not consent to the
relinquishment of de jure control of the Company by Mr. Sillerman
(i.e. relinquishment of control such that more than 50% of the total voting
power in the Company is no longer held by him), there can be no assurance that
the FCC will so consent.
The Company has not reserved for issuance upon the conversion of all of
the shares of Series D Preferred Stock or conversion of all of the Exchange
Notes, as the case may be, a sufficient number of shares of Class A Common
Stock. In
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<PAGE>
either such event, the Company will have to seek the approval of its
stockholders to authorize additional shares of Class A Common Stock. The
Company has reserved approximately 3,280,000 shares of Class A Common Stock
for issuance upon conversion of the shares of Series D Preferred Stock or the
Exchange Notes, as the case may be. Holders of options to purchase
approximately 962,000 shares of Class A Common Stock and holders of
approximately 850,000 shares of Class B Common Stock have agreed not to
exercise such options or convert such shares of Class B Common Stock into
shares of Class A Common Stock until such time as the Company has increased
the number of shares of Class A Common Stock authorized for issuance. Currently,
the Company does not have a sufficient number of shares of Class A Common Stock
to convert approximately 3,000 shares of Series D Preferred Stock.The Company
intends to request its stockholders to increase the authorized number of shares
of Class A Common Stock at its next Annual Meeting. There can be no assurance,
however, that the stockholders of the Company will authorize such an increase.
The Certificate of Designations and the Exchange Indenture each provide
that in the event that the Company is unable to issue shares of Class A Common
Stock upon conversion of the shares of Series D Preferred Stock or the
Exchange Notes (either because there are an insufficient number of shares of
Class A Common Stock available for issuance or the Company is restricted by
FCC rules from issuing shares of Class A Common Stock), the Company will be
required to pay an amount in cash equal to 110% of the Current Market Price
(as defined herein) of the Class A Common Stock as of the date of such
conversion (the "Conversion Payments"). See "Description of Series D Preferred
Stock and Exchange Notes -- Conversion Rights" and "-- Description of Exchange
Notes -- Conversion." The New Credit Agreement or the Indenture may prohibit
or restrict the Company from making the Conversion Payments. Any future credit
agreement or other agreements relating to financing to which the Company
becomes a party may contain similar prohibitions or restrictions. In the event
conversions occur at a time when the Company is prohibited or restricted from
making the Conversion Payments, the Company could seek the consent of its
lenders or the holders of the Notes to make the Conversion Payments or could
attempt to refinance the borrowings that contain such prohibitions or
restrictions. If the Company does not obtain such consent or repay such
borrowings, the Company will remain prohibited from making the Conversion
Payments. In such case, the Company's failure to make Conversion Payments
would constitute a breach under the Exchange Note Indenture (if in effect)
which may constitute a default under the New Credit Agreement and the
Indenture. Under such circumstances, the Company may not have the financial
resources to repay all of its obligations that would become due.
SUBORDINATION OF THE EXCHANGE NOTES
The Exchange Notes if issued will be subordinate in right of payment to
all Senior Debt of the Company. In the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Exchange Notes only after all Senior Debt has been paid
in full and there may not be sufficient assets remaining to pay amounts due on
any or all of the Exchange Notes then outstanding. In addition, indebtedness
outstanding under the New Credit Agreement is expected to be secured by
substantially all of the assets of the Company and its subsidiaries. As of March
31, 1996, on a pro forma basis after giving effect to the Transactions, the
Company would have had approximately $450.6 million of Senior Debt. Additional
Senior Debt may be incurred by the Company from time to time subject to certain
restrictions contained in the New Credit Agreement and the Indenture. See
"Description of Series D Preferred Stock and Exchange Notes -- Subordination."
HOLDING COMPANY STRUCTURE; DEPENDENCE UPON OPERATIONS OF SUBSIDIARIES
Substantially all of the assets of the Company are held by the
Company's subsidiaries, and all of the Company's operating revenues are
derived from operations of such subsidiaries. In addition, future acquisitions
may be made through present or future subsidiaries of the Company. Therefore,
the Company's ability to pay the Liquidation Preference of and dividends when
due on the Series D Preferred Stock and interest and principal when due to
holders of the Exchange Notes is dependent upon the earnings of its
subsidiaries and the distribution of sufficient funds from its direct and
indirect subsidiaries. The Company's subsidiaries will have no obligation,
contingent or otherwise, to make any funds available to the Company for
payment of the Liquidation Preference of and dividends when due on the Series
D Preferred Stock or on principal of or interest on the Exchange Notes. Under
the Indenture and the New Credit Agreement, the Company's subsidiaries will be
restricted in their ability to incur debt in the future.
HISTORICAL LOSSES
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<PAGE>
Although the Company had net income of $1.8 million for the year ended
December 31, 1994, the Company had net losses of $985,000, $4.4 million
(including a charge of $5.0 million relating to the write-down of the Texas
Rangers broadcast rights) and $17.8 million (including a non-recurring charge
of approximately $14.0 million, substantially all of which was non-cash) for
the three months ended March 31, 1996 and the years ended December 31, 1995
and 1993, respectively. On a pro forma basis, after giving effect to the
Recent Acquisitions and the Transactions, as if such transactions had occurred
on January 1, 1995, for the year ended December 31, 1995 and the three months
ended March 31, 1996, the Company would have had a net loss of approximately
$19.0 million and $6.6 million, respectively. In connection with the SCMC
Termination Agreement, the Company has agreed to the cancellation of $2.0
million of indebtedness plus accrued interest thereon owing from SCMC to the
Company and has issued warrants to SCMC to purchase up to 600,000 shares of
Class A Common Stock at an exercise price of $33 3/4 per share. In connection
with such agreement, the Company will recognize a non-cash charge to earnings
of approximately $4.5 million during the three-month period ended June 30,
1996 and $1.1 million upon completion of the MMR Merger. Approximately $19.5
million of the net proceeds of the Financing has been allocated to make
certain payments to R. Steven Hicks, the current President and Chief Executive
Officer of the Company, and D. Geoffrey Armstrong, the current Executive Vice
President and Chief Financial Officer of the Company, and in connection
therewith, the Company will recognize a non-recurring charge to earnings of
approximately $19.4 million during the three-month period ended June 30, 1996.
In addition, the Company will recognize an extraordinary loss of approximately
$14.7 million relating to the write-off of deferred financing costs of the Old
Credit Agreement and the costs of the Tender Offer during the three-month
period ended June 30, 1996. Depreciation and amortization relating to past
acquisitions and future acquisitions, interest expenses under the Company's
debt and dividend payments on the Series D Preferred Stock will continue to
affect the Company's net income (loss) in the future.
CHANGE OF CONTROL
The Indenture and the Old Indenture provide that, upon the occurrence
of a Change of Control, the holders of the Notes and the Old Notes will have
the right to require the Company to repurchase their notes at a price equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of repurchase. In
addition, a Change of Control may constitute a default under the New Credit
Agreement. Unless waived or cured, any such default could create a default
under the Notes, the Old Notes and the Series D Preferred Stock. If a Change
of Control were to occur, due to the highly leveraged nature of the Company,
the Company may not have the financial resources to repay all of its
obligations under any indebtedness that would become payable upon the
occurrence of such Change of Control. The Company's failure to make a required
repurchase in the event of a Change of Control would create an Event of
Default under the Notes and the Old Notes. In addition, the Communications Act
of 1934, as amended (the "Communications Act") and FCC rules require the prior
consent of the FCC to any change of control of the Company. See "--
Substantial Leverage; Inability to Service Obligations," "Description of
Series D Preferred Stock and Exchange Notes -- Description of Series D
Preferred Stock -- Special Conversion Rights; Change of Control" and
"Description of Series D Preferred Stock and Exchange Notes -- Description of
Exchange Notes -- Special Conversion Rights; Change of Control."
EXPANSION STRATEGY; NEED FOR ADDITIONAL FUNDS
The Company's principal growth strategy is to operate and acquire
highly-ranked radio stations with attractive audience demographics in major
and medium-sized markets located throughout the United States. The Company
regularly explores acquisition opportunities; however, with the exception of
the Acquisitions, the Company has no agreements or understandings regarding
such possible future acquisitions. There can be no assurance that the Company
will consummate the Acquisitions or be able to identify stations to acquire in
the future. Each acquisition will be subject to the prior approval of the FCC
and of the lenders under debt instruments to which the Company is a party.
Furthermore, as a result of the Recent Legislation, future acquisitions may be
subject to antitrust review by the Antitrust Agencies, even if approved by the
FCC. In addition, the Company may require additional debt or equity financing
to finance properties it may seek to acquire in the future. The availability
of additional acquisition financing cannot be assured, and depending on the
terms of proposed acquisitions and financings, could be restricted by the
terms of debt instruments to which the Company is a party. There can be no
assurance that any future acquisitions will be successfully integrated into
the Company's operations or that such
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<PAGE>
acquisitions will not have a material adverse effect on the Company's
financial condition and results of operations. See "-- Risks Associated with
Integration of the Stations to be Acquired," and "--Regulatory Matters."
CONTROL BY MANAGEMENT
Robert F.X. Sillerman holds approximately 52.5% of the combined voting
power of the Company. Mr. Sillerman and his affiliates, together with other
members of the Company's management, hold approximately 61.6% of the combined
voting power of the Company. Mr. Sillerman and his affiliates will hold
approximately 55.3% and Mr. Sillerman and his affiliates, together with the
Company's management, will hold approximately 57.5% of the combined voting
power of the Company following completion of the MMR Merger. The Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), has one vote
per share on all matters, whereas the Class B Common Stock, par value $.01 per
share ("Class B Common Stock"), has ten votes per share except in certain
matters. Accordingly, management currently is, and following the MMR Merger
will be, able to control the vote on all matters except (i) in the election of
directors, with respect to which the holders of the Class A Common Stock will
be entitled to elect two of the Company's seven Directors (and three of the
Company's nine Directors following completion of the MMR Merger) by a class
vote, (ii) in connection with any proposed "going private" transaction between
the Company and Mr. Sillerman or his affiliates, with respect to which the
holders of the Class A Common Stock and Class B Common Stock vote as a single
class, with each share of Class A Common Stock and Class B Common Stock
entitled to one vote per share and (iii) as otherwise provided by law. In
addition, in the event dividends on the Series D Preferred Stock are in
arrears and unpaid in an aggregate amount equal to six full quarterly
dividends and in certain other circumstances, the holders of the Series D
Preferred Stock (voting separately as a class) will be entitled to elect two
additional members of the Board of Directors of the Company. See "Description
of Series D Preferred Stock and Exchange Notes -- Voting Rights."
POTENTIAL CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES
Mr. Sillerman and other members of the Company's management have direct
and indirect investments and interests in entities that own and operate radio
stations, including radio stations that are in certain of the same markets as
the Company's existing or proposed radio stations. These investments and
interests (and any similar investments and interests in the future) may give
rise to certain conflicts of interest as well as to potential attribution
under FCC rules or invocation of the FCC's cross-interest policy, which could
restrict the Company's ability to acquire radio stations in certain markets.
See "-- Regulatory Matters."
SCMC, Mr. Sillerman and Howard J. Tytel, a Director and Executive Vice
President of the Company, have interests in entities that own and operate
radio stations other than the Company. Messrs. Sillerman and Tytel and their
affiliates hold a substantial equity interest in, and are parties to
consulting and marketing agreements with, each of MMR and Triathlon. Pursuant
to the consulting and marketing agreements, SCMC is obligated to offer to such
companies any radio broadcasting opportunities that come to their attention in
medium and small markets (defined in such agreements as those markets ranked
71st and smaller out of the radio markets summarized by Duncan's Radio Market
Guide (1995 ed.)). The Company does not intend to pursue acquisitions in the
medium-sized markets in the eastern United States that MMR primarily focuses
on until the consummation of the MMR Merger or in the small and medium-sized
markets in the Midwest and Western regions of the United States that Triathlon
primarily focuses on, except that upon consummation of the Prism Acquisition
the Company will own three radio stations in the Wichita, Kansas market, a
market in which Triathlon has radio station ownership interests.
SCMC has acted from time to time as the Company's financial advisor
since the Company's inception. SCMC is controlled by Mr. Sillerman, and
Messrs. Sillerman and Tytel are officers and directors of SCMC. SCMC acts in
similar capacities for each of MMR and Triathlon. These companies may seek to
participate in business opportunities which may be suitable for the Company.
In addition, SCMC provided advisory services to MMR and the Company in
connection with the MMR Merger. The MMR Merger was approved by independent
committees of the Board of Directors of each of MMR and the Company and both
the Company and MMR received opinions from nationally-recognized investment
banking firms that the MMR Merger was fair to their respective stockholders
from a financial point of view. On April 15, 1996, the Company and SCMC
entered into the SCMC Termination Agreement pursuant to which SCMC assigned to
the Company
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<PAGE>
its rights to receive fees for consulting and marketing services payable by
each of MMR and Triathlon in consideration of which SCMC received warrants to
purchase 600,000 shares of Class A Common Stock and the Company will forgive,
upon the consummation of the MMR Merger, a $2.0 million loan made to SCMC plus
accrued and unpaid interest thereon. In addition, pursuant to such agreement,
the Company and SCMC terminated the arrangement whereby SCMC performed
financial consulting services for the Company. Subsequent to the termination
of its current relationship with SCMC, the Company intends to perform
internally the functions performed by SCMC.
On June 19, 1996, the Company and Mr. Hicks entered into an agreement
pursuant to which Mr. Hicks resigned as an officer and Director of the Company
effective on that date and agreed not to compete with the Company for the
period of approximately one year with the Company or MMR in any market in which
the Company or MMR currently owns, operates, provides programming to or sells
advertising on behalf of radio stations and any eight additional markets in
which the Company or MMR has entered into agreements to purchase one or more
radio stations on or before the consummation of the MMR Merger.
RELIANCE ON KEY PERSONNEL
Following consummation of the Acquisitions, the Company's business will
be dependent to a significant extent upon the performance of certain key
individuals, including Messrs. Sillerman, Ferrel and Armstrong. Mr. Ferrel,
Chief Executive Officer, President and Chief Operating Officer of MMR, has
agreed to become the Chief Executive Officer of the Company upon consummation of
the MMR Merger. The Company has entered into a five-year employment agreement
with each of Messrs. Sillerman and Armstrong, effective as of April 1, 1995. In
addition, the Company expects to enter into an employment agreement with Mr.
Ferrel, to be effective upon the consummation of the MMR Merger. There can be no
assurance that the services of Messrs. Sillerman, Ferrel or Armstrong will
continue to be provided for the term of such agreements. Messrs. Sillerman's and
Armstrong's employment agreements require, and Mr. Ferrel's employment agreement
will require, that they devote substantially all of their business time to the
business and affairs of the Company, except that Mr. Sillerman's agreement
permits him to fulfill his obligations as a director and officer of companies in
which he currently serves in such capacities and to devote a portion of his
business time to personal, non-broadcast investments or commitments or to
certain broadcast investments. It is anticipated that in the event that the MMR
Merger is not consummated, the services of Mr. Ferrel will not be available to
the Company and Mr. Sillerman will continue to serve as the Chief Executive
Officer of the Company.
The loss of the services of Messrs. Sillerman or Armstrong, or of Mr.
Ferrel (following the consummation of the MMR Merger), could have a material
adverse effect on the Company. The Company has obtained key-man insurance for
its benefit on the life of Mr. Sillerman, and intends to obtain such insurance
for Messrs. Ferrel and Armstrong effective upon the consummation of the MMR
Merger, in the amount of $5.0 million for each individual. In addition, the
Company has entered into employment agreements with several high-profile
on-air personalities. However, there can be no assurance that the Company will
be able to retain any of such employees or prevent them from competing with
the Company in the event of their departure.
DEPENDENCE ON ECONOMIC FACTORS
Because the Company derives substantially all of its revenue from the
sale of advertising time, its revenues may be adversely affected by economic
conditions which impact advertisers. In particular, because approximately 75%
of the Company's revenue has generally been derived from local advertisers,
operating results in individual geographic markets will be adversely affected
by local or regional economic downturns. Such economic downturns might have an
adverse impact
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<PAGE>
on the Company's financial condition and results of operations. In addition,
revenues of radio stations may be affected by many other factors including:
(i) the popularity of programming, including programming such as sports
programming where the Company makes long-term commitments; (ii) regulatory
restrictions on types of programming or advertising (such as beer and wine
advertising); (iii) competition within national, regional or local markets
from programming on other stations or from other media; (iv) loss of market
share to other technologies and (v) challenges to license renewals.
REGULATORY MATTERS
The radio broadcasting industry is subject to extensive regulation by
the FCC. In particular, the Company's business is dependent upon its
continuing to hold, and, in connection with acquisitions of radio stations,
upon obtaining prior FCC consent to assignments or transfers of control of,
broadcasting station operating licenses issued by the FCC. Radio broadcasting
licenses may be granted for maximum terms of seven years, although the FCC has
proposed in a recent rulemaking raising the maximum term to eight years, as
permitted by the Recent Legislation. There can be no assurance that the
Company's licenses will be renewed or that the FCC will approve any of the
Acquisitions or the Dispositions, especially if third parties challenge the
Company's renewal, acquisition or disposition applications. Third parties have
challenged certain FCC applications of the Company or the radio stations
involved in the Acquisitions. Failure to obtain the renewal of any of the
Company's principal broadcast licenses or to obtain FCC approval for an
assignment or transfer of control to the Company of a license in connection
with a station acquisition could have a material adverse effect on the
Company's business and operations. In addition, the number and locations of
radio stations the Company may acquire is limited by FCC rules and will vary
depending upon whether the interests in other radio stations or certain other
media properties of certain individuals affiliated with the Company are
attributable to those individuals. Moreover, under the FCC's cross-interest
policy, the FCC in certain instances may prohibit one party from acquiring an
attributable interest in one media outlet and a substantial non-attributable
economic interest in another media outlet in the same market, thereby
prohibiting a particular acquisition by the Company. Also, the activities of
persons who are deemed by the FCC to control the Company could adversely
affect the Company's ability to obtain license renewals and to acquire radio
stations.
The issuance of shares of Class A Common Stock, including those
issuable upon conversion of shares of Series D Preferred Stock,
that would cause Robert F.X. Sillerman not to hold directly voting
stock of the Company representing more than 50% of the total voting power of
the Company would require the Company to seek the prior consent of the FCC.
The Company intends to seek such consent at such time as it may be required. The
Certificate of Designations provides that the Company will use its best efforts
to secure all necessary consents and approvals, if any, and take all other
commercially reasonable steps to permit conversion of the Series D Preferred
Stock. Presently, due to the single majority stockholder exemption, stockholders
holding 5% or more of the total voting power of the Company do not have an
attributable interest in the Company because Mr. Sillerman owns more than 50%
of the voting power of the Company. In the event that Mr. Sillerman's voting
power in the Company dropped to 50% or less, all stockholders holding 5% or
more of the total voting power of the Company would have an attributable
interest in the Company for purposes of the FCC's local ownership rules, which
could adversely affect the Company's ability to acquire or to hold interests
in radio stations in particular markets, depending upon the other media
interests of those stockholders. The FCC has outstanding a notice of proposed
rule making that, among other things, seeks comment on whether the FCC should
modify its attribution rules by (i) restricting the availability of the single
majority stockholder exemption and (ii) attributing under certain
circumstances certain interests such as non-voting stock or debt. The Company
cannot predict the outcome of this proceeding or how it will affect the
Company's business.
As a result of the Recent Legislation, radio station acquisitions are
subject to antitrust review by the Antitrust Agencies, even if approved by the
FCC. The Antitrust Agencies have not articulated the standards that may be
applied in an antitrust review in the radio broadcasting industry. There can
be no assurance that the Antitrust Agencies will approve the Acquisitions and
Dispositions or that such antitrust review will not otherwise impact the
Company's business or its strategy.
There can be no assurance that there will not be changes in the current
regulatory requirements, the imposition of additional regulations or the
creation of new regulatory agencies, which changes would restrict or curtail
the ability of the Company to acquire, operate and dispose of stations or, in
general, to compete profitably with other operators of radio and
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other media properties. Moreover, there can be no assurance that there will
not be other regulatory changes, including aspects of deregulation, that will
result in a decline in the value of broadcasting licenses held by the Company
or adversely affect the Company's competitive position.
COMPETITION
The radio broadcasting industry is highly competitive. The financial
results of each of the Company's stations are dependent to a significant
degree upon its audience ratings and its share of the overall advertising
revenue within the station's geographic market. Each of the Company's stations
competes for audience share and advertising revenue directly with other FM and
AM radio stations, as well as with other media, within their respective
markets. The Company's audience ratings and market share are subject to change
and any adverse change in audience share and advertising ratings in any
particular market could have a material and adverse effect on the Company's
net revenues. The Recent Legislation will permit other radio broadcasting
companies to enter the markets in which the Company operates or may operate in
the future, some of which may be larger and have more financial resources than
the Company. The Company's stations also compete with other advertising media
such as newspapers, television, magazines, billboard advertising, transit
advertising and direct mail advertising. Radio broadcasting is also subject to
competition from new media technologies that are being developed or
introduced, such as the delivery of audio programming by cable television
systems or the introduction of digital audio broadcasting. Competition within
the radio broadcasting industry occurs primarily in individual markets, so
that a station in one market does not generally compete directly with stations
in other markets. Although the Company believes that each of its stations is
able to compete effectively in its market, there can be no assurance that any
of the Company's stations will be able to maintain or increase current
audience ratings and advertising revenue market share.
NO TRANSFER OF COMMON STOCK TO ALIENS
The Company's Certificate of Incorporation restricts the ownership,
voting and transfer of the Company's capital stock in accordance with the
Communications Act and the rules of the FCC to prohibit ownership of more than
25% of the Company's outstanding capital stock, or more than 25% of the voting
rights it represents (such percentage, however, is 20% in the case of those
subsidiaries that are direct holders of FCC licenses), by or for the account
of Aliens (as defined herein) or corporations otherwise subject to domination
or control by Aliens. Based upon reports filed with the Commission, the
Company believes that there are 1,071,429 shares of Class A Common Stock (the
"Nomura Shares") held by Nomura Holdings America, Inc. ("Nomura"),
representing 16.6% of the outstanding shares of Class A Common Stock and 6.5%
of the outstanding voting power of the Company. Because a substantial portion
of the common stock of Nomura is owned and voted by Aliens, the Company, in
order to comply with the requirements of the Communications Act and the rules
and regulations of the FCC promulgated thereunder, may decide not to permit or
recognize any issuance or transfer of its Common Stock or its Series D
Preferred Stock to an Alien. Failure to comply with such rules and regulations
could result in the imposition of penalties on the Company. This restriction
on transfers to Aliens may adversely affect the market for the Company's
securities, including the Series D Preferred Stock and the Class A Common
Stock. In addition, the Certificate of Incorporation provides that shares of
capital stock of the Company determined by the Company's Board of Directors to
be owned beneficially by an Alien shall always be subject to redemption by the
Company by action of the Board of Directors to the extent necessary, in the
judgment of the Board of Directors, to comply with the alien ownership
restrictions of the Communications Act and the FCC rules and regulations.
SHARES ELIGIBLE FOR FUTURE SALE
After giving effect to the transactions contemplated in the Hicks
Agreement, there will be outstanding a total of 6,533,215 shares of Class A
Common Stock and 856,126 shares of Class B Common Stock. Of these outstanding
shares, 1,308,215 shares of Class A Common Stock and all of the shares of
Class B Common Stock are "Restricted Securities," as that term is defined in
Rule 144 promulgated under the Securities Act. Of such shares, 236,786 shares
of Class A Common Stock and the 856,126 shares of Class A Common Stock
issuable upon conversion of the Class B Common Stock are currently eligible
for sale in the open market under Rule 144 (subject to the limitations set
forth herein). The Company believes that the remaining 1,071,429 shares of
Class A Common Stock (which were transferred to Nomura in December 1994) may
not be able to be sold in the open market under Rule 144 until December 8,
1996. In addition, the shares of Class
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A Common Stock held by Nomura have one demand and certain piggy-back
registration rights with respect thereto which expire on October 7, 2000. In
connection with the MMR Merger, the Company will issue shares of
Class A Common Stock and Class B Common Stock, of which approximately
18 percent, will be "Restricted Securities." The sale, or availability for
sale, of substantial amounts of Common Stock in the public market pursuant to
Rule 144 or otherwise could adversely affect the prevailing market price of the
shares of Class A Common Stock and could impair the Company's ability to raise
additional capital through the sale of equity securities.
The Company, Robert F. X. Sillerman and D. Geoffrey Armstrong, each
have agreed not to sell or otherwise dispose of an aggregate of 57,506 shares
of Class A Common Stock and 856,126 shares of Class B Common Stock or sell or
grant any rights, options or warrants with respect to Common Stock or
securities convertible into Common Stock, without the prior consent of
Goldman, Sachs & Co., until August 29, 1996.
In addition, each of Robert F.X. Sillerman, D. Geoffrey Armstrong,
Howard J. Tytel and Richard A. Liese, each a director of
the Company, and SCMC, have agreed not to exercise any rights, options or
warrants to acquire Class A Common Stock and Mr. Sillerman has
further agreed not to transfer any shares of Class B Common Stock that he
holds until the stockholders of the Company have approved an increase in the
number of authorized shares of Class A Common Stock sufficient to insure the
availability of all shares of Class A Common Stock issuable upon conversion of
the Series D Preferred Stock, or the Exchange Notes, as the case may be, and
all options, rights and warrants to purchase shares of Class A Common Stock.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER.
Although the Series D Preferred Stock is, and the Exchange Notes are
eligible for, trading in PORTAL by "qualified institutional buyers" ("QIBs")
as defined in Rule 144A under the Securities Act and "accredited investors" as
defined in Rule 501 promulgated under the Securities Act, there can be no
assurance as to the liquidity of the markets for the Series D Preferred Stock
or the Exchange Notes, the ability of holders of the Series D Preferred Stock
or the Exchange Notes to sell such securities or the price at which holders
would be able to sell. Future trading prices of the Series D Preferred Stock
or the Exchange Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's operating results and the
market for similar securities. The Initial Purchasers of the Series D
Preferred Stock have advised the Company that they currently intend to make a
market in the Series D Preferred Stock and the Exchange Notes, in the event
that the Exchange Notes are issued upon exchange of the Series D Preferred
Stock. However, the Initial Purchasers are not obligated to do so and any
market making may be discontinued at any time without notice. The Company does
not intend to apply for listing of the Series D Preferred Stock offered hereby
or the Exchange Notes on any securities exchange.
SELLING SECURITYHOLDERS
The Registration Statement has been filed pursuant to Rule 415 under
the Securities Act to afford the holders of the Securities the opportunity to
sell such Securities in a public transaction rather than pursuant to an
exemption from the registration and prospectus delivery requirements of the
Securities Act. In order to avail itself of that opportunity, a holder must
notify the Company in writing of its intention to sell Securities and request
the Company to file a supplement to this Prospectus or an amendment to the
Registration Statement identifying such holder as a Selling Securityholder and
disclosing such other information concerning the Selling Securityholder and
the Securities to be sold as may then be required by the Securities Act and
the rules and regulations thereunder, as applicable. No offer or sale pursuant
to this Prospectus may be made by any holder until such a request has been
made and until any such supplement has been filed or any such amendment has
become effective. The holders of Securities who have made such a request and
as to which any such required supplement or amendment has been filed or become
effective are referred to herein as "Selling Securityholders."
As of the date of this Prospectus, no holder of Securities has made
such a request and, accordingly, no Selling Securityholders are named herein.
The Company will from time to time supplement or amend this Prospectus to
reflect the required information concerning any Selling Securityholders.
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The Company has agreed to bear all expenses (other than expenses
incurred by any holder of Securities, including fees and expenses of counsel
and other advisors retained by such holder, in excess of $30,000.00 in the
aggregate) in connection with the registration and sale of the Securities
covered by this Prospectus.
No holder of shares of Series D Preferred Stock has, as of the date
hereof, converted such shares into shares of Class A Common Stock or exchanged
such shares for Exchange Notes.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of any
of the Securities offered hereby, all of which are being offered directly by
the Selling Securityholders. The sale of the Securities may be effected by the
Selling Securityholders from time to time in transactions on PORTAL or in the
over-the-counter market, in negotiated transactions or a combination of such
methods of sale, in each such case, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Securityholders may effect
such transactions by selling Securities to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from Selling Securityholders and/or purchasers of
Securities for whom such broker-dealers may act as agents or to whom they sell
as principals, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions). The Company has agreed to keep
this Registration Statement effective until May 31, 1999.
At the time a particular offer of Securities is made, a supplemental
Prospectus will be distributed which will set forth the number of Securities
being offered and the terms of the offering including the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter
for the Securities purchased from the Selling Securityholders, any discounts,
commissions and other items constituting compensation from the Selling
Securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers.
In order to comply with certain state securities laws, if applicable,
the Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Securities may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with by the Company and the Selling
Securityholder.
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with Selling Securityholders in the distribution
of Securities may be deemed to be "underwriters" as defined in the Securities
Act in which event all brokerage commissions or discounts and other
compensation received by such Selling Securityholders, broker-dealers, agents
or underwriters may be deemed underwriting compensation under the Securities
Act. In addition, any of the Securities that qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than this Prospectus.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of Securities may not simultaneously engage
in market making activities with respect to the Company's securities for
specified periods prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Securityholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of
Class A Common Stock by the Selling Securityholders.
The Company has agreed to indemnify Selling Securityholders against
certain civil liabilities in connection with the Registration Statement,
including certain liabilities under the Securities Act.
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DESCRIPTION OF SERIES D PREFERRED STOCK AND EXCHANGE NOTES
GENERAL
The following is a summary of certain terms of the Series D Preferred
Stock offered hereby. The terms of the Series D Preferred Stock are set forth
in the Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof (the "Certificate of Designations"). This
summary is not intended to be complete and is subject to, and qualified in its
entirety by reference to, the Company's Amended and Restated Certificate of
Incorporation, which includes the Certificate of Designations, including the
definitions therein of certain terms used below. Copies of the Amended and
Restated Certificate of Incorporation and the Certificate of Designations will
be made available as set forth under "Available Information" and
"Incorporation of Certain Documents by Reference." The definitions of certain
terms used in the following summary are set forth below under "-- Certain
Definitions."
Pursuant to the Certificate of Designations, 2,990,000 shares of Series
D Preferred Stock with a liquidation preference of $50 per share (the
"Liquidation Preference") were authorized and issued in the Series D Preferred
Stock Offering. The Series D Preferred Stock is fully paid and nonassessable,
and Holders thereof have no preemptive rights in connection therewith.
The Liquidation Preference of the Series D Preferred Stock is not
necessarily indicative of the price at which shares of the Series D Preferred
Stock actually trade, and the Series D Preferred Stock may trade at prices
below its Liquidation Preference. The market price of the Series D Preferred
Stock can be expected to fluctuate with changes in the financial markets and
economic conditions, the financial condition and prospects of the Company and
other factors that generally influence the market prices of securities. See
"Risk Factors."
The transfer agent for the Series D Preferred Stock is The Bank of New
York unless and until a successor is selected by the Company (the "Transfer
Agent"). The offices of the Transfer Agent are located in New York City at One
Wall Street, New York, New York 10286.
RANKING
The Series D Preferred Stock ranks senior in right of payment to every
other class or series of capital stock of the Company as to dividends and upon
liquidation, dissolution or winding up of the Company. The Certificate of
Designations provides that the Company may not, without the consent of the
Holders of at least a majority of the then outstanding shares of Series D
Preferred Stock, authorize, create (by way of reclassification or otherwise)
or issue any class or series of capital stock of the Company ranking on a
parity with the Series D Preferred Stock ("Parity Securities") or any
obligation or security convertible or exchangeable into or evidencing a right
to purchase, shares of any class or series Parity Securities. The Certificate
of Designations provides that the Company may not, without the consent of the
Holders of at least two-thirds of the then outstanding shares of Series D
Preferred Stock, authorize, create (by way of reclassification or otherwise)
or issue any class or series of capital stock of the Company ranking senior to
the Series D Preferred Stock ("Senior Securities") or any obligation or
security convertible or exchangeable into or evidencing a right to purchase,
shares of any class or series of Senior Securities.
DIVIDENDS
The Holders of shares of the Series D Preferred Stock are entitled to
receive, when, as and if dividends are declared by the Board of Directors out
of funds of the Company legally available therefor, cumulative preferential
dividends from the issue date of the Series D Preferred Stock accruing at the
rate per share of $3.25 per annum, or $0.8125 per quarter, payable quarterly
in arrears on February 28, May 31, August 31, and November 30 in each year or,
if any such date is not a Business Day, on the next succeeding business day
(each, a "Dividend Payment Date"), to the Holders of record as of the next
preceding February 15, May 15, August 15 and November 15 (each, a "Record
Date"). Dividends are payable in cash. The first dividend payment of $0.8125
per share of Series D Preferred Stock is payable on August 31, 1996. Dividends
payable
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on the Series D Preferred Stock will be computed on the basis of a
360-day year of twelve 30-day months and will be deemed to accrue on a daily
basis. The Series D Preferred Stock is not be redeemable unless all dividends
accrued through May 31, 1999 shall have been paid in cash. For a discussion of
certain federal income tax considerations relevant to the payment of dividends
on the Series D Preferred Stock, see "Certain Federal Income Tax
Consequences -- Dividends on Series D Preferred Stock."
Dividends on the Series D Preferred Stock accrue whether or not the
Company has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends accumulate to the extent they are not paid on the Dividend
Payment Date for the quarter to which they relate. Accumulated unpaid
dividends will bear interest at the rate of 6 1/2% per annum. The Certificate
of Designations provides that the Company will take all actions required or
permitted under Delaware law to permit the payment of dividends on the Series
D Preferred Stock.
No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the Series D
Preferred Stock with respect to any dividend period unless all dividends for
all preceding dividend periods have been declared and paid upon, or declared
and a sufficient sum set apart for the payment of such dividend upon, all
outstanding shares of Series D Preferred Stock. Unless full cumulative
dividends on all outstanding shares of Series D Preferred Stock due for all
past dividend periods shall have been declared and paid, or declared and a
sufficient sum for the payment thereof set apart, then: (i) no dividend (other
than a dividend payable solely in shares of any class of stock ranking junior
to the Series D Preferred Stock as to the payment of dividends and as to
rights in liquidation, dissolution or winding up of the affairs of the Company
("Junior Securities")) shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any shares of Junior Securities; (ii) no
other distribution shall be declared or made upon, or any sum set apart for
the payment of any distribution upon, any shares of Junior Securities; (iii)
no shares of Junior Securities shall be purchased, redeemed or otherwise
acquired or retired for value (excluding an exchange for shares of other
Junior Securities) by the Company or any of its Subsidiaries; and (iv) no
monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition or
retirement for value of any shares of Junior Securities by the Company or any
of its Subsidiaries. Holders of the Series D Preferred Stock are not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described.
VOTING RIGHTS
Holders of record of shares of the Series D Preferred Stock have no
voting rights, except as required by law and as provided in the Certificate of
Designations. The Certificate of Designations provides that upon (a) the
accumulation of accrued and unpaid dividends on the outstanding Series D
Preferred Stock in an amount equal to six full quarterly dividends (whether or
not consecutive); (b) the failure of the Company to satisfy any mandatory
redemption or repurchase obligation (including, without limitation, pursuant
to any required Change of Control Offer) with respect to the Series D
Preferred Stock; (c) the failure of the Company to make a Change of Control
Offer on the terms and in accordance with the provisions described below under
the caption "--Special Conversion Rights; Change of Control"; (d) the failure
of the Company to honor its obligations with respect to any share of Series D
Preferred Stock upon conversion thereof or (e) the failure of the Company to
comply with any of the other covenants or agreements set forth in the
Certificate of Designations and the continuance of such failure for 60
consecutive days or more (each of the events described in clauses (a), (b),
(c), (d) and (e) being referred to herein as a "Voting Rights Triggering
Event"), the number of members of the Company's Board of Directors will be
immediately and automatically increased by two, and the Holders of a majority
of the outstanding shares of Series D Preferred Stock, voting as a separate
class, will be entitled to elect two members to the Board of Directors of the
Company. Voting rights arising as a result of a Voting Rights Triggering Event
will continue until such time as all dividends in arrears on the Series D
Preferred Stock are paid in full and all other Voting Rights Triggering Events
have been cured or waived.
In addition, as provided above under "-- Ranking," the Company may not
authorize, create (by way of reclassification or otherwise) or issue (i) any
Parity Securities, or any obligation or security convertible into or
evidencing the right to purchase any Parity Securities, without the
affirmative vote or consent of the Holders of a majority of the then
outstanding shares of Series D Preferred Stock; and (ii) any Senior
Securities, or any obligation or security convertible into or evidencing
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the right to purchase Senior Securities, without the affirmative vote or
consent of the Holders of two-thirds of the then outstanding shares of Series
D Preferred Stock, in each case, voting as a separate class.
In addition, the Certificate of Designations provides that the Company
may not amend or otherwise alter its Amended and Restated Certificate of
Incorporation in any manner that adversely affects the rights of Holders of
Series D Preferred Stock or the holders of Class A Common Stock without the
affirmative vote or consent of the Holders of a majority of the
then-outstanding shares of Series D Preferred Stock.
CONVERSION RIGHTS
Each Holder of shares of Series D Preferred Stock has the right, at
such Holder's option, to convert its shares of Series D Preferred Stock into
shares of Class A Common Stock at any time, unless previously redeemed or
repurchased, at a conversion rate of 1.0987 shares of Class A Common Stock per
share of Series D Preferred Stock (the "Conversion Rate") (subject to the
adjustments described below and subject to the Company obtaining the approval
of the FCC, if required). In the event that an insufficient number of shares
of Class A Common Stock are available for issuance or the Company is
restricted by FCC rules from issuing shares of Class A Common Stock upon
conversion of any shares of Series D Preferred Stock, the Company is required
to pay to the Holder of each share of Series D Preferred Stock seeking to
convert such share an amount per share of Class A Common Stock in cash equal
to 110% of the Current Market Price of the Class A Common Stock as of the date
of such conversion (the "Conversion Payments"). The right to convert a share
of Series D Preferred Stock called for redemption or delivered for repurchase
terminates at the close of business on the Redemption Date for such Series D
Preferred Stock or the repurchase date, as the case may be. Overdue Conversion
Payments will bear interest at the rate of 6 1/2% per annum.
The right of conversion attaching to any share of Series D Preferred
Stock may be exercised by the Holder thereof by delivering the share of Series
D Preferred Stock to be converted to the office of the Conversion Agent,
accompanied by a duly signed and completed notice of conversion in form
reasonably satisfactory to the Conversion Agent. The conversion date is the
date on which the share of Series D Preferred Stock and the duly signed and
completed notice of conversion are so delivered. As promptly as practicable on
or after the conversion date, the Company will issue and deliver to the
Conversion Agent a certificate or certificates for the number of full shares
of Class A Common Stock issuable upon conversion, together with payment in
cash in lieu of any fraction of a share. Such certificate or certificates will
be delivered by the Conversion Agent to the appropriate Holder on a book-entry
basis or by mailing certificates evidencing the additional shares to the
Holders at their respective addresses set forth in the register of Holders
maintained by the Transfer Agent. All shares of Class A Common Stock issuable
upon conversion of the Series D Preferred Stock will be fully paid and
nonassessable and will rank pari passu with the other shares of Class A Common
Stock outstanding from time to time. Any Series D Preferred Stock surrendered
for conversion during the period from the close of business on any Record Date
to the opening of business on the next succeeding Dividend Payment Date must
be accompanied by payment of an amount equal to the dividends payable on such
Dividend Payment Date on the Series D Preferred Stock being surrendered for
conversion. In the case of any Series D Preferred Stock that has been
converted after any Record Date but before the next Dividend Payment Date,
dividends that are payable on such Dividend Payment Date are payable on such
Dividend Payment Date notwithstanding such conversion, and such dividends will
be paid to the Holder of such Series D Preferred Stock on such Record Date. As
a result, Holders that surrender Series D Preferred Stock for conversion on a
date that is not a Dividend Payment Date will not receive any dividends for
the period from the Dividend Payment Date next preceding the date of
conversion to the date of conversion or for any later period, even if the
shares of Series D Preferred Stock are surrendered after notice of redemption.
No other payment or adjustment for dividends, or for any dividends in respect
of shares of Class A Common Stock, will be made upon conversion. Holders of
Class A Common Stock issued upon conversion are not be entitled to receive any
dividends payable to holders of Class A Common Stock as of any record time
before the close of business on the conversion date. No fractional shares will
be issued upon conversion but, in lieu thereof, an appropriate amount will be
paid in cash by the Company based on the Current Market Price of the Class A
Common Stock at the close of business on the day of conversion.
A Holder delivering Series D Preferred Stock for conversion is not be
required to pay any taxes or duties in respect of the issue or delivery of
Class A Common Stock on conversion but is required to pay any tax or duty that
may be payable
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in respect of any transfer involved in the issue or delivery of the shares of
Class A Common Stock in a name other than that of the Holder of the Series D
Preferred Stock. Certificates representing shares of Class A Common Stock will
not be issued or delivered unless all taxes and duties, if any, payable by the
Holder have been paid.
The conversion price is subject to adjustment in certain events,
including, without duplication: (a) dividends (and other distributions) paid
in shares of Class A Common Stock of the Company, (b) subdivisions,
combinations and reclassification of any shares of Class A Common Stock, (c)
the issuance to all holders of Class A Common Stock of the Company of other
securities or rights, options or warrants entitling them to subscribe for or
purchase any shares of Class A Common Stock of the Company (collectively,
"Rights") at less than the then Current Market Price of Class A Common Stock
(determined as of the record date for stockholders entitled to receive such
other securities or rights, options or warrants), (d) subject to certain
exceptions, the issuance of shares of Class A Common Stock (or Rights) for a
consideration per share (or an exercise price per share) that is less than the
then Current Market Price of Class A Common Stock (determined as of the date
of issuance of such shares or Rights), (e) distributions to all holders of
Class A Common Stock of evidences of indebtedness of the Company, shares of
capital stock, cash or assets (including securities, but excluding those
dividends, Rights and distributions referred to above, dividends and
distributions paid exclusively in cash and distributions upon mergers or
consolidations to which the next succeeding paragraph applies), (f)
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in (e) above, or cash distributed upon a merger or
consolidation to which the next succeeding paragraph applies) to all holders
of Class A Common Stock in an aggregate amount that, combined together with
(i) other such all-cash distributions made within the preceding 12 months in
respect of which no adjustment has been made and (ii) any cash and the fair
market value of other consideration payable in respect of any tender offer or
other stock repurchase program by the Company or any of its Subsidiaries for
Class A Common Stock concluded within the preceding 12 months in respect of
which no adjustment has been made, exceeds 10% of the Company's market
capitalization (being the product of the then Current Market Price of the
Class A Common Stock and the number of shares of Class A Common Stock then
outstanding) on the record date for such distribution and (g) the successful
completion of a tender offer by the Company or any of its subsidiaries for
Class A Common Stock that involves an aggregate consideration that, together
with (i) any cash and other consideration payable in a tender offer or other
stock repurchase program by the Company or any of its subsidiaries for Class A
Common Stock expiring within 12 months preceding the expiration of such tender
offer in respect of which no adjustment has been made and (ii) the aggregate
number of any such all-cash distributions referred to in (f) above to all
holders of Class A Common Stock within the 12 months preceding the expiration
of such tender offer in respect of which no adjustments have been made,
exceeds 10% of the Company's market capitalization on the expiration of such
tender offer. The Certificate of Designations provides that the Company may
make voluntary reductions in the conversion price in addition to those
required in the foregoing provisions, provided that each such reduction is in
effect for at least 20 calendar days. The Certificate of Designations also
provides that the Company will not pay any dividend or make any distribution
to, or on behalf of the holders of, any class or series of Common Stock unless
the holders of Class A Common Stock share therein on an equal share for share
basis. No adjustment of the conversion price is required to be made until the
cumulative adjustments amount to 1.0% or more of the conversion price.
In case of any consolidation, amalgamation, arrangement or merger of
the Company with or into another Person or any merger of another Person with
or into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of any class or series
of the Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each share of Series D
Preferred Stock then outstanding will, without the consent of the Holder of
any Series D Preferred Stock, become convertible only into the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by a Holder of the number of shares of Class A Common
Stock into which such Series D Preferred Stock was convertible immediately
prior thereto (assuming such holder of Class A Common Stock failed to exercise
any rights of election and that such Series D Preferred Stock was then
convertible).
In addition, the Certificate of Designations provides that in the event
that any other transaction or event occurs as to which the foregoing
conversion price adjustment provisions are not strictly applicable but the
failure to make any adjustment would adversely affect the conversion rights
represented by the Series D Preferred Stock in accordance with the essential
intent and principles of such provisions, then, in each such case, either (i)
the Company will appoint an investment banking firm of recognized national
standing, or any other financial expert that does not (or whose directors,
officers, employees,
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affiliates or stockholders do not) have a direct or material indirect financial
interest in the Company or any of its Subsidiaries, who has not been, and, at
the time it is called upon to give independent financial advice to the Company,
is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of the Company or any of its
Subsidiaries, which will give their opinion upon or (ii) the Board of Directors
shall determine, consistent with the Board of Directors' fiduciary duties to the
Company's shareholders, the adjustment, if any, on a basis consistent with the
essential intent and principles established in the foregoing conversion price
adjustment provisions, necessary to preserve, without dilution, the conversion
rights represented by the Series D Preferred Stock. Upon receipt of such opinion
or determination, the Company will promptly mail a copy thereof to the Holders
of the Series D Preferred Stock and will make the adjustments described therein.
The Certificate of Designations provides that the Company provide to
Holders of Series D Preferred Stock reasonable notice of any event that would
result in an adjustment to the conversion price pursuant to the foregoing
paragraph so as to permit the Holders to effect a conversion of shares of
Series D Preferred Stock into shares of Class A Common Stock prior to the
occurrence of such event.
If at any time the Company makes a distribution of property to its
stockholders that would be taxable to such stockholders as a dividend for
United States federal income tax purposes (e.g., distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends on
common stock or rights to subscribe for common stock) and, pursuant to the
anti-dilution provisions of the Certificate of Designations, the number of
shares into which Series D Preferred Stock is convertible is increased, such
increase may be deemed for United States federal income tax purposes to be the
payment of a taxable dividend to Holders of Series D Preferred Stock. See
"Certain Federal Income Tax Consequences -- Adjustment of Conversion Price."
The New Credit Agreement or the Indenture may prohibit or restrict the
Company from making the Conversion Payments. Any future credit agreement or
other agreements relating to financing to which the Company becomes a party
may contain similar prohibitions or restrictions. In the event conversions
occur at a time when the Company is prohibited or restricted from making the
Conversion Payments, the Company could seek the consent of its lenders or the
holders of the Notes to make the Conversion Payments or could attempt to
refinance the borrowings that contain such prohibitions or restrictions. If
the Company does not obtain such consent or repay such borrowings, the Company
remains prohibited from making the Conversion Payments. In such case, the
Company's failure to make Conversion Payments would constitute a breach under
the Exchange Note Indenture (if in effect) which may constitute a default
under the New Credit Agreement and the Indenture. Under such circumstances,
the Company may not have the financial resources to repay all of its
obligations that would become due.
The Certificate of Designations provides that, commencing on the
earlier of (i) the consummation of the MMR Merger or (ii) December 31, 1996,
the Company will use its best efforts to secure all necessary consents and
approvals, if any, and make all necessary filings (including, without
limitation, consents and approvals of and filings with the FCC) and take all
other commercially reasonable steps to permit conversion of the Series D
Preferred Stock in accordance with the terms described above.
Exchange
On any Dividend Payment Date, the Company may, at its option, exchange
all but not less than all of the outstanding shares of Series D Preferred
Stock for Exchange Notes upon payment of all accrued and unpaid dividends;
provided that the Company will not be entitled to make the exchange if a
default under the Exchange Note Indenture or any other instrument or agreement
governing Indebtedness of the Company or any of its Subsidiaries would result
from the exchange. See "-- Description of the Exchange Notes" below for a
summary of the terms of the Exchange Notes. Holders of shares of Series D
Preferred Stock are entitled to receive $50 in principal amount of Exchange
Notes for each $50 of Liquidation Preference of Series D Preferred Stock held
by such Holder at the time of exchange, plus cash in an amount equal to all
accrued and unpaid dividends and Liquidated Damages (if any) thereon to the
date of exchange (the "Exchange Date") .
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<PAGE>
The Exchange Notes will be issuable in all appropriate denominations.
Notice of the intention to exchange will be sent by or on behalf of the
Company not more than 60 days nor less than 30 days prior to the Exchange
Date, by first class mail, postage prepaid, to each Holder of record of Series
D Preferred Stock at its registered address. In addition to any information
required by law or by the applicable rules of any exchange upon which Series D
Preferred Stock may be listed or admitted to trading, such notice will state:
(i) the Exchange Date; (ii) the place or places where certificates for such
shares are to be surrendered for exchange, including any procedures applicable
to exchanges to be accomplished through book-entry transfers; and (iii) that
dividends on the shares of Series D Preferred Stock to be exchanged will cease
to accrue on the Exchange Date. If notice of any exchange has been properly
given, and if on or before the Exchange Date the Exchange Notes have been duly
executed and authenticated and an amount in cash equal to all accrued and
unpaid dividends and Liquidated Damages (if any) thereon to the Exchange Date
has been deposited with the Transfer Agent, then on and after the close of
business on the Exchange Date, the shares of Series D Preferred Stock to be
exchanged will no longer be deemed to be outstanding and may thereafter be
issued in the same manner as the other authorized but unissued convertible
exchangeable preferred stock, but not as Series D Preferred Stock, and all
rights of the Holders thereof as stockholders of the Company will cease,
except the right of the Holders to receive upon surrender of their
certificates the Exchange Notes and all accrued and unpaid dividends and
Liquidated Damages (if any) thereon to the Exchange Date.
REDEMPTION
Mandatory Redemption
On May 31, 2007 (the "Mandatory Redemption Date"), the Company is
required to redeem (subject to the legal availability of funds therefor) all
outstanding shares of Series D Preferred Stock at a price in cash equal to the
Liquidation Preference thereof, plus accrued and unpaid dividends and
Liquidated Damages (if any) to the date of redemption. The Company is not be
required to make sinking fund payments with respect to the Series D Preferred
Stock. The Certificate of Designations provides that the Company will take all
actions required or permitted under Delaware law to permit such redemption.
Optional Redemption
The Series D Preferred Stock may not be redeemed at the option of the
Company on or prior to June 1, 1999. The Series D Preferred Stock may be
redeemed, in whole or in part, at the option of the Company on or after June
1, 1999, at the redemption prices specified below (expressed as percentages of
the Liquidation Preference thereof), in each case, together with accrued and
unpaid dividends and Liquidated Damages (if any), if any, to the date of
redemption, upon not less than 30 nor more than 60 days' prior written notice,
if redeemed during the 12-month period commencing on June 1 of each of the
years set forth below:
Year Redemption Rate
---- ---------------
1999 ....................... 104.55%
2000 ....................... 103.90%
2001 ....................... 103.25%
2002 ....................... 102.60%
2003 ....................... 101.95%
2004 ....................... 101.30%
2005 ....................... 100.65%
2006 and thereafter ........ 100.00%
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PAYMENT AND CONVERSION
All amounts payable in cash with respect to the Series D Preferred
Stock are payable in United States dollars at the office or agency of the
Company maintained for such purpose within the City and State of New York or,
at the option of the Company, payment of dividends and Liquidated Damages (if
any) may be made by check mailed to the Holders of the Series D Preferred
Stock at their respective addresses set forth in the register of Holders of
Series D Preferred Stock maintained by the Transfer Agent; provided that all
cash payments with respect to shares of Series D Preferred Stock the Holders
of which have given wire transfer instructions to the Company are required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company,
the Company's office or agency in New York is the office of the Paying Agent
maintained for such purpose.
Any payment on the Series D Preferred Stock due on any day that is not
a Business Day need not be made on such day, but may be made on the succeeding
Business Day with the same force and effect as if made on such due date.
The Company has initially appointed the Transfer Agent to act as the
Paying Agent and Conversion Agent. The Company may at any time terminate the
appointment of any Paying Agent or Conversion Agent and appoint additional or
other Paying Agents and Conversion Agents, provided that until the Series D
Preferred Stock has been delivered to the Company for cancellation, or moneys
sufficient to pay the Liquidation Preference and accrued dividends and
Liquidated Damages (if any) on the Series D Preferred Stock have been made
available for payment and either paid or returned to the Company as provided
in the Certificate of Designations, it will maintain an office or agency in
the Borough of Manhattan, The City of New York for surrender of Series D
Preferred Stock for conversion.
Dividends payable on the Series D Preferred Stock on any redemption
date or repurchase date that is a Dividend Payment Date will be paid to the
Holders of record as of the immediately preceding Record Date.
All moneys deposited with any Paying Agent or then held by the Company
in trust for the payment of the Liquidation Preference and dividends or
Liquidated Damages (if any) on any shares of Series D Preferred Stock which
remain unclaimed at the end of two years after such payment has become due and
payable will be repaid to the Company, and the Holder of such shares of Series
D Preferred Stock will thereafter look only to the Company for payment
thereof.
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock (a "reduction or decrease in capital stock"), each
Holder of shares of the Series D Preferred Stock will be entitled to payment
out of the assets of the Company available for distribution of an amount equal
to the Liquidation Preference per share of Series D Preferred Stock held by
such Holder, plus accrued and unpaid dividends and Liquidated Damages (if any)
to the date fixed for liquidation, dissolution, winding up or reduction or
decrease in capital stock, before any distribution is made on any Junior
Securities, including, without limitation, common stock of the Company. After
payment in full of the Liquidation Preference and all accrued dividends and
Liquidated Damages (if any), to which Holders of Series D Preferred Stock are
entitled, such Holders will not be entitled to any further participation in
any distribution of assets of the Company. However, neither the voluntary
sale, conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all of the property or assets
of the Company nor the consolidation or merger of the Company with or into one
or more corporations will be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company or reduction or decrease
in capital stock, unless such sale, conveyance, exchange or transfer shall be
in connection with a liquidation, dissolution or winding up of the business of
the Company or reduction or decrease in capital stock.
The Certificate of Designations does not contain any provision
requiring funds to be set aside to protect the Liquidation Preference of the
Series D Preferred Stock, although such Liquidation Preference will be
substantially in excess of the par value of the shares of the Series D
Preferred Stock.
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SPECIAL CONVERSION RIGHTS; CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of shares of
Series D Preferred Stock has the right to require the Company to repurchase
all or any part of such Holder's Series D Preferred Stock pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate Liquidation Preference thereof plus
accrued and unpaid dividends and Liquidated Damages (if any) thereon to the
date of purchase (the "Change of Control Payment").
The Company may, at its option, in lieu of paying the Change of Control
Payment in cash, pay the Change of Control Payment in shares of Class A Common
Stock valued at 95% of the Current Market Price of the Class A Common Stock
determined solely on the basis of the five trading days ending on and
including the third trading day preceding the Change of Control Payment Date;
provided that the payment may not be made in shares of Class A Common Stock
unless such shares are listed on a United States national securities exchange
or traded on the Nasdaq National Market at the time of payment.
The Certificate of Designations provides that within 30 days following
any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase all outstanding shares of Series D
Preferred Stock pursuant to the procedures required by the Certificate of
Designations and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Series D Preferred Stock
as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all shares of Series D Preferred Stock or
portions thereof properly tendered pursuant to the Change of Control Offer,
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all shares of Series D Preferred Stock or portions
thereof so tendered and (3) deliver or cause to be delivered to the Transfer
Agent the shares of Series D Preferred Stock so accepted together with an
Officers' Certificate stating the aggregate Liquidation Preference of the
shares of Series D Preferred Stock or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Series D
Preferred Stock so tendered the Change of Control Payment for such Series D
Preferred Stock, and the Transfer Agent will promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new certificate
representing the shares of Series D Preferred Stock equal in Liquidation
Preference amount to any unpurchased portion of the shares of Series D
Preferred Stock surrendered, if any. The Certificate of Designations provides
that, prior to complying with the provisions of this covenant, but in any
event within 90 days following a Change of Control, the Company will either
repay all outstanding Indebtedness or obtain the requisite consents, if any,
under all agreements governing outstanding Indebtedness to permit the
repurchase of Series D Preferred Stock required by this covenant. The Company
will publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above are applicable whether
or not any other provisions of the Certificate of Designations are applicable.
Except as described above with respect to a Change of Control, the Certificate
of Designations does not contain provisions that permit the Holders of the
Series D Preferred Stock to require that the Company repurchase or redeem the
Series D Preferred Stock in the event of a takeover, recapitalization or
similar transaction.
The New Credit Agreement is expected to prohibit the Company from
purchasing any Series D Preferred Stock prior to its maturity, and will also
provide that certain change of control events with respect to the Company
constitute a default thereunder. The Senior Subordinated Note Indenture also
contains restrictions on the ability of the Company to repurchase Series D
Preferred Stock. Any future credit agreements or other agreements relating to
Indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from purchasing Series D Preferred Stock, the
Company could seek the consent of its lenders to the purchase of Series D
Preferred Stock or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing
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Series D Preferred Stock. In such case, the Holders of a majority of the
outstanding shares of Series D Preferred Stock, voting as a separate class,
may be entitled to elect two members to the Board of Directors of the Company.
The Company will not be required to make a Change of Control Offer to
the Holders of Series D Preferred Stock upon a Change of Control if and only
if a third party makes the Change of Control Offer described above in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Certificate of Designations and purchases all shares of Series D
Preferred Stock validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principal or his Related Parties (as defined
below), (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that (A) any
"person" (as defined above), other than the Principal and his Related Parties,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time, upon the happening of an event or otherwise), directly or
indirectly, of Voting Stock of the Company having more than 35% of the
combined voting power of all classes of Voting Stock of the Company then
outstanding or (B) the Principal and his affiliates acquire, in the aggregate,
beneficial ownership (as defined above) of more than 66 2/3% of the shares of
Class A Common Stock at the time outstanding, or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of the Company and its Subsidiaries taken as
a whole. Although there is a developing body of case law interpreting the
phrase "substantially all," there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a Holder of Series D
Preferred Stock to require the Company to repurchase such Series D Preferred
Stock as a result of a sale, lease, transfer, conveyance or other disposition
of less than all of the assets of the Company and its Subsidiaries taken as a
whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Certificate of Designations or (ii) was
nominated for election or elected to such Board of Directors with the approval
of a majority of the Continuing Directors who were members of such Board at
the time of such nomination or election.
"Principal" means Robert F.X. Sillerman.
"Related Party" with respect to the Principal means (A) any spouse or
immediate family member (in the case of an individual) of the Principal or (B)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons (as defined above) beneficially
owning (as defined above) an 80% or more controlling interest of which consist
of the Principal and/or such other persons referred to in the immediately
preceding clause (A).
CERTAIN COVENANTS
Transactions with Affiliates
The Certificate of Designations provides that the Company will not, and
will not permit any of its 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
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person and (ii) the Company
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<PAGE>
delivers to the Holders (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 Holders 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) transactions between or among the Company and/or its Wholly
Owned Subsidiaries, (2) the MMR Merger and transactions and agreements
specifically contemplated by the Agreement and Plan of Merger among the
Company, SFX Merger Company and MMR as in effect on the Closing Date, (3) the
redemption or repurchase of the Existing MMR Indebtedness, (4) transactions and
agreements specifically contemplated by the Termination and Assignment Agreement
between the Company and SCMC as in effect on the Closing Date, (5) payments
required by the terms of the joint lease among the Company, SCMC and the
landlord thereunder for the Company's corporate headquarters located at 150 East
58th Street, New York, New York and any agreements directly related thereto, in
each case, as the same are in effect on the Closing Date, (6) the payment of
any dividend or the issuance of the Exchange Notes in exchange for the Series
D Preferred Stock, provided that such dividends are paid on a pro rata basis
and the Exchange Notes are issued in accordance with the terms of the
Certificate of Designations, (7) payments made by the Company to SCMC for
facilities maintenance and other services and reimbursements pursuant to the
Shared Facilities Agreement, (8) payments and other transactions by the
Company pursuant to the Management Termination Agreements and (9) any
Permitted Investment, in each case, shall not be deemed to be Affiliate
Transactions.
Payments for Consent
The Certificate of Designations provides that neither the Company nor
any of its Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of dividend or other distribution, fee or
otherwise, to any Holder of shares of Series D Preferred Stock for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of the Certificate of Designations or the Series D Preferred Stock
unless such consideration is offered to be paid and is paid to all Holders of
the Series D Preferred Stock that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
Reports
The Certificate of Designations provides that, whether or not required
by the rules and regulations the Commission, so long as any shares of Series D
Preferred Stock are outstanding, the Company will furnish to the Holders of
Series D Preferred Stock (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on
Forms 10-Q and 10-K if the Company were required to file such Forms, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company will file
a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request. In addition, the Certificate of Designations provides that, for
so long as any Series D Preferred Stock remains outstanding, the Company will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Series D Preferred Stock in
accordance with the Certificate of Designations if the requirements of the
Transfer Agent for such transfer or exchange are met. The Transfer Agent may
require a Holder, among
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other things, to furnish appropriate endorsements and transfer documents and
the Company may require a Holder to pay any taxes and fees required by law or
permitted by the Certificate of Designations.
AMENDMENT, SUPPLEMENT AND WAIVER
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any shares of Series D Preferred Stock held by a
non-consenting Holder): (i) alter the voting rights with respect to the Series
D Preferred Stock or reduce the number of shares of Series D Preferred Stock
whose Holders must consent to an amendment, supplement or waiver, (ii) reduce
the Liquidation Preference of or change the Mandatory Redemption Date of any
share of Series D Preferred Stock or alter the provisions with respect to the
redemption of the Series D Preferred Stock (other than provisions relating to
the covenant described above under the caption "-- Special Conversion Rights;
Change of Control"), (iii) reduce the rate of or change the time for payment
of dividends on any share of Series D Preferred Stock, (iv) waive a default in
the payment of dividends or Liquidated Damages (if any) on the Series D
Preferred Stock, (v) make any share of Series D Preferred Stock payable in
money other than that stated in the Certificate of Designations, (vi) make any
change in the provisions of the Certificate of Designations relating to
waivers of the rights of Holders of Series D Preferred Stock to receive the
Liquidation Preference, dividends or Liquidated Damages (if any) on the Series
D Preferred Stock, (vii) waive a redemption payment with respect to any share
of Series D Preferred Stock (other than a payment required by the covenant
described above under the caption "--Special Conversion Rights; Change of
Control") or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the covenant described under the
caption "--Special Conversion Rights; Change of Control" including the related
definitions requires the consent of the Holders of at least 75% of the shares
of Series D Preferred Stock then outstanding if such amendment would adversely
affect the rights of Holders of Series D Preferred Stock.
Notwithstanding the foregoing, without the consent of any Holder of
Series D Preferred Stock, the Company may (to the extent permitted by Delaware
law) amend or supplement the Certificate of Designations to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Series D
Preferred Stock in addition to or in place of certificated Series D Preferred
Stock or to make any change that would provide any additional rights or
benefits to the Holders of Series D Preferred Stock or that does not adversely
affect the legal rights under the Certificate of Designations of any such
Holder.
BOOK-ENTRY, DELIVERY AND FORM
The Series D Preferred Stock initially were issued in the form of one
or more Global Preferred Shares (the "Global Shares"). The Global Shares were
deposited on the date of the closing of the sale of the Series D Preferred
Stock offered hereby (the "Closing Date") with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede
& Co., as nominee of the Depositary (such nominee being referred to herein as
the "Global Share Holder").
The Depositary is a limited-purpose trust company that was created to
hold securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
Pursuant to procedures established by the Depositary, (i) upon deposit
of the Global Shares, the Depositary credited the accounts of Participants
designated by the Initial Purchasers with portions of the Liquidation
Preference amount of the Global Shares and (ii) ownership of the Series D
Preferred Stock evidenced by the Global Shares was shown on, and the transfer
of ownership thereof was effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's Participants),
the Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of
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<PAGE>
securities that they own. Consequently, the ability to transfer Series D
Preferred Stock evidenced by the Global Shares is limited to such extent.
So long as the Global Share Holder is the registered owner of any
Series D Preferred Stock, the Global Share Holder is considered the sole
Holder under the Certificate of Designations of any shares of Series D
Preferred Stock evidenced by the Global Shares. Beneficial owners of shares of
Series D Preferred Stock evidenced by the Global Shares are not considered the
owners or Holders thereof under the Certificate of Designations for any
purpose. The Company does not have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Series D Preferred
Stock.
Payments in respect of the Liquidation Preference, dividends and
Liquidated Damages (if any) on any Series D Preferred Stock registered in the
name of the Global Share Holder on the applicable record date are payable by
the Company to or at the direction of the Global Share Holder in its capacity
as the registered Holder under the Certificate of Designations. Under the
terms of the Certificate of Designations, the Company may treat the persons in
whose names Series D Preferred Stock, including the Global Shares, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, the Company does not have nor will have any responsibility or
liability for the payment of such amounts to beneficial owners of Series D
Preferred Stock. The Company believes, however, that it is currently the
policy of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Series D
Preferred Stock are governed by standing instructions and customary practice
and are the responsibility of the Depositary's Participants or the
Depositary's Indirect Participants.
The Company is not liable for any delay by the Global Share Holder or
the Depositary in identifying the beneficial owners of Series D Preferred
Stock and the Company may conclusively rely on, and will be protected in
relying on, instructions from the Global Share Holder or the Depositary for
all purposes.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest
in a Global Share may, upon request to the Company, exchange such beneficial
interest for Series D Preferred Stock in the form of registered definitive
certificates ("Certificated Securities"). Upon any such issuance, the Company
is required to register such Certificated Securities in the name of, and cause
the same to be delivered to, such person or persons (or the nominee of any
thereof). In addition, if (i) the Company notifies the Holders in writing that
the Depositary is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Holders in writing that it elects to
cause the issuance of Series D Preferred Stock in the form of Certificated
Securities under the Certificate of Designations, then, upon surrender by the
Global Share Holder of its Global Shares, Series D Preferred Stock in such
form will be issued to each person that the Global Share Holder and the
Depositary identify as being a beneficial owner of the related Series D
Preferred Stock.
SAME-DAY SETTLEMENT AND PAYMENT
The Certificate of Designations requires that payments in respect of
the Series D Preferred Stock represented by a Global Share (including
Liquidation Preference, dividends and Liquidated Damages, if any) be made by
wire transfer of immediately available funds to the accounts specified by the
Global Share Holder. With respect to Certificated Securities, the Company will
make all payments of Liquidation Preference, dividends and Liquidated Damages
(if any) by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by
mailing a check to each such Holder's registered address. The shares of Series
D Preferred Stock represented by the Global Shares are expected to be eligible
to trade in the PORTAL Market and to trade in the Depositary's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Series D Preferred Stock will, therefore, be required by the Depositary to be
settled in immediately available funds. The Company expects that secondary
trading in the Certificated Securities will also be settled in immediately
available funds.
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SHELF REGISTRATION; LIQUIDATED DAMAGES
On May 31, 1996, the Company and the Initial Purchasers entered into
the Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Company agreed to file the Shelf Registration Statement with
the Commission on the appropriate form under the Securities Act with respect
to the Series D Preferred Stock, the Exchange Notes issuable upon exchange
thereof and the Class A Common Stock issuable upon conversion to cover resales
of the Series D Preferred Stock, the Exchange Notes issuable upon exchange
thereof and the Class A Common Stock issuable upon conversion by the Holders
thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Company
will use its best efforts to cause the Shelf Registration Statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Securities" means each share of Series D
Preferred Stock until the earlier of (i) the date on which such share of
Series D Preferred Stock, such Exchange Note or such share of Class A Common
Stock has been effectively registered under the Securities Act and disposed of
in accordance with the Shelf Registration Statement or (ii) the date on which
such share of Series D Preferred Stock, such Exchange Note or such share of
Class A Common Stock is eligible to be distributed to the public pursuant to
Rule 144(k) under the Securities Act.
The Registration Rights Agreement provides that the Company will (i)
file the Shelf Registration Statement with the Commission on or prior to 45
days after the Closing Date, (ii) use its best efforts to cause the Shelf
Registration to be declared effective by the Commission on or prior to 120
days of the Closing Date and (iii) use its best efforts to maintain the
effectiveness of the Shelf Registration Statement for three years following
the Closing Date (subject to the Company's right to notify Holders that the
Prospectus contained therein ceases to be accurate and complete as a result of
material business developments for up to 120 days during such three-year
period, provided that (A) no single period may exceed 45 days and (B) such
periods in the aggregate may not exceed 60 days in any calendar year). If (a)
the Company fails to file the Shelf Registration Statement required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) such Registration Statement is not declared effective by the Commission on
or prior to the date specified for such effectiveness (the "Effectiveness
Target Date") or (c) the Shelf Registration Statement is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (c) above a "Registration Default"), then the Company will pay
Liquidated Damages to each Holder of Series D Preferred Stock, with respect to
the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 in
Liquidation Preference of Series D Preferred Stock held by such Holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 in Liquidation Preference of Series D Preferred Stock with respect
to each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum amount of Liquidated Damages of $.50 per week per
$1,000 aggregate Liquidation Preference of the shares of Series D Preferred
Stock. All accrued Liquidated Damages will be paid by the Company on each
Dividend Payment Date in cash. Such payment will be made to the Global Series
D Preferred Stock Holder by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Securities by wire transfer
to the accounts specified by them or by mailing checks to their registered
addresses if no such accounts have been specified. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Series D Preferred Stock and beneficial owners of interests
in Global Shares will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on
the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their shares of Series D
Preferred Stock or Class A Common Stock included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set
forth above.
REISSUANCE
Shares of the Series D Preferred Stock redeemed for or converted into
Class A Common Stock or otherwise acquired by the Company will assume the
status of authorized but unissued convertible exchangeable preferred stock and
may thereafter be reissued in the same manner as the other authorized but
unissued convertible exchangeable preferred stock, but not as Series D
Preferred Stock.
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<PAGE>
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Certificate of
Designations. Reference is made to the Certificate of Designations for a full
disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
"Advertising Business" means any business deriving substantially all of
its revenues from the (i) sale of advertisements and (ii) sale of products or
provision of services to any business described in clause (i) above.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of
a Person shall be deemed to be control.
"Bank Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Credit Agreement) or
commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against the sale of
receivables) or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"Broadcast Business" means any business, the majority of whose revenues
are derived from the broadcast of radio programming.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and Eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any lender
party to the New Credit Agreement or with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thomson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard
& Poor's Corporation and in each case maturing within six months after the
date of acquisition.
"Closing Date" means May 31, 1996, the date on which shares of Series D
Preferred Stock were first issued.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such
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<PAGE>
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Certificate of Designations in
the book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Current Market Price" means, with respect to any particular security
on any date of determination, the average over the 20 trading days ending on
the date immediately preceding the date of such determination of the last
reported sale price, or, if no such sale takes place on any such day, the
closing bid price, in either case as reported for consolidated transactions on
the principal national securities exchange (including the Nasdaq National
Market) on which such security is listed or admitted for trading; provided,
however, that if any event that results in an adjustment of the Conversion
Rate occurs during the period beginning on the first day of such 20-day period
and ending on the date immediately preceding the date of determination, the
Current Market Price as determined pursuant to the foregoing will be
appropriately adjusted to reflect the occurrence of such event or, if such
security is not listed on any exchange or admitted for trading on the Nasdaq
Stock Market, the Current Market Price of such security shall be the last
reported bid price for such security on the date preceding the date of such
determination provided by a New York Stock Exchange member firm designated by
the Company or, if no such member firm can provide such a bid price, as
determined in good faith by a majority of the independent directors of the
Company. In the event the Company elects to pay any Change of Control Payment
in shares of Class A Common Stock or is required to pay cash to Holders
seeking to convert shares of Series D Preferred Stock at a time when an
insufficient number of shares of Class A Common Stock are authorized for
issuance or in lieu of the issuance of a fractional share, the Current Market
Price shall be determined on the basis of the average of the five trading days
ending on and including the third trading day preceding the Change of Control
Payment Date or the date of such conversion, as the case may be.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Series D Preferred Stock or Exchange Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Notes" means the Company's 6 1/2% Convertible Subordinated
Exchange Notes due 2007 issuable in exchange for the Company's Series D
Preferred Stock.
"Existing MMR Indebtedness" means all Indebtedness of MMR and its
Subsidiaries in existence at the closing of the MMR Merger, until such amounts
are repaid.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Closing Date.
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<PAGE>
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States of
America is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Indebtedness" means, with respect to any Person, without duplication,
any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
banker's acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property or payment
obligations under an LMA or representing any Hedging Obligations, except any
such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other
Person.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities
by the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment. If the Company or any
Subsidiary of the Company sells or otherwise disposes of any Equity Interests
of any direct or indirect Subsidiary of the Company such that, after giving
effect to any such sale or disposition, such Person is no longer a Subsidiary
of the Company, the Company shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the Fair Market Value of the
Equity Interests of such Subsidiary not sold or disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Local Marketing Agreement" or "LMA" means a local marketing
arrangement, sale agreement, time brokerage agreement, management agreement or
similar arrangement pursuant to which a Person, subject to customary
preemption rights and other limitations (i) obtains the right to sell at least
a majority of the advertising inventory of a radio station of which a third
party is the licensee, (ii) obtains the right to broadcast programming and
sell advertising time during a majority of the air time of a radio station or
(iii) manages the selling operations of a radio station with respect to at
least a majority of the advertising inventory of such station.
"Management Termination Agreements" means each of (i) the termination
agreement between the Company and R. Steven Hicks, dated April 16, 1996, and
(ii) the employment agreement between the Company and D. Geoffrey Armstrong,
effective April 15, 1996, in each case, as in effect on the Closing Date.
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"Material Broadcast License" means one or more authorizations issued by
the Federal Communications Commission for the operation of AM or FM radio
stations that individually or collectively are material to the financial
condition, results of operations or prospects of the Company and its
Subsidiaries taken as a whole.
"MMR" means Multi-Market Radio, Inc., a Delaware corporation.
"MMR Merger" means the merger of SFX Merger Company, a Wholly Owned
Subsidiary of the Company, with and into MMR, pursuant to which MMR will
become a Wholly Owned Subsidiary of the Company.
"New Credit Agreement" means that certain credit agreement to be
entered into by and among the Company, the Company's Subsidiaries and the
lenders party thereto, providing for $150.0 million of borrowings, including
any related notes, guarantees, collateral documents, and other agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary of the Company; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if
after such Investment (i) such Person becomes a Subsidiary of the Company or
(ii) 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 Subsidiary of the Company; (d) 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; (e) any Investment received involuntarily; (f)
Investments in any Person (other than an Affiliate of the Company that is not
also a Subsidiary of the Company) engaged in a Broadcast Business or an
Advertising Business which Investments have an aggregate fair market value
(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 (f) that are at the time outstanding,
not to exceed $20.0 million and (g) other Investments in any Person (other
than an Affiliate of the Company that is not also a Subsidiary of the Company)
having an aggregate fair market value (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
(g) that are at the time outstanding, not to exceed $15.0 million.
"Person" means any individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"SCMC" means Sillerman Communications Management Company, a Delaware
corporation.
"SFX Merger Company" means SFX Merger Company, a Delaware corporation.
"Shared Facilities Agreement" means the Shared Facilities Agreement
between the Company and SCMC, as in effect on the Closing Date or the date of
the Exchange Note Indenture.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Voting Stock thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
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"Voting Stock" means with respect to any specified Person, Capital
Stock with voting power, under ordinary circumstances and without regard to
the occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will, if and when issued, be issued pursuant to an
indenture (the "Exchange Note Indenture") to be entered into between the
Company and Chemical Bank, as trustee (the "Exchange Note Trustee"). The terms
of the Exchange Notes will include those stated in the Exchange Note Indenture
and those made part of the Exchange Note Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Exchange
Notes will be subject to all such terms, and Holders of Exchange Notes are
referred to the Exchange Note Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Exchange
Note Indenture does not purport to be complete and is qualified in its
entirety by reference to the Exchange Note Indenture, including the
definitions therein of certain terms used below. Copies of the proposed form
of Exchange Note Indenture and Exchange Note Registration Rights Agreement are
available as set forth under "Available Information" and "Incorporation of
Certain Documents by Reference." The definitions of certain terms to be used
in the Exchange Note Indenture and in the following summary are substantially
the same as those used in the Certificate of Designations. For a description
thereof, see "Description of Series D Preferred Stock and Exchange Notes --
Certain Definitions." For a description of the registration rights with
respect to the Exchange Notes, see "Description of Series D Preferred Stock
and Exchange Notes -- Shelf Registration; Liquidated Damages."
The Exchange Notes will be limited in aggregate principal amount to the
Liquidation Preference of Series D Preferred Stock exchanged therefor, and
will mature on May 31, 2007. Interest on the Exchange Notes will accrue at the
rate of 6 1/2% per annum and will be payable semi-annually in arrears on May
31 and November 30 (each, an "Interest Payment Date"), commencing with the
first such date to occur after the date of exchange, to Holders of record on
the immediately preceding May 15 and November 15 (each, an "Exchange Note
Record Date"). Interest on the Exchange Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
and including the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium,
if any, and interest and Liquidated Damages (if any) on the Exchange Notes
will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the
Company, payment of interest and Liquidated Damages (if any) may be made by
check mailed to the Holders of the Exchange Notes at their respective
addresses set forth in the register of Holders of Exchange Notes. Until
otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Exchange Note Trustee maintained for such
purpose. The Exchange Notes will be issued in all appropriate denominations.
The Exchange Notes will be general unsecured obligations of the Company
and will be subordinated to all existing and future Senior Debt of the Company
(as defined in the Exchange Note Indenture), including the obligations of the
Company under the New Credit Agreement and the Senior Subordinated Notes. See
"-- Subordination." In addition, the Exchange Notes will be effectively
subordinated to all Indebtedness and other liabilities and commitments
(including trade payables and lease obligations) of the Company's
Subsidiaries. Any right of the Company to receive assets of any of its
Subsidiaries upon the latter's liquidation or reorganization (and the
consequent right of the holders of the Exchange Notes to participate in those
assets) will be effectively subordinated to the claims of that Subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would
still be subordinate to any security in the assets of such Subsidiary and any
indebtedness of such Subsidiary senior to that held by the Company.
CONVERSION
Each Exchange Note will be convertible at its principal amount at any
time prior to maturity into shares of Class A Common Stock at the conversion
price per share in effect at the time of the exchange of such Exchange Notes
for the Series D Preferred Stock, subject to adjustments substantially
identical to those described under "Description of Series D Preferred Stock
and Exchange Notes -- Conversion Rights" above and subject to compliance with
FCC rules and regulations.
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SUBORDINATION
The payment of principal of, premium (if any) and interest and
Liquidated Damages (if any) on the Exchange Notes will be subordinated in
right of payment, as set forth in the Exchange Note Indenture, to the prior
payment in full of all Senior Debt, whether outstanding on the date of the
Exchange Note Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, or
in an assignment for the benefit of creditors or any marshaling of Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt, whether or not an allowable claim)
before the Holders will be entitled to receive any payment with respect to the
Exchange Notes; and until all Obligations with respect to Senior Debt are paid
in full, any distribution to which the Holders would be entitled will be made
to the holders of Senior Debt (except that, in either case, Holders may
receive (i) securities that are subordinated at least to the same extent as
the Exchange Notes to Senior Debt and any securities issued in exchange for
Senior Debt and (ii) payments made from the trust described below under "--
Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the
Exchange Notes (except as described above) if (i) a default in the payment of
the principal of, premium, if any, or interest on Designated Senior Debt
occurs or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits holders of Designated Senior Debt as to
which such default relates to accelerate its maturity and the trustee receives
a notice of such default (a "Payment Blockage Notice") from the Company or the
holders of any Designated Senior Debt. Payments on the Exchange Notes may and
shall be resumed upon the date on which such default is cured or waived.
The Exchange Note Indenture will further require that the Company
promptly notify the holders of Senior Debt if payment of the Exchange Notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders may recover less ratably than
creditors of the Company who are holders of Senior Debt or other creditors of
the Company who are not subordinated to holders of Senior Debt. As of March
31, 1996, after giving pro forma effect to the Transactions, the Company would
have had approximately $450.0 million of Senior Debt outstanding.
"Designated Senior Debt" means (i) so long as any Senior Bank Debt is
outstanding, the Senior Bank Debt, (ii) so long as any Senior Subordinated
Notes are outstanding, the Senior Subordinated Notes and (iii) thereafter, any
other Senior Debt permitted under the Exchange Note Indenture, the principal
amount of which is $25.0 million or more and that has been designated by the
Company as "Designated Senior Debt."
"Senior Bank Debt" means the Indebtedness outstanding under, and any
other Obligations with respect to, Bank Facilities, to the extent that any
such Indebtedness and other Obligations are permitted by the Exchange Note
Indenture to be incurred.
"Senior Debt" means (a) the Senior Bank Debt, (b) the Senior
Subordinated Notes, (c) all additional Indebtedness that is permitted under
the Exchange Note Indenture that is not by its terms pari passu with or
subordinated to the Exchange Notes, (d) all Obligations of the Company with
respect to the foregoing clauses (a), (b) and (c), including post-petition
interest and (d) all (including all subsequent) renewals, extensions,
amendments, refinancings, repurchases or redemptions, modifications,
replacements or refundings thereto (whether or not coincident therewith) that
are permitted by the Exchange Note Indenture. Notwithstanding anything to the
contrary in the foregoing, Senior Debt shall not include (i) any Indebtedness
of the Company to any of its Subsidiaries, (ii) any Indebtedness incurred for
the purchase of goods or materials or for services obtained in the ordinary
course of business (other than with the proceeds of borrowings from banks or
other financial institutions) or (iii) any Indebtedness incurred in violation
of the Exchange Note Indenture.
REDEMPTION
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Optional Redemption
The Exchange Notes may not be redeemed at the option of the Company on
or prior to June 1, 1999. The Exchange Notes may be redeemed, in whole or in
part, at the option of the Company on or after June 1, 1999, at the redemption
prices specified below (expressed as a percentage of principal amount
thereof), in each case, together with accrued and unpaid interest and
Liquidated Damages (if any) to the date of redemption, upon not less than 30
nor more than 60 days' prior written notice, if redeemed during the 12-month
period commencing on June 1 of each of the years set forth below:
YEAR REDEMPTION RATE
---- ---------------
1999 ................. 104.55%
2000 ................. 103.90%
2001 ................. 103.25%
2002 ................. 102.60%
2003 ................. 101.95%
2004 ................. 101.30%
2005 ................. 100.65%
2006 and thereafter .. 100.00%
PAYMENT AND CONVERSION
The Exchange Notes will be payable in United States dollars, against
surrender thereof at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the
Company, payment of interest and Liquidated Damages (if any) may be made by
check mailed to the Holders of the Exchange Notes at their respective
addresses set forth in the register of Holders of Exchange Notes; provided
that all payments with respect to Exchange Notes the Holders of which have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Paying Agent maintained
for such purpose.
Any payment on the Exchange Notes due on any day that is not a Business
Day need not be made on such day, but may be made on the succeeding Business
Day with the same force and effect as if made on such due date.
The Company has initially appointed The Bank of New York as Paying
Agent and Conversion Agent. The Company may at any time terminate the
appointment of any Paying Agent or Conversion Agent and appoint additional or
other Paying Agents and Conversion Agents, provided that until the Exchange
Notes have been delivered to the Company for cancellation, or moneys
sufficient to pay the principal or, premium, if any, and interest on the
Exchange Notes have been made available for payment and either paid or
returned to the Company as provided in the Certificate of Designations, it
will maintain an office or agency in the Borough of Manhattan, The City of New
York for surrender of Exchange Notes for conversion.
Interest payable on the Exchange Notes on any redemption date or
repurchase date that is an Interest Payment Date will be paid to the Holders
of record as of the immediately preceding Exchange Note Record Date.
All moneys deposited with any Paying Agent or then held by the Company
in trust for the payment of principal of, premium, if any, and interest on any
Exchange Notes which remain unclaimed at the end of two years after such
payment
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has become due and payable will be repaid to the Company, and the
Holder of such Exchange Notes will thereafter look only to Company for payment
thereof.
SPECIAL CONVERSION RIGHTS; CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Exchange
Notes will have the right to require the Company to repurchase all or any part
of such Holder's Exchange Notes pursuant to the offer described below (the
"Note Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages (if any) thereon to the date of purchase (the "Note Change
of Control Payment").
The Company may, at its option, in lieu of paying the Note Change of
Control Payment in cash, pay the Note Change of Control Payment in shares of
Class A Common Stock valued at 95% of the Current Market Price of the Class A
Common Stock determined solely on the basis of the five trading days ending on
and including the third trading day preceding the Note Change of Control
Payment Date; provided that the payment may not be made in shares of Class A
Common Stock unless such shares are listed on a United States national
securities exchange or traded on Nasdaq at the time of payment.
Within ten days following any Change of Control, the Company will mail
a notice to each Holder of Exchange Notes describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Exchange Notes pursuant to the procedures required by the Exchange Note
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Exchange Notes as a result
of a Change of Control.
On the Note Change of Control Payment Date, the Company will, to the
extent lawful, (1) accept for payment all Exchange Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with
the Paying Agent an amount equal to the Note Change of Control Payment in
respect of all Exchange Notes or portions thereof so tendered and (3) deliver
or cause to be delivered to the Trustee the Exchange Notes so accepted
together with an Officers' Certificate stating the aggregate principal amount
of Exchange Notes or portions thereof being purchased by the Company. The
Paying Agent will promptly mail to each Holder of Exchange Notes so tendered
the Note Change of Control Payment for such Exchange Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder new Exchange Notes equal in aggregate principal amount to any
unpurchased portion of the Exchange Notes surrendered, if any. The Exchange
Note Indenture will provide that, prior to complying with the provisions of
this covenant, but in any event within 90 days following a Change of Control,
the Company will either repay all outstanding Senior Debt or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Debt to permit the repurchase of Exchange Notes required by this covenant. The
Company will publicly announce the results of the Note Change of Control Offer
on or as soon as practicable after the Note Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Exchange Note Indenture are
applicable. Except as described above with respect to a Change of Control, the
Exchange Note Indenture does not contain provisions that permit the Holders of
the Exchange Notes to require that the Company repurchase or redeem the
Exchange Notes in the event of a takeover, recapitalization or similar
transaction.
The New Credit Agreement is expected to prohibit the Company from
purchasing any Exchange Note prior to maturity, and is also expected to
provide that certain change of control events with respect to the Company
would constitute a default thereunder. The Senior Subordinated Note Indenture
also contains restrictions on the ability of the Company to repurchase Series
D Preferred Stock. Any future credit agreements or other agreements relating
to Senior Debt to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from purchasing Exchange Notes, the Company
could seek the consent of its lenders to the purchase of Exchange Notes or
could attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing Exchange Notes.
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In such case, the Company's failure to purchase tendered Exchange Notes would
constitute an Event of Default under the Exchange Note Indenture which would,
in turn, constitute a default under the New Credit Agreement.
The Company will not be required to make a Note Change of Control Offer
to the Holders of Exchange Notes upon a Change of Control if and only if a
third party makes the Note Change of Control Offer described above in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Exchange Note Indenture applicable to a Note Change of Control
Offer made by the Company and purchases all Exchange Notes validly tendered
and not withdrawn under such Note Change of Control Offer.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principal or his Related Parties (as defined
below), (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that (A) any
"person" (as defined above), other than the Principal and his Related Parties,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time, upon the happening of an event or otherwise), directly or
indirectly, of Voting Stock of the Company having more than 35% of the
combined voting power of all classes of Voting Stock of the Company then
outstanding or (B) the Principal and his affiliates acquire, in the aggregate,
beneficial ownership (as defined above) of more than 662/3% of the shares of
Class A Common Stock at the time outstanding, or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of the Company and its Subsidiaries taken as
a whole. Although there is a developing body of case law interpreting the
phrase "substantially all," there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a Holder of Exchange
Notes to require the Company to repurchase such Exchange Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries taken as a whole to another
Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Exchange Note Indenture or (ii) was
nominated for election or elected to such Board of Directors with the approval
of a majority of the Continuing Directors who were members of such Board at
the time of such nomination or election.
"Principal" means Robert F.X. Sillerman.
"Related Party" with respect to the Principal means (A) any spouse or
immediate family member (in the case of an individual) of the Principal or (B)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons (as defined above) beneficially
owning (as defined above) an 80% or more controlling interest of which consist
of the Principal and/or such other persons referred to in the immediately
preceding clause (A).
CERTAIN COVENANTS
Transactions with Affiliates
The Exchange Note Indenture will provide that the Company will not, and
will not permit any of its 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
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been
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obtained in a comparable transaction by the Company or such 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 Holders 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) transactions between or
among the Company and/or its Wholly Owned Subsidiaries, (2) the MMR Merger and
transactions and agreements specifically contemplated by the Agreement and
Plan of Merger among the Company, SFX Merger Company and MMR as in effect on
the date of the Exchange Note Indenture, (3) the redemption or repurchase of
the Existing MMR Indebtedness, (4) transactions and agreements specifically
contemplated by the Termination and Assignment Agreement between the Company
and SCMC as in effect on the date of the Exchange Note Indenture, (5) required
by the terms of the joint lease among the Company, SCMC and the landlord
thereunder for the Company's corporate headquarters located at 150 East 58th
Street, New York, New York and any agreements directly related thereto, in
each case, as the same are in effect on the date of the Exchange Note
Indenture and (6) the payment of any dividend or the issuance of the Exchange
Notes in exchange for the Series D Preferred Stock, provided that such
dividends are paid on a pro rata basis and the Exchange Notes are issued in
accordance with the terms of the Certificate of Designations, (7) made by the
Company to SCMC for facilities maintenance and other services and
reimbursements pursuant to the Shared Facilities Agreement, (8) and other
transactions by the Company pursuant to the Management Termination Agreements
and (9) any Permitted Investment, in each case, shall not be deemed to be
Affiliate Transactions.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Exchange Note Indenture will provide that the Company may not
consolidate or merge with or into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company
is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Exchange Notes and
the Exchange Note Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) such transaction will
not result in the loss or suspension or material impairment of any Material
Broadcast License; and (v) except in the case of a merger of the Company with
or into a Wholly Owned Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction.
PAYMENTS FOR CONSENT
The Exchange Note Indenture will provide that neither the Company nor
any of its Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of Exchange Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Exchange Note Indenture or the
Exchange Notes unless such consideration is offered to be paid and is paid to
all Holders of the Exchange Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
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The Exchange Note Indenture will provide that, whether or not required
by the rules and regulations of the Commission, so long as any Exchange Notes
are outstanding, the Company will furnish to the Trustee and to the Holders of
Exchange Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company has agreed that, for so long as any Exchange
Notes remain outstanding, it will furnish to the Holders of Exchange Notes,
and to securities analysts and prospective investors upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Exchange Note Indenture will provide that each of the following
constitutes an Event of Default: (i) default for 30 days in the payment when
due of interest on, or Liquidated Damages with respect to, the Exchange Notes
(whether or not prohibited by the subordination provisions of the Exchange
Note Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Exchange Notes (whether or not prohibited by the
subordination provisions of the Exchange Note Indenture); (iii) failure by the
Company to comply with any of the provisions described under the caption "--
Special Conversion Rights; Change of Control"; (iv) failure by the Company to
honor any of its obligation with respect to any Exchange Note upon conversion
thereof; (v) failure by the Company for 60 days after notice to comply with
any of its other agreements in the Exchange Note Indenture or the Exchange
Notes; (vi) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the
date of the Exchange Note Indenture, which default results in the acceleration
of such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount
of any other such Indebtedness the maturity of which has been so accelerated,
aggregates $25.0 million or more; (vii) failure by the Company or any of its
Subsidiaries to pay final judgments aggregating in excess of $25.0 million,
which judgments are not paid, discharged or stayed for a period of 60 days;
and (viii) certain events of bankruptcy or insolvency with respect to the
Company, any of its Significant Subsidiaries or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Exchange
Notes may declare all the Exchange Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary, all outstanding Exchange Notes will
become due and payable without further action or notice. Holders of the
Exchange Notes may not enforce the Exchange Note Indenture or the Exchange
Notes except as provided in the Exchange Note Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Exchange Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Exchange Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Exchange Notes
pursuant to the optional redemption provisions of the Exchange Note Indenture,
an equivalent premium shall also become and be immediately due and payable to
the extent permitted by law upon the acceleration of the Exchange Notes. If an
Event of Default occurs prior to May 31, 1999 by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Exchange Notes
prior to May 31, 1999, then the premium specified in the Exchange Note
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Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Exchange Notes.
The Holders of a majority in aggregate principal amount of the Exchange
Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Exchange Notes waive any existing Default or Event of Default
and its consequences under the Exchange Note Indenture except a continuing
Default or Event of Default in the payment of
interest on, or the principal of, the Exchange Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Exchange Note Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Exchange Notes
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Exchange Notes to receive payments in respect of the principal of, premium, if
any, and interest and Liquidated Damages (if any) on such Exchange Notes when
such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Exchange Notes concerning issuing temporary
Exchange Notes, registration of Exchange Notes, mutilated, destroyed, lost or
stolen Exchange Notes and the maintenance of an office or agency for payment
and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Exchange
Indenture. In addition, the Company may, at its option and at any time, elect
to have the obligations of the Company released with respect to certain
covenants that are described in the Exchange Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the Exchange Notes.
In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages (if any) on the outstanding Exchange Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Exchange Notes are being defeased to maturity
or to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Exchange Indenture,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Exchange Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance,
the Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that the Holders
of the outstanding Exchange Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit (or greater period of time in which any such deposit of trust funds
may remain subject to bankruptcy or insolvency laws insofar as those apply to
the deposit by the Company); (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound; (vi) the Company
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must have delivered to the Trustee an opinion of counsel to the effect that, as
of the date of suchopinion, (A) the trust funds will not be subject to rights of
holders of Indebtedness other than the Exchange Notes and (B) assuming no
intervening bankruptcy of the Company between the date of deposit and the 91st
day following the deposit and assuming no Holder of Exchange Notes is an insider
of the Company, after the 91st day following the deposit, the trust funds will
not be subject to the effects of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under any
applicable United States or state law; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Exchange Notes over the
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and (viii) the
Company must deliver to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Exchange Notes in accordance with the
Exchange Note Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Exchange Note Indenture. The Company is not required to
transfer or exchange any Note selected for redemption. Also, the Company is
not required to transfer or exchange any Note for a period of 15 days before a
selection of Exchange Notes to be redeemed.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Exchange
Note Indenture may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the Exchange Notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Exchange Notes),
and any existing default or compliance with any provision of Exchange Note
Indenture or the Exchange Notes may be waived with the consent of the Holders
of at least a majority in principal amount of the then outstanding Exchange
Notes (including consents obtained in connection with a purchase of, or tender
offer or exchange offer for, Exchange Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Exchange Notes held by a non-consenting Holder): (i)
reduce the principal amount of Exchange Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Exchange Note or alter the provisions with respect to
the redemption of the Exchange Notes (other than provisions relating to the
covenant described above under the caption "-- Special Conversion Rights;
Change of Control"), (iii) reduce the rate of or change the time for payment
of interest on any Exchange Note, (iv) waive a Default or Event of Default in
the payment of principal of or premium, if any, or interest or Liquidated
Damages (if any) on the Exchange Notes, (v) make any Exchange Note payable in
money other than that stated in the Exchange Notes, (vi) make any change in
the provisions of the Exchange Note Indenture relating to waivers of past
Defaults or the rights of Holders of Exchange Notes to receive payments of
principal of or premium, if any, or interest or Liquidated Damages (if any) on
the Exchange Notes, (vii) waive a redemption payment with respect to any
Exchange Note (other than a payment required by the covenant described above
under the caption "-- Special Conversion Rights; Change of Control") or (viii)
make any change in the foregoing amendment and waiver provisions. In addition,
any amendment to the covenant described under the caption "-- Special
Conversion Rights; Change of Control" including the related definitions will
require the consent of the Holders of at least 75% of the principal amount of
the Exchange Notes then outstanding if such amendment would adversely affect
the rights of Holders of Exchange Notes.
Notwithstanding the foregoing, without the consent of any Holder of
Exchange Notes, the Company and the Trustee may amend or supplement the
Exchange Note Indenture or the Exchange Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Exchange Notes in addition to or
in place of certificated Exchange Notes, to provide for the assumption of the
Company's obligations to Holders of Exchange Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Exchange Notes or that does not adversely affect
the legal rights under the Exchange Note Indenture of any such Holder, or to
comply with
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requirements of the Commission in order to effect or maintain the
qualification of the Exchange Note Indenture under the Trust Indenture Act.
SHELF REGISTRATION; LIQUIDATED DAMAGES
The Company and the Initial Purchasers entered into the Registration
Rights Agreement on or prior to the Closing Date. See "Description of Series D
Preferred Stock and Exchange Notes -- Shelf Registration; Liquidated Damages."
CONCERNING THE TRUSTEE
The Exchange Note Indenture contains certain limitations on the rights
of the Trustee, should it become a creditor of the Company, to obtain payment
of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Exchange Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Exchange Note Indenture provides that in
case an Event of Default shall occur (which shall not be cured), the Trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Exchange Note Indenture at the request of any Holder of Exchange
Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 10,000,000
shares of Class A Common Stock, 1,000,000 shares of Class B Common Stock,
1,200,000 shares of Class C Common Stock and 10,010,000 shares of preferred
stock. In connection with the MMR Merger and the Preferred Stock Offering, the
Company's stockholders will consider an amendment to the Company's Certificate
of Incorporation to increase the authorized shares of Class A Common Stock and
Class B Common Stock. Subsequent to the completion of the Financing, the
Company has outstanding 6,458,215 shares of Class A Common Stock, 1,000,000
shares of Class B Common Stock, 2,000 shares of Series B Preferred Stock and
2,990,000 shares of Series D Preferred Stock. Upon completion of the
Transactions and the MMR Merger, the Company will have outstanding 8,381,262
shares of Class A Common Stock, 1,086,146 shares of Class B Common Stock,
2,000 shares of Series B Preferred Stock and 2,990,000 shares of Series D
Preferred Stock. In connection with the Preferred Stock Offering, the Company
has reserved for issuance 3,282,659 shares of Class A Common Stock issuable
upon the conversion of the Series D Preferred Stock, or the Exchange Notes as
the case may be. Accordingly, the Company will not be able to issue shares of
Class A Common Stock upon the conversion of all of the shares of Series D
Preferred Stock or the Exchange Notes, as the case may be, until the
stockholders of the Company have approved the increase in the number of
authorized shares of Class A Common Stock, as to which there can be no
assurance. In order to reserve shares of Class A Common Stock available for
issuance upon conversion of substantially all of the shares of Series D
Preferred Stock, or the Exchange Notes as the case may be, the holders of
options to purchase approximately 962,000 shares of Class A Common Stock and
the holders of approximately 850,000 shares of Class B Common Stock have
agreed not to exercise such options or convert such shares of Class B Common
Stock into shares of Class A Common Stock until such time as the Company has
increased the number of shares of Class A Common Stock available for issuance.
The following description of the authorized capital stock of the Company is a
summary and is qualified in its entirety by the provisions of the Company's
Certificate of Incorporation.
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COMMON STOCK
Dividends. Holders of shares of Common Stock are entitled to receive
such dividends as may be declared by the Board of Directors out of funds
legally available for such purpose. No dividend may be declared or paid in
cash or property on any share of any class of Common Stock, however, unless
simultaneously the same dividend is declared or paid on each share of the
other classes of Common Stock. In the case of any stock dividend, holders of
Class A Common Stock are entitled to receive the same percentage dividend
(payable in shares of Class A Common Stock) as the holders of Class B Common
Stock (payable in shares of Class B Common Stock). The payment of dividends is
limited by the Old Indenture and the Old Credit Agreement and is expected to
be limited by the terms of the Notes and the Indenture and other indebtedness
incurred after the consummation of the Offering.
Voting Rights. Holders of shares of Class A Common Stock and Class B
Common Stock vote as a single class on all matters submitted to a vote of the
stockholders, with each share of Class A Common Stock entitled to one vote and
each share of Class B Common Stock entitled to ten votes, except (i) for the
election of directors, (ii) with respect to any "going private" transaction
between the Company and Mr. Sillerman or any of his affiliates and (iii) as
otherwise provided by law.
In the election of directors, the holders of Class A Common Stock,
voting as a separate class, are entitled to elect two-sevenths (two currently)
of the Company's directors. Any person nominated by the Board of Directors for
election by the holders of Class A Common Stock as a director of the Company
must be qualified to be an Independent Director. In the event of the death,
removal or resignation of a director elected by the holders of Class A Common
Stock prior to the expiration of his term, the vacancy on the Board of
Directors created thereby may be filled by a person appointed by a majority of
the directors then in office, although less than a quorum. Any person
appointed to fill any such vacancy must, however, be qualified to be an
Independent Director. Any director elected by the holders of Class A Common
Stock or appointed by the Board of Directors as specified in this paragraph is
referred to in this Offering Circular as a "Class A Director." The holders of
Class A Common Stock and Class B Common Stock voting as a single class, with
each share of Class A Common Stock entitled to one vote and each share of
Class B Common Stock entitled to ten votes, are entitled to elect the
remaining directors. The holders of Common Stock are not entitled to
cumulative votes in the election of directors.
Each of Mr. Sillerman and SCMC has agreed to abstain, and has agreed to
cause each of his and its respective affiliated transferees to abstain, from
voting in any election of Class A Directors.
The holders of the Class A Common Stock and Class B Common Stock vote
as a single class with respect to any proposed "going private" transaction
with Mr. Sillerman or any of his affiliates, with each share of Class A Common
Stock and Class B Common Stock entitled to one vote.
Under Delaware law, the affirmative vote of the holders of a majority
outstanding shares of any class of Common Stock is required to approve, among
other things, a change in the designations, preferences or limitations of the
shares of such class of Common Stock.
Liquidation Rights. Upon liquidation, dissolution, or winding-up of the
Company, the holders of Class A Common Stock are entitled to share ratably
with the holders of Class B Common Stock all assets available for distribution
after payment in full of creditors.
Other Provisions. Each share of Class B Common Stock is convertible,
subject to compliance with FCC rules and regulations, at the option of its
holder, into one share of Class A Common Stock at any time. Each share of
Class B Common Stock converts automatically into one share of Class A Common
Stock upon its sale or other transfer to a party not affiliated with the
Company, subject (as are all conversions of the Company's capital stock) to
compliance with FCC rules and regulations. The holders of Common Stock are not
entitled to preemptive or subscription rights. The shares of Common Stock
presently outstanding are validly issued, fully-paid and nonassessable. In any
merger, consolidation or business combination, the consideration to be
received per share by holders of Class A Common Stock must be identical to
that received by holders of Class B Common Stock, except that in any such
transaction in which shares of Common Stock are distributed, such shares may
differ as to voting rights to the extent that voting rights now differ among
the classes of Common
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Stock. No class of Common Stock may be subdivided, consolidated, reclassified
or otherwise changed unless concurrently the other classes of Common Stock are
subdivided, consolidated, reclassified or otherwise changed in the same
proportion and in the same manner.
PREFERRED STOCK
General. The Company's outstanding preferred stock consists of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
SERIES B PREFERRED STOCK
Dividends. No dividends are payable on the Series B Preferred Stock.
Voting Rights. The holders of record of the Series B Preferred Stock
are not entitled to voting rights, except as otherwise required by law.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Company, the
holders of the Series B Preferred Stock are entitled to be paid out of the
assets or surplus funds of the Company available for distribution, or proceeds
thereof, an amount in cash equal to $1,000 for each share outstanding before
any payment will be made upon, or assets distributed to the holders of, Common
Stock or any other capital stock of the Company. If the assets of the Company
are insufficient to pay in full the liquidation payments payable to the
holders of the Series B Preferred Stock and any other class or series of a
class of capital stock of the Company, the terms of which expressly provide
that the shares thereof rank on a parity as to the payment of dividends and
the distribution of assets upon the liquidation, dissolution or winding-up of
the Company with the Series B Preferred Stock, such holders share ratably to
such distribution of assets or proceeds in proportion to the amount payable on
such distribution if the amount to which the holders of the Series B Preferred
Stock are entitled if paid in full.
Redemption. The Company redeemed all of the shares of Series A
Preferred Stock in October, 1994 at the liquidation value of $1,000 per share.
The Company was obligated to redeem the Series B Preferred Stock in equal
amounts of 1,000 shares in October 1995, 1996, 1997 and 1998 at the
liquidation value of $1,000 per share. In January 1994, the Company
repurchased the 1,000 shares of Series B Preferred Stock due October 1998 for
$750,000. The $168,000 excess of the repurchase price over the accreted value
of the shares was recorded as an adjustment to the purchase price of Command.
Conversion Rights. The Series B Preferred Stock does not have any
conversion rights.
SERIES C PREFERRED STOCK
Dividends. The holders of the Series C Preferred Stock (the "Series C
Preferred Stock") are entitled to cumulative dividends equal to six percent
(6%) per annum of the liquidation preference of each share of Series C
Redeemable Preferred Stock payable quarterly in arrears.
Voting Rights. The holders of the Series C Preferred Stock are not
entitled to voting rights, except as otherwise required by law.
Redemption. The Company is entitled, at its option, to redeem the
Series C Redeemable Preferred Stock, in whole or in part at any time, and from
time to time, until September 13, 1998 at a redemption price per share equal
to one hundred per cent (100%) of the liquidation preference (as defined
below) per share, together with all accrued and unpaid dividends for the
shares of Series C Preferred Stock so redeemed (collectively, the "Redemption
Price"). The holders of the Series C Preferred Stock are entitled, at their
option, to cause the Company to purchase the Series C Preferred Stock, in
whole or in part, after September 13, 2000 at the Redemption Price.
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Conversion Rights. Upon an occurrence of an event of default (as such
term is defined in the Certificate of Designations of the Series C Preferred
Stock), which is not cured within 90 days after receipt of notice of such
default, the holder of the Series C Preferred Stock are entitled to convert
their shares of Series C Redeemable Preferred Stock then outstanding into the
number of shares of Class A Common Stock that shall be determined by dividing
the number of shares of Series C Preferred Stock then outstanding by the
product of seventy-five percent (75%) multiplied by the average closing bid
and ask price per share for the Class A Common Stock quoted on the Nasdaq
National Market or any successor exchange on which the Class A Common Stock is
listed for the thirty (30) day period immediately prior to the effective date
of the conversion.
Liquidation Rights. In the event of liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, the holders of
shares of Series C Preferred Stock then outstanding, shall be entitled to
receive out of the assets or surplus funds of the Company available any
distribution to stockholders, or proceeds thereof, whether from capital,
surplus or earnings, before any distribution is made to holders of Class A
Common Stock, a liquidation preference in the amount per share of Series C
Preferred Stock equal to One Thousand Dollars ($1,000) (the "Liquidation
Preference").
SERIES D PREFERRED STOCK
For a description of the terms of the Series D Preferred Stock, see
"Description of Series D Preferred Stock and Exchange Notes."
TRANSFER AGENT
Chemical Mellon Shareholder Services L.L.C. is the Transfer Agent and
Registrar for the Class A Common Stock and the Class B Common Stock and The
Bank of New York is the Transfer Agent and Registrar with respect to the
Series D Preferred Stock.
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND STATUTE
Directors' Liability. The General Corporation Law of the State of
Delaware (the "Delaware Law") provides that a corporation may limit the
liability of each director to the corporation or its stockholders for monetary
damages except for liability (i) for any breach of the directors duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock
redemptions or repurchases and (iv) for any transaction from which the
director derives an improper personal benefit. The Certificate of
Incorporation provides for the elimination and limitation of the personal
liability of directors of the Company for monetary damages to the fullest
extent permitted by Delaware Law. In addition, the Certificate of
Incorporation provides that if the Delaware Law is amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of the directors shall be eliminated or limited to the fullest
extent permitted by the Delaware Law, as so amended. The effect of this
provision is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care
as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(iv) above. This provision does not limit or eliminate the rights of the
Company or any stockholder to seek non-monetary relief such as an injunction
or rescission in the event of a breach of a director's duty of care.
Section 203 of Delaware Law. The Company is subject to the "business
combination" statute of the Delaware Law, an anti-takeover law enacted in
1988. In general, Section 203 of the Delaware Law prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder," for a period of three years after the date of the
transaction in which the person became an "interested stockholder," unless (a)
prior to such date the board of directors of the corporation approved either
the "business combination" or the transaction which resulted in the
stockholder becoming an "interested stockholder," (b) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder" owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of
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shares outstanding those shares owned (i) by persons who are directors and
also officers and (ii) employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer, or (c) on or
subsequent to such date the "business combination" is approved by the board of
directors and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 662/3% of the outstanding voting stock which
is not owned by the "interested stockholder." A "business combination"
includes mergers, stock or asset sales and other transactions resulting in a
financial benefit to the "interested stockholders." An "interested
stockholder" is a person who, together with affiliates and associates, owns
(or within three years, did own) 15% or more of the corporation's voting
stock. Although Section 203 permits the Company to elect not to be governed by
its provisions, the Company to date has not made this election. As a result of
the application of Section 203, potential acquirors of the Company may be
discouraged from attempting to effect an acquisition transaction with the
Company, thereby possibly depriving holders of the Company's securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions.
FOREIGN OWNERSHIP
The Certificate of Incorporation restricts the ownership, voting and
transfer of the capital stock of the Company, in accordance with the
Communications Act, and the rules of the FCC, to prohibit ownership of more
than 25% of the Company's outstanding capital stock, or more than 25% of the
voting rights it represents (such percentage, however, is 20% in the case of
those subsidiaries that are direct holders of FCC licenses), by or for the
account of Aliens or corporations otherwise subject to domination or control
by Aliens. The Company has determined that, because of the ownership by Nomura
of a significant amount of Class A Common Stock and the fact that Aliens own a
substantial portion of Nomura's own voting common stock, the Company may
prohibit acquisitions by Aliens of additional shares of the Company's equity
securities, including the Class A Common Stock and the Series D Preferred
Stock, in light of the provisions of the Communications Act, the rules of the
FCC and the Certificate of Incorporation. In addition, the Certificate of
Incorporation provides that shares of capital stock of the Company determined
by the Board of Directors to be owned beneficially by an Alien shall always be
subject to redemption by the Company by action of the Board of Directors to
the extent necessary, in the judgment of the Board of Directors, to comply
with the alien ownership restrictions of the Communications Act and the FCC
rules and regulations.
The Certificate of Incorporation authorizes the Board of Directors of
the Company to adopt such provisions as it deems necessary to enforce these
prohibitions. The Company established certain procedures and controls designed
to implement the aforesaid prohibitions. Specifically, at the time shares of
the Company's equity securities, including but not limited to, the Series D
Preferred Stock, are presented for transfer, the Company's transfer agent
inquires as to whether the shares are to be transferred to or for the account
of an Alien, an entity with Alien ownership or an entity that would be
considered Alien by the FCC. If so, the proposed transfer may not be
permitted.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is the opinion of Baker & McKenzie, counsel to the Company, that the
federal income tax consequences relevant to the purchase, ownership and
disposition of the Series D Preferred Stock and the Exchange Notes are as
described herein, subject to the limitations and qualifications set forth
below. This summary deals only with investors who hold the Series D Preferred
Stock and Exchange Notes as capital assets. There can be no assurance that the
Internal Revenue Service will take a similar view of such consequences.
Further, the discussion does not address all aspects of taxation that may be
relevant to particular purchasers in light of their personal circumstances
(including the effect of any foreign, state or local tax laws) or to certain
types of purchasers (including dealers in securities, insurance companies,
foreign persons, financial institutions and tax-exempt entities) subject to
special treatment under the federal income tax laws.
The discussion of the federal income tax consequences set forth below
is based upon currently existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), judicial decisions, and administrative
interpretations including, but not limited to, Treasury regulations relating
to original issue discount (the "OID Regulations"). Because individual
circumstances may differ, each prospective purchaser of Series D Preferred
Stock or Exchange Notes
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is strongly urged to consult his own tax advisor with respect to his particular
tax situation and the particular tax effects of any state, local, foreign or
other tax laws and possible changes in the tax laws.
DIVIDENDS ON SERIES D PREFERRED STOCK
Dividends paid on the Series D Preferred Stock will be taxable as
ordinary income to the extent of the Company's current or accumulated earnings
and profits for federal income tax purposes. To the extent that the amount of
distributions paid on the Series D Preferred Stock exceeds the Company's
current or accumulated earnings and profits for federal income tax purposes,
such distributions will be treated first as a return of capital and will be
applied against and reduce the adjusted tax basis of the Series D Preferred
Stock in the hands of the shareholder. Any remaining amount after the holder's
basis has been reduced to zero will be taxed as capital gain and will be
long-term capital gain if the holder's holding period for the Series D
Preferred Stock exceeds one year. For purposes of the remainder of this
discussion, the term "dividend" refers to a distribution taxed as ordinary
income as described above unless the context indicates otherwise.
Dividends received by corporate shareholders will be eligible for the
70% dividends-received deduction under section 243 of the Code, subject to the
limitations contained in sections 246 and 246A of the Code. Under section
246(c) of the Code, the 70% dividends-received deduction will not be available
with respect to Series D Preferred Stock which is held for 45 days or less (90
days in the case of a dividend attributable to a period or periods aggregating
more than 366 days), including the day of disposition, but excluding the day
of acquisition or any day which is more than 45 days (or 90 days in the case
of the more than 366 day period) after the date on which the Series D
Preferred Stock becomes ex-dividend. The length of time that a shareholder is
deemed to have held stock for these purposes is reduced for periods during
which the shareholder's risk of loss with respect to the stock is diminished
by reason of the existence of certain options, contracts to sell, short sales
or other similar transactions. Section 246(c) also denies the
dividends-received deduction to the extent that a corporate taxpayer is under
an obligation with respect to substantially similar or related property, to
make payments corresponding to the dividend received. Under section 246(b) of
the Code, the aggregate dividends- received deductions allowed may not exceed
70% of the taxable income (with certain adjustments) of the corporate
shareholder. Moreover, under section 246A of the Code, to the extent that a
corporate shareholder incurs indebtedness "directly attributable" to
investment in the Series D Preferred Stock and the Series D Preferred Stock
constitutes "debt financed portfolio stock" within the meaning of section
246A(c)(1) of the Code, the dividends-received deduction is proportionately
reduced.
A corporate stockholder's liability for alternative minimum tax may be
affected by the portion of the dividends received which such corporate
stockholder deducts in computing taxable income. This results from the fact
that corporate stockholders are required to increase alternative minimum
taxable income by 75% of the excess of current earnings and profits (with
certain adjustments) over alternative minimum taxable income (determined
without regard to earnings and profits adjustments or the alternative tax net
operating loss deduction).
Proposed legislation would reduce the dividends-received deduction from
70% to 50% and increase the holding period required to take such a deduction.
It is not clear whether such proposed legislation will ultimately be enacted
or, if enacted, will be enacted as currently proposed.
Section 1059 of the Code requires a corporate shareholder to reduce its
basis (but not below zero) in the Series D Preferred Stock by the "nontaxed
portion" of any "extraordinary dividend" if the holder has not held its Series
D Preferred Stock for more than two years as of the date the amount or payment
of such dividend is agreed to, announced or declared. Generally, the nontaxed
portion of an extraordinary dividend is the amount excluded from income under
section 243 of the Code (relating to the dividends-received deduction). An
"extraordinary dividend" on the Series D Preferred Stock would include a
dividend that (i) equals or exceeds 5% of the holder's adjusted tax basis in
the Series D Preferred Stock, treating all dividends having ex-dividend dates
within an 85-day period as one dividend, or (ii) exceeds 20% of the holder's
adjusted tax basis in the Series D Preferred Stock, treating all dividends
having ex-dividend dates within a 365-day period as one dividend. In
determining whether a dividend paid is an extraordinary dividend, a holder may
elect to use the fair market value of the Series D Preferred Stock rather than
its basis for purposes of applying the 5% (or 20%) limitation if the
shareholder is able to establish to the satisfaction of the Secretary of the
Treasury such fair market value as of the day before the ex-dividend date. An
"extraordinary dividend" would also include any amount treated as a dividend
in the case of a
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redemption of the Series D Preferred Stock that is non-pro rata as to all
shareholders, without regard to the period the holder held the stock. If any
part of the nontaxed portion of an extraordinary dividend has not been applied
to reduce basis as a result of the limitation on reducing basis below zero,
the amount thereof will be treated as gain from the sale or exchange of stock
when such stock is disposed of or sold.
The extraordinary dividend rules do not apply with respect to
"qualified preferred dividends." A "qualified preferred dividend" is any fixed
dividend payable with respect to preferred stock which (i) provides for fixed
preferred dividends payable no less often than annually and (ii) is not in
arrears as to dividends when acquired, provided the actual rate of return, as
determined under section 1059(e)(3) of the Code, on such stock does not exceed
15%. Where a qualified preferred dividend exceeds the 5% (or 20%) threshold
for extraordinary dividend status described above, (i) the extraordinary
dividend rules will not apply if the taxpayer holds the stock for more than
five years, and (ii) if the taxpayer disposes of the stock before it has been
held for more than five years, the aggregate reduction in basis cannot exceed
the excess of the qualified preferred dividends paid on such stock during the
period held by the taxpayer over the qualified preferred dividends which would
have been paid during such period on the basis of the stated rate of return,
as determined under section 1059(e)(3) of the Code. The length of time that a
taxpayer is deemed to have held stock for purposes for section 1059 of the
Code is determined under principles similar to those contained in section
246(c) of the Code discussed above.
Proposed legislation would require immediate recognition of gain under
section 1059 to the extent a corporate holder's tax basis would have been
reduced below zero, instead of deferring such gain until the ultimate sale or
exchange of such stock. It is not clear whether such proposed legislation will
ultimately be enacted or, if enacted, will be enacted as currently proposed.
Corporate stockholders are urged to consult their own tax advisors with
respect to the possible application of section 1059 to the ownership and
disposition of their Series D Preferred Stock.
REDEMPTION PREMIUM
If the redemption price of redeemable preferred stock exceeds its issue
price, all or a portion of such excess may, pursuant to section 305(c) of the
Code, be viewed as constructive distributions (and thus as dividends depending
upon the presence of current or accumulated earnings and profits) over the
period during which the Series D Preferred Stock cannot be called for
redemption under an economic accrual method similar to the method described
under the fourth paragraph under "-- Original Issue Discount." Pursuant to
recently issued regulations (the "Section 305(c) Regulations"), such accrual
will arise due to the Optional Redemption Feature or the requirement that the
Company deliver cash in lieu of Class A Common Stock in the event there is
insufficient authorized capital or the Company is restricted by FCC rules to
satisfy the Company's obligation to deliver Class A Common Stock on a Holder's
exercise of conversion rights (the "Cash Settlement Payment") only if, based
on all of the facts and circumstances as of the date the Series D Preferred
Stock is issued, redemption pursuant to the Optional Redemption or Cash
Settlement Payment were more likely than not to occur. Even if redemption were
more likely than not to occur, however, constructive distribution treatment
would not result if the redemption premium were solely in the nature of a
penalty for premature redemption. For this purpose, a penalty for premature
redemption is a premium paid as a result of changes in economic or market
condition over which neither the issuer nor the holder has control, such as
changes in prevailing dividend rates. The Section 305(c) Regulations provide a
safe harbor pursuant to which constructive distribution treatment will not
result from an issuer call right if the issuer and the holder are unrelated,
there are no arrangements that effectively require the issuer to redeem the
stock and exercise of the option to redeem would not reduce the yield of the
stock. Although the Company believes that either the Optional Redemption or the
Cash Settlement Payment would not be treated as more likely than not to be
exercised under these rules, that the redemption premium is in the nature of a
penalty for premature redemption or that the safe harbor would apply, this
determination cannot be made with certainty at this time. Thus, no assurance can
be given as to the treatment of the redemption premium with respect to the
Series D Preferred Stock under the Section 305(c) Regulations.
The sale of Series D Preferred Stock will generally result in taxable
gain or loss equal to the difference between the amount received and the
shareholder's adjusted tax basis in the Series D Preferred Stock sold.
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<PAGE>
REDEMPTION AND EXCHANGE OF SERIES D PREFERRED STOCK.
A redemption of shares of Series D Preferred Stock for cash (whether
pursuant to the Mandatory Redemption, the Optional Redemption Feature or the
Cash Settlement Payment) or an exchange of shares of Series D Preferred Stock
for Exchange Notes will be a taxable event.
A redemption of shares of Series D Preferred Stock for cash will be
treated as a dividend to the extent of the Company's current or accumulated
earnings and profits, unless the redemption (i) results in a "complete
termination" of the shareholder's stock interest in the Company under section
302(b)(3) of the Code, (ii) is "substantially disproportionate" with respect
to the shareholder under section 302(b)(2) of the Code or (iii) is "not
essentially equivalent to a dividend" with respect to the shareholder under
section 302(b)(1) of the Code. In determining whether any of these tests have
been met, the shareholder must take into account not only stock he actually
owns, but also stock he constructively owns within the meaning of section 318
of the Code. A distribution to a shareholder is "not essentially equivalent to
a dividend" if it results in a "meaningful reduction" in the shareholder's
stock interest in the Company. If, as a result of a redemption for cash of the
Series D Preferred Stock, a shareholder of the Company whose relative stock
interest in the Company is minimal and who exercises no control over corporate
affairs suffers a significant reduction in his proportionate interest in the
Company (including any ownership of Common Stock and any shares constructively
owned), that shareholder should be regarded as having suffered a meaningful
reduction in his interest in the Company, but there can be no certainty as to
when such reduction has occurred because the applicable test is not based on
numerical criteria. Satisfaction of the "complete termination" and
"substantially disproportionate" exceptions is dependent upon compliance with
the objective tests set forth in sections 302(b)(3), and 302(b)(2) of the
Code, respectively.
If the redemption is not treated as a distribution taxable as a
dividend, the redemption of the Series D Preferred Stock for cash would result
in taxable gain or loss equal to the difference between the amount of cash
received and the shareholder's adjusted tax basis in the Series D Preferred
Stock redeemed. Such gain or loss would be capital gain or loss and would be
long-term capital gain or loss if the holding period for the Series D
Preferred Stock exceeded one year.
An exchange of Series D Preferred Stock for Exchange Notes at the
option of the Company will be subject to the same general rules as a
redemption for cash. However, because the Exchange Notes will be convertible
into Class A Common Stock, which a holder of the Exchange Notes will be deemed
to own under the constructive ownership rules of the Code, it is unlikely that
the receipt of Exchange Notes in exchange for the Series D Preferred Stock
would qualify under the "complete termination" or "substantially
disproportionate" tests described above. The redemption would be treated as a
distribution to the extent of the "issue price" of the Exchange Notes and be
taxable as a dividend (to the extent of the Company's current or accumulated
earnings and profits) unless the "not essentially equivalent to a dividend"
test is satisfied. The issue price of the Exchange Notes would be determined
in the manner described below for purposes of computing original discount (if
any) on Exchange Notes according to the OID Regulations. As noted above, this
subjective test requires that the distribution result in a "meaningful
reduction" of the shareholder's stock interest in the Company in order for the
distribution to qualify as a sale or exchange. Because the provisions of
section 302(b) of the Code are separately applied to each shareholder based
upon the particular facts and circumstances at the time of the redemption, and
because a holder (generally), will be deemed, for purposes of section 302(b)
of the Code, to own shares of Common Stock into which Exchange Debentures are
convertible, no assurance can be given that an exchange of Series D Preferred
Stock for Exchange Notes will be treated as a sale or exchange. Therefore,
each holder is urged to consult his own tax advisor with respect to the
question of whether a redemption of Series D Preferred Stock will satisfy any
of the nondividend exceptions set forth in section 302(b) of the Code. If any
such exception is satisfied, dividend treatment would not apply and such
shareholder would recognize gain or loss equal to the difference between the
issue price of Exchange Notes and the shareholder's adjusted tax basis in the
Series D Preferred Stock. Such gain or loss would be capital gain or loss and
would be long-term capital gain or loss if the holding period for the Series D
Preferred Stock exceeded one year. If neither the Series D Preferred Stock nor
the Exchange Notes are regularly traded on an established securities market at
the time of the exchange, gain realized on the exchange of Series D Preferred
Stock for Exchange Notes may qualify for installment sale treatment.
If the amount received in a redemption of Series D Preferred Stock is
treated as a distribution which may be taxable as a dividend as opposed to
consideration received in a sale or exchange, the amount of the distribution
will be measured
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<PAGE>
by the amount of cash or the issue price of the Exchange Notes, as the case may
be, received by the shareholder. The shareholder's adjusted tax basis in the
redeemed Series D Preferred Stock will be transferred to any remaining stock
holdings in the Company. If the shareholder does not retain any stock ownership
in the Company, it is unclear whether the shareholder will be permitted to
transfer such basis to any Exchange Notes received in the redemption or will
lose such basis entirely. Under section 1059 of the Code, the term
"extraordinary dividend" includes any redemption of stock that is treated as a
dividend and that is non-pro rata as to all stock, including holders of common
stock, irrespective of the holding period. Consequently, to the extent an
exchange of Series D Preferred Stock for debentures or cash constitutes a
distribution taxable as a dividend, it may constitute an "extraordinary
dividend" to a corporate shareholder. See "-- Dividends on Series D Preferred
Stock."
Proposed legislation would change the treatment of a redemption of
Series D Preferred Stock for Exchange Notes for corporate shareholders. Under
the proposed legislation, a corporate shareholder would recognize gain
immediately with respect to any redemption treated as a dividend (in whole or
in part) when the non-taxed portion of the dividend (i.e. the amount of the
dividend subject to the dividend exclusion under Section 243) exceeds the basis
of the shares surrendered, if the redemption is treated as a dividend due to
options being counted as stock ownership. It is not clear whether such proposed
legislation will ultimately be enacted or, if enacted, will be enacted as
currently proposed.
ORIGINAL ISSUE DISCOUNT
Stated interest on the Exchange Notes should be includable in income by
a holder in accordance with his method of accounting. There is also a risk
that the Exchange Notes will be treated as having original issue discount
("OID") taxable as interest income, as described below.
If the Series D Preferred Stock is exchanged for Exchange Notes at a
time when the stated redemption price at maturity of such Exchange Notes
exceeds their issue price (including the value of the conversion feature) by
an amount equal to or greater than 0.25% of the stated redemption price at
maturity multiplied by the number of complete years to maturity, the Exchange
Notes will be treated as having OID equal to the entire amount of such excess.
If the Exchange Notes are traded on an established securities market within
the meaning of section 1273(b)(3) of the Code, the issue price of the Exchange
Notes will be their fair market value (including the value of the conversion
feature) as of the issue date. Similarly, if the Series D Preferred Stock, but
not the Exchange Notes issued and exchanged therefor, is traded on an
established securities market at the time of the exchange, then the issue
price of each Exchange Note should be the fair market value of the Series D
Preferred Stock at the time of the exchange. In the event that neither the
Series D Preferred Stock nor the Exchange Notes are traded on an established
securities market, and absent any "potentially abusive situation," the issue
price of the Exchange Notes will be their stated principal amount, or, in the
event the Exchange Notes do not bear "adequate stated interest" within the
meaning of section 1274 of the Code, their "imputed principal amount" as
determined under section 1274 of the Code using the applicable federal rate
(the "AFR") in effect as of the date of the exchange.
A holder of an Exchange Note would generally be required under section
1272 of the Code to include in gross income (irrespective of its method of
accounting) a portion of such OID for each year during which it holds such an
Exchange Note, even though the cash to which such income is attributable would
not be received until maturity or redemption of the Exchange Note. The amount
of any OID included in income for each year would be calculated under a
constant yield to maturity formula that would result in the allocation of less
OID to the early years of the term of the Exchange Note and more OID for later
years.
If the Exchange Notes are issued with OID and the Company were found to
have had an intention to call the Exchange Notes before maturity, any gain
realized on a sale, exchange or redemption of Exchange Notes prior to maturity
would be considered ordinary income to the extent of any unamortized OID for
the period remaining to the stated maturity of the Exchange Notes. The Company
cannot predict whether it would have an intention to call the Exchange Notes
before their maturity at the time, if ever, it issues the Exchange Notes.
- 55 -
<PAGE>
Proposed legislation would change the treatment to the Company of
accrued but unpaid interest or OID on the Exchange Notes by deferring a
deduction for unpaid interest or OID until such amounts are paid. It is not
clear whether such proposed legislation will ultimately be enacted or, if
enacted, will be enacted as currently proposed.
If issued with OID, the Exchange Notes may be subject to the provision
of the Code dealing with high yield discount obligations in which case the
Company may not be entitled to claim a deduction with respect to a certain
portion of the OID (the "Disqualified Portion") and the remainder of the OID
may not be claimed as a deduction until paid. In such case, the Disqualified
Portion of the OID may be treated as a dividend with respect to the stock of
the Company and the rules applicable to distributions with respect to the
Series D Preferred Stock may apply.
BOND PREMIUM ON EXCHANGE NOTES
If the Series D Preferred Stock is exchanged for Exchange Notes at a
time when the issue price of such Exchange Notes (excluding the amount thereof
attributable to the conversion feature as determined under Treasury regulation
section 1.171-2(c)(2)) exceeds the amount payable at the maturity date (or
earlier redemption date, if appropriate) of the Exchange Notes, such excess
will be deductible, subject to certain limitations with respect to
individuals, by the holder of such Exchange Notes as amortizable bond premium
over the term of the Exchange Notes (taking into account earlier call dates,
in certain instances) under a yield to maturity formula, but only if an
election by the taxpayer under the section 171 of the Code is in effect or is
made. An election under section 171 of the Code is available only if the
Exchange Notes are held as capital assets. Such election is binding once made
and applies to all debt obligations owned or subsequently acquired by the
taxpayer. Under the Code, the amortizable bond premium will be treated as an
offset to interest income on the Exchange Notes rather than as a separate
deduction item unless otherwise provided in future regulations.
MARKET DISCOUNT ON EXCHANGE NOTES
If the purchase price paid by a subsequent purchaser of Exchange Notes
is less than the revised issue price of the Exchange Notes on such purchaser's
purchase date, the "market discount" rules will apply to such holder, subject
to a de minimis exception. (The revised issue price is the issue price of the
Exchange Note, increased by all prior accruals of OID, determined without
regard to any bond premium paid by any holder.) Any gain recognized by such
holder upon the sale, exchange, redemption or retirement of the Exchange Notes
will generally be treated as ordinary income to the extent of the market
discount (if any) accrued during the period the holder held the Exchange Notes
and not previously included in income by such holder. A holder who purchases
an Exchange Note at a market discount and who does not elect to include market
discount in income as it accrues may be required to defer the deduction of all
or a portion of the interest expense on any indebtedness incurred or
maintained by such holder to purchase or carry the Exchange Note.
ACQUISITION PREMIUM ON EXCHANGE NOTES
If a holder purchases an Exchange Note at an acquisition premium, the
holder reduces the amount of any OID includible in gross income by a fraction,
the numerator of which is the excess of the adjusted basis of the debt
instrument immediately after its acquisition over the adjusted issue price and
the denominator of which is the excess of the sum of all amounts payable on the
Exchange Note after the purchase date, other than payments of qualified stated
interest, over the Exchange Note's adjusted issue price.
REDEMPTION OR SALE OF EXCHANGE NOTES
Generally, any redemption or sale of Exchange Notes by a holder would
result in taxable gain or loss equal to the difference between the amount of
cash received (except to the extent that cash received is attributable to
accrued interest) and the holder's tax basis in the Exchange Notes. The tax
basis of a holder who received an Exchange Note in exchange for Series D
Preferred Stock will generally be equal to the issue price of the Exchange
Note on the date the Exchange Note is issued (or, in the case of an Exchange
Note received as to which the holder thereof is entitled to installment sale
treatment, the adjusted tax basis of the Series D Preferred Stock exchanged)
plus any OID on the Exchange Note included in the holder's income prior to
sale or redemption of the Exchange Note, reduced by any amortizable bond
premium applied against the holder's income prior to sale or redemption of the
Exchange Note. The tax basis of a holder who purchased an Exchange Note will
generally be equal to the purchase price of the Exchange Note plus any OID or
market discount (see "Certain Federal Income Tax Consequences -- Market
Discount On Exchange Notes") included in the holder's income prior to sale or
redemption of the Exchange Note, reduced by any amortizable bond premium
applied against the holder's income prior to sale or redemption of the
Exchange Note. Subject to the application of the market discount rules
discussed below, with respect to subsequent purchasers, such gain or loss
would be capital gain or loss and would be long-term capital gain or loss if
the holding period exceeded one year. However, if the Company were found to
have an intention at the time the Exchange Notes were issued to call them
before maturity, the gain would be ordinary income to the extent of any
unamortized OID.
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<PAGE>
CONVERSION OF SERIES D PREFERRED STOCK OR EXCHANGE NOTES INTO CLASS A COMMON
STOCK
No gain or loss will be recognized for federal income tax purposes on
conversion of Series D Preferred Stock or Exchange Notes solely into shares of
Class A Common Stock, except with respect to any cash received in lieu of a
fractional share interest (in an amount equal to the difference between the
cash received and the holder's adjusted tax basis in such fractional shares).
Except to the extent of cash paid in lieu of fractional shares, the tax basis
for the shares of Class A Common Stock received upon conversion will be equal
to the tax basis of the Series D Preferred Stock or Exchange Notes converted,
and the holding period of the shares of Class A Common Stock will include the
holding period of the Series D Preferred Stock or Exchange Notes converted
(provided the Series D Preferred Stock or Exchange Notes were held as capital
assets).
ADJUSTMENT OF CONVERSION PRICE
Section 305 of the Code treats as a distribution (taxable as a dividend
to the extent of the issuing corporation's current or accumulated earnings and
profits) certain actual or constructive distributions of stock with respect to
stock or convertible securities. Certain adjustments in the conversion ratio
of stock or convertible securities are considered distributions of stock. For
example, Treasury regulations treat holders of convertible preferred stock or
convertible debentures as having received such a constructive distribution
where the conversion price of such preferred stock or debentures is adjusted
to reflect certain taxable distributions with respect to the stock into which
such preferred stock or debentures are convertible. The conversion rates of
the Series D Preferred Stock and the Exchange Notes are subject to adjustment
under certain circumstances. Any adjustment increasing the number of shares of
Class A Common Stock into which the Series D Preferred Stock or Exchange Notes
can be converted could cause the holders thereof to be viewed under section
305 of the Code as receiving a deemed distribution taxable as a dividend
whether or not such holders exercise their conversion rights.
BACKUP WITHHOLDING
Under section 3406 of the Code and applicable Treasury regulations, a
holder of Series D Preferred Stock, Exchange Notes, or Class A Common Stock
may be subject to backup withholding at the rate of 31% with respect to
"reportable payments," which include dividends or interest paid on, or the
proceeds of a sale, exchange or redemption of, Series D Preferred Stock,
Exchange Notes, or Class A Common Stock, as the case may be. The payor will be
required to deduct and withhold the prescribed amounts if (i) the payee fails
to furnish a taxpayer identification number ("TIN") to the payor in the manner
required by the Code and applicable Treasury regulations, (ii) the Internal
Revenue Service notifies the payor that the TIN furnished by the payee is
incorrect, (iii) there has been a "notified payee underreporting" described in
section 3406(c) of the Code or (iv) there has been a failure of the payee to
certify under penalty of perjury that the payee is not subject to withholding
under section 3406(a)(1)(C) of the Code. If any one of the events listed above
occurs, the Company will be required to withhold an amount equal to 31% from
any dividend payment made with respect to Series D Preferred Stock or Class A
Common Stock, any payment of interest or principal pursuant to the terms of
the Exchange Notes, or any payment of proceeds of a redemption of Series D
Preferred Stock, Exchange Notes, or Class A Common Stock, as the case may be,
to a holder. Amounts paid as backup withholding do not constitute an
additional tax and will be credited against the holder's federal income tax
liabilities, so long as the required information is provided to the Internal
Revenue Service. The Company will report to the holders of Series D Preferred
Stock, Exchange Notes or Class A Common Stock and to the Internal Revenue
Service the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any with respect to payment on the securities.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER OF SERIES D PREFERRED STOCK OR EXCHANGE
NOTES SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
TO HIM OF THE SERIES D PREFERRED STOCK OR EXCHANGE NOTES INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN INCOME TAX LAWS, AND
ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
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<PAGE>
LEGAL MATTERS
The validity of the Securities offered hereby has been passed upon for
the Company by Baker & McKenzie, New York, New York. Howard J. Tytel, Esq.,
who has an equity interest in and is an executive officer and director of the
Company, is Of Counsel to Baker & McKenzie. Fisher Wayland Cooper Leader &
Faragosa L.L.P., Washington D.C. represented the Company with respect to
certain legal matters under the Communications Act and the rules and
regulations promulgated thereunder by the FCC.
EXPERTS
The consolidated financial statements of SFX Broadcasting, Inc. and
Subsidiaries at December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995, the consolidated financial statements of
Multi-Market Radio, Inc. at December 31, 1995 and 1994, and for the years
then ended, and the financial statements of KKRW-FM (a division of CBS, Inc.)
at December 31, 1995 and 1994, and for the years then ended all appearing in
the Company's Current Report on Form 8-K dated May 30, 1996, have been audited
by Ernst & Young LLP, independent auditors, as stated in their reports
appearing therein and are incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Liberty Broadcasting, Inc. at
December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994,
and the nine months ended December 31, 1993, and the combined financial
statements of HMW Communications, Inc.-Selected Operations (combination of six
radio stations to be sold) as of December 31, 1995 and 1994, for the year
ended December 31, 1995, and various periods from January 6, 1994 to December
31, 1994, all appearing in the Company's Current Report on Form 8-K dated May
9, 1996, have been audited by Coopers & Lybrand L.L.P., independent auditors, as
stated in their reports appearing therein and are incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The financial statements of Prism Radio Partners, L.P. as of December
31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, all appearing in the Company's Current Report on Form 8-K
dated May 9, 1996, have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, to the extent and for the period indicated in
their report thereon and are incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The financial statements of ABS Greenville Partners, L.P. at December
31, 1995 and 1994 and for the year then ended, all appearing in the Company's
Current Report on Form 8-K dated May 9, 1996, have been audited by Cheely
Burcham Eddins Rokenbrod & Carroll, independent auditors, as stated in their
report appearing therein and are incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
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<PAGE>
GLOSSARY
"Acquisitions" refers collectively to the Liberty Acquisition, the
Prism Acquisition, the MMR Merger, the Additional Acquisitions and the Houston
Exchange.
"Additional Acquisitions" refers collectively to the acquisitions by
the Company, pursuant to four separate agreements, of all of the assets of
WROQ-FM, operating in Greenville, South Carolina, WJDX-FM, WSTZ-FM and
WZRX-AM, each operating in Jackson, Mississippi, WTRG-FM and WRDU-FM, both
operating in Raleigh-Durham, North Carolina, and WMFR-AM, WMAG-FM and WTCK-AM,
each operating in Greensboro, North Carolina, and, pursuant to a separate
agreement, has an option, which it intends to exercise, to acquire WHSL-FM
operating in Greensboro, North Carolina.
"Broadcast Cash Flow" is defined as net revenues (including where
applicable, fees earned by the Company pursuant to the SCMC Termination
Agreement) less station operating expenses. EBITDA is defined as net income
(loss) before (i) extraordinary items, (ii) provisions for income taxes, (iii)
interest (income) expense, (iv) other (income) expense, (v) cumulative effects
of changes in accounting principles, (vi) depreciation, amortization, duopoly
integration costs and acquisition related costs and (vii) non-recurring
charges related to the write-down of the Texas Rangers broadcast rights and
the valuation charge related to the Founders' Stock. The difference between
Broadcast Cash Flow and EBITDA is that EBITDA includes corporate expenses.
Although Broadcast Cash Flow and EBITDA are not measures of performance
calculated in accordance with generally accepted accounting principles
("GAAP"), the Company believes that Broadcast Cash Flow and EBITDA are
accepted by the broadcasting industry as generally recognized measures of
performance and are used by analysts who report publicly on the performance of
broadcasting companies. In addition, EBITDA is the basis for determining
compliance with several covenants in certain of the Company's debt
instruments. Nevertheless, these measures should not be considered in
isolation or as a substitute for operating income, net income, net cash
provided by operating activities or any other measure for determining the
Company's operating performance or liquidity which is calculated in accordance
with GAAP.
"Charlotte Acquisition" refers to the Company's recent acquisition of
WTDR-FM and WLYT-FM, both operating in Charlotte, North Carolina.
"Dallas Acquisition" refers to the Company's recent acquisition of
KTCK-AM, operating in Dallas, Texas.
"Dallas Disposition" refers to the sale of radio station KTCK-AM,
operating in Dallas, Texas.
"Dispositions" refers collectively to the Washington Dispositions,
the Louisville Dispositions and the Dallas Disposition.
"EBITDA" refers to the definition set forth under Broadcast Cash
Flow.
"Financing" refers collectively to the Note Offering and the
Preferred Stock Offering.
"Houston Exchange" refers to the exchange of the Company's radio
station KRLD-AM, operating in Dallas, Texas, and the Company's Texas State
Networks for radio station KKRW-FM, operating in Houston, Texas.
"Liberty Acquisition" refers to the acquisition of Liberty
Broadcasting, Incorporated, which owns and operates, provides programming to
or sells advertising on behalf of 14 FM and six AM radio stations located in
six markets: Washington, DC/Baltimore, Maryland; Nassau-Suffolk, New York;
Providence, Rhode Island; Hartford, Connecticut; Albany, New York and
Richmond, Virginia.
"Louisville Dispositions" refers collectively to the sale of three of
the stations to be acquired from Prism Radio Partners L.P., each operating in
the Louisville, Kentucky market.
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<PAGE>
"MMR Dispositions" refers collectively to the sale by Multi-Market
Radio, Inc. of KOLL-FM, operating in Little Rock, Arkansas, and WRXR-FM and
WKBG-FM, both operating in Augusta, Georgia.
"MMR Hartford Acquisition" refers to the acquisition by Multi-Market
Radio, Inc. of WKSS-FM, operating in Hartford, Connecticut.
"MMR Merger" refers to the acquisition by merger of Multi-Market
Radio, Inc. after giving effect to the MMR Hartford Acquisition, the MMR
Myrtle Beach Acquisition and the MMR Dispositions.
"MMR Myrtle Beach Acquisition" refers to the acquisition by
Multi-Market Radio, Inc. of WMYB-FM, Myrtle Beach, South Carolina.
"Prism Acquisition" refers to the acquisition of substantially all
of the assets of Prism Radio Partners L.P. used in the operation of ten FM and
six AM radio stations located in five markets: Louisville, Kentucky;
Jacksonville, Florida; Raleigh, North Carolina; Tucson, Arizona and Wichita,
Kansas.
"Recent Acquisitions" refers to the Charlotte Acquisition, the Dallas
Acquisition and the San Diego Acquisition.
"Recent Legislation" refers to the recently enacted
Telecommunications Act of 1996.
"San Diego Acquisition" refers to the Company's recent acquisition of
KYXY-FM, operating in San Diego, California.
"Tender Offer" refers to the purchase for cash by the Company on
May 31, 1996, of $79,406,000 of the Old Notes.
"Transactions" refers collectively to the Acquisitions, the Tender
Offer, the Dispositions, the Financing and the implementation of each of the
Amended Hicks Agreement, the Armstrong Agreement and the SCMC Termination
Agreement.
"Washington Dispositions" refers to the sale of three of the stations
to be acquired from Liberty Broadcasting, Incorporated, each operating in the
Washington, DC/Baltimore, Maryland market.
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<PAGE>
=============================================================================
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING AND SALE OF THE SECURITIES
OFFERED HEREBY, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND ANY SUCH
INFORMATION OR REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------
TABLE OF CONTENTS
Page
Available Information...................................... 5
Incorporation of Certain Documents
by Reference...................................... 5
The Company................................................ 6
Summary of Terms of Series D
Preferred Stock................................... 8
Ratio of Earnings to Fixed Charges........................ 10
Risk Factors.............................................. 10
Selling Securityholders................................... 19
Plan of Distribution...................................... 20
Description of Series D Preferred
Stock and Exchange Notes......................... 21
Description of Capital Stock.............................. 47
Certain Federal Income
Tax Consequences................................. 51
Legal Matters............................................. 58
Experts................................................... 58
Glossary.................................................. 59
=============================================================================
<PAGE>
=============================================================================
[LOGO]
2,990,000 SHARES OF 6 1/2% SERIES D CUMULATIVE
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK,
$149,500,000 IN AGGREGATE PRINCIPAL AMOUNT OF 6 1/2%
CONVERTIBLE SUBORDINATED EXCHANGE NOTES DUE 2007
AND
3,285,113 SHARES OF CLASS A COMMON STOCK
--------------------
PROSPECTUS
--------------------
, 1996
=============================================================================
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of this offering, to be paid by the Company
unless otherwise noted, in connection with the issuance and distribution of
the securities being registered are as follows:
SEC Registration Fee.................................. $ 51,551.72
Legal Fees and Expenses............................... $ 70,000.00
Accounting Fees and Expenses.......................... $ 30,000.00
Miscellaneous Expenses................................ $ 5,000.00
Total........................................ $156,551.72
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify any person who is, or is
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was an officer or director of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which he actually and reasonably incurred
in connection therewith.
SFX's Certificate of Incorporation provides that no director
of SFX shall be personally liable to SFX or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, or (iv)
for any transaction from which the director derived an improper personal
benefit.
SFX's By-laws provide that SFX shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of SFX) by reason of the fact that he is, was or has agreed to
become a director or officer of SFX, or is or was serving or has
agreed to serve at the request of SFX as a director or officer of
another company, partnership, joint venture, trust or other enterprise,
against costs, charges, expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
or on his behalf in connection with such action, suit or proceeding and any
appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of SFX, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of SFX, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
II - 1
<PAGE>
The By-Laws also provide that SFX shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of SFX to
procure a judgment in its favor by reason of the fact that he is, was or has
agreed to become a director or officer of SFX, or is or was serving at
the request of SFX as a director or officer of another company,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against costs,
charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection with the defense or settlement
of such action or suit and any appeal therefrom, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of SFX and except that no such indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to SFX unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
such liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper.
To the extent that a director or officer of SFX shall be
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to above, or in the defense of any claim, issue or matter
therein, he shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith.
The By-Laws further provide that any indemnification (unless ordered
by a court) shall be paid by SFX as authorized in the specific case
upon a determination that indemnification of the director or officer is proper
in the circumstances because he has met the applicable standard of conduct set
forth in the By-Laws because unless a determination is made that
indemnification of the director or officer is not proper in the circumstances
because he has not met the applicable standard of conduct set forth in the
By-Laws. Such determination shall be made (i) by the Board of Directors of SFX
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the stockholders.
Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding shall be paid by SFX in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by SFX as authorized in the By-Laws.
The Board of Directors of SFX shall purchase and maintain insurance on
behalf of any person who is or was or has agreed to become a director or
officer of SFX, or is or was serving at the request of SFX as
a director or officer of another company, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by
him or on his behalf in any such capacity, or arising out of his status as
such, whether or not SFX would have the power to indemnify him against
such liability under the provisions of the By-laws, provided that such
insurance is available on acceptable terms, which determination shall be made
by a vote of a majority of the Board of Directors.
The By-Laws also provide that the indemnification and advancement of
expenses provided by, or granted pursuant to, the By-Laws shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the estate, heirs, executors and administrators of such person.
II - 2
<PAGE>
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of April 15, 1996, among SFX Broadcasting, Inc., SFX Merger
Company and Multi-Market Radio, Inc., including exhibits
(Incorporated by reference to Exhibit 2.1 to Form 8-K filed
May 8, 1996).
3.1 Restated Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3.1 to Amendment No. 3
to Registration Statement on Form S-1 (File No. 33-65442)
filed with the Commission on September 29, 1993).
3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company filed with the Delaware Secretary
of State's office on July 29, 1994 (Incorporated by reference
to Exhibit 3.2 to Form 10-K for the period ending December 31,
1994).
3.3 By-laws of the Company (Incorporated by reference to Exhibit
3.2 to Registration Statement on Form S-1 (File No. 33-65442)
filed with the Commission on July 2, 1993).
3.4 Certificate of Designations of the Company's Series C
Redeemable Convertible Preferred Stock. (Incorporated by
reference to Exhibit 3.4 to Form S-4 (File No. 333-06553)
filed with the Commission on June 21, 1996).
3.5 Certificate of Designations of the Company's 6 1/2% Series
D Cumulative Convertible Exchangeable Preferred Stock.
(Incorporated by reference to Exhibit 3.5 to Form S-4 (File
No. 333-06553) filed with the Commission on June 21, 1996).
+3.6 Warrants issued to Sillerman Communications Management
Corporation.
4.1 Form of Certificate for shares of Class A Common Stock
(Incorporated by reference to Exhibit 4.1 to Amendment No. 3
to Registration Statement Form S-1 (File No. 33-65442) filed
with the Commission on September 29, 1993).
4.2 Voting Trust Agreement Between Mr. Sillerman, Mr. Tytel and
William J. Magee, Jr. (Incorporated by reference to Exhibit 9
to Amendment No. 1 to Registration Statement Form S-1 (File
No. 33-65442) filed with the Commission on September 7, 1993).
4.3 Indenture relating to the Company's 10 3/4% Senior
Subordinated Notes due 2006. (Incorporated by reference to
Exhibit 4.3 to Form S-4 (File No. 333-06553) filed with the
Commission on June 21, 1996).
4.4 Supplemental Indenture relating to the Company's 113/8%
Senior Subordinated Notes due 2000. (Incorporated by reference
to Exhibit 4.4 to Form S-4 (File No. 333-06553) filed with the
Commission on June 21, 1996).
4.5 Offer to Purchase and Consent Solicitation, dated May 2,
1996, of SFX Broadcasting, Inc. with respect to its 113/8
Senior Subordinated Notes due 2000 (Incorporated by reference
to Exhibit 4.1 to Form 8-K for the period ending May 8, 1996).
*5 Opinion of Baker & McKenzie with respect to the legality of
the securities being registered.
II - 3
<PAGE>
*8 Opinion of Baker & McKenzie with respect to certain tax matters.
*12 Computation of Ratio of Earnings to Fixed Charges of the Company.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Coopers & Lybrand LLP.
*23.3 Consent of KPMG Peat Marwick LLP.
*23.4 Consent of Cheely Burcham Edding Rokenbrod & Carroll.
23.5 Consent of Baker & McKenzie (contained in Exhibit 5).
*23.6 Consent of Fisher Wayland Cooper Leader & Zaragoza L.L.P.
+25 Statement of Eligibility of Chemical Bank; Form T-1.
- ------------------------------
* Filed herewith
+ To be filed by amendment
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the
applicable form.
(2) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is
used in connection with an offering of securities subject to Rule 415
under the Securities Act, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceedings) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II - 4
<PAGE>
(c) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(f) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
(g) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
II - 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of New York, State of New York, on the 25th day of
June, 1996.
SFX BROADCASTING, INC.
By:
--------------------------------
Robert F.X. Sillerman,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under the heading "Signatures" constitutes and appoints
D. Geoffrey Armstrong and Howard J. Tytel, or either of them his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any or all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, each acting alone, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
--------- ----- ----
- ----------------------------- Chairman of the Board of Directors, June 25, 1996
Robert F.X. Sillerman Chief Executive Officer and Director
(principal executive officer)
- ----------------------------- Executive Vice President, Treasurer, June 25, 1996
D. Geoffrey Armstrong Chief Operating Officer, Chief
Financial Officer and Director
(principal financial and accounting
officer)
- ----------------------------- Executive Vice President, Secretary June 25, 1996
Howard J. Tytel and Director
- ----------------------------- Vice President and Director June 25, 1996
Richard A. Liese
- ----------------------------- Director June 25, 1996
James F. O'Grady, Jr.
- ----------------------------- Director June 25, 1996
Paul Kramer
</TABLE>
II - 6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
---- ----------- --------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of April 15, 1996,
among SFX Broadcasting, Inc., SFX Merger Company and Multi-Market Radio,
Inc., including exhibits (Incorporated by reference to Exhibit 2.1 to Form 8-K
filed May 8, 1996.
3.1 Restated Certificate of Incorporation of the Company (Incorporated by reference
to Exhibit 3.1 to Amendment No. 3 to Registration Statement on Form S-1
(File No. 33-65442) filed with the Commission on September 29, 1993).
3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the
Company filed with the Delaware Secretary of State's office on July 29, 1994.
(Incorporated by reference to Exhibit 3.2 to Form 10-K for the period ending
December 31, 1994).
3.3 By-laws of the Company (Incorporated by reference to Exhibit 3.2 to Registration
Statement on Form S-1 (File No. 33-65442) filed with the Commission on
July 2, 1993).
3.4 Certificate of Designations of the Company's Series C Redeemable Convertible
Preferred Stock. (Incorporated by reference to Exhibit 3.4 to Form S-4 (File
No. 333-06553) filed with the Commission on June 21, 1996).
3.5 Certificate of Designations of the Company's 6 1/2% Series D Cumulative
Convertible Exchangeable Preferred Stock. (Incorporated by reference to
Exhibit 3.5 to Form S-4 (File No. 333-06553) filed with the Commission on
June 21, 1996).
+3.6 Warrants issued to Sillerman Communications Management Corporation.
4.1 Form of Certificate for shares of Class A Common Stock (Incorporated by
reference to Exhibit 4.1 to Amendment No. 3 to Registration Statement Form S-1
(File No. 33-65442) filed with the Commission on September 29, 1993).
4.2 Voting Trust Agreement Between Mr. Sillerman, Mr. Tytel and William J. Magee,
Jr. (Incorporated by reference to Exhibit 9 to Amendment No. 1 to
Registration Statement Form S-1 (file No. 33-65442) (filed with the Commission
on September 7, 1993).
4.3 Indenture relating to the Company's 10 3/4% Senior Subordinated Notes due 2006.
(Incorporated by reference to Exhibit 4.3 to Form S-4 (Filed No. 333-06553) filed
with the Commission on June 21, 1996).
4.4 Supplemental Indenture relating to the Company's 11 3/8% Senior Subordinated
Notes due 2000. (Incorporated by reference to Exhibit 4.4 to Form S-4 (File
No. 333-06553) filed with the Commission on June 21, 1996).
4.5 Offer to Purchase and Consent Solicitation, dated May 2, 1996, of SFX
Broadcasting, Inc. with respect to its 11 3/8% Senior Subordinated Notes due 2000.
(Incorporated by reference to Exhibit 4.1 to Form 8-K for the period ending
May 8, 1996).
*5 Opinion of Baker & McKenzie with respect to the legality of the securities being
registered.
*8 Opinion of Baker & McKenzie with respect to certain tax matters.
*12 Computation of Ratio of Earnings to Fixed Charges of the Company.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Coopers & Lybrand LLP.
*23.3 Consent of KPMG Peat Marwick LLP.
*23.4 Consent of Cheely Burcham Edding Rokenbrod & Carroll.
23.5 Consent of Baker & McKenzie (contained in Exhibit 5).
*23.6 Consent of Fisher Wayland Cooper Leader & Zaragoza L.L.P.
+25 Statement of Eligibility of Chemical Bank, Form T-1.
- --------
* Filed herewith.
+ To be filed by amendment.
</TABLE>
II - 7
June 25, 1996
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Ladies and Gentlemen:
We have acted as counsel to SFX Broadcasting, Inc., a Delaware corporation (the
"Company"), in connection with its filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a Registration
Statement on Form S-3 (the "Registration Statement"), relating to 2,990,000
shares of 6-1/2% Series D Cumulative Convertible Exchangeable Preferred Stock
due May 31, 2007 (the "Series D Preferred Stock"), $149,500,000 in aggregate
principal amount of 6-1/2% Convertible Subordinated Exchange Notes due 2007 (the
"Exchange Notes") and 3,285,113 shares of Class A Common Stock with a par value
of $.01 per share (the "Class A Common Stock") of the Company.
We have examined the originals, or photostatic or certified copies, of such
records of the Company, certificates of officer of the Company and of public
officials, and such other documents as we have deemed relevant and necessary as
the basis of the opinions set forth below. In such examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as photostatic or certified copies and the authenticity of the
originals of such copies.
Based upon the foregoing, we are of the opinion, subject to compliance with
applicable state securities and "blue sky" laws, that:
1. The Series D Preferred Stock is legally issued, fully-paid and
nonassessable.
2. Assuming due execution and delivery of the Exchange Note Indenture (as
defined in the Registration Statement) by the Company and the Trustee appointed
thereunder, the Exchange Note Indenture will be the binding obligation of the
Company (assuming it is a binding obligation of the Trustee thereunder), except
to the extent that: (i) the same may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws now or hereafter
in effect relating to creditors' rights generally or by general principles of
equity whether asserted in an action at law or in equity; and (ii) rights to
indemnity and contribution thereunder may be limited by state or federal
securities laws;
SFX Broadcasting, Inc.
June 25, 1996
Page 2
3. Assuming due execution and delivery of the Exchange Note Indenture by
the Company and the Trustee appointed thereunder (assuming the Exchange Note
Indenture is a binding obligation of the Trustee), the due authentication by the
Trustee and the due execution and delivery by the Company, and the issuance of
the Exchange Notes under the Exchange Note Indenture, all as described in the
Registration Statement, the Exchange Notes, when duly executed, authenticated,
issued and delivered in exchange for outstanding shares of Series D Preferred
Stock, will be the binding obligations of the Company, except to the extent
that: (i) the same may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws now or hereafter in effect
relating to creditors' rights generally or by general principles of equity
whether asserted in an action at law or in equity; and (ii) rights to indemnity
and contribution thereunder may be limited by state or federal securities laws.
4. Assuming there are an adequate number of shares of Class A Common Stock
duly reserved for issuance at and after the time shares of Class A Common Stock
are issued on conversion of the Series D Preferred Stock or the Exchange Notes
in accordance with the provisions thereof and of the proposed Exchange Note
Indenture, such shares of Class A Common Stock will be legally issued, fully-
paid and nonassessable.
We express no opinion as to whether the execution and delivery of the Exchange
Note Indenture, or the issuance of Exchange Notes thereunder, would conflict
with any agreement binding on the Company at the time of such execution or
issuance.
We hereby consent to the use of our opinion, as herein set forth, as an exhibit
to the Registration Statement and to the use of our name under the caption
"Legal Matters" in the prospectus forming a part of the Registration Statement.
This consent is not to be construed as an admission that we are a person whose
consent is required to be filed with the Registration Statement under the
provisions of the Securities Act.
Very truly yours,
/s/ BAKER & McKENZIE
jih/chl/jhjb/jff
June 25, 1996
SFX Broadcasting, Inc.
150 East 58th Street, 19th Floor
New York, New York 10155
Ladies and Gentlemen:
We have acted as counsel to SFX Broadcasting, Inc., a Delaware
corporation (the "Company"), in connection with its filing of a registration
statement on Form S-3, Reg. No. 333- , (the "Registration Statement") with
the United States Securities and Exchange Commission under the Securities Act of
1933, as amended, covering 2,990,000 shares of 6-1/2% Series D Cumulative
Convertible Exchangeable Preferred Stock due May 31, 2007 (the "Series D
Preferred Stock"), $149,500,000 in aggregate principal amount of 6-1/2%
Convertible Subordinated Exchange Notes due 2007 (the "Exchange Notes") and
3,285,113 shares of Class A Common Stock with a par value of $.01 per share (the
"Class A Common Stock").
We have examined such records and documents, including the Registration
Statement, which we deemed relevant and necessary for the basis of this opinion
as set forth below. On the basis of the foregoing, our opinion, under present
United States federal tax laws, is set forth in the Registration Statement under
the caption "Certain Federal Income Tax Consequences." This opinion is limited
by the qualifications set forth in the Registration Statement section captioned
"Certain Federal Income Tax Consequences."
We hereby consent to the use of our opinion, as herein set forth, as an
exhibit to the Registration Statement and to the use of our name under the
caption "Legal Matters" in the prospectus forming a part of the Registration
Statement. This consent is not to be construed as an admission that we are a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act.
Very truly yours,
/s/ BAKER & McKENZIE
pjc/blg/chl
<PAGE>
EXHIBIT 12
SFX BROADCASTING, INC.
COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to
fixed charges and ratio of earnings to combined fixed charges and preferred
stock dividends for each of the five fiscal years ended December 31, 1995 and
the three-month period ended March 31, 1996.
EXHIBIT 12
STATEMENT REGARDING RECOMPUTATION OF RATIOS
IN THOUSANDS EXCEPT RATIOS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
PRO FORMA
FOR THE
RECENT
ACQUISITIONS PRO FORMA
AND THE FOR THE
TRANSACTIONS RECENT
OTHER ACQUISITIONS
THAN THE AND THE
MMR MERGER TRANSACTIONS
1991 1992 1993 1994 1995 1995 1995
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS:
Income (loss) before income taxes
extraordinary item and cumulative
effect on a change in accounting
principle (4,232) (2,208) (14,919) 3,310 (4,396) (24,309) (19,017)
Fixed charges (interest expense,
including amortization of deferred
financing costs) 4,241 3,610 7,351 9,332 12,903 50,243 50,243
- ------------------------------------- ------- ------- -------- ------- ------- --------- ---------
Earnings 9 1,402 (7,568) 12,642 8,507 25,934 31,226
------- ------- -------- ------- ------- --------- ---------
Fixed charges (interest expense,
including amortization of deferred
financing costs) 4,241 3,610 7,351 9,332 12,903 50,243 50,243
Preferred stock dividends 302 385 557 348 291 10,009 10,009
- ------------------------------------- ------- ------- -------- ------- ------- --------- ---------
Combined fixed charges and preferred
stock dividends 4,543 3,995 7,908 9,680 13,194 60,252 60,252
------- ------- -------- ------- ------- --------- ---------
Ratio of earnings to combined fixed
charges and preferred stock
dividends -- -- -- 1.3 -- -- --
Deficiency of earnings to cover
combined fixed charges and preferred
stock dividends (4,534) (2,593) (15,476) -- (4,687) (34,318) (29,026)
RATIO OF EARNINGS TO FIXED CHARGES:
Income (loss) before income taxes
extraordinary item and cumulative
effect of a change in accounting
principle (4,232) (2,208) (14,919) 3,310 (4,396) (24,309) (19,017)
Fixed charges (interest expense,
including amortization of deferred
financing costs) 4,241 3,610 7,351 9,332 12,903 50,243 50,243
- ------------------------------------- ------- ------- -------- ------- ------- --------- ---------
Earnings 9 1,402 (7,568) 12,642 8,507 25,934 31,226
------- ------- -------- ------- ------- --------- ---------
Fixed charges (interest expense,
including amortization of deferred
financing costs) 4,241 3,610 7,351 9,332 12,903 50,243 50,243
- ------------------------------------- ------- ------- -------- ------- ------- --------- ---------
Ratio of earnings to fixed charges -- -- -- 1.4 -- -- --
Deficiency of earnings to cover fixed
charges (4,232) (2,208) (14,919) -- (4,396) (24,309) (19,017)
</TABLE>
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of SFX Broadcasting,
Inc. for the registration of 2,990,000 shares of 6 1/2 Series D Cumulative
Convertible Exchangeable Preferred Stock due May 31, 2007, $149,500,000 in
aggregate principal amount of 6 1/2% Convertible Subordinated Exchange Notes due
2007 and 3,285,113 shares of Class A Common Stock and to the incorporation by
reference therein of our reports dated February 20, 1996, except for Note 14 as
to which the date is May 1, 1996 with respect to the consolidated financial
statements of SFX Broadcasting, Inc., February 14, 1996, except for Note 10 as
to which the date is May 1, 1996 with respect to the consolidated financial
statements of Multi-Market Radio, Inc. and May 20, 1996 with respect to the
financial statements of KKRW-FM (a division of CBS, Inc.) all included in the
Current Report on Form 8-K dated May 30, 1996 of SFX Broadcasting, Inc., filed
with the Securities and Exchange Commission.
/s/ Ernst & Young
Ernst & Young LLP
New York, New York
June 19, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference the registration statement
of SFX Broadcasting, Inc. on Form S-3 of our report dated March 8, 1996,
on our audits of the combined financial statements of HMW Communications,
Inc. - Selected Operations as of December 31, 1995 and 1994, and for the
year ended December 31, 1995, and various periods from January 6, 1994 to
December 31, 1994, all of which have been included in SFX Broadcasting,
Inc.'s current report on Form 8-K dated May 9, 1996. We also consent to
the reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Raleigh, North Carolina
June 19, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
of SFX Broadcasting, Inc. on Form S-3 of our report dated March 13, except as to
Note 14 for which the date is March 26, 1996, on our audits of the consolidated
financial statements of Liberty Broadcasting, Inc., as of December 31, 1995 and
1994 and for the years ended December 31, 1995, 1994 and for the nine months
ended December 31, 1993, which report is included in SFX Broadcasting, Inc.'s
current report on Form 8-K dated May 9, 1996. We also consent to the reference
to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 19, 1996
[KPMG PEAT MARWICK LLP LOGO]
INDEPENDENT ACCOUNTANT'S CONSENT
We consent to incorporation by reference in the registration statement filed on
Form S-3 of SFX Broadcasting, Inc. of our report dated March 29, 1996 relating
to the balance sheets of Prism Radio Partners L.P. as of December 31, 1995 and
1994, and the related statements of operations, partners' capital and cash flows
for each of the years in the three year period ended December 31, 1995, which
report appears in SFX Broadcasting, Inc.'s Form 8-K dated May 9, 1996, and to
the reference to our firm appearing under the heading "Experts" in the
registration statement.
/s/ KPMG Peat Marwick LLP
Phoenix, Arizona
June 24, 1996
[LOGO FOR CHEELY BURCHAM EDDINS ROKENBROD & CARROLL]
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to incorporation by reference in the registration statement filed on
Form S-3 of SFX Broadcasting, Inc. of our report dated February 1, 1996 relating
to the balance sheet of ABS Greenville Partners, L.P. as of December 31, 1995,
and the related statements of operations, partners' deficit and cash flows for
the year then ended, which report appears in SFX Broadcasting, Inc.'s Form 8-K
dated May 9, 1996, and to the reference to our firm appearing under the heading
"Experts" in the registration statement.
/s/ Cheely Burcham Eddins Rokenbrod & Carroll
Richmond, Virginia
June 24, 1996
CONSENT
We hereby consent to the use of our firm name in SFX Broadcasting Inc.'s
Registration Statement on Form S-3 and in the Prospectus forming a part of such
Registration Statement. In giving this consent, we do not concede that we come
within the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended.
/s/ Fisher Wayland Cooper Leader & Zaragoza L.L.P.
FISHER WAYLAND COOPER LEADER & ZARAGOZA L.L.P.
Dated: June 21, 1996
