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Filed Pursuant to Rule 424(b)(3)
Registration File No.: 33-21127
[LOGO FOR SFX BROADCASTING, INC.]
747,441 SHARES OF CLASS A COMMON STOCK
160,000 CLASS A WARRANTS
160,000 CLASS B WARRANTS
This Prospectus relates to up to 747,441 shares of Class A Common Stock,
par value $.01 per share, of SFX Broadcasting, Inc., a Delaware corporation
(the "Company"), that may be issued upon the exercise of outstanding (i)
Class B Warrants, (ii) Unit Purchase Options dated March 30, 1994, including
the shares of Class A Common Stock issuable upon exercise of the warrants
underlying the Unit Purchase Options, (iii) Common Stock Purchase Warrants
dated July 29, 1993, (iv) warrants issued to The Huff Alternative Income
Fund, L.P. (the "Huff Warrants"), and (v) stock options (the "Stock Options")
issued pursuant to stock option plans. (The Class B Warrants, Unit Purchase
Options, Common Stock Purchase Warrants and Huff Warrants are collectively
referred to in this Prospectus as the "Warrants.") In addition, this
Prospectus relates to up to 160,000 Class A Warrants and 160,000 Class B
Warrants that may be issued upon the exercise of the Unit Purchase Options.
The Warrants (other than certain of the Huff Warrants) and the Stock
Options were originally issued by Multi-Market Radio, Inc. ("MMR"). On
November 22, 1996, a wholly-owned subsidiary of the Company was merged with
and into MMR (the "Merger"), as a result of which MMR became a wholly-owned
subsidiary of the Company. As a result of the Merger, (i) each outstanding
share of Class A Common Stock, par value $.01 per share, and Series B
Convertible Preferred Stock Share, par value $.01 per share, of MMR was
converted into the right to receive .2983 of a share of Class A Common Stock
of the Company (and cash in lieu of any fractional share of Class A Common
Stock of the Company), (ii) each outstanding share of Class B Common Stock,
par value $.01 per share, and Original Preferred Stock, par value $.01 per
share, of MMR was converted into the right to receive .2983 of a share of
Class B Common Stock of the Company, par value $.01 per share (and cash in
lieu of any fractional share of Class B Common Stock of the Company), and
(iii) each outstanding Warrant and Stock Option of MMR was assumed by the
Company and, as assumed, adjusted so that (a) each Warrant and Stock Option
shall be exercisable for .2983 of a share of Class A Common Stock of the
Company and (b) the per share exercise price for the shares of Class A Common
Stock of the Company issuable upon the exercise of such assumed Warrants and
Stock Options shall be equal to the quotient obtained by dividing the
exercise price per share of Class A Common Stock of MMR under such Warrant
and Stock Option immediately prior to the consummation of the Merger by
.2983, and rounding the resulting exercising price down to the nearest whole
cent.
The economic rights of shares of Class A Common Stock and shares of Class
B Common Stock of the Company are identical, but the voting rights differ in
that each share of Class A Common Stock is entitled to one vote and each
share of Class B Common Stock is generally entitled to ten votes. See
"Description of Common Stock." As of January 31, 1997, Robert F.X. Sillerman,
a Director of the Company and the Executive Chairman of the Company, may be
deemed to be the beneficial owner of approximately 56.4% of the combined
voting power of the Company, and Mr. Sillerman and other members of
management of the Company may be deemed to be the beneficial owners of
approximately 58.1% of the combined voting power of the Company. See "Risk
Factors--Control by Management."
The shares of Class A Common Stock and the Class B Warrants of the Company
are traded on The Nasdaq Stock Market, Inc.'s National Market System (the
"Nasdaq National Market") under the symbols "SFXBA" and "SFXBW,"
respectively. On February 18, 1997, the last reported sales price of a share
of Class A Common Stock and a Class B Warrant of the Company on the Nasdaq
National Market was $35.50 and $2.625, respectively.
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SEE "RISK FACTORS," BEGINNING ON PAGE 4, FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS.
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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.
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The date of this Prospectus is February 21, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities being offered by this Prospectus. 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 informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information (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, 13th
Floor, New York, New York 10048 and the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such documents
can also 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. The Company is an electronic filer under the EDGAR (Electronic Data
Gathering, Analysis and Retrieval) system maintained by the Commission. The
Commission maintains a Web site (http://www.sec.gov) on the Internet that
contains reports, proxy and information statements and other information
regarding companies that file electronically with the Commission. In
addition, documents filed by the Company can be inspected at the offices of
The Nasdaq Stock Market, Inc., Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K, as amended, for the
year ended December 31 1995;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996, June 30, 1996, and September 30,
1996;
(iii) the Company's Current Reports on Form 8-K dated April 18, 1996,
May 8, 1996, May 16, 1996, May 29, 1996, June 21, 1996, July 10,
1996 (as amended), August 8, 1996, October 3, 1996, October 30,
1996, November 1, 1996, November 27, 1996, January 17, 1996,
January 21, 1997, January 22, 1997 and January 27, 1997;
(iv) the description of the Company's Class A Common Stock contained
in the Company's Registration Statement on Form 8-A (File No.
0-22486) filed with the Commission on September 27, 1993, as
amended; and
(iv) the description of the Company's Class B Warrants contained in
the Company's Registration Statement on Form 8-A (File No.
0-22486) filed with the Commission on January 9, 1997.
All documents and reports filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the shares of Class A Common
Stock of the Company to which this Prospectus relates shall be deemed to be
incorporated by reference into this Prospectus and to be a part thereof from
the date of filing of such documents or reports.
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Any statement contained in a document which is, or is 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 the
previous statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any document incorporated by reference in this Prospectus (other than
exhibits to such documents unless such exhibits are specifically incorporated
by reference herein). Requests for such documents should be directed to the
principal executive offices of the Company at 150 East 58th Street, 19th
Floor, New York, New York 10155, Attention: Timothy Klahs, Director of
Investor Relations; telephone number (212) 407-9191.
TABLE OF CONTENTS
PAGE
Available Information 2
Incorporation Of Certain Documents By Reference 2
Risk Factors 4
Description Of Class A Warrants And Class B Warrants 11
Description Of Common Stock 12
Use Of Proceeds 13
Plan Of Distribution 13
Legal Matters 15
Experts 15
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE OFFERING
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO OR 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 OR ANY SALE MADE UNDER THIS
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS
PROSPECTUS.
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RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus, the following factors should be considered
carefully by prospective investors in evaluating the Company before
purchasing any of the securities offered hereby. The information contained or
incorporated by reference in this Prospectus includes forward-looking
statements that involve risks and uncertainties, a number of which are
identified in this "Risk Factors" section. These risks and uncertainties
include, without limitation, risks related to the consummation of
acquisitions and dispositions, integration of acquired stations, leverage,
regulation of radio broadcasting and other matters. The Company's actual
results may differ materially from the results discussed in the
forward-looking statements, due to such risks and uncertainties.
RISKS RELATED TO PENDING ACQUISITIONS AND DISPOSITIONS
Consummation of the Company's pending acquisitions and dispositions of
radio stations is subject to a number of factors, certain of which are beyond
the Company's control. In particular, consummation of the acquisitions and
the dispositions is subject to the prior approval by the Federal
Communications Commission (the "FCC") of the assignments or transfers of
control of operating licenses issued by the FCC, 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 and the prior approval of the lenders under the
Company's senior credit facility. As a result of the elimination of the
national ownership limits and the liberalization of the local ownership
limits effected by the Telecommunications Act of 1996 (the "Recent
Legislation"), acquisitions and dispositions will be subject to antitrust
review by the Federal Trade Commission and the Department of Justice,
Antitrust Division (the "Antitrust Agencies"). The Antitrust Agencies have
indicated their intention to review matters related to the concentration of
ownership within markets even when the ownership in question is in compliance
with the provisions of the Recent Legislation. While the Company believes
that none of its pending acquisitions or dispositions of radio stations
substantially lessens competition, there can be no assurance that the
Antitrust Agencies will not take a contrary position, which could delay or
prevent the consummation of any or all of the Company's pending acquisitions
or dispositions of radio stations or require the Company to restructure its
ownership in the relevant market or markets. See "--Extensive Regulation of
Radio Broadcasting."
The Company will also require financing in order to consummate the pending
acquisitions, which the Company may obtain through the issuance of additional
securities, borrowings under its senior credit facility and proceeds from
pending dispositions of radio stations. The ability of the Company to issue
certain securities or borrow under its senior credit facility will be subject
to meeting certain financial tests. In addition, consummation of certain
acquisitions is subject to the prior approval of the lenders under the
Company's senior credit facility. There can be no assurance that the
Company's existing stations, and the stations which the Company will acquire,
will achieve the cash flow levels required to issue certain securities or
borrow under its senior credit facility. As a result of the foregoing, there
can be no assurance as to when the Company's pending acquisitions or
dispositions of radio stations will be consummated or that they will be
consummated at all.
RISKS ASSOCIATED WITH INTEGRATION OF THE STATIONS
As of January 1, 1996, the Company owned and operated, provided
programming to or sold advertising on behalf of 22 radio stations located in
eight markets. Since that time, the number of stations has more than tripled.
The Company's plans with respect to radio stations it has acquired and plans
to acquire 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 net revenues 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
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radio stations to be acquired. The integration of the newly acquired 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. The Company
currently anticipates realizing certain cost savings and eliminating certain
non-recurring expenses as a result of the acquisitions. While management
believes that the anticipated cost savings and elimination of non-recurring
expenses are reasonably achievable, the Company's ability to achieve such
cost savings and to eliminate such non-recurring expenses is subject to
numerous factors, many of which are beyond the Company's control. There can
be no assurance that the Company will realize any such cost savings or will
be able to eliminate such non-recurring expenses.
EXTENSIVE REGULATION OF RADIO BROADCASTING
Adoption of the Recent Legislation in February 1996 eliminated the
national limits and liberalized the local limits on radio station ownership
by a single company. However, the Antitrust Agencies are increasingly
scrutinizing acquisitions of radio stations and the entering into of joint
sales agreements ("JSAs") and local market agreements ("LMAs"). There can be
no assurance that policy and rule-making activities of the Antitrust Agencies
will not impact the Company's operations (including existing stations or
markets), expansion strategy or its ability to realize the benefits which
management had anticipated obtaining following the adoption of the Recent
Legislation.
The radio broadcasting industry is subject to extensive regulation by the
FCC. In particular, the Company's business depends on it continuing to hold,
and, in connection with acquisitions of radio stations, on it obtaining prior
FCC consent to assignments or transfers of control of, broadcast station
operating licenses issued by the FCC. There can be no assurance that the
Company's licenses will be renewed or that the FCC will approve future
acquisitions or dispositions. 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. The issuance of shares of Class A Common
Stock of the Company, including those issuable pursuant to the conversion of
other securities of the Company and pursuant to all other rights, options or
warrants to purchase Class A Common Stock of the Company, that would cause
Robert F.X. Sillerman, a Director of the Company and the Executive Chairman
of the Company, to hold directly voting stock of the Company representing
less than 50% of the total voting power of the Company will require the
Company to seek and obtain the consent of the FCC.
The Congress and/or the FCC have under consideration, and in the future
may consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of the Company's radio broadcast stations, result
in the loss of audience share and advertising revenues for the Company's
radio broadcasting stations, and affect the ability of the Company to acquire
additional radio broadcast stations or finance such acquisitions. In
particular, the FCC recently released a notice of proposed rulemaking 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, (ii) increasing the amount of stock an investment
company can own without attribution, (iii) attributing, under certain
circumstances, certain interests such as non-voting stock or debt, and (iv)
attributing, under certain circumstances, JSAs.
SUBSTANTIAL LEVERAGE; INABILITY TO SERVICE OBLIGATIONS
In connection with its acquisitions of radio stations, the Company has
incurred and will incur significant amounts of indebtedness. Subject to
certain restrictions contained in the Company's debt instruments, 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."
The degree to which the Company is and may become 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
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the Company's cash flow from operations will be dedicated to the payment of
the principal and interest on its debt and dividends on capital stock and
will not be available for other purposes, (iii) the agreements governing the
Company's debt contain or are expected to 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 and (iv) the
Company's level of indebtedness could make it more vulnerable to economic
downturns, limit its ability to withstand competitive pressures and limit its
flexibility in reacting to changes in its industry and general economic
conditions. Certain of the Company's competitors operate on a less leveraged
basis, and have significantly greater operating and financial flexibility,
than the Company.
The Company's ability to make scheduled payments of principal of, to pay
interest on or to refinance, its debt and to make dividend and redemption
payments on its capital 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 by the Company and
the integration of these stations into the Company's operations. The
Company's borrowings under its senior credit facility will be, and other
future borrowings may be, at variable rates of interest, which will result in
higher interest expense in the event of increases in interest rates. There
can be no assurance that the Company's business will generate sufficient cash
flow from operations or that future working capital borrowings will be
available in an amount which enables the Company to service its debt, to make
dividend, conversion and redemption payments and to make necessary capital or
other expenditures. The Company may be required to refinance a portion of the
principal amount of its debt or the aggregate liquidation preference of its
preferred stock prior to their 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.
HISTORICAL LOSSES
Although the Company had net income of $1.8 million for the year ended
December 31, 1994, the Company had net losses of $45.3 million, $4.4 million
and $17.8 million for the nine months ended September 30, 1996, and the years
ended December 31, 1995 and 1993, respectively. Depreciation and amortization
relating to past acquisitions and future acquisitions, interest expenses
under the Company's debt and dividend payments will continue to affect the
Company's net income (loss) in the future. There is no assurance that losses
will not continue or that the Company will become profitable in the future.
CHANGE OF CONTROL
Upon the occurrence of a change of control (as defined in the applicable
document) of the Company, the holders of certain preferred stock or certain
debt instruments will have the right, subject to certain conditions and
restrictions, to require the Company to repurchase their securities at a
price equal to 101% of the aggregate liquidation preference or the aggregate
principal amount thereof, as applicable, plus accrued and unpaid dividends or
interest, as applicable, to the date of repurchase. The repurchase price is
payable in cash. In addition, a change of control may constitute a default
under the Company's senior credit facility. If a change of control were to
occur, due to the highly leveraged nature of the Company, the Company might
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. 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 "--Extensive Regulation of Radio
Broadcasting" and "--Substantial Leverage; Inability to Service Obligations."
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, there can be no
assurance
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that the Company will consummate any 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 certain acquisitions will be subject to the
prior approval of the lenders under the Company's senior credit facility.
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 such acquisitions and financings, could be
restricted by the terms of certain debt instruments and preferred stock.
There can be no assurance that any future acquisitions will be successfully
integrated into the Company's operations or that such acquisitions will not
have a material adverse effect on the Company's financial condition and
results of operations. See "--Extensive Regulation of Radio Broadcasting" and
"--Risks Associated with Integration of the Stations."
COMPETITION
The radio broadcasting industry is highly competitive and the Company's
stations are located in highly competitive markets. 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 its
respective market. 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.
The Company's audience ratings and market share are subject to change, and
any adverse change in audience rating or market share in any particular
market could have a material and adverse effect on the Company's net
revenues. Although the Company competes with other radio stations with
comparable programming formats in most of its markets, if another station in
the market were to convert its programming format to a format similar to one
of the Company's radio stations, if a new radio station were to adopt a
competitive format, or if an existing competitor were to strengthen its
operations, the Company's stations could suffer a reduction in ratings or
advertising revenue and could require the Company to incur increased
promotional and other expenses. In addition, certain of the Company's
stations compete, and in the future other stations may compete, with groups
of stations in a market operated by a single operator. As a result of the
Recent Legislation, the radio broadcasting industry has become increasingly
consolidated, resulting in the existence of radio broadcasting companies
which are significantly larger, with greater financial resources, than the
Company. Furthermore, the Recent Legislation will permit other radio
broadcasting companies to enter the markets in which the Company operates or
may operate in the future. 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 its current audience ratings and advertising revenue market share.
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. The Company cannot
predict the effect, if any, that any of these new technologies may have on
the radio broadcasting industry.
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 affect 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. These economic downturns might have
an adverse impact 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; (iii) competition within national regional or local markets from
programming on other stations or from other media; (iv) loss of market share
of other technologies; and (v) challenges to license renewals.
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CONTROL BY MANAGEMENT
As of January 31, 1997, Mr. Sillerman, a Director of the Company and the
Company's Executive Chairman, may be deemed to be the beneficial owner of
approximately 56.4% of the combined voting power of the Company, and Mr.
Sillerman and other members of the Company's management may be deemed to be
the beneficial owners of approximately 58.1% of the combined voting power of
the Company.
The Class A Common Stock of the Company has one vote per share on all
matters, whereas the Class B Common Stock, par value $.01 per share, of the
Company has ten votes per share except in certain matters. Accordingly,
management currently is 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 of the Company are entitled to elect, by a class vote,
two-sevenths (2/7ths) of the Company's directors (or if such number of
directors is not a whole number, the next higher whole number), (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 the Class B Common Stock of the Company vote as a
single class, with each share of Class A Common Stock and of Class B Common
Stock entitled to one vote per share and (iii) as otherwise provided by law.
In addition, if dividends on the 6 1/2% Series D Cumulative Convertible
Exchangeable Preferred Stock due May 31, 2007 (the "Series D Preferred
Stock") and the 12 5/8% Series E Cumulative Exchangeable Preferred Stock are
unpaid in an aggregate amount equal to six full quarterly dividends and three
full semi-annual dividends, respectively, and in certain other circumstances,
the holders of such shares will be entitled to elect two additional members
of the Board of Directors of the Company. The control of the Company by
management may have the effect of discouraging certain types of
change-of-control transactions, including transactions in which the holders
of capital stock of the Company might otherwise receive a premium for their
shares over the then-current market price. See "Description of Common Stock."
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 Triathlon Broadcasting Company
("Triathlon"), a publicly-traded company which owns and operates radio
stations, including stations which are in the same market as certain of the
Company's 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 "--Extensive
Regulation of Radio Broadcasting." Pursuant to a consulting and marketing
agreement with Triathlon, Sillerman Communications Management Corporation
("SCMC"), an affiliate of Mr. Sillerman and Howard J. Tytel, a Director of
the Company and an Executive Vice President of the Company, is obligated to
offer to Triathlon any radio broadcasting opportunities that come to its
attention in medium and small markets located west of the Mississippi River.
The Company does not intend to pursue acquisitions in the medium and small
markets in the Midwest and Western regions of the United Stations on which
Triathlon primarily focuses, except for three radio stations owned by the
Company in the Wichita, Kansas market, a market in which Triathlon has radio
station ownership interests. The Company has entered into a JSA with
Triathlon whereby Triathlon sells advertising time on the Company's stations
operating in the Wichita market. On April 15, 1996, the Company and SCMC
entered into an agreement (the "SCMC Termination Agreement"), pursuant to
which SCMC assigned to the Company its rights to receive fees for consulting
and marketing services payable by Triathlon, except for fees relating to
certain transactions pending at the date of such agreement, and the Company
and SCMC terminated an arrangement pursuant to which SCMC performed financial
consulting services for the Company.
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 Triathlon, which may seek to participate in business
opportunities which may be suitable for the Company.
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RELIANCE ON KEY PERSONNEL
The Company's business is dependent to a significant extent upon the
performance of certain key individuals, including Mr. Sillerman, Michael G.
Ferrel, a Director of the Company and the Company's Chief Executive Officer,
and D. Geoffrey Armstrong, a Director of the Company, the Company's Chief
Operating Officer and an Executive Vice President of the Company. The Company
entered into a five-year employment agreement with each of Messrs. Sillerman
and Armstrong in April 1995 and a five-year employment agreement with Mr.
Ferrel in November 1996. The Company has agreed to enter into a new
employment agreement with Mr. Sillerman pursuant to which Mr. Sillerman will
continue in his position with the Company for a five-year term, subject to
renewal for an additional five-year term. 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. Pursuant to Mr. Armstrong's
employment agreement, he has the right to terminate the agreement under
certain circumstances, and, in connection with such termination, to receive
substantial payments from the Company. Messrs. Sillerman's and Armstrong's
employment agreements 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. The loss of
the services of Messrs. Sillerman, Armstrong or Ferrel could have a material
adverse effect on the Company.
In addition, the Company has entered into employment agreements with
certain of the high-profile on-air personalities. However, there can be no
assurance that the Company will be able to retain any of these employees or
prevent them from competing with the Company in the event of their departure.
NO TRANSFER OF CAPITAL STOCK TO ALIENS
The Company's Restated Certificate of Incorporation, as amended (the
"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 (this percentage, however, is 20% in the case of those
subsidiaries of the Company that are direct holders of FCC licenses), by or
for the account of non-U.S. citizens or their representatives or a foreign
government or a representative thereof or a corporation organized under the
laws of a foreign country ("Aliens") or corporations otherwise subject to
domination or control by Aliens. As of January 31, 1997, based upon reports
filed with the Commission, the Company believes that there are 1,071,429
shares of Class A Common Stock held by Nomura Holdings America, Inc.
("Nomura"), representing 13.3% of the outstanding shares of Class A Common
Stock and 5.7% of the combined 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 to an Alien. Failure to comply with these 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. 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.
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company has not paid any dividends on its common stock since its
inception in 1992 and does not anticipate that it will pay any dividends on
its common stock in the foreseeable future. Earnings, if any, will be
retained by the Company to fund its growth. Certain of the Company's debt
instruments
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include covenants restricting the Company's ability to pay dividends or to
make certain other distributions to stockholders. The Company is a holding
company, substantially all of the operations of which are conducted through
subsidiaries. The ability of such subsidiaries to pay dividends is subject to
applicable state law and certain other restrictions.
MARKET RISK WITH RESPECT TO COMMON STOCK; CERTAIN INVESTMENT LIMITATIONS
The shares of Class A Common Stock of the Company are quoted on the Nasdaq
National Market. However, the prices at which the shares of Class A Common
Stock trade may depend upon many factors, including markets for similar
securities, industry conditions, and the performance of, and investor
expectations for, the Company. No assurance can be given that a holder of the
shares of Class A Common Stock of the Company will be able to sell such
shares at any particular price. Certain institutional investors may invest
only in dividend-paying equity securities or may operate under other
restrictions that may prohibit or limit their ability to invest in the shares
of Class A Common Stock of the Company.
SHARES ELIGIBLE FOR FUTURE SALE AND POSSIBLE ADVERSE EFFECT THEREOF
As of January 31, 1997 there were approximately 8,063,347 shares on Class
A Common Stock and approximately 1,064,936 shares of Class B Common Stock of
the Company issued and outstanding. Of these outstanding shares,
approximately 1,281,897 shares of Class A Common Stock and approximately
856,126 shares of Class B Common Stock are "Restricted Securities," as that
term is defined in Rule 144 ("Rule 144") promulgated under the Securities
Act. Of such shares, the Company believes that 1,281,897 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 therein). In
addition, the shares of Class A Common Stock held by Nomura have one demand
and certain piggy-back registration rights which expire on October 7, 2000.
Approximately 77,944 shares of Class A Common Stock (including shares of
Class A Common Stock issuable upon the exercise of options and warrants) and
approximately 208,810 shares of Class B Common Stock issued in the Merger are
subject to restrictions on resale under Rule 145 ("Rule 145") promulgated
under the Securities Act. In addition, each of the 2,990,000 outstanding
shares of Series D Preferred Stock is convertible at the option of the holder
thereof into 1.0987 shares of Class A Common Stock (subject to adjustments in
certain events) at any time prior to the close of business on May 31, 2007,
the maturity date of the Series D Preferred Stock. The Company has filed a
registration statement with the Commission with respect to the resale by the
holders thereof of the shares of Series D Preferred Stock, the shares of
Class A Common Stock issuable upon conversion thereof and the Exchange Notes
issuable upon the exchange thereof. Such registration statement was declared
effective in July 1996. The sale, or availability for sale, of substantial
amounts of shares of stock of the Company in the public market pursuant to
Rule 144, Rule 145 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.
POSSIBLE ADVERSE IMPACT OF AUTHORIZED BUT UNISSUED SHARES OF CAPITAL STOCK
AND DELAWARE LAW
The Company has 100,000,000 shares of Class A Common Stock, 10,000,000
shares of Class B Common Stock, 1,200,000 shares of Class C Common Stock, par
value $.01 share, and 10,010,000 shares of preferred stock, par value $.01
per share, authorized, of which approximately 8,063,347 shares of Class A
Common Stock, 1,064,936 shares of Class B Common Stock, no shares of Class C
Common Stock and 5,243,000 shares of preferred stock are outstanding as of
January 31, 1997. Pursuant to the Certificate of Incorporation, the unissued
shares of preferred stock shall have such designations, rights and
preferences as may be determined from time to time by the Board of Directors
of the Company. Accordingly, the Board of Directors of the Company is
empowered, without stockholder approval, to issue stock preferred stock with
liquidation, conversion, voting or other rights which could adversely affect
the voting power or other rights of the holders of the then outstanding
shares of stock of the Company. In addition, the Board of Directors of the
Company may authorize the issuance of substantial amounts of shares of common
or preferred stock, as a financing technique or otherwise, the effect of
which would be to dilute the economic
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and voting rights of existing stockholders and might adversely affect the
prices at which the shares of Class A Common Stock trade. The Board of
Directors of the Company could use the issuance of additional shares of
capital stock of the Company as a method of discouraging, delaying or
preventing a change in control of the Company.
The Company is subject to the "business combination" statute of Section
203 of the General Corporation Law of the State of Delaware (the "DGCL"). In
general, Section 203 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," with certain specified exceptions. A
"business combination" includes mergers, stock or asset sales and other
transactions resulting in a financial benefit to the "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns (or, within three years, owned) 15% or more
of the corporation's voting stock. The effect of Section 203 of the DGCL may
be to make it more difficult to effect a change in control of the Company.
DESCRIPTION OF CLASS A WARRANTS AND CLASS B WARRANTS
The following statements are qualified by reference to the Warrant
Agreement, dated as of March 23, 1994, among MMR, American Stock Transfer &
Trust Company, as warrant agent, D.H. Blair Investment Banking Corp. and
Americorp Securities, Inc. (the "Warrant Agreement") governing the Class A
Warrants and the Class B Warrants. A copy of the Warrant Agreement has been
incorporated by reference as an exhibit to the Registration Statement.
ChaseMellon Shareholder Services, L.L.C., the Company's transfer agent for
its common stock, has assumed the rights, duties and obligations of the
warrant agent under the Warrant Agreement.
As of the date of this Prospectus, the Company has no Class A Warrants and
749,460 Class B Warrants outstanding. An additional 160,000 Class A Warrants
and 160,000 Class B Warrants are issuable upon exercise of the Unit Purchase
Options. Each Class A Warrant (including the Class A Warrants underlying the
Unit Purchase Options) entitles the registered holder to purchase .2983 of a
share of Class A Common Stock for $7.75 (a per share exercise price of
$25.98), subject to adjustment as described below, from the date of issuance
until March 22, 1999. Each Class B Warrant (including the Class B Warrants
underlying the Unit Purchase Options) entitles the holder to purchase .2893
of a share of Class A Common Stock for $11.50 (a per share exercise price of
$38.55), subject to adjustment as described below, from the date of issuance
until March 22, 1999.
The Class A Warrants and the Class B Warrants may be exercised upon
surrender of the certificates therefor on or prior to the expiration or
redemption date at the offices of the Company's warrant agent with the
"Subscription Form" on the reverse side of the certificate filled out and
executed as indicated, accompanied by payment of the full exercise price for
the number of Class A Warrants or Class B Warrants being exercised.
The Class A Warrants and the Class B Warrants are subject to redemption by
the Company, on not less than 30 days' written notice, at a redemption price
of $.01 per warrant, if the average trading price of the Class A Common Stock
of the Company for any period of 20 consecutive business days ending within
five business days of the date on which the notice of redemption is given
shall have exceeded $36.04 per share (subject to adjustment) with respect to
the Class A Warrants and $53.64 per share (subject to adjustment) with
respect to the Class B Warrants. However, the Class A Warrants and the Class
B Warrants underlying the Unit Purchase Options may not be redeemed by the
Company unless at the redemption date the Unit Purchase Options have been
exercised and the underlying warrants are outstanding. Holders of warrants
will automatically forfeit their rights to purchase the shares of Class A
Common Stock issuable upon exercise of the warrants unless the warrants are
exercised before they are to be redeemed. All of the outstanding warrants of
a class, except for those underlying the Unit Purchase Options, must be
redeemed if any portion of that class are to be redeemed. A notice of
redemption will be mailed to each of the registered holders of the warrants
no later than 30 days before the date fixed for redemption. The notice of
redemption shall specify the redemption price, the date fixed for redemption,
the place where the warrant certificates shall be delivered and the date of
expiration of the right to exercise the warrants.
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The Class A Warrants and the Class B Warrants contain provisions that
protect the holders thereof against dilution by adjustment of the exercise
price and shares issuable upon exercise in certain events, such as stock
dividends, stock splits, mergers, sales of all or substantially all of the
Company's assets at less than the market value, sales of stock at below
market price and other unusual events.
The applicable warrant exercise price may be reduced and the applicable
warrant expiration date may be extended upon notice to the holders of the
Class A Warrants and the Class B Warrants.
The Company is not required to issue fractional warrants upon adjustment
or fractional shares of Class A Common Stock upon exercise of the Class A
Warrants or the Class B Warrants. In lieu thereof, an amount of each equal to
the same fraction of the then current market value of a share of Class A
Common Stock or a warrant, as the case may be, may be paid.
The ownership of a Class A Warrant or a Class B Warrant does not entitle
the holder thereof to any of the rights of a holder of shares of Class A
Common Stock of the Company.
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 100,000,000 shares of Class A Stock,
10,000,000 shares of Class B Common Stock and 1,200,000 shares of Class C
Common Stock (collectively, the "SFX Common Stock"). In addition, the Company
is authorized to issue shares of preferred stock. See "Risk Factors--Possible
Adverse Impact of Authorized but Unissued Shares of Capital Stock and
Delaware Law."
DIVIDENDS. Holders of shares of SFX 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 SFX Common Stock, however,
unless simultaneously the same dividend is declared or paid on each share of
the other classes of SFX Common Stock. In the case of any stock dividend,
holders of shares of Class A Common Stock of the Company are entitled to
receive the same percentage dividend (payable in shares of Class A Common
Stock) as the holders of shares of Class B Common Stock (payable in shares of
Class B Common Stock) and shares of Class C Common Stock (payable in shares
of Class C Common Stock). The payment of dividends is limited by certain
agreements to which the Company is a party and is expected to be limited by
other indebtedness which may be incurred in the future.
VOTING RIGHTS. Holders of shares of Class A Common Stock and shares of
Class B Common Stock of the Company 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. The holders of shares
of Class C Common Stock have no voting rights except as otherwise provided by
law.
In the election of directors, the holders of shares of Class A Common
Stock of the Company, voting as a separate class, are entitled to elect
two-sevenths (2/7ths) of the Company's directors (or, if such number of
directors is not a whole number, the next higher whole number). The holders
of Class A Common Stock of the Company are currently entitled to elect three
of the Company's nine directors. Any person nominated by the Board of
Directors for election by the holders of shares of Class A Common Stock as a
director of the Company must be qualified to be an "Independent Director," as
such term is used in the Certificate of Incorporation. In general, an
Independent Director is a director who is not (i) an officer, employee or
affiliate of the Company or any of its subsidiaries or any affiliate of Mr.
Sillerman, (ii) an affiliate of Mr. Sillerman or (iii) an individual having a
relationship with the Company which, in the opinion of the Board of
Directors, would interfere with such person's exercise of independent
judgment in carrying out the responsibilities of a director). In the event of
the death, removal or resignation of a director elected by the holders of
shares 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. The holders of shares of Class A
Common Stock and the holders of shares of Class B Common Stock of the
Company, voting as a single class, with
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each share of Class A Common Stock entitled to one vote and each shares of
Class B Common Stock entitled to ten votes, are entitled to elect the
remaining directors. The holders of Class A Common Stock or Class B Common
Stock of the Company 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 directors elected by the shares of Class A Common
Stock voting separately as a class.
The holders of shares of 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 is affiliates, with each share of
Class A Common Stock and each share of 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 SFX Common Stock is required to approve,
among other things, a change in the designations, preferences or limitations
of the shares of such class of SFX Common Stock.
LIQUIDATION RIGHTS. Upon the liquidation, dissolution, or winding-up of
the Company, the holders of shares of SFX Common Stock are entitled to share
ratably in all assets available for distribution after payment in full of
creditors.
OTHER PROVISIONS. Each share of Class B Common Stock of the Company is
convertible, subject to compliance with FCC rules and regulations, at the
option of its holder, into one share of Class A Common Stock of the Company
at any time. Each share of Class B Common Stock and each share of Class C
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 to compliance with FCC rules and regulations. The holders of SFX
Common Stock are not entitled to preemptive or subscription rights. The
shares of SFX 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 shares
of Class A Common Stocks, Class B Common Stock and Class Common Stock must be
identical, except that in any such transaction in which shares of common
stock are distributed to the stockholders of the Company, such shares may
differ as to voting rights to the extent that voting rights now differ among
the classes of SFX Common Stock. No class of SFX Common Stock may be
subdivided, consolidated, reclassified or otherwise changed unless
concurrently the other classes of SFX Common Stock are subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
USE OF PROCEEDS
To the extent that any Warrants and Stock Options are exercised, the
Company plans to use the proceeds therefrom for working capital and other
general corporate purposes.
PLAN OF DISTRIBUTION
Pursuant to that certain Amended and Restated Agreement and Plan of
Merger, dated as of April 15, 1996, as amended (the "Merger Agreement"),
among SFX, MMR and SFX Merger Company, a Delaware corporation and a
wholly-owned subsidiary of SFX, on November 22, 1996 (the "Effective Time"),
SFX Merger Company merged with and into MMR (the "Merger") and MMR became a
wholly-owned subsidiary of the Company. As a result of the Merger, (i) each
outstanding share of Class A Common Stock and Series B Convertible Preferred
Stock of MMR was converted into the right to receive .2983 of a share of
Class A Common Stock of the Company (and cash in lieu of any fractional share
of Class A Common Stock of the Company), (ii) each outstanding share of Class
B Common Stock and Original Preferred Stock of MMR was converted into the
right to receive .2983 of a share of Class B Common Stock of the Company (and
cash in lieu of any fractional share of Class B Common Stock of the Company),
and (iii) each outstanding Warrant and Stock Option was assumed by the
Company and, as assumed, adjusted so that (a) each Warrant and Stock Option
shall be exercisable for .2983 of a share of Class A Common Stock of the
Company and (b) the per share exercise price for the shares of Class
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A Common Stock of the Company issuable upon the exercise of such assumed
Warrants and Stock Options shall be equal to the quotient obtained by
dividing the exercise price per share of Class A Common Stock of MMR under
such Warrant or Stock Option immediately prior to the consummation of the
Merger by .2983, and rounding the resulting exercising price down to the
nearest whole cent.
The following is a description of the Warrants and the Stock Options. All
of the Warrants and Stock Options contain provisions that protect the holders
thereof against dilution by adjustment of the exercise price and shares
issuable upon exercise in certain events, such as stock dividends, stock
splits or sales of stock at below certain specified prices.
CLASS B WARRANTS. At the Effective Time, MMR had outstanding 749,460 Class
B Warrants, each of which entitled the holder to purchase one share of Class
A Common Stock of MMR for $11.50 per share, subject to the terms and
conditions of the Warrant Agreement. The Class B Warrants expire on March 22,
1999. Pursuant to the Merger Agreement, each Class B Warrant was assumed by
SFX and, as assumed, entitles the holder to purchase .2983 of a share of
Class A Common Stock of the Company for $11.50 (which is equal to an exercise
price per share of Class A Common Stock of the Company of $38.55). The
749,460 outstanding Class B Warrants of the Company entitle the holders
thereof to purchase an aggregate of approximately 223,564 shares of Class A
Common Stock of the Company. Pursuant to the Warrant Agreement, upon the
consummation of the Merger, the Company agreed in writing to assume the
obligations, rights and duties of MMR with respect to the Class B Warrants.
In addition, the parties to the Warrant Agreement, as well as the Company and
ChaseMellon Shareholder Services, L.L.C., the Company's transfer agent,
executed an agreement, dated as of the Effective Time, pursuant to which
ChaseMellon Shareholder Service, L.L.C. assumed the rights, obligations and
duties of warrant agent under the Warrant Agreement.
The Class B Warrants of the Company have traded on the Nasdaq National
Market since November 25, 1996. From November 25, 1996 to December 31, 1996,
the high and low bids for the Class B Warrants were $5.875 and $1.625,
respectively. From January 1, 1997 to February 18, 1997, the high and low
bids for the Class B Warrants were $2.75 and $1.875, respectively.
UNIT PURCHASE OPTIONS. At the Effective Time, MMR had outstanding 160,000
Unit Purchase Options, each of which entitled the holder thereof to purchase
one unit ("Unit"), each Unit consisting of one share of Class A Common Stock
of MMR, one Class A Warrant of MMR and one Class B Warrant of MMR, at an
exercise price of $7.75 per Unit, subject to the terms and conditions of
those certain Unit Purchase Options, dated March 23, 1994, issued by MMR to
certain of its underwriters and their designees. Pursuant to the Merger
Agreement, each Unit Purchase Option was assumed by SFX and, as assumed,
entitles the holder to purchase .2983 of a share of Class A Common Stock of
the Company, one Class A Warrant and one Class B Warrant at an exercise price
per Unit of $7.75. The Unit Purchase Options expire on March 22, 1999. The
Class A Warrants and the Class B Warrants underlying the Units have the terms
described above under "Description of Class A Warrants and Class B Warrants."
COMMON STOCK PURCHASE WARRANTS. At the Effective Time, MMR had outstanding
100,000 Common Stock Purchase Warrants, each of which entitled the holder to
purchase one share of Class A Common Stock of MMR at an exercise price of
$9.10 per share, subject to the terms and conditions contained in those
certain Common Stock Purchase Warrants, dated July 29, 1993, issued by MMR to
certain of its underwriters and their designees. Pursuant to the Merger
Agreement, each Common Stock Purchase Warrant was assumed by SFX and, as
assumed, entitles the holder to purchase .2983 of a share of Class A Common
Stock of the Company for $9.10 (which is equal to an exercise price per share
of Class A Common Stock of the Company of $30.51). The Common Stock Purchase
Warrants expire on July 28, 1999. The 100,000 outstanding Common Stock
Purchase Warrants entitle the holders thereof to purchase an aggregate of
approximately 29,830 shares of Class A Common Stock of the Company.
HUFF WARRANTS. The Merger Agreement required MMR, on or prior to the
Effective Time, to repay all amounts outstanding under certain debentures of
MMR issued to The Huff Alternative Income Fund, L.P. ("Huff") and to redeem
all shares of preferred stock of MMR held by Huff. In connection with such
repayment and redemption and obtaining Huff's consent to the consummation of
the Merger, at the Effective Time SFX issued to Huff the Huff Warrants, which
entitle Huff to purchase an aggregate of
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269,427 shares of Class A Common Stock at exercise prices per share which
range from $25.98 to $41.90. The Huff Warrants expire on November 22, 2006,
subject to early termination under certain circumstances. The Company has
granted the holders of the Huff Warrants certain demand and piggyback
registration rights with respect to the shares of Common Stock underlying the
Huff Warrants.
STOCK OPTIONS. At the Effective Time, MMR had outstanding an aggregate of
273,000 options under its 1993 Stock Option Plan, 1994 Stock Option Plan and
1995 Stock Option Plan, which entitled the holders thereof to purchase an
aggregate of 273,000 shares of Class A Common Stock of MMR at various prices.
Pursuant to the Merger Agreement, each Stock Option was assumed by SFX and,
as assumed, entitles the holder thereof to purchase .2983 of a share of Class
A Common Stock of the Company at the exercise price set out in the Stock
Option. (The exercise price per share of Class A Common Stock of the Company
is equal to the quotient obtained by dividing the exercise price per share of
Class A Common Stock of MMR under such Stock Option immediately prior to the
consummation of the Merger by .2983, and rounding the resulting exercise
price down to the nearest whole cent.) The 273,000 outstanding Stock Options
entitle the holders to purchase an aggregate of approximately 81,436 shares
of Class A Common Stock of the Company.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Baker & McKenzie, New York, New York. Howard J. Tytel, who has an
equity interest in and is an executive officer and a Director of the Company,
is Of Counsel to Baker & McKenzie. Fisher Wayland Cooper Leader & Zaragoza
LLP, Washington D.C., has represented the Company with respect to legal
matters under the Communications Act and the rules and regulations
promulgated thereunder by the FCC.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
at December 31, 1995 and 1994, and for each of the three years in the period
ended December 31, 1995, and the consolidated financial statements of MMR at
December 31, 1995 and 1994, and for the years then ended, incorporated by
reference herein, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports with respect thereto, and are
incorporated by reference herein in reliance upon such reports 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 and
1994, and the nine months ended December 31, 1993, incorporated by reference
herein, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their reports with respect thereto, and are
incorporated by reference herein in reliance upon such reports 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, incorporated by reference herein, have been audited by KPMG Peat
Marwick L.L.P., independent certified public accountants, to the extent and
for the period indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The combined balance sheets of the Secret Communications Stations:
Indianapolis, Indiana, and Pittsburgh, Pennsylvania at June 30, 1996, and the
related combined statements of operations and cash flows for the year then
ended, incorporated by reference herein, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference in reliance upon the
authority of said firm as experts in giving said reports.
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