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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 17 , 1997
(October 15, 1996)
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SFX BROADCASTING, INC.
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(Exact name of registrant as specified in charter)
Delaware 0-22486 13-3649750
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
150 East 58th Street, 19th Floor, New York, New York 10155
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 407-9191
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N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Prospectus Supplement
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Pursuant to the Registration Statement on Form S-3 (Reg. No. 333-16995) filed
by the Company on November 27, 1996 with the Securities and Exchange
Commission, the Company is filing a Prospectus Supplement under which it
is offering 2,250,000 shares of its 12-5/8% Series E Cumulative Exchangeable
Preferred Stock.
The Prospectus Supplement is attached hereto as Exhibit 99.1 and incorporated
herein by reference. The Form of Underwriting Agreement and the form of
Certificate of Designations related to the Series E Cumulative Exchangeable
Preferred Stock are attached hereto as Exhibits 1.1 and 4.1, respectively.
Amendment to Secret Agreement
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In October 1996, the Company entered into a purchase agreement with Secret
Communications, pursuant to which the Company agreed to acquire substantially
all of the assets used in the operation by Secret Communications of nine radio
stations located in three markets (Indianapolis, Indiana, Pittsburgh,
Pennsylvania, and Cleveland, Ohio). In January 1997, the parties reached an
agreement in principle to amend the purchase agreement to provide that the
purchase price will be reduced from $300.0 million to $255.0 million and that
the Cleveland stations will not be transferred. In addition, if (i) at any
time prior to the date 12 months from the execution of the amendment, Secret
Communications enters into a binding agreement to sell the Cleveland stations
at a price less than $45.0 million and (ii) such disposition is consummated
prior to March 31, 1998, the Company will be required to pay, at closing, the
difference between the sale price and $45.0 million, but in no event more than
$5.0 million.
Employment Agreements
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The Company's Compensation Committee, Independent Directors and Mr. Sillerman
have agreed that the Company will 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. Mr. Sillerman's annual base pay under the agreement will be
$400,000, initially, subject to periodic adjustments. The Board of Directors
has also approved an additional compensation provision, pursuant to which Mr.
Sillerman is to receive a one-time $1.25 million payment, subject to recoupment
by the Company ratably to the extent that Mr. Sillerman does not remain
employed by the Company for a ten-year period. The Board of Directors and the
Compensation Committee also approved a $1.25 million loan to Mr. Sillerman,
which loan will be a full-recourse obligation of Mr. Sillerman and bear
interest. Mr. Sillerman has indicated his intention to use the proceeds from
the loan to acquire additional common equity in the Company.
The employment agreement, which has not yet been finalized, will include the
issuance of stock options or their equivalent both upon the execution of the
employment agreement and in the event of a change of control of the Company in
amounts to be determined by the Board of Directors and the Compensation
Committee. The initial grant of such stock options or their equivalent will be
at an exercise price determined on the date of the Compensation Committee's
original agreement as to the new employment agreement. Depending upon the
ultimate form and amount of stock options or their equivalent granted under the
employment agreement, the Company may incur compensation charges in 1996 or
later years. It is anticipated that, except as described above, the provisions
of Mr. Sillerman's employment agreement, including those with respect to
changes of control of the Company, will be similar to those in his existing
employment agreement.
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The Company has entered into an employment agreement with Michael G. Ferrel,
pursuant to which Mr. Ferrel has agreed to serve as the Company's President and
Chief Executive Officer for a period of five years from November 1996. The
Company has agreed to pay Mr. Ferrel an annual base salary of $300,000 for the
first year, which increases by five percent in each subsequent year.
Additionally, Mr. Ferrel's employment agreement provides for an annual bonus
equal to the greater of $75,000 or an amount determined by the Company's
Compensation Committee based upon the Company's achievement of certain
performance goals as set by the Board of Directors. Prior to entering into his
employment agreement, Mr. Ferrel was granted fully-vested options to purchase
up to 50,000 shares of Class A Common Stock at an exercise price of $33.75 per
share. Upon entering into his employment agreement, Mr. Ferrel was paid a cash
bonus of $500,000 and was granted fully-vested options to purchase up to 30,000
shares of the Company's Class A Common Stock. The Company also loaned Mr.
Ferrel $300,000 and paid Mr. Ferrel relocation expenses totaling $25,000. Mr.
Ferrel used the proceeds from the bonus payment and the loan to pay tax
liabilities related to certain performance-based stock awards earned by Mr.
Ferrel during his employment as Chief Executive Officer and President of
Multi-Market Radio, Inc. The loan bears interest at an annual rate of ___% and
is payable in full upon the termination of Mr. Ferrel's employment with the
Company. The Company also agreed to grant Mr. Ferrel, in each of the next four
succeeding years, fully-vested options to purchase up to 30,000 shares of the
Company's Class A Common Stock at their fair market value at the time of each
grant.
Termination of the Wichita Joint Sales Agreement
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The Company has terminated its Joint Sales Agreement with Triathlon
Broadcasting Company ("Triathlon") pursuant to which Triathlon sold advertising
on the Company's three radio stations operating in Wichita, Kansas.
Supplemental Indentures
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Pursuant to an Indenture, dated as of May 31, 1996, (the "Indenture") by and
among the Company, the Guarantors referred to therein and The Chase Manhattan
Bank (formerly known as Chemical Bank) (the "Trustee"), pursuant to which the
Company's 10 3/4% Senior Subordinated Notes due 2006 (the "Notes") were issued,
the Company has entered into three Supplemental Indentures, dated as of
November 25, 1996, January 10, 1996 and January 13, 1997, respectively, by and
among itself, the Guarantors referred to in each Supplemental Indenture and the
Trustee.
The First and Third Supplemental Indentures add certain of the Company's
recently acquired subsidiaries as guarantors of the Notes. The Second
Supplemental Indenture was entered into in order to cure a defect in the
original Indenture which prevented the Company's subsidiaries from guaranteeing
senior debt of the Company incurred in compliance with the Indenture. The
Second Supplemental Indenture, in curing this defect, will allow the Company to
increase the amount it can borrow under its senior credit facility.
The three Supplemental Indentures are attached hereto as Exhibits 4.2, 4.3 and
4.4, respectively, and are incorporated herein by reference.
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Delsener/Slater Acquisition
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In January 1996, the Company consummated its acquisition of privately-owned
Delsener/Slater Enterprises, Ltd., a concert promotion company, pursuant to a
Stock Purchase Agreement, dated as of October 11, 1996. Pursuant to the terms
of the Stock Purchase Agreement, the Company acquired Delsener/Slater
Enterprises, Ltd. for $20 million in cash and approximately $4 million in
additional future payments. The cash portion of the transaction was funded
from the Company's existing cash reserves and by borrowing on the Company's
$225 million line of credit with the Bank of New York.
The Company's press release, dated January 7, 1997, announcing the consummation
of the transaction, is attached hereto as Exhibit 99.4 and incorporated herein
by reference.
Houston Exchange
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In December 1996, the Company consummated its acquisition of radio station
KKRW-FM, operating in Houston, Texas, from CBS Radio, a division of CBS, Inc.,
pursuant to an Asset Exchange Agreement dated as of May 1, 1996 (the "Exchange
Agreement"). Pursuant to the terms of the Exchange Agreement, the Company
acquired KKRW-FM from CBS in exchange for radio station KRLD-AM, Dallas, Texas
and the Texas State Networks, both of which were previously owned by the
Company.
The Company's press release, dated December 4, 1996, announcing the
consummation of this transaction, is attached hereto as Exhibit 99.2 and
incorporated herein by reference.
Albany Acquisition
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In January 1996, the Company completed its acquisition of radio station
WYSR-FM, operating in Albany, New York, from Jarad Broadcasting Company of New
York, Inc., pursuant to an Asset Purchase Agreement dated as of August 1996
(the "Purchase Agreement"). Pursuant to the terms of the Purchase Agreement,
the Company acquired WYSR-FM for $1 million.
The Company's press release, dated January 6, 1997, announcing the consummation
of the transaction, is attached hereto as Exhibit 99.3 and incorporated herein
by reference.
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Richmond Acquisition
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The Company has entered into definitive agreements, (the "Richmond Acquisition
Agreement") by and among the Company, ABS Communications, Inc., ABS
Communications L.L.C., ABS Richmond Partners, L.P., ABS Richmond Partners II,
L.P., EBF, Inc. and EBF Partners whereby the Company agreed to acquire a 96%
interest in radio stations WKHK-FM, WBZU-FM, WLEE-FM and WVGO-FM, each
operating in Richmond, Virginia. In connection with the Richmond Acquisition
Agreement, the Company loaned to ABS Communications, L.L.C. $14.5 million to
finance the purchase of two of these radio stations, and has deposited
$2 million in escrow to secure the Company's obligations under the Agreement.
The Richmond Acquisition Agreement is attached hereto as Exhibit 2.3 and is
incorporated herein by reference.
Stock Option Agreement
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The Company has entered into a Stock Option Agreement (the "Option
Agreement"), dated May 9, 1996, with Michael G. Ferrel. Pursuant to the terms
of the Option Agreement, Mr. Ferrel has been granted the fully-vested right to
purchase up to 50,000 shares of the Company's Class A Common Stock at a
purchase price of $33.75 per share. Theses options will expire on May 9, 2001.
The Option Agreement is attached hereto as Exhibit 10.1 and incorporated
herein by reference.
Class B Warrants
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Pursuant to the Company's merger transaction with MMR, the Company has assumed
certain Class B Warrants originally issued by MMR. Each Class B Warrant
entitles its registered holder to purchase .2983 shares of the Company's Class
A Common Stock at a price of $11.50, subject to adjustment, from the date of
issuance until March 22, 1999. The Class B Warrants are quoted on the Nasdaq
National Market under the symbol "SFXBW."
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
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1.1 Form of Underwriting Agreement.
2.1 Asset Exchange Agreement, dated as of May 1, 1996, by and between SFX
Broadcasting of Texas (KRLD), Inc.; SFX Broadcasting of Texas (TSN),
Inc.; SFX Broadcasting of Texas (TSN) Licensee, Inc.; SFX Broadcasting
of the Southwest, Inc.; SFX Broadcasting, Inc. and CBS Inc.
(incorporated by reference to Exhibit 10.3 to the Form 8-K of SFX
Broadcasting, Inc. (Commission File No. 0-22486) filed with the
Securities and Exchange Commission on May 8, 1996).
2.2 Master Richmond Station Group Agreement, dated December 17, 1996,
by and among SFX Broadcasting, Inc., ABS Communications Incorporated,
Kenneth A. Brown, EBF Inc., EBF Partners, ABS Communications, LLC.,
ABS Richmond Partners, L.P., ABS Richmond Partners II, L.P., ABS
Richmond Towers, L.P. and J. Edwin Conrad.
2.3 Stock Purchase Agreement, dated as of October 11, 1996, by and among
Delsener/Slater Enterprises, Ltd., Beach Concerts, Inc., Connecticut
Concerts, Incorporated, Broadway Concerts, Inc., Ardee Productions,
Ltd. Ardee Festivals NJ, Inc., In-House Tickets, Inc., Exit 116
Revisited, Inc., Dumb Deal, Inc., Ron Delsener, Mitch Slater, and SFX
Broadcasting, Inc. (incorporated by reference to Exhibit 10.3 to the
Form 8-K of SFX Broadcasting, Inc. (Commission File No. 0-22486) filed
with the Securities and Exchange Commission on October 29, 1996).
4.1 Form of Certificate of Designations.
4.2 First Supplemental Indenture, dated as of November 25, 1996.
4.3 Second Supplemental Indenture, dated as of January 10, 1997.
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4.4 Third Supplemental Indenture, dated as of January 13, 1997.
10.1 Stock Option Agreement, dated May 9, 1996, by and between SFX
Broadcasting, Inc. and Michael G. Ferrel.
99.1 Prospectus Supplement of SFX Broadcasting, Inc., dated January 17,
1997.
99.2 Press Release issued by SFX Broadcasting, Inc. dated December 6, 1996.
99.3 Press Release issued by SFX Broadcasting, Inc. dated January 6, 1997.
99.4 Press Release issued by SFX Broadcasting, Inc. dated January 7, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereto duly authorized.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
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Name: Howard J. Tytel
Title: Executive Vice President
and Secretary
Date: January 17, 1997
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SFX BROADCASTING, INC.
12 5/8% Series E Cumulative Exchangeable Preferred Stock due October 31, 2006
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Underwriting Agreement
January , 1997
BT Securities Corporation
Goldman, Sachs & Co.
Lehman Brothers Inc.
c/o BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
SFX Broadcasting, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to BT Securities Corporation ("BT"), Goldman, Sachs & Co. ("Goldman") and
Lehman Brothers Inc. ("Lehman" and, together with BT and Goldman, the
"Underwriters") an aggregate of 2,250,000 shares of 12 5/8% Series E Cumulative
Exchangeable Preferred Stock, par value $.01 per share (Liquidation Preference
$100.00 per share) (the "Shares"), of the Company. The Shares will be
exchangeable as set forth in the Certificate of Designations relating thereto
(the "Certificate of Designations") for the Company's 12 5/8% Senior
Subordinated Exchange Debentures due 2006 (the "Exchange Debentures").
1. The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-16995) in
respect of the Shares and the Exchange Debentures has been filed with the
Securities and Exchange Commission (the "Commission"); such registration
statement and any post-effective amendment thereto, if any, each in the form
heretofore delivered to you for each of the other Underwriters, and, excluding
exhibits thereto but including all documents incorporated by reference in the
prospectus contained therein (the "Incorporated Documents"), have been
declared effective by the Commission in such form; no other document with
respect to such registration statement or document incorporated by reference
therein has heretofore been filed with the Commission; and, to the Company's
knowledge, no stop order suspending the effectiveness of such registration
statement has been issued and, to the Company's knowledge, no proceeding for
that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in such registration statement or filed with
the Commission pursuant to Rule 424(a)
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of the rules and regulations of the Commission under the Securities Act of
1933, as amended (the "Act"), is hereinafter called a "Preliminary
Prospectus;" the various parts of such registration statement, including all
exhibits thereto and including (i) the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) under the
Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the registration statement at the time it was
declared effective and (ii) the Incorporated Documents contained in the
registration statement at the time such part of the registration statement
became effective, each as amended at the time such part of the registration
statement became effective, is hereinafter collectively called the
"Registration Statement;" and such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, together with each prospectus
supplement filed on or after the date hereof by the Company pursuant to Rule
424(b) of the Act, is hereinafter called the "Prospectus;" and any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the Incorporated Documents, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; and any reference to
any amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as the
case may be (the term "Incorporated Documents" being deemed to include all
such subsequently filed documents);
(b) The Incorporated Documents, when they became effective or were
filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder (except to the
extent subsequently superseded or modified in a filing prior to the effective
date of the Registration Statement), and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by reference
in the Prospectus or any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the case may
be, will conform in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished
in writing to the Company by an Underwriter expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects, to the requirements of the
Act and the rules and regulations of the Commission thereunder and do not and
will not, as of the applicable effective date as to the Registration Statement
and any amendment thereto, and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information relating to an Underwriter furnished in writing to the Company by
an Underwriter expressly
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for use therein;
(d) Except as disclosed in the Registration Statement (including the
Incorporated Documents), none of the Company, any of its direct or indirect
subsidiaries (each, a "Subsidiary" and, collectively, the "Subsidiaries") or
any of the stations to be acquired in the Pending Acquisitions (as defined in
the Prospectus) (collectively, the "Acquisition Entities") have sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material losses or
interferences with their businesses, taken as a whole, from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise than
as set forth or contemplated in the Prospectus; and, since the respective
dates as of which information is given or incorporated by reference in the
Registration Statement and the Prospectus, there have not been any changes in
the capital stock or long-term debt of the Company, any of the Subsidiaries
or, to the Company's knowledge, any of the Acquisition Entities or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company, any of
the Subsidiaries or any of the Acquisition Entities, otherwise than as set
forth or contemplated in the Prospectus;
(e) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus, is and, after giving effect to
the Pending Acquisitions, will be duly registered and qualified to conduct its
business and is and, after giving effect to the Pending Acquisitions, will be
in good standing, in each jurisdiction or place where the nature of its
business requires such registration or qualification, except where the failure
to be so qualified would not have a material adverse effect or a prospective
material adverse effect on the assets, liabilities, results of operations,
management, condition (financial or other), prospects, properties, business or
net worth of the Company and the Subsidiaries, taken as a whole (a "Material
Adverse Effect").
(f) All of the issued shares of capital stock of the Company have
been duly authorized, are validly issued, fully paid and nonassessable and
have been issued in compliance with all applicable federal and state
securities laws; the Shares have been duly authorized by the Company for
issuance and sale to the Underwriters pursuant to this Agreement and the
Shares, when issued and delivered against payment therefor in accordance with
the terms hereof, will be validly issued, fully paid and non-assessable, will
have been issued in compliance with all applicable federal and state
securities laws and will be entitled to the rights, privileges and preferences
set forth in the Certificate of Designations. The stockholders of the Company
have no preemptive rights with respect to the Shares.
(g) Each Subsidiary of the Company is listed on Schedule II hereto.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing in the jurisdiction of its incorporation, with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus, and is and, after giving effect to
the Pending Acquisitions, will be duly registered and qualified to conduct its
business and is and, after giving effect to the Pending Acquisitions, will be
in good standing, in each jurisdiction or place where the nature of its
business requires such registration or qualification, except where the failure
to be so qualified would not have a
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Material Adverse Effect; all of the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and free of any preemptive or similar rights, and
are owned by the Company directly, or indirectly through one of the other
Subsidiaries, free and clear of any lien, adverse claim, security interest or
other encumbrance (except for security interests under the New Credit
Agreement) and have been issued in compliance with all applicable federal and
state securities laws.
(h) The Company and each of the Subsidiaries, as applicable, has full
corporate power and authority to issue, sell and deliver the Shares to the
Underwriters as provided herein and to enter into this Agreement, the
Certificate of Designations, the indenture governing the Exchange Debentures
(the "Exchange Indenture"), the New Credit Agreement, the purchase agreements,
letters of intent and other agreements relating to each of the Pending
Acquisitions (the "Acquisition Documents"), and the purchase agreements,
letters of intent and other agreements relating to each of the Pending
Dispositions (as defined in the Prospectus) (the "Disposition
Documents")(each, a "Transaction Document" and, collectively, the "Transaction
Documents"), to carry out all the terms and provisions hereof and thereof to
be carried out by them and to issue, and deliver the Shares as provided herein
and therein.
(i) This Agreement has been duly authorized, validly executed and
delivered by the Company and constitutes a legal, valid and binding agreement
of the Company (assuming it is a legal, valid and binding agreement of the
Underwriters), enforceable against the Company in accordance with its terms
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 hereunder may be limited
by state or federal securities laws.
(j) The Certificate of Designations has been duly authorized by all
necessary corporate and stockholder action.
(k) The execution and delivery of the Exchange Indenture has been
duly authorized by the Company and when duly executed and delivered by the
Company (assuming the due execution and delivery by the trustee thereunder)
will constitute the legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms 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.
(l) The Exchange Debentures have been duly authorized, and, when duly
executed, authenticated, issued and delivered in exchange for the Shares in
accordance with the terms of the Certificate of Designations and the Exchange
Indenture, will be validly issued and outstanding, and will constitute the
legal, valid and binding obligations of the Company, entitled to the benefits
of the Exchange Indenture and enforceable against the Company in accordance
with their terms 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
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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.
(m) The execution and delivery of each of the other Transaction
Documents to which the Company or any Subsidiary is a party have been duly
authorized by the Company and each Subsidiary party thereto and each of the
other Transaction Documents which has been executed prior to or on the date
hereof has been duly executed and delivered by the Company and each Subsidiary
party thereto and is the legal, valid and binding agreement of the Company and
each Subsidiary party thereto (assuming it is a legal, valid and binding
agreement of the other parties thereto), enforceable against the Company and
each Subsidiary party thereto in accordance with its terms 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.
(n) Each of the Transaction Documents, the Shares and the Exchange
Debentures conforms in all material respects to the respective statements
relating thereto contained in the Prospectus.
(o) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus. The authorized capital stock of
the Company conforms to the description thereof contained in the Prospectus.
(p) The Company's capitalization at September 30, 1996, and adjusted
capitalization at such date after giving effect to the Transactions is, in
each case, as set forth in the Prospectus under the caption "Capitalization."
(q) Except as disclosed in the Prospectus, there are no outstanding
(A) securities or obligations of the Company or any of the Subsidiaries
convertible into or exchangeable for any capital stock of the Company or any
such Subsidiary, (B) warrants, rights or options to subscribe for or purchase
from the Company or any of the Subsidiaries any such capital stock or any such
convertible or exchangeable securities or obligations or (C) obligations of
the Company or any of the Subsidiaries to issue any shares of capital stock,
any such convertible or exchangeable securities or obligations, or any such
warrants, rights or options.
(r) Except for (a) certain registration rights in respect of shares
held by Nomura Holdings America Inc., (b) as otherwise disclosed in the
Prospectus and (c) in connection with and assumed by the Company as a result
of the MMR Merger, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to require
the Company to file a registration statement under the Act with respect to any
securities owned or to be owned by such person or to require the Company to
include such securities in any securities being registered pursuant to any
registration statement filed by the Company under the Act.
(s) The consolidated financial statements and schedules of the
Company and the financial statements and schedules of each of the Acquisition
Entities included or incorporated by reference in the
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Registration Statement and the Prospectus present fairly in all material
respects the financial position of the Company on a consolidated basis and of
each of the Acquisition Entities, respectively, and the results of operations
and changes in financial condition as of the dates and for the periods therein
specified. Such financial statements and schedules have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise noted therein). The
selected financial data set forth under the captions "Summary--Summary
Consolidated Financial Data" and "Unaudited Pro Forma Condensed Combined
Financial Statements" in the Preliminary Prospectus and the Prospectus fairly
present, on the basis stated in the Preliminary Prospectus and the Prospectus,
the information included. The other financial and statistical information and
data set forth or incorporated by reference in the Preliminary Prospectus and
the Prospectus is, in all material respects, accurately presented and prepared
on a basis consistent with published industry sources (with respect to certain
statistical information) and such financial statements and the books and
records of the Company, the Subsidiaries and the Acquisition Entities, as
applicable. The unaudited pro forma condensed combined financial statements
and the related notes thereto included in the Preliminary Prospectus and the
Prospectus present fairly, as stated therein, the pro forma financial position
and results of operations at the respective dates and for the respective
periods indicated. The pro forma adjustments are factually supportable. All
adjustments necessary to fairly present such pro forma information have been
made.
(t) Each of Ernst & Young LLP, KPMG Peat Marwick LLP, Coopers &
Lybrand LLP, Deloitte & Touche LLP, Arthur Andersen LLP, Mohle, Adams, Till,
Guidry & Wallace, LLP and Cheely Burcham Eddins Rokenbrod & Carroll, who have
certified certain financial statements of the Company, the Subsidiaries and
the Acquisition Entities, and whose reports appear or are incorporated by
reference in the Preliminary Prospectus and the Prospectus, were independent
public accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(u) Subsequent to the date of the most recent consolidated balance
sheets for the Company and each of the Acquisition Entities included or
incorporated by reference in the Preliminary Prospectus and the Prospectus,
except as set forth in the Preliminary Prospectus and the Prospectus, (i) none
of the Company, any of the Subsidiaries or, to the Company's knowledge, any
Acquisition Entity has incurred any liabilities or obligations, direct or
contingent, or entered into any transaction not in the ordinary course of
business, except such as would not have a Material Adverse Effect and (ii)
none of the Company, any of the Subsidiaries or, to the Company's knowledge,
any Acquisition Entity has sustained, since the date of the latest audited
financial statements included or incorporated by reference in the Preliminary
Prospectus and the Prospectus, any material losses or interferences with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, except such as would not have a Material Adverse Effect.
(v) Except as disclosed in the Prospectus (including, without
limitation, the documents incorporated by reference therein), there are no
business relationships or related party transactions which would be required
to be disclosed therein by Item 404 of Regulation S-K of the Commission and
each business relationship or related party transaction described therein is a
fair and accurate description of the relationships and transactions so
described.
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(w) None of the Company, the Subsidiaries or the Acquisition
Entities, nor, to the Company's or any Subsidiary's knowledge, any director,
officer, agent, employee or other person associated with or acting on behalf
of the Company or any of the Subsidiaries, has used any corporate funds during
the last five years for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; made any unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment, except such as would
not have a Material Adverse Effect.
(x) Except (i) as disclosed in the Prospectus, (ii) for the approval
by the Federal Communications Commission (the "FCC") of the assignment or
transfer or control of the FCC licenses or authorizations in connection with
certain of the Pending Acquisitions or Pending Dispositions, (iii) from time
to time, for FCC authorizations required in the ordinary course of business of
the Company, (iv) for FCC approvals in connection with the exercise of certain
rights or remedies under the New Credit Agreement and (v) for approvals under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the execution,
delivery and performance of this Agreement, the execution, delivery and
performance of the other Transaction Documents, and the consummation by the
Company and the Subsidiaries of the transactions contemplated hereby and
thereby will not (A) require any consent, approval, authorization or other
order (which has not been obtained) of any court, regulatory body,
administrative agency or other governmental body, including the FCC, except
such as may be required under the Act, the Exchange Act, the Trust Indenture
Act of 1939, as amended (the "TIA"), securities regulatory bodies (including
self-regulatory bodies), securities exchanges or the securities or Blue Sky
laws of the various states; (B) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or by-laws of the
Company or any of the Subsidiaries; (C) require any consent or approval (which
has not been obtained) of the parties to, or conflict with or constitute a
breach of any of the terms or provisions of, or a default under, any agreement
or other instrument to which the Company or any of the Subsidiaries is a party
or by which the Company or any of the Subsidiaries or their respective
property is bound; (D) violate or conflict with any laws or administrative
regulations, including without limitation, the Communications Act of 1934, as
amended, and the rules and regulations of the FCC thereunder (collectively
called the "Communications Act"), rulings of court, decrees applicable to the
Company, any of the Subsidiaries or their respective property; (E) result in
termination or revocation of any of the permits, licenses, approvals, orders,
certificates, franchises or authorizations of governmental or regulatory
authorities, including those relating to the Communications Act, owned or held
by the Company or any of the Subsidiaries in order to conduct the broadcast
operations of the stations owned or operated by them (collectively,
"Licenses") or result in any other material impairment of the rights of the
holder of any such License; or (F) result in the creation or imposition of any
lien (other than under the New Credit Agreement) on any asset of the Company
or any of the Subsidiaries, except, in the case of (A), (C), (D), (E) or (F)
above, such as would not, either singly or in the aggregate, have a Material
Adverse Effect.
(y) Except as disclosed in the Prospectus, each of the Company, the
Subsidiaries and the Acquisition Entities is operating in material compliance
with all laws, regulations, administrative orders or rulings or court decrees
applicable to it or to any of its property (including without limitation those
relating to broadcast operations, environmental, safety or similar matters,
federal or state laws relating
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to the hiring, promotion or pay of employees), except for violations which
would not have a Material Adverse Effect.
(z) Except as disclosed in the Prospectus, each of the Company, the
Subsidiaries and, to the Company's knowledge, the Acquisition Entities has
such Licenses as are necessary to own, lease and operate its respective
properties and to conduct its respective business; each of the Company and the
Subsidiaries has and, after giving effect to the Pending Acquisitions, will
have fulfilled and performed all of its material obligations with respect to
such Licenses and, to the best knowledge of the Company, no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights
of the holder of any such License that would result in a Material Adverse
Effect; the Licenses are in full force and effect, are valid for the balance
of their respective terms, are unimpaired by any acts or omissions of the
Company, the Subsidiaries, any of their employees, agents, officers, directors
or stockholders and are free and clear of any material non-standard
restrictions that might limit the full operation of any stations of the
Company or the Subsidiaries, or, to the Company's knowledge, of the
Acquisition Entities; no renewal of any License would constitute a major
environmental action under Sections 1.1305 or 1.1307 of the FCC's rules; all
information contained in any pending application for modification, extension
or renewal of the Licenses or other applications filed with the FCC by the
Company, the Subsidiaries or, to the Company's knowledge, the Acquisition
Entities is true, complete and accurate in all material respects.
(aa) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending which are required to be described therein to
which the Company, any of the Subsidiaries or, to the Company's knowledge, any
of the Acquisition Entities is a party or to which the property (including
without limitation Licenses) of the Company, any of the Subsidiaries or any of
the Acquisition Entities is subject, and, to the Company's knowledge, no such
proceedings have been threatened against the Company, any of the Subsidiaries
or any of the Acquisition Entities or with respect to any of their respective
properties (including without limitation Licenses).
(ab) All reports, filings and regulatory fees required to be filed
with the FCC by the Company, the Subsidiaries or, to the Company's knowledge,
any of the Acquisition Entities with respect to the operation of the stations
of the Company, the Subsidiaries or of the Acquisition Entities have been
timely filed, except for such filings which if not timely filed would not have
a Material Adverse Effect. All such reports and filings are accurate and
complete in all material respects. The Company, the Subsidiaries and, to the
Company's knowledge, the Acquisition Entities maintain appropriate local
public files as required by FCC rules. The Company, the Subsidiaries and the
Acquisition Entities are operating only those facilities for which an
appropriate FCC license, permit or authorization has been obtained and is in
effect.
(ac) None of the Company, the Subsidiaries or, to the knowledge of
the Company, the sellers of the Acquisition Entities is in breach or violation
of any of the terms or provisions of any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company, any of
the Subsidiaries or, to the knowledge of the Company, any of sellers of the
Acquisition Entities, as applicable, are a party or by which the Company, any
of the Subsidiaries or, to the knowledge of the Company, any of the sellers of
the Acquisition Entities, as applicable, are bound or to which any of the
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property or assets of the Company, any of the Subsidiaries or, to the
knowledge of the Company, any of sellers of the Acquisition Entities, as
applicable, are subject, nor is the Company, any of the Subsidiaries or, to
the knowledge of the Company, any of the sellers of the Acquisition Entities
in violation of the provisions of its charter, by-laws, operating agreement or
other organizational documents or any statute or any judgment, order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company, any of the Subsidiaries, to the knowledge of the Company,
any of the sellers of the Acquisition Entities or any of their properties or
assets (except to the extent any such conflict, breach, violation or default
is cured at or prior to the Time of Delivery and within the grace period
applicable thereto or would not have a Material Adverse Effect).
(ad) Each of the Company, the Subsidiaries and, to the Company's
knowledge, the sellers of each of the Acquisition Entities has (i) good title
to all of the properties and assets owned by them as described in the
Prospectus, free and clear of all liens, charges, encumbrances or restrictions
(except security interests under the New Credit Agreement), except as would
not have a Material Adverse Effect after giving effect to the Pending
Acquisitions and (ii) peaceful and undisturbed possession in all material
respects under all material leases to which such person is a party as lessee,
except as would not have a Material Adverse Effect after giving effect to the
Pending Acquisitions.
(ae) The Company, the Subsidiaries and, to the Company's knowledge,
the sellers of each of the Acquisition Entities own or possess adequate rights
to use all material trademarks, service marks, tradenames, trademark
registrations, service mark registrations and copyrights necessary for the
conduct of their businesses, and to the Company's knowledge, the conduct of
their businesses will not conflict with, and neither the Company nor any of
the Subsidiaries has received any notice of any claim of conflict with, any
such rights of others (except in any such case for any conflict that would not
have a Material Adverse Effect).
(af) Each of the Company, the Subsidiaries and, to the Company's
knowledge, the Acquisition Entities is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA)
for which the Company or any Subsidiary would have any liability; none of the
Company or the Subsidiaries has incurred or expects to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Section 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company or any
Subsidiary would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification, except, in each case, as would not have
a Material Adverse Effect.
(ag) There is (i) no material unfair labor practice complaint pending
against the Company, any of the Subsidiaries or, to the Company's knowledge,
any of the Acquisition Entities, or, to the best knowledge of the Company,
threatened against any of them, before the National Labor Relations Board or
any state or local labor relations board, and no significant grievance or
significant arbitration
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proceeding arising out of or under any collective bargaining agreement is so
pending against the Company, any of the Subsidiaries or any of the Acquisition
Entities, or, to the best knowledge of the Company, threatened against any of
them, (ii) no material strike, labor dispute, slowdown or stoppage pending
against the Company, any of the Subsidiaries or any of the Acquisition
Entities nor, to the best knowledge of the Company or any Subsidiary,
threatened against the Company, any of the Subsidiaries or any of the
Acquisition Entities and (iii) to the best knowledge of the Company and each
Subsidiary, no union representation question existing with respect to the
employees of the Company, any of the Subsidiaries or any of the Acquisition
Entities and, to the best knowledge of the Company and each Subsidiary, no
union organizing activities are taking place, except, in each case, as would
not have a Material Adverse Effect.
(ah) The Company and each of the Subsidiaries has reviewed the effect
of Environmental Laws (as defined below) and the disposal of hazardous or
toxic substances, wastes, pollutants and contaminants on the business, assets,
operations and properties of the Company, each of the Subsidiaries and each of
the Acquisition Entities, as applicable, and identified and evaluated
associated costs and liabilities (including, without limitation, any material
capital and operating expenditures required for clean-up, closure of
properties and compliance with Environmental Laws, all permits, licenses and
approvals, all related constraints on operating activities and all potential
liabilities to third parties). Except as described in the Prospectus, on the
basis of such reviews, the Company has reasonably concluded that such
associated costs and liabilities would not have a Material Adverse Effect.
Except as described in the Prospectus, none of the Company, the Subsidiaries
or the Acquisition Entities has violated any environmental, safety or similar
law or regulation applicable to it or its business or property relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), lacks
any permit, license or other approval required of it under applicable
Environmental Laws or is violating any term or condition of such permit,
license or approval which could reasonably be expected to, either individually
or in the aggregate, have a Material Adverse Effect.
(ai) The Company, the Subsidiaries and, to the Company's knowledge,
the Acquisition Entities have filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof and have
paid, or made adequate reserve or provision for the payment of, all taxes
shown as due thereon except in any case where such failure would not have a
Material Adverse Effect, and the Company has no knowledge of any tax
deficiency that has had (or would have) a Material Adverse Effect.
(aj) The Company and the Subsidiaries (i) make and keep accurate
books and records and (ii) maintain internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance with
management's specific or general authorization, (B) transactions are recorded
as necessary to permit preparation of their consolidated financial statements
and to maintain accountability for their assets, (C) access to their assets is
permitted only in accordance with management's specific or general
authorization and (D) the reported accountability for their assets is compared
with existing assets at reasonable intervals.
(ak) Neither the Company nor any of the Subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act
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of 1940, as amended, or (ii) a "holding company" or a "subsidiary company" or
an "affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(al) Each of the Company, the Subsidiaries and, to the Company's
knowledge, the Acquisition Entities has complied with all provisions of
Florida Statutes, ss.517.075, relating to doing business in Cuba.
(am) None of the Company, the Subsidiaries or any agent thereof
acting on behalf of any of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Shares
to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224)
of the Board of Governors of the Federal Reserve.
(an) The Company is subject to Section 13 or 15(d) of the Exchange
Act.
(ao) The Company has delivered to the Underwriters true and correct,
executed copies of each of the Transaction Documents which has been executed
prior to the date hereof and, except as described in the Prospectus, there
have been no amendments, alterations, modifications or waivers thereto or in
the exhibits or schedules thereto other than those as to which the
Underwriters shall previously have been advised and shall not have reasonably
objected after being furnished a copy thereof.
(ap) Other than as contemplated by this Agreement, the Transaction
Documents and the Prospectus, there is no broker, finder or other party that
is entitled to receive from the Company or any of the Subsidiaries any
brokerage or finder's fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement or any of the Transaction
Documents (other than customary brokerage or similar fees payable to third
parties in connection with the Transaction Documents).
The Company and the Subsidiaries acknowledge that the Underwriters
and, for purposes of the opinions to be delivered to the Underwriters pursuant
to Section 7 hereof, counsel for the Company and the Subsidiaries and counsel
for the Underwriters, will rely upon the accuracy and truth of the foregoing
representations and hereby consent to such reliance.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price per share of $96.25, the number of Shares set forth
opposite the name of such Underwriter in Schedule I hereto.
3. Upon the authorization by you of the release of the Shares, the
several Underwriters propose to offer the Shares for sale upon the terms and
conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder will
be represented by one or more Global Shares in book-entry form which will be
deposited by or on behalf of the Company with The Depository Trust Company
("DTC") or its designated custodian. The Company will deliver the Shares to BT
against payment by or on behalf of each Underwriter of the purchase price
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therefor by wire transfer to or at the direction of the Company of Federal
(same day) funds, by causing DTC to credit the Shares to the account of BT at
DTC. The Company will cause the certificates representing the Shares to be
made available to BT for checking at least twenty-four hours prior to the Time
of Delivery at the office of DTC or its designated custodian (the "Designated
Office").
(b) The time and date of delivery and payment for the Shares shall be
9:30 a.m., New York City time, on January 23, 1997 (the "Time of Delivery") or
such other time and date as BT and the Company may agree upon in writing.
(c) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7 hereof, will be delivered at such time and
date at the offices of Baker & McKenzie, 805 Third Avenue, New York, New York
10022 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 1:00 p.m., New York City time, on the New York Business
Day immediately preceding the Time of Delivery at which meeting the final
drafts of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New
York are generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file a
supplement to such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on January 17, 1997; to make no
further amendment or any supplement to the Registration Statement or
Prospectus (including, without limitation, by way of filing additional
Incorporated Documents with the Commission) prior to the Time of Delivery (or
the completion of the distributions by the Underwriters of the Shares, if
later) which shall be disapproved by you promptly after reasonable notice
thereof; to prepare and file with the Commission, promptly upon your
reasonable request, any amendment or supplement to the Registration Statement
or Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause the
same to become promptly effective; to advise you, promptly after it receives
notice thereof, of the time when any amendment to the Registration Statement
has been filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies thereof; to
file promptly all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Shares; to advise you, promptly
after it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any Preliminary
Prospectus or prospectus, of the suspension of the qualification of the Shares
or the Exchange Debentures issuable upon exchange of the Shares for offering
or sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus or for
additional
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information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares or the Exchange Debentures issuable
upon exchange of the Shares for offering and sale under the securities laws of
such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares or the Exchange Debentures issuable upon
exchange of the Shares and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary during such
period to amend or supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in order to comply
with the Act or the Exchange Act, to notify you and upon your request to file
such document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance, and
in case any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares and the Exchange Debentures issuable upon exchange
of the Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as you may request of
an amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), an earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule 158);
(e) To furnish to the Underwriters, without charge (i) four signed
copies of the Registration Statement as first filed with the Commission and of
each amendment to it, including all exhibits, (ii) such number of conformed
copies of the Registration Statement as so filed and of each amendment to it,
without exhibits, as the Underwriters may reasonably request and (iii) for a
period of five years following the Time of Delivery, copies of any annual
reports, quarterly reports and current reports filed with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by
the Commission;
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(f) To furnish to its holders of the Shares and the Exchange
Debentures as soon as practicable after the end of each fiscal year an annual
report (including a balance sheet and statements of income, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as practicable after
the end of each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail.
(g) To use their best efforts to permit the Shares to be eligible for
clearance and settlement through The Depository Trust Company ("DTC").
(h) To apply the net proceeds from the sale of the Shares as set
forth in the Prospectus.
(i) To take such steps as shall be necessary to ensure that neither
the Company nor any of the Subsidiaries shall become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or (ii)
a "holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(j) To cause the Certificate of Designations to be filed with the
appropriate authorities prior to the Time of Delivery.
(k) If, prior to the completion of the distribution of the Shares,
the Company or any Subsidiary commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after the
date the Prospectus or if the information reported in the Prospectus, if any,
concerning the Company's or any Subsidiary's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Florida Department of Banking and Finance (the "Department")
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(l) Use its best efforts to do all things necessary to satisfy the
closing conditions set forth in Section 7 hereof.
6. The Company agrees to pay all costs and expenses incident to the
performance of their obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions, including any costs of printing of the
Registration Statement, any Preliminary Prospectus, the Prospectus and any
amendment or supplement thereto and any "Blue Sky" memoranda, (ii) all
arrangements relating to the delivery to the Underwriters of copies of the
foregoing documents and the costs of distributing the foregoing documents,
(iii) the fees and disbursements of the counsel, the accountants and any other
experts or advisors retained by the Company, (iv) preparation (including
printing), issuance and delivery to the Underwriters of the Shares and the
Exchange Debentures, including transfer agent's fees, (v) the qualification of
the Shares and Exchange Debentures under state securities and "Blue Sky" laws,
including filing fees and fees and disbursements of counsel for the
Underwriters relating thereto, (vi) the
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costs and expenses of DTC and its nominee, including its book-entry system;
(vii) the filing fees of the Commission and the National Association of
Securities Dealers, Inc. relating to the Shares and the Exchange Debentures
(including the fees, disbursements and charges of counsel to the Underwriters
in connection therewith), (viii) expenses of the Company in connection with
any meetings with prospective investors in the Shares and Exchange Debentures,
(ix) fees and expenses of the Trustee, including fees and expenses of counsel
to the Trustee, (x) any fees charged by investment rating agencies for the
rating of the Shares and Exchange Debentures and (xi) all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement. If the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 10 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy
all conditions on their part to be performed or satisfied hereunder other than
by reason of a default by the Underwriters, the Company will reimburse the
Underwriters upon demand (accompanied by documentation) for all out-of-pocket
expenses (including counsel fees and disbursements) that shall have been
incurred by the Underwriters in connection with the proposed purchase and sale
of the Shares. The Company shall not in any event be liable to the
Underwriters for the loss of anticipated profits from the transactions covered
by this Agreement.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at the Time of Delivery, shall be subject, in their reasonable
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Time of Delivery, true
and correct in all material respects, the condition that the Company shall
have performed all of its obligations hereunder theretofore to be performed,
and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) All of the representations and warranties of the Company and the
Subsidiaries contained in this Agreement shall be true and correct in all
material respects on the date hereof and at the Time of Delivery with the same
force and effect as if made on and as of the date hereof, at the Time of
Delivery. The Company and the Subsidiaries shall have performed or complied
with all of the agreements herein contained and required to be performed or
complied with by them at or prior to the Time of Delivery.
(c) The Prospectus, in form and substance reasonably satisfactory to
the Underwriters, shall have been printed and copies distributed to the
Underwriters not later than 12:00 p.m., New York City time, on the day
following the date of this Agreement or at such later date and time as to
which the Underwriters may agree. No stop order suspending the qualification
or exemption from qualification of the Shares in any jurisdiction referred to
in Section 5(b) shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
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<PAGE>
(d) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Time of Delivery, have a Material Adverse Effect; no
action, suit or proceeding shall have been commenced and be pending against or
affecting or, to the best knowledge of the Company and the Subsidiaries,
threatened against, the Company or any of the Subsidiaries before any court or
arbitrator or any governmental body, agency or official that, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect; and no stop order shall have been issued by the Commission or any
governmental agency of any jurisdiction referred to in Section 5(b) preventing
the use of the Prospectus, or any amendment or supplement thereto, or which
could reasonably be expected to have a Material Adverse Effect.
(e) Since the dates as of which information is given in the
Prospectus and other than as set forth in the Prospectus, (i) there has not
been, singly or in the aggregate, any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the assets, liabilities, results of
operation, management, condition (financial or other), prospects, properties,
business or net worth of the Company, the Subsidiaries and the Acquisition
Entities, taken as a whole (each a "Material Adverse Change"), or any material
change in the long-term debt, or material increase in the short-term debt,
from that set forth in the Prospectus; (ii) no dividend or distribution of any
kind shall have been declared, paid or made by the Company on any class of its
capital stock; (iii) the Company, the Subsidiaries and the Acquisition
Entities shall not have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the
Company, the Subsidiaries and the Acquisition Entities, taken as a whole, and
that are required to be disclosed on a balance sheet or notes thereto in
accordance with generally accepted accounting principles and are not disclosed
on the latest balance sheet or notes thereto included in the Prospectus.
(f) The Underwriters shall have received a certificate, dated the
Time of Delivery, signed on behalf of the Company by (i) Robert F.X.
Sillerman, Executive Chairman, (ii) Howard J. Tytel, Executive Vice President,
and (iii) D. Geoffrey Armstrong, Executive Vice President, Chief Financial
Officer and Treasurer, confirming that (A) such officers, have participated in
conferences with other officers and representatives of the Company and the
Subsidiaries, representatives of the independent public accountants of the
Company and the Subsidiaries and representatives of counsel to the Company and
the Subsidiaries at which the contents of the Prospectus and related matters
were discussed and (B) the matters set forth in paragraphs (b), (d) and (e)
and the second sentence of paragraph (c) of this Section 7 are true and
correct at the Time of Delivery.
(g) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Shares, the Exchange
Debentures, the Exchange Indenture, the other Transaction Documents, the
Prospectus and all other legal matters relating to this Agreement and the
transactions contemplated hereby including, without limitation, the Pending
Acquisitions and the New Credit Agreement, shall be satisfactory in all
material respects to counsel for the Underwriters, and the Company and the
Subsidiaries shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon such
matters.
(h) Baker & McKenzie, counsel for the Company and the Subsidiaries,
shall have furnished to the Underwriters its written opinion, as counsel to
the Company and the Subsidiaries, addressed to the
16
<PAGE>
Underwriters and dated the Time of Delivery, in form and substance reasonably
satisfactory to the Underwriters.
(i) Fisher Wayland Cooper Leader & Zaragoza, L.L.P., special
communications counsel for the Company and the Subsidiaries, shall have
furnished to the Underwriters its written opinion, as special communications
counsel to the Company and the Subsidiaries, addressed to the Underwriters and
dated the Time of Delivery, in form and substance reasonably satisfactory to
the Underwriters.
(j) The Underwriters shall have received at the Time of Delivery an
opinion of Latham & Watkins, counsel for the Underwriters, dated the Time of
Delivery, and addressed to the Underwriters, in form and substance reasonably
satisfactory to the Underwriters.
(k) The Company shall have delivered to the Underwriters letters of
each of Ernst & Young LLP, KPMG Peat Marwick LLP, Coopers & Lybrand LLP,
Deloitte & Touche LLP, Arthur Andersen LLP, Mohle, Adams, Till, Guidry &
Wallace, LLP and Cheely Burcham Eddins Rokenbrod & Carroll, and such other
letters as the Underwriters may reasonably request, addressed to the
Underwriters and dated the Time of Delivery (i) confirming that they are
independent public accountants under the guidelines of the American Institute
of Certified Public Accountants and (ii) stating the conclusions and findings
of such firm with respect to the financial information and other related
matters presented in the Registration Statement. Such letters shall be in form
and substance reasonably satisfactory to the Underwriters and their counsel.
(l) The Company shall have caused the Certificate of Designations to
be filed with the appropriate authorities and the Underwriters shall have
received a certified copy thereof.
(m) The Company shall have received the consent of the lenders under
the New Credit Facility to the transactions contemplated hereby and shall have
delivered to the Underwriters evidence thereof in form and substance
reasonably satisfactory to the Underwriters.
(n) The Company shall have entered into each of the Transaction
Documents, the form and substance of each of which shall be reasonably
acceptable to the Underwriters (provided that any Transaction Document which
was entered into prior to the date of this Agreement shall be deemed
acceptable to the Underwriters in form and substance for purposes of this
Section 7), and the Underwriters shall have received counterparts, conformed
as executed, thereof and of all other documents and agreements entered into in
connection therewith. There shall exist at and as of the Time of Delivery,
after giving effect to the transactions contemplated by this Agreement and the
other Transaction Documents, no conditions that would constitute a default (or
an event that with notice or the lapse of time, or both, would constitute a
default) under any of the other Transaction Documents or that would have a
Material Adverse Effect on the Company's ability to consummate the Pending
Acquisitions as described in the Prospectus. Each Transaction Document shall
be in full force and effect.
(o) The Company shall have furnished to the Underwriters a
certificate, dated the Time of Delivery, of its Executive Vice President,
Chief Financial Officer and Treasurer as to the solvency of the Company and
the Subsidiaries following consummation of the transactions contemplated
hereby.
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<PAGE>
(p) (i) None of the Company, any of the Subsidiaries or any of the
Acquisition Entities shall have sustained since the date of the latest audited
financial statements included in the Prospectus losses or interferences with
their businesses, taken as a whole, from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus or (ii) since the respective dates as of which
information is given or incorporated by reference in the Registration
Statement and the Prospectus, there shall not have been any change in the
capital stock or long-term debt of the Company, any of the Subsidiaries or any
of the Acquisition Entities or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company, the
Subsidiaries and the Acquisition Entities, taken as a whole, otherwise than as
set forth or contemplated in the Prospectus, the effect of which, in any such
case described in clause (i) or (ii), is, in the reasonable judgment of the
Underwriters, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Shares being
delivered at the Time of Delivery on the terms and in the manner contemplated
herein and in the Prospectus.
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or The Nasdaq Stock Market's National
Market or in the over-the-counter market shall have been suspended or
materially limited, or minimum prices shall have been established on such
exchange by the Commission, or by such exchange or by any other regulatory
body or governmental authority having jurisdiction, (ii) a banking moratorium
shall have been declared by federal or state authorities, (iii) the United
States shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall have been
a declaration of a national emergency or war by the United States or (iv)
there shall have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international conditions
on the financial markets in the United States shall be such) as, in each case,
to make it, in the reasonable judgment of the Underwriters, impracticable or
inadvisable to proceed with the offering or delivery of the Shares being
delivered at the Time of Delivery on the terms and in the manner contemplated
herein and in the Prospectus.
(r) Subsequent to the execution and delivery of this Agreement, (i)
no downgrading shall have occurred in the rating accorded the Shares or any
other security of the Company by a nationally recognized statistical rating
organization, as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Securities Act, and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Shares or any other security
of the Company.
(s) There shall exist at and as of the Time of Delivery no conditions
that would constitute a default (or an event that with notice or the lapse of
time, or both, would constitute a default) under the New Credit Agreement. At
the Time of Delivery, the New Credit Agreement shall be in full force and
effect and shall not have been modified.
(t) The Company shall have entered into an amendment to that certain
Asset Purchase Agreement (as so amended, the "Secret Agreement"), dated as of
October 15, 1996, between the
18
<PAGE>
Company and Secret Communications Limited Partnership ("Secret"), which
amendment shall reflect in all material respects the agreement in principle
described in the Prospectus under the caption "Agreements Related to the
Pending Acquisitions and the Pending Dispositions--Secret Communications
Acquisition."
(u) The Company shall have delivered to the Underwriters audited
financial statements of the radio stations of Secret to be acquired by the
Company from Secret pursuant to the Secret Agreement which audited financial
statements shall meet the requirements of Regulation S-X of the Act, which
audited financial statements of Secret shall not be materially different in
form or substance from the unaudited financial statements of Secret utilized
in preparing the pro forma financial statements of the Company included in the
Prospectus. The Company shall have filed with the Commission such audited
financial statements of Secret on Form 8-K in the form required by Regulation
S-X of the Act.
(v) The Company and the Trustee named therein shall have executed a
supplemental indenture, substantially in the form and substance previously
delivered to the Underwriters and their counsel, amending Section 4.09 of that
certain Indenture, between the Company and Chemical Bank, as trustee, dated as
of May 31, 1996, relating to the Company's 10 3/4% Senior Subordinated Notes
due 2006 and such amendment shall have become effective.
(w) Latham & Watkins shall have been furnished with such documents,
in addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 7 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(x) Prior to the Time of Delivery, the Company and the Subsidiaries
shall have furnished to the Underwriters such further information,
certificates and documents as the Underwriters may reasonably request.
All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Underwriters and counsel for the Underwriters.
8. (a) The Company agrees to indemnify and hold harmless each
Underwriter, and each person, if any, who controls each Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or otherwise, insofar as any such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement
originally filed with respect to the Shares or any amendment thereto
or any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based
upon written information furnished by or on behalf
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<PAGE>
of the Company filed in any jurisdiction in order to qualify the
Shares under the securities or "Blue Sky" laws thereof or filed with
the Commission or any securities association or securities exchange
(each an "Application"); or
(ii) the omission or alleged omission to state, in such
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto,
or any Application, a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by any Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, the Company will not be liable
in any such case to the extent that any such loss, claim, damage, or liability
is finally judicially determined to arise out of or be based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application in reliance upon and in conformity with written information
furnished to the Company by the Underwriters specifically for use therein; and
provided, further, that the Company will not be liable to the Underwriters or
any person controlling the Underwriters with respect to any such untrue
statement or omission made in any Preliminary Prospectus which is completely
corrected in the Prospectus or any amendment or supplement thereto if (x) it
is finally judicially determined that the person asserting any such loss,
claim, damage or liability purchased Shares from the Underwriters in reliance
upon the Preliminary Prospectus but was not sent or given a copy of the
Prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Shares to such person and (y) the Company
notified the Underwriters to send the Prospectus to such person, unless such
failure to deliver the Prospectus was a result of noncompliance by the Company
with Section 5 of this Agreement. This indemnity agreement will be in addition
to any liability that the Company may otherwise have to the indemnified
parties. The Company shall not be liable under this Section 8 for any
settlement of any claim or action effected without its consent, which shall
not be unreasonably withheld.
(b) The Underwriters, severally and not jointly, will indemnify and
hold harmless each of the Company, its directors, its officers who signed the
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which the Company or any
such director, officer or controlling person may become subject under the Act,
the Exchange Act, or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the
20
<PAGE>
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Underwriters specifically for use
therein; and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses incurred by
the Company or any such director, officer or controlling person in connection
with investigating or defending against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any liability
that the Underwriters may otherwise have to the indemnified parties. The
Underwriters shall not be liable under this Section 8 for any settlement of
any claim or action effected without their consent, which shall not be
unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 8, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to
the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest,
(ii) the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it and/or
other indemnified parties that are different from or additional to those
available to the indemnifying party or (iii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of
such indemnified party or parties and such indemnified party or parties shall
have the right to select separate counsel to defend such action on behalf of
such indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval, not to be unreasonably withheld, by such indemnified party of
counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred
by such indemnified party in connection with the defense thereof, unless (i)
the indemnified party shall have employed separate counsel in accordance with
the proviso to the immediately preceding sentence (it being understood,
however, that in connection with such action the indemnifying party shall not
be liable for the expenses of more than one separate counsel (in addition to
local counsel) in any one action or separate but substantially similar actions
in the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Underwriters in the case of paragraph (a) of
this Section 8 or the Company in the case of paragraph (b) of this
21
<PAGE>
Section 8, representing the indemnified parties under such paragraph (a) or
paragraph (b), as the case may be, who are parties to such action or actions)
or (ii) the indemnifying party has authorized in writing the employment of
counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
consent of the indemnifying party, unless such indemnified party waived in
writing its rights under this Section 8, in which case the indemnified party
may effect such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Shares or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof). The relative benefits received by the Company on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (before deducting expenses) received by
the Company bear to the total discounts and commissions received by the
Underwriters. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand,
or the Underwriters on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or
per capita allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in the first sentence of
this paragraph (d). Notwithstanding any other provision of this paragraph (d),
the Underwriters shall not be obligated to make contributions hereunder that
in the aggregate exceed the total discounts and commissions received by the
Underwriters under this Agreement, less the aggregate amount of any damages
that the Underwriters have otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
the Underwriters, and each director of the Company, each officer of the
Company who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, shall have the same rights to contribution as the
Company.
22
<PAGE>
9. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters,
as set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereon) made by or
on behalf of any Underwriter or any controlling person of any Underwriter, or
the Company, or any officer or director or controlling person of the Company,
and shall survive delivery of and payment for the Shares.
10. (a) This Agreement may be terminated in the sole discretion of
the Underwriters by notice to the Company given prior to the Time of Delivery
in the event that the Company shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder at or prior thereto or, if at or prior to the Time of
Delivery:
(i) the Company or any Acquisition Entity shall have
sustained any loss or interference with respect to its businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or any
legal or governmental proceeding, which loss or interference, in the
sole reasonable judgment of the Underwriters, has had or has a
Material Adverse Effect or there shall have been, in the sole
reasonable judgment of the Underwriters, any Material Adverse Change,
except in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange or The Nasdaq Stock Market's National Market or in the
over-the-counter market shall have been suspended or materially
limited, or minimum prices shall have been established on such
exchange by the Commission, or by such exchange or by any other
regulatory body or governmental authority having jurisdiction;
(iii) a banking moratorium shall have been declared by
federal or state authorities;
(iv) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of
a national emergency or war by the United States;
(v) (a) a downgrading shall have occurred in the rating
accorded to any debt security of the Company by a nationally
recognized statistical rating organization, as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, or
(b) any such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications,
its rating of any debt security of the Company; or
(vi) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the reasonable
judgment of the Underwriters, impracticable or inadvisable to proceed
with the offering or delivery of the Shares being delivered at the
Time of Delivery on the terms and in the manner contemplated herein
and in the
23
<PAGE>
Prospectus.
(b) Termination of this Agreement pursuant to this Section 10 shall
be without liability of any party to any other party except as provided in
Section 9 hereof.
11. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you jointly or by BT on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Underwriters shall be delivered or sent by mail,
telex or facsimile transmission to you as the representatives in care of BT
Securities Corporation, One Bankers Trust Plaza, 130 Liberty Street, New York,
New York 10006, Attention: Corporate Finance Department; and if to the Company
shall be delivered or sent by mail to the address of the Company set forth in
the Registration Statement, Attention: Secretary; provided, however, that any
notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex constituting
such Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take
effect upon receipt thereof.
12. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares from any Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
13. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
15. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please
sign and return to us counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters
and the Company. It is understood that your acceptance of this letter on
behalf of each of the Underwriters is pursuant to the authority set forth in a
form of Agreement among Underwriters, the form of which shall be submitted to
the Company for examination upon request, but without warranty on your part as
to the authority of the signers thereof.
Very truly yours,
SFX BROADCASTING, INC.
By:_______________________________
Name:
Title:
Accepted as of the date hereof on behalf of the Underwriters by:
BT SECURITIES CORPORATION
By:_______________________________
Name:
Title:
25
<PAGE>
SCHEDULE I
Total Number of Shares
Underwriter To be Purchased
- ----------- ---------------
BT Securities Corporation............................. 1,350,000
Goldman, Sachs & Co. ................................ 450,000
Lehman Brothers Inc. ............................... 450,000
---------
Total ............................................ 2,250,000
=========
26
<PAGE>
SCHEDULE II
1. SFX Broadcasting of the Southwest, Inc., a Delaware corporation
2. SFX Broadcasting of Texas, Inc., a Delaware corporation
3. SFX Broadcasting of Texas (KRLD), Inc., a Delaware corporation
4. SFX Broadcasting of Texas (KRLD) Licensee, Inc., a Delaware corporation
5. SFX Broadcasting of Texas (TSN), Inc., a Delaware corporation
6. SFX Broadcasting of Texas (TSN) Licensee, Inc., a Delaware corporation
7. KODA-FM Licensee, Inc., a Delaware corporation
8. KJQY-FM Licensee, Inc., a Delaware corporation
9. SFX Broadcasting of Texas (KTCK), Inc., a Delaware corporation
10. SFX Broadcasting of Texas (KTCK) Licensee, Inc., a Delaware corporation
11. SFX Broadcasting of the Southeast, Inc., a Delaware corporation
12. SFX Broadcasting of South Carolina (WMYI), Inc., a Delaware corporation
13. SFX Broadcasting of South Carolina (WMYI) Licensee, Inc., a Delaware
corporation
14. SFX Broadcasting of Mississippi, Inc., a Delaware corporation
15. SFX Broadcasting of Mississippi Licensee, Inc., a Delaware corporation
16. SFX Broadcasting of South Carolina (WSSL), Inc., a Delaware corporation
17. SFX Broadcasting of South Carolina (WSSL) Licensee, Inc., a Delaware
corporation
18. SFX Broadcasting of Tennessee, Inc., a Delaware corporation
19. SFX Broadcasting of Tennessee Licensee, Inc., a Delaware corporation
20. SFX Broadcasting of Jackson, Inc., a Delaware corporation
21. SFX Broadcasting of Jackson Licensee, Inc., a Delaware corporation
22. SFX Broadcasting of North Carolina, Inc., a Delaware corporation
23. SFX Broadcasting of North Carolina Licensee, Inc., a Delaware corporation
24. SFX Broadcasting of San Diego, Inc., a Delaware corporation
25. Parker Broadcasting Company, a California corporation
26. SFX Broadcasting of San Diego Licensee, Inc., a Delaware corporation
27. SFX Acquisition Corporation
28. SFX Merger Company
27
<PAGE>
MASTER RICHMOND STATION GROUP AGREEMENT
THIS MASTER RICHMOND STATION GROUP AGREEMENT is made and entered into
as of the 17th day of December, 1996, by and among SFX BROADCASTING, INC., a
Delaware corporation ("SFX"), ABS COMMUNICATIONS INCORPORATED, a Virginia
corporation ("ABS"), KENNETH A. BROWN ("KAB"), EBF INC., a Delaware corporation
("EBFI"), EBF PARTNERS, a New York partnership ("EBFP" and, together with ABS,
KAB and EBFI, the "Current Partners"), ABS COMMUNICATIONS, L.L.C., a Virginia
limited liability company (the "LLC"), ABS RICHMOND PARTNERS, L.P., a Virginia
limited partnership ("RICH-I"), ABS RICHMOND PARTNERS II, L.P., a Virginia
limited partnership ("RICH-II" and, together with RICH-I, the "Partnerships"),
ABS RICHMOND TOWERS, L.P., a Virginia limited partnership and J. EDWIN CONRAD
for certain limited purposes specified herein.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Parties have entered into that certain Letter of Intent,
dated August 9, 1996 (the "Letter of Intent") which provides, in part, the
Parties' intention for SFX (i) to acquire (A) substantially all of the Current
Partners' partnership interests in the Partnerships and (B) the Benchmark
Assets through the LLC as well as the financing of the acquisition of such
assets by the LLC, (ii) to finance and assume certain liabilities of KAB and
ABS under the Benchmark Agreements, including the repayment of all outstanding
loans under the Signet Loan Agreement, (iii) to indemnify KAB and ABS for any
losses which may be incurred by KAB and ABS under the Benchmark Agreements and
(iv) to enter into such other arrangements and transactions with the other
Parties which are more particularly described in the Letter of Intent
(collectively, the "Contemplated Transactions"); and
WHEREAS, the Parties understand that the Contemplated Transactions
must occur in several stages and accordingly desire to enter into this
Agreement to identify the timing and execution of the various agreements which
must be entered into to consummate the Contemplated Transactions;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions contained herein, and intending to be fully bound hereby, the
Parties hereby agree as follows:
<PAGE>
SECTION 1. Certain Definitions. When used in this Agreement, the
following words or phrases shall have the following meanings:
"Agreement" shall mean this Master Richmond Station Group Agreement,
as it may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Amended and Restated Operating Agreement" shall mean the Amended and
Restated Operating Agreement substantially in the form attached hereto as
Exhibit A.
"Benchmark Agreements" shall mean all of the agreements set forth on
Schedule 1 attached hereto.
"Benchmark Asset Purchase Agreement" shall mean that certain Asset
Purchase Agreement, dated as of May 31, 1996 by and among Benchmark Radio
Acquisition Fund III Limited Partnership, WVGO License Limited Partnership,
WDCK License Limited Partnership and ABS Communications Incorporated.
"Benchmark Assets" shall mean all of the assets to be acquired by the
LLC pursuant to the Benchmark Agreements.
"Benchmark Stations" shall mean collectively, radio station WLEE(FM)
in Williamsburg, Virginia and radio station WBZU(FM) in Richmond Virginia.
"Brown Employment Agreement" shall mean the Employment Agreement
substantially in the form attached hereto as Exhibit B.
"Brown Non-Competition Agreement" shall mean the Non-Competition
Agreement substantially in the form attached hereto as Exhibit C.
"Closing" shall mean, as applicable, the Closing as defined under the
KAB Contribution Agreement or the Purchase and Sale Agreement.
"Collateral Assignment of Contracts" shall mean the Collateral
Assignment of Contracts substantially in the form attached hereto as Exhibit O.
"Conrad Employment Agreement" shall mean the Employment Agreement
substantially in the form attached hereto as Exhibit D.
-2-
<PAGE>
"Conrad Non-Competition Agreement" shall mean the Non-Competition
Agreement substantially in the form attached hereto as Exhibit E.
"Deed of Trust" shall mean the Deed of Trust substantially in the form
attached hereto as Exhibit N.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" shall mean Signet Trust Company.
"Escrow Agreement" shall mean the Escrow Agreement substantially in
the form attached hereto as Exhibit F.
"KAB Contribution Agreement" shall mean the KAB Contribution Agreement
substantially in the form attached hereto as Exhibit G.
"Letter of Intent" shall mean that certain letter of intent dated
August 9, 1996 by and among SFX Broadcasting, Inc., KAB, ABS, the LLC and each
of the Partnerships.
"Liberty Entities" shall mean Liberty Acquisition Subsidiary
Corporation and Liberty Broadcasting of Maryland II, Incorporated.
"Party" or "Parties" shall mean each of the parties, either
individually or collectively, as applicable, signatory to this Agreement.
"Purchase and Sale Agreement" shall mean the Purchase and Sale
Agreement substantially in the form attached hereto as Exhibit I.
"Put and Call Agreement" shall mean the Put and Call Agreement
substantially in the form attached hereto as Exhibit J.
"Related Agreements" shall mean each of the agreements attached to
this Agreement as an Exhibit.
"Rich Stations" shall mean, collectively, radio station WKHK-FM in
Colonial Heights, Virginia and radio station WVGO-FM in Crewe, Virginia.
"Security Agreement" shall mean the Security Agreement substantially
in the form attached hereto as Exhibit H.
-3-
<PAGE>
"SFX Contribution Agreement" shall mean the SFX Contribution Agreement
substantially in the form attached hereto as Exhibit K.
"SFX Convertible Note Agreement" shall mean the Convertible Note
Agreement substantially in the form attached hereto as Exhibit L.
"Signet Loan Agreement" shall mean that certain Promissory Note, dated
as of May 28, 1996, by and among Jacob Brown, KAB and Signet Bank as assigned
to the LLC pursuant to that certain Assignment dated May 28, 1996.
"Tower Lease" shall mean the Tower Lease substantially in the form
attached hereto as Exhibit M.
SECTION 2. Order of Transactions.
(a) The applicable Parties shall have entered into the following
agreements and the following actions shall have taken place simultaneously with
the execution of this Agreement and the consummation of the transactions
contemplated by the Benchmark Agreements:
(i) SFX and the LLC shall have entered into the SFX Convertible
Note Agreement, the Security Agreement, the Deed of Trust and the Collateral
Assignment of Contracts and any and all other agreements or documents
contemplated thereunder;
(ii) SFX, the Current Partners, the LLC and the Escrow Agent
shall have entered into the Escrow Agreement;
(iii) All amounts outstanding under the Signet Loan Agreement
shall have been repaid, any and all security interests granted to Signet Bank
pursuant to the Signet Loan Agreement shall have been terminated, extinguished
and released and the Signet Loan Agreement shall have been terminated;
(iv) KAB and the LLC shall have entered into, and consummated the
transactions under, the KAB Contribution Agreement;
(v) The Current Partners and the LLC shall have entered into the
Purchase and Sale Agreement; and
(vi) The Liberty Entities, SFX and the LLC shall have entered
into the SFX Contribution Agreement.
-4-
<PAGE>
(b) The applicable Parties shall have executed each of the following
agreements contemporaneously herewith, which agreements shall become effective
automatically upon the consummation of the transactions contemplated by the
Purchase and Sale Agreement without any further action by any of the applicable
Parties thereto (other than on the date of its effectiveness, the applicable
Parties completing the appropriate blanks and dates to reflect its
effectiveness); provided, in the event the transactions contemplated by the
Purchase and Sale Agreement are not consummated, each of the agreements listed
below shall be null and void and of no force and effect: The Amended and
Restated Operating Agreement, the Brown Employment Agreement, the Brown
Non-Competition Agreement, the Conrad Employment Agreement, the Conrad
Non-Competition Agreement and the Put and Call Agreement.
(c) Contemporaneously herewith, ABS Richmond Towers, L.P. ("ABS
Tower") and RICH-I shall have entered into the Tower Lease. ABS Tower and
RICH-I hereby agree that until the closing of the Purchase and Sale Agreement,
neither ABS Tower nor RICH-I shall amend, modify, terminate or revise in any
manner the Tower Lease without the prior written consent of SFX.
SECTION 3. Payment of Expenses. SFX hereby agrees to lend to the LLC
sufficient funds under the SFX Convertible Note Agreement so that the LLC may:
(a) reimburse or pay all reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees and any reasonable expenses
relating to the provisions of Article V of the Purchase and Sale Agreement)
incurred by the Current Partners which are directly related to the negotiation,
preparation and closing of this Agreement, the Benchmark Agreements, the
Purchase and Sale Agreement and the other agreements contemplated under this
Agreement and the Contemplated Transactions and such other reasonable costs and
expenses incurred by KAB to date in connection with the solicitation and
achievement of finding a financing source to consummate the Contemplated
Transactions;
(b) pay all fees and expenses of Interstate/Johnson Lane Corporation
("Interstate") when due as provided in that certain Placement Agency Agreement,
dated April 17, 1996 as modified by the partners thereto as reflected in Annex
A to the Letter of Intent between ABS and Interstate.
SECTION 4. [INTENTIONALLY OMITTED].
-5-
<PAGE>
SECTION 5. Certain Obligations of SFX. In addition to the obligations
of SFX contained in the agreements contemplated in this Master Agreement, SFX
hereby:
(a) agrees to cause to be performed, at its sole expense, promptly
after the execution of this Master Agreement, Phase I environmental studies of
the real property and transmitting equipment used by the Partnerships in
connection with the operation of the Rich Stations; and
(b) guaranties the obligations of the Liberty Entities (as defined in
the SFX Contribution Agreement) (and their assignees, if any) under the SFX
Contribution Agreement (in the event that such obligations have not already
been transferred to SFX by the Liberty Entities' valid assignment to SFX of all
of their respective rights and obligations thereunder).
SECTION 6. Further Assurances. Each Party hereby agrees and covenants
to the other Parties that:
(a) such Party will use his or its commercially reasonable best
efforts to cause the completion of each of the Contemplated Transactions as
expeditiously as practical and in connection therewith, such Party will avoid
taking any actions that would prevent or delay the consummation of the
Contemplated Transactions;
(b) such Party will deal with the other Parties in good faith in
completing the Contemplated Transactions; and
(c) such Party will execute all such documents which may be necessary
or appropriate to consummate the Contemplated Transactions as expeditiously as
practical and does hereby consent to the consummation of the Contemplated
Transactions and waive any rights that such Party has under any agreements
other than under this Agreement and the Related Agreements that would preclude
the consummation of the Contemplated Transactions.
SECTION 7. Indemnification.
(a) Current Partners' Indemnities. Each Current Partner hereby agrees,
severally and not jointly (based on such Current Partner's respective
percentage interests in the Partnerships), to indemnify, defend and hold the
LLC, SFX and each of their affiliates (collectively, the "SFX Parties")
harmless with respect to any and all demands, claims, actions, suits,
proceedings, assessments, judgments, costs, losses,
-6-
<PAGE>
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' fees) (collectively, the "Losses") asserted against, resulting from,
imposed upon or incurred by the LLC or SFX or its assignees directly or
indirectly relating to or arising out of the breach of any of the
representations or warranties or failure by such Current Partner to perform any
covenants or agreements of such Current Partner set forth in this Agreement or
the Related Agreements.
(b) SFX's Indemnities. SFX hereby agrees to indemnify, defend and hold
the Current Partners and their affiliates harmless with respect to any and all
Losses asserted against, resulting from, imposed upon or incurred by the
Current Partners directly or indirectly relating to or arising out of the
breach of any of the representations, warranties, covenants or agreements of
SFX set forth in this Agreement or any of the Related Agreements.
(c) Limitation on Indemnity.
(i) The SFX Parties shall be entitled to indemnification under
this Agreement only to the extent that the aggregate sum of the SFX Parties'
Losses under this Agreement and the Related Agreements for which the Current
Partners are responsible hereunder individually or in the aggregate exceeds One
Hundred Fifty Thousand Dollars ($150,000) (the "Threshold Amount")(and only to
the extent of such excess). The aggregate indemnification liability for each of
the Current Partners under this Agreement shall be limited to an amount equal
to such Current Partner's allocable portion of the Purchase Price (as defined
in the Purchase and Sale Agreement) paid to such Current Partner pursuant to
Section 3.2 of the Purchase and Sale Agreement. Notwithstanding anything to the
contrary contained herein, the SFX Parties shall not be entitled to any
indemnification under this Agreement relating to any matter disclosed in the
Environmental Report (as defined in the Purchase and Sale Agreement).
(ii) The Current Partners shall be entitled to indemnification
under this Agreement only to the extent that the aggregate sum of the Current
Partners' Losses under this Agreement and the Related Agreements exceeds the
Threshold Amount (and only to the extent of such excess). The indemnification
liability of SFX under this Agreement shall be limited to an amount equal to
the total Purchase Price paid to the Current Partners pursuant to Section 3.2
of the Purchase and Sale Agreement which amount will be offset by such amounts
received by the Current Partners under the Escrow Agreement.
-7-
<PAGE>
(d) Survival of Representations and Warranties. The Current Partners
and the SFX Parties shall have the right to bring an action for indemnification
for a period of eighteen (18) months following the Conversion Date (as defined
in the SFX Convertible Note Agreement); upon the expiration of such period,
such right shall lapse and be of no further force or effect. Notwithstanding
the foregoing, the representations and warranties made in the KAB Contribution
Agreement, the Purchase and Sale Agreement and the SFX Contribution Agreement
with respect to (A) (i) title to the partnership interests being sold or
contributed thereunder and (ii) taxes shall survive the Closing until the
expiration of any applicable statutes of limitations including any extensions
thereof and shall thereupon expire together with any right to indemnification
with respect thereto and (B) environmental matters, three (3) years from the
Conversion Date.
(e) Procedures.
(i) Any party seeking indemnification under this Section 7 (the
"Indemnified Party") shall give the party from whom indemnification is being
sought (the "Indemnifying Party") notice of any matter which such Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Agreement, within 30 days of such determination, stating the amount
of the Loss, if known, and method of computation thereof. The obligations of an
Indemnifying Party under this Section 7 with respect to Losses arising from
claims of any third party which are subject to the indemnification provided for
in this Section 7 ("Third Party Claims") shall be governed by and contingent
upon the following additional terms and conditions: Within 30 days after
receipt by an Indemnified Party of notice of (i) any Third Party Claim or (ii)
the commencement of any action or proceeding which may entitle such Indemnified
Party to indemnification under this Section 7, such Indemnified Party shall
give the Indemnifying Party written notice of such claim or the commencement of
such action or proceeding and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting from such claim. The
failure to give the Indemnifying Party timely notice under this Section 7 shall
not preclude the Indemnified Party from seeking indemnification from the
Indemnifying Party unless the Indemnifying Party has been materially prejudiced
by such failure.
(ii) If the Indemnifying Party assumes the defense of any such
claim or litigation resulting therefrom with counsel reasonably acceptable to
the Indemnified Party,
-8-
<PAGE>
the obligations of the Indemnifying Party as to such claim shall be limited to
assuming, in good faith, the defense of such claim or litigation and to holding
the Indemnified Party harmless from and against any losses, damages and
liabilities caused by or arising out of any settlement approved by the
Indemnifying Party or any judgment in connection with such claim or litigation
resulting therefrom; provided, however, that the Indemnified Party may
participate, at its expense, in the defense of such claim or litigation
provided that the Indemnifying Party shall direct and control the defense of
such claim or litigation. The Indemnified Party shall cooperate and make
available all books and records reasonably necessary and useful in connection
with the defense. Without the written consent of the Indemnified Party, the
Indemnifying Party shall not, in the defense of such claim or any litigation
resulting therefrom, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim or litigation. No such claim or litigation
resulting therefrom which is being defended in good faith by the Indemnifying
Party shall be settled or compromised without the written consent of the
Indemnifying Party.
(iii) If the Indemnifying Party shall not, within 30 days of
receipt of notice of any such claim or litigation, give notice to the
Indemnified Party of its intention to assume the defense of any such claim or
litigation resulting therefrom, the Indemnified Party may, but shall have no
obligation to, defend against such claim or litigation, acting in good faith
and in such manner as it may deem appropriate, and the Indemnified Party may
compromise or settle such claim or litigation without the Indemnifying Party's
consent. The Indemnifying Party shall promptly pay any such settlement of such
claim or litigation and shall also promptly reimburse the Indemnified Party for
the amount of all reasonable expenses, legal or otherwise, incurred by the
Indemnified Party in connection with the defense against or settlement of such
claim or litigation. In addition, the Indemnifying Party shall promptly pay the
amount of any judgment rendered with respect to such claim or in such
litigation.
(f) Sole Remedy. The indemnification provided in this Section 7 shall
be the sole and exclusive post-Closing remedy available to any party with
respect to any claims relating to this Agreement, the Purchase and Sale
Agreement, the KAB Contribution Agreement, the SFX Contribution Agreement
-9-
<PAGE>
and the SFX Convertible Note Agreement. In furtherance of the foregoing, the
parties (on behalf of themselves and their respective affiliates, directors,
officers, employees, agents, successors and assigns) hereby waive from and
after the date of the Closing, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action they may have against any
other party relating to the subject matter of this Agreement or any of the
other agreements referred to in the preceding sentence arising under or based
upon any federal, state, local or foreign law, rule or regulation (including,
without limitation, any law, rule or regulation relating to environmental
matters).
SECTION 8. Rich LMA. The parties hereto contemplate that there may be
entered into a Local Marketing Agreement ("Rich LMA") between the Partnerships
and the LLC with respect to the Rich Stations. The parties hereby acknowledge
and agree that the Rich LMA shall be in a form satisfactory to SFX, the LLC and
the Partnerships.
SECTION 9. Consequential Damages. Notwithstanding any provision
contained herein, in the event that an arbitrator under the Escrow Agreement
determines that any Party shall have acted in bad faith in connection with any
of the Contemplated Transactions, any other Party who has incurred a Loss may
seek as one of its damages consequential damages.
SECTION 10. Restriction on Consents, Amendments, Waivers and
Modifications; Opinions. The LLC hereby agrees not to amend, waive or modify
any term or condition set forth in any Related Agreement or in any other
agreement contemplated hereby to which the LLC is a Party (or consent to any
change requested thereunder) without the prior written consent of SFX. In
addition, the LLC hereby agrees that any and all forms of opinions to be
delivered to the LLC under any of the Related Agreements shall be in a form
reasonably satisfactory to SFX.
SECTION 11. Restriction on Sale of Stations. While the Purchase and
Sale Agreement is in effect, each of (i) ABS, KAB and the LLC (with respect to
the Benchmark Stations) and (ii) EBFI, EBFP, RICH-I and RICH-II (with respect
to the Rich Stations) hereby agree that such Party shall not sell, transfer or
otherwise encumber any of the Benchmark Stations or the Rich Stations, as
applicable, without the prior written approval of SFX, other than as part of
the Contemplated Transactions.
-10-
<PAGE>
SECTION 12. Amendment. This Agreement may only be amended with the
written consent of all of the Parties.
SECTION 13. Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia without
giving effect to the choice of law provisions thereof.
SECTION 14. Notices. Any notice, demand or request required or
permitted to be given under the provisions of this Agreement shall be in
writing and shall be deemed to have been duly delivered and received on the
date of personal delivery or on the date of receipt, if mailed by registered or
certified mail, postage prepaid and return receipt requested, or on the date of
a stamped receipt, if sent by an overnight delivery service, and shall be
addressed to the following addresses, or to such other address as any Party may
request:
To KAB: Kenneth A. Brown
2002 Millington Court
Richmond, VA 23233
To ABS: ABS Communications Incorporated
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
To the LLC: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
To EBFI and EBFP: c/o Coleman Wortham, III
Davenport & Co. of Virginia, Inc.
901 East Cary Street
Richmond, VA 23219
To SFX: SFX Broadcasting, Inc.
150 East 58th Street
New York, NY 10155
Attn: Howard Tytel
To Partnerships: c/o Coleman Wortham, III
901 East Cary Street
Richmond, VA 23219
-11-
<PAGE>
Copies of all notices to KAB, ABS, the LLC, EBFI, EBFP and the Partnerships
shall also be sent to:
LeClair Ryan
707 East Main Street, 11th Floor
Richmond, VA 23219
Attn: Kurt Magette, Esq.
SECTION 15. Schedules and Exhibits. This Agreement and the Related
Agreements contain various schedules and exhibits. The Parties agree that
disclosure in any one schedule or exhibit shall constitute disclosure for all
purposes under this Agreement and the Related Agreements; provided, that the
disclosure is detailed enough to indicate its applicability to such other
schedule or exhibit.
SECTION 16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together shall constitute one and the same instrument.
SECTION 17. Guarantee to Provide Purchase Price. In the event that all
of the conditions precedent set forth in Article XIII of the Purchase and Sale
Agreement have been satisfied, SFX hereby irrevocably and unconditionally
guarantees to the Current Partners that SFX shall pay or cause to be paid the
Purchase Price to the Current Partners. The obligations of SFX under this
Section 17 are absolute and direct, and constitute primary obligations of SFX.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
-------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
and Secretary
ABS COMMUNICATIONS INCORPORATED
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
KENNETH A. BROWN
/s/ Kenneth A. Brown
----------------------------------
EBF INC.
By: /s/ Coleman Wortham, III
-------------------------------
Name: Coleman Wortham, III
Title:
EBF PARTNERS
By: /s/ Coleman Wortham, III
-------------------------------
Partner Coleman Wortham, III
<PAGE>
ABS COMMUNICATIONS, L.L.C.
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
ABS RICHMOND PARTNERS, L.P.
By: ABS COMMUNICATIONS INCORPORATED,
its General Partner
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
ABS RICHMOND PARTNERS II, L.P.
By: ABS COMMUNICATIONS INCORPORATED,
its General Partner
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
J. Edwin Conrad is executing this
Agreement solely to evidence his rights
and obligations to enter into the Conrad
Employment Agreement and the Conrad
Non-Competition Agreement as of the
closing under the Purchase and Sale
Agreement:
J. EDWIN CONRAD
----------------------------------
J. EDWIN CONRAD
<PAGE>
ABS RICHMOND TOWERS, L.P.
By: Kenneth A. Brown , its
----------------------------
General Partner
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
<PAGE>
SCHEDULE 1
See attached list of documents.
-16-
<PAGE>
CONVERTIBLE NOTE AGREEMENT
DATED AS OF DECEMBER 17, 1996
AMONG
ABS COMMUNICATIONS, L.L.C.,
AS BORROWER,
AND
SFX BROADCASTING, INC.,
AS LENDER
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS............................................... 1
1.1 Certain Defined Terms.......................................... 1
1.2 Accounting Terms: Utilization of GAAP
for Purposes of Calculations Under
Agreement...................................................... 19
SECTION 2. THE LOAN.................................................. 20
2.1 Note; Procedure for Borrowings;
Prepayment..................................................... 20
2.2 Interest....................................................... 21
2.3 Payments of Principal and Interest............................. 21
2.4 Use of Proceeds................................................ 21
2.5 Taxes.......................................................... 22
SECTION 3. CONDITIONS TO THE LOANS................................... 23
3.1 Conditions to Initial Loan..................................... 23
3.2 Conditions to Each Other Loan.................................. 25
SECTION 4. BORROWER'S REPRESENTATIONS AND
WARRANTIES................................................ 26
4.1 Existence; Compliance with Law................................. 26
4.2 Executive Offices; Collateral Locations;
Corporate or Other Names....................................... 26
4.3 Power; Authorization; Enforceable
Obligations.................................................... 26
4.4 Financial Statements and Projections........................... 27
4.5 Conduct of Business; Material Contracts........................ 27
4.6 Subsidiaries................................................... 28
4.7 FCC and Station Matters........................................ 28
4.8 Real Property.................................................. 29
4.9 Personal Property Liens........................................ 29
4.10 No Material Adverse Change: No
Restricted Payments............................................ 29
4.11 Title to Properties: Liens.................................... 29
4.12 Litigation..................................................... 29
4.13 Payment of Taxes............................................... 30
4.14 Restrictions; No Default....................................... 30
4.15 Governmental Regulation........................................ 30
4.16 Securities Activities.......................................... 31
4.17 Employee Benefit Plans......................................... 31
i
<PAGE>
Page
----
4.18 Environmental Matters.......................................... 31
4.19 Ventures and Outstanding Stock................................. 31
4.20 Labor Matters.................................................. 32
4.21 Insurance...................................................... 32
4.22 Disclosure..................................................... 32
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS.......................... 33
5.1 Financial Statements and Other Reports......................... 33
5.2 Corporate Existence; Compliance with Laws...................... 34
5.3 Payment of Taxes and Claims.................................... 34
5.4 Maintenance of Properties; Insurance........................... 35
5.5 Tax Treatment.................................................. 35
5.6 Books and Records.............................................. 35
5.7 Litigation..................................................... 35
5.8 Environmental Laws............................................. 36
5.9 Indemnity...................................................... 36
5.10 Access......................................................... 37
5.11 FCC Conversion Consent Filing.................................. 37
SECTION 6. BORROWER'S NEGATIVE COVENANTS............................. 38
6.1 Indebtedness................................................... 38
6.2 Liens.......................................................... 38
6.3 Investments; Joint Ventures.................................... 39
6.4 Contingent Obligations......................................... 39
6.5 Restricted Payments............................................ 39
6.6 Restriction on Fundamental Changes:
Asset Sales and Acquisitions................................... 39
6.7 Restriction on Leases.......................................... 40
6.8 Transactions with Affiliates................................... 40
6.9 Conduct of Business............................................ 40
6.10 Amendments or Waivers of Related
Documents...................................................... 40
6.11 ERISA.......................................................... 41
6.12 Hazardous Materials............................................ 41
6.13 Sale-Leasebacks................................................ 41
6.14 Fiscal Year.................................................... 41
SECTION 7. EVENTS OF DEFAULT......................................... 42
7.1 Events of Default.............................................. 42
7.2 Remedies....................................................... 43
SECTION 8. CONVERSION OF NOTE........................................ 44
8.1 Conversion..................................................... 44
8.2 Conversion Date Procedures..................................... 45
8.3 Taxes on Conversion............................................ 45
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8.4 Termination of Loan Documents.................................. 45
8.5 Termination of Conversion Right................................ 45
SECTION 9. MISCELLANEOUS............................................. 45
9.1 Expenses....................................................... 46
9.2 Amendments and Waivers......................................... 46
9.3 Independence of Covenants...................................... 46
9.4 Notices........................................................ 46
9.5 Survival of Representations, Warranties
and Agreements................................................. 47
9.6 Failure or Indulgence Not Waiver;
Remedies Cumulative............................................ 47
9.7 Marshalling; Payments Set Aside................................ 47
9.8 Severability................................................... 48
9.9 Headings....................................................... 48
9.10 Applicable Law................................................. 48
9.11 Successors and Assigns......................................... 48
9.12 Consent to Jurisdiction and Service of Process................. 48
9.13 Waiver of Jury Trial........................................... 49
9.14 Counterparts; Effectiveness.................................... 49
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Schedules
Schedule 1 - Benchmark Acquisition Documents
Schedule 2 - Rich Acquisition Documents
Schedule 4.2 - Collateral Locations
Schedule 4.4 - Financial Statements
Schedule 4.5 - Material Contracts
Schedule 4.7(a) - Radio Broadcast Stations
Schedule 4.7(b) - LMAs
Schedule 4.8 - Real Property
Schedule 4.9 - UCC-1 Filing Jurisdictions
Schedule 4.10 - Restricted Payments
Schedule 4.12 - Litigation
Schedule 4.18 - Environmental Matters
Schedule 4.19 - Options, Warrants; Members
Schedule 4.20 - Labor Matters
Schedule 4.21 - Insurance
Schedule 6.1 - Existing Indebtedness
Schedule 6.2 - Existing Liens
Schedule 6.4 - Existing Contingent Obligations
Schedule 6.8 - Leases
Exhibits
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Convertible Note
EXHIBIT C - Form of Notice of Borrowing
Exhibit D - Form of Security Agreement
Exhibit E - Form of Loan Certificate
Exhibit F - Form of Amended and Restated Operating Agreement
EXHIBIT G - Form of Collateral Assignment of Contracts
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CONVERTIBLE NOTE AGREEMENT
THIS CONVERTIBLE NOTE AGREEMENT is dated as of December 17, 1996 and
entered into by and among ABS COMMUNICATIONS, L.L.C., a Virginia limited
liability company ("BORROWER") and SFX BROADCASTING, INC., a Delaware
corporation, as Lender ("LENDER").
R E C I T A L S
WHEREAS, Borrower has contractually agreed to acquire from Benchmark radio
stations WLEE(FM) and WBZU(FM) licensed to Williamsburg, Virginia and Richmond,
Virginia, respectively (collectively, the "BENCHMARK STATIONS");
WHEREAS, Borrower desires to obtain loans from Lender under this Agreement
in order to (i) pay off and terminate the Signet Loan Agreement, (ii) finance
the working capital needs of Borrower to perform under the Benchmark TBA, (iii)
finance the acquisition of the Benchmark Stations, (iv) finance the working
capital needs of Borrower to operate the Benchmark Stations after the Benchmark
Acquisition, and (v) to finance the working capital needs of Borrower under the
Rich LMA, if applicable;
WHEREAS, Borrower desires to secure its Obligations by granting to Lender,
to the extent permitted by law, first priority security interests (subject to
Permitted Liens) in all of its assets, other than the Excluded Assets, pursuant
to the Security Agreement and the other Security Documents;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as
follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement shall
have the following meanings:
"ABS" means ABS Communications Incorporated, a Virginia corporation.
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"ACCELERATION EVENT" has the meaning set forth in Section 2.2 hereof.
"ACQUISITION" means the Benchmark Acquisition and the Rich Acquisition.
"ACQUISITION DOCUMENTS" means collectively, the Benchmark Acquisition
Documents and the Rich Acquisition Documents.
"AFFILIATE", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AGREEMENT" means this Convertible Note Agreement, including all exhibits
and schedules hereto, as the same may be amended, restated or otherwise
modified from time to time.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"BENCHMARK" means, collectively, Benchmark Radio Acquisition Fund III
Limited Partnership, WVGO License Limited Partnership, and WDCK License Limited
Partnership, each a Maryland limited partnership.
"BENCHMARK ACQUISITION" means the acquisition by Borrower of the Benchmark
Stations pursuant to the Benchmark Acquisition Documents and upon terms and
conditions set forth therein.
"BENCHMARK ACQUISITION DOCUMENTS" means all of the purchase agreements and
related documents pursuant to which the Benchmark Acquisition is implemented or
evidenced as more particularly described on Schedule 1 annexed hereto.
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"BENCHMARK ACQUISITION FCC CONSENT" means the initial written action or
actions by the FCC approving the assignment of the FCC Licenses for each
Benchmark Station to be acquired as part of the Benchmark Acquisition to
Borrower in the manner contemplated by the Benchmark Acquisition Documents, in
form and substance satisfactory to Lender.
"BENCHMARK LOAN" means a Loan in the amount of $14,500,000 made by Lender
to Borrower under this Agreement in order to consummate the Benchmark
Acquisition.
"BENCHMARK STATIONS" has the meaning set forth in the recitals to this
Agreement.
"BENCHMARK TBA" means that certain Time Brokerage Agreement, dated May 31,
1996 between Benchmark and Buyer, as assigned by Buyer to Borrower pursuant to
that certain Assignment and Assumption Agreement, dated as of June 1, 1996 by
and between Buyer and Borrower.
"BENCHMARK TRANSACTIONS" means all of the transactions contemplated by the
Benchmark Acquisition Documents.
"BORROWER" has the meaning assigned to that term in the introduction to
this Agreement.
"BROWN" means Kenneth A. Brown, an individual resident of the Commonwealth
of Virginia.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are authorized or required by law or
other governmental action to close.
"BUYER" means ABS Communications Incorporated, a Virginia corporation.
"CAPITAL LEASE", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"CASH EQUIVALENTS" means, as at any date of determination, (i) marketable
securities (a) issued or
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directly and unconditionally guaranteed as to interest and principal by the
United States Government or (b) issued by any agency of the United States the
obligations of which are backed by the full faith and credit of the United
States, in each case maturing within one year after such date, (ii) marketable
direct obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof,
in each case maturing within one year after such date and having, at the time
of the acquisition thereof, the highest rating obtainable from either Standard
& Poor's or Moody's, (iii) commercial paper maturing no more than one year from
the date of creation thereof and having, at the time of the acquisition
thereof, a rating of at least A-1 from Standard & Poor's or at least P-1 from
Moody's, (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued by any commercial bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia that (a) is at least "adequately capitalized" (as defined in the
regulations of its primary Federal banking regulator) and (b) has Tier 1
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95 % of its assets
invested continuously in the types of investments referred to in clauses (i)
through (iv) above, (b) has net assets of not less than $500,000,000, and (c)
has the highest rating obtainable from either Standard & Poor's or Moody's.
"CHANGE OF CONTROL" means (i)(a) the failure of Brown and ABS to own and
control collectively 100% of the Membership Interests of Borrower, or (b)
either of Brown or ABS shall assign, delegate, encumber or otherwise transfer
or agree to assign, delegate, encumber or otherwise transfer in any manner or
to any extent, any of its rights or obligations as a Member (in each case,
other than as permitted under Section 8.1), or (ii) the failure of Brown to be
the Manager of Borrower other than because of Brown's death or incapacity. For
the purpose of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise.
"CLAIM" has the meaning set forth in Section 5.9 hereof.
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"COLLATERAL" means, collectively, all real and personal property securing
the Obligations pursuant to the Security Documents in accordance with the terms
thereof.
"COLLATERAL ASSIGNMENT OF CONTRACTS" means the Collateral Assignment of
Contracts substantially in the form of Exhibit G annexed hereto.
"COMMITMENT PERIOD" means the period from and including the date hereof to,
but not including the Maturity Date or such earlier date in which Lender's
obligation to make any Loans under this Agreement shall terminate as provided
herein.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended,
including as amended by the Telecommunications Act of 1996, and the rules,
regulations and policies promulgated thereunder, as from time to time in
effect.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
Exhibit A annexed hereto delivered to Lender by Borrower pursuant to Section 3
hereof.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under any interest rate swap, hedge, cap, collar or similar agreement.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to
make take-or-pay or similar payments if
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required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (Y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof
is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if less, the amount to which such Contingent Obligation
is specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any Stock issued by that Person or of any indenture, mortgage, deed of trust,
contract, undertaking, agreement or other instrument to which that Person is a
party or by which it or any of its properties is bound or to which it or any of
its properties is subject.
"CONVERSION CONSENT" means any Final Order approving Lender's conversion of
the Loan into Membership Interests pursuant to Section 8.1, in form and
substance satisfactory to Lender.
"CONVERSION DATE" has the meaning set forth in Section 8.1 hereof.
"CONVERSION EVENT" means the date on which all of the following shall have
occurred or shall be occurring contemporaneously: (i) the Rich Acquisition
shall have been completed, and (ii) all transactions contemplated pursuant to
that certain SFX Contribution Agreement dated of even date herewith between
Borrower, Lender and the other parties thereto (the "SFX CONTRIBUTION
AGREEMENT") shall have been completed.
"DEED OF TRUST" means a Deed of Trust substantially in the form of Exhibit
G annexed hereto
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"DEFAULT" means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default.
"DOLLARS" and the sign "$" mean the lawful money of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member, (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades
or businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member,
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time, a member.
"ERISA EVENT" means (i) a "reportable event" within the meaning of Section
4043 of ERISA and the regulations issued thereunder with respect to any Pension
Plan (excluding those for which the provision for 30-day notice to the PBGC has
been waived by regulation), (ii) the failure to meet the minimum funding
standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan, (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA, (iv)
the withdrawal by Borrower or any of its ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such Pension
Plan resulting in liability
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pursuant to Sections 4063 or 4064 of ERISA, (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which might constitute grounds under ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan, (vi) the
imposition of liability on Borrower or any of its ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of Section
4212(c) of ERISA, (vii) the withdrawal by Borrower or any of its ERISA
Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential
liability therefor, or the receipt by Borrower or any of its ERISA Affiliates
of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4041A or 4042 of ERISA, (viii) the
occurrence of an act or omission which could give rise to the imposition on
Borrower or any of its ERISA Affiliates of fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section 409 or
502(c), (i) or (1) or 4071 of ERISA in respect of any Employee Benefit Plan,
(ix) the assertion of a material claim (other than routine claims for benefits)
against any Employee Benefit Plan other than a Multiemployer Plan or the assets
thereof, or against Borrower or any of its ERISA Affiliates in connection with
any such Employee Benefit Plan, (x) receipt from the Internal Revenue Service
of notice of the failure of any Pension Plan (or any other Employee Benefit
Plan intended to be qualified under Section 401(a) of the Internal Revenue
Code) to qualify under Section 401(a) of the Internal Revenue Code, or the
failure of any trust forming part of any Pension Plan to qualify for exemption
from taxation under Section 501(a) of the Internal Revenue Code, or (xi) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or pursuant to ERISA with respect to any Pension Plan.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by Borrower or any of its ERISA Affiliates.
"ENVIRONMENTAL LAWS" means all statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and
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the like relating to (i) environmental matters, including, without limitation,
those relating to fines, injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from the Release or
threatened Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, in any manner applicable to Borrower, or any of its
properties, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss.9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss.6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air Act (42
U.S.C. ss.7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss.2601 et
seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss.136
et seq.), the Occupational Safety and Health Act (29 U.S.C. ss.651 et seq.) and
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss.11001 et
seq.), each as amended or supplemented, and any analogous future or present
local, state and federal statutes and regulations promulgated pursuant thereto,
each as in effect as of the date of determination.
"ENVIRONMENTAL LIABILITIES AND COSTS" shall mean all liabilities,
obligations, responsibilities, remedial actions, removal costs, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all reasonable fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim,
suit, action or demand by any person or entity, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute
or common law (including any thereof arising under any Environmental Law,
permit, order or agreement with any Governmental Authority) and which relate to
any health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Release, threatened Release,
or the presence of a Hazardous Material.
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"ESCROW AGREEMENT" means that certain Escrow Agreement of even date
herewith entered into by and among Lender, Borrower and the other parties
signatory thereto.
"EVENT OF DEFAULT" means any of the events set forth in Section 7.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"EXCLUDED ASSETS" means the Limited Partnership Interests and the
distributions or proceeds related to such Limited Partnership Interests.
"EXCLUDED LOAN AMOUNTS" means any Loan amount made by Lender to Borrower
for working capital purposes under this Agreement for any given month in excess
of $100,000. For the avoidance of doubt, Excluded Loan Amounts shall not
include the Benchmark Loan and such other Loan amount used to pay off all
amounts outstanding under the Signet Loan Agreement.
"FACILITIES" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by Borrower or any of
its predecessors or Affiliates but specifically not including the transmission
tower currently used by radio station WKHK(FM).
"FCC" means the Federal Communications Commission and any successor
governmental agency performing functions similar to those performed by the
Federal Communications Commission on the date hereof.
"FCC LICENSE" means any license, permit or other authorization issued by
the FCC relating to the Stations.
"FINAL ORDER" means, as of any date of determination with respect to any
written action or consent by the FCC, such written action or consent which
shall have been obtained and (A)(i) which shall not have been reversed, stayed,
enjoined, annulled or suspended and (ii) for which the time for filing a
request for administrative or judicial review or for instituting administrative
review thereof sua
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sponte, shall have expired without any such filing having been made or action
for such review sua sponte having been taken, or, in the event of such filing
or review sua sponte, such filing or review sua sponte shall have disposed of
favorably to confirmation of such written action or the grant of such consent
and the time for seeking further relief or review with respect thereto shall
have expired without any request or action for such further relief or review
having been filed or taken or (B) Lender shall have notified Borrower that it
has determined in its sole discretion that there is no reasonable basis for
concluding that such written action or consent shall not become a final order
(as provided in clause (A) hereof) in due course.
"FINANCIAL STATEMENTS" means, for any period, the balance sheet of Borrower
as at the end of such period and the related statement of income and the
related statement of equity and cash flows of Borrower for such period and for
the period from the beginning of the then current Fiscal Year to the end of
such period, all in reasonable detail and certified by the chief financial
officer of Borrower that they fairly present the financial condition of
Borrower as at the dates indicated and the results of operations and cash flows
for the periods indicated, subject to changes resulting from audit and normal
year-end adjustments.
"FISCAL YEAR" means the fiscal year of Borrower ending on December 31 of
each calendar year.
"FTC" means the Federal Trade Commission and the Antitrust Department of
the Department of Justice and any successor governmental agency performing
functions similar to those performed by the Federal Trade Commission or the
Antitrust Department of the Department of Justice on the date hereof.
"GAAP" means generally accepted accounting principles set forth in 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 may be approved by a significant segment of the accounting
profession, in each case as the same are applicable to the circumstances as of
the date of determination.
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"GOVERNMENTAL AUTHORITY" means any federal, state or local governmental
authority, agency or court.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent, order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance at any
time defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste",
"restricted hazardous waste", "infectious waste", "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto, (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance, (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources, (iv) any
flammable substances or explosives, (v) any radioactive materials, (vi)
asbestos in any form, (vii) urea formaldehyde foam insulation, (viii)
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million, (ix)
pesticides and (x) any other chemical, material or substance, exposure to which
is prohibited, limited or regulated by any governmental authority or which may
or could pose a hazard to the health and safety of the owners, occupants or any
Persons in the vicinity of the Facilities.
"INDEBTEDNESS", as applied to any Person, means (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity
with GAAP, (iii) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money, (iv) any
obligation owed for all or any part of the deferred purchase price of property
or services (excluding any such obligations incurred under ERISA), which
purchase price is (a) due more than six months from the date of incurrence of
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the obligation in respect thereof or (b) evidenced by a note or similar written
instrument, (v) all indebtedness secured by any Lien on any property or asset
owned or held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is nonrecourse to the credit
of that Person and (vi) obligations under non-compete agreements and all other
obligations that would be properly classified as a liability on a balance sheet
conforming with GAAP (other than current trade payables and current accrued
expenses).
"INDEMNIFIED PERSON" has the meaning set forth in Section 5.9 hereof.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other acquisition
by Borrower of, or of a beneficial interest in, any Stock of any other Person
(other than a Person that, prior to such purchase or acquisition, was a
wholly-owned Subsidiary of Borrower), or (ii) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Borrower to any other Person other than a
wholly-owned Subsidiary of Borrower, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business. The amount
of any Investment shall be the original cost of such Investment plus the cost
of all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention
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agreement, any lease in the nature thereof, and any agreement to give any
security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"LIMITED PARTNERSHIP INTERESTS" means the limited partnership interests
that Borrower owns in the Rich Partnerships.
"LMA" means any joint sales agreement, advertising sales agreement, time
brokerage agreement, local marketing agreement or similar arrangement to which
Borrower is a party (whether originally or pursuant to an assignment).
"LOAN DOCUMENTS" means (i) this Agreement, (ii) the Note, and (iii) the
Security Documents.
"LOANS" means the revolving credit loans which may be made by Lender to
Borrower from time to time under the terms of this Agreement.
"MANAGER" means Brown, or any other person designated by the Members from
time to time to manage Borrower.
"MANAGER'S CERTIFICATE" means a certificate executed by the Manager or, if
the Members have not designated a Manager, a certificate executed by any
Member, in form and substance satisfactory to Lender.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to
time.
"MASTER AGREEMENT" means that certain Master Richmond Station Group
Agreement of even date herewith entered into by and among Lender, Borrower and
each of the other parties signatory thereto.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Borrower or (ii) the impairment of any material portion of the
Collateral or the ability of Borrower to perform in any material respect, or of
Lender to enforce, the Obligations; provided, however, so long as Borrower has
not breached this Agreement through waiving any material rights that it has
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under the Benchmark Acquisition Documents or Borrower has not taken any actions
or omitted to any actions under any of the Benchmark Acquisition Documents
which are willfully or grossly negligent, Material Adverse Effect shall not
include or be caused by the poor performance (financial or otherwise) of the
Benchmark Stations.
"MATERIAL CONTRACT" has meaning assigned to it in Section 4.5.
"MATURITY DATE" means the earlier of (i) May 29, 1998, or (ii) the date on
which the Loan and other Obligations are declared immediately due and payable
in accordance with Section 7.2.
"MEMBER" has the meaning assigned to it in the Operating Agreement.
"MEMBERSHIP INTEREST" has the meaning assigned to it in the Operating
Agreement.
"MOODY'S" means Moody's Investors Service, Inc., or any Person succeeding
thereto by merger, consolidation or acquisition of all or substantially all of
its assets, including substantially all of its business of rating securities.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in Section
3(37) of ERISA, to which Borrower or any of its ERISA Affiliates is
contributing, or ever has contributed, or to which Borrower or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
"NOTE" means that certain Convertible Grid Note of even date herewith
executed by Borrower, substantially in the form of Exhibit B attached hereto,
and all renewals, amendments, restatements and replacements thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of Exhibit C
annexed hereto delivered to Lender by Borrower pursuant to Section 2.1 hereof.
"OBLIGATIONS" means all obligations of every nature of Borrower from time
to time owed to Lender under the Loan
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Documents, whether for principal, interest, expenses, indemnification or
otherwise.
"OPERATING AGREEMENT" means the Operating Agreement of ABS Communications,
L.L.C., dated as of April 29, 1996.
"OPERATING LEASE" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real or personal) that is not a Capital Lease other than
(i) any such lease under which that Person is the lessor or (ii) any LMA.
"OTHER TAXES" has the meaning assigned to it in Section 2.5.
"PBGC" means the Pension Benefit Guaranty Corporation (or any successor
thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to Section 412 of the Internal Revenue Code or Section
302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by Section 5.3;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested
in good faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and
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other similar obligations (exclusive of obligations for the payment of
borrowed money);
(iv) any attachment or judgment Lien not constituting an Event of
Default under Section 7.1;
(vi) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Borrower;
(viii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(ix) Liens of a collecting bank under Section 4-208 of the Uniform
Commercial Code as in effect in the relevant jurisdiction; and
(x) Liens related to the Excluded Assets.
"PERMITTED LIENS" means Liens permitted pursuant to Section 6.2.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"RELATED DOCUMENTS" means the (i) Acquisition Documents and (ii) the LMAs.
"RELEASE" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles
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containing any Hazardous Materials), or into or out of any Facility, including
the movement of any Hazardous Material through the air, soil, surface water,
groundwater or property.
"RESTRICTED PAYMENT" means, with respect to any Person, (a) the declaration
or payment of any dividend or distribution or the occurrence of any liability
to make any other payment or distribution of cash or other property or assets
in respect of such Person's Stock, (b) any payment on account of the purchase,
redemption, defeasance or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly,
or (c) any payment, loan, contribution, or other transfer of funds or other
property to any stockholder, partner or member of such Person or any Affiliate
of such stockholder, partner or member.
"RETIREE WELFARE PLAN" means any Welfare Plan providing for continuing
coverage or benefits for any participant or any beneficiary of a participant
after such participant's termination of employment, other than continuation
coverage provided pursuant to Section 4980B of the Internal Revenue Code and at
the sole expense of the participant or the beneficiary of the participant.
"RICH ACQUISITION" means the acquisition by Borrower of the Rich
Partnerships and the Rich Stations pursuant to the Rich Acquisition Documents
and upon terms and conditions set forth herein.
"RICH ACQUISITION DOCUMENTS" means all of the purchase agreements and
related documents pursuant to which the Rich Acquisition is implemented or
evidenced as more particularly described on Schedule 2 annexed hereto.
"RICH ACQUISITION FCC CONSENT" means the initial written action or actions
by the FCC approving the assignment of the FCC Licenses for each Rich Station
to be acquired as part of the Rich Acquisition to Borrower in the manner
contemplated by the Rich Acquisition Documents, in form and substance
satisfactory to Lender.
"RICH LMA" means that certain Local Marketing Agreement that may be entered
into between the Rich Partnerships and Borrower with respect to the Rich
Stations.
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"RICH PARTNERSHIPS" means ABS Richmond Partners, L.P., a Virginia limited
partnership and ABS Richmond Partners II, L.P., a Virginia limited partnership.
"RICH STATIONS" means, collectively, radio station WKHK(FM), licensed to
Colonial Heights, Virginia and radio station WVGO(FM), licensed to Crewe,
Virginia.
"SECURITY AGREEMENT" means the Security Agreement to be executed and
delivered by Borrower on the date hereof, substantially in the form of Exhibit
D annexed hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"SECURITY DOCUMENTS" means the Security Agreement, the Deed of Trust, the
Collateral Assignment of Contracts, mortgages, security agreements, pledge
agreements, assignments, licenses, landlord consents and releases and all other
instruments or documents (including, without limitation, UCC-1 financing
statements, fixture filings or similar documents required in order to perfect
the Liens created by the Security Documents) delivered by Borrower or any other
Person pursuant to this Agreement and the other Loan Documents to grant to
Lender Liens to secure the Obligations.
"SIGNET LOAN AGREEMENT" means that certain Promissory Note, dated as of May
28, 1996 by and among Jacob Brown, Kenneth A. Brown and Signet Bank, as
assigned to the LLC pursuant to that certain Assignment dated April 29, 1996.
"STANDARD & POOR'S" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., or any Person succeeding thereto by merger, consolidation or
acquisition of all or substantially all of its assets, including substantially
all of its business of rating securities.
"STATIONS" means the Rich Stations and the Benchmark Stations.
"STOCK" means all membership interests, shares, options, warrants, general
or limited partnership interests, participation or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company or equivalent entity whether voting or nonvoting, including
common stock, preferred stock, or any
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other "equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange Commission
under the Exchange Act).
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof.
"TAXES" means taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on or
measured by the net income of Lender by the United States of America or the
jurisdiction under the laws of which Lender is organized, or in each case, any
political subdivision thereof; provided, however, neither Taxes nor Other Taxes
shall include any item that is based on income, profits or gains or is in lieu
of such tax.
"TERMINAL DATE" means December 31, 1997 or such other date the parties may
mutually agree.
"WELFARE PLAN" means any welfare plan, as defined in Section 3(1) of ERISA,
which is maintained or contributed to by Borrower or any ERISA Affiliate.
1.2 ACCOUNTING TERMS: UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT. Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements required to be delivered
by Borrower to Lender shall be prepared in accordance with GAAP as in effect at
the time of such preparation. Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies
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in conformity with those used to prepare the financial statements referred to
in Section 4.4.
SECTION 2.
THE LOAN
2.1 NOTE; PROCEDURE FOR BORROWINGS; PREPAYMENT.
a. Subject to the terms and conditions hereof, Lender hereby agrees to make
Loan(s) to Borrower from time to time during the Commitment Period in an
aggregate principal amount at any one time not to exceed the amounts necessary
to fund Borrower's obligations hereunder and under the Master Agreement.
b. Borrower may borrow under the Note during the Commitment Period on any
Business Day; provided, Borrower shall give Lender irrevocable Notice of
Borrowing (which notice must be received by Lender before 1:00 P.M., New York
City Time) signed by the Chief Financial Officer of Borrower. Lender agrees to
fund in accordance with such notice as expeditiously as practicable but in no
event later than three (3) Business Days after receipt of such notice;
provided, in any thirty (30) day period, Lender agrees to fund (only once
during such thirty (30) day period) within one (1) Business Day after receipt
of a Notice of Borrowing, so long as the requested amount does not exceed two
hundred and fifty thousand dollars ($250,000). Borrower may not prepay the
Loans before the Terminal Date without the prior consent of Lender.
c. On the date hereof, Borrower shall execute and deliver to Lender a
Notice of Borrowing and a Note substantially in the form of Exhibit B annexed
hereto. Lender agrees to make, on the date hereof, an initial loan in the
amount requested and Lender is hereby authorized to record the date and amount
of such initial Loan and each subsequent Loan made by Lender, and the date and
amount of each payment or prepayment of principal thereof on the schedule
annexed to and constituting a part of such Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided, however, that the failure to make such notation shall not in any way
limit, affect or modify the obligation of Borrower to repay any of its
Obligations, or the rights
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of Lender to any amounts due under this Agreement or the Note.
2.2 INTEREST. Borrower shall not pay any interest on the Loans until the
Terminal Date; provided, however, in the event the repayment of the Loans are
accelerated for any reason pursuant to Section 7.2 (the "ACCELERATION EVENT"),
Borrower shall pay interest on the Loans (i) from the date such applicable Loan
was made to the Terminal Date (or, if applicable, the date such Acceleration
Event shall have occurred) at a rate equal to the product of (A) 1/2 and (B)
the sum of the prime rate of Citibank, N.A. on the date of such Acceleration
Event plus 1% ("PRIME PLUS 1%") and thereafter until such time such Loan is
fully repaid at a rate per annum equal to Prime plus 1%. All computations of
interest shall be made by Lender and on the basis of a three hundred and sixty
(360) day year, in each case for the actual number of days occurring in the
period for which such interest is payable. Each determination by Lender of the
interest payable hereunder shall be conclusive and binding for all purposes,
absent manifest error or bad faith.
2.3 PAYMENTS OF PRINCIPAL AND INTEREST.
a. Borrower shall pay in full all outstanding principal under the Loans on
the Maturity Date.
b. In the event Borrower is required to pay interest on the Loans under
Section 2.2, Borrower shall pay all accrued interest within thirty (30) days
after the event causing the interest to accrue, and then monthly thereafter
until the Maturity Date.
c. All payments by Borrower of principal, interest, fees and other
Obligations hereunder and under the Note shall be made in Dollars in same day
funds, free of any restriction or condition, and delivered to Lender not later
than 12:00 Noon (New York City Time) on the date due. Funds received by Lender
after that time on such due date shall be deemed to have been paid by Borrower
on the next succeeding Business Day.
2.4 USE OF PROCEEDS. Borrower shall use the proceeds of the Loans for
Borrower's obligations as they arise under the Master Agreement, including,
without limitation, (i) to pay off all amounts outstanding under the Signet
Loan Agreement,
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(ii) for the payment of reasonable costs and expenses of the Benchmark
Transactions that are payable by Borrower, (iii) payment of reasonable costs
and expenses under the Benchmark TBA, (iv) to finance the working capital
requirements of Borrower to operate the Benchmark Stations after the Benchmark
Acquisition (other than the $3.9 million that Borrower will incur to acquire
the Rich Stations from any Person other than Lender (or if from Lender not as
part of this Agreement)), (v) to finance the working capital requirements of
Borrower under the Rich LMA, if applicable and (vi) to finance the acquisition
of the Rich Stations (each a "PERMITTED USE").
2.5 TAXES.
a. Any and all payments by, or on behalf of, Borrower hereunder or under
the Note or any other Loan Document, shall be made, in accordance with this
Section 2.5, free and clear of and without deduction for any and all present or
future Taxes. If Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under the Note or any other Loan
Document to Lender, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions Lender receives an amount equal to
the sum it would have received had no such deductions been made, (ii) Borrower
shall make such deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxing or other authority in accordance with
applicable law.
b. In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
any other Loan Document (hereinafter referred to as "OTHER TAXES").
c. Borrower shall indemnify and pay, within ten (10) days of demand
therefor, Lender for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.5) paid by Lender and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted.
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d. Within thirty (30) days after the date of any such payment of Taxes or
Other Taxes, Borrower shall furnish to Lender, the original or a certified copy
of a receipt evidencing payment thereof.
SECTION 3.
CONDITIONS TO THE LOANS
3.1 CONDITIONS TO INITIAL LOAN. The agreement of Lender to enter into this
Agreement is subject to the satisfaction of the following conditions:
a. This Agreement, the Note, the Security Agreement, the Deed of Trust and
the Collateral Assignment of Contracts shall have been duly executed by
Borrower and delivered to Lender and the security interest granted by the
Borrower to Lender under the Security Documents shall constitute, to the extent
permitted by law, a first priority perfected security interest in all of the
assets of the Borrower other than the Excluded Assets;
b. Lender shall have received such other documents, financing statements,
instruments, certificates, opinions and agreements as Lender shall reasonably
request in connection with the transactions contemplated by this Agreement;
c. Lender shall have received a loan certificate signed by the Manager of
Borrower, substantially in the form of Exhibit E attached hereto, including a
certificate of incumbency with respect to each authorized signatory of
Borrower, together with appropriate attachments which shall include, without
limitation, the following (i) a copy of the Articles of Organization of
Borrower certified to be true, complete and correct by the State Corporation
Commission for the Commonwealth of Virginia, (ii) a true, complete and correct
copy of the Operating Agreement and (iii) certificates of good standing from
each jurisdiction in which Borrower does business;
d. (i) Lender shall have received executed or conformed copies of the
Related Documents and any amendments thereto as of the date hereof, the terms
and conditions of which shall be in all respects satisfactory to Lender, (ii)
the Related Documents shall be in full force and effect and
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no term or condition thereof shall have been amended, modified or waived after
the execution thereof, (iii) Borrower shall not have failed in any respect to
perform any obligation or covenant required by the Related Documents to be
performed or complied with by it on or before the date hereof (other than such
failures of which Lender has actual knowledge), and (iv) Lender shall have
received a Manager's Certificate from Borrower in form and substance
satisfactory to Lender to the effect set forth in clauses (i), (ii) and (iii)
above;
e. The Benchmark Acquisition FCC Consent shall have been obtained and shall
have become a Final Order;
f. Borrower shall deliver to Lender a Manager's Certificate stating that
(i) the Benchmark Acquisition has been duly approved, (ii) all actions
necessary by it to consummate the Benchmark Acquisition have been taken (other
than the payment of the purchase price which shall not exceed $14,500,000 and
the conveyance of the appropriate assets) and (iii) Borrower will proceed to
consummate the Benchmark Acquisition immediately upon the making of the initial
Loan on the Closing Date. The Benchmark Acquisition shall become effective in
accordance with the Benchmark Acquisition Documents without any variation
therefrom (other than immaterial variations), except as disclosed to Lender;
g. Borrower shall have delivered copies of any environmental audit reports
delivered in connection with the Benchmark Acquisition and all other
environmental information and reports (other than immaterial environmental
information and reports) received in connection therewith to Lender;
h. The assets of the Benchmark Stations shall be free and clear of all
Liens (other than Permitted Liens) and all assets and liabilities assumed by
Borrower pursuant to the Benchmark Acquisition Documents and the transactions
contemplated thereby shall be acceptable to Lender;
i. (i) No event which would constitute an Event of Default or Default
(after giving effect to the making of the Loan on the Closing Date) shall have
occurred and be continuing, (ii) the representations and warranties in Section
4 shall be true, correct and complete in all material respects, (iii) since
April 29, 1996, no Material
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Adverse Effect shall have occurred, (iv) no litigation, inquiry or other action
and no injunction or restraining order shall be pending or threatened with
respect to the making of the Loan hereunder or the transactions contemplated
hereby, and (v) Borrower shall have delivered to Lender a Manager's Certificate
to such effect, in form and substance reasonably satisfactory to Lender;
j. Borrower shall have delivered to Lender a Compliance Certificate, dated
as of the Closing Date and calculated to give effect to the funding of the Loan
under this Agreement, demonstrating compliance with the covenants set forth in
this Agreement as of the Closing Date; and
k. Lender shall have received originally executed copies of the favorable
written opinions of each of the counsel referred to in the Benchmark
Acquisition Documents, dated as of the Closing Date, and each such opinion of
counsel shall state that Lender is entitled to rely thereon.
l. Lender shall have received originally executed copies of one or more
favorable written opinions, dated as of the date hereof, of LeClair Ryan,
counsel for Borrower, in form and substance reasonably satisfactory to Lender
and its counsel.
m. Borrower shall have certified to Lender that the Loan will be for a
Permitted Use.
Lender agrees to act reasonably and diligently in exercising Lender's
rights under this Section 3.1.
3.2 CONDITIONS TO EACH OTHER LOAN. The agreement of Lender to make any other
Loans requested to be made by it on any date after the date hereof is subject
to the satisfaction of the following conditions as of the date such Loan is
requested to be made:
a. Each of the representations and warranties made by Borrower, in or
pursuant to the Loan Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date, except to
the extent a representation or a warranty made by Borrower which specifically
relates to an earlier date;
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b. No Default or Event of Default shall have occurred and be continuing on
such date or after giving effect to the Loan requested to be made on such date;
and
c. There shall not have occurred any change, or development or event which
could reasonably be expected to have a Material Adverse Effect.
d. Borrower shall have certified to Lender that the Loan will be for a
Permitted Use.
SECTION 4.
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to make the
initial Loan on the Closing Date, Borrower represents and warrants to Lender
that, as of the date hereof (after giving effect to the Benchmark Acquisition)
the following statements are true, correct and complete:
4.1 EXISTENCE; COMPLIANCE WITH LAW. Borrower (a) is a limited liability company
duly formed, validly existing and in good standing under the laws of the
Commonwealth of Virginia and is duly qualified to do business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, (b) has the requisite
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease, and to conduct its business as now, heretofore and proposed to be
conducted and to enter into the transactions contemplated by this Agreement,
(c) has all licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental Authorities
having jurisdiction, to the extent required for such ownership, operation and
conduct, (d) is in compliance with the Operating Agreement and its Articles of
Organization and (e) is in compliance with all rules and regulations of the FCC
and the terms of all FCC Licenses, and is in compliance in all material
respects with all other applicable provisions of law.
4.2 EXECUTIVE OFFICES; COLLATERAL LOCATIONS; CORPORATE OR OTHER NAMES. The
current locations of Borrower's executive
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office, principal place of business, corporate offices, all warehouses and
premises within which any Collateral is stored or located, and the locations of
all of Borrower's records concerning the Collateral are set forth in Schedule
4.2 and, except as set forth in Schedule 4.2, such locations have not changed
during the preceding 12 months. During the prior five (5) years, except as set
forth in Schedule 4.2, Borrower (or any of its predecessors in interest) has
not been known as or used any corporate, fictitious or trade name.
4.3 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution, delivery and
performance by Borrower of the Loan Documents and the creation of all Liens
provided for herein and therein (a) are within Borrower's power, (b) have been
duly authorized by all necessary action by Borrower under applicable law and
under the Operating Agreement and its Articles of Organization, (c) are not in
contravention of any provision of the Operating Agreement or Borrower's
Articles of Organization, (d) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality, (e) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which Borrower is a party or
by which Borrower or any of its property is bound, (f) will not result in the
creation or imposition of any Lien upon any of the property of Borrower other
than those in favor of Lender, all pursuant to the Loan Documents, and (g) do
not require the consent or approval of any Governmental Authority or any other
Person, all of which will have been duly obtained, made or complied with before
the date hereof and which will be in full force and effect as of the date
hereof. At or prior to the date hereof, each of the Loan Documents to which
Borrower is a party shall have been duly executed and delivered for the benefit
of or on behalf of Borrower, and each shall then constitute a legal, valid and
binding obligation of Borrower to the extent it is a party thereto, enforceable
against Borrower in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or
other similar laws affecting creditors' rights and to equitable principles of
general applicability.
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4.4 FINANCIAL STATEMENTS AND PROJECTIONS. Borrower has delivered the Financial
Statements for the period ended October 31, 1996 and projections identified in
Schedule 4.4.
4.5 CONDUCT OF BUSINESS; MATERIAL CONTRACTS. Borrower is engaged only in the
businesses permitted to be engaged in pursuant to Section 6.9 and is conducting
its business in accordance with the provisions of Section 6.9. Borrower holds
all licenses (including, without limitation, FCC Licenses), permits,
franchises, certificates of authority, or any waivers of the foregoing that are
necessary to permit it to conduct its businesses as now conducted or to be
conducted and to hold and operate its properties. All such licenses, permits,
franchises, certificates of authority, and waivers are valid and in full force
and effect. Schedule 4.5 contains a complete list, as of the date hereof, of
each contract, agreement, arrangement or understanding to which Borrower is a
party or any of its assets are bound, except for those time sales agreements
which (i) are on Borrower's standard form, (ii) are terminable by Borrower
within thirteen (13) weeks or less notice without penalty, and (iii) provide
for annual payments of fifty thousand dollars ($50,000) or less (each a
"MATERIAL CONTRACT"); provided, Lender acknowledges that the tower for the
WKHK(FM) radio station is not owned by the Rich Partnerships.
4.6 SUBSIDIARIES. Borrower has no Subsidiaries.
4.7 FCC AND STATION MATTERS. Upon and following consummation of each
Acquisition, each of the following representations and warranties will be true,
correct and complete in all respects (other than such inaccuracies which are
immaterial):
(i) Schedule 4.7(a) annexed hereto correctly describes each of the
radio broadcast stations owned by Borrower.
(ii) Borrower has duly filed in a timely manner all filings which are
required to be filed by Borrower under the Communications Act and is in all
respects in compliance with the Communications Act, including, without
limitation, the rules and regulations of the FCC relating to the broadcast
of radio signals. Borrower owns or has valid leasehold interests in all
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property necessary to operate in compliance with the Communications Act the
Stations Borrower has acquired in such Acquisition.
(iii) Schedule 4.7(b) annexed hereto correctly sets forth each of the
LMAs for Borrower and sets forth the termination date, if any, of each such
agreement and the amounts payable or receivable thereunder. Each such LMA
is in full force and effect and Borrower is in substantial compliance
therewith. Other than as contemplated in connection with the exercise by
Borrower of any option to acquire any radio station which is the subject of
such LMA, no event has occurred which permits, or after notice or lapse of
time would permit, the early termination of any such LMA, and Borrower has
no knowledge of any fact or circumstance which is likely to result in the
non-renewal of any LMA.
4.8 REAL PROPERTY. Borrower does not own any interest in real property other
than the real property identified in Schedule 4.8.
4.9 PERSONAL PROPERTY LIENS. Upon the filing of Uniform Commercial Code
financing statements naming Borrower as "debtor", naming Lender as "secured
party" and describing the Collateral (as defined in the Security Agreement) in
the filing offices set forth in Schedule 4.9 hereto, the security interests in
such Collateral granted to Lender will, to the extent a security interest in
such Collateral may be perfected by filing Uniform Commercial Code financing
statements, constitute valid and perfected security interests therein prior to
all other Liens. The Collateral has been duly and validly pledged to Lender
pursuant to the Security Agreement and the Deed of Trust and the Security
Agreement and the Deed of Trust create in favor of Lender a valid, perfected
first priority security interest in the Collateral as security for the
Obligations subject to no equal or prior security interest.
4.10 NO MATERIAL ADVERSE CHANGE: NO RESTRICTED PAYMENTS. Since April 29, 1996,
no event or change has occurred that has caused or evidences, either in any
case or in the aggregate, a Material Adverse Effect. Except as set forth on
Schedule 4.10, Borrower has not directly or indirectly
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declared, ordered, paid or made, or set apart any sum or property for, any
Restricted Payment or agreed to do so.
4.11 TITLE TO PROPERTIES: LIENS. Borrower has (a) good, sufficient and legal
title to (in the case of fee interests in real property), (b) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
and (c) good title to (in the case of all other personal property), all of its
properties and assets reflected in the financial statements referred to in
Section 4.4, except for assets disposed of since the date of such financial
statements in the ordinary course of business. Except for Permitted Liens, all
such properties and assets are free and clear of Liens.
4.12 LITIGATION. There are no actions, suits, proceedings, arbitrations or
governmental investigations (whether or not purportedly on behalf of Borrower)
at law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, including, without limitation, the FCC, pending or, to the
knowledge of Borrower, threatened against or affecting Borrower or any property
of Borrower other than those listed on Schedule 4.12.
4.13 PAYMENT OF TAXES. Except to the extent permitted by Section 5.3, all tax
returns and reports of Borrower required to be filed by, or on behalf of,
Borrower have been timely filed, and all taxes, assessments, fees and other
governmental charges upon Borrower and upon its properties, assets, income,
businesses and franchises which are due and payable have been paid when due and
payable. There is no proposed tax assessment against Borrower or any of its
Members which is not being actively contested by Borrower or such Member in
good faith and by appropriate proceedings.
4.14 RESTRICTIONS; NO DEFAULT. No Contractual Obligation, lease, agreement,
instrument or other document to which Borrower is a party or by which it or any
of its properties or assets is bound or affected and no provision of the
Operating Agreement, Borrower's Articles of Organization, applicable law or
governmental regulation has resulted in or will result in a Material Adverse
Effect. Borrower is not subject to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state,
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municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Borrower is not in default and, to Borrower's knowledge, no third party is in
default, under or with respect to any Contractual Obligation, lease, agreement,
instrument or other document to which Borrower is a party, or any final
judgment, writ, injunction, decree, rule or regulation of any court or any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, by which Borrower or
any of its properties or assets is bound, which default could result in a loss
or liability to Borrower in excess of $100,000. No Default has occurred and is
continuing.
4.15 GOVERNMENTAL REGULATION. Borrower is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of the
Obligations unenforceable.
4.16 SECURITIES ACTIVITIES. Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose
of purchasing or carrying any Margin Stock.
4.17 EMPLOYEE BENEFIT PLANS.
a. Borrower and each of its ERISA Affiliates are in compliance with all
applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit
Plan, and have performed all their obligations under each Employee Benefit
Plan.
b. No ERISA Event has occurred or is reasonably expected to occur.
c. Except to the extent required under Section 4980B of the Internal
Revenue Code, no Employee Benefit Plan provides health or welfare benefits
(through the purchase of
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insurance or otherwise) for any retired or former employees of Borrower or any
of its ERISA Affiliates.
d. As of the most recent valuation date for any Pension Plan, the amount
of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA),
individually or in the aggregate for all Pension Plans (excluding for purposes
of such computation any Pension Plans with respect to which assets exceed
benefit liabilities), does not exceed $25,000.
4.18 ENVIRONMENTAL MATTERS. Except for routine operations in the ordinary
course of business in compliance with applicable permits issued by a
Governmental Authority, each Facility is free of any Hazardous Material and
Borrower has not caused or suffered to occur any Release at, under, above or
within any Facility. There are no existing or potential Environmental
Liabilities and Costs of Borrower of which Borrower, after due inquiry, has
knowledge, which could result in liability to Borrower in excess of $100,000.
Except as set forth on Schedule 4.18, Borrower is not involved in operations
which could lead to the imposition of any material Environmental Liabilities
and Costs on it, or any owner of any premises which it occupies, or any Lien
securing the same under any Environmental Law.
4.19 VENTURES AND OUTSTANDING STOCK. Borrower is not engaged in any Joint
Venture with any other Person. Except as set forth in Schedule 4.19, there are
no outstanding rights to purchase options, warrants or similar rights or
agreements pursuant to which Borrower or any Member may be required to issue,
sell or purchase any Membership Interests, Stock or other equity security.
Schedule 4.19 sets forth, as of the date hereof (and as of the Benchmark Loan
date, if applicable), the name and description of each of Borrower's Members,
the percentage interest of each such Member in the profits of Borrower and the
percentage voting rights of each such Member in Borrower.
4.20 LABOR MATTERS. There are no strikes or other labor disputes against
Borrower that are pending or, to Borrower's knowledge, threatened. Hours worked
by, and payment made to, employees of Borrower have not been in violation of
the Fair Labor Standards Act or any other material applicable law dealing with
such matters. All payments due from Borrower on account of employee health and
welfare insurance have been paid or accrued as a liability on the books of
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Borrower. Except as set forth in Schedule 4.20, Borrower has no obligation
under any collective bargaining agreement, management agreement, or any
employment agreement, and a correct and complete copy of each agreement listed
on Schedule 4.20 has been provided to Lender. There is no organizing activity
involving Borrower pending or, to Borrower's knowledge, threatened by any labor
union or group of employees.
4.21 INSURANCE. Borrower maintains, with financially sound and reputable
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by corporations of established
reputation engaged in the same or similar business of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations. Attached as Schedule 4.21 hereto is a complete and accurate
description of all policies of insurance of Borrower that will be in effect as
of the date hereof (and as of the Benchmark Loan Date, as applicable).
4.22 DISCLOSURE. No information contained in this Agreement, the other Loan
Documents, the Financial Statements or any written statement furnished by or on
behalf of Borrower, any Member of Borrower, or any Affiliate thereof pursuant
to the terms of this Agreement or any other Loan Document, which has previously
been delivered to Lender, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made. With respect to all business plans and other forecasts and
projections furnished by, or on behalf of, Borrower and made available to
Lender relating to the financial condition, operations, business, properties or
prospects of Borrower (a) all facts stated as such therein are true and
complete, (b) all facts upon which the forecasts or projections therein
contained are based are true and complete in all material respects and no
material fact was omitted therefrom, (c) all assumptions made on that basis are
reasonable under the circumstances and are disclosed therein, and (d) the
forecasts or projections are reasonably based on those facts and assumptions.
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SECTION 5.
BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the Loans and
other Obligations (or until the exercise of the Conversion Option), unless
Lender shall otherwise consent in writing, Borrower shall perform all covenants
in this Section 5.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Borrower will maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with
GAAP. Borrower will deliver to Lender:
(i) as soon as available and in any event within 30 days after the
end of each month ending after the date hereof, copies of Borrower's
Financial Statements for such month, together with the. monthly sales
reports and, if applicable, cash flow for such month of each Station as
furnished to Borrower by each Station. In addition, Borrower shall cause
the accountants who prepared any audited or unaudited Financial Statements
relating to Borrower (or the Benchmark Stations) to consent to the use of
such Financial Statements by Lender in its filings with the Securities and
Exchange Commission as well as filing such auditor's consents with any
such filing with the Securities and Exchange Commission. Concurrently with
the delivery of such Financial Statements, Borrower shall deliver to
Lender a certificate of Borrower's chief financial officer certifying that
no Default under the Loan Documents has occurred and is continuing or
specifying each such Default;
(ii) promptly upon their becoming available, copies of all
information required to be filed by Borrower with the FCC and all press
releases and other statements made available generally by Borrower to the
public and all material FCC notices and correspondence received by
Borrower;
(iii) promptly upon any officer of Borrower obtaining knowledge of
any condition or event that constitutes an Event of Default or Default, or
becoming aware that Lender has given any notice or taken any
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other action with respect to a claimed Event of Default or Default, a
Manager's Certificate specifying the nature and period of existence of
such event, change, Event of Default, Default, or condition, and what
action Borrower has taken, is taking and proposes to take with respect
thereto;
(iv) promptly upon their becoming available, all copies of subscribed
Arbitron rating reports with respect to the Stations, in a form agreed
upon by Borrower and Lender; and
(v) with reasonable promptness, such other information and data with
respect to Borrower or any of its Affiliates as from time to time may be
reasonably requested by Lender.
5.2 CORPORATE EXISTENCE; COMPLIANCE WITH LAWS. Borrower will at all times (a)
preserve and keep in full force and effect its legal existence and all rights,
licenses and other authorizations, and franchises material to its business, (b)
comply with all provisions of all franchises and licenses, all FCC Licenses,
and all material agreements and leases to which it is a party, and shall suffer
no loss or forfeiture thereof or thereunder and (c) comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (other than non-compliances which are immaterial).
5.3 PAYMENT OF TAXES AND CLAIMS. Borrower will, and will cause each of its
Members to, pay all taxes, assessments and other governmental charges imposed
upon it or any of its properties or assets or in respect of any of its income,
businesses or franchises before any penalty accrues thereon, and all claims,
including, without limitation, claims for labor, services, materials and
supplies (other than immaterial claims) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets, before the time when any penalty or fine shall be incurred with respect
thereto; provided that no such charge or claim need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor.
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5.4 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower will maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Borrower
and from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. Borrower will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business against loss or damage of the kinds
customarily carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses. Each such policy of
insurance shall name Lender as the loss payee and additional insured, as
applicable, thereunder, and shall provide for at least 30 days prior written
notice to Lender of any modification or cancellation of such policy.
5.5 TAX TREATMENT. Borrower will take all reasonably necessary actions to
ensure that Borrower is not taxable as a corporation for Federal income tax
purposes and will take all reasonable actions to ensure that Borrower is not
taxable as a corporation under any applicable law of any state or political
subdivision thereof (other than any state or political subdivision which taxes
all limited liability companies as corporations).
5.6 BOOKS AND RECORDS. Borrower shall keep adequate records and books of
account with respect to its business activities, in which proper entries,
reflecting all of its financial transactions, are made in accordance with GAAP
and on a basis consistent with the Financial Statements.
5.7 LITIGATION. Borrower shall notify Lender in writing, promptly upon learning
thereof, of any litigation, Claim or other action commenced or threatened
against Borrower, and of the institution against Borrower of any suit or
administrative proceeding which (a) may involve an amount in excess of $100,000
individually or in the aggregate or (b) could have or result in a Material
Adverse Effect if adversely determined.
5.8 ENVIRONMENTAL LAWS. Borrower shall comply with all Environmental Laws.
Borrower shall promptly take any and all necessary remedial action in
connection with the presence, storage, use, disposal, transportation or Release
of any Hazardous Materials on, under or about any Facility
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in order to comply with all applicable Environmental Laws and Governmental
Authorizations, except when, and only to the extent that, Borrower's liability
for such presence, storage, use, disposal, transportation or discharge of any
Hazardous Materials is being contested in good faith by Borrower.
5.9 INDEMNITY. Borrower shall indemnify and hold Lender and its Affiliates,
officers, directors, employees, attorneys and agents (each, an "INDEMNIFIED
PERSON"), harmless from and against any and all suits, actions, costs, fines,
deficiencies, penalties, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys' fees and disbursements and other
costs of investigations or defense, including those incurred upon any appeal)
(each, a "CLAIM") which may be instituted or asserted against or incurred by
such Indemnified Person as the result of credit having been extended under this
Agreement or any other Loan Document or otherwise arising in connection with
the transactions contemplated hereunder and thereunder, including any and all
Environmental Liabilities and Costs and regardless of whether the Indemnified
Person is a party to such Claim; provided, that Borrower shall not be liable
for any indemnification to such Indemnified Person with respect to any portion
of any such Claim which results solely from such Indemnified Person's gross
negligence or willful misconduct as determined by a final judgment of a court
of competent jurisdiction; provided, further, that no member of Borrower shall
have any personal liability to Lender except as provided in the Master
Agreement and that Lender shall have no right to attach, liquidate or otherwise
take any interest in the Excluded Assets or their proceeds. NEITHER LENDER NOR
ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY
HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR
ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS
A RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE
IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED THEREBY.
5.10 ACCESS. Borrower shall, upon reasonable advance notice and during normal
business hours (unless a Default shall have occurred and be continuing, in
which event no notice shall be required and Lender shall have such access at
any
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and all times) (a) provide access to Lender and any of its officers, employees
and agents, as frequently as Lender determines to be appropriate to the
properties and facilities of Borrower, (b) permit Lender and any of its
officers, employees and agents to inspect, audit and make extracts from all of
Borrower's records, files and books of account, and (c) permit Lender to
conduct audits to inspect, review and evaluate the Collateral, and Borrower
agrees to render to Lender at Borrower's cost and expense, such clerical and
other assistance as may be reasonably requested with regard thereto. Borrower
shall make available to Lender and its counsel, as quickly as practicable under
the circumstances, originals or copies of all books, records, Member minutes,
contracts, insurance policies, environmental audits, business plans, files,
financial statements (actual and pro forma), filings with federal, state and
local regulatory agencies, and other instruments and documents which Lender may
request. Borrower shall deliver any document or instrument reasonably necessary
for Lender, as it may from time to time request, to obtain records from any
service bureau or other Person which maintains records for Borrower, and shall
maintain duplicate records or supporting documentation on media, including
computer tapes and discs owned by Borrower. Borrower agrees to make available
to Lender upon its reasonable request information and records prepared by its
independent certified public accountants and its banking and other financial
institutions.
5.11 FCC CONVERSION CONSENT FILING. Lender and Borrower shall use their
reasonable best efforts (i) to file with the FCC, within twelve (12) days
following the date of this Agreement, the requisite applications to obtain the
Conversion Consent and (ii) to obtain the prompt grant of such applications.
SECTION 6.
BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that until payment in full of the Loan and
other Obligations (or until the exercise of the Conversion Option), unless
Lender shall otherwise consent in writing or unless otherwise permitted under
the Master Agreement, Borrower shall perform all covenants in this Section 6.
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6.1 INDEBTEDNESS. Borrower shall not directly or indirectly, create, incur,
assume or guaranty, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(i) the Obligations;
(ii) Indebtedness existing on the date hereof and disclosed on
Schedule 6.1;
(iii) Contingent Obligations permitted by Section 6.4;
(iv) Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of Section 6.7; and
(v) Liabilities related to the Excluded Assets.
6.2 LIENS. Borrower shall not directly or indirectly, create, incur, assume or
permit to exist any Lien on or with respect to any property or asset of any
kind (including any document or instrument in respect of goods or accounts
receivable) of Borrower whether now owned or hereafter acquired, or any income
or profits therefrom, or file or permit the filing of, or permit to remain in
effect, any financing statement or other similar notice of any Lien with
respect to any such property, asset, income or profits under the Uniform
Commercial Code of any State or under any similar recording or notice statute,
except for the following:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Security Documents;
(iii) Liens securing Capital Leases permitted under Section 6.7;
(iv) Liens existing on the date hereof and disclosed on Schedule 6.2;
and
(v) Liens related to the Excluded Assets.
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6.3 INVESTMENTS; JOINT VENTURES. Borrower shall not directly or indirectly,
make or own any Investment in any Person, including any Joint Venture, except:
(i) Investments in Cash Equivalents;
(ii) as it relates to the Limited Partnership Interests; and
(iii) Investments contemplated by the Acquisition Documents in
connection with any Acquisition.
6.4 CONTINGENT OBLIGATIONS. Borrower shall not directly or indirectly, create
or become or remain liable with respect to any Contingent Obligation, except:
(i) Contingent Obligations with respect to transactions permitted
pursuant to Section 6.6 (including, without limitation, any escrow deposits
made in connection with the Acquisition);
(ii) Other Contingent Obligations existing as of the date hereof as
set forth in Schedule 6.4; and
(iii) As related to the Excluded Assets.
6.5 RESTRICTED PAYMENTS. Borrower shall not make any Restricted Payment to any
Person; provided, however, so long as no Event of Default shall have occurred
and be continuing, (i) Borrower may from time to time make distributions to
each Member for payment of such Member's federal, state and local income tax
liability in respect of the net income of Borrower in accordance with the
Operating Agreement and (ii) Borrower may distribute to its Members at any time
distributions from, or proceeds related to, the Excluded Assets.
6.6 RESTRICTION ON FUNDAMENTAL CHANGES: ASSET SALES AND ACQUISITIONS. Until
such time Borrower has repaid in full all of the Loans or upon the occurrence
of the Conversion Event, Borrower shall not alter its corporate, capital or
legal structure or amend or modify in any respect the Operating Agreement or
its Articles of Organization or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-
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lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or fixed assets,
whether now owned or hereafter acquired (other than in the ordinary course of
business), or acquire by purchase or otherwise all or substantially all the
business, property or fixed assets of, or Stock or other evidence of beneficial
ownership of, any Person or any division or line of business of any Person or
enter into any local management agreement, local marketing agreement, time
brokerage agreement or similar arrangement with respect to any broadcast
properties (including, without limitation, the Stations) except (i) in
connection with any Acquisition and (ii) Investments permitted pursuant to
Section 6.3.
6.7 RESTRICTION ON LEASES. Except as set forth in Schedule 6.7, Borrower shall
not become liable in any way, whether directly or by assignment or as a
guarantor or other surety, for the obligations of the lessee under any
Operating Lease or Capital Lease.
6.8 TRANSACTIONS WITH AFFILIATES. Borrower shall not directly or indirectly,
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower on terms that are less favorable to
Borrower than those that might be obtained at the time from Persons who are not
an Affiliate.
6.9 CONDUCT OF BUSINESS. From and after the date hereof, Borrower shall not
engage in any business other than (i) the business engaged in by Borrower on
the date hereof, (ii) owning and operating the Benchmark Stations and holding
of the FCC Licenses for the Benchmark Stations, (iii) performing under the Rich
LMA, and (iv) any other activities agreed to by the parties hereto.
6.10 AMENDMENTS OR WAIVERS OF RELATED DOCUMENTS. Borrower shall not agree to
any amendment to, or waive any of its rights under, any of the Related
Documents, including without limitation, without obtaining the written consent
of Lender to such amendment or waiver.
6.11 ERISA. Neither Borrower nor any ERISA Affiliate shall, without Lender's
prior written consent, acquire any new ERISA Affiliate that maintains or has an
obligation to
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contribute to a Pension Plan that has either an "accumulated funding
deficiency," as defined in Section 302 of ERISA, or any "unfunded vested
benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA in the case of any
Pension Plan other than a Multiemployer Plan and in Section 4211 of ERISA in
the case of a Multiemployer Plan. Additionally, neither Borrower nor any ERISA
Affiliate shall (a) terminate any Title IV Plan where such termination could
reasonably be anticipated to result in liability to Borrower, (b) permit any
accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA, to be
incurred with respect to any Pension Plan, (c) fail to make any contributions
or fail to pay any amounts due and owing as required by the terms of any Plan
before such contributions or amounts become delinquent, (d) make a complete or
partial withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan; (e) fail to provide Lender with copies of any Plan
documents or governmental reports or filings, if reasonably requested by
Lender, (f) fail to make any contribution or pay any amount due as required by
Internal Revenue Code Section 412 or Section 302 of ERISA, (g) allow any ERISA
Event or event described in Section 4062(e) of ERISA to occur with respect to
any Title IV Plan, or (h) with respect to all Retiree Welfare Plans, allow the
present value of future anticipated expenses to exceed $100,000 or fail to
provide copies of such projections to Lender.
6.12 HAZARDOUS MATERIALS. Except as set forth in Schedule 4.18, Borrower shall
not, and shall not permit any Person within its control (a) to cause a Release
of Hazardous Material on, under, in or about any Facility, (b) to use, store,
generate, treat or dispose of Hazardous Materials, except in compliance with
the Environmental Laws, or (c) to transport any Hazardous Materials to or from
any Facility, except in compliance with the Environmental Laws.
6.13 SALE-LEASEBACKS. Borrower shall not engage in any sale-leaseback or
similar transaction involving any of its property or assets.
6.14 FISCAL YEAR. Borrower shall not shall change its Fiscal Year end from
December 31 without the consent of Lender.
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SECTION 7.
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "EVENT OF
DEFAULT" hereunder:
a. Borrower shall fail to make any payment in respect of any Obligations
hereunder or under any of the other Loan Documents when due and payable or
declared due and payable in accordance with the terms hereof or of the other
Loan Documents;
b. Borrower shall fail or neglect to perform, keep or observe any of the
provisions of Section 2, Section 5 or Section 6 which is likely to result in a
Material Adverse Effect;
c. Any representation or warranty herein or in any Loan Document or in any
written statement pursuant thereto or hereto, made by any Person (other than
Lender) any report, financial statement or certificate made or delivered to
Lender by Borrower shall be untrue or incorrect in any material respect as of
the date when made;
d. A case or proceeding shall have been commenced against Borrower or any
Member, as the case may be, in a court having competent jurisdiction seeking a
decree or order (i) under the Bankruptcy Code, or any other applicable federal,
state or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of Borrower or Member or of any substantial part of its properties, or (iii)
ordering the winding up, dissolution or liquidation of the affairs of Borrower
or such Member and such case or proceeding shall remain undismissed or unstayed
for sixty (60) consecutive days or such court shall enter a decree or order
granting the relief sought in such case or proceeding;
e. Borrower or any Member (i) shall file a petition seeking relief under
the Bankruptcy Code, or an application seeking dissolution of Borrower under
any applicable federal, state or foreign bankruptcy or other similar law, (ii)
shall consent to the institution of proceedings thereunder or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
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receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of Borrower or any Member or of any substantial part of Borrower's or such
Member's properties, (iii) shall fail generally to pay its debts as such debts
become due, or (iv) shall take any corporate action in furtherance of any such
action;
f. Any material provision of any Loan Document shall for any reason cease
to be valid, binding and enforceable in accordance with its terms or Borrower
shall so state in writing, or any Lien created under any Collateral Document
shall cease to be a valid and perfected Lien having the first priority security
interest in any of the Collateral purported to be covered thereby, provided
such events are not caused by Lender's acts or omission;
g. There shall occur a Change of Control (other than pursuant to the Master
Agreement);
h. Any FCC License (other than non-material auxiliary service licenses)
relating to a Station shall be canceled, revoked, materially and adversely
modified, terminated or finally denied renewal for any reason;
i. (i) Borrower shall not receive (A) the Rich Acquisition FCC Consent
before the Terminal Date, or Borrower shall fail to comply with the Rich
Acquisition FCC Consent, or the Rich Acquisition FCC Consent shall be
rescinded, shall no longer be in full force and effect, or the effectiveness
thereof shall have been stayed by judicial proceedings, or the Rich Acquisition
FCC Consent shall not have become a Final Order before the Terminal Date, or
(B) any other required consents to the consummation of the Rich Acquisition
before the Terminal Date, including any required consent of the FTC (which may
be evidenced by the expiration of any premerger notification waiting period),
(ii) Lender shall not receive the Conversion Consent before the Terminal Date,
or (iii) the Rich Acquisition shall not be completed before the Terminal Date.
j. Any breach or default (other than immaterial breaches or defaults) by
any party to the Purchase and Sale Agreement (as defined in the Master
Agreement) shall have occurred.
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7.2 REMEDIES. Upon the occurrence of any Event of Default described in Section
7.1(d) or (e), the unpaid principal amount of the Loan and all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which
are hereby expressly waived by Borrower. Upon the occurrence and during the
continuation of any other Event of Default, Lender may, at its option, by
written notice to Borrower, declare all or any portion of the amounts described
in the preceding sentence to be, and the same shall forthwith become,
immediately due and payable. Additionally, upon the occurrence of an Event of
Default, Lender shall have all the rights and remedies granted to it under any
Loan Document or under applicable law, including (subject to applicable FCC
requirements, if any) all remedies of a secured party under the Uniform
Commercial Code in any applicable jurisdiction. Notwithstanding the rights of
Lender as set forth herein, Lender agrees that it shall not exercise its right
to foreclose on any assets of Borrower until the Terminal Date other than in
the event where Borrower shall have willfully and knowingly breached or caused
an Event of Default under Section 7.1(b) or 7.1(c) or shall have intentionally
and in bad faith attempted to prevent the consummation of any of the
transactions contemplated in this Agreement.
7.3 EVOLUTION OF REMEDIES AND STANDARDS. The parties contemplate that Borrower
may enter into the Rich LMA. Upon Borrower entering into the Rich LMA, Lender
agrees that the standard for a Material Adverse Effect shall be related to all
of the Stations as a whole.
SECTION 8.
CONVERSION OF NOTE
8.1 CONVERSION. Simultaneously with the occurrence of the Conversion Event (the
"CONVERSION DATE"), all Loan amounts, other than the Excluded Loan Amounts,
outstanding hereunder (together with the contribution of the radio station
assets under the SFX Contribution Agreement) shall automatically convert into
Membership Interests in Borrower representing 96% of the Percentage Interest
(as defined in the Amended and Restated Operating Agreement) in Borrower. Any
Excluded Loan Amounts outstanding on the Conversion Date shall remain
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as an intercompany loan on the books of Borrower after the Conversion Date with
commercially reasonably terms of repayment. Notwithstanding anything in this
Agreement to the contrary, no such conversion into Membership Interests shall
occur unless and until the Conversion Consent shall (i) have been obtained and
(ii) be in full force and effect at the time of such conversion.
8.2 CONVERSION DATE PROCEDURES. On the Conversion Date, Lender will surrender
the Note to Borrower and furnish appropriate endorsements or transfer documents
as required by Borrower; provided, in the event there shall be any Excluded
Loan Amounts outstanding on the Conversion Date, Borrower shall execute a new
promissory note in favor of Lender in such principal amount equal to the
Excluded Loan Amounts which note shall bear interest at Prime plus 1% and which
principal shall be amortized on commercially reasonable terms. On the
Conversion Date, Borrower shall issue in Lender's name that percentage of
Membership Interest as may be determined in accordance with the Amended and
Restated Operating Agreement substantially in the form of Exhibit F hereto and,
if such Membership Interests are certificated, deliver to Lender such
certificates evidencing the Membership Interests. Additionally, on the
Conversion Date, Borrower and Lender shall, and Borrower shall cause its
Members to, execute such Amended and Restated Operating Agreement.
8.3 TAXES ON CONVERSION. On the Conversion Date, Borrower shall pay any
documentary, stamp or similar issue or transfer tax due on the issue on its
Membership Interests to Lender upon the conversion.
8.4 TERMINATION OF LOAN DOCUMENTS. Upon the completion of all matters set forth
in Sections 8.2 and 8.3 above, this Agreement and the other Loan Documents and
all of Borrower's obligations hereunder and thereunder (other than those
obligations which expressly survive the termination of this Agreement), shall
terminate, and Lender shall take such actions, at Borrower's expense, that are
reasonably necessary to release Lender's Liens on and security interest in, the
Collateral.
8.5 TERMINATION OF CONVERSION RIGHT. On and after the Terminal Date: (i) Lender
shall have no further right to convert the Note to any equity interest in
Borrower and (ii)
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Lender agrees to cooperate in good faith with Borrower until the Maturity Date
in Borrower's solicitation of debt or equity to fund the transactions
contemplated in the Acquisition Documents and the extinguishment of the Note.
SECTION 9.
MISCELLANEOUS
9.1 EXPENSES. Subject to Section 3(a) of the Master Agreement, Borrower agrees
to pay promptly all the reasonable costs and expenses of Lender (including the
reasonable fees, expenses and disbursements of counsel to Lender) in connection
with the negotiation, preparation, execution and administration of the Loan
Documents and the Loan and any consents, amendments, waivers or other
modifications hereto or thereto and any other documents or matters requested by
Borrower; provided, that any and all costs and expenses must be reasonable and
Lender has loaned the amounts necessary to fund these costs and expenses under
the Note. Borrower agrees to pay promptly, after the occurrence of an Event of
Default, all reasonable costs and expenses, including attorneys' fees
(including allocated costs of internal counsel) and reasonable costs of
settlement, incurred by Lender in enforcing any Obligations of or in collecting
any payments due from Borrower hereunder or under the other Loan Documents by
reason of such Event of Default or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings;
provided, all such amounts shall become part of the Note and will be due and
payable in accordance with Sections 2.2 and 2.3.
9.2 AMENDMENTS AND WAIVERS. No amendment, modification, termination or waiver
of any provision of this Agreement or of the Note, or consent to any departure
by Borrower therefrom, shall in any event be effective without the written
concurrence of Lender.
9.3 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of an
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Event of Default or Default if such action is taken or condition exists.
9.4 NOTICES. Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered
in person or by courier service, upon receipt of telefacsimile or telex if
received by 5 p.m. (local time) on a Business Day (or if not received by such
time on a Business Day, the telefacsimile or telex shall be deemed received on
the next Business Day), or three Business Days after depositing it in the
United States mail with postage prepaid and properly addressed; provided that
notices to Lender shall not be effective until received. For the purposes
hereof, the address of each party hereto shall be as set forth below (or shall
be such other address as may be designated by such Person in a written notice
delivered to the other party hereto):
If to Borrower: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
If to Lender: SFX Broadcasting, Inc.
150 East 58th Street
New York, New York 10155
Attention: Howard Tytel
9.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
a. All representations, warranties and agreements made herein shall survive
the execution and delivery of this Agreement and the making of the Loan
hereunder.
b. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower set forth in Sections 2.5, 5.9 and 9.1
shall survive the payment of the Loans and the termination of this Agreement.
9.6 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay
on the part of Lender in the exercise of any power, right or privilege
hereunder or under any other
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Loan Document shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
9.7 MARSHALLING; PAYMENTS SET ASIDE. Lender shall not be under any obligation
to marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the Obligations. To the extent that Borrower makes a
payment or payments to Lender or Lender shall enforce any security interests or
exercise any right of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause, then, to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor or related thereto,
shall be revived and continued in full force and effect as if such payment or
payments had not been made or such enforcement or setoff had not occurred.
9.8 SEVERABILITY. In case any provision in or obligation under this Agreement
or the Note shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
9.9 HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
9.10 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO CONFLICTS OR CHOICE OF LAWS
PRINCIPLES THEREOF.
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9.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of the parties hereto and the successors and assigns of Lender. Neither
Borrower's rights nor obligations hereunder nor any interest therein may be
assigned or delegated by Borrower without the prior written consent of Lender.
9.12 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS
BROUGHT AGAINST Borrower ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF VIRGINIA, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT Borrower ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION.
Borrower hereby agrees that service of all process in any such proceeding in
any such court may be made by registered or certified mail, return receipt
requested, to Borrower at its address provided in Section 9.4, such service
being hereby acknowledged by Borrower to be sufficient for personal
jurisdiction in any action against Borrower in any such court and to be
otherwise effective and binding service in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Lender to bring proceedings against Borrower in the courts
of any other jurisdiction.
9.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES
TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
OR LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. Each party hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has already
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relied on this waiver in entering into this Agreement, and that each will
continue to rely on this waiver in their related future dealings. Each party
hereto further warrants and represents that it has reviewed this waiver with
its legal counsel and that it knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN MADE HEREUNDER. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
9.14 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument.
This Agreement shall become effective upon the execution of a counterpart
hereof by each of the parties hereto and receipt by Borrower and Lender of
written or telephonic notification of such execution and authorization of
delivery thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers hereunto duly
authorized as of the date first written above.
BORROWER: ABS COMMUNICATIONS, L.L.C.
By: /s/ Kenneth A. Brown
-----------------------------------
Name: Kenneth A. Brown
Title:
LENDER: SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
-----------------------------------
Name: Howard J. Tytel
Title:
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<PAGE>
KAB CONTRIBUTION AGREEMENT
THIS KAB CONTRIBUTION AGREEMENT is made and entered into as of the
17th day of December, 1996, by and among KENNETH A. BROWN ("KAB"), ABS
COMMUNICATIONS, L.L.C., a Virginia limited liability company (the "Company")
and for certain limited purposes as specified herein, ABS COMMUNICATIONS
INCORPORATED ("ABS").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ABS Richmond Partners, L.P., a Virginia limited partnership
("RICH-I"), owns and operates radio station WKHK-FM in Colonial Heights,
Virginia ("WKHK") and ABS Richmond Partners II, L.P., a Virginia limited
partnership ("RICH-II" and, together with RICH-I, the "Partnerships"), owns and
operates radio station WVGO-FM in Crewe, Virginia ("WVGO" and, together with
WKHK, the "Stations"), each pursuant to licenses issued by the Federal
Communications Commission (together with any successor agency or body, the
"FCC"); and
WHEREAS, KAB is the owner of a 24.5% limited partnership interest in
RICH-I and a 24.5% limited partnership interest in RICH-II (collectively, the
"KAB Partnership Interests"); and
WHEREAS, KAB desires to contribute such portions of the KAB
Partnership Interests representing $1,700,000 in equity and $5,100,000 in gross
value (the "Contributed Interests") to the Company in exchange for an increase
in his capital interest in the Company; and
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions contained herein, and intending to be fully bound hereby, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. When used in this Agreement, the following
words or phrases shall have the following meanings:
<PAGE>
"ABS" shall mean ABS Communications Incorporated, a Virginia
corporation.
"Agreement" shall mean this Contribution Agreement, as it may be
amended, supplemented or otherwise modified from time to time in accordance
with the terms hereof.
"Closing" shall have the meaning assigned to such term in Section 3.1
of this Agreement.
"Closing Date" shall mean the date on which the Closing shall be
deemed to occur and shall be the date of this Agreement.
"Communications Act" shall mean the Communications Act of 1934, as
amended, including as amended by the Telecommunications Act of 1996, and the
rules, regulations and policies promulgated thereunder.
"Company" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"Contracts" shall mean all contracts, agreements, or binding
commitments or arrangements, written or oral, to which (i) either Partnership
is a party or by which any of the Partnership Assets may be bound or (ii) KAB
is a party and in which such contract, agreement or arrangement relates to the
Partnership Assets.
"Contributed Interests" shall have the meaning assigned to such term
in the recitals to this Agreement.
"Disclosure Schedule" shall mean the separate Disclosure Schedule
attached to this Agreement regarding certain representations and warranties
made by KAB as further described in Article V of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"FCC" shall have the meaning assigned to such term in the recitals to
this Agreement.
"FCC Licenses" shall mean the main transmitter licenses for the
Stations together with each of the other consents, rights, licenses, permits
and authorizations issued or granted by the FCC for the operation of or used in
connection with the ownership or operation of the Stations, together with any
renewals or extensions thereof.
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<PAGE>
"Financial Statements" shall have the meaning assigned to such term in
Section 5.16 of this Agreement.
"Governmental Authority" shall mean a federal, state or local court,
legislature, governmental agency, commission or regulatory or administrative
authority or instrumentality.
"KAB" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"KAB Partnership Interests" shall have the meaning assigned to such
term in the recitals to this Agreement.
"Law" shall mean applicable common law and any statute, ordinance,
code or other law, rule, permit, permit condition, regulation, order, technical
or other standard, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority or court.
"Lien" shall mean any security agreement or financing statement filed
with an appropriate Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for security
purposes, any lien, mortgage, pledge, option, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including, without limitation, reservations,
rights of entry, possibilities of reverter, encroachments, easements, rights of
way, restrictive covenants, leases and licenses) of any kind, which (i) creates
or confers an interest in property to secure payment or performance of a
liability, obligation or claim, or which retains or reserves such an interest
for such purpose; (ii) grants to any Person the right to purchase or otherwise
acquire, or obligates any Person to sell or otherwise dispose of, or otherwise
results or may result in any Person acquiring, any property or interest
therein; (iii) restricts the transfer of, or the exercise of any rights or the
enjoyment of any benefits arising by reason of ownership of, any property; or
(iv) otherwise constitutes an interest in or claim against property whether or
not arising pursuant to any Law, FCC License or Contract.
"Master Agreement" shall mean that certain Master Richmond Station
Group Agreement, dated as of even date herewith by and among the Company, KAB
and the other signatories party thereto.
-3-
<PAGE>
"Operating Agreement" shall mean that certain operating agreement
governing the Company dated as of April 29, 1996 between KAB and ABS.
"Partnership Assets" shall mean all assets, properties, rights, titles
and privileges of the Partnerships of every kind, character and description,
whether tangible, intangible, real, personal or mixed, of whatever description
and wherever located, used in connection with the operation of the Stations
including, without limitation, all additions, accessions, and substitutions
made before the Closing as permitted pursuant to the terms of this Agreement.
For the avoidance of doubt, the parties agree (i) that WKHK Station Tower is
not included in this definition of Partnership Assets, and (ii) as contemplated
in Schedule A hereto.
"Partnerships" shall have the meaning assigned to such term in the
recitals to this Agreement.
"PCBs" shall have the meaning assigned to such term in Section 5.14 of
this Agreement.
"Permitted Liability" shall mean the proportionate share of the
Partnerships' liability allocable to the Contributed Interests which in the
aggregate is approximately $3,900,000 as of the Closing Date.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization or other legal entity.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended.
"Real Estate Contracts" shall have the meaning assigned to such term
in Section 5.11 of this Agreement.
"RICH-I" shall have the meaning assigned to such term in the recitals
to this Agreement.
"RICH-II" shall have the meaning assigned to such term in the recitals
to this Agreement.
"Stations" shall have the meaning assigned to such term in the
recitals to this Agreement.
"Transfer Taxes" shall have the meaning assigned to such term in
Section 2.2 of this Agreement.
-4-
<PAGE>
"WKHK" shall have the meaning assigned to such term in the recitals to
this Agreement.
"WVGO" shall have the meaning assigned to such term in the recitals to
this Agreement.
ARTICLE II
CONTRIBUTION
------------
SECTION 2.1 Contribution. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date, KAB shall contribute to the
Company, and the Company shall accept from KAB, the Contributed Interests, free
and clear of any and all Liens other than the Permitted Liability. For purposes
of this Agreement, any Liens on the assets of the Partnership shall not be
deemed to constitute Liens on the Contributed Interests. In consideration for
the Contributed Interests, KAB's Capital Account (as defined in Section 6.1 of
the Operating Agreement) shall be increased by $1,700,000. KAB and ABS hereby
agree to this value and agree that their profits interests in the Company shall
remain 99% and 1%, respectively.
SECTION 2.2 Payment of Taxes and Other Charges. KAB shall pay, at the
Closing or, if due thereafter, promptly when due, any and all taxes
(collectively, "Transfer Taxes") payable in connection with the transfer of the
Contributed Interests to the Company. Subject to the Company's right of
reasonable review and comment prior to filing, KAB shall prepare and file any
tax returns with respect to such Transfer Taxes.
SECTION 2.3 Indemnification of Permitted Liability. KAB hereby agrees
to indemnify and hold the Company and all of the members of the Company
harmless for the Permitted Liability if the other assets of the Company are
insufficient to extinguish such Permitted Liability.
SECTION 2.4 Amendment to Operating Agreement. To the extent necessary,
KAB and ABS agree that this Agreement shall constitute an amendment of the
Operating Agreement and hereby reaffirm the Operating Agreement as so amended.
-5-
<PAGE>
ARTICLE III
CLOSING
-------
SECTION 3.1 The Closing. The consummation of the transactions
contemplated herein (the "Closing") shall take place at the offices of LeClair
Ryan, 707 East Main Street, 11th Floor, Richmond, Virginia 23219 on the date
hereof commencing at 9:00 a.m. local time or at such other place as the parties
shall mutually agree.
SECTION 3.2 FCC Consents. It is specifically understood and agreed by
the Company and KAB that the Closing and the assignment of the Contributed
Interests to the Company is not subject to the prior consent and approval of
the FCC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby makes the following representations and warranties
to KAB, each of which is true and correct on the date hereof, shall be
unaffected by any notice to KAB other than in the Disclosure Schedule and shall
survive the Closing to the extent provided in the Master Agreement. Such
representations and warranties are subject to, and qualified by, any fact or
facts disclosed in the appropriate section of the Disclosure Schedule.
SECTION 4.1 Organization and Standing. The Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia, and, as of the date hereof, the
Company shall be duly qualified to do business and be in good standing in the
Commonwealth of Virginia.
SECTION 4.2 Authorization and Binding Obligation. The Company has all
necessary power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and the Company's execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all necessary action on its part. This
Agreement has been duly executed and delivered by the Company and this
Agreement constitutes, and the other agreements to be executed in connection
herewith will constitute, the valid and binding obligation of the Company,
enforceable in accordance with
-6-
<PAGE>
their terms, except as limited by laws affecting creditors' rights or equitable
principles generally.
SECTION 4.3 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body, pending against the Company that would
adversely affect the Company's ability to perform its obligations pursuant to
this Agreement or the agreements to be executed in connection herewith.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF KAB
-------------------------------------
KAB hereby makes the following representations and warranties to the
Company, each of which is true and correct on the date hereof, shall be
unaffected by any notice to the Company other than in the Disclosure Schedule
and shall survive the Closing to the extent provided in the Master Agreement.
Such representations and warranties are subject to, and qualified by, any fact
or facts disclosed in the appropriate section of the Disclosure Schedule.
SECTION 5.1 Authorization and Binding Obligation. KAB has the legal
capacity to enter into and perform this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by KAB
and this Agreement and the agreements to be executed in connection herewith
will constitute the valid and binding obligation of KAB enforceable in
accordance with their terms, except as limited by laws affecting the
enforcement of creditor's rights or equitable principles generally.
SECTION 5.2 Title to Contributed Interests. Section 5.2 of the
Disclosure Schedule correctly and completely sets forth the percentage
partnership interest in the Partnerships owned by KAB as of the date hereof.
The Contributed Interests owned by KAB is free and clear of all Liens other
than the Permitted Liability. There are no agreements or commitments to which
KAB is a party obligating KAB to deliver or sell, or cause to be delivered or
sold, the Contributed Interests owned by KAB or granting or obligating KAB to
grant, extend, or enter into any option, right of first refusal, or other
similar agreement or commitment with respect to the Contributed Interests owned
by KAB, other than the rights waived in the consents attached hereto as Exhibit
5.3.
-7-
<PAGE>
SECTION 5.3 Absence of Conflicting Agreements or Required Consents.
Except as set forth in Section 5.3 of the Disclosure Schedule and as provided
in Exhibit 5.3, the execution, delivery and performance of this Agreement by
KAB: (i) does not require the consent of any third party; (ii) will not violate
any applicable law, judgment, order, injunction, decree, rule, regulation or
ruling of any governmental authority to which KAB is a party or by which it or
the Partnership Assets are bound; (iii) will not, either alone or with the
giving of notice or the passage of time, or both, conflict with, constitute
grounds for termination of or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, agreement,
instrument, license or permit to which KAB or the Partnership Assets are now
subject; and (iv) will not result in the creation of any Lien, charge or
encumbrance on any of the Partnership Assets.
SECTION 5.4 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body, pending against KAB that would materially and
adversely affect KAB's ability to perform its obligations pursuant to this
Agreement or the agreements to be executed in connection herewith.
SECTION 5.5 Organization and Standing of Partnerships. Each
Partnership is a partnership duly organized and validly existing and in good
standing under the laws of the Commonwealth of Virginia, and has the requisite
partnership power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each Partnership is duly
qualified as a foreign partnership to do business in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. All certificates and other
documents relating to the organization and qualification of each Partnership
required to be filed by such Partnership in any jurisdiction in which such
Partnership is organized or qualified have been filed. True and complete copies
of all such certificates and other documents (including, without limitation,
the partnership agreements of the Partnerships and all amendments thereto)
relating to the organization and qualification of the Partnerships, as amended
to date, have been furnished to the Company. Copies of any amendment thereto
before the Closing Date will be furnished to the Company promptly upon the
effectiveness of any such amendment.
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<PAGE>
SECTION 5.6 Capitalization of the Partnerships. Section 5.6 of the
Disclosure Schedule correctly and completely sets forth the partnership
interests in the Partnerships and the record owner of all such partnership
interests. There are no agreements or commitments to which either Partnership
is a party of any character relating to any partnership interest in the
Partnerships, including, without limitation, any agreement or commitment
obligating such Partnership to issue, deliver or sell, or cause to be issued,
delivered or sold, any partnership interest or granting or obligating such
Partnership to grant, extend, or enter into any option, right of first refusal
or other similar agreement or commitment with respect to any partnership
interest.
SECTION 5.7 Title to Assets; Encumbrances. Except as set forth in
Section 5.7 of the Disclosure Schedule, the Partnerships have good, valid and
marketable title to, or other legal right to use, all the Partnership Assets,
free and clear of any Lien. No other Person has any properties or assets used
or held for use in connection with the operation of the Stations which are not
included in the Partnership Assets. The Partnership Assets constitute all the
assets which are currently used or are necessary to conduct the business and
operations of the Stations in all respects as currently conducted.
SECTION 5.8 Government Authorizations.
(a) Section 5.8 of the Disclosure Schedule contains a true and
complete list of the FCC Licenses and other material licenses, permits or other
authorizations from governmental and regulatory authorities which are necessary
for the lawful conduct of the business and operations of the Stations in the
manner and to the full extent they are presently conducted. The Partnerships
are the authorized legal holders of the FCC Licenses and other licenses,
permits and authorizations listed in said Section 5.8, none of which is subject
to any restrictions or condition which would limit in any respect the full
operation of the Stations as now operated.
(b) Except as set forth in said Section 5.8 of the Disclosure
Schedule, there are no applications, complaints or proceedings pending (and, as
of the Closing, material applications, complaints or proceedings) or, to the
best of KAB's knowledge, threatened as of the date hereof by or before the FCC
relating to the business or operations of the Stations other than applications,
complaints or proceedings which generally affect the broadcasting industry. The
FCC Licenses
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<PAGE>
listed in said Section 5.8 are in good standing, are in full force and effect
and are unimpaired, and as of the Closing, are unimpaired in any material
respects, by any act or omission of the Partnerships, KAB or any of their
respective officers, directors or employees; and the operation of the Stations
is in accordance with the FCC Licenses. No proceedings are pending or, to the
knowledge of KAB, are threatened with respect to the FCC Licenses which may
result in the revocation, adverse modification, non-renewal or suspension of
any of the FCC Licenses, the denial of any pending applications for either of
the Stations, the issuance of any cease and desist order against either of the
Stations, the imposition of any administrative sanctions by the FCC with
respect to the FCC Licenses which as of the date of this Agreement may have an
adverse effect on or which as of the Closing may have a material adverse effect
on the Company's ability to continue to operate the Stations as they are
currently operated. KAB knows of no facts that would reasonably preclude the
FCC Licenses from being renewed in the ordinary course. All material reports,
forms and statements required to be filed by the Partnership and KAB with the
FCC with respect to the Stations since the grant of the last renewal of the FCC
Licenses have been filed and are substantially complete and accurate. KAB knows
of no facts which, under the Communications Act, or the existing rules and
regulations of the FCC, would disqualify KAB as an assignor of the Contributed
Interests.
SECTION 5.9 Compliance with FCC Regulations. The operation of the
Stations is and all of the Partnership Assets are in compliance in all material
respects with (i) all applicable engineering standards required to be met under
applicable FCC rules and (ii) all other applicable rules, regulations,
requirements and policies of the FCC, including, but not limited to, ANSI
Radiation Standards C95.1 - 1982 to the extent required to be met under
applicable FCC rules and regulations; and there are no existing claims known to
KAB to the contrary.
SECTION 5.10 Taxes. Except as set forth in Section 5.10 of the
Disclosure Schedule , KAB and, to the best of KAB's knowledge, the Partnerships
have filed all applicable federal, state, local and foreign income, franchise,
sales, use, property, excise, payroll and other tax returns required by law and
has paid in full all taxes, estimated taxes, interest, assessments, and
penalties due and payable. All returns and forms which have been filed have
been true and correct in all material respects and no tax or other payment in a
material amount other than as shown on
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<PAGE>
such returns and forms are required to be paid and have been paid by the
Partnerships or KAB. There are no present disputes as to taxes of any nature
payable by the Partnerships or KAB which in any event could materially
adversely affect any of the Partnership Assets or the operation of the
Stations.
SECTION 5.11 Real Property.
(a) Section 5.11 to the Disclosure Schedule contains a complete and
accurate list of all real property constituting Partnership Assets and used
primarily or exclusively by the Stations and all Contracts relating to the
tower, transmitter, studio site and offices of the Stations (collectively the
"Real Estate Contracts") and a summary of the applicable leases.
(b) The Real Estate Contracts listed in Section 5.11 constitute valid
and binding obligations of the applicable Partnership and, to the best of KAB's
knowledge, of all other persons purported to be parties thereto and are in full
force and effect as of the date hereof and will on the Closing Date constitute
valid and binding obligations of such Partnership and, to the best of KAB's
knowledge, of all other persons purported to be parties thereto and shall be in
full force and effect. Neither Partnership is in default under any of such Real
Estate Contracts and has not received or given written notice of any default
thereunder from or to any of the other parties thereto.
SECTION 5.12 Contracts. Section 5.12 of the Disclosure Schedule lists
all Contracts as of the date of this Agreement, except (A) Contracts entered
into in the ordinary course of business (i) of less than three (3) months
duration and which impose monetary obligations of less than Five Thousand
Dollars ($5,000) each or Fifty Thousand Dollars ($50,000) in the aggregate,
(ii) for the sale or sponsorship of broadcast time on the Stations for cash,
for which no prepayment has been received and with not more than twelve (12)
months remaining in their terms, or (iii) Contracts which are currently
scheduled to expire before the Closing Date and (B) time sales agreements which
(i) are on the Partnership's standard form, (ii) are terminable by the
Partnerships within thirteen (13) weeks or less notice without penalty, and
(iii) provide for annual payments of fifty thousands dollars ($50,000) or less.
SECTION 5.13 Status of Contracts. Except as noted in Section 5.13 of
the Disclosure Schedule, KAB has delivered
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to the Company true and complete copies of all Contracts, including any and all
amendments and other modifications to such Contracts. All Contracts are valid,
binding and enforceable by the Partnerships in accordance with their respective
terms, except as limited by laws affecting creditors' rights or equitable
principles generally. To the best of KAB's knowledge, each Partnership has
complied in all material respects with all Contracts and is not in default
beyond any applicable grace periods under any of the Contracts, and no other
contracting party is in default under any of the Contracts.
SECTION 5.14 Environmental Matters. Neither the Partnerships nor KAB
in connection with the operation of the Stations have unlawfully disposed of
any hazardous waste or hazardous substance including Polychlorinated Byphenyls
("PCBs") in a manner which has caused, or could cause, the Company to incur any
liability under applicable law in connection therewith; and KAB warrants that
the technical equipment included in the Partnership Assets do not contain any
PCBs which are required by law to be removed and if any equipment does contain
PCBs, that such equipment is stored and maintained in compliance with
applicable law. The Partnership and KAB have complied in all material respects
with all federal, state and local environmental laws, rules and regulations
applicable to the Stations and its operations, including but not limited to the
FCC's guidelines regarding RF radiation. No hazardous waste has been disposed
of by KAB, and to the best of KAB's knowledge, no hazardous waste has been
disposed of by the Partnerships on the real estate occupied by the Stations or
their transmitters. As used herein, the term "hazardous waste" shall mean as
defined in the RCRA and in the equivalent state statute under the law of the
state in which such real estate is located.
SECTION 5.15 Copyrights, Trademarks and Similar Rights.
(a) Except for the FCC Licenses, Section 5.15 of the Disclosure
Schedule is a true and complete list of all copyrights, trademarks, trade
names, licenses, patents, permits, jingles and other similar intangible
property rights and interests applied for, issued to or owned by each of the
Partnerships or KAB or under which such Partnership or KAB is a licensee or
franchisee and used in the conduct of the business and operations of the
Stations.
(b) All of such rights and interests are issued to or owned by the
Partnerships or KAB, or if licensed or franchised
-12-
<PAGE>
to the Partnerships, to the best of KAB's knowledge, are valid and in good
standing and uncontested. KAB has delivered or made available to the Company
copies of all documents establishing such rights, licenses or other authority.
KAB has received no written notice and has no knowledge of any infringements or
unlawful use of such property. The properties listed in Section 5.15 of the
Disclosure Schedule include all such properties necessary to conduct in all
respects the business and operations of the Stations as now conducted.
SECTION 5.16 Financial Statements. KAB has delivered to the Company
complete audited copies of the statement of income and the balance sheet for
the Partnerships and the Stations for the period ending December 31, 1995,
December 31, 1994 and an unaudited statement of income and balance sheet for
the nine (9) months ending September 30, 1996 (collectively, the "Financial
Statements"). The audited Financial Statements have been audited by the
accounting firm of Cheeley, Burcham et al. The audited Financial Statements
accurately represent and present fairly the financial condition and results of
operations of the Partnerships for the periods indicated. The unaudited
Financial Statements accurately represent and present fairly the financial
condition and results of operations of the Partnerships for the nine (9) months
ending September 30, 1996. Between September 30, 1996 and the date hereof,
there has been no material adverse change in the business, property, assets or
condition (financial or otherwise) of the Partnerships and (except for the
transaction contemplated herein) the Partnerships have operated the Stations in
all respects only in the ordinary course of business.
Except for (i) liabilities as and to the extent reflected or reserved
against in the Financial Statements, (ii) liabilities not yet due and payable
or obligations to be performed or satisfied after the date hereof under
Contracts listed in the Disclosure Schedule, (iii) liabilities incurred between
September 30, 1996 and the date hereof in the ordinary and usual course of
business (including tax liabilities resulting solely from the normal operations
of the Partnerships during such period) and (iv) any other liabilities
disclosed in this Agreement or in the Disclosure Schedule, on the date hereof,
each Partnership has no liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, of a nature customarily reflected
in financial statements reflecting the accrual basis of accounting.
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<PAGE>
SECTION 5.17 Personnel Information.
(a) Section 5.17 of the Disclosure Schedule contains a true and
complete list of all persons employed by the Partnerships or the Stations,
including a description of material compensation arrangements (other than
employee benefit plans set forth in Section 5.20 of the Disclosure Schedule)
and a list of other terms of any and all agreements affecting such persons. KAB
has not received notification that any of the current key employees of the
Partnerships or the Stations presently plan to terminate their employment,
whether by reason of the transactions contemplated hereby or otherwise and KAB
shall immediately notify the Company upon receipt of any such notice.
(b) The Partnerships are not parties to any Contract with any labor
organization, nor have the Partnerships agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of the Partnerships' employees. KAB has
no knowledge of any organizational effort currently being made or threatened by
or on behalf of any labor union with respect to employees of the Partnerships.
Except as disclosed in Section 5.17 of the Disclosure Schedule, during the past
three (3) years, the Partnerships have not experienced any strikes, work
stoppages, grievance proceedings, claims of unfair labor practices filed or
other significant labor difficulties of any nature.
(c) Except as disclosed in Section 5.17 of the Disclosure Schedule,
the Partnerships, to the best of KAB's knowledge, have complied in all material
respects with all laws relating to the employment of labor, including, without
limitation, ERISA and those laws relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity and payment and withholding of taxes.
SECTION 5.18 Litigation. Except as set forth in Section 5.18 of the
Disclosure Schedule, neither the Partnerships nor the Stations are subject to
any judgment, award, order, writ, injunction, arbitration decision or decree
materially adversely affecting the conduct of the business of the Partnerships,
the Stations or the Partnership Assets, and, to the best of KAB's knowledge,
there is no litigation or proceeding threatened against the Partnerships, KAB
or the Stations in any federal, state or local court, or before any
administrative agency or arbitrator (including, without limitation, any
proceeding which seeks the forfeiture of, or
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<PAGE>
opposes the renewal of, any of the FCC Licenses), or before any other tribunal
duly authorized to resolve disputes, which would reasonably be expected to have
any material adverse effect upon the business, property, assets or condition
(financial or otherwise) of the Partnerships or the Stations or which seeks to
enjoin or prohibit, or otherwise questions the validity of, any action taken or
to be taken pursuant to or in connection with this Agreement. In particular,
but without limiting the generality of the foregoing, there are no
applications, complaints or proceedings pending or, to the best of KAB's
knowledge, threatened before the FCC or any other governmental organization
with respect to the business or operations of the Partnerships or the Stations
other than applications, complaints or proceedings which affect the
broadcasting industry generally.
SECTION 5.19 Compliance With Laws. Except as set forth in Section 5.19
of the Disclosure Schedule, KAB has not received any notice asserting any
non-compliance by the Partnerships or the Stations in connection with the
business or operation of the Partnerships or the Stations with any applicable
statute, rule or regulation, federal, state or local. Each of the Partnerships
and the Stations are not in default with respect to any judgment, order,
injunction or decree of any court, administrative agency or other Governmental
Authority or any other tribunal duly authorized to resolve disputes in any
respect material to the transactions contemplated hereby. Each of the
Partnerships and the Stations are in compliance in all material respects with
all laws, regulations and governmental orders applicable to the conduct of the
business and operations of the Stations, the failure to comply with which would
have a material adverse effect on the business, operations or financial
condition of the Partnerships or the Stations, and the present use of the
Partnership Assets do not violate any of such laws, regulations or orders.
SECTION 5.20 Employee Benefit Plans. Section 5.20 of the Disclosure
Schedule contains a true and complete list as of the date of this Agreement of
all employee benefit plans applicable to the employees of the Partnerships and
the Stations. The Partnerships do not maintain any other employee benefit plan
as the term is defined in Section 3 of the Employee Retirement Income Security
Act of 1984, as amended, applicable to the employees of the Partnerships
employed at the Stations.
SECTION 5.21 Accuracy of Information. No written statements made by
KAB herein and no information provided by
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<PAGE>
KAB herein or in the documents, instruments or other written communications
made or delivered directly by KAB to the Company in connection with the
negotiations covering the contribution of the Contributed Interests contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained therein or herein not misleading, and there is no
fact known to KAB which relates to any information contained in any such
written document, instrument or communications which KAB has not disclosed to
the Company in writing which materially affects adversely the Stations or the
Partnership Assets.
ARTICLE VI
CONDITIONS TO CLOSING
---------------------
SECTION 6.1 KAB's Condition to Closing. The obligations of KAB
hereunder are subject to the representations and warranties of the Company set
forth in Article IV hereof being true and correct in all material respects on
the Closing Date.
SECTION 6.2 The Company's Conditions to Closing. The obligations of
the Company hereunder are, at the Company's option, subject to satisfaction, on
the Closing Date, of each of the following conditions:
(a) The representations and warranties of KAB set forth in Article V
hereof are true and correct in all material respects;
(b) KAB shall have delivered the Contributed Assets with good title,
free and clear of any and all liens and encumbrances. For purposes of this
Section 6.2, any Liens on the Partnerships Assets shall not be deemed to
constitute Liens on the Contributed Interests.
ARTICLE VII
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
SECTION 7.1 KAB's and ABS' Documents. At the Closing, ABS shall
deliver, and KAB shall cause ABS to deliver or cause to be delivered, to the
Company the following:
(a) Assignment of KAB's Contributed Interests (and all right, title
and interest therein) to the Company, free
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<PAGE>
and clear of any and all Liens other than the Permitted Liability.
(b) Certified resolutions of the Board of Directors of ABS approving
the execution and delivery of this Agreement;
(c) Governmental certificates showing that ABS is duly incorporated
and in good standing in the Commonwealth of Virginia dated not more than ten
(10) days before the Closing Date;
(d) Articles of Incorporation and Bylaws of ABS certified by the
secretary of ABS as of the Closing Date; and
(e) Such additional information and materials as the Company shall
have reasonably requested.
SECTION 7.2 The Company's Documents. At the Closing, the Company shall
deliver or cause to be delivered to KAB the following:
(a) Governmental certificates from the Commonwealth of Virginia
showing that the Company is duly incorporated and in good standing in the
Commonwealth of Virginia dated not more than ten (10) days before the Closing
Date;
(b) Certified resolutions of each of the members of the Company
approving the execution and delivery of this Agreement and each of the other
documents and agreements referred to herein and authorizing the consummation of
the transactions contemplated hereby and thereby;
(c) Articles of Organization and Operating Agreement of the Company
certified by the manager of the Company as of the Closing Date; and
(d) Such additional information and materials as KAB shall have
reasonably requested.
ARTICLE VIII
OTHER PROVISIONS
----------------
SECTION 8.1 Severability. If any part or any provision of this
Agreement shall be invalid or unenforceable under applicable law, said part or
provisions shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the
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<PAGE>
remaining provisions of this Agreement which shall be construed as if such
invalid parts or provisions had not been inserted, and such invalid or
unenforceable provisions shall become and be immediately amended and reformed
to include only the portions thereof as are enforceable by the court or such
other body having jurisdiction of this Agreement; and the parties agree that
such portions as so amended and reformed shall be valid and binding as though
any wholly invalid or unenforceable portion had not been included herein.
SECTION 8.2 Benefit and Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party.
SECTION 8.3 Entire Agreement. This Agreement and the Schedules hereto
embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings
relating to the matters provided for in this Agreement other than the Master
Agreement. No amendment, waiver of compliance with any provision or condition
hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
SECTION 8.4 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
SECTION 8.5 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia without
giving effect to the choice of law provisions thereof.
SECTION 8.6 Notices. Any notice, demand or request required or
permitted to be given under the provisions of this Agreement shall be in
writing and shall be deemed to have been duly delivered and received on the
date of personal delivery or on the date of receipt, if mailed by registered or
certified mail, postage prepaid and return receipt requested, or on the date of
a stamped receipt, if sent by an overnight delivery service, and shall be
addressed to the following addresses, or to such other address as any party may
request, in the case of KAB, by notifying the Company, and in the case of the
Company, by notifying KAB:
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<PAGE>
To KAB: Kenneth A. Brown
2002 Millington Court
Richmond, VA 23233
To the ABS Communications, L.L.C.
Company: 300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
SECTION 8.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together shall constitute one and the same instrument.
SECTION 8.8 Survival of Representations and Warranties;
Indemnification. The survival period of the representations and warranties set
forth in this Agreement and the indemnification obligations of KAB under this
Agreement shall be set forth in, and controlled by, the Master Agreement other
than KAB's obligations under Section 2.3 of this Agreement which shall remain
ongoing until such time KAB shall have fulfilled such obligations or such
obligations shall have been extinguished.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
ABS COMMUNICATIONS, L.L.C.
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
KENNETH A. BROWN
/s/ Kenneth A. Brown
----------------------------------
FOR PURPOSES OF ARTICLE 2.1 AND 2.4
ONLY:
ABS COMMUNICATIONS INCORPORATED
/s/ Kenneth A. Brown
----------------------------------
Name: Kenneth A. Brown
Title:
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<PAGE>
Schedule A
KAB hereby agrees to provide Buyer within five (5) days of this Agreement an
itemized list of assets which may be excluded from the Partnership Assets,
which itemized list shall be in a form (and supported by appropriate back-up
documentation) reasonably satisfactory to SFX that such itemized assets have
been acquired solely with the funds of KAB or ABS.
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<PAGE>
SFX CONTRIBUTION AGREEMENT
THIS SFX CONTRIBUTION AGREEMENT is made and entered into as of the
17th day of December, 1996, by and among LIBERTY ACQUISITION SUBSIDIARY
CORPORATION, a Delaware corporation ("Liberty 1"), LIBERTY BROADCASTING OF
MARYLAND II INCORPORATED, a Maryland corporation ("Liberty 2" and, together
with Liberty 1, the "Liberty Entities"), SFX BROADCASTING, INC., a Delaware
corporation ("SFX") and ABS COMMUNICATIONS, L.L.C., a Virginia limited
liability company (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, radio station WMXB-FM in Richmond, Virginia (the "Station")
is operated pursuant to a license issued to Liberty 1 by the Federal
Communications Commission (together with any successor agency or body, the
"FCC"); and
WHEREAS, all of the assets (other than the FCC Licenses) used in
connection with the operation of the Station are owned by Liberty 2; and
WHEREAS, simultaneously with the execution of this Agreement, SFX has
entered into the Master Agreement (as defined) pursuant to which SFX has agreed
to contribute to the Company the Contributed Assets;
WHEREAS, on the Closing Date the Liberty Entities, which are
controlled by SFX, shall assign all of the Contributed Assets to SFX and SFX
shall contribute the Contributed Assets to the Company in accordance with this
Agreement; and
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions contained herein, and intending to be fully bound hereby, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 Definitions. When used in this Agreement, the following
words or phrases shall have the following meanings:
<PAGE>
"Agreement" shall mean this SFX Contribution Agreement, as it may be
amended, supplemented or otherwise modified from time to time in accordance
with the terms hereof.
"Amended Operating Agreement" shall mean that certain amended and
restated operating agreement governing the Company, dated as of the date
hereof.
"Closing" shall have the meaning assigned to such term in Section 3.1
of this Agreement.
"Closing Date" shall mean the date on which the Closing shall be
deemed to occur and shall be the date of this Agreement.
"Communications Act" shall mean the Communications Act of 1934, as
amended, including as amended by the Telecommunications Act of 1996, and the
rules, regulations and policies promulgated thereunder.
"Company" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"Contracts" shall mean all contracts, agreements, or binding
commitments or arrangements, written or oral, by which any of the Contributed
Assets may be bound.
"Contributed Assets" shall mean the FCC Licenses and the Station
Assets.
"Convertible Note Agreement" shall mean that certain Convertible Note
Agreement, dated as of even date herewith between the Company and SFX.
"Disclosure Schedule" shall mean the separate Disclosure Schedule
attached to this Agreement regarding certain representations and warranties
made by the Liberty Entities or SFX as further described in Article V or
Article VI of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"FCC" shall have the meaning assigned to such term in the recitals to
this Agreement.
"FCC Licenses" shall mean the main transmitter licenses for the
Station together with each of the other
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<PAGE>
consents, rights, licenses, permits and authorizations issued or granted by the
FCC for the operation of or used in connection with the ownership or operation
of the Station, together with any renewals or extensions thereof.
"Governmental Authority" shall mean a federal, state or local court,
legislature, governmental agency, commission or regulatory or administrative
authority or instrumentality.
"Law" shall mean applicable common law and any statute, ordinance,
code or other law, rule, permit, permit condition, regulation, order, technical
or other standard, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority or court.
"Lien" shall mean any security agreement or financing statement filed
with an appropriate Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for security
purposes, any lien, mortgage, pledge, option, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including, without limitation, reservations,
rights of entry, possibilities of reverter, encroachments, easements, rights of
way, restrictive covenants, leases and licenses) of any kind, which (i) creates
or confers an interest in property to secure payment or performance of a
liability, obligation or claim, or which retains or reserves such an interest
for such purpose; (ii) grants to any Person the right to purchase or otherwise
acquire, or obligates any Person to sell or otherwise dispose of, or otherwise
results or may result in any Person acquiring, any property or interest
therein; (iii) restricts the transfer of, or the exercise of any rights or the
enjoyment of any benefits arising by reason of ownership of, any property; or
(iv) otherwise constitutes an interest in or claim against property whether or
not arising pursuant to any Law, FCC License or Contract.
"Master Agreement" shall mean that certain Master Richmond Station
Group Agreement, dated as of even date herewith by and among the Company, SFX
and the other signatories party thereto.
"Permitted Liens" shall mean any Liens that do not interfere
materially with the ability to use, for the purpose currently being used, the
properties or assets subject thereto or affected thereby to the extent granted
by the Liberty Entities or SFX.
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<PAGE>
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization or other legal entity.
"Purchase and Sale Agreement" shall mean that certain Purchase and
Sale Agreement, dated as of even date herewith by and among the Company, EBF,
Inc., EBF Partners and the other parties thereto.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended.
"Real Estate Contracts" shall have the meaning assigned to such term
in Section 5.9 of this Agreement.
"SFX" shall mean SFX Broadcasting, Inc., a Delaware corporation.
"Station" shall have the meaning assigned to such term in the recitals
to this Agreement.
"Station Assets" shall mean, with the exception of the FCC Licenses,
all assets, properties, rights, titles and privileges of every kind, character
and description, whether tangible, intangible, real, personal or mixed, of
whatever description and wherever located, used exclusively in connection with
the operation of the Station including, without limitation, all additions,
accessions, and substitutions made before the Closing as permitted pursuant to
the terms of this Agreement.
ARTICLE II
CONTRIBUTION
------------
SECTION 2.1 Assignment and Contribution. (a) Subject to FCC consent as
provided in Section 3.1 hereof, immediately prior to the Closing hereunder, the
Liberty Entities and SFX shall enter into an assignment and assumption
agreement pursuant to which each of the Liberty Entities shall assign to SFX
and SFX shall accept and assume all of each Liberty Entities' respective right,
title, interest and obligations in and to the Contributed Assets owned by it,
free and clear of any and all Liens other than Permitted Liens.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date, SFX shall
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contribute to the Company, and the Company shall accept from SFX the
Contributed Assets, free and clear of any and all Liens other than Permitted
Liens. In consideration for the Contributed Assets and together with the
conversion of the loans as contemplated under the Convertible Note Agreement
and SFX's other obligations under the Amended Operating Agreement, SFX's
Percentage Interest (as defined in the Amended Operating Agreement) in the
Company shall equal 96%.
SECTION 2.2 Payment of Taxes and Other Charges. SFX shall pay, at the
Closing or, if due thereafter, promptly when due, any and all taxes
(collectively, "Transfer Taxes") payable in connection with the transfer of the
Contributed Assets to the Company. Subject to the Company's right of reasonable
review and comment prior to filing, SFX shall prepare and file any tax returns
with respect to such Transfer Taxes.
ARTICLE III
CLOSING
-------
SECTION 3.1 The Closing. The consummation of the transactions
contemplated herein (the "Closing") shall take place at the offices of Paul,
Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York 10022,
commencing at 9:00 a.m. local time concurrently with the closing of the
transactions contemplated under the Purchase and Sale Agreement.
Notwithstanding anything in this Agreement to the contrary, the
Closing shall not be consummated without prior FCC consent (the "FCC Consents")
with respect thereto having been obtained. It shall be a condition precedent to
the parties' obligation to consummate the Closing that such consent shall have
become a Final Order (defined below) without materially adverse conditions. For
purposes of this Agreement, a Final Order shall mean an FCC consent or grant as
to which the time within which any party in interest other than the FCC may
seek administrative or judicial reconsideration or review of such consent or
grant has expired and no petition for such reconsideration or review has been
timely filed with the FCC or with a court of competent jurisdiction, and the
normal time within which the FCC may review such consent or grant on its own
motion has expired and the FCC has not undertaken such review. The parties
shall, within ten (10) business days following the date of this Agreement, file
an appropriate application with the FCC
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seeking its consent to the transactions contemplated hereunder and shall use
their best efforts to obtain such consent and a Final Order thereof promptly.
If the Closing would fall after the period permitted by such consent, the
parties shall file appropriate requests with the FCC for an extension of time
within which to complete the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby makes the following representations and warranties
to the Liberty Entities and SFX, each of which is true and correct on the date
hereof, shall be unaffected by any notice to SFX other than in the Disclosure
Schedule and shall survive the Closing to the extent provided in the Master
Agreement. Such representations and warranties are subject to, and qualified
by, any fact or facts disclosed in the appropriate section of the Disclosure
Schedule.
SECTION 4.1 Organization and Standing. The Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia, and, as of the date hereof, the
Company is duly qualified to do business and is in good standing in the
Commonwealth of Virginia.
SECTION 4.2 Authorization and Binding Obligation. Subject to obtaining
FCC consent as set forth in Section 3.1 hereof, the Company has all necessary
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and the Company's execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all necessary action on its part. This
Agreement has been duly executed and delivered by the Company and this
Agreement constitutes, and the other agreements to be executed in connection
herewith will constitute, the valid and binding obligation of the Company,
enforceable in accordance with their terms, except as limited by laws affecting
creditors' rights or equitable principles generally.
SECTION 4.3 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body, pending against the Company that would
adversely affect the Company's ability to perform its obligations pursuant to
this Agreement or the agreements to be executed in connection herewith.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE LIBERTY ENTITIES
------------------------------------------------------
The Liberty Entities hereby jointly (other than with respect to
Sections 5.1, 5.2, 5.3 and 5.5 which are made severally and not jointly) make
the following representations and warranties to the Company, each of which is
true and correct on the date hereof. Such representations and warranties are
subject to, and qualified by, any fact or facts disclosed in the appropriate
section of the Disclosure Schedule.
SECTION 5.1 Organization and Standing. (a) Liberty 1 is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, and (b) Liberty 2 is a corporation duly organized, validly existing
and in good standing under the laws of Maryland and as of the date hereof,
Liberty 2 is duly qualified to do business and is in good standing in the
Commonwealth of Virginia.
SECTION 5.2 Authorization and Binding Obligation. Subject to obtaining
FCC consent as set forth in Section 3.1 hereof, each of the Liberty Entities
has all necessary power and authority to enter into and perform its obligations
under this Agreement and the transactions contemplated hereby and the
execution, delivery and performance of this Agreement by each of the Liberty
Entities, and the transactions contemplated hereby, have been duly and validly
authorized by all necessary action on the part of each of them. This Agreement
has been duly executed and delivered by each of the Liberty Entities and this
Agreement and the agreements to be executed in connection herewith will
constitute the valid and binding obligation of the Liberty Entities enforceable
in accordance with their terms, except as limited by laws affecting the
enforcement of creditor's rights or equitable principles generally.
SECTION 5.3 Absence of Conflicting Agreements or Required Consents.
Except as set forth in Section 5.3 of the Disclosure Schedule and except as set
forth in Section 3.1 hereof, the execution, delivery and performance of this
Agreement by the Liberty Entities: (i) does not require the consent of any
third party; (ii) will not violate any applicable law, judgment, order,
injunction, decree, rule, regulation or ruling of any governmental authority to
which either of the Liberty Entities is a party or by which either of them or
the Contributed Assets is or are bound; (iii) will
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not, either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, agreement, instrument, license or permit to which either of the
Liberty Entities or the Contributed Assets is or are now subject; and (iv) will
not result in the creation of any Lien, charge or encumbrance on any of the
Contributed Assets.
SECTION 5.4 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body, pending against either of the Liberty Entities
that would adversely affect the ability of either of them to perform its
obligations pursuant to this Agreement or the agreements to be executed in
connection herewith.
SECTION 5.5 Title to Contributed Assets. Except as set forth in
Section 5.5 of the Disclosure Schedule, (a) Liberty 1 has good, valid and
marketable title to, or other legal right to use, all the FCC Licenses, and (b)
Liberty 2 has good, valid and marketable title to, or other legal right to use
all the Station Assets, in both cases free and clear of any Lien other than
Permitted Liens.
SECTION 5.6 Government Authorizations.
(a) Section 5.6 of the Disclosure Schedule contains a true and
complete list of the FCC Licenses and other material licenses, permits or other
authorizations from governmental and regulatory authorities which are necessary
for the lawful conduct of the business and operations of the Station in the
manner and to the full extent they are presently conducted. Liberty 1 is the
authorized legal holder of the FCC Licenses and other licenses, permits and
authorizations listed in said Section 5.6, none of which is subject to any
restrictions or condition which would limit in any respect the full operation
of the Station as now operated.
(b) Except as set forth in said Section 5.6 of the Disclosure
Schedule, there are no applications, complaints or proceedings pending (and as
of the Closing, material applications, complaints or proceedings) or, to the
best knowledge of either of the Liberty Entities, threatened as of the date
hereof by or before the FCC relating to the business or operations of the
Station other than applications, complaints or proceedings which generally
affect the broadcasting industry. The FCC Licenses listed in said Section 5.6
are in good standing, are in full force and effect and are unimpaired, and as
of the Closing are unimpaired in
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any material respects, by any act or omission of Liberty 1 or any of its
respective officers, directors or employees; and the operation of the Station
is in accordance with the FCC Licenses. No proceedings are pending or, to the
knowledge of either of the Liberty Entities, are threatened with respect to the
FCC Licenses which may result in the revocation, adverse modification,
non-renewal or suspension of any of the FCC Licenses, the denial of any pending
applications for the Station, the issuance of any cease and desist order
against the Station, the imposition of any administrative sanctions by the FCC
with respect to the FCC Licenses which as of the date of this Agreement may
have an adverse effect on or which as of the Closing may have a material
adverse effect on the Company's ability to continue to operate the Station as
it is currently operated. Liberty 1 knows of no fact that would reasonably
preclude the FCC Licenses that are renewable in the ordinary course from being
renewed in the ordinary course. All material reports, forms and statements
required to be filed by Liberty 1 with the FCC with respect to the Station
since the grant of the last renewal of the FCC Licenses have been filed and are
substantially complete and accurate. Liberty 1 knows of no facts which, under
the Communications Act, or the existing rules and regulations of the FCC, would
disqualify Liberty 1 as an assignor of the FCC Licenses.
SECTION 5.7 Compliance with FCC Regulations. The operation of the
Station is and all of the Contributed Assets are in compliance in all material
respects with (i) all applicable engineering standards required to be met under
applicable FCC rules and (ii) all other applicable rules, regulations,
requirements and policies of the FCC, including, but not limited to, ANSI
Radiation Standards C95.1 - 1982 to the extent required to be met under
applicable FCC rules and regulations; and there are no existing claims known to
the Liberty Entities to the contrary.
SECTION 5.8 Taxes. Except as set forth in Section 5.8 of the
Disclosure Schedule, the Liberty Entities have filed with respect to the
Station all applicable federal, state, local and foreign income, franchise,
sales, use, property, excise, payroll and other tax returns required by law and
has paid in full all taxes, estimated taxes, interest, assessments, and
penalties due and payable. All returns and forms which have been filed have
been true and correct in all material respects and no tax or other payment in a
material amount other than as shown on such returns and forms are required to
be paid and have been paid by either of the Liberty Entities. There are no
present disputes as to taxes of any nature payable by either of the Liberty
Entities
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relating to the Station which in any event could materially adversely affect
any of the Contributed Assets or the operation of the Station.
SECTION 5.9 Real Property.
(a) Section 5.9 to the Disclosure Schedule contains a complete and
accurate list of all real property constituting the Contributed Assets and used
by the Station and all Contracts relating exclusively to the tower,
transmitter, studio site and offices of the Station (collectively the "Real
Estate Contracts") and a summary of the applicable leases.
(b) The Real Estate Contracts listed in Section 5.9 constitute valid
and binding obligations of the respective Liberty Entity (as set forth therein)
and, to the best knowledge of the Liberty Entities, of all other persons
purported to be parties thereto and are in full force and effect as of the date
hereof and will on the Closing Date constitute valid and binding obligations of
SFX and, to the best knowledge of each of the Liberty Entities, of all other
persons purported to be parties thereto and shall be in full force and effect.
Neither of the Liberty Entities is in default under any of such Real Estate
Contracts nor has either of them received or given written notice of any
default thereunder from or to any of the other parties thereto.
SECTION 5.10 Contracts. Section 5.10 of the Disclosure Schedule lists
all Contracts as of the date of this Agreement, except (A) Contracts entered
into in the ordinary course of business (i) of less than three (3) months
duration and which impose monetary obligations of less than Five Thousand
Dollars ($5,000) each or Fifty Thousand Dollars ($50,000) in the aggregate,
(ii) for the sale or sponsorship of broadcast time on the Station for cash, for
which no prepayment has been received and with not more than twelve (12) months
remaining in their terms, or (iii) Contracts which are currently scheduled to
expire before the Closing Date and (B) time sales agreements which (i) are on
the Liberty Entities' standard form, (ii) are terminable by the Liberty
Entities within thirteen (13) weeks or less notice without penalty, and (iii)
provide for annual payments of fifty thousands dollars ($50,000) or less.
SECTION 5.11 Status of Contracts. Except as noted in Section 5.11 of
the Disclosure Schedule, each of the Liberty Entities has delivered to the
Company true and complete copies of all Contracts, including any and all
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amendments and other modifications to such Contracts. All Contracts are valid,
binding and enforceable by the Liberty Entity party thereto in accordance with
their respective terms, except as limited by laws affecting creditors' rights
or equitable principles generally. Each of the Liberty Entities has complied in
all material respects with all Contracts to which it is a party and is not in
default beyond any applicable grace periods under any of the Contracts, and no
other contracting party is in default under any of the Contracts.
SECTION 5.12 Environmental Matters. Neither of the Liberty Entities
has unlawfully disposed of any hazardous waste or hazardous substance including
Polychlorinated Byphenyls ("PCBs") in a manner which has caused, or could
cause, the Company to incur any liability under applicable law in connection
therewith; and the Liberty Entities warrant that the technical equipment
included in the Contributed Assets do not contain any PCBs which are required
by law to be removed and if any equipment does contain PCBs, that such
equipment is stored and maintained in compliance with applicable law. Each of
the Liberty Entities has complied in all material respects with all federal,
state and local environmental laws, rules and regulations applicable to the
Station and its operations, including but not limited to the FCC's guidelines
regarding RF radiation. To the best of the Liberty Entities' knowledge, no
hazardous waste has been disposed of by any other person, on the real estate
occupied by the Station or its transmitters. As used herein, the term
"hazardous waste" shall mean as defined in the RCRA and in the equivalent state
statute under the law of the state in which such real estate is located.
SECTION 5.13 Copyrights, Trademarks and Similar Rights.
(a) Except for the FCC Licenses, Section 5.13 of the Disclosure
Schedule is a true and complete list of all copyrights, trademarks, trade
names, licenses, patents, permits, jingles and other similar intangible
property rights and interests applied for, issued to or owned by either of the
Liberty Entities or under which it is a licensee or franchisee and used
exclusively in the conduct of the business and operations of the Station.
(b) All of such rights and interests are issued to or owned by the
Liberty Entity indicated on the Disclosure Schedule or if licensed or
franchised to either of the Liberty Entities to the best of such Liberty
Entity's knowledge, are valid and in good standing and uncontested. The Liberty
Entities have delivered or made available to the Company
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copies of all documents establishing such rights, licenses or other authority.
Neither of the Liberty Entities has received written notice nor has any
knowledge of any infringements or unlawful use of such property. The properties
listed in Section 5.13 of the Disclosure Schedule include all such properties
necessary to conduct in all respects the business and operations of the Station
as now conducted.
SECTION 5.14 Personnel Information.
(a) Section 5.14 of the Disclosure Schedule contains a true and
complete list of all persons employed exclusively by the Station in connection
with the operation of the Station, including a description of material
compensation arrangements (other than employee benefit plans set forth in
Section 5.14 of the Disclosure Schedule) and a list of other terms of any and
all agreements affecting such persons. Neither of the Liberty Entities has
received notification that any of the current key employees listed in Section
5.14 of the Disclosure Schedule presently plan to terminate their employment,
whether by reason of the transactions contemplated hereby or otherwise and the
applicable Liberty Entity shall immediately notify the Company upon receipt of
any such notice.
(b) The Station is not subject to any Contract with any labor
organization, and the Station has not agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of their employees.
(c) Except as disclosed in Section 5.14 of the Disclosure Schedule,
each of the Liberty Entities has, with respect to the Station, complied in all
material respects with all laws relating to the employment of labor, including,
without limitation, ERISA and those laws relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity and payment and withholding of taxes.
SECTION 5.15 Litigation. Except as set forth in Section 5.15 of the
Disclosure Schedule, the Station is not subject to any judgment, award, order,
writ, injunction, arbitration decision or decree materially adversely affecting
the conduct of the business of the Station or the Contributed Assets, and to
the best knowledge of each of the Liberty Entities, there is no litigation or
proceeding threatened against either of them or the Station in any federal,
state or local court, or before any administrative agency or arbitrator
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(including, without limitation, any proceeding which seeks the forfeiture of,
or opposes the renewal of, the FCC Licenses), or before any other tribunal duly
authorized to resolve disputes, which would reasonably be expected to have any
material adverse effect upon the business, property, assets or condition
(financial or otherwise) of the Station or which seeks to enjoin or prohibit,
or otherwise questions the validity of, any action taken or to be taken
pursuant to or in connection with this Agreement. In particular, but without
limiting the generality of the foregoing, except as set forth in Section 5.6 of
the Disclosure Schedule, there are no applications, complaints or proceedings
pending or to the best knowledge of each of the Liberty Entities threatened
before the FCC or any other governmental organization with respect to the
business or operations of the Station other than applications, complaints or
proceedings which affect the broadcasting industry generally.
SECTION 5.16 Compliance With Laws. Except as set forth in Section 5.16
of the Disclosure Schedule, neither of the Liberty Entities has received any
notice asserting any non-compliance by it in connection with the business or
operation of the Station with any applicable statute, rule or regulation,
federal, state or local. Neither of the Liberty Entities nor the Station is in
default with respect to any judgment, order, injunction or decree of any court,
administrative agency or other Governmental Authority or any other tribunal
duly authorized to resolve disputes in any respect material to the transactions
contemplated hereby. Each of the Liberty Entities and the Station are in
compliance in all material respects with all laws, regulations and governmental
orders applicable to the conduct of the business and operations of the Station,
the failure to comply with which would have a material adverse effect on the
business, operations or financial condition of the Station, and the present use
of the Contributed Assets do not violate any of such laws, regulations or
orders (other than immaterial violations).
SECTION 5.17 Employee Benefit Plans. Section 5.17 of the Disclosure
Schedule contains a true and complete list as of the date of this Agreement of
all employee benefit plans applicable to the employees at the Station. The
Station does not maintain any other employee benefit plan as the term is
defined in Section 3 of the Employee Retirement Income Security Act of 1984, as
amended, applicable to the employees of the Station.
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SECTION 5.18 Accuracy of Information. No written statements made by
either of the Liberty Entities herein and no information provided by either of
the Liberty Entities herein or in the documents, instruments or other written
communications made or delivered directly by either of the Liberty Entities to
the Company covering the contribution of the Contributed Assets contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained therein or herein not misleading, and there is no fact
known to either of the Liberty Entities which relates to any information
contained in any such written document, instrument or communications which the
applicable Liberty Entity has not disclosed to the Company in writing which
materially affects adversely the Station or the Contributed Assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SFX
-------------------------------------
SFX hereby makes the following representations and warranties to the
Company, each of which shall be true and correct on the Closing Date, and SFX
makes the representations and warranties set forth in Sections 6.1, 6.2, 6.3
and 6.4, each of which is true and correct on the Closing Date and on the date
hereof). Such representations and warranties are subject to, and qualified by,
any fact or facts disclosed in the appropriate section of the Disclosure
Schedule.
SECTION 6.1 Organization and Standing. SFX is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
SECTION 6.2 Authorization and Binding Obligation. Subject to obtaining
FCC consent as set forth in Section 3.1 hereof, SFX has all necessary power and
authority to enter into and perform its obligations under this Agreement and
the transactions contemplated hereby and SFX's execution, delivery and
performance of this Agreement and the transactions contemplated hereby, have
been duly and validly authorized by all necessary action on its part. This
Agreement has been duly executed and delivered by SFX and this Agreement and
the agreements to be executed in connection herewith will constitute the valid
and binding obligation of SFX enforceable in accordance with their terms,
except as limited by laws affecting the enforcement of creditor's rights or
equitable principles generally.
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SECTION 6.3 Absence of Conflicting Agreements or Required Consents.
Except as set forth in Section 5.3 of the Disclosure Schedule and except as set
forth in Section 3.1 hereof, the execution, delivery and performance of this
Agreement by SFX: (i) does not require the consent of any third party; (ii)
will not violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority to which SFX is a party or
by which it or the Contributed Assets are bound; (iii) will not, either alone
or with the giving of notice or the passage of time, or both, conflict with,
constitute grounds for termination of or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
agreement, instrument, license or permit to which SFX or the Contributed Assets
are now subject; and (iv) will not result in the creation of any Lien, charge
or encumbrance on any of the Contributed Assets.
SECTION 6.4 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body, pending against SFX that would adversely affect
its ability to perform its obligations pursuant to this Agreement or the
agreements to be executed in connection herewith.
SECTION 6.5 Title to Contributed Assets. On the Closing Date, except
as set forth in Section 5.5 of the Disclosure Schedule, SFX will have (i) good,
valid and marketable title to, or other legal right to use, all the Station
Assets, free and clear of any Lien other than Permitted Liens, and (ii) the
legal right to assign to the Company all the FCC Licenses, free and clear of
any Lien other than Permitted Liens.
SECTION 6.6 Government Authorizations.
(a) Section 5.6 of the Disclosure Schedule contains a true and
complete list of the FCC Licenses and other material licenses, permits or other
authorizations from governmental and regulatory authorities which are necessary
for the lawful conduct of the business and operations of the Station in the
manner and to the full extent they are presently conducted. As of the Closing
Date, SFX will be the authorized legal holder of the FCC Licenses and other
licenses, permits and authorizations listed in said Section 5.6, none of which
is subject to any restrictions or condition which would limit in any respect
the full operation of the Station as now operated.
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(b) Except as set forth in Section 5.6 of the Disclosure Schedule,
there are no applications, complaints or proceedings pending or, to the best of
SFX's knowledge, threatened as of the date hereof by or before the FCC relating
to the business or operations of the Station other than applications,
complaints or proceedings which generally affect the broadcasting industry. The
FCC Licenses listed in said Section 5.6 are in good standing, are in full force
and effect and are unimpaired by any act or omission of SFX or any of its
respective officers, directors or employees; and the operation of the Station
is in accordance with the FCC Licenses. No proceedings are pending or, to the
knowledge of SFX, are threatened with respect to the FCC Licenses which may
result in the revocation, adverse modification, non-renewal or suspension of
any of the FCC Licenses, the denial of any pending applications for the
Station, the issuance of any cease and desist order against the Station, the
imposition of any administrative sanctions by the FCC with respect to the FCC
Licenses or which may adversely affect the Company's ability to continue to
operate the Station as it is currently operated. SFX has no reason to believe
that the FCC Licenses that are normally renewable in the ordinary course will
not be renewed in their ordinary course. All material reports, forms and
statements required to be filed by SFX or any affiliate thereof with the FCC
with respect to the Station since the grant of the last renewal of the FCC
Licenses have been filed and are substantially complete and accurate. Subject
to obtaining the required FCC consents as contemplated by Section 3.1 hereof
and subject to the assignment of the Contributed Assets as contemplated in
Section 2.1 hereof, there are no facts which, under the Communications Act, or
the existing rules and regulations of the FCC, would disqualify SFX as an
assignor of the Contributed Assets.
SECTION 6.7 Compliance with FCC Regulations. The operation of the
Station and all of the Contributed Assets are in compliance in all material
respects with (i) all applicable engineering standards required to be met under
applicable FCC rules and (ii) all other applicable rules, regulations,
requirements and policies of the FCC, including, but not limited to, ANSI
Radiation Standards C95.1 - 1982 to the extent required to be met under
applicable FCC rules and regulations; and there are no existing claims known to
SFX to the contrary.
SECTION 6.8 Taxes. Except as set forth in Section 5.8 of the
Disclosure Schedule, SFX or an applicable affiliate thereof has filed with
respect to the Station all applicable federal, state, local and foreign income,
franchise, sales,
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use, property, excise, payroll and other tax returns required by law and has
paid in full all taxes, estimated taxes, interest, assessments, and penalties
due and payable. All returns and forms which have been filed have been true and
correct in all material respects and no tax or other payment in a material
amount other than as shown on such returns and forms are required to be paid
and have been paid by SFX or its affiliates. There are no present disputes as
to taxes of any nature payable by SFX relating to the Station which in any
event could materially adversely affect any of the Contributed Assets or the
operation of the Station.
SECTION 6.9 Real Property.
(a) Section 5.9 to the Disclosure Schedule contains a complete and
accurate list of all real property constituting the Contributed Assets and used
by the Station and all Contracts relating exclusively to the tower,
transmitter, studio site and offices of the Station (collectively the "Real
Estate Contracts") and a summary of the applicable leases.
(b) On the Closing Date, the Real Estate Contracts listed in Section
5.9 constitute valid and binding obligations of SFX and, to the best of SFX's
knowledge, of all other persons purported to be parties thereto and constitute
valid and binding obligations of SFX and, to the best of SFX's knowledge, of
all other persons purported to be parties thereto and shall be in full force
and effect. SFX is not in default under any of such Real Estate Contracts nor
has it received or given written notice of any default thereunder from or to
any of the other parties thereto.
SECTION 6.10 Contracts. Section 5.10 of the Disclosure Schedule lists
all Contracts as of the date of this Agreement, except (A) Contracts entered
into in the ordinary course of business (i) of less than three (3) months
duration and which impose monetary obligations of less than Five Thousand
Dollars ($5,000) each or Fifty Thousand Dollars ($50,000) in the aggregate,
(ii) for the sale or sponsorship of broadcast time on the Station for cash, for
which no prepayment has been received and with not more than twelve (12) months
remaining in their terms, or (iii) Contracts which are currently scheduled to
expire before the Closing Date and (B) time sales agreements which (i) are on
SFX's (or any of its affiliates') standard form, (ii) are terminable by SFX or
any of its affiliates within thirteen (13) weeks or less notice without
penalty, and (iii) provide for annual payments of fifty thousands dollars
($50,000) or less.
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SECTION 6.11 Status of Contracts. Except as noted in Section 5.11 of
the Disclosure Schedule, SFX (or an affiliate thereof) has delivered to the
Company true and complete copies of all Contracts, including any and all
amendments and other modifications to such Contracts. All Contracts are valid,
binding and enforceable by SFX in accordance with their respective terms,
except as limited by laws affecting creditors' rights or equitable principles
generally. SFX and its affiliates have complied in all material respects with
all Contracts and are not in default beyond any applicable grace periods under
any of the Contracts, and no other contracting party is in default under any of
the Contracts.
SECTION 6.12 Environmental Matters. Neither SFX nor any affiliate
thereof has in connection with the operation of the Station unlawfully disposed
of any hazardous waste or hazardous substance including Polychlorinated
Byphenyls ("PCBs") in a manner which has caused, or could cause, the Company to
incur any liability under applicable law in connection therewith; and SFX
warrants that the technical equipment included in the Contributed Assets do not
contain any PCBs which are required by law to be removed and if any equipment
does contain PCBs, that such equipment is stored and maintained in compliance
with applicable law. SFX has complied in all material respects with all
federal, state and local environmental laws, rules and regulations applicable
to the Station and its operations, including but not limited to the FCC's
guidelines regarding RF radiation. No hazardous waste has been disposed of by
SFX, and to the best of SFX's knowledge, no hazardous waste has been disposed
of by any other person, on the real estate occupied by the Station or its
transmitters. As used herein, the term "hazardous waste" shall mean as defined
in the RCRA and in the equivalent state statute under the law of the state in
which such real estate is located.
SECTION 6.13 Copyrights, Trademarks and Similar Rights.
(a) Except for the FCC Licenses, Section 5.13 of the Disclosure
Schedule is a true and complete list of all copyrights, trademarks, trade
names, licenses, patents, permits, jingles and other similar intangible
property rights and interests applied for, issued to or owned by SFX or under
which such SFX is a licensee or franchisee and used exclusively in the conduct
of the business and operations of the Station.
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(b) All of such rights and interests are issued to or owned by SFX or
if licensed or franchised to SFX to the best of SFX's knowledge, are valid and
in good standing and uncontested. SFX has delivered or made available to the
Company copies of all documents establishing such rights, licenses or other
authority. SFX has received no written notice and has no knowledge of any
infringements or unlawful use of such property. The properties listed in
Section 5.13 of the Disclosure Schedule include all such properties necessary
to conduct in all respects the business and operations of the Station as now
conducted.
SECTION 6.14 Personnel Information.
(a) Section 5.14 of the Disclosure Schedule contains a true and
complete list of all persons employed exclusively by the Station in connection
with the operation of the Station, including a description of material
compensation arrangements (other than employee benefit plans set forth in
Section 5.14 of the Disclosure Schedule) and a list of other terms of any and
all agreements affecting such persons. SFX has not received notification that
any of the current key employees listed in Section 5.14 of the Disclosure
Schedule presently plan to terminate their employment, whether by reason of the
transactions contemplated hereby or otherwise and SFX shall immediately notify
the Company upon receipt of any such notice.
(b) The Station is not subject to any Contract with any labor
organization, and the Station has not agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of their employees.
(c) Except as disclosed in Section 5.14 of the Disclosure Schedule,
SFX has, with respect to the Station, complied in all material respects with
all laws relating to the employment of labor, including, without limitation,
ERISA and those laws relating to wages, hours, collective bargaining,
unemployment insurance, workers' compensation, equal employment opportunity and
payment and withholding of taxes.
SECTION 6.15 Litigation. Except as set forth in Section 5.15 of the
Disclosure Schedule, the Station is not subject to any judgment, award, order,
writ, injunction, arbitration decision or decree materially adversely affecting
the conduct of the business of the Station or the Contributed Assets, and to
the best of SFX's knowledge, there is no
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<PAGE>
litigation or proceeding threatened against SFX or the Station in any federal,
state or local court, or before any administrative agency or arbitrator
(including, without limitation, any proceeding which seeks the forfeiture of,
or opposes the renewal of, the FCC Licenses), or before any other tribunal duly
authorized to resolve disputes, which would reasonably be expected to have any
material adverse effect upon the business, property, assets or condition
(financial or otherwise) of the Station or which seeks to enjoin or prohibit,
or otherwise questions the validity of, any action taken or to be taken
pursuant to or in connection with this Agreement. In particular, but without
limiting the generality of the foregoing, except as set forth in Section 5.6 of
the Disclosure Schedule, there are no applications, complaints or proceedings
pending or to the best of SFX's knowledge threatened before the FCC or any
other governmental organization with respect to the business or operations of
the Station other than applications, complaints or proceedings which affect the
broadcasting industry generally.
SECTION 6.16 Compliance With Laws. Except as set forth in Section 5.16
of the Disclosure Schedule, SFX has not received any notice asserting any
non-compliance by it in connection with the business or operation of the
Station with any applicable statute, rule or regulation, federal, state or
local. Neither SFX nor the Station is in default with respect to any judgment,
order, injunction or decree of any court, administrative agency or other
Governmental Authority or any other tribunal duly authorized to resolve
disputes in any respect material to the transactions contemplated hereby. SFX
and the Station are in compliance in all material respects with all laws,
regulations and governmental orders applicable to the conduct of the business
and operations of the Station, the failure to comply with which would have a
material adverse effect on the business, operations or financial condition of
the Station, and the present use of the Contributed Assets do not violate any
of such laws, regulations or orders (other than immaterial violations).
SECTION 6.17 Employee Benefit Plans. Section 5.17 of the Disclosure
Schedule contains a true and complete list as of the date of this Agreement of
all employee benefit plans applicable to the employees at the Station. The
Station does not maintain any other employee benefit plan as the term is
defined in Section 3 of the Employee Retirement Income Security Act of 1984, as
amended, applicable to the employees of the Station.
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SECTION 6.18 Accuracy of Information. No written statements made by
SFX herein and no information provided by SFX herein or in the documents,
instruments or other written communications made or delivered directly by SFX
to the Company covering the contribution of the Contributed Assets contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained therein or herein not misleading, and there is no fact
known to SFX which relates to any information contained in any such written
document, instrument or communications which SFX has not disclosed to the
Company in writing which materially affects adversely the Station or the
Contributed Assets.
ARTICLE VII
CONDITIONS TO CLOSING
---------------------
SECTION 7.1 SFX's Condition to Closing. The obligations of SFX
hereunder are, at SFX's option, subject to satisfaction, on the Closing Date,
of each of the following conditions:
a. The representations and warranties of the Company set forth in
Article IV hereof being true and correct in all material respects on the
Closing Date.
b. The consummation of all of the transactions contemplated by the
Purchase and Sale Agreement shall have occurred or shall occur
contemporaneously with the Closing of the transactions contemplated by this
Agreement.
c. The FCC Consents shall have become a Final Order.
SECTION 7.2 The Company's Conditions to Closing. The obligations of
the Company hereunder are, at the Company's option, subject to satisfaction, on
the Closing Date, of each of the following conditions:
a. The representations and warranties of SFX set forth in Article VI
hereof are true and correct in all material respects; and
b. SFX shall have delivered the Contributed Assets to the Company,
free and clear of any and all liens and encumbrances.
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ARTICLE VIII
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
SECTION 8.1 SFX's Documents. At the Closing, SFX shall deliver to the
Company the following:
(a) With respect to the Contributed Assets, SFX shall deliver an
assignment and assumption agreement to effect the assignment of the Contributed
Assets to the Company, free and clear of any and all Liens other than Permitted
Liens.
(b) Certified resolutions of the Board of Directors of SFX approving
the execution and delivery of this Agreement;
(c) Governmental certificates showing that SFX is in good standing in
the Commonwealth of Virginia dated not more than five (5) days before the
Closing Date;
(d) Articles of Incorporation and Bylaws of SFX certified by the
secretary of SFX as of the Closing Date; and
(e) Such additional information and materials as the Company shall
have reasonably requested.
SECTION 8.2 The Company's Documents. At the Closing, the Company shall
deliver or cause to be delivered to SFX the following:
(a) An assumption agreement assuming all of the liabilities and
obligations relating to the Contributed Assets, effective as of the Closing
Date.
(b) Governmental certificates from the Commonwealth of Virginia
showing that the Company is duly organized and in good standing in the
Commonwealth of Virginia dated not more than five (5) days before the Closing
Date;
(c) Certified resolutions of each of the members of the Company
approving the execution and delivery of this Agreement and each of the other
documents and agreements referred to herein and authorizing the consummation of
the transactions contemplated hereby and thereby;
(d) Articles of Organization and the Amended Operating Agreement
certified by the manager of the Company as of the Closing Date; and
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<PAGE>
(e) Such additional information and materials as SFX shall have
reasonably requested.
ARTICLE IX
OTHER PROVISIONS
----------------
SECTION 9.1 Severability. If any part or any provision of this
Agreement shall be invalid or unenforceable under applicable law, said part or
provisions shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining provisions of
this Agreement which shall be construed as if such invalid parts or provisions
had not been inserted, and such invalid or unenforceable provisions shall
become and be immediately amended and reformed to include only the portions
thereof as are enforceable by the court or such other body having jurisdiction
of this Agreement; and the parties agree that such portions as so amended and
reformed shall be valid and binding as though any wholly invalid or
unenforceable portion had not been included herein.
SECTION 9.2 Benefit and Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party; provided, the Liberty Entities shall have the right, subject
to applicable FCC requirements, to assign any and all of their respective
rights in this Agreement or any of the Contributed Assets to any of their
affiliates without the prior written consent of the Company so long as SFX, on
the Closing Date, shall contribute the Contributed Assets to the Company as
contemplated in this Agreement.
SECTION 9.3 Entire Agreement. This Agreement and the Schedules hereto
embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings
relating to the matters provided for in this Agreement other than the Master
Agreement. No amendment, waiver of compliance with any provision or condition
hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
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SECTION 9.4 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
SECTION 9.5 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia without
giving effect to the choice of law provisions thereof.
SECTION 9.6 Notices. Any notice, demand or request required or
permitted to be given under the provisions of this Agreement shall be in
writing and shall be deemed to have been duly delivered and received on the
date of personal delivery or on the date of receipt, if mailed by registered or
certified mail, postage prepaid and return receipt requested, or on the date of
a stamped receipt, if sent by an overnight delivery service, and shall be
addressed to the following addresses, or to such other address as any party may
request:
To the SFX Broadcasting, Inc.
Liberty 150 East 58th Street
Entities New York, NY 10155
or SFX: Attn: Howard Tytel
To the ABS Communications, L.L.C.
Company: 300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
SECTION 9.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together shall constitute one and the same instrument.
SECTION 9.8 Survival of Representations and Warranties;
Indemnification. The survival period of the representations and warranties set
forth in this Agreement and the indemnification obligations of SFX under this
Agreement shall be set forth in, and controlled by, the Master Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
ABS COMMUNICATIONS, L.L.C.
By: /s/ Kenneth A. Brown
--------------------------------
Name: Kenneth A. Brown
Title:
LIBERTY ACQUISITION SUBSIDIARY
CORPORATION
By: /s/ Howard J. Tytel
--------------------------------
Name: Howard J. Tytel
Title:
LIBERTY BROADCASTING OF MARYLAND, II
INCORPORATED
By: /s/ Howard J. Tytel
--------------------------------
Name: Howard J. Tytel
Title:
SFX BROADCASTING, INC.
By: Howard J. Tytel
--------------------------------
Name: Howard J. Tytel
Title:
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<PAGE>
INSTRUMENT OF ASSIGNMENT
INSTRUMENT OF ASSIGNMENT from Kenneth A. Brown ("Assignor") to ABS
Communications, L.L.C., a Virginia limited liability company ("Assignee").
Assignor and Assignee (along with ABS Communications Incorporated, for
certain limited purposes as specified therein) have executed and delivered a
KAB Contribution Agreement, dated as of December 17, 1996 (the "KAB
Contribution Agreement"). Capitalized terms used herein without definition
shall have the respective meanings assigned to them in the KAB Contribution
Agreement.
1. Pursuant to Section 7.1 of the KAB Contribution Agreement, for
valuable consideration, receipt of which is hereby acknowledged, Assignor does
hereby assign, transfer and convey to the Assignee, its successors and assigns
forever, such portions of the KAB Partnership Interests representing $1,700,000
in equity and $5,100,000 in gross value.
2. Nothing contained in this Instrument of Assignment shall in any way
supersede, modify, replace, amend, change, rescind, waive, exceed, expend,
enlarge or in any way affect the provisions, including the warranties,
covenants, agreements, conditions, representations or, in obligations and
indemnifications of Assignor or Assignee set forth in the KAB Contribution
Agreement, including without limitation any limits on indemnification specified
therein. This Instrument of Assignment is intended only to effect the transfer
of certain interests the transfer of which is contemplated in the KAB
Contribution Agreement and shall be governed in accordance with the terms and
conditions of the KAB Contribution Agreement.
3. This Instrument of Assignment is (i) executed pursuant to the KAB
Contribution Agreement and may be executed in two counterparts, each of which
as so executed shall be deemed to be an original, but all of which together
shall constitute one instrument and (ii) shall be governed by and in accordance
with the internal laws of the Commonwealth of Virginia, without regard to the
principles of conflicts of law thereof.
<PAGE>
IN WITNESS THEREOF, Assignor has caused this Instrument of Assignment
to be duly executed and delivered as of this 17th day of December, 1996.
By: /s/ Kenneth A. Brown
--------------------------------
Name: Kenneth A. Brown
Accepted:
ABS COMMUNICATIONS, L.L.C.
By: /s/ Kenneth A. Brown
------------------------------------
Name: Kenneth A. Brown
Title: Manager
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===============================================================================
PURCHASE AND SALE AGREEMENT
DATED AS OF DECEMBER 17, 1996
AMONG
KENNETH A. BROWN,
ABS COMMUNICATIONS INCORPORATED,
EBF INC.,
EBF PARTNERS,
AND
ABS COMMUNICATIONS, L.L.C.
===============================================================================
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<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS................................................ 2
SECTION 1.1 Definitions............................................ 2
ARTICLE II SIMULTANEOUS CONTRIBUTION;
PURCHASE AND SALE.......................................... 8
SECTION 2.1 Simultaneous Contribution.............................. 8
SECTION 2.2 Purchase and Sale of Partnership
Interests.............................................. 8
ARTICLE III PURCHASE PRICE; ADJUSTMENT;
TRANSFER TAXES............................................. 9
SECTION 3.1 Purchase Price......................................... 9
SECTION 3.2 Payment; Delivery...................................... 9
SECTION 3.4 Payment of Taxes and Other Charges..................... 11
SECTION 3.5 Sellers' Representative................................ 11
ARTICLE IV CLOSING.................................................... 12
SECTION 4.1 The Closing............................................ 12
SECTION 4.2 Place of Closing....................................... 12
ARTICLE V GOVERNMENTAL CONSENTS...................................... 12
SECTION 5.1 FCC Consents........................................... 12
SECTION 5.2 FCC Applications....................................... 13
SECTION 5.3 HSR Applications....................................... 13
ARTICLE VI REPRESENTATIONS AND WARRANTIES
OF BUYER................................................... 14
SECTION 6.1 Organization and Standing.............................. 14
SECTION 6.2 Authorization and Binding
Obligation............................................. 14
SECTION 6.3 Absence of Conflicting Agreements
or Required Consents................................... 14
SECTION 6.4 Litigation............................................. 15
SECTION 6.5 FCC Qualifications..................................... 15
ARTICLE VII REPRESENTATIONS AND WARRANTIES
OF EBF SELLERS............................................. 15
SECTION 7.1 Organization and Standing.............................. 15
SECTION 7.2 Authorization and Binding
Obligation............................................. 16
SECTION 7.3 Title to Partnership Interest.......................... 16
SECTION 7.4 Absence of Conflicting Agreements
or Required Consents................................... 16
SECTION 7.5 Litigation............................................. 17
<PAGE>
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ARTICLE VIII REPRESENTATIONS AND WARRANTIES
OF KAB/ABS SELLERS......................................... 17
SECTION 8.1 Organization and Standing.............................. 17
SECTION 8.2 Authorization and Binding
Obligation............................................. 17
SECTION 8.3 Title to Partnership Interest.......................... 18
SECTION 8.4 Absence of Conflicting Agreements
or Required Consents................................... 18
SECTION 8.5 Litigation............................................. 18
ARTICLE IX REPRESENTATIONS AND WARRANTIES
OF SELLERS................................................. 19
SECTION 9.1 Organization and Standing.............................. 19
SECTION 9.2 Capitalization of the Partnerships..................... 19
SECTION 9.3 Title to Assets; Encumbrances.......................... 20
SECTION 9.4 Government Authorizations.............................. 20
SECTION 9.5 Compliance with FCC Regulations........................ 21
SECTION 9.6 Taxes.................................................. 21
SECTION 9.7 Real Property.......................................... 22
SECTION 9.8 Contracts.............................................. 22
SECTION 9.9 Status of Contracts.................................... 23
SECTION 9.10 Environmental Matters.................................. 23
SECTION 9.11 Copyrights, Trademarks and Similar
Rights................................................. 23
SECTION 9.12 Financial Statements................................... 24
SECTION 9.13 Personnel Information.................................. 25
SECTION 9.14 Litigation............................................. 25
SECTION 9.15 Compliance With Laws................................... 26
SECTION 9.16 Employee Benefit Plans................................. 26
SECTION 9.17 Accuracy of Information................................ 27
ARTICLE X COVENANTS OF BUYER......................................... 27
SECTION 10.1 Notification........................................... 27
SECTION 10.2 No Inconsistent Action................................. 27
SECTION 10.3 Buyer's Post-Closing Covenant.......................... 27
ARTICLE XI COVENANTS OF SELLERS....................................... 28
SECTION 11.1 Sellers' Pre-Closing Covenants......................... 28
SECTION 11.2 Notification........................................... 30
SECTION 11.3 No Inconsistent Action................................. 31
SECTION 11.4 Environmental Studies.................................. 31
ARTICLE XII JOINT COVENANTS............................................ 31
SECTION 12.1 Conditions............................................. 32
SECTION 12.2 Confidentiality........................................ 32
SECTION 12.3 Cooperation............................................ 32
SECTION 12.4 Employee Matters....................................... 32
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SECTION 12.5 Update................................................. 33
ARTICLE XIII CONDITIONS OF CLOSING BY BUYER............................. 33
SECTION 13.1 Representations, Warranties and
Covenants.............................................. 33
SECTION 13.2 Governmental Consents.................................. 34
SECTION 13.3 Governmental Authorizations............................ 34
SECTION 13.4 Adverse Proceedings.................................... 35
SECTION 13.5 Legal Opinion.......................................... 35
SECTION 13.6 FCC Legal Opinion...................................... 35
SECTION 13.7 Third-Party Consents................................... 35
SECTION 13.8 Encumbrances; Financing Statements..................... 35
SECTION 13.9 Bank Loan.............................................. 35
ARTICLE XIV CONDITIONS OF CLOSING BY
SELLERS.................................................... 36
SECTION 14.1 Representations, Warranties and
Covenants.............................................. 36
SECTION 14.2 Governmental Consents.................................. 37
SECTION 14.3 Adverse Proceedings.................................... 37
SECTION 14.4 Legal Opinion.......................................... 37
SECTION 14.5 Bank Loan.............................................. 37
ARTICLE XV [INTENTIONALLY OMITTED].................................... 38
ARTICLE XVI COMMISSIONS OR FINDER'S FEE................................ 38
SECTION 16.1 Buyer's Representation and
Agreement to Indemnify................................. 38
SECTION 16.2 Sellers' Representation and
Agreement to Indemnify................................. 38
ARTICLE XVII DOCUMENTS TO BE DELIVERED AT
CLOSING.................................................... 39
SECTION 17.1 Sellers' Documents..................................... 39
SECTION 17.2 Buyer's Documents...................................... 40
ARTICLE XVIII TERMINATION RIGHTS......................................... 40
SECTION 18.1 Termination............................................ 40
SECTION 18.2 Liability.............................................. 41
ARTICLE XIX OTHER PROVISIONS........................................... 41
SECTION 19.1 Risk of Loss........................................... 41
SECTION 19.2 Further Assurances..................................... 42
SECTION 19.3 Waiver................................................. 42
SECTION 19.4 Severability........................................... 42
SECTION 19.5 Benefit and Assignment................................. 43
SECTION 19.6 Entire Agreement....................................... 43
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SECTION 19.7 Headings............................................... 43
SECTION 19.8 Governing Law.......................................... 43
SECTION 19.9 Notices................................................ 43
SECTION 19.10 Financial Statements................................... 44
SECTION 19.11 Counterparts........................................... 44
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made and entered into as of the
17th day of December, 1996, by and among KENNETH A. BROWN ("KAB"), ABS
COMMUNICATIONS INCORPORATED, a Virginia corporation ("ABS"), EBF INC., a
Delaware corporation ("EBFI"), EBF PARTNERS, a New York partnership ("EBFP"
and, together with KAB, ABS and EBFI, "Sellers"), and ABS COMMUNICATIONS,
L.L.C., a Virginia limited liability company ("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ABS Richmond Partners, L.P., a Virginia limited partnership
("RICH-I"), owns and operates radio station WKHK-FM in Colonial Heights,
Virginia ("WKHK") and ABS Richmond Partners II, L.P., a Virginia limited
partnership ("RICH-II" and, together with RICH-I, the "Partnerships"), owns and
operates radio station WVGO-FM in Crewe, Virginia ("WVGO" and, together with
WKHK, the "Stations"), each pursuant to licenses issued by the Federal
Communications Commission (together with any successor agency or body, the
"FCC"); and
WHEREAS, ABS is the owner of a 0.5% general partnership interest in
RICH-I and a 0.5% general partnership interest in RICH-II (collectively, the
"ABS Partnership Interests"); and
WHEREAS, EBFI is the owner of a 0.5% general partnership interest in
RICH-I and a 0.5% general partnership interest in RICH-II (collectively, the
"EBFI Partnership Interests"); and
WHEREAS, EBFP is the owner of a 74.5% limited partnership interest in
RICH-I and a 74.5% limited partnership interest in RICH-II (collectively, the
"EBFP Partnership Interests" and together with the EBFI Partnership Interests,
the "EBF Partnership Interests"); and
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Page
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WHEREAS, simultaneously with the execution of this Agreement, KAB has
contributed to Buyer, and Buyer has accepted from KAB, such portions of KAB's
limited partnership interests in the Partnerships representing in the aggregate
$1,700,000 in equity and $5,100,000 in gross value (the "Contributed
Interests"; to the extent KAB has remaining any limited partnership interests
in the Partnerships after giving effect to the contribution of the Contributed
Interests such remaining interests shall be referred to as the "KAB Sold
Interests") in exchange for an increase in KAB's capital interest in Buyer,
pursuant to, and upon the terms and subject to the conditions set forth in, the
KAB Contribution Agreement, dated of even date herewith by and between KAB and
Buyer (the "KAB Contribution Agreement"); and
WHEREAS, each of KAB and ABS desires to sell, and Buyer desires to
purchase, the KAB Sold Interests and the ABS Partnership Interests,
respectively, (collectively, the "KAB/ABS Sold Interests"), upon the terms and
conditions as contained herein; and
WHEREAS, EBFI and EBFP (the "EBF Sellers") desire to sell, and Buyer
desires to purchase, the EBF Partnership Interests (the "EBF Sold Interests"
and, together with the KAB/ABS Sold Interests, the "Partnership Interests"),
upon such terms and conditions as contained herein; and
WHEREAS, upon the acquisition of the Partnership Interests by Buyer,
the Partnerships will dissolve, terminate and liquidate into Buyer;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions contained herein, and intending to be fully bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 Definitions. When used in this Agreement, the following
words or phrases shall have the following meanings:
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Page
----
"ABS" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"ABS Partnership Interests" shall have the meaning assigned to such
term in the recitals to this Agreement.
"Agreement" shall mean this Purchase and Sale Agreement, as it may be
amended, supplemented or otherwise modified from time to time in accordance
with the terms hereof.
"Arbiter" shall have the meaning assigned to such term in Section
3.3(a) of this Agreement.
"Base Purchase Price" shall mean Twenty One Million and Three Hundred
Thousand Dollars ($21,300,000); provided, Buyer shall have borrowed Three
Million Nine Hundred Thousand Dollars ($3,900,000) of debt recourse to KAB as
of the Closing Date.
"Buyer" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"Closing" shall have the meaning assigned to such term in Section 4.1
of this Agreement.
"Closing Date" shall have the meaning assigned to such term in Section
4.1 of this Agreement.
"Closing Date Current Assets" shall mean current assets of the
Partnerships as of the Closing Date determined in accordance with GAAP.
"Closing Date Current Liabilities" shall mean current liabilities of
the Partnerships as of the Closing Date determined in accordance with GAAP.
"Closing Date Liabilities" shall mean all liabilities, other than
Estimated Closing Date Current Liabilities, of the Partnerships as of the
Closing Date determined in accordance with GAAP and certified in writing by
Sellers and delivered to Buyer not less than five (5) business days before the
Closing Date.
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Page
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"Closing Statement" shall have the meaning assigned to such term in
Section 3.3(a) of this Agreement.
"Communications Act" shall mean the Communications Act of 1934, as
amended, including as amended by the Telecommunications Act of 1996, and the
rules, regulations and policies promulgated thereunder.
"Contracts" shall mean all contracts, agreements, or binding
commitments or arrangements, written or oral, to which (i) either Partnership
is a party or by which any of the Partnership Assets may be bound or (ii) any
Seller is a party and in which such contract, agreement or arrangement relates
to the Partnership Assets.
"Contributed Interests" shall have the meaning assigned to such term
in the recitals to this Agreement.
"Contribution Agreement" shall have the meaning assigned to such term
in the recitals to this Agreement.
"Disclosure Schedule" shall mean the separate Disclosure Schedule
attached to this Agreement regarding certain representations and warranties
made by Sellers or Buyer, as the case may be, as further described in Articles
6, 7, 8 and 9 of this Agreement.
"Distributions" shall mean (i) the declaration or payment of any
dividend or distribution or the occurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of the
Partnerships' partnership interests, (ii) any payment on account of the
purchase, redemption, defeasance or other retirement of the Partnerships'
partnership interests, or (iii) any payment, loan, contribution or other
transfers of funds or other property to any partner of the Partnerships or any
affiliate of such partner.
"EBF Partnership Interests" shall have the meaning assigned to such
term in the recitals to this Agreement.
"EBF Sellers" shall have the meaning assigned to such term in the
recitals to this Agreement.
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Page
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"EBF Sold Interests" shall have the meaning assigned to such term in
the recitals to this Agreement.
"EBFI" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"EBFI Partnership Interests" shall have the meaning assigned to such
term in the recitals to this Agreement.
"EBFP" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"EBFP Partnership Interests" shall have the meaning assigned to such
term in the recitals to this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Estimated Adjustment Amount" shall have the meaning assigned to such
term in Section 3.3(b) of this Agreement.
"Estimated Closing Date Current Assets" shall mean the bona fide
estimate of the Closing Date Current Assets as of ten (10) days before the
Closing Date, as certified in writing by Sellers and delivered to Buyer not
less than five (5) business days before the Closing Date.
"Estimated Closing Date Current Liabilities" shall mean the bona fide
estimate of the Closing Date Current Liabilities as of ten (10) days before the
Closing Date, as certified in writing by Sellers and delivered to Buyer not
less than five (5) business days before the Closing Date.
"FCC" shall have the meaning assigned to such term in the recitals to
this Agreement.
"FCC Applications" shall have the meaning assigned to such term in
Section 5.2 of this Agreement.
"FCC Consents" shall have the meaning assigned to such term in Section
5.1 of this Agreement.
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"FCC Licenses" shall mean the main transmitter licenses for the
Stations together with each of the other consents, rights, licenses, permits
and authorizations issued or granted by the FCC for the operation of or used in
connection with the ownership or operation of the Stations, together with any
renewals or extensions thereof.
"Final Adjustment Amount" shall have the meaning assigned to such term
in Section 3.3(b) of this Agreement.
"Final Order" shall have the meaning assigned to such term in Section
4.1 of this Agreement.
"Financial Statements" shall have the meaning assigned to such term in
Section 9.12 of this Agreement.
"GAAP" shall mean United States generally accepted accounting
principals as in effect on the date of this Agreement.
"Governmental Authority" shall mean a federal, state or local court,
legislature, governmental agency, commission or regulatory or administrative
authority or instrumentality.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"HSR Applications" shall have the meaning assigned to such term in
Section 5.3 of this Agreement.
"KAB" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"KAB Partnership Interests" shall have the meaning assigned to such
term in the recitals to this Agreement.
"KAB/ABS Sellers" shall have the meaning assigned to such term in the
recitals to this Agreement.
"KAB/ABS Sold Interests" shall have the meaning assigned to such term
in the recitals to this Agreement.
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"Law" shall mean applicable common law and any statute, ordinance,
code or other law, rule, permit, permit condition, regulation, order, technical
or other standard, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority or court.
"Lien" shall mean any security agreement or financing statement filed
with an appropriate Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for security
purposes, any lien, mortgage, pledge, option, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including, without limitation, reservations,
rights of entry, possibilities of reverter, encroachments, easements, rights of
way, restrictive covenants, leases and licenses) of any kind, which (i) creates
or confers an interest in property to secure payment or performance of a
liability, obligation or claim, or which retains or reserves such an interest
for such purpose; (ii) grants to any Person the right to purchase or otherwise
acquire, or obligates any Person to sell or otherwise dispose of, or otherwise
results or may result in any Person acquiring, any property or interest
therein; (iii) restricts the transfer of, or the exercise of any rights or the
enjoyment of any benefits arising by reason of ownership of, any property; or
(iv) otherwise constitutes an interest in or claim against property whether or
not arising pursuant to any Law, FCC License or Contract.
"Master Agreement" shall mean that certain Master Richmond Station
Group Agreement dated of even date herewith entered into by and among Sellers,
Buyer, SFX, J. Edwin Conrad and the Partnerships.
"Partnership Assets" shall mean all assets, properties, rights, titles
and privileges of the Partnerships of every kind, character and description,
whether tangible, intangible, real, personal or mixed, of whatever description
and wherever located, used in connection with the operation of the Stations
including, without limitation, all additions, accessions, and substitutions
made prior to the Closing as permitted pursuant to the terms of this Agreement.
For the avoidance of doubt, the parties agree (i) that WKHK Station Tower is
not included in this definition of Partnership Assets, and (ii) as contemplated
in Schedule A hereto.
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"Partnership Interests" shall have the meaning assigned to such term
in the recitals to this Agreement.
"Partnerships" shall have the meaning assigned to such term in the
recitals to this Agreement.
"PCBs" shall have the meaning assigned to such term in Section 7.13 of
this Agreement.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization or other legal entity.
"Purchase Price" shall have the meaning assigned to such term in
Section 3.1 of this Agreement.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended.
"Real Estate Contracts" shall have the meaning assigned to such term
in Section 7.10(a) of this Agreement.
"Representative" shall have the meaning assigned to such term in
Section 3.5 of this Agreement.
"RICH LMA" shall mean a Local Marketing Agreement which may be entered
into between Buyer and the Partnerships with respect to the Stations.
"RICH-I" shall have the meaning assigned to such term in the recitals
to this Agreement.
"RICH-II" shall have the meaning assigned to such term in the recitals
to this Agreement.
"Sellers" shall mean collectively, the EBF Sellers and the KAB/ABS
Sellers.
"SFX" shall mean SFX Broadcasting, Inc., a Delaware corporation.
"SFX Contribution Agreement" shall mean the SFX Contribution Agreement
entered into by and between SFX and Buyer.
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"SFX Convertible Note Agreement" shall mean the Convertible Note
Agreement entered into by and between SFX and Buyer.
"Stations" shall have the meaning assigned to such term in the
recitals to this Agreement.
"Transfer Taxes" shall have the meaning assigned to such term in
Section 3.4 of this Agreement.
"UCC" shall mean the Uniform Commercial Code.
"WKHK" shall have the meaning assigned to such term in the recitals to
this Agreement.
"WVGO" shall have the meaning assigned to such term in the recitals to
this Agreement.
ARTICLE II
SIMULTANEOUS CONTRIBUTION; PURCHASE AND SALE
--------------------------------------------
SECTION 2.1 Simultaneous Contribution. Simultaneously with the
execution of this Agreement, KAB has contributed to Buyer, and Buyer has
accepted from KAB, the Contributed Interests, free and clear of any and all
Liens, in exchange for an increase in KAB's capital interest in Buyer of
$1,700,000.
SECTION 2.2 Purchase and Sale of Partnership Interests. Upon the terms
and subject to the conditions set forth in this Agreement, on the Closing Date,
(i) the EBF Sellers shall sell, assign, transfer and convey to Buyer, and Buyer
shall purchase from the EBF Sellers, the EBF Sold Interests, free and clear of
any and all Liens and (ii) KAB/ABS Sellers shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase from the KAB/ABS Sellers, the KAB/ABS
Sold Interests, free and clear of any and all Liens. For purposes of this
Agreement, any Liens on the Partnership Assets shall not be deemed to
constitute Liens on the Partnership Interests.
ARTICLE III
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PURCHASE PRICE; ADJUSTMENT; TRANSFER TAXES
------------------------------------------
SECTION 3.1 Purchase Price. The consideration for the purchase of the
Partnership Interests shall be the aggregate sum of the following, as adjusted
pursuant to the provisions of Section 3.3 hereof (the "Purchase Price"):
(a)
the Base Purchase Price; plus
(b)
the Estimated Closing Date Current Assets; minus
(c)
the Estimated Closing Date Current Liabilities; minus
(d) the Closing Date Liabilities.
Sellers agree that each Seller's allocable portion of the Purchase Price shall
be indicated on Schedule 3.1. Sellers and Buyer agree that the fair market
value of any asset of the Partnerships that would otherwise be described in
Section 751(a) of the Internal Revenue Code of 1986, as amended (the "Code")
shall equal its adjusted tax basis as of the Closing Date. The parties will
file all documents and returns consistent with this agreement including, but
not limited to, pursuant to Section 743(b) and Section 1060 of the Code.
SECTION 3.2 Payment; Delivery. Buyer shall pay to each Seller such
Seller's allocable portion of the Purchase Price at the Closing by wire
transfer in immediately available funds as determined under Section 3.1 and
pursuant to Schedule 3.1 to a bank designated in writing by the Representative
(as defined below) of such Seller.
SECTION 3.3 Post-Closing Adjustments.
(a) Closing Statement. As promptly as practicable, but in any event
not later than 90 days after the Closing Date, Buyer shall deliver to Sellers a
statement (the "Closing Statement") which sets forth (i) the Closing Date
Current Assets and the Closing Date Current Liabilities and (ii) Buyer's
calculation of the adjustment to the Purchase Price resulting therefrom.
Concurrently with the delivery of the Closing Statement, Buyer shall deliver to
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Sellers copies of work papers which set forth in reasonable detail Buyer's
calculations of the various amounts included in such Closing Statement. Buyer
shall, and shall cause its independent certified public accountants to, give
Sellers access, during regular business hours upon reasonable notice, to the
books and records of the Partnerships which relate to or are necessary for the
preparation of the Closing Statement for the purpose of reviewing work
performed in preparation of, and the amounts set forth in, the Closing
Statement. The Closing Statement and the computations of Closing Date Current
Assets and the Closing Date Current Liabilities set forth therein shall be
conclusive and binding upon the parties unless, within 30 days after the
delivery of such Closing Statement, Sellers notify Buyer in writing that
Sellers dispute any of the amounts set forth therein. The parties shall in good
faith attempt to resolve any dispute, in which event the Closing Statement and
the computations of Closing Date Current Assets and Closing Date Current
Liabilities, as amended to the extent necessary to reflect the resolution of
the dispute, shall be conclusive and binding upon the parties. If the parties
do not reach agreement resolving the dispute within 10 days after notice
pursuant to the second preceding sentence, the parties shall submit the dispute
for resolution to the Washington D.C. office of Deloitte & Touche LLP (the
"Arbiter"). Promptly, but in no event later than 20 days after the appointment
of the Arbiter, the Arbiter shall determine, based on presentations by the
parties and such additional procedures as the Arbiter deems appropriate, only
those issues in dispute and shall render a report as to the dispute and the
resulting computations of the Closing Date Current Assets and the Closing Date
Current Liabilities, as the case may be, together with amendments to the
Closing Statement to the extent necessary to reflect the Arbiter's
determinations, which shall be conclusive and binding upon the parties. All
references hereinafter to amounts set forth in the Closing Statement shall be
references to the amounts which shall have become conclusive and binding on the
parties in accordance with this Section 3.3(a). The fees, costs and expenses of
the Arbiter shall be allocated between the parties in such manner as the
Arbiter in its sole discretion deems appropriate.
(b) Purchase Price Adjustments. In preparing the Closing Statement,
Buyer shall adjust the Purchase Price as follows: If the sum of (i) the Closing
Date Current Assets minus the Closing Date Current Liabilities (such sum,
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the "Final Adjustment Amount") exceeds the sum of (ii) the Estimated Closing
Date Current Assets minus the Estimated Closing Date Current Liabilities (such
sum, the "Estimated Adjustment Amount"), the Purchase Price shall be increased
by the amount of such excess. If the Estimated Adjustment Amount exceeds the
Final Adjustment Amount, the Purchase Price shall be reduced by the amount of
such excess.
(c) Interest. Any Purchase Price adjustment pursuant to Section 3.3(b)
payable by Buyer to Sellers or by Sellers to Buyer, as the case may be, shall
bear interest at an annual rate equal to the prime or reference rate from time
to time of Citibank, N.A., from and including the Closing Date to but not
including the date of payment. An amount equal to any such Purchase Price
adjustment (plus interest determined pursuant to the preceding sentence) shall
be paid by Sellers or Buyer, as the case may be, by wire transfer of
immediately available funds to Buyer or Sellers, as the case may be. The Final
Adjustment Amount, including interest thereon, shall be made on the third
business day following (i) the 30th day after delivery by Buyer to Sellers of
the Closing Statement if there shall have been no disputes between the parties
with respect thereto, or (ii) the date mutual agreement is reached as to any
Purchase Price adjustment, in the event of a dispute that is settled by the
parties without resort to the Arbiter, or (iii) the receipt of the report of
the Arbiter in the event of a dispute that is settled by the Arbiter, as
applicable.
SECTION 3.4 Payment of Taxes and Other Charges. Sellers shall pay, at
the Closing or, if due thereafter, promptly when due, all gross receipts taxes,
gains taxes (including, without limitation, real property gains tax or other
similar taxes), transfer taxes, sales taxes, stamp taxes, and any other taxes
(collectively, "Transfer Taxes") payable in connection with the transfer of the
Partnership Interests. Subject to Buyer's right of reasonable review and
comment before filing, Sellers shall prepare and file any tax returns with
respect to such Transfer Taxes.
SECTION 3.5 Sellers' Representative. To facilitate the consummation of
the transactions contemplated by this Agreement before, at and after the
Closing, the Sellers hereby irrevocably consent to the appointment of, and do
hereby appoint and empower, Coleman Wortham, III and KAB as the sole and
exclusive representative (each a
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"Representative") of the EBF Sellers and the KAB/ABS Sellers, respectively, to
make all decisions and determinations on behalf of such Seller that such
Representative may deem necessary or appropriate to accomplish the intent of
this Agreement. Without limiting the generality of the foregoing, each
Representative shall have the power to agree and determine on behalf of its
respective Seller, with Buyer, as to the amount of any adjustments to the
Purchase Price, or otherwise. All decisions of the Representatives shall be
final and binding on their respective Sellers.
ARTICLE IV
CLOSING
-------
SECTION 4.1 The Closing. Except as otherwise mutually agreed upon by
Sellers and Buyer, the consummation of the transactions contemplated herein
(the "Closing") shall occur within ten (10) days after the satisfaction or
waiver of each condition to Closing contained herein (such date of the closing,
the "Closing Date") (excluding conditions that by their terms cannot be
satisfied until the Closing Date). For purposes of this Agreement, the FCC
Consents shall be deemed to be a "Final Order" when (i) they have not been
vacated, reversed, stayed, set aside, annulled or suspended; (ii) they are not
the subject of any pending timely appeal, request for stay or petition or
motion for rehearing, reconsideration or review by any party or by the FCC on
its own motion; and (iii) they are actions by the FCC as to which the time for
filing any such appeal, request, petition or similar document or the normal
time for the reconsideration or review by the FCC on its own motion under the
Communications Act and the rules and regulations of the FCC has expired.
SECTION 4.2 Place of Closing. The Closing shall take place at the
offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York,
New York 10022, commencing at 9:00 a.m. local time or at such other place as
the parties shall mutually agree.
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ARTICLE V
GOVERNMENTAL CONSENTS
---------------------
SECTION 5.1 FCC Consents. It is specifically understood and agreed by
Buyer and Sellers that the Closing and the assignment of the Partnership
Interests is expressly conditioned on and is subject to the prior consent and
approval of the FCC and any conditions imposed in such approval, which
conditions are not deemed, in Buyer's reasonable judgment subject to Schedule
5.1, materially adverse to Buyer's interest in the Stations (the "FCC
Consents").
SECTION 5.2 FCC Applications. Sellers and Buyer shall use their
reasonable best efforts to file with the FCC the requisite applications
for consent to the transfer of control of the Partnerships to Buyer and
such other applications for the transactions contemplated hereunder
(including any applications in connection with assignments to Buyer of
the FCC Licenses) (the "FCC Applications") within ten (10) business days
following the date of this Agreement and Buyer shall, to the extent
deemed necessary, file temporary waiver requests with such applications for
the purposes of coming into compliance with the FCC's local ownership
limitations. Buyer shall have the right to make such amendments to the
FCC Applications and waiver requests as shall be necessary to reflect
changes that may occur in the structure of Buyer, for a period of fifteen
(15) days following the date on which the FCC Applications are accepted
for filing by the FCC, provided that Buyer remains qualified to be the
assignee of the Stations and provided that any such changes do not
materially adversely impact such waiver requests. Thereafter, Sellers
and Buyer shall prosecute the FCC Applications with reasonable best
efforts to obtain the grant of the FCC Applications as expeditiously
as practicable (but neither Sellers nor Buyer shall have any obligation
to satisfy complainants or the FCC by taking any steps which would have
a material adverse effect upon Sellers or Buyer or upon any affiliated
entity). If the FCC Consents impose any condition on any party hereto,
such party shall use its reasonable best efforts to comply with such
condition; provided, however, that no party hereto shall be required
hereunder to comply with any condition that would have a material adverse
effect upon it or any affiliated entity.
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The parties hereto acknowledge that, in the event the FCC Consents impose
conditions precedent to the effectiveness of the FCC Consents, the parties
hereto shall not effectuate the Closing without first having satisfied such
conditions precedent. If reconsideration or judicial review is sought with
respect to the FCC Consents, the party affected shall vigorously oppose such
efforts for reconsideration or judicial review; provided, however, that nothing
herein shall be construed to limit any party's right to terminate this
Agreement pursuant to Article 18 hereof.
SECTION 5.3 HSR Applications. Sellers and Buyer shall use their
reasonable best efforts to file any notification and report form required under
the HSR Act with respect to the transactions contemplated by this Agreement
(the "HSR Applications") within ten (10) business days following the date of
this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to
Sellers, each of which is true and correct on the date hereof, shall remain
true and correct through and including the Closing Date, shall be unaffected
by any notice to Sellers other than in the Disclosure Schedule and shall
survive the Closing to the extent provided in the Master Agreement. Such
representations and warranties are subject to, and qualified by, any fact
or facts disclosed in the appropriate section of the Disclosure Schedule.
SECTION 6.1 Organization and Standing. Buyer is a limited liability
company duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia, and, as of the Closing Date, Buyer
shall be duly qualified to do business and be in good standing in the
Commonwealth of Virginia. As of the date hereof, KAB and ABS own 99% and 1%,
respectively, of the profit interest in Buyer.
SECTION 6.2 Authorization and Binding Obligation. Subject to obtaining
the FCC Consents, Buyer has all necessary power and authority to enter into
and perform this Agreement and the transactions contemplated
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hereby, and Buyer's execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly
authorized by all necessary action on its part. This Agreement has been
duly executed and delivered by Buyer and this Agreement constitutes,
and the other agreements to be executed in connection herewith will
constitute, the valid and binding obligation of Buyer, enforceable in
accordance with their terms, except as limited by laws affecting creditors'
rights or equitable principles generally.
SECTION 6.3 Absence of Conflicting Agreements or Required Consents.
Except as set forth in Article V hereof with respect to governmental
consents, the execution, delivery and performance of this Agreement by
Buyer: (a) does not require the consent of any third party; (b) will not
violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority to which Buyer is a
party; and (c) will not, either alone or with the giving of notice or
the passage of time, or both, conflict with, constitute grounds for
termination of or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any agreement, instrument, license or
permit to which Buyer is now subject.
SECTION 6.4 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation
before any court or governmental body, pending against Buyer that would
adversely affect Buyer's ability to perform its obligations pursuant to
this Agreement or the agreements to be executed in connection herewith.
SECTION 6.5 FCC Qualifications. Buyer knows of no facts that, under
the Communications Act or the existing rules and regulations of the FCC,
would disqualify Buyer as an assignee of the Stations.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF EBF SELLERS
---------------------------------------------
The EBF Sellers hereby jointly and severally make the following
representations and warranties to Buyer, each of which is true and correct
on the date hereof, shall
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remain true and correct to and including the Closing Date, shall be
unaffected by any notice to Buyer other than in the Disclosure Schedule
and shall survive the Closing to the extent provided in the Master
Agreement. Such representations and warranties are subject to, and
qualified by, any fact or facts disclosed in the appropriate section of
the Disclosure Schedule.
SECTION 7.1 Organization and Standing.
(a) EBFI is a corporation duly organized, validly existing and in
good standing under the laws of the State of its incorporation, is duly
qualified to do business in the Commonwealth of Virginia, and has the
corporate power and authority to own, lease and operate its properties and
to carry on its business as now being conducted.
(b) EBFP is a partnership duly organized and validly existing and in
good standing under the laws of New York, and has the requisite partnership
power and authority to own, lease and operate its properties and to carry on
its business as it is now being conducted.
SECTION 7.2 Authorization and Binding Obligation. Subject to obtaining
the FCC Consents, each EBF Seller has the corporate or partnership power and
authority, as applicable, to enter into and perform this Agreement and the
transactions contemplated hereby; such EBF Seller's execution, delivery and
performance of this Agreement, and the transactions contemplated hereby, have
been duly and validly authorized by all necessary corporate or partnership
action, as applicable, on its part. This Agreement has been duly executed and
delivered by each EBF Seller and this Agreement and the agreements to be
executed by such EBF Seller in connection herewith will constitute the valid
and binding obligation of such EBF Seller enforceable in accordance with their
terms, except as limited by laws affecting the enforcement of creditor's rights
or equitable principles generally.
SECTION 7.3 Title to Partnership Interest. Section 7.3 of the
Disclosure Schedule correctly and completely sets forth the percentage
Partnership Interest in the Partnerships owned by each EBF Seller as of the
date hereof. The Partnership Interest owned by each such EBF Seller is free and
clear of all Liens. There are no agreements or commitments to which any EBF
Seller is a party
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obligating such EBF Seller to deliver or sell, or cause to be delivered or
sold, the Partnership Interest owned by such EBF Seller or granting or
obligating such EBF Seller to grant, extend, or enter into any option, right of
first refusal, or other similar agreement or commitment with respect to the
Partnership Interest owned by such EBF Seller.
SECTION 7.4 Absence of Conflicting Agreements or Required Consents.
Except as set forth in Article V hereof with respect to governmental consents
and as set forth in Section 7.4 of the Disclosure Schedule, the execution,
delivery and performance of this Agreement by each EBF Seller: (i) does not
require the consent of any third party; (ii) will not violate any applicable
law, judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority to which such EBF Seller is a party or by which it or
the Partnership Assets are bound; (iii) will not, either alone or with the
giving of notice or the passage of time, or both, conflict with, constitute
grounds for termination of or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, agreement,
instrument, license or permit to which such EBF Seller or the Partnership
Assets are now subject; and (iv) will not result in the creation of any Lien,
charge or encumbrance on any of the Partnership Assets.
SECTION 7.5 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body, pending against either EBF Seller that would
reasonably be expected to materially adversely affect such EBF Seller's ability
to perform its obligations pursuant to this Agreement or the agreements to be
executed by such EBF Seller in connection herewith.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF KAB/ABS SELLERS
-------------------------------------------------
The KAB/ABS Sellers hereby jointly and severally make the following
representations and warranties to Buyer, each of which is true and correct on
the date hereof, shall remain true and correct to and including the Closing
Date, shall be unaffected by any notice to Buyer
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other than in the Disclosure Schedule and shall survive the Closing to the
extent provided in the Master Agreement. Such representations and warranties
are subject to, and qualified by, any fact or facts disclosed in the
appropriate section of the Disclosure Schedule.
SECTION 8.1 Organization and Standing. ABS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
its incorporation, is duly qualified to do business in the Commonwealth of
Virginia, and has the corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted.
SECTION 8.2 Authorization and Binding Obligation. Subject to obtaining
the FCC Consents, each KAB/ABS Seller has the corporate or individual power and
authority, as applicable, to enter into and perform this Agreement and the
transactions contemplated hereby; such KAB/ABS Seller's execution, delivery and
performance of this Agreement, and the transactions contemplated hereby, have
been duly and validly authorized by all necessary action on its part. This
Agreement has been duly executed and delivered by each KAB/ABS Seller and this
Agreement and the agreements to be executed in connection herewith will
constitute the valid and binding obligation of each such KAB/ABS Seller
enforceable in accordance with their terms, except as limited by laws affecting
the enforcement of creditor's rights or equitable principles generally.
SECTION 8.3 Title to Partnership Interest. Section 8.3 of the
Disclosure Schedule correctly and completely sets forth the percentage
Partnership Interest in the Partnerships owned by each KAB/ABS Seller as of the
date hereof. The Partnership Interest owned by each such KAB/ABS Seller is free
and clear of all Liens. There are no agreements or commitments to which any
KAB/ABS Seller is a party obligating such KAB/ABS Seller to deliver or sell, or
cause to be delivered or sold, the Partnership Interest owned by such KAB/ABS
Seller or granting or obligating such KAB/ABS Seller to grant, extend, or enter
into any option, right of first refusal, or other similar agreement or
commitment with respect to the Partnership Interest owned by such KAB/ABS
Seller.
SECTION 8.4 Absence of Conflicting Agreements or Required Consents.
Except as set forth in Article V
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hereof with respect to governmental consents and as set forth in Section 8.4 of
the Disclosure Schedule, the execution, delivery and performance of this
Agreement by each KAB/ABS Seller: (i) does not require the consent of any third
party; (ii) will not violate any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority to which such
KAB/ABS Seller is a party or by which it or the Partnership Assets are bound;
(iii) will not, either alone or with the giving of notice or the passage of
time, or both, conflict with, constitute grounds for termination of or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, agreement, instrument, license or permit to which such
KAB/ABS Seller or the Partnership Assets are now subject; and (iv) will not
result in the creation of any Lien, charge or encumbrance on any of the
Partnership Assets.
SECTION 8.5 Litigation. There is no litigation, administrative,
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body, pending against either KAB/ABS Seller that
would reasonably be expected to materially adversely affect such KAB/ABS
Seller's ability to perform its obligations pursuant to this Agreement or the
agreements to be executed in connection herewith.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Sellers hereby jointly and severally make the following
representations and warranties to Buyer, each of which is true and correct on
the date hereof, shall remain true and correct to and including the Closing
Date, shall be unaffected by any notice to Buyer other than in the Disclosure
Schedule and shall survive the Closing to the extent provided in the Master
Agreement. Such representations and warranties are subject to, and qualified
by, any fact or facts disclosed in the appropriate section of the Disclosure
Schedule.
SECTION 9.1 Organization and Standing. Each Partnership is a
partnership duly organized and validly existing and in good standing under the
laws of the Commonwealth of Virginia, and has the requisite partnership
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power and authority to own, lease and operate its properties and to carry on
its business as it is now being conducted. Each Partnership is duly qualified
as a foreign partnership to do business in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not have a material adverse effect
on the business, operations or prospects of such Partnership. True and complete
copies of all such certificates and other documents (including, without
limitation, the partnership agreements of the Partnerships and all amendments
thereto) relating to the organization and qualification of the Partnerships, as
amended to date, have been furnished to Buyer. Copies of any amendment thereto
prior to the Closing Date will be furnished to Buyer promptly upon the
effectiveness of any such amendment.
SECTION 9.2 Capitalization of the Partnerships. Section 9.2 of the
Disclosure Schedule correctly and completely sets forth the Partnership
Interests in the Partnerships and the record owner of all such Partnership
Interests. There are no agreements or commitments to which either Partnership
is a party of any character relating to any Partnership Interest, including,
without limitation, any agreement or commitment obligating such Partnership to
issue, deliver or sell, or cause to be issued, delivered or sold, any
Partnership Interest or granting or obligating such Partnership to grant,
extend, or enter into any option, right of first refusal or other similar
agreement or commitment with respect to any Partnership Interest except as
among the Sellers which have been and are hereby waived.
SECTION 9.3 Title to Assets; Encumbrances.
(a) Except as set forth in Section 9.3 of the Disclosure Schedule, the
Partnerships have good, valid and marketable title to, or other legal right to
use, all the Partnership Assets, free and clear of any Lien. The Partnership
Assets constitute all the assets which are currently used or are necessary to
conduct the business and operations of the Stations in all respects as
currently conducted, except for the WKHK Tower.
(b) To the best knowledge of each of the Sellers, the Partnership
Assets are in good working condition (normal wear and tear excepted) and are
adequate
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and suitable for the purposes for which they are currently used. To the best
knowledge of each of the Sellers, the technical equipment constituting
Partnership Assets has been maintained in accordance with industry practice and
is in good operating condition and complies in all material respects with all
applicable rules and regulations of the FCC and the terms of the FCC Licenses.
SECTION 9.4 Government Authorizations.
(a) Section 9.4 of the Disclosure Schedule contains a true and
complete list of the FCC Licenses and other material licenses, permits or other
authorizations from governmental and regulatory authorities which are necessary
for the lawful conduct of the business and operations of the Stations in the
manner and to the full extent they are presently conducted. The Partnerships
are the authorized legal holders of the FCC Licenses and other licenses,
permits and authorizations listed in said Section 9.4, none of which is subject
to any restrictions or condition which would limit in any respect the full
operation of the Stations as now operated.
(b) Except as set forth in said Section 9.4 of the Disclosure
Schedule, there are no applications, complaints or proceedings pending (and as
of the Closing, material applications, complaints or proceedings) or, to the
best of Sellers' knowledge, threatened as of the date hereof by or before the
FCC relating to the business or operations of the Stations other than
applications, complaints or proceedings which generally affect the broadcasting
industry. Sellers have delivered to Buyer true and complete copies of the FCC
Licenses, including any and all amendments and other modifications thereto.
Except as set forth in Section 9.4 of the Disclosure Schedule, the FCC Licenses
listed in said Section 9.4 are in good standing, are in full force and effect
and are unimpaired, and as of the Closing are unimpaired in any material
respects, by any act or omission of the Partnerships, Sellers or any of their
respective officers, directors or employees; and the operation of the Stations
is in accordance with the FCC Licenses. Except as set forth in Section 9.4 of
the Disclosure Schedule, no proceedings are pending or, to the knowledge of
Sellers, are threatened with respect to the FCC Licenses which may result in
the revocation, modification, non-renewal or suspension of any of the FCC
Licenses, the denial of any pending applications, the issuance of any
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cease and desist order, the imposition of any administrative actions by the FCC
with respect to the FCC Licenses which as of the date of this Agreement may
have an adverse effect on or which as of the Closing may have a material
adverse effect on Buyer's ability to continue to operate the Stations as they
are currently operated. Sellers know of no fact that would reasonably preclude
the FCC Licenses from being renewed in the ordinary course. All material
reports, forms and statements required to be filed by the Partnership and
Sellers with the FCC with respect to the Stations since the grant of the last
renewal of the FCC Licenses have been filed and are substantially complete and
accurate. Sellers know of no facts which, under the Communications Act, or the
existing rules and regulations of the FCC, would disqualify any Seller as an
assignor of the Partnership Interests.
SECTION 9.5 Compliance with FCC Regulations. The operation of the
Stations is and all of the Partnership Assets are in compliance in all material
respects with (i) all applicable engineering standards required to be met under
applicable FCC rules and (ii) all other applicable rules, regulations,
requirements and policies of the FCC, including, but not limited to, ANSI
Radiation Standards C95.1 - 1982 to the extent required to be met under
applicable FCC rules and regulations; and there are no existing claims known to
Sellers to the contrary.
SECTION 9.6 Taxes. Except as set forth in Section 9.6 of the
Disclosure Schedule, the Partnerships and Sellers have filed all applicable
federal, state, local and foreign income, franchise, sales, use, property,
excise, payroll and other tax returns required by law and have paid in full all
taxes, estimated taxes, interest, assessments, and penalties due and payable.
All returns and forms which have been filed have been true and correct in all
material respects and no tax or other payment in a material amount other than
as shown on such returns and forms are required to be paid and have been paid
by the Partnerships or Sellers. There are no present disputes as to taxes of
any nature payable by the Partnerships or Sellers which in any event could
materially adversely affect any of the Partnership Assets or the operation of
the Stations.
SECTION 9.7 Real Property.
(a) Section 9.7 to the Disclosure Schedule contains a complete and
accurate list of all real property
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constituting Partnership Assets and used primarily or exclusively by the
Stations and all Contracts relating to the tower, transmitter, studio site and
offices of the Stations (collectively the "Real Estate Contracts") and a
summary of the applicable leases.
(b) The Real Estate Contracts listed in Section 9.7 constitute valid
and binding obligations of the applicable Partnership and, to the best of
Sellers' knowledge, of all other persons purported to be parties thereto and
are in full force and effect as of the date hereof and will on the Closing Date
constitute valid and binding obligations of such Partnership and, to the best
of Sellers' knowledge, of all other persons purported to be parties thereto and
shall be in full force and effect. Neither Partnership is in default (beyond
any applicable grace period) under any of such Real Estate Contracts and has
not received or given written notice of any default (beyond any applicable
grace period) thereunder from or to any of the other parties thereto. Each
Seller will use its reasonable best efforts to obtain valid and binding
third-party consents from all third parties to the Real Estate Contracts, if
required, so as to insure that Buyer will enjoy all of the privileges of the
Partnerships thereunder.
SECTION 9.8 Contracts. Section 9.8 of the Disclosure Schedule lists
all Contracts in effect as of the date of this Agreement, except (A) Contracts
entered into in the ordinary course of business (i) of less than three (3)
months duration and which impose monetary obligations of less than Five
Thousand Dollars ($5,000) each or Fifty Thousand Dollars ($50,000) in the
aggregate, (ii) for the sale or sponsorship of broadcast time on the Stations
for cash, for which no prepayment has been received and with not more than
twelve (12) months remaining in their terms, or (iii) Contracts which are
currently scheduled to expire prior to Closing Date and (B) time sales
agreements which (i) are on the Partnership's standard form, (ii) are
terminable by the Partnerships within thirteen (13) weeks or less notice
without penalty, and (iii) provide for annual payments of fifty thousands
dollars ($50,000) or less.
SECTION 9.9 Status of Contracts. Except as noted in Section 9.9 of the
Disclosure Schedule, Sellers have delivered to SFX true and complete copies of
all Contracts listed in Section 9.8 of the Disclosure Schedule,
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including any and all amendments and other modifications to such Contracts. All
Contracts are valid, binding and enforceable by the Partnerships in accordance
with their respective terms, except as limited by laws affecting creditors'
rights or equitable principles generally. To the best of Sellers' knowledge,
(i) each Partnership has complied in all material respects with all Contracts
and is not in default beyond any applicable grace periods under any of the
Contracts, and (ii) no other contracting party is in default under any of the
Contracts.
SECTION 9.10 Environmental Matters. Neither the Partnerships nor
Sellers in connection with the operation of the Stations have unlawfully
disposed of any hazardous waste or hazardous substance including
Polychlorinated Byphenyls ("PCBs") in a manner which has caused, or reasonably
be expected to cause, Buyer to incur any liability under applicable law in
connection therewith; and Sellers warrant that the technical equipment included
in the Partnership Assets do not contain any PCBs which are required by law to
be removed and if any equipment does contain PCBs, that such equipment is
stored and maintained in material compliance with applicable law. The
Partnership and Sellers have complied in all material respects with all
federal, state and local environmental laws, rules and regulations applicable
to the Stations and its operations, including but not limited to the FCC's
guidelines regarding RF radiation. To the best of Seller's knowledge, no
hazardous waste has been unlawfully disposed of by any other person on the real
estate occupied by the Stations or their transmitters. As used herein, the term
"hazardous waste" shall mean as defined in the RCRA and in the equivalent state
statute under the law of the state in which such real estate is located.
SECTION 9.11 Copyrights, Trademarks and Similar Rights.
(a) Section 9.11 of the Disclosure Schedule is a true and complete
list of all copyrights, trademarks, trade names, licenses, patents, permits,
jingles and other similar intangible property rights and interests applied for,
issued to or owned by each of the Partnerships or Sellers or under which such
Partnership or Seller is a licensee or franchisee and used in the conduct of
the business and operations of the Stations.
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(b) All of such rights and interests are issued to or owned by the
Partnerships or Sellers, or if licensed or franchised to the Partnerships or
Sellers, to the best of Sellers' knowledge, are valid and in good standing and
uncontested. Sellers have delivered or made available to Buyer copies of all
documents establishing such rights, licenses or other authority. Sellers have
received no written notice and has no knowledge of any infringements or
unlawful use of such property.
SECTION 9.12 Financial Statements. Sellers have delivered to Buyer
complete audited copies of the statement of income and the balance sheet for
the Partnerships and the Stations for the period ending December 31, 1995,
December 31, 1994 and an unaudited statement of income and balance sheet for
the nine (9) months ending September 30, 1996 (the "Financial Statements"). The
audited Financial Statements have been audited by the accounting firm of
Cheeley, Burcham et al. and accurately represent and present fairly the
financial condition and results of operations of the Partnerships for the
periods indicated. The unaudited Financial Statements accurately represent and
present fairly the financial condition and results of operations of the
Partnerships for the nine (9) months ending September 30, 1996. Between
September 30, 1996 and the date hereof, there has been no material adverse
change in the business, property, assets or condition (financial or otherwise)
of the Partnerships and (except for the transaction contemplated herein) the
Partnerships have operated the Stations in all material respects only in the
ordinary course of business.
Except for (i) liabilities as and to the extent reflected or reserved
against in the Financial Statements, (ii) liabilities not yet due and payable
or obligations to be performed or satisfied after the date hereof under
Contracts listed in the Disclosure Schedule, (iii) liabilities incurred between
September 30, 1996 and the date hereof in the ordinary and usual course of
business (including tax liabilities resulting solely from the normal operations
of the Partnerships during such period) and (iv) any other liabilities
disclosed in this Agreement or in the Disclosure Schedule, on the date hereof,
each Partnership has no liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, of a nature customarily reflected
in financial statements reflecting the accrual basis of accounting.
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SECTION 9.13 Personnel Information.
(a) Section 9.13 of the Disclosure Schedule contains a true and
complete list of all persons employed by the Partnerships or the Stations,
including a description of material compensation arrangements (other than
employee benefit plans set forth in Section 9.13 of the Disclosure Schedule)
and a list of other terms of any and all agreements affecting such persons. As
of the date of this Agreement, Sellers have not received notification that any
of the current key employees of the Partnerships or the Stations presently plan
to terminate their employment, whether by reason of the transactions
contemplated hereby or otherwise and Sellers shall immediately notify Buyer
upon receipt of any such notice.
(b) The Partnerships are not parties to any Contract with any labor
organization, nor have the Partnerships agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of the Partnerships' employees. Sellers
have no knowledge of any organizational effort currently being made or
threatened by or on behalf of any labor union with respect to employees of the
Partnerships. During the past three (3) years, the Partnerships have not
experienced any strikes, work stoppages, grievance proceedings, claims of
unfair labor practices filed or other significant labor difficulties of any
nature.
(c) Except as disclosed in Section 9.13 of the Disclosure Schedule,
the Partnerships, to the best of Sellers' knowledge, have complied in all
material respects with all laws relating to the employment of labor, including,
without limitation, ERISA and those laws relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity and payment and withholding of taxes.
SECTION 9.14 Litigation. Except as set forth in Section 9.14 of the
Disclosure Schedule, neither the Partnerships nor the Stations are subject to
any judgment, award, order, writ, injunction, arbitration decision or decree
materially adversely affecting the conduct of the business of the Partnerships,
the Stations or the Partnership Assets, and there is no litigation or
proceeding
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or, to the best of Sellers' knowledge, investigation pending or threatened
against the Partnerships, Sellers or the Stations in any federal, state or
local court, or before any administrative agency or arbitrator (including,
without limitation, any proceeding which seeks the forfeiture of, or opposes
the renewal of, any of the FCC Licenses), or before any other tribunal duly
authorized to resolve disputes, (i) which would reasonably be expected to have
any material adverse effect upon the business, property, assets or condition
(financial or otherwise) of the Partnerships or the Stations or (ii) which
seeks to enjoin or prohibit, or otherwise questions the validity of, any action
taken or to be taken pursuant to or in connection with this Agreement, which
litigation or proceeding would reasonably be expected to materially adversely
affect the consummation of the transactions contemplated by this Agreement.
SECTION 9.15 Compliance With Laws. Except as set forth in Section 9.15
of the Disclosure Schedule, Sellers have not received any notice asserting any
non-compliance (other than notices of non-compliance which are immaterial) by
the Partnerships or the Stations in connection with the business or operation
of the Partnerships or the Stations with any applicable statute, rule or
regulation, federal, state or local. Each of the Partnerships and the Stations
are not in default with respect to any judgment, order, injunction or decree of
any court, administrative agency or other Governmental Authority or any other
tribunal duly authorized to resolve disputes in any respect material to the
transactions contemplated hereby. Each of the Partnerships and the Stations are
in compliance in all material respects with all laws, regulations and
governmental orders applicable to the conduct of the business and operations of
the Stations, the failure to comply with which would have a material adverse
effect on the business, operations or financial condition of the Partnerships
or the Stations, and the present use of the Partnership Assets do not violate
any of such laws, regulations or orders (other than immaterial violations).
SECTION 9.16 Employee Benefit Plans. Section 9.16 of the Disclosure
Schedule contains a true and complete list as of the date of this Agreement of
all employee benefit plans applicable to the employees of the Partnerships and
the Stations. Neither the Partnerships nor any Seller maintains any other
employee benefit plan as the term is defined in Section 3 of the Employee
Retirement
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Income Security Act of 1984, as amended, applicable to the employees of the
Partnerships employed at the Stations.
SECTION 9.17 Accuracy of Information. No written statements made by
Sellers herein and no information provided by Sellers herein or in the
documents, instruments or other written communications made or delivered
directly by Sellers to Buyer covering the contribution and purchase and sale of
the Partnership Interests contain any untrue statement of a material fact or
omits a material fact necessary to make the statements contained therein or
herein not misleading, and there is no fact known to Sellers which relates to
any information contained in any such written document, instrument or
communications which Sellers have not disclosed to Buyer in writing which
materially affects adversely the Stations or the Partnership Assets.
ARTICLE X
COVENANTS OF BUYER
------------------
SECTION 10.1 Notification. Prior to the Closing Date, Buyer shall
notify Sellers of any litigation, arbitration or administrative proceeding
pending or, to its knowledge, threatened against Buyer which challenges the
transactions contemplated hereby.
SECTION 10.2 No Inconsistent Action. Buyer shall not take any other
action which is materially inconsistent with its obligations under this
Agreement.
SECTION 10.3 Buyer's Post-Closing Covenant. Buyer, for a period of one
(1) year following the Closing Date, shall make available for audit and
inspection by Sellers and its representatives for any reasonable purpose all
records, files, documents and correspondence transferred to it hereunder (the
"Records"); provided, Buyer shall make available to Sellers all tax Records
relating to, and reasonably requested by, Sellers in connection with any tax
audit of Sellers even beyond the one (1) year period. Buyer shall at no time
dispose of or destroy any Records prior to the one (1) year period (or any such
tax Records thereafter) without giving sixty (60) days prior notice to Sellers
to permit Sellers, at their own expense, to examine, duplicate or take
possession of and title to such records, files, documents and correspondence.
All personnel records shall
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be maintained as confidential if required by any applicable state or federal
law.
ARTICLE XI
COVENANTS OF SELLERS
--------------------
SECTION 11.1 Sellers' Pre-Closing Covenants. Each Seller jointly and
severally covenants and agrees that between the date of this Agreement and the
Closing Date, such Seller shall (except (i) as expressly permitted by this
Agreement or with the prior written consent of Buyer (which consent shall not
be unreasonably withheld or delayed) or (ii) as otherwise provided under the
RICH LMA) act in accordance with the following:
(a) Each Seller shall cause the Partnerships to conduct the business
and operations of the Stations in the ordinary and prudent course of business
(without taking into account the existence of this Agreement) and with the
intent of preserving the ongoing operations and assets of the Stations,
including, but not limited to, maintaining the independent identity of the
Stations, retaining the current format of the Stations and using its reasonable
best efforts to retain the services of key employees.
(b) Each Seller shall cause each of the Partnerships to use its
reasonable best efforts to preserve the operation of the Stations intact and to
preserve the business of the Stations' customers, suppliers and others having
business relations with the Stations and continue to conduct financial
operations of the Stations, including its credit and collection policies, in
the ordinary course of business with substantially the same effort, and to
substantially the same extent and in the same manner, as in the prior conduct
of the business of the Stations.
(c) Each Seller shall cause the Partnerships to operate the Stations
in all material respects in accordance with FCC rules and regulations and the
FCC Licenses and with all other laws, regulations, rules and orders, and shall
not cause or permit by any act, or failure to act, any of the FCC Licenses to
expire, be surrendered, adversely modified, or otherwise terminated, or fail to
prosecute with reasonable due diligence any pending applications to the FCC.
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(d) [INTENTIONALLY OMITTED].
(e) Each Seller shall not, other than in the ordinary course of
business or after receiving Buyer's prior written approval, (i) sell or dispose
of or commit to sell or dispose of any of the Partnership Assets; (ii) grant or
agree to grant any general increases in the rates of salaries or compensation
payable to employees of the Partnerships; (iii) grant or agree to grant any
specific bonus or increase to any executive or management employee of the
Partnerships; or (iv) provide for any new pension, retirement or other
employment benefits for employees of the Partnerships or any increases in any
existing benefits.
(f) [INTENTIONALLY OMITTED].
(g) Sellers may cause the Partnerships to enter into or renew any
Contract in the ordinary course of business without taking into account the
existence of this Agreement.
(h) Sellers shall give Buyer and Buyer's counsel, accountants,
engineers and other representatives, full and reasonable access during normal
business hours to all of the Partnerships' personnel, properties, books,
Contracts, reports and records including financial information and tax returns
with supporting work papers relating to the Partnerships and the Stations, to
all real estate buildings and equipment relating to the Partnerships and the
Stations, and to the employees of the Partnerships and the Stations in order
that Buyer may have full opportunity to make such investigation as it desires
of the affairs of the Partnerships and the Stations. Sellers shall to furnish
Buyer with information and copies of all documents and agreements including but
not limited to financial and operating data and other information concerning
the financial condition, results of operations and business of the Partnerships
and the Stations, that Buyer may reasonably request in order to complete
Buyer's due diligence examination of the Partnerships and the Stations. The
rights of Buyer under this Section shall not be exercised in such a manner as
to materially interfere with the business of the Partnerships or the Stations.
(i) The Partnerships shall spend not less than one hundred percent
(100%) of the cash promotions,
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advertising and research expenditures the Partnerships budgeted for the
Stations for the period from the date of this Agreement through the Closing
Date.
(j) Sellers shall use their reasonable best efforts to maintain the
employment at the Stations and to renew, in accordance with this Agreement, the
existing employment Contracts of the employees listed in Section 9.13 of the
Disclosure Schedule. Between the date hereof and for a period of three (3)
years from the Closing Date, neither Sellers nor any executive officer of
Sellers shall, directly or indirectly, through any agent or otherwise, hire or
solicit the employment of any of the employees listed on Section 9.13 of the
Disclosure Schedule who are hired by Buyer at or after the Closing or who are
subject to non-competition agreements with Buyer (but only to the extent
limited by such non-competition agreements), except as agreed to in writing by
Buyer and Sellers. Notwithstanding anything to the contrary herein, the
covenants and agreements contained in the immediately preceding sentence shall
not constitute joint and several covenants and agreements of Sellers, but shall
constitute joint and several covenants and agreements (i) by the EBF Sellers
with respect to both EBF Sellers and any executive officer of such Sellers and
(ii) by the KAB/ABS Sellers with respect to both KAB/ABS Sellers and any
executive officer of such Sellers.
(k) Sellers shall provide Buyer with revenue pacing reports for the
Stations on a weekly basis during the term of this Agreement. Additionally,
within twenty-five (25) days of the end of each month, Sellers shall deliver to
Buyer an unaudited statement of revenue and expenses of the Stations for the
month then ended. The weekly revenue pacing reports and the monthly statements
of revenue and expenses shall be certified by the managing general partners of
the Partnerships, shall be true and complete in all material respects to the
best of Sellers' knowledge and shall fairly and accurately represent in all
material respects the results of operation of the Stations for the period
covered by such reports and statements. Sellers shall also furnish to Buyer any
and all other information at such times as is customarily prepared by Sellers
concerning the financial condition of the Stations as Buyer may reasonably
request.
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(l) Sellers shall cooperate with Buyer by providing Buyer with such
financial and accounting records as Buyer may reasonably request in connection
with the preparation of financial statements of the Partnerships and the
Stations.
(m) The Partnerships shall not, and Sellers shall cause the
Partnerships not to, make any Distributions other than Distributions to each
partner of the Partnerships for payment of such partner's federal, state and
local income tax liability in respect of the net income of the Partnerships.
SECTION 11.2 Notification. Sellers shall notify Buyer of any material
litigation, arbitration or administrative proceeding pending or, to their
knowledge, threatened against Sellers which challenges the transactions
contemplated hereby.
SECTION 11.3 No Inconsistent Action. Sellers shall not take any action
which is materially inconsistent with its obligations under this Agreement.
SECTION 11.4 Environmental Studies. Sellers shall cooperate fully and
in all respects with the carrying out of Phase I environmental studies of the
real property and transmitting equipment used by the Partnerships in connection
with the operation of the Stations as contemplated by Section 5(a) of the
Master Agreement. In the event that such Phase I environmental studies (the
"Environmental Report") disclose a potential environmental liability, whether
fixed or contingent, and such liability is reasonably estimated by the
Environmental Consultant (as defined below) to cost less than One Hundred Fifty
Thousand Dollars ($150,000) to cure, Sellers shall promptly either (i) begin
remedial action to cure the condition giving rise to such liability and cure
such condition prior to Closing (at a cost to Sellers not to exceed such
estimated costs) or (ii) reduce the Purchase Price by such amount, which shall
have been estimated no later than 45 days from the date of this Agreement by
the environmental consultant who shall be reasonably acceptable to Sellers and
who shall have conducted the Phase I environmental studies (the "Environmental
Consultant"). However, in the event the Environmental Consultant reasonably
estimates within such period that such remedial action is likely to cost in
excess of One Hundred Fifty Thousand Dollars ($150,000), Buyer
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shall have the right, which right must be exercised within 15 days of receipt
of such estimate by delivery of a written notice to Sellers, to (i) terminate
this Agreement prior to Closing and no party hereto shall have any liability to
the other as a result of such termination or (ii) require that the Purchase
Price shall be reduced by $150,000. Notwithstanding any provision contained in
this Section 11.5, in the event the findings of the Phase I studies render it
impossible for SFX to obtain financing on commercially reasonable terms to
effect the transactions contemplated by the Master Agreement, then Buyer shall
terminate this Agreement.
ARTICLE XII
JOINT COVENANTS
---------------
Buyer and Sellers covenant and agree that between the date hereof and
the Closing Date, they shall act in accordance with the following:
SECTION 12.1 Conditions. If any event should occur, either within or
without the control of any party hereto, which would prevent fulfillment of the
conditions upon the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, the parties hereto shall use their
reasonable best efforts to cure the event as expeditiously as possible.
SECTION 12.2 Confidentiality. Buyer and Sellers shall each keep
confidential all information obtained by it with respect to the other in
connection with this Agreement and the negotiations preceding this Agreement,
and will use such information solely in connection with the transactions
contemplated by this Agreement, and if the transactions contemplated hereby are
not consummated for any reason, each shall return to the other, without
retaining a copy thereof, any schedules, documents or other written information
obtained from the other in connection with this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing (i) no party hereto shall be
required to keep confidential or return any information which (A) is known or
available through other lawful sources, not bound by a confidentiality
agreement with the disclosing party; (B) is or becomes publicly known through
no fault of the receiving party or
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its agents; (C) is required to be disclosed pursuant to an order or request of
a judicial or governmental authority (provided the disclosing party is given
reasonable prior notice) or pursuant to the requirements of the Communications
Act, the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended; or (D) is independently acquired or developed by such party
without violating any of the provision of this Section 12.2, and (ii) KAB, with
the prior written consent of SFX, may make public announcements on behalf of
Sellers or Buyer if prudent or necessary.
SECTION 12.3 Cooperation. Buyer and Sellers shall cooperate fully with
each other in taking any actions, including actions to obtain the required
consent of any governmental instrumentality or any third party necessary or
helpful to accomplish the transactions contemplated by this Agreement;
provided, however, that no party shall be required to take any action which
would have a material adverse effect upon it or any affiliated entity.
SECTION 12.4 Employee Matters. Buyer has agreed to hire all of the
employees listed on Section 9.13 of the Disclosure Schedule immediately
following the Closing. Sellers shall be responsible for all salary and benefits
of the employees of the Stations for the period prior to the Closing Date. All
employees of the Stations shall cease active participation in all of the
Partnerships' employee benefit plans on the Closing Date, in accordance with
the terms of such plans.
SECTION 12.5 Update. Each Seller shall provide Buyer prompt written
notice ("Seller Update Notice") of any change in any of the information
contained in the representations and warranties made in Articles VII, VIII or
IX hereof or any Exhibits or Schedules herein or attached hereto. Buyer shall
provide Sellers prompt written notice ("Buyer Update Notice") of any change in
any of the information contained in the representations and warranties made in
Article VI or any Buyer Exhibits or Schedules herein or attached hereto.
Delivery of (i) the Seller Update Notice to Buyer and (ii) the Buyer Update
Notice to Sellers, shall not be deemed to amend, modify or revise any of the
representations and warranties made by the Sellers or Buyer herein or any
Exhibits or Schedules herein or attached hereto without the prior written
consent of Buyer or the Sellers, as applicable.
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SECTION 12.6 FCC Matters. Should any fact relating to any Seller or
Buyer which would cause the FCC to deny its consent to the transactions
contemplated by this Agreement come to such Seller's or Buyer's attention, as
applicable, such Seller or Buyer, as applicable, shall promptly notify Buyer or
the Sellers thereof, as applicable, and shall use its reasonable best efforts
to take such steps as may be necessary to remove any such impediment to the
transactions contemplated by this Agreement.
ARTICLE XIII
CONDITIONS OF CLOSING BY BUYER
------------------------------
The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
SECTION 13.1 Representations, Warranties and Covenants.
(a) Except for the representations and warranties contained in Section
9.10 with respect to any matter which shall have been disclosed in the
Environmental Report, all representations and warranties of Sellers made in
this Agreement shall be true and complete in all material respects as of the
date hereof and on and as of the Closing Date as if made on and as of that
date, except (i) for changes expressly permitted or contemplated by the terms
of this Agreement or (ii) to the extent that a representation or a warranty of
Sellers made in this Agreement expressly relates to an earlier date.
(b) All of the terms, covenants and conditions to be complied with and
performed by Sellers on or prior to Closing Date shall have been complied with
or performed in all material respects.
(c) Buyer shall have received a certificate, dated as of the Closing
Date, executed by a duly authorized officer of ABS and EBFI, by a duly
authorized general partner of EBFP and by KAB, to the effect that the
representations and warranties of Sellers contained in this Agreement are true
and complete in all material respects on and as of the Closing Date as if made
on and as of that
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date, and that each Seller has complied with or performed all terms, covenants
and conditions to be complied with or performed by it in all material respects
on or prior to the Closing Date.
SECTION 13.2 Governmental Consents.
(a) The FCC Consents shall have become a Final Order.
(b) All consents, notices, approvals and actions required to permit
the consummation of the transactions contemplated hereby under the HSR Act
shall have been obtained or made.
(c) The FCC consent authorizing SFX to convert its loan under the SFX
Convertible Note Agreement into membership interests in Buyer shall have become
a Final Order, or such condition shall have been specifically waived, in
writing, by Buyer.
SECTION 13.3 Governmental Authorizations. The Partnerships shall be
the holders of the FCC Licenses, and there shall not have been any modification
of any of such FCC Licenses which has a material adverse effect on the Stations
or the conduct of their business and operations. No proceeding shall be
pending, the effect of which reasonably could be to revoke, cancel, fail to
renew, suspend or modify materially and adversely the FCC Licenses.
SECTION 13.4 Adverse Proceedings. (i) No suit, action, claim or
governmental proceeding shall be pending against any party hereto which would
reasonably be expected to render the consummation of the transactions
contemplated by this Agreement unlawful, and (ii) no order, decree or judgment
of any court, agency or other governmental authority shall have been rendered
against, any party hereto which would render it unlawful, as of the Closing
Date, to effect the transactions contemplated by this Agreement in accordance
with its terms.
SECTION 13.5 Legal Opinion. Sellers shall have delivered to Buyer a
written opinion of its counsel, dated as of the Closing Date with respect to
(i) due incorporation of ABS and EBFI, due organization and existence of EBFP
and the Partnerships and legal capacity of KAB, (ii) due authorization,
execution and delivery by Sellers, (iii)
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valid and binding obligation and enforceability of this Agreement and each of
the other agreements to be executed by each Seller, (iv) no conflicts as to the
Partnerships and (v) the sufficiency of this Agreement and the applicable
instruments of assignment to validly transfer all of each Seller's Partnership
Interests to Buyer, addressed to Buyer in a form reasonably satisfactory to
Buyer.
SECTION 13.6 FCC Legal Opinion. Sellers shall have furnished Buyer a
written opinion of Sellers' FCC counsel, dated the Closing Date, addressed to
Buyer in a form reasonably satisfactory to Buyer.
SECTION 13.7 Third-Party Consents. Sellers shall have obtained and
shall have delivered to Buyer all third-party consents listed on Section 13.7
of the Disclosure Schedule.
SECTION 13.8 Encumbrances; Financing Statements. Other than as set
forth in Section 9.3 of the Disclosure Schedule, Sellers shall have delivered
to Buyer releases, if any, under the UCC of any financing statements filed
against any Partnership Assets in the jurisdiction in which the Partnership
Assets are and have been located since such Partnership Assets were acquired by
Sellers. On the Closing Date, the Partnership Assets shall be free and clear of
all Liens other than (i) Liens which relate to Closing Date Current Liabilities
and (ii) as set forth in Section 9.3 of the Disclosure Schedule.
SECTION 13.9 Bank Loan. Simultaneously with the Closing hereunder, (i)
Buyer shall have paid in full all principal, interest, fees and any other
amounts outstanding (the "Loan Amount") under that certain Credit Agreement
dated August 30, 1993 (the "Chase Agreement") by and among Rich-I, Rich-II, ABS
Greenville Partners, L.P., ABS Toledo Partners, L.P. and The Chase Manhattan
Bank (as successor in interest to Chemical Bank) ("Chase"), as amended through
the Closing Date; provided, that in no event shall the Loan Amount exceed the
Base Purchase Price and such Loan Amount shall be treated as a Closing Date
Liability adjusting the Purchase Price as contemplated under Section 3.1 hereof
and (ii) Chase shall have provided the Partnerships with a payoff letter
acknowledging that upon receipt of the Loan Amount, (1) the Chase Agreement
shall be terminated, and any and all Liens held by Chase securing the Loan
Amount shall be released and the borrowers thereunder shall have been
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released from any and all liabilities under the Chase Agreement. In addition,
Buyer shall have paid such other liabilities or RICH-I and RICH-II set forth
on Schedule 13.9 hereto and such amounts shall be treated as a Closing Date
Liability adjusting the Purchase Price as contemplated under Section 3.1
hereof.
ARTICLE XIV
CONDITIONS OF CLOSING BY SELLERS
--------------------------------
The respective obligations of Sellers hereunder are, at their option,
subject to satisfaction, at or prior to the Closing Date, of each of the
following conditions:
SECTION 14.1 Representations, Warranties and Covenants.
(a) All representations and warranties of Buyer made in this Agreement
shall be true and complete in all material respects as of the date hereof and
on and as of the Closing Date as if made on and as of that date, except (i) for
changes expressly permitted or contemplated by the terms of this Agreement or
(ii) to the extent that a representation or a warranty of Buyer made in this
Agreement expressly relates to an earlier date.
(b) All the terms, covenants and conditions to be complied with and
performed by Buyer on or prior to the Closing Date shall have been complied
with or performed in all material respects.
(c) Sellers shall have received a certificate, dated as of the Closing
Date, executed by a duly authorized officer of Buyer, to the effect that the
representations and warranties of Buyer contained in this Agreement are true
and complete in all material respects on and as of the Closing Date as if made
on and as of that date, and that Buyer has complied with or performed all
terms, covenants and conditions to be complied with or performed by it in all
material respects on or prior to the Closing Date.
SECTION 14.2 Governmental Consents.
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(a) The FCC Consents shall have become a Final Order.
(b) All consents, notices, approvals and actions required to permit
the consummation of the transactions contemplated hereby under the HSR Act
shall have been obtained or made.
SECTION 14.3 Adverse Proceedings. (i) No suit, action, claim or
governmental proceeding shall be pending against any party hereto which would
reasonably be expected to render the consummation of the transactions
contemplated by this Agreement unlawful, and (ii) no order, decree or judgment
of any court, agency or other governmental authority shall have been rendered
against, any party hereto which would render it unlawful, as of the Closing
Date, to effect the transactions contemplated by this Agreement in accordance
with its terms.
SECTION 14.4 Legal Opinion. Buyer shall have delivered to Sellers an
opinion of its counsel, dated as of the Closing Date with respect to (i) due
incorporation of Buyer, (ii) due authorization, execution and delivery by Buyer
and (iii) valid and binding obligation and enforceability of this Agreement and
each of the other agreements to be executed by Buyer, addressed to Sellers in a
form reasonably satisfactory to Sellers.
SECTION 14.5 Bank Loan. Simultaneously with the Closing hereunder, (i)
Buyer shall have paid in full the Loan Amount; provided, that in no event shall
the Loan Amount exceed the Base Purchase Price and such Loan Amount shall be
treated as a Closing Date Liability adjusting the Purchase Price as
contemplated under Section 3.1 hereof and (ii) Chase shall have provided the
Partnerships with a payoff letter acknowledging that upon receipt of the Loan
Amount, (1) the Chase Agreement shall be terminated, and any and all Liens held
by Chase securing the Loan Amount shall be released and the borrowers
thereunder shall have been released from any and all liabilities under the
Chase Agreement. In addition, Buyer shall have paid such other liabilities of
RICH-I and RICH-II set forth on Schedule 13.9 hereto and such amounts shall be
treated as a Closing Date Liability adjusting the Purchase Price as
contemplated under Section 3.1 hereof.
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ARTICLE XV
[INTENTIONALLY OMITTED]
ARTICLE XVI
COMMISSIONS OR FINDER'S FEE
---------------------------
SECTION 16.1 Buyer's Representation and Agreement to Indemnify. Buyer
represents and warrants to Sellers that neither it nor any Person acting on its
behalf has agreed to pay a commission, finder's fee or similar payment in
connection with this Agreement or any matter related hereto to any Person other
than to Interstate/Johnson Lane Corporation ("Interstate") whose fees and
expenses shall be paid by SFX through a loan to Buyer in accordance with the
Master Agreement. Buyer further agrees to indemnify, defend and hold Sellers
harmless from and against any and all claims, losses, liabilities and expenses
(including reasonable attorney's fees) arising out of a claim by any Person
(other than Interstate) based on any such arrangement or agreement made or
alleged to have been made by Buyer.
SECTION 16.2 Sellers' Representation and Agreement to Indemnify. Each
Seller represents and warrants to Buyer that neither it nor any Person acting
on its behalf has agreed to pay a commission, finder's fee or similar payment
in connection with this Agreement or any matter related hereto to any Person
other than to (i) Interstate whose fees and expenses shall be paid by SFX in
accordance with the Master Agreement and (ii) Davenport & Co. of Virginia, Inc.
whose fees and expenses shall be paid by Sellers. Each Seller further agrees to
indemnify, defend and hold Buyer harmless from and against any and all claims,
losses, liabilities and expenses (including reasonable attorney's fees) arising
out of a claim by any Person (other than Interstate) based on any such
arrangement or agreement made or alleged to have been made by Sellers.
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ARTICLE XVII
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
SECTION 17.1 Sellers' Documents. At the Closing, Sellers shall deliver
or cause to be delivered to Buyer the following:
(a) Assignment of the Partnership Interests (and all right, title and
interest therein) to Buyer, free and clear of any and all Liens;
(b) Certified resolutions of the Board of Directors of each of ABS and
EBFI approving the execution and delivery of this Agreement, the Master
Agreement and each of the other documents to be executed and delivered by such
Seller and authorizing the consummation of the transactions contemplated hereby
and thereby;
(c) The certificates, dated the Closing Date, of each Seller in the
form described in Section 13.1(c);
(d) Governmental certificates showing, in the case of ABS and EBFI,
that such Sellers are duly incorporated in the Commonwealth of Virginia and the
State of Delaware, respectively, and that each of them is in good standing in
the Commonwealth of Virginia dated not more than ten (10) days before the
Closing Date;
(e) Articles of Incorporation and Bylaws of ABS and EBFI certified by
the respective secretary of ABS and EBFI as of the Closing Date;
(f) The Partnership Agreement of EBFP certified by an authorized
partner of EBFP as of the Closing Date;
(g) At the time of Closing, originals or copies of all programs,
operations, transmissions, or maintenance logs and all other records required
to be maintained by the FCC with respect to the Stations, including each
Station's public file, shall be left at the Stations and thereby delivered to
Buyer;
(h) Sellers' opinion letters referenced in Section 13.5 and Section
13.6 above; and
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(i) Such additional information and materials as Buyer shall have
reasonably requested.
SECTION 17.2 Buyer's Documents. At the Closing, Buyer shall deliver or
cause to be delivered to Sellers the following:
(a) The Purchase Price in accordance with Section 3.2 hereof;
(b) A certificate, dated the Closing Date, by Buyer in the form
described in Section 14.1(c) above;
(c) The opinion of Buyer's counsel, dated the Closing Date, to the
effect set forth in Section 14.4;
(d) Governmental certificates from the Commonwealth of Virginia
showing that Buyer is duly incorporated and in good standing in the
Commonwealth of Virginia dated not more than ten (10) days before the Closing
Date;
(e) Certified resolutions of each of the members of Buyer approving
the execution and delivery of this Agreement and each of the other documents
and agreements referred to herein and authorizing the consummation of the
transactions contemplated hereby and thereby;
(f) Articles of Organization and Operating Agreement of Buyer
certified by the manager of Buyer as of the Closing Date; and
(g) Such additional information and materials as Sellers shall have
reasonably requested.
ARTICLE XVIII
TERMINATION RIGHTS
------------------
SECTION 18.1 Termination. In addition to the termination rights
provided under Section 11.5 hereof, this Agreement may be terminated by any
party hereto, if the party seeking to terminate is not in material default or
breach of this Agreement, upon written notice to the other parties upon the
occurrence of any of the following:
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(a) If the other party or parties default in any material respect in
the observance or in the due and timely performance of any of its or their
covenants or agreements herein contained and such material default shall not be
cured within thirty (30) days of the date of notice of default served by the
party claiming such material default; or
(b) If the FCC denies the FCC Applications, or if the FCC fails to
grant the FCC Consents before December 31, 1997; provided, that the party
seeking termination has diligently prosecuted the FCC Applications in good
faith; or
(c) By Buyer only, if normal broadcast transmissions are not operating
on the date immediately preceding the Closing Date; or
(d) If all of the parties hereto agree that all of the transactions
contemplated in the Master Agreement can not be completed on or before December
31, 1997; or
(e) As provided in Sections 11.4 or 19.1 hereof.
SECTION 18.2 Liability. The termination of this Agreement under
Section 11.4, 18.1 or 19.1 hereof shall not relieve any party of any liability
for material breach of this Agreement prior to the date of termination.
ARTICLE XIX
OTHER PROVISIONS
----------------
SECTION 19.1 Risk of Loss. The risk of loss or damage to any of the
Partnership Assets before the Closing Date shall be upon Sellers unless
otherwise agreed in writing. Sellers shall repair, replace and restore any such
damaged or lost Partnership Asset to its condition as of the date of this
Agreement as soon as possible and in no event later than the Closing Date.
Sellers hereby agree to notify Buyer in writing of any loss or damage to any
Partnership Asset which Sellers' reasonably believe has a value exceeding Fifty
Thousand Dollars ($50,000) as soon as possible after the occurrence of such
loss or damage. Except as provided below, if Sellers fail to so restore or
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replace a Partnership Asset with a value exceeding Fifty Thousand Dollars
($50,000) which is lost or damaged after the date hereof, Buyer may, within 30
days after written notice of such failure from Sellers, elect either to
terminate this Agreement pursuant to Article XVIII hereof or to consummate the
Closing on the Closing Date. If Sellers fail to restore or replace such
Partnership Asset and Buyer does not elect to terminate this Agreement, Sellers
shall assign to Buyer at Closing Sellers' rights under any insurance policy or
pay over to Buyer all proceeds of insurance covering such Partnership Asset's
damage, destruction or loss. If the restoration and replacement of any damaged
or destroyed property has not been completed at the time the Closing would
otherwise be held, then unless Sellers and Buyer otherwise agree, the Closing
Date shall be delayed and shall take place within fifteen (15) days after
Sellers give written notice to Buyer of completion of the restoration or
replacement of such Partnership Asset. If the delay in the Closing Date under
this Section 19.1 would cause the Closing to fall at anytime after the period
permitted by the FCC Consents, Sellers and Buyer shall file an appropriate
request with the FCC for an extension of time within which to complete the
Closing.
SECTION 19.2 Further Assurances. After the Closing, Sellers shall from
time to time, at the request of and without further cost or expense to Buyer,
execute and deliver such other instruments of conveyance and transfer and take
such other actions as may reasonably requested in order to consummate the
transactions contemplated hereby to vest in Buyer good and marketable title to
the assets being transferred hereunder, and Buyer shall from time to time, at
the request of and without further cost or expense to Sellers, execute and
deliver such other instruments and take such other actions as may reasonably be
requested in order to more effectively relieve Sellers of any obligations being
assumed by Buyer hereunder.
SECTION 19.3 Waiver. No delay or failure by any party hereto in
exercising any right, power or privilege under this Agreement, or under any
other instrument or document given in connection with or pursuant to this
Agreement, shall impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No single or partial
exercise of any such right, power or privilege shall preclude the further
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exercise of any right, power of privilege, or the exercise of any other right,
power or privilege.
SECTION 19.4 Severability. If any part or any provision of this
Agreement shall be invalid or unenforceable under applicable law, said part or
provisions shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining provisions of
this Agreement which shall be construed as if such invalid parts or provisions
had not been inserted, and such invalid or unenforceable provisions shall
become and be immediately amended and reformed to include only the portions
thereof as are enforceable by the court or such other body having jurisdiction
of this Agreement; and the parties agree that such portions as so amended and
reformed shall be valid and binding as though any wholly invalid or
unenforceable portion had not been included herein.
SECTION 19.5 Benefit and Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party.
SECTION 19.6 Entire Agreement. This Agreement, the Master Agreement
and the Exhibits and Schedules attached hereto and thereto embody the entire
agreement and understanding of the parties hereto and supersede any and all
prior agreements, arrangements and understandings relating to the matters
provided for in this Agreement. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
SECTION 19.7 Headings. The headings set forth in this Agreement are
for convenience only and will not control or affect the meaning or construction
of the provisions of this Agreement.
SECTION 19.8 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia without
giving effect to the choice of law provisions thereof.
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SECTION 19.9 Notices. Any notice, demand or request required or
permitted to be given under the provisions of this Agreement shall be in
writing and shall be deemed to have been duly delivered and received on the
date of personal delivery or on the date of receipt, if mailed by registered or
certified mail, postage prepaid and return receipt requested, or on the date of
a stamped receipt, if sent by an overnight delivery service, and shall be
addressed to the following addresses, or to such other address as any party may
request, in the case of Sellers, by notifying Buyer, and in the case of Buyer,
by notifying Sellers:
To Sellers: ABS Communications Incorporated
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
Kenneth A. Brown
2002 Millington Court
Richmond, VA 23233
EBF Inc.
c/o Coleman Wortham, III
Davenport & Co. of Virginia, Inc.
901 East Cary Street
Richmond, VA 23219
EBF Partners
c/o Coleman Wortham, III
901 East Cary Street
Richmond, VA 23219
To Buyer: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Attn: Kenneth A. Brown
To SFX: SFX Broadcasting, Inc.
150 East 58th Street
New York, NY 10155
Attn: Howard Tytel
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SECTION 19.10 Financial Statements. The Financial Statements required
to be delivered to Buyer shall be mailed to the following:
SFX Broadcasting, Inc.
150 East 58th Street
New York, New York 10155
Attn: Howard Tytel
SECTION 19.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SELLERS:
ABS COMMUNICATIONS INCORPORATED
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
KENNETH A. BROWN
/s/ Kenneth A. Brown
----------------------------------
EBF INC.
By: /s/ Coleman Wortham, III
-------------------------------
Name: Coleman Wortham, III
Title:
EBF PARTNERS
By: /s/ Coleman Wortham, III
-------------------------------
Partner Coleman Wortham, III
<PAGE>
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BUYER:
-----
ABS COMMUNICATIONS, L.L.C.
By: /s/ Kenneth A. Brown
-------------------------------
Name: Kenneth A. Brown
Title:
<PAGE>
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Schedule A
----------
KAB hereby agrees to provide the Buyer within five (5) days of this
Agreement an itemized list of assets which may be excluded from the Partnership
Assets, which itemized list shall be in a form (and supported by appropriate
back-up documentation) reasonably satisfactory to SFX that such itemized assets
have been acquired solely with the funds of KAB or ABS.
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Schedule 5.1
------------
It is specifically acknowledged and agreed by Sellers and Buyer that
it shall not be a materially adverse condition on the FCC Consents if the FCC
(a) denies the temporary waiver referenced in Section 5.2 and/or (b) imposes
conditions that consummation of the transactions contemplated hereby and/or the
commencement of operations of WLEE-FM as a Ft. Lee station cannot occur unless
and until one FM radio station to be under common control by Buyer or parties
to Buyer is divested to a third party.
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 17th day
of December 1996, by and between SFX Broadcasting, Inc. (the "Company") and
Kenneth A. Brown, an individual (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company's majority-owned subsidiary, ABS Communications,
L.L.C., a Virginia limited liability company (the "LLC"), owns and operates
certain radio stations in the Richmond and Williamsburg, Virginia areas; and
WHEREAS, the Executive has experience in managing the operation of
radio stations; and
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company, upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. When used in this Agreement, the following
initially capitalized words or phrases shall have the following meanings:
"ABS" means ABS Communications Incorporated, a Virginia corporation
wholly-owned by KAB.
"Incentive Compensation" has the meaning ascribed to such term in
Section 4.2(a) of this Agreement.
"Agreement" means this Employment Agreement, together with any and all
exhibits, attachments and schedules appended hereto, as the same may be
amended, modified or supplemented from time to time.
"Base Salary" means Two Hundred Thousand Dollars ($200,000.00) per
annum.
<PAGE>
"Bonus Year" means the particular calendar year (or any portion
thereof covered by the Term of this Agreement), commencing on the Start Date
through and until the Termination Date for which Incentive Compensation is
calculated pursuant to Section 4.2 of this Agreement.
"Cause" means a good faith determination by the Company that one or
more of the following has occurred: (i) the Executive has been convicted of any
crime or offense which constitutes a felony in the jurisdiction involved, or
(ii) the Executive has engaged in gross misconduct or fraud.
"Company" has the meaning ascribed to such term in the preamble of
this Agreement and includes all permitted successors and assigns thereof.
"Comparable Executives" means other General Managers of radio station
area markets comparable in size to the Richmond Radio Market employed by the
Company.
"Customer Lists" means any information, complete or incomplete,
whether written, electronically recorded or otherwise, identifying any or all
of the Company's or the LLC's customers or vendors, whether former, current or
prospective, as it may exist at any time and from time to time.
"Duties and Responsibilities" has the meaning ascribed to such term in
Section 3.2 of this Agreement.
"Executive" has the meaning ascribed to such term in the preamble of
this Agreement.
"Fair Market Value" means the value of one (1) share of common stock
of the applicable company or corporation, determined as follows, without regard
to any restriction other than a restriction which, by its terms, will never
lapse:
(i) if the common stock is traded on an exchange or the National
Association of Securities Dealers, Inc. ("NASD") National Market
("National Market"), the closing price as reported for composite
transactions on the date of valuation or, if no sales occurred on that
date, then the average price on such exchange or the National Market
for the twenty (20) trading days ending on such date;
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(ii) if the common stock is not traded on an exchange or the
National Market but is otherwise traded over-the-counter, the average
of the highest bid and lowest asked prices quoted on the NASD SmallCap
Market (the "SmallCap Market") as of the close of business on the date
of valuation or, if on such day such security is not quoted on the
SmallCap Market, the average of the representative bid and asked
prices on such date in the domestic over-the-counter market as
reported by the National Quotation Bureau, Inc., or any similar
successor organization; and
(iii) if neither clause (i) nor (ii) above applies, the fair
market value shall be determined by the mutual agreement of the
parties. If the parties cannot agree, either party may notify the
other party and each party will select an investment banker (a
"Banker") with a minimum of five years experience in the valuation of
radio stations to determine the fair market value. If a party fails to
select a Banker within 30 days of the notice, the sole Banker's
appraisal shall be the Fair Market Value. If two appraisals are so
obtained and if these appraisals are within 10% of each other, the
average of the appraisals shall be the Fair Market Value. If the
appraisals are not within 10% of each other, the two Bankers shall
select a third Banker, and such third Banker shall make its appraisal,
and of the three (3) appraisals, and the appraisal that is neither the
highest or the lowest shall be the Fair Market Value. Each party shall
bear the cost of its or his own Banker; provided, however, if only one
Banker is selected or if a third Banker is selected, both parties
shall bear half the cost of the one Banker or the third Banker, as the
case may be.
"KAB" means Kenneth A. Brown.
"Life Insurance Policy" means a permanent whole life insurance policy
in the amount of [___________] Dollars ($__________) in respect of the life of
the Executive, which Life Insurance Policy shall be owned by the Executive who
shall have the right to designate the beneficiary thereof.
"LLC" has the meaning ascribed to such term in the recitals hereto.
"Members" means the Company and KAB.
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"Membership Interests" means the ownership interests in the LLC owned
by the Members.
"Non-compete Agreement" has the meaning ascribed to such term in
Section 3.4 of this Agreement.
"Operating Agreement" means the LLC's Amended and Restated Operating
Agreement among the Company and KAB.
"Permanent Disability" means, with respect to the Executive the
absence of the Executive from his employment by reason of any mental, emotional
or physical illness, injury, disability, handicap, impediment or incapacity for
a period of one hundred eighty (180) days during any twelve-month period (with
such one hundred eighty (180) days comprised solely of the number of days
during which the Executive is absent for a consecutive period of at least
thirty (30) days), effective as of the last day of such one hundred eighty
(180) day period.
"Personal Property" means, without limitation except for those items
of property listed on Schedule 1.1 hereto, all books, manuals, documents,
records, reports, notes, notebooks, contracts, lists, registers, blueprints,
computer programs and software, equipment (including office equipment), credit
cards, parking or other permits, security and access passes and all other
Proprietary Information relating to the business of the Company and the LLC,
together with any and all repositories and copies thereof, whether photostatic,
electronic or otherwise, held by the Executive from time to time.
"Prohibited Activity" means to directly or indirectly (i) own, manage,
operate, join, control, participate in, or become employed by, (ii) render any
services (including, without limitation, consulting services), advice or
assistance of any nature on behalf of or (iii) invest in, acquire any interest
in or participate in the management, operation or control of, any person,
corporation, partnership or other entity which is engaged in the ownership or
operation of radio stations or any other businesses in which the Company, the
LLC or any of their affiliates is engaged; provided, however, that this
restriction shall not preclude the Executive from (i) engaging in any activity
outside the Richmond Radio Market so long as such activity will not, directly
or indirectly, be in competition with the Company, the LLC or any of their
affiliates, (ii) any Tower Activity or (iii) investing his personal funds in
securities of any company or entity in
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competition with the Company or the LLC if the securities of such company or
entity are listed for trading on any nationally registered securities exchange
or authorized for quotation on the National Market and the Executive's holdings
therein represent two percent (2%) or less of the total number of outstanding
shares or other securities of such company or entity, as long as the Executive
has no other connection or relationship, whether direct or indirect, with the
issuer of such securities.
"Proprietary Information" means information which would be treated
under appropriate legal standards as confidential or proprietary, including,
but not limited to (i) marketing, competitive or other information available
only to the management of the Company or the LLC, (ii) information pertaining
to the contracts between the Company or the LLC and their respective customers
or vendors, including Customer Lists, pricing information and contract
termination dates, (iii) information that is not generally known in the
business in which the Company or the LLC is engaged, concerning the Company's
or the LLC's suppliers, properties, products, designs, concepts, ideas,
methods, prospects, processes, techniques and services, including, but not
limited to, information related to research, development, programming,
techniques of application, inventions, operations, constructions, purchasing,
accounting, engineering, marketing, merchandising, selling, renting, leasing,
negotiating, contracting and recording, (iv) all patents, trademarks, trade
secrets and other intellectual or industrial property rights, title and
interest therein, if any, which are or will in the future be owned by the
Company or the LLC, including, without limitation, all works, ideas, processes,
systems and improvements to or relating to the Company's or the LLC's business
or methods of operation and (v) any and all other information related to the
Company or the LLC of which the Executive may become aware but which is not
generally known to outsiders, including, but not limited to, cost allocations
and all other confidential information concerning or relating to any of the
customers, business or methods of operation of the Company or the LLC;
provided, that the foregoing provisions shall not be construed to prevent the
Executive from making use of or disclosing any such information which (A) is
already in or subsequently enters the public domain through no fault on the
part of the Executive; provided, however, that specific information which is
compiled on behalf of the Company or the LLC shall not be deemed to be in the
public domain merely because the components thereof are encompassed in general
information
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that is published or in the public domain or in the Executive's prior
possession; (B) is intentionally disclosed by the Company or the LLC to any
entity (not an affiliate of the Company or the LLC) on a non-confidential
basis; (C) is developed by the Executive without the use of any Proprietary
Information; (D) is required to be disclosed in order to comply with any law or
any order or ruling of a federal, state or local governmental or regulatory
authority or (E) is related to a Tower Activity.
"Richmond Radio Market" means the geographic broadcast area covered by
the Richmond Station Group, as it may exist at any time and from time to time
during the term of this Agreement.
"Richmond Station Group" means, either individually or collectively,
as the context may require, each of WBZU, WKHK, WLEE, WMXB and WVGO not
previously disposed of.
"Severance Payment" means a lump sum payment of Five Hundred Thousand
Dollars ($500,000.00), immediately payable to the Executive by check or in
immediately available funds, payable only in the event (i) of the Executive's
death or Permanent Disability, or (ii) the Company terminates the Executive as
an employee of the Company without Cause before the expiration of the Term
pursuant to Section 5.2(b)(ii) of this Agreement.
"Start Date" means the date of this Agreement.
"Subsidiary" means any corporation, partnership, joint venture,
association or other entity in which the Company or the LLC has or may have,
directly or indirectly, a majority equity interest.
"Term" means the period of time commencing on the Start Date and
ending on the fifth anniversary of the Start Date, together with any extension
thereof, or any abbreviated portion of such period of time (including any
extensions thereof) resulting from termination of the Executive's employment
pursuant to the provisions of Section 5.1 of this Agreement.
"Termination Date" means the date on which the Executive's employment
is terminated due to the expiration of the Term in accordance with Section 2.1
of this Agreement or pursuant to Section 5.1 of this Agreement.
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"Tower Activity" means the ownership, leasing, or other activities
related to transmission towers and facilities, including, but not limited to,
the activities of Token Tower, LLC.
"WBZU" means WBZU-FM Radio Station in Richmond, Virginia.
"WKHK" means WKHK-FM Radio Station in Colonial Heights, Virginia.
"WLEE" means WLEE-FM Radio Station in Williamsburg, Virginia.
"WMXB" means WMXB-FM Radio Station in Richmond, Virginia.
"WVGO" means WVGO-FM Radio Station in Crewe, Virginia.
ARTICLE II
TERM OF EMPLOYMENT
------------------
SECTION 2.1 Initial Term. The Company hereby employs the Executive as
its General Manager of each of the radio stations in the Richmond Station Group
(the "General Manager") and the Executive hereby accepts employment from the
Company and agrees to perform in such capacity upon the terms and conditions
set forth in this Agreement, for a period commencing on the Start Date and
continuing thereafter for the duration of the Term. Such Term, including any
extensions thereof shall be subject to earlier termination pursuant to the
provisions of Article 5 of this Agreement.
ARTICLE III
POSITION; DUTIES AND RESPONSIBILITIES;
CONDITIONS TO EMPLOYMENT
--------------------------------------
SECTION 3.1 Position. During the Term, the Executive shall be employed
as the General Manager. In such capacity, the Executive shall faithfully and
diligently use his best efforts to perform the duties and bear the
responsibilities of such office as set forth in Section 3.2 of this Agreement.
The Executive shall report and be
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responsible directly to, and in discharging his Duties and Responsibilities (as
defined below) shall be subject to the ultimate supervision and control of, the
President and Chief Executive Officer of the Company.
SECTION 3.2 Duties and Responsibilities. The Executive acknowledges
and agrees that his exclusive function as an employee of the Company is to
perform such duties and bear such responsibilities as shall be required of him
to supervise adequately and direct the overall management and profitability of
the Richmond Station Group to enhance the value of the Richmond Station Group
(such exclusive function of the Executive is referred to as the "Duties and
Responsibilities"). Unless the parties mutually agree, the Executive shall have
no duty or responsibility with respect to the operation of other Subsidiaries
or management functions of the Company that are not directly associated with
the Executive's Duties and Responsibilities. The Executive shall obtain the
prior consent of the Company with respect to any of the transactions referred
to in Exhibit A attached hereto.
SECTION 3.3 Time Commitment. The Executive shall devote his full
business time and attention during normal working hours to the business of the
Company and the LLC to discharge satisfactorily his Duties and
Responsibilities; provided, however, that the Executive may engage in any
lawful activity other than a Prohibited Activity so long as such activity does
not interfere with his Duties and Responsibilities.
SECTION 3.4 Non-compete Agreement. Simultaneously with, and as a
condition to, the execution of this Agreement, the parties hereto shall enter
into a Non-compete and Non-solicitation Agreement (the "Non-compete
Agreement"), substantially in the form of Exhibit B attached hereto.
ARTICLE IV
SALARY AND BENEFITS
-------------------
SECTION 4.1 Base Salary. In consideration of the services to be
rendered by the Executive under this Agreement and commencing on the Start
Date, the Company shall pay the Executive the Base Salary, payable in
semi-monthly installments in arrears on the 15th day and the last day of each
month in accordance with the payroll policies of
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the Company as from time to time in effect, or at such other intervals as
Comparable Executives. The Base Salary shall not be reduced during the term of
this Agreement, except in the event the Executive is terminated for Cause.
SECTION 4.2 Other Compensation.
(a) Incentive Compensation. In addition to the Base Salary as provided
for in Section 4.1 of this Agreement, commencing on the Start Date the
Executive shall be entitled to receive from the Company certain additional
incentive compensation (the "Incentive Compensation"), subject to the
provisions of Section 5.2 of this Agreement. The Incentive Compensation shall
be determined by the Company based on the overall financial performance of the
Richmond Station Group, as a whole, (in a manner consistent with similar
incentive compensation arrangements for Comparable Executives) which in no
event may be less than Fifty Thousand Dollars ($50,000.00) for any Bonus Year.
The Company agrees to determine the amount of the Incentive Compensation to
which the Executive shall be entitled as soon as possible after the end of each
Bonus Year, and to pay such Incentive Compensation no later than April 1 of the
following calendar year or 90 days following the Termination Date, whichever is
first.
(b) Carried Interest Amount.
(i) In addition to the Base Salary and the Incentive Compensation
payable to the Executive as set forth in this Agreement, the Company shall also
pay to the Executive, subject to the terms and conditions of this Section
4.2(b), an amount (the "Carried Interest Amount") as described below.
(ii) Subject to Section 4.2(b)(vi) and Article V of this
Agreement, the Carried Interest Amount shall be paid to the Executive in cash
within ninety (90) days after the fifth anniversary of the Start Date (the
"Fifth Anniversary Date") regardless of the date of the termination of the
Executive's employment with the Company. Interest shall accrue on any unpaid
portion of the Carried Interest Amount beginning on the ninety-first day after
the Fifth Anniversary Date at a rate equal to the prime rate of Citibank, N.A.
on such ninety-first day plus 1%.
(iii) The Carried Interest Amount shall be an amount equal to the
greater of (1) the difference, if any, of (x) the Fair Market Value of one
hundred thousand
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(100,000) shares of the Common Stock of the Company ("SFX Common Stock") on the
date hereof over (y) the Fair Market Value of such shares (adjusted for stock
splits, stock dividends and any issuance of SFX Common Stock) on the Fifth
Anniversary Date, and (2) (x) twenty percent (20%) of the value of the Richmond
Station Group on the Fifth Anniversary Date (the "Fifth Anniversary Value")
minus (y) an amount equal to the sum of $78,189,501 (the "Hurdle Amount") and,
to the extent any of the stations in the Richmond Station Group (other than
WVGO) is sold, less the Imputed Disposition Value allocated to each such
station specified on Annex A of Schedule 4.2(b) attached hereto; provided,
however, if WVGO is sold, within 30 days after such sale, the Company and KAB
will each select an arbitrator and the two arbitrators so selected shall select
a third arbitrator (the "Final Arbitrator") who shall finally determine whether
the Hurdle Rate shall be adjusted as a result of such sale. The arbitration
proceedings shall be held on an expedited basis at a time selected by the Final
Arbitrator in Washington, D.C. and shall be conducted under the auspices and in
accordance with the rules of the American Arbitration Association. In the
arbitration proceeding, the Final Arbitrator shall be permitted to rely on any
and all documents and agreements as the Final Arbitrator shall deem
appropriate, including, without limitation, that certain Letter of Intent,
dated as of August 9, 1996 entered into among the Company, the Executive and
the other parties thereto (the "LOI"), testimony of all relevant persons who
participated in the negotiation of the LOI and in the negotiation and
consummation of the transactions contemplated under the LOI, experts in the
radio industry, customs and practices in the radio industry and the relevant
FCC laws, rules and regulations relating to radio stations. The sole function
of the Final Arbitrator will be to determine whether the Hurdle Rate shall or
shall not be adjusted as a result of the sale of WVGO. In the event the Final
Arbitrator determines that the Hurdle Rate shall be adjusted, then the Imputed
Disposition Value of WVGO as well as all of the other stations in the Richmond
Station Group for all purposes shall be as set forth in Annex B to Schedule
4.2(b) attached hereto; provided, in the event the Final Arbitrator determines
that the Hurdle Rate shall not be adjusted, the Imputed Disposition Value of
WVGO shall be $0. Any and all determinations made by the Final Arbitrator shall
be final and binding on all parties hereto. In the event the Company or the LLC
acquires any additional radio stations (the "Acquired Stations") and the
Executive agrees to become the General Manager of such Acquired Station, the
parties will agree in good faith to negotiate the amount
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(the "Adjusted Hurdle Amount") by which the Hurdle Amount shall be an adjusted
(as well as the Imputed Disposition Value with respect to the Acquired
Station). If the parties disagree as to the Adjusted Hurdle Amount (or the
Imputed Disposition Value of such Acquired Station) the Increased Hurdle Amount
(and, if applicable, the Imputed Disposition Value of such Acquired Station)
will be determined in accordance with clause (iii) of the definition of Fair
Market Value. Notwithstanding the foregoing, nothing in this Section 4.2 shall
obligate the Executive to manage any Acquired Station. For purposes of clause
(y) of the foregoing sentence, the parties agree that the aggregate amount of
the dispositions (including, without limitation, the Imputed Disposition Value)
could exceed the Hurdle Amount so that the amount calculated in such clause (y)
may be negative and thus would be added to any amount in clause (x) of the
foregoing sentence to compute the Carried Interest Amount.
(iv) Nothing in this Section 4.2(b) should be interpreted as any
limitation or restriction on the Company's or the LLC's right to acquire or
dispose of any of their respective radio stations or other assets.
(v) The Fifth Anniversary Value shall be determined by an
appraiser (the "Appraiser") mutually acceptable to the Company and the
Executive. The Company and the Executive shall use their best efforts to
mutually agree on the Appraiser on or before the fifteenth (15th) day after the
Fifth Anniversary Date; provided, if the Company and the Executive cannot agree
on the Appraiser, the Company and the Executive shall each select its own
Appraiser having a minimum of five years of experience appraising radio
stations. Each party shall select its or his Appraiser within 30 days after the
Fifth Anniversary Date and if any party fails to select its or his Appraiser
within such period, the Appraiser selected by the other party shall determine
the Fifth Anniversary Value. If two Appraisers are selected and if their
appraisals are within 10% of each other, the average of these appraisals shall
be the Fifth Anniversary Value. If these appraisals differ by more than 10%,
the two Appraisers shall select a third Appraiser and such third Appraiser
shall make its appraisal, and of the three (3) appraisals, the appraisal that
is neither the highest or the lowest shall be the Fifth Anniversary Value. Each
party will bear the cost of the Appraiser that he or it selects; provided,
however, if only one Appraiser is selected or if a third Appraiser is selected,
both parties shall bear the cost of the single Appraiser or the third
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Appraiser, as the case may be. Each Appraiser must agree upon his appointment
to render his appraisal within 15 days of such appointment. Each Appraiser
shall base its determination of the Fifth Anniversary Value on comparable
valuations for radio station groups similar to the Richmond Station Group,
shall not take into account balance sheet adjustments (i.e. cash and debt) of
the LLC and shall not include the value of any radio stations which are not
primarily managed by the Executive.
(vi) The Executive shall be entitled to receive the full Carried
Interest Amount, except that (X) if the Executive terminates his employment
with the Company on his own accord, then the amount payable in satisfaction of
the obligations of the Company under this Section 4.2(b) shall be reduced
according to the date of employment termination as follows:
===============================================================================
Percentage of Carried
Interest Amount the
Executive shall be
Employment Termination entitled to receive
- -------------------------------------------------------------------------------
Any time before the second 0%
anniversary of the Start Date
- -------------------------------------------------------------------------------
On or after the second and 40%
before the third anniversary of
the Start Date
- -------------------------------------------------------------------------------
On or after the third and before 60%
the fourth anniversary of the
Start Date
- -------------------------------------------------------------------------------
On or after the fourth and 80%
before the fifth anniversary of
the Start Date
- -------------------------------------------------------------------------------
After the fifth anniversary of 100%
the Start Date
===============================================================================
and (Y) if the Executive's employment with the Company is terminated by the
Company for Cause, then the Executive shall not be entitled to receive the
Carried Interest Amount or any portion thereof. If the Executive's employment
is terminated other than as contemplated by clause (X) or (Y) of the preceding
sentence, the Carried Interest Amount shall be unaffected.
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SECTION 4.3 Benefits. During the Term, the Executive shall be entitled
to the following benefits:
(a) Automobile. The Company shall provide Executive with the use of an
automobile which is equal to or better than automobiles used by Comparable
Executives; provided, the initial automobile to be provided under this
Agreement shall be pursuant to that certain lease (whose lease payments will be
equal to $350.00/month) with ABS Communications, Incorporated.
(b) Insurance. The Company shall obtain and maintain during the Term
the Life Insurance Policy.
(c) Vacation. The Executive shall be entitled to three (3)
weeks of paid vacation per year to be taken at such times as shall be mutually
agreed by the Company and the Executive.
(d) Other Benefits. The Executive shall be entitled to
participate in, and receive benefits (which are comparable to all benefits
which are provided to Comparable Executives) under any plan, arrangement,
program or policy of the Company providing for health (including
hospitalization, major medical and dental) insurance coverage, supplemental
life insurance coverage, accident or disability or other accidental death and
dismemberment insurance coverage, additional vacation time, sick leave, stock
options or other interest ownership or incentive compensation payments or other
benefits which the Company may from time to time maintain for the benefit of
the Comparable Executives. Before the Termination Date, and during any
extension of the benefits period hereunder, the Executive's benefits will not
be reduced unless the reduction is consistent among Comparable Executives. To
the extent not prohibited by law and not commercially unreasonable, the Company
shall waive all waiting periods required for participation in such benefit
plans, arrangements, programs and policies described above including
pre-existing conditions.
SECTION 4.4 Withholding. The Company shall withhold such
taxes, deductions and other charges or withholdings as shall be required to be
withheld by applicable United States federal, state and local law or regulation
from compensation paid to the Executive, including, without limitation, from
all applicable payments of the Base Salary, Incentive Compensation and benefits
to the Executive.
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SECTION 4.5 Expense Reimbursement. The Executive shall be
authorized and entitled to incur reasonable ordinary and necessary business
expenses for managing the affairs of the LLC directly related to or arising out
of the Richmond Station Group. The Company shall reimburse the Executive from
time to time on a timely basis consistent with Comparable Executives for all
such business expenses incurred by the Executive in connection with his duties
under this Agreement; provided, that to be reimbursed, the Executive shall
submit to the Company, within a reasonable time period after incurring any such
expense, all documentation pertaining thereto, which documentation shall
include information required by the rules and regulations of the United States
Internal Revenue Service then in effect permitting expense reimbursement. The
Company may from time to time specify those business expenses which are and are
not reimbursable by the Company; provided, such policy is uniformly in force
among the Comparable Executives.
SECTION 4.6 Physical Examinations. The Executive agrees that
as soon as practicable after the Start Date, and from time to time thereafter,
he shall undergo any physical examinations and any other tests required for key
man, disability and employee benefit insurance (including, without limitation,
the Life Insurance Policy), as are reasonably required to obtain such
insurance. The Company acknowledges and accepts that the results of any such
examination and tests are confidential doctor-patient information and the
Company agrees not to make any request for such results. The cost of such
physical examinations shall be borne by the Company. The Executive shall
promptly sign any insurance applications submitted to enable the Company to
obtain key man insurance.
ARTICLE V
TERMINATION OF EMPLOYMENT
SECTION 5.1 Termination Events. Subject to the other terms
and conditions of this Agreement, the Executive's employment under this
Agreement shall terminate upon the earlier of the expiration of the Term or the
occurrence of any of the following events:
(a) Death; Permanent Disability. The Executive's
employment shall terminate upon (i) the death of the Executive or (ii) the
Permanent Disability of the Executive.
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(b) Termination Without Cause. The Executive's
employment may be terminated by the Company without Cause upon the giving of
written notice to the Executive, effective as of the date set forth in such
notice.
(c) Termination by Executive; Termination With Cause. The
Executive's employment may be terminated (i) by the Executive on his own accord
or (ii) by the Company with Cause, each upon the giving of written notice to
the other party, effective as of the date set forth in such notice.
SECTION 5.2 Termination Obligations of the Company. Upon the
Termination Date, subject in every respect to the fulfillment of the
Executive's obligations pursuant to Section 5.3 and Section 5.4 of this
Agreement, the Executive shall be entitled to the following:
(a) Death; Permanent Disability; Termination
Without Cause. In the event the Executive is terminated pursuant to
Section 5.1(a) or 5.1(b) of this Agreement, the Executive or his estate,
as applicable, shall be entitled to the following:
(i) Base Salary. The Base Salary accrued
and unpaid through the Termination Date.
(ii) Incentive Compensation. A pro rata portion of
the Incentive Compensation for the Bonus Year which includes the
Termination Date to be paid at the time specified in Section 4.2 of
this Agreement, with such proration to be calculated based on the
financial results of the Richmond Station Group for the entire Bonus
Year prorated for the period during which the Executive was employed;
provided, that the Executive may request that such results be
determined through an interim closing of the books.
(iii) Benefits. Any benefits pursuant to Section 4.3
of this Agreement accrued, if applicable, through the Termination
Date; provided, that such benefits shall continue for a period of
eighteen (18) months following the Termination Date, except that in
the event of termination of employment of the Executive as a result of
Permanent Disability, the Company shall maintain the Life Insurance
Policy through age 65 for the Executive.
(iv) Severance Payment. The Severance
Payment.
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(b) Voluntary Termination; Termination With Cause. In the
event of termination pursuant to Section 5.1(c) of this Agreement, the
Executive shall be entitled to the Base Salary accrued and unpaid through the
Termination Date plus any benefits pursuant to Section 4.3 of this Agreement
that shall have accrued through the Termination Date.
Except as expressly set forth in this Section 5.2, following
the Termination Date, the Executive shall be entitled to no compensation,
bonus, benefits, interests, options or other remuneration of any kind whether
under this Agreement or otherwise. Nothing in this Agreement is intended to
preclude the Executive from the full exercise of any remedies available to him
at law or equity to seek enforcement of this Agreement. Notwithstanding any
provision contained herein to the contrary, the Company shall be permitted to
maintain key man insurance policies regarding the life of the Executive for its
own benefit during any period of time, whether during the Term or thereafter.
SECTION 5.3 Termination Obligations of the Executive. Other
than as provided in Section 5.2(a)(iii) hereof, the Executive hereby
acknowledges and agrees that all Personal Property furnished to or prepared by
the Executive in the course of or incident to his employment, belongs to the
Company and the LLC and shall be promptly returned to the Company and the LLC
upon the Termination Date. The Executive hereby acknowledges that for the
duration of this Agreement, he has gained and will gain knowledge of
Proprietary Information. Following the Termination Date, the Executive shall
not retain any written or other tangible material containing any Proprietary
Information relating to the business of the Company and the LLC. The
Executive's obligations under this Section 5.3 are further subject to the terms
and conditions of the Non- compete Agreement.
SECTION 5.4 Other Positions. Upon the Termination Date, all
offices, positions and directorships then held by the Executive with the
Company, the LLC and any Subsidiaries shall automatically terminate and no
further action shall be required to effectuate any such termination.
SECTION 5.5 Survival. The representations, warranties,
covenants and agreements contained in Section 4.2(b), Section 5.2, Section 5.3,
Section 5.4 and Article 6 of this Agreement shall survive the Termination Date
and the
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expiration of this Agreement pursuant to their respective terms.
ARTICLE VI
REPRESENTATIONS OF THE EXECUTIVE AND THE COMPANY
SECTION 6.1 Other Agreements. The Executive hereby represents
and warrants to the Company that he is not bound by any employment agreement,
restrictive covenant, confidentiality or proprietary information or other
agreement that would prohibit or inhibit in any way the full and complete
performance by the Executive of his duties under the terms and limits of this
Agreement. The Executive further represents, warrants and agrees that the
fulfillment of his Duties and Responsibilities and his duties as General
Manager do not and will not conflict with, or infringe upon, any other
agreements or understandings of the Executive with any other party.
SECTION 6.2 Tax Consequences. The Executive acknowledges that
the payments and other benefits herein provided may have serious negative
income tax consequences to the Executive. The Executive represents, warrants
and agrees that he has consulted with an independent professional tax advisor,
that he is fully responsible for all the tax ramifications of the provisions of
this Agreement and that neither the Company nor any of its representatives,
agents or advisors has made any representation or warranty to the Executive as
to the appropriate tax treatment to the Executive of these matters.
SECTION 6.3 Health of the Executive. The Executive represents
and warrants that as of the date of this Agreement, the Executive has no reason
to believe that he suffers from a condition that would lead to a Permanent
Disability during the five-year period commencing on the Start Date.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Arbitration. Except as otherwise expressly
provided herein, any claim or controversy arising out of or relating to any
provision of this Agreement, or the breach thereof, shall, upon written demand
of either
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party, be settled by arbitration in accordance with the Commercial Arbitration
Rules then in effect of the American Arbitration Association, to the extent
consistent with the laws of the Commonwealth of Virginia (including the rights
to assess costs and fees) and judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
Arbitration proceedings shall be conducted in Washington, D.C.
SECTION 7.2 Assignment; Successors and Assigns. This
Agreement may not be assigned, nor may any obligations hereunder be delegated,
by the Executive; provided, however, the rights and obligations (to the extent
applicable) of the Executive shall inure to the benefit and be binding upon his
guardian, conservator, executor, administrator, or similar transferee through
operation of law and that the Executive and such successors will receive from
the Company full and complete financial statements of the Company to the extent
necessary to exercise their rights under this Agreement. This Agreement is
fully and freely assignable by the Company in connection with the consolidation
of the Company with, or its merger into, any other corporation, or the sale by
the Company of all or substantially all of its properties or assets; provided
that the surviving entity in any such merger, consolidation or sale shall be a
financially responsible party. Subject to the foregoing, the Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
heirs, legal representatives, successors and permitted assigns, and shall not
benefit any person or entity other than those enumerated above.
SECTION 7.3 Notices. Any notice, request, claim, demand,
document or other communication required or permitted to be given under any
provision of this Agreement to any party hereto shall be made in writing and
shall be deemed to have been duly delivered and received (i) on the date of
personal or same-day courier delivery, (ii) on the date of receipt, if mailed
by certified or registered mail, postage prepaid and return receipt requested,
(iii) three (3) business days following the date of deposit with the United
States Postal Service, if sent by regular first class mail, (iv) on the date of
transmission, if sent by telecopy, facsimile or other electronic transmission
and confirmatory evidence of such transmission is received and retained by
sender, or (v) on the date of the stamped receipt, if sent by an overnight
delivery service; and shall be addressed to the following addresses or to such
other address as either party may request and shall have specified by notice,
in writing, to the other:
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<PAGE>
To the Company: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Tel: (804) 330-5700
Fax: (804) 330-5727
Attention: Manager
With a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, NY 10022
Attention: Seth M. Zachary, Esq.
To the Executive: Mr. Kenneth A. Brown
2002 Millington Court
Richmond, VA 23233
Tel: (804) 740-4431
With a copy to: LeClair Ryan
707 East Main Street, 11th Floor
Richmond, VA 23219
Tel: (804) 783-2003
Attention: Kurt Magette, Esq.
SECTION 7.4 Entire Agreement. The terms and provisions of
this Agreement, together with all exhibits and schedules attached hereto,
embody the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof, are intended by the parties to be the
final expression of such agreement and understanding, and supersede and
terminate, and may not be contradicted by evidence of, any and all prior or
contemporaneous agreements, arrangements or understandings, whether written or
verbal, between the parties hereto with respect to the subject matter hereof.
The parties hereby agree that this Agreement shall be in effect as of the date
hereof.
SECTION 7.5 Amendments. Neither this Agreement nor any term
or provision hereof may be modified, amended, changed, waived, extended,
suspended, discharged or terminated unless evidenced by an instrument in
writing signed by the party against whom enforcement is sought.
SECTION 7.6 Waivers. By an instrument in writing similarly
executed, either party may waive compliance by the other party with any
provision of this Agreement that such other party was or is obligated to comply
with or perform. A waiver of any provision of this Agreement shall not be
deemed a waiver of any other provision of this Agreement.
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<PAGE>
No waiver of any breach of any provision of this Agreement shall be deemed the
waiver of any subsequent breach thereof or of any other provision. No failure
by either party hereto to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder by either party preclude any other or future
exercise of that right or any other right hereunder by that party.
SECTION 7.7 Severability; Enforcement. If any part or
provision of this Agreement, or the application thereof to any person, place or
circumstance, shall be held by a court or such other body of competent
jurisdiction to be invalid, illegal, unenforceable or void in any respect under
applicable law, said part or provision shall be ineffective only to the extent
of such invalidity or unenforceability, without in any way affecting the
remaining parts and provisions of this Agreement which shall be construed as if
such invalid or unenforceable part or provision had not been included, and such
invalid or unenforceable part or provision shall become and be immediately
amended and reformed to include only the portions thereof as are valid and
enforceable by such court or other body having jurisdiction of this Agreement,
including such portions as may continue to be applied to other persons, places
or circumstances which shall continue to remain in full force and effect; and
the parties to this Agreement agree that such part or provision as so amended
or reformed shall be valid and binding as though any wholly invalid or
unenforceable portion had not been included in this Agreement.
SECTION 7.8 Governing Law. The validity, construction,
operation, interpretation, enforceability, performance and effect of this
Agreement, and any and all terms and provisions hereof, and the respective
rights, duties and obligations of the parties hereunder, shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Virginia, without giving effect to principles of conflicts of law thereunder.
SECTION 7.9 Headings. The headings set forth in this
Agreement are provided for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement.
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<PAGE>
SECTION 7.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
______________________________
Name: Howard J. Tytel
Title:
By: /s/ Kenneth A. Brown
-----------------------------------
Kenneth A. Brown
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<PAGE>
SCHEDULE 4.2(b)
ANNEX A
The Imputed Disposition Value of each station (other than WVGO) in the
Richmond Station Group shall be the greater of (X) the sale price of such
station plus 8%; provided, if any such station is not sold in a bona fide arm's
length transaction, the sale price will be determined in accordance with clause
(iii) in the definition of Fair Market Value or (Y) for WBZU: $11,934,096; for
WLEE: $11,934,096; for WKHK: $29,632,161; and for WMXB:
$24,689,147.
ANNEX B
The Imputed Disposition Value of each station in the Richmond Station
Group shall be the greater of (X) the sale price of such station plus 8%;
provided, if any such station is not sold in a bona fide arm's length
transaction, the sale price will be determined in accordance with clause (iii)
in the definition of Fair Market Value or (Y) for WBZU: $10,797,970; for WLEE:
$10,797,970; for WVGO: $7,443,642; for WKHK: $26,811,179; and for WMXB:
$22,338,740.
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EXHIBIT A
ACTIONS REQUIRING MANAGER'S PRIOR CONSENT
The Executive shall obtain the prior written authorization (unless
specified otherwise) of the Company or the Company's Representative with
respect to all transactions beyond the ordinary course of managing the Richmond
Station Group. The limitations specified below specifically do not include any
limitation on incurring trade payables in the ordinary course of business.
Specifically, the following transactions require the Company's consent:
1. Merger, consolidation or sale of substantially all of the assets or a
segment of the business of the LLC or any Subsidiary thereof;
2. Disposal or encumbrance, in a single transaction or series of related
transactions, of any assets of the LLC having a value of $50,000 or more;
3. Acquisition or disposition of an interest in, or substantial portion of the
assets or a segment of the business of, another entity;
4. Creation or dissolution of a subsidiary, branch, or foreign business rising
to a level of an operation;
5. Entry of the LLC into a line of business not conducted by the Richmond
Station Group as of the Start Date;
6. Entry into an agreement or arrangement for the borrowing of money or the
advance payment of funds by or the extension of credit to the LLC involving
$50,000 or more;
7. Guarantee by the LLC of the obligations of a third party (including those
of affiliated companies);
8. Entry into a collective bargaining agreement;
9. Entry into, modification of, or termination of significant employment
agreements, including compensation of officers or other senior executive
employees of the LLC whose annual compensation before bonus is $200,000 or
more;
<PAGE>
10. Entry into, modification of or termination of any agreements or arrangement
with the LLC members, shareholders, directors, managers, officers,
employees, or relatives thereof (excluding any employment arrangements
which the Executive in good faith determines are consistent with past and
customary practices);
11. Appointment or removal of additional senior executive employees of the LLC
whose annual compensation before bonus is $200,000 or more;
12. Appointment or removal of outside auditors of the LLC;
13. Any capital expenditure or series of related capital expenditures by LLC
not in approved budgets in excess of $50,000;
14. The LLC's entry into or amendment of any profit sharing, pension, or
similar plan;
15. Any third-party license agreement as licensee or licensor of trademarks,
patents, or proprietary know-how involving more than $50,000;
16. Approval or revision of annual operating and capital budgets (which
approval or revision may be oral);
17. Approval or modification of the LLC's or any Subsidiary's investment
policies addressing short-, medium-and long-term investment of the LLC's or
such Subsidiary's non-working capital cash; and
18. Institution of or joinder of the LLC or any Subsidiary as a party to
litigation, arbitration, or similar proceedings involving more than
$50,000.
The Company's Representative with full and complete authority to act on
behalf of the LLC under this Exhibit A is:
[-----------------------------]
Phone No. [___________________]
Fax No. [___________________]
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<PAGE>
and if such Representative is unavailable, the person with full and complete
authority to act in lieu of such Representative is:
[-----------------------------]
Phone No. [___________________]
Fax No. [___________________]
The Company shall have the right to change the Representative or the alternate
Representative at any time and from time to time; provided, however, the
Company will endeavor to name such Representatives to provide for the efficient
and amicable fulfillment of the Executive's Duties and Responsibilities.
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<PAGE>
EXHIBIT B
FORM OF
NON-COMPETE AND NON-SOLICITATION AGREEMENT
THIS NON-COMPETE AND NON-SOLICITATION AGREEMENT is made as of the
[___] day of [________], 199[_], by and between SFX Broadcasting, Inc., a
Delaware corporation (the "Company"), ABS Communications, L.L.C., a Virginia
limited liability company (the "LLC") and Kenneth A. Brown, an individual (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have simultaneously herewith
entered into an Employment Agreement, dated as of even date herewith (the
"Employment Agreement"), setting forth certain terms and conditions of the
employment of the Executive by the Company; and
WHEREAS, the Executive acknowledges that in the course of, and as a
direct consequence of, the Executive's employment with the Company, the
Executive will be exposed to certain Proprietary Information; and
WHEREAS, due to the highly competitive nature of the Company's and the
LLC's business, the Company and the LLC desire to protect their rights to, and
the confidentiality of, the Proprietary Information and the Executive
acknowledges the necessity and desirability of such protection; and
WHEREAS, as a condition to the Executive's employment with the
Company, the Company and the LLC also desire to protect their respective
business, other employees and customers from competition and solicitation
actions on the part of the Executive during, and for a limited period of time
following, the Executive's employment; and
WHEREAS, as a condition to the execution and delivery of the
Employment Agreement, the parties hereto are entering into, and hereby agree to
comply in all respects with, the terms and provisions set forth in this
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
<PAGE>
1. Definitions. When used in this Agreement, the following initially
capitalized words or phrases shall have the following meanings:
"Agreement" means this Non-compete and Non-solicitation Agreement,
together with any and all exhibits, attachments and schedules appended hereto,
as the same may be amended, modified or supplemented from time to time.
"Company" has the meaning ascribed to such term in the preamble to
this Agreement.
"Employment Agreement" has the meaning ascribed to such term in the
recitals to this Agreement.
"Executive" has the meaning ascribed to such term in the preamble to
this Agreement.
"Improvements" has the meaning ascribed to such term in Section 2 of
this Agreement.
"LLC" means ABS Communications, L.L.C., a Virginia limited liability
company.
All other initially capitalized words and phrases not otherwise herein
defined shall have the respective meanings ascribed to such terms in the
Employment Agreement.
2. Personal Property and Proprietary Information; Improvements. The
Executive hereby acknowledges and agrees that all Personal Property, including
all Proprietary Information, furnished to or prepared by the Executive in the
course of or incident to his employment, is, and shall forever hereafter
remain, the exclusive property of the Company or the LLC and of their
respective assignees and successors, including, but not limited to, any
portions thereof that may be created, enhanced, suggested or improved by the
Executive in connection with, or in the course of, the Executive's duties at
the Company and the LLC under the Employment Agreement (the "Improvements").
The Executive hereby covenants and agrees to fully disclose any and all
Improvements to the Proprietary Information, as and when such are created and
shall promptly upon the Company's or the LLC's request, and without further
consideration other than that provided for herein and in the Employment
Agreement, but at no expense to the Executive, make all such applications,
execute all such papers, and take all such actions as may be necessary, proper
or desirable so that the property rights with respect
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<PAGE>
to such Improvements shall vest in and remain with the Company or the LLC and
so that the Company or the LLC may obtain, own and exploit, for its own
benefit, letters patent and other property rights with respect to such
Improvements. This Section shall survive the termination of this Agreement and
the Employment Agreement.
3. Non-Disclosure of Proprietary Information. The Executive recognizes
and acknowledges that the Proprietary Information is a valuable, special and
unique asset of the Company's business. The Executive covenants and agrees that
he shall not, either directly or indirectly, other than in the performance of
his duties and obligations to the Company and the LLC, disclose, disseminate,
publish or use or permit the disclosure, dissemination, publishing or use of
the Proprietary Information and/or any part thereof to or for himself or any
other person, firm, corporation, association, partnership or any other entity
whatsoever outside the Company or to any officer, director, stockholder,
partner, member, associate, employee, agent or representative of any thereof
for any reason or any purpose whatsoever, except as may be required in the
proper discharge of the Executive's duties pursuant to the terms of the
Executive's employment with the Company under the Employment Agreement. This
Section shall survive the termination of this Agreement and the Employment
Agreement.
4. Obligations of the Executive Upon Termination.
(a) Regarding Personal Property. The Executive hereby acknowledges
that for the duration of the Employment Agreement, the Executive has gained and
will gain knowledge of Proprietary Information. Upon the Termination Date, the
Executive covenants and promises that all Personal Property, including all
Proprietary Information, then in the Executive's possession, control or
influence, whether prepared by the Executive or others, shall be promptly and
immediately returned by the Executive to the Company or the LLC. Following the
Termination Date, the Executive shall not retain any written or other tangible
material containing any Proprietary Information relating to the business of the
Company or the LLC.
(b) Regarding Prohibited Activity. For a period of one (1) year
following the Termination Date, the Executive agrees that the Executive shall
not engage in any Prohibited Activity within the Richmond Radio Market;
provided, however, that this provision shall not prohibit
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<PAGE>
the Executive from making any personal investment which is purely passive in
nature following the Termination Date; provided, further, that if the Executive
desires to become a consultant to an entity which is engaged in a Prohibited
Activity within the Richmond Radio Market, the Executive may seek the consent
of the Company by submitting to the Company in writing a detailed description
of the Executive's proposed consulting activities, the identity of the entity
to receive such consulting activities and the Executive's proposed
responsibilities (including, without limitation, the extent to which the
Executive will be engaged in consulting activities relating to a Prohibited
Activity).
5. Non-competition. During the Term and for a period of one (1) year
thereafter, the Executive shall not, without the express prior written consent
of the Company and the LLC, directly or indirectly, whether alone or by action
in concert with others, whether for the Executive's own purposes or for any
other person or persons, partnership, firm, association, syndicate, company or
corporation engaged in or concerned with or interested in a business similar to
or competitive with that conducted by the Company, the LLC or any of their
Subsidiaries, engage in or perform services with any person, business or
organization (or become interested therein or therewith as an individual,
partner, shareholder, member, director, officer, principal, agent, employee,
lender, trustee or in any relation or capacity whatsoever) in the Richmond
Radio Market which sells, solicits, bids for, contracts for, provides or
performs, or which proposes to sell, solicit, bid for, contract for, provide or
perform, services or products in the Richmond Radio Market in competition with
or similar to the activities engaged in, concerned with or conducted by the
Company, the LLC or any of their Subsidiaries during the Term.
6. Non-solicitation.
(a) Officers and Employees. The Executive acknowledges and agrees that
any solicitation of the Company's or the LLC's or any of their respective
Subsidiaries' officers, managers, members, consultants or other employees may
involve the use or disclosure of Proprietary Information protected by this
Agreement. In recognition of this fact, during the Term and for the period of
one (1) year following the Termination Date, the Executive agrees that the
Executive shall not, for himself or on behalf of any other person or persons,
company, corporation, partnership, firm, association, syndicate or
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<PAGE>
other entity, directly or indirectly, alone or by action in concert with
others, solicit or engage for employment any person who at the Termination Date
is or was an officer, manager, member, consultant or other employee of the
Company, the LLC or any of their Subsidiaries during the Term without the
express prior written consent of the Company.
(b) Customers and Suppliers. The Executive acknowledges and agrees
that any solicitation of the Company's, the LLC's or any of their respective
Subsidiaries' customers or suppliers may involve the use or disclosure of
Proprietary Information protected by this Agreement. In recognition of this
fact, during the Term and for a period of one (1) year following the
Termination Date, the Executive agrees that the Executive shall not, without
the express prior written permission of the Company, for himself or on behalf
of any other person, corporation, partnership or other entity, directly or
indirectly, whether alone or by action in concert with others, solicit, induce
or encourage or attempt to solicit, induce or encourage, any person known by
him to have a relationship with the Company, the LLC or any of their
Subsidiaries, or any customer or supplier of the Company, the LLC or any of
their Subsidiaries, to discontinue, terminate, cancel or refrain from entering
into any contractual or business relationship with the Company, the LLC or any
of their Subsidiaries.
7. Early Termination. Notwithstanding any other provision in Section 5
and Section 6 of this Agreement to the contrary, in the event that the
Executive's employment with the Company is terminated by the Executive due to a
material breach by the Company of its obligations under the Employment
Agreement, then the Executive's obligations under Section 5 and Section 6 of
this Agreement shall cease as of the Termination Date. Notwithstanding any
other provision contained herein (other than the preceding sentence which shall
control), the Executive's obligations under Section 5 and Section 6 of this
Agreement shall in all cases cease on the earlier of (i) one (1) year after the
Termination Date or (ii) the sixth (6th) anniversary of the date of this
Agreement.
8. Reasonableness of Covenants. Executive hereby acknowledges and
agrees that the foregoing covenants, promises duties and obligations are
commercially reasonable and reasonably necessary to protect the Company.
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<PAGE>
9. Injunctive Relief. The Executive agrees that it would be difficult
to measure damage to the Company for any breach or violation by the Executive
of the covenants, promises, duties and obligations set forth in this Agreement
and that injury to the Company from any such breach or violation by the
Executive would be impossible to calculate, and that money damages would be an
inadequate remedy for any such breach or violation. Accordingly, the Executive
agrees that if any provision of this Agreement is, or is threatened to be,
breached or violated, the Company shall be entitled, in addition to any and all
other rights and remedies it may have, either at law or in equity, to seek an
injunction or other appropriate orders enjoining or restraining any such breach
or violation, whether actual or threatened, by the Executive without showing or
proving any actual damage sustained by the Company.
10. Express Conditions of Company's Obligations. Subject to the
provisions of Section 7 hereof, the Executive acknowledges and agrees that any
obligations of the Company payable to or inuring to the benefit of the
Executive under this Agreement or the Employment Agreement following the
Termination Date are expressly conditioned upon the Executive's compliance with
and adherence to the provisions of Section 2 through (and including) Section 7
of this Agreement.
11. Miscellaneous.
(a) Assignment; Successors and Assigns. This Agreement may not be
assigned, nor may any obligations hereunder be delegated, by the Executive and
shall terminate upon his death. This Agreement is fully and freely assignable
by the Company in connection with the consolidation of the Company with, or its
merger into, any other corporation, or the sale by the Company of all or
substantially all of its properties or assets, but shall be assigned only
contemporaneously with the valid assignment of the Employment Agreement in
accordance with the terms thereof. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors and permitted assigns, and
shall not benefit any person or entity other than those enumerated above.
(b) Notices. Any notice, request, claim, demand, document or other
communication required or permitted to be given under any provision of this
Agreement to any party hereto shall be made in writing and shall be deemed to
have
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<PAGE>
been duly delivered and received (i) on the date of personal or same-day
courier delivery, (ii) on the date of receipt, if mailed by certified or
registered mail, postage prepaid and return receipt requested, (iii) three (3)
business days following the date of deposit with the United States Postal
Service, if sent by regular first class mail, (iv) on the date of transmission,
if sent by telecopy, facsimile or other electronic transmission and
confirmatory evidence of such transmission is received and retained by sender,
or (v) on the date of the stamped receipt, if sent by an overnight delivery
service; and shall be addressed to the following addresses or to such other
address as either party may request and shall have specified by notice, in
writing, to the other:
To the Company: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Tel: (804) 330-5700
Fax: (804) 330-5727
Attention: Manager
With a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, NY 10022
Attention: Seth M. Zachary, Esq.
To the Executive: Mr. Kenneth A. Brown
2002 Millington Court
Richmond, VA 23233
Tel: (804) 740-4431
With a copy to: LeClair Ryan
707 East Main Street, 11th Floor
Richmond, VA 23219
Tel: (804) 783-2003
Attention: Kurt Magette, Esq.
(c) Entire Agreement. The terms and provisions of this Agreement,
together with all exhibits and schedules attached hereto, embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, are intended by the parties to be the final expression of such
agreement and understanding, and supersede and terminate, and may not be
contradicted by evidence of, any and all prior or contemporaneous agreements,
arrangements or understandings, whether written or verbal, between the parties
hereto with respect to the
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subject matter hereof. The parties hereby agree that this Agreement shall be in
effect as of the date hereof.
(d) Amendments. Neither this Agreement nor any term or provision
hereof may be modified, amended, changed, waived, extended, suspended,
discharged or terminated unless evidenced by an instrument in writing signed by
the party against whom enforcement is sought.
(e) Waivers. By an instrument in writing similarly executed, either
party may waive compliance by the other party with any provision of this
Agreement that such other party was or is obligated to comply with or perform.
A waiver of any provision of this Agreement shall not be deemed a waiver of any
other provision of this Agreement. No waiver of any breach of any provision of
this Agreement shall be deemed the waiver of any subsequent breach thereof or
of any other provision. No failure by either party hereto to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder by either party
preclude any other or future exercise of that rights or any other right
hereunder by that party.
(f) Severability; Enforcement. If any part or provision of this
Agreement, or the application thereof to any person, place or circumstance,
shall be held by a court or such other body of competent jurisdiction to be
invalid, illegal, unenforceable or void in any respect under applicable law,
said part or provision shall be ineffective only to the extent of such
invalidity or unenforceability, without in any way affecting the remaining
parts and provisions of this Agreement which shall be construed as if such
invalid or unenforceable part or provision had not been included, and such
invalid or unenforceable part or provision shall become and be immediately
amended and reformed to include only the portions thereof as are valid and
enforceable by such court or other body having jurisdiction of this Agreement,
including such portions as may continue to be applied to other persons, places
or circumstances which shall continue to remain in full force and effect; and
the parties to this Agreement agree that such part or provision as so amended
or reformed shall be valid and binding as though any wholly invalid or
unenforceable portion had not been included in this Agreement.
(g) Governing Law. The validity, construction, operation,
interpretation, enforceability, performance and
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<PAGE>
effect of this Agreement, and any and all terms and provisions hereof, and the
respective rights, duties and obligations of the parties hereunder, shall be
governed by and construed and enforced in accordance with the laws of the
Commonwealth of Virginia, without giving effect to principles of conflicts of
law thereunder.
(h) Headings. The headings set forth in this Agreement are provided
for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
------------------------------
Name: Howard J. Tytel
Title:
ABS COMMUNICATIONS, L.L.C.
By: SFX BROADCASTING, INC.,
as Manager
By: /s/ Howard J. Tytel
------------------------------
Name: Howard J. Tytel
Title:
/s/ Kenneth A. Brown
-----------------------------------
Kenneth A. Brown
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 17th day
of December, 1996, by and between SFX Broadcasting, Inc., a Delaware
corporation (the "Company") and J. Edwin Conrad, an individual (the
"Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company's majority-owned subsidiary, ABS Communications,
L.L.C., a Virginia limited liability company ("LLC"), owns and operates certain
radio stations in the Richmond and Williamsburg, Virginia areas; and
WHEREAS, the Executive has experience in managing the operation of
radio stations; and
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company, upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 Definitions. When used in this Agreement, the following
initially capitalized words or phrases shall have the following meanings:
"ABS" means ABS Communications, Incorporated, a Virginia corporation.
"Incentive Compensation" has the meaning ascribed to such term in
Section 4.2(a) of this Agreement.
"Agreement" means this Employment Agreement, together with any and all
exhibits, attachments and schedules appended hereto, as the same may be
amended, modified or supplemented from time to time.
<PAGE>
"Base Salary" means One Hundred Thirty Thousand Dollars ($130,000) per
annum.
"Bonus Year" means the particular calendar year (or any portion
thereof covered by the Term of this Agreement), commencing on the Start Date
through and until the Termination Date for which Incentive Compensation is
calculated pursuant to Section 4.2 of this Agreement.
"Cause" means a good faith determination by the Company that one or
more of the following has occurred: (i) the Executive has been convicted of any
crime or offense which constitutes a felony in the jurisdiction involved, or
(ii) the Executive has engaged in gross misconduct or fraud.
"Company" has the meaning ascribed to such term in the preamble of
this Agreement and includes all permitted successors and assigns thereof.
"Comparable Executives" means other station group level executives of
radio station area markets comparable in size to the Richmond Radio Market (but
below the level of a group general manager but reporting to a group general
manager) employed by the Company.
"Customer Lists" means any information, complete or incomplete,
whether written, electronically recorded or otherwise, identifying any or all
of the Company's or the LLC's customers or vendors, whether former, current or
prospective, as it may exist at any time and from time to time.
"Duties and Responsibilities" has the meaning ascribed to such term in
Section 3.2 of this Agreement.
"Executive" has the meaning ascribed to such term in the preamble of
this Agreement.
"Life Insurance Policy" means a permanent whole life insurance policy
in the amount of [___________] Dollars ($__________) in respect of the life of
the Executive, which Life Insurance Policy shall be owned by the Executive who
shall have the right to designate the beneficiary thereof.
"Members" means the Company and Kenneth A. Brown.
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"Membership Interests" means the ownership interests in the LLC owned
by the Members.
"Non-compete Agreement" has the meaning ascribed to such term in
Section 3.4 of this Agreement.
"Operating Agreement" means the LLC's Amended and Restated Operating
Agreement among the Company and Kenneth A. Brown.
"Permanent Disability" means, with respect to the Executive the
absence of the Executive from his employment by reason of any mental, emotional
or physical illness, injury, disability, handicap, impediment or incapacity for
a period of one hundred eighty (180) days during any twelve-month period (with
such one hundred eighty (180) days comprised solely of the number of days
during which the Executive is absent for a consecutive period of at least
thirty (30) days), effective as of the last day of such one hundred eighty
(180) day period.
"Personal Property" means, without limitation except for those items
of property listed on Schedule 1.1 hereto, all books, manuals, documents,
records, reports, notes, notebooks, contracts, lists, registers, blueprints,
computer programs and software, equipment (including office equipment), credit
cards, parking or other permits, security and access passes and all other
Proprietary Information relating to the business of the Company and the LLC,
together with any and all repositories and copies thereof, whether photostatic,
electronic or otherwise, held by the Executive from time to time.
"Prohibited Activity" means to directly or indirectly (i) own, manage,
operate, join, control, participate in, or become employed by, (ii) render any
services (including, without limitation, consulting services), advice or
assistance of any nature on behalf of or (iii) invest in, acquire any interest
in or participate in the management, operation or control of, any person,
corporation, partnership or other entity which is engaged in the ownership or
operation of radio stations or any other businesses in which the Company, the
LLC or any of their affiliates is engaged; provided, however, that this
restriction shall not preclude the Executive from (i) engaging in any activity
outside the Richmond Radio Market so long as such activity will not, directly
or indirectly,
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be in competition with the Company or any of its affiliates, or (ii) investing
his personal funds in securities of any company or entity in competition with
the Company or the LLC if the securities of such company or entity are listed
for trading on any nationally registered securities exchange or authorized for
quotation on the National Market and the Executive's holdings therein represent
two percent (2%) or less of the total number of outstanding shares or other
securities of such company or entity, as long as the Executive has no other
connection or relationship, whether direct or indirect, with the issuer of such
securities.
"Proprietary Information" means information which would be treated
under appropriate legal standards as confidential or proprietary, including,
but not limited to (i) marketing, competitive or other information available
only to the management of the Company or the LLC, (ii) information pertaining
to the contracts between the Company or the LLC and their respective customers
or vendors, including Customer Lists, pricing information and contract
termination dates, (iii) information that is not generally known in the
business in which the Company or the LLC is engaged, concerning the Company's
or the LLC's suppliers, properties, products, designs, concepts, ideas,
methods, prospects, processes, techniques and services, including, but not
limited to, information related to research, development, programming,
techniques of application, inventions, operations, constructions, purchasing,
accounting, engineering, marketing, merchandising, selling, renting, leasing,
negotiating, contracting and recording, (iv) all patents, trademarks, trade
secrets and other intellectual or industrial property rights, title and
interest therein, if any, which are or will in the future be owned by the
Company or the LLC, including, without limitation, all works, ideas, processes,
systems and improvements to or relating to the Company's or the LLC's business
or methods of operation and (v) any and all other information related to the
Company or the LLC of which the Executive may become aware but which is not
generally known to outsiders, including, but not limited to, cost allocations
and all other confidential information concerning or relating to any of the
customers, business or methods of operation of the Company or the LLC;
provided, that the foregoing provisions shall not be construed to prevent the
Executive from making use of or disclosing any such information which (A) is
already in or subsequently enters the public domain through no fault on the
part of the
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Executive; provided, however, that specific information which is compiled on
behalf of the Company or the LLC shall not be deemed to be in the public domain
merely because the components thereof are encompassed in general information
that is published or in the public domain or in the Executive's prior
possession; (B) is intentionally disclosed by the Company or the LLC to any
entity (not an affiliate of the Company or the LLC) on a non-confidential
basis; (C) is developed by the Executive without the use of any Proprietary
Information; or (D) is required to be disclosed in order to comply with any law
or any order or ruling of a federal, state or local governmental or regulatory
authority.
"Richmond Radio Market" means the geographic broadcast area covered by
the Richmond Station Group, as it may exist at any time and from time to time
during the term of this Agreement.
"Richmond Station Group" means, either individually or collectively,
as the context may require, each of WBZU, WKHK, WLEE, WMXB and WVGO not
previously disposed of.
"Severance Payment" means a lump sum payment of the lesser of (i)
Three Hundred Thousand Dollars ($300,000), or (ii) an amount equal to the
aggregate of the remaining base salary (including the base salary accrued
through the applicable Termination Date) and guaranteed minimum incentive
compensation due to the Executive for the Term of this Agreement, immediately
payable to the Executive by check or in immediately available funds.
"Start Date" means the date of this Agreement.
"Subsidiary" means any corporation, partnership, joint venture,
association or other entity in which the Company or the LLC has or may have,
directly or indirectly, a majority equity interest.
"Term" means the period of time commencing on the Start Date and
ending on the fifth anniversary of the Start Date, together with any extension
thereof, or any abbreviated portion of such period of time (including any
extensions thereof) resulting from termination of the Executive's employment
pursuant to the provisions of Section 5.1 of this Agreement.
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"Termination Date" means the date on which the Executive's employment
is terminated due to the expiration of the Term in accordance with Section 2.1
of this Agreement or pursuant to Section 5.1 of this Agreement.
"WBZU" means WBZU-FM Radio Station in Richmond, Virginia.
"WKHK" means WKHK-FM Radio Station in Colonial Heights, Virginia.
"WLEE" means WLEE-FM Radio Station in Williamsburg, Virginia.
"WMXB" means WMXB-FM Radio Station in Richmond, Virginia.
"WVGO" means WVGO-FM Radio Station in Crewe, Virginia.
ARTICLE II
TERM OF EMPLOYMENT
------------------
SECTION 2.1 Initial Term. The Company hereby employs the Executive as
its Chief Financial Officer of each of the radio stations in the Richmond
Station Group (the "Chief Financial Officer") and the Executive hereby accepts
employment from the Company and agrees to perform in such capacity upon the
terms and conditions set forth in this Agreement, for a period commencing on
the Start Date and continuing thereafter for the duration of the Term. Such
Term, including any extensions thereof shall be subject to earlier termination
pursuant to the provisions of Article 5 of this Agreement.
ARTICLE III
POSITION; DUTIES AND RESPONSIBILITIES;
CONDITIONS TO EMPLOYMENT
--------------------------------------
SECTION 3.1 Position. During the Term, the Executive shall be employed
as the Chief Financial Officer. In such capacity, the Executive shall
faithfully and diligently use his best efforts to perform the duties and
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bear the responsibilities of such office as set forth in Section 3.2 of this
Agreement. The Executive shall report and be responsible directly to, and in
discharging his Duties and Responsbilities (as defined below) shall be subject
to the ultimate supervision and control of, the general manger of the Richmond
Station Group and the Chief Financial Officer of the Company.
SECTION 3.2 Duties and Responsibilities. The Executive acknowledges
and agrees that his exclusive function as an employee of the Company is to
perform such duties and bear such responsibilities as shall be required of him
to supervise adequately and direct the overall financial management and
profitability of the Richmond Station Group to enhance the value of the
Richmond Station Group (such exclusive function of the Executive is referred to
as the "Duties and Responsibilities"). Unless the parties mutually agree, the
Executive shall have no duty or responsibility with respect to the operation of
other Subsidiaries or management functions of the Company that are not directly
associated with the Executive's Duties and Responsibilities. The Executive
shall obtain the prior consent of the Company with respect to any of the
transactions referred to in Exhibit A attached hereto.
SECTION 3.3 Time Commitment. The Executive shall devote his full
business time and attention during normal working hours to the business of the
Company and the LLC to discharge satisfactorily his Duties and
Responsibilities; provided, however, that the Executive may engage in any
lawful activity other than a Prohibited Activity so long as such activity does
not interfere with his Duties and Responsibilities.
SECTION 3.4 Non-compete Agreement. Simultaneously with, and as a
condition to, the execution of this Agreement, the parties hereto shall enter
into a Non-compete and Non-solicitation Agreement (the "Non-compete
Agreement"), substantially in the form of Exhibit B attached hereto.
ARTICLE IV
SALARY AND BENEFITS
-------------------
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SECTION 4.1 Base Salary. In consideration of the services to be
rendered by the Executive under this Agreement and commencing on the Start
Date, the Company shall pay the Executive the Base Salary, payable in
semi-monthly installments in arrears on the 15th day and the last day of each
month in accordance with the payroll policies of the Company as from time to
time in effect, or at such other intervals as Comparable Executives. The Base
Salary shall not be reduced during the term of this Agreement, except in the
event the Executive is terminated for Cause.
SECTION 4.2 Incentive Compensation. In addition to the Base Salary as
provided for in Section 4.1 of this Agreement, commencing on the Start Date the
Executive shall be entitled to receive from the Company certain additional
incentive compensation (the "Incentive Compensation"), subject to the
provisions of Section 5.2 of this Agreement. The Incentive Compensation shall
be determined by the Company based on the overall financial performance of the
Richmond Station Group, as a whole, (in a manner consistent with similar
incentive compensation arrangements for Comparable Executives) which in no
event may be less than Ten Thousand Dollars ($10,000) but not greater than
$20,000 for any Bonus Year. The Company agrees to determine the amount of the
Incentive Compensation to which the Executive shall be entitled as soon as
possible after the end of each Bonus Year, and to pay such Incentive
Compensation no later than April 1 of the following calendar year or 90 days
following the Termination Date, whichever is first.
SECTION 4.3 Benefits. During the Term, the Executive shall be entitled
to the following benefits:
(a) Automobile. The Company will provide the Executive with the use of
an automobile the cost of which is comparable to the cost of automobiles used
by Comparable Executives; provided, the initial automobile to be provided under
this Agreement shall be pursuant to that certain automobile lease (which lease
payments will be equal to $350/month) with Conrad & Associates, Inc.
(b) Insurance. The Company shall obtain and maintain during the Term
the Life Insurance Policy.
(c) Vacation. The Executive shall be entitled to three (3) weeks of
paid vacation per year to be taken at
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such times as shall be mutually agreed by the Company and the Executive.
(d) Other Benefits. The Executive shall be entitled to participate in,
and receive benefits (which are comparable to all benefits which are provided
to Comparable Executives) under any plan, arrangement, program or policy of the
Company providing for health (including hospitalization, major medical and
dental) insurance coverage, supplemental life insurance coverage, accident or
disability or other accidental death and dismemberment insurance coverage,
additional vacation time, sick leave, stock options or other interest ownership
or incentive compensation payments or other benefits which the Company may from
time to time maintain for the benefit of the Comparable Executives. Before the
Termination Date, and during any extension of the benefits period hereunder,
the Executive's benefits will not be reduced unless the reduction is consistent
among Comparable Executives. To the extent not prohibited by law and not
commercially unreasonable, the Company shall waive all waiting periods required
for participation in such benefit plans, arrangements, programs and policies
described above including pre-existing conditions.
SECTION 4.4 Withholding. The Company shall withhold such taxes,
deductions and other charges or withholdings as shall be required to be
withheld by applicable United States federal, state and local law or regulation
from compensation paid to the Executive, including, without limitation, from
all applicable payments of the Base Salary, Incentive Compensation and benefits
to the Executive.
SECTION 4.5 Expense Reimbursement. The Executive shall be authorized
and entitled to incur reasonable ordinary and necessary business expenses for
managing the affairs of the LLC directly related to or arising out of the
Richmond Station Group. The Company shall reimburse the Executive from time to
time on a timely basis consistent with Comparable Executives for all such
business expenses incurred by the Executive in connection with his duties under
this Agreement; provided, that to be reimbursed, the Executive shall submit to
the Company, within a reasonable time period after incurring any such expense,
all documentation pertaining thereto, which documentation shall include
information required by the rules and regulations of
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the United States Internal Revenue Service then in effect permitting expense
reimbursement. The Company may from time to time specify those business
expenses which are and are not reimbursable by the Company; provided, such
policy is uniformly in force among the Comparable Executives.
SECTION 4.6 Physical Examinations. The Executive agrees that as soon
as practicable after the Start Date, and from time to time thereafter, he shall
undergo any physical examinations and any other tests required for key man,
disability and employee benefit insurance (including, without limitation, the
Life Insurance Policy), as are reasonably required to obtain such insurance.
The Company acknowledges and accepts that the results of any such examination
and tests are confidential doctor-patient information and the Company agrees
not to make any request for such results. The cost of such physical
examinations shall be borne by the Company. The Executive shall promptly sign
any insurance applications submitted to enable the Company to obtain key man
insurance.
ARTICLE V
TERMINATION OF EMPLOYMENT
-------------------------
SECTION 5.1 Termination Events. Subject to the other terms and
conditions of this Agreement, the Executive's employment under this Agreement
shall terminate upon the earlier of the expiration of the Term or the
occurrence of any of the following events:
(a) Death; Permanent Disability. The Executive's employment shall
terminate upon (i) the death of the Executive or (ii) the Permanent Disability
of the Executive.
(b) Termination Without Cause. The Executive's employment may be
terminated by the Company without Cause upon the giving of written notice to
the Executive, effective as of the date set forth in such notice.
(c) Voluntary Termination; Termination With Cause. The Executive's
employment may be terminated (i) by the Company with Cause or (ii) by the
Executive of his own accord, each upon the giving of written notice to the
other party, effective as of the date set forth in such notice.
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SECTION 5.2 Termination Obligations of the
Company. Upon the Termination Date, subject in every respect to the
fulfillment of the Executive's obligations pursuant to Section 5.3 and Section
5.4 of this Agreement, the Executive shall be entitled to the following:
(a) Death; Permanent Disability; Termination
Without Cause. In the event the Executive is terminated pursuant to Section
5.1(a) or 5.1(b) of this Agreement, the Executive or his estate, as
applicable, shall be entitled to the following:
(i) Benefits. Any benefits pursuant to Section
4.3 of this Agreement accrued, if applicable, through the
Termination Date; provided, that such benefits shall continue
for a period of eighteen (18) months following the Termination
Date, except that in the event of termination of employment of
the Executive as a result of Permanent Disability, the Company
shall maintain the Life Insurance Policy through age 65 for the
Executive; and
(ii) Severance Payment. The Severance
Payment.
(b) Voluntary Termination; Termination With
Cause. In the event of termination pursuant to Section 5.1(c) of this
Agreement, the Executive shall be entitled to the Base Salary accrued and
unpaid through the Termination Date plus any benefits pursuant to Section 4.3
of this Agreement that shall have accrued through the Termination Date.
Except as expressly set forth in this Section 5.2,
following the Termination Date, the Executive shall be entitled to no
compensation, bonus, benefits, interests, options or other remuneration of any
kind whether under this Agreement or otherwise. Nothing in this Agreement is
intended to preclude the Executive from the full exercise of any remedies
available to him at law or equity to seek enforcement of this Agreement.
Notwithstanding any provision contained herein to the contrary, the Company
shall be permitted to maintain key man insurance policies regarding the life
of the Executive for its own benefit during any period of time, whether during
the Term or thereafter.
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SECTION 5.3 Termination Obligations of the
Executive. Other than as provided in Section 5.2(a)(i) hereof, the Executive
hereby acknowledges and agrees that all Personal Property furnished to or
prepared by the Executive in the course of or incident to his employment,
belongs to the Company and the LLC and shall be promptly returned to the
Company and the LLC upon the Termination Date. The Executive hereby
acknowledges that for the duration of this Agreement, he has gained and will
gain knowledge of Proprietary Information. Following the Termination Date, the
Executive shall not retain any written or other tangible material containing
any Proprietary Information relating to the business of the Company and the
LLC. The Executive's obligations under this Section 5.3 are further subject to
the terms and conditions of the Non- compete Agreement.
SECTION 5.4 Other Positions. Upon the Termination Date, all
offices, positions and directorships then held by the Executive with the
Company, the LLC and any Subsidiaries shall automatically terminate and no
further action shall be required to effectuate any such termination.
SECTION 5.5 Survival. The representations, warranties,
covenants and agreements contained in Section 4.2(b), Section 5.2, Section
5.3, Section 5.4 and Article 6 of this Agreement shall survive the Termination
Date and the expiration of this Agreement pursuant to their respective terms.
ARTICLE VI
REPRESENTATIONS OF THE EXECUTIVE AND THE COMPANY
SECTION 6.1 Other Agreements. The Executive hereby
represents and warrants to the Company that he is not bound by any employment
agreement, restrictive covenant, confidentiality or proprietary information or
other agreement that would prohibit or inhibit in any way the full and
complete performance by the Executive of his duties under the terms and limits
of this Agreement. The Executive further represents, warrants and agrees that
the fulfillment of his Duties and Responsibilities and his duties as Chief
Financial Officer do not and will not conflict with, or infringe upon, any
other agreements or understandings of the Executive with any other party.
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SECTION 6.2 Tax Consequences. The Executive acknowledges
that the payments and other benefits herein provided may have serious negative
income tax consequences to the Executive. The Executive represents, warrants
and agrees that he has consulted with an independent professional tax advisor,
that he is fully responsible for all the tax ramifications of the provisions
of this Agreement and that neither the Company nor any of its representatives,
agents or advisors has made any representation or warranty to the Executive as
to the appropriate tax treatment to the Executive of these matters.
SECTION 6.3 Health of the Executive. The Executive
represents and warrants that as of the date of this Agreement, the Executive
has no reason to believe that he suffers from a condition that would lead to a
Permanent Disability during the five-year period commencing on the Start Date.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Arbitration. Except as otherwise expressly
provided herein, in any claim or controversy arising out of or relating to any
provision of this Agreement, or the breach thereof, shall, upon written demand
of either party, be settled by arbitration in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association, to
the extent consistent with the laws of the Commonwealth of Virginia (including
the rights to assess costs and fees) and judgment upon the award rendered by
the arbitrator(s) may be entered in any court of competent jurisdiction.
Arbitration proceedings shall be conducted in Washington, D.C.
SECTION 7.2 Assignment; Successors and Assigns. This
Agreement may not be assigned, nor may any obligations hereunder be delegated,
by the Executive; provided, however, the rights and obligations (to the extent
applicable) of the Executive shall inure to the benefit and be binding upon
his guardian, conservator, executor, administrator, or similar transferee
through operation of law and that the Executive and such successors will
receive from the Company full and complete financial statements of the Company
to the extent necessary to exercise their rights under this Agreement.
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This Agreement is fully and freely assignable by the Company in connection
with the consolidation of the Company with, or its merger into, any other
corporation, or the sale by the Company of all or substantially all of its
properties or assets; provided that the surviving entity in any such merger,
consolidation or sale shall be a financially responsible party. Subject to the
foregoing, the Agreement shall be binding upon and shall inure to the benefit
of the parties and their respective heirs, legal representatives, successors
and permitted assigns, and shall not benefit any person or entity other than
those enumerated above.
SECTION 7.3 Notices. Any notice, request, claim, demand,
document or other communication required or permitted to be given under any
provision of this Agreement to any party hereto shall be made in writing and
shall be deemed to have been duly delivered and received (i) on the date of
personal or same-day courier delivery, (ii) on the date of receipt, if mailed
by certified or registered mail, postage prepaid and return receipt requested,
(iii) three (3) business days following the date of deposit with the United
States Postal Service, if sent by regular first class mail, (iv) on the date
of transmission, if sent by telecopy, facsimile or other electronic
transmission and confirmatory evidence of such transmission is received and
retained by sender, or (v) on the date of the stamped receipt, if sent by an
overnight delivery service; and shall be addressed to the following addresses
or to such other address as either party may request and shall have specified
by notice, in writing, to the other:
To the Company: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Tel: (804) 330-5700
Fax: (804) 330-5727
Attention: Manager
With a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Seth M. Zachary, Esq.
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To the Executive: J. Edwin Conrad
20 Darien Way
Greenville, SC 29615
Tel: (864) 458-9085
With a copy to: LeClair Ryan
707 East Main Street, 11th Floor
Richmond, Virginia 23219
Tel: (804) 783-2003
Attention: Kurt Magette, Esq.
SECTION 7.4 Entire Agreement. The terms and provisions of
this Agreement, together with all exhibits and schedules attached hereto,
embody the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof, are intended by the parties to be the
final expression of such agreement and understanding, and supersede and
terminate, and may not be contradicted by evidence of, any and all prior or
contemporaneous agreements, arrangements or understandings, whether written or
verbal, between the parties hereto with respect to the subject matter hereof.
The parties hereby agree that this Agreement shall be in effect as of the date
hereof.
SECTION 7.5 Amendments. Neither this Agreement nor any term
or provision hereof may be modified, amended, changed, waived, extended,
suspended, discharged or terminated unless evidenced by an instrument in
writing signed by the party against whom enforcement is sought.
SECTION 7.6 Waivers. By an instrument in writing similarly
executed, either party may waive compliance by the other party with any
provision of this Agreement that such other party was or is obligated to
comply with or perform. A waiver of any provision of this Agreement shall not
be deemed a waiver of any other provision of this Agreement. No waiver of any
breach of any provision of this Agreement shall be deemed the waiver of any
subsequent breach thereof or of any other provision. No failure by either
party hereto to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder by either party preclude any other or future exercise of
that right or any other right hereunder by that party.
SECTION 7.7 Severability; Enforcement. If any
part or provision of this Agreement, or the application
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thereof to any person, place or circumstance, shall be held by a court or such
other body of competent jurisdiction to be invalid, illegal, unenforceable or
void in any respect under applicable law, said part or provision shall be
ineffective only to the extent of such invalidity or unenforceability, without
in any way affecting the remaining parts and provisions of this Agreement
which shall be construed as if such invalid or unenforceable part or provision
had not been included, and such invalid or unenforceable part or provision
shall become and be immediately amended and reformed to include only the
portions thereof as are valid and enforceable by such court or other body
having jurisdiction of this Agreement, including such portions as may continue
to be applied to other persons, places or circumstances which shall continue
to remain in full force and effect; and the parties to this Agreement agree
that such part or provision as so amended or reformed shall be valid and
binding as though any wholly invalid or unenforceable portion had not been
included in this Agreement.
SECTION 7.8 Governing Law. The validity, construction,
operation, interpretation, enforceability, performance and effect of this
Agreement, and any and all terms and provisions hereof, and the respective
rights, duties and obligations of the parties hereunder, shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Virginia, without giving effect to principles of conflicts of law thereunder.
SECTION 7.9 Headings. The headings set forth in this
Agreement are provided for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
SECTION 7.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
______________________________
Name: Howard J. Tytel
Title:
/s/ J. Edwin Conrad
-----------------------------------
J. Edwin Conrad
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EXHIBIT A
ACTIONS REQUIRING COMPANY'S PRIOR CONSENT
The Executive shall obtain the prior written authorization
(unless specified otherwise) of the Company or the Company's Representative
with respect to all transactions beyond the ordinary course of managing the
Richmond Station Group. The limitations specified below specifically do not
include any limitation on incurring trade payables in the ordinary course of
business. Specifically, the following transactions require the Company's
consent:
I. Merger, consolidation or sale of substantially all of
the assets or a segment of the business of the LLC or
any Subsidiary thereof;
II. Disposal or encumbrance, in a single transaction or
series of related transactions, of any assets of the
LLC having a value of $50,000 or more;
III. Acquisition or disposition of an interest in, or
substantial portion of the assets or a segment of the
business of, another entity;
IV. Creation or dissolution of a subsidiary, branch, or
foreign business rising to a level of an operation;
V. Entry of the LLC into a line of business not conducted
by the Richmond Station Group as of the Start Date;
VI. Entry into an agreement or arrangement for the
borrowing of money or the advance payment of funds by
or the extension of credit to the LLC involving $50,000
or more;
VII. Guarantee by the LLC of the obligations of a third
party (including those of affiliated companies);
VIII. Entry into a collective bargaining agreement;
IX. Entry into, modification of, or termination of
significant employment agreements, including
compensation of officers or other senior executive
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employees of the LLC whose annual compensation before
bonus is $200,000 or more;
X. Entry into, modification of or termination of any agreements or
arrangement with the LLC members, shareholders, directors, managers,
officers, employees, or relatives thereof (excluding any employment
arrangements which the Executive in good faith determines are
consistent with past and customary practices);
XI. Appointment or removal of additional senior executive
employees of the LLC whose annual compensation before
bonus is $200,000 or more;
XII. Appointment or removal of outside auditors of the LLC;
XIII. Any capital expenditure or series of related
capital expenditures by the LLC not in approved
budgets in excess of $50,000;
XIV. The LLC's entry into or amendment of any profit
sharing, pension, or similar plan;
XV. Any third-party license agreement as licensee or
licensor of trademarks, patents, or proprietary know-
how involving more than $50,000;
XVI. Approval or revision of annual operating and capital
budgets (which approval or revision may be oral);
XVII. Approval or modification of the LLC's or any
Subsidiary's investment policies addressing short-
, medium- and long-term investment of the LLC's or
such Subsidiary's non-working capital cash; and
XVIII. Institution of or joinder of the LLC or any
Subsidiary as a party to litigation, arbitration,
or similar proceedings involving more than
$50,000.
The Company's Representative with full and complete authority to act
on behalf of the LLC under this Exhibit A is:
[-----------------------------]
Phone No. [___________________]
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Fax No. [___________________]
and if such Representative is unavailable, the person with full and complete
authority to act in lieu of such Representative is:
[_____________________________]
Phone No. [___________________]
Fax No. [___________________]
The Company shall have the right to change the Representative or the alternate
Representative at any time and from time to time; provided, however, the
Company will endeavor to name such Representatives to provide for the efficient
and amicable fulfillment of the Executive's Duties and Responsibilities.
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EXHIBIT B
FORM OF
NON-COMPETE AND NON-SOLICITATION AGREEMENT
THIS NON-COMPETE AND NON-SOLICITATION AGREEMENT is made as of the
[___] day of [________], 199[_], by and between SFX Broadcasting, Inc., a
Delaware corporation (the "Company"), ABS Communications, L.L.C., a Virginia
limited liability company (the "LLC") and J. Edwin Conrad, an individual (the
"Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Executive have simultaneously herewith
entered into an Employment Agreement, dated as of even date herewith (the
"Employment Agreement"), setting forth certain terms and conditions of the
employment of the Executive by the Company; and
WHEREAS, the Executive acknowledges that in the course of, and as a
direct consequence of, the Executive's employment with the Company, the
Executive will be exposed to certain Proprietary Information; and
WHEREAS, due to the highly competitive nature of the Company's and the
LLC's business, the Company and the LLC desire to protect their rights to, and
the confidentiality of, the Proprietary Information and the Executive
acknowledges the necessity and desirability of such protection; and
WHEREAS, as a condition to the Executive's employment with the
Company, the Company and the LLC also desire to protect their respective
businesses, other employees and customers from competition and solicitation
actions on the part of the Executive during, and for a limited period of time
following, the Executive's employment; and
WHEREAS, as a condition to the execution and delivery of the
Employment Agreement, the parties hereto are entering into, and hereby agree to
comply in all respects with, the terms and provisions set forth in this
Agreement;
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. When used in this Agreement, the following initially
capitalized words or phrases shall have the following meanings:
"Agreement" means this Non-compete and Non-solicitation Agreement,
together with any and all exhibits, attachments and schedules appended hereto,
as the same may be amended, modified or supplemented from time to time.
"Company" has the meaning ascribed to such term in the preamble to
this Agreement.
"Employment Agreement" has the meaning ascribed to such term in the
recitals to this Agreement.
"Executive" has the meaning ascribed to such term in the preamble to
this Agreement.
"Improvements" has the meaning ascribed to such term in Section 2 of
this Agreement.
"LLC" means ABS Communications, L.L.C., a Virginia limited liability
company.
All other initially capitalized words and phrases not otherwise herein defined
shall have the respective meanings ascribed to such terms in the Employment
Agreement.
2. Personal Property and Proprietary Information; Improvements. The
Executive hereby acknowledges and agrees that all Personal Property, including
all Proprietary Information, furnished to or prepared by the Executive in the
course of or incident to his employment, is, and shall forever hereafter
remain, the exclusive property of the Company or the LLC and of their
respective assignees and successors, including, but not limited to, any
portions thereof that may be created, enhanced, suggested or improved by the
Executive in connection with, or in the course of, the Executive's duties at
the Company and the LLC under the Employment Agreement (the "Improvements").
The Executive hereby covenants and agrees to fully disclose any and all
Improvements to the Proprietary Information, as and when such are created and
shall promptly upon the Company's or the LLC's request, and
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<PAGE>
without further consideration other than that provided for herein and in the
Employment Agreement, but at no expense to the Executive, make all such
applications, execute all such papers, and take all such actions as may be
necessary, proper or desirable so that the property rights with respect to such
Improvements shall vest in and remain with the Company or the LLC and so that
the Company or the LLC may obtain, own and exploit, for its own benefit,
letters patent and other property rights with respect to such Improvements.
This Section shall survive the termination of this Agreement and the Employment
Agreement.
3. Non-Disclosure of Proprietary Information. The Executive recognizes
and acknowledges that the Proprietary Information is a valuable, special and
unique asset of the Company's or the LLC's business. The Executive covenants
and agrees that he shall not, either directly or indirectly, other than in the
performance of his duties and obligations to the Company and the LLC, disclose,
disseminate, publish or use or permit the disclosure, dissemination, publishing
or use of the Proprietary Information and/or any part thereof to or for himself
or any other person, firm, corporation, association, partnership or any other
entity whatsoever outside the Company or to any officer, director, stockholder,
partner, member, associate, employee, agent or representative of any thereof
for any reason or any purpose whatsoever, except as may be required in the
proper discharge of the Executive's duties pursuant to the terms of the
Executive's employment with the Company under the Employment Agreement. This
Section shall survive the termination of this Agreement and the Employment
Agreement.
4. Obligations of the Executive Upon Termination.
(a) Regarding Personal Property. The Executive hereby acknowledges
that for the duration of the Employment Agreement, the Executive has gained and
will gain knowledge of Proprietary Information. Upon the Termination Date, the
Executive covenants and promises that all Personal Property, including all
Proprietary Information, then in the Executive's possession, control or
influence, whether prepared by the Executive or others, shall be promptly and
immediately returned by the Executive to the Company or the LLC. Following the
Termination Date, the Executive shall not retain any written or other tangible
material containing
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<PAGE>
any Proprietary Information relating to the business of the Company or the LLC.
(b) Regarding Prohibited Activity. For a period of one (1) year
following the Termination Date, the Executive agrees that the Executive shall
not engage in any Prohibited Activity within the Richmond Radio Market;
provided, however, that this provision shall not prohibit the Executive from
making any personal investment which is purely passive in nature following the
Termination Date; provided, further, that if the Executive desires to become a
consultant to an entity which is engaged in a Prohibited Activity within the
Richmond Radio Market, the Executive may seek the consent of the Company by
submitting to the Company in writing a detailed description of the Executive's
proposed consulting activities, the identity of the entity to receive such
consulting activities and the Executive's proposed responsibilities (including,
without limitation, the extent to which the Executive will be engaged in
consulting activities relating to a Prohibited Activity).
5. Non-competition. During the Term and for a period of one (1) year
thereafter, the Executive shall not, without the express prior written consent
of the Company and the LLC, directly or indirectly, whether alone or by action
in concert with others, whether for the Executive's own purposes or for any
other person or persons, partnership, firm, association, syndicate, company or
corporation engaged in or concerned with or interested in a business similar to
or competitive with that conducted by the Company, the LLC or any of their
Subsidiaries, engage in or perform services with any person, business or
organization (or become interested therein or therewith as an individual,
partner, shareholder, member, director, officer, principal, agent, employee,
lender, trustee or in any relation or capacity whatsoever) in the Richmond
Radio Market which sells, solicits, bids for, contracts for, provides or
performs, or which proposes to sell, solicit, bid for, contract for, provide or
perform, services or products in the Richmond Radio Market in competition with
or similar to the activities engaged in, concerned with or conducted by the
Company, the LLC or any of their Subsidiaries during the Term.
6. Non-solicitation.
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<PAGE>
(a) Officers and Employees. The Executive acknowledges and agrees that
any solicitation of the Company's, the LLC's or any of their Subsidiaries'
officers, managers, members, consultants or other employees may involve the use
or disclosure of Proprietary Information protected by this Agreement. In
recognition of this fact, during the Term and for the period of one (1) year
following the Termination Date, the Executive agrees that the Executive shall
not, for himself or on behalf of any other person or persons, company,
corporation, partnership, firm, association, syndicate or other entity,
directly or indirectly, alone or by action in concert with others, solicit or
engage for employment any person who at the Termination Date is or was an
officer, manager, member, consultant or other employee of the Company, the LLC
or any of their Subsidiaries during the Term without the express prior written
consent of the Company.
(b) Customers and Suppliers. The Executive acknowledges and agrees
that any solicitation of the Company's, the LLC's or any of their Subsidiaries'
customers or suppliers may involve the use or disclosure of Proprietary
Information protected by this Agreement. In recognition of this fact, during
the Term and for a period of one (1) year following the Termination Date, the
Executive agrees that the Executive shall not, without the express prior
written permission of the Company, for himself or on behalf of any other
person, corporation, partnership or other entity, directly or indirectly,
whether alone or by action in concert with others, solicit, induce or encourage
or attempt to solicit, induce or encourage, any person known by him to have a
relationship with the Company, the LLC or any of their Subsidiaries, or any
customer or supplier of the Company, the LLC or any of their Subsidiaries, to
discontinue, terminate, cancel or refrain from entering into any contractual or
business relationship with the Company, the LLC or any of their Subsidiaries.
7. Early Termination. Notwithstanding any other provision in Section 5
and Section 6 of this Agreement to the contrary, in the event that the
Executive's employment with the Company is terminated by the Executive due to a
material breach by the Company of its obligations under the Employment
Agreement, then the Executive's obligations under Section 5 and Section 6 of
this Agreement shall cease as of the Termination Date. Notwithstanding any
other provision contained herein (other than the preceding sentence which
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<PAGE>
shall control), the Executive's obligations under Section 5 and Section 6 of
this Agreement shall in all cases cease on the earlier of (i) one (1) year
after the Termination Date or (ii) the sixth (6th) anniversary of the date of
this Agreement.
8. Reasonableness of Covenants. Executive hereby acknowledges and
agrees that the foregoing covenants, promises duties and obligations are
commercially reasonable and reasonably necessary to protect the Company.
9. Injunctive Relief. The Executive agrees that it would be difficult
to measure damage to the Company for any breach or violation by the Executive
of the covenants, promises, duties and obligations set forth in this Agreement
and that injury to the Company from any such breach or violation by the
Executive would be impossible to calculate, and that money damages would be an
inadequate remedy for any such breach or violation. Accordingly, the Executive
agrees that if any provision of this Agreement is, or is threatened to be,
breached or violated, the Company shall be entitled, in addition to any and all
other rights and remedies it may have, either at law or in equity, to seek an
injunction or other appropriate orders enjoining or restraining any such breach
or violation, whether actual or threatened, by the Executive without showing or
proving any actual damage sustained by the Company.
10. Express Conditions of Company's Obligations. Subject to the
provisions of Section 7 hereof, the Executive acknowledges and agrees that any
obligations of the Company payable to or inuring to the benefit of the
Executive under this Agreement or the Employment Agreement following the
Termination Date are expressly conditioned upon the Executive's compliance with
and adherence to the provisions of Section 2 through (and including) Section 7
of this Agreement.
11. Miscellaneous.
(a) Assignment; Successors and Assigns. This Agreement may not be
assigned, nor may any obligations hereunder be delegated, by the Executive and
shall terminate upon his death. This Agreement is fully and freely assignable
by the Company in connection with the consolidation of the Company with, or its
merger into, any other corporation, or the sale by the Company of all or
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<PAGE>
substantially all of its properties or assets, but shall be assigned only
contemporaneously with the valid assignment of the Employment Agreement in
accordance with the terms thereof. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors and permitted assigns, and
shall not benefit any person or entity other than those enumerated above.
(b) Notices. Any notice, request, claim, demand, document or other
communication required or permitted to be given under any provision of this
Agreement to any party hereto shall be made in writing and shall be deemed to
have been duly delivered and received (i) on the date of personal or same-day
courier delivery, (ii) on the date of receipt, if mailed by certified or
registered mail, postage prepaid and return receipt requested, (iii) three (3)
business days following the date of deposit with the United States Postal
Service, if sent by regular first class mail, (iv) on the date of transmission,
if sent by telecopy, facsimile or other electronic transmission and
confirmatory evidence of such transmission is received and retained by sender,
or (v) on the date of the stamped receipt, if sent by an overnight delivery
service; and shall be addressed to the following addresses or to such other
address as either party may request and shall have specified by notice, in
writing, to the other:
To the Company: ABS Communications, L.L.C.
300 Arboretum Place
Suite 590
Richmond, VA 23236
Tel: (804) 330-5700
Fax: (804) 330-5727
Attention: Manager
With a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, NY 10022
Attention: Seth M. Zachary, Esq.
To the Executive: J. Edwin Conrad
20 Darien Way
Greenville, SC 29615
Tel: (864) 458-9085
With a copy to: LeClair Ryan
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<PAGE>
707 East Main Street, 11th Floor
Richmond, VA 23219
Tel: (804) 783-2003
Attention: Kurt Magette, Esq.
(c) Entire Agreement. The terms and provisions of this Agreement,
together with all exhibits and schedules attached hereto, embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, are intended by the parties to be the final expression of such
agreement and understanding, and supersede and terminate, and may not be
contradicted by evidence of, any and all prior or contemporaneous agreements,
arrangements or understandings, whether written or verbal, between the parties
hereto with respect to the subject matter hereof. The parties hereby agree that
this Agreement shall be in effect as of the date hereof.
(d) Amendments. Neither this Agreement nor any term or provision
hereof may be modified, amended, changed, waived, extended, suspended,
discharged or terminated unless evidenced by an instrument in writing signed by
the party against whom enforcement is sought.
(e) Waivers. By an instrument in writing similarly executed, either
party may waive compliance by the other party with any provision of this
Agreement that such other party was or is obligated to comply with or perform.
A waiver of any provision of this Agreement shall not be deemed a waiver of any
other provision of this Agreement. No waiver of any breach of any provision of
this Agreement shall be deemed the waiver of any subsequent breach thereof or
of any other provision. No failure by either party hereto to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder by either party
preclude any other or future exercise of that rights or any other right
hereunder by that party.
(f) Severability; Enforcement. If any part or provision of this
Agreement, or the application thereof to any person, place or circumstance,
shall be held by a court or such other body of competent jurisdiction to be
invalid, illegal, unenforceable or void in any respect under applicable law,
said part or provision shall be ineffective only to the extent of such
invalidity or unenforceability, without in any way affecting the remaining
parts and
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<PAGE>
provisions of this Agreement which shall be construed as if such invalid or
unenforceable part or provision had not been included, and such invalid or
unenforceable part or provision shall become and be immediately amended and
reformed to include only the portions thereof as are valid and enforceable by
such court or other body having jurisdiction of this Agreement, including such
portions as may continue to be applied to other persons, places or
circumstances which shall continue to remain in full force and effect; and the
parties to this Agreement agree that such part or provision as so amended or
reformed shall be valid and binding as though any wholly invalid or
unenforceable portion had not been included in this Agreement.
(g) Governing Law. The validity, construction, operation,
interpretation, enforceability, performance and effect of this Agreement, and
any and all terms and provisions hereof, and the respective rights, duties and
obligations of the parties hereunder, shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Virginia, without
giving effect to principles of conflicts of law thereunder.
(h) Headings. The headings set forth in this Agreement are provided
for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
-------------------------------
Name: Howard J. tytel
Title:
ABS COMMUNICATIONS, L.L.C.
By: SFX BROADCASTING, INC., as
Company
By: /s/ Howard J. Tytel
-------------------------------
Name:
Title:
/s/ J. Edwin Conrad
-----------------------------------
J. Edwin Conrad
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<PAGE>
ABS COMMUNICATIONS, L.L.C.
AMENDED AND RESTATED OPERATING AGREEMENT
AMONG
SFX BROADCASTING, INC.,
KENNETH A. BROWN
AND
ABS COMMUNICATIONS INCORPORATED
DATED AS OF
DECEMBER 17, 1997
.
<PAGE>
AMENDED AND RESTATED OPERATING AGREEMENT
OF
ABS COMMUNICATIONS, L.L.C.
THIS AMENDED AND RESTATED OPERATING AGREEMENT of ABS COMMUNICATIONS,
L.L.C. (the "Agreement") is entered into this 17th day of December,
1996, by and among SFX Broadcasting, Inc., a Delaware corporation ("SFX"),
Kenneth A. Brown ("KAB") and ABS Communications Incorporated, a Virginia
corporation ("ABS").
RECITALS
WHEREAS, KAB and ABS formed ABS COMMUNICATIONS, L.L.C. (the "Company")
on April 29, 1996 by the filing of an Articles of Organization with the
Virginia State Corporation Commission and the execution and delivery of the
Operating Agreement of the Company, dated as of April 29, 1996 (the "Original
Operating Agreement");
WHEREAS, KAB and ABS initially contributed $99.00 and $1.00,
respectively, to the Company and received Capital Account credits therefor and
Percentage Interests of 99% and 1%, respectively;
WHEREAS, pursuant to that certain KAB Contribution Agreement, dated as
of December 17, 1996 by and among KAB and the Company (the "KAB Contribution
Agreement"), KAB has contributed the Contributed Interests (as defined in the
KAB Contribution Agreement) to the Company and received a Capital Account
credit therefor of $1,700,000 and the Percentage Interests of KAB and ABS have
remained 99% and 1%, respectively;
WHEREAS, the parties hereto wish to amend and restate the Original
Operating Agreement in its entirety to reflect the admission of SFX as a
Member, to conclude the withdrawal of ABS from the Company as a Member as of
the date of this Agreement, and to reflect the adjustment of the Percentage
Interests of the remaining Members, and to provide for the allocation of Profit
and Loss (as defined in Article I hereto), cash flow and other proceeds of the
Company among the Members, the respective rights, obligations and interests of
the Members to each other and to the Company, and certain other matters;
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WHEREAS, in accordance with the terms of the Contribution Agreement,
dated as of December 17, 1996 by and between SFX, the Company and the other
parties thereto (the "SFX Contribution Agreement"), SFX has agreed to
contribute, subject to certain conditions, the Contributed Assets (as defined
in the SFX Contribution Agreement) to the Company pursuant to the SFX
Contribution Agreement substantially in the form attached hereto as Exhibit B;
WHEREAS, in accordance with the terms of the Convertible Note
Agreement, dated as of December 17, 1996 by and between SFX and the Company
(the "Convertible Note Agreement"), SFX has agreed to convert, subject to the
occurrence of a Conversion Event (as defined in the Convertible Note
Agreement), all Loan amounts outstanding (other than the Excluded Loan Amounts
(as defined in the Convertible Note Agreement)) into membership interests in
the Company as contemplated thereunder.
ARTICLE I
DEFINED TERMS
The following capitalized terms shall have the meanings specified in
this Article I. Other terms may be defined in the text of this Agreement and,
throughout this Agreement those terms shall have the meanings respectively
ascribed to them.
"Act" means the Virginia Limited Liability Company Act (Virginia Code
ss.ss.13.1-1000 to 13.1-1063), as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in the Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(a) increase such Capital Account by any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement (including
Section 3.6) or is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-(g)(1) and 1.704-2(i)(5) of the
Regulations; and
(b) increase such Capital Account by the items described in Sections
1.704-1(b)(2)(ii)(d)(4),
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1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
"Agreement" means this Agreement, as amended from time to time.
"Capital Account" means, with respect to any Member, the account
maintained for each Member on the books of account of the Company in accordance
with Section 3.5; provided, however, the Capital Account balance as of the date
of this Agreement for each Member shall be as reflected on Exhibit A.
"Capital Contribution" means the total amount of cash and the fair
market value of any other assets contributed to the Company by a Member, net of
liabilities assumed or to which the assets are subject.
"Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
"Company" means ABS COMMUNICATIONS, L.L.C., the limited liability
company formed and existing pursuant to the Original Operating Agreement, as
such limited liability company may from time to time be constituted.
"Depreciation" means, for each taxable year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such taxable year, except that if the adjusted book
value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such taxable year, Depreciation shall be an amount
which bears the same ratio to such adjusted book value as the federal income
tax depreciation, amortization or other cost recovery deduction for such
taxable year bears to such beginning adjusted tax basis; provided, however,
that if the adjusted basis for federal income tax purposes of an asset at the
beginning of such taxable year is zero, Depreciation shall be determined with
reference to such beginning adjusted book value using any reasonable method
selected by the Manager.
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"Fiscal Year" shall mean the Company's fiscal year, which shall be the
calendar year.
"Interest" means a Person's share of the Profits and Losses of, and
the right to receive distributions from, the Company.
"Majority Vote" means an affirmative vote by the Members whose
aggregate Percentage Interests on the date of such vote exceeds fifty percent
(50%).
"Member" means each Person signing this Agreement and any Person who
subsequently is admitted as a Member of the Company. The members of the Company
as of the date of this Agreement are those Persons listed in Section 2.7.
"Negative Capital Account" means a Capital Account with a debit
balance.
"Percentage Interest" means, as to the Members as of the date of this
Agreement, the percentage set forth after the Member's name below:
SFX Ninety-six percent (96%)
KAB Four percent (4%)
"Person" means and includes an individual, corporation, company,
association, partnership, limited liability company, trust, living trust,
estate, or other entity.
"Positive Capital Account" means a Capital Account with a credit
balance.
"Profit and Loss" means, for each Fiscal Year of the Company (or other
period for which Profit or Loss must be computed) the Company's taxable income
or loss determined in accordance with Code Section 703(a), with the following
adjustments:
(a) all items of income, gain, loss, deduction, or credit
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in computing taxable income or loss;
(b) any tax-exempt income of the Company, not otherwise taken
into account in computing Profit or Loss, shall be included in computing
taxable income or loss;
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<PAGE>
(c) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as such pursuant to Regulation Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profit
or Loss, shall be subtracted from taxable income or loss;
(d) gain or loss resulting from any taxable disposition of
Company property shall be computed by reference to the adjusted book value of
the property disposed of, notwithstanding the fact that the adjusted book value
differs from the adjusted basis of the property for federal income tax
purposes;
(e) in lieu of depreciation, amortization or other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such taxable year;
(f) to the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution
other than in liquidation of a Partner's interest in the Partnership, the
amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall
be taken into account for purposes of computing Profits or Losses; and
(g) notwithstanding any other provision of this definition, any
items which are specifically allocated pursuant to Section 5.3 hereof shall not
be taken into account in computing Profit or Loss.
"Regulations" means the Regulations, including any Temporary and
Proposed Regulations, promulgated by the U.S. Treasury Department under the
Code, as such Regulations may be amended from time to time (including
corresponding provisions of any succeeding Regulations).
"Transfer" means, when used as a noun, any voluntary sale,
hypothecation, pledge, assignment, attachment, or other transfer, and, when
used as a verb, means voluntarily to sell, hypothecate, pledge, assign, or
otherwise transfer.
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ARTICLE II
FORMATION AND NAME; OFFICE; PURPOSE;
TERM; WITHDRAWAL OF ABS
2.1 FORMATION. KAB and ABS formed the Company as a limited liability
company pursuant to the Act and in accordance with the terms of the Original
Operating Agreement. The Members execute and adopt this Agreement as an
Operating Agreement of the Company pursuant to ss.13.1-1023 of the Act.
2.2 NAME OF THE COMPANY. The name of the Company shall be ABS
COMMUNICATIONS, L.L.C.
2.3 PURPOSE. The purpose of the Company is to engage in any lawful
business of every kind and character for which a limited liability company may
be organized under the Act, including, without limitation, to own, operate,
manage and maintain radio stations. The Company shall have all the powers
provided for a limited liability company under the Act.
2.4 TERM. The term of the Company began on April 29, 1996 and shall
continue in existence until December 31, 2046, unless sooner terminated
pursuant to this Agreement or the Act.
2.5 PRINCIPAL OFFICE. The principal office of the Company shall be in
care of SFX Broadcasting, Inc., 150 East 58th Street, New York, New York 10155,
or at any other place as the Manager may designate from time to time.
2.6 REGISTERED OFFICE; RESIDENT AGENT. The Company shall maintain a
registered office in Virginia and the name and address of the Company's
resident agent in Virginia shall be as set forth in the Company's Articles of
Organization.
2.7 WITHDRAWAL OF ABS. As of the date of this Agreement, ABS hereby
withdraws from the Company as a Member and shall have no further right, title,
or interest in the Company or in any of its assets. In exchange therefore, the
Company has paid ABS $100 in cash, and ABS acknowledges receipt of such $100 in
full redemption of its interest.
2.8 MEMBERS. The names and addresses of the Members as of the date of
this Agreement are as follows:
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SFX Broadcasting, Inc., with its principal office at 150 East 58th
Street, New York, New York 10155.
Kenneth A. Brown, an individual residing at 2002 Millington Court,
Richmond, Virginia 23233.
ARTICLE III
MEMBERS; CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 CAPITAL CONTRIBUTIONS. On or prior to the date hereof, each Member
shall contribute, or has contributed, to the capital (whether in cash or
otherwise) of the Company the full amount of the capital contributions as set
forth opposite its name in Exhibit A attached hereto.
3.2 NO OTHER CAPITAL CONTRIBUTIONS. No Member shall be required to
contribute any additional capital to the Company. Other than as required in
Section 3.6, and except as set forth in the Act, no Member shall have any
personal liability to the Company, to any other Member of the Company, or to
any other person with respect to any obligations of the Company.
3.3 NO INTEREST ON CAPITAL CONTRIBUTIONS. Members shall not be paid
interest on their Capital Contributions.
3.4 RETURN OF CAPITAL CONTRIBUTIONS. No Member shall have the right to
receive the return of any Capital Contribution.
3.5 CAPITAL ACCOUNT MAINTENANCE. The Company shall maintain for each
Member a separate Capital Account in accordance with the following provisions
(which Capital Account shall be adjusted as otherwise required by Section
1.704-1(b) of the Regulations):
(a) Each Member's Capital Account shall be increased by such Member's
Capital Contributions, such Member's distributive share of Profits and any
items in the nature of income or gain which are specially allocated pursuant to
Article V hereof, and the amount of any Company liabilities assumed by such
Member or which are secured by any property distributed to such Member;
(b) Each Member's Capital Account shall be decreased by the amount of
cash and the fair market value of
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any property distributed to such Member pursuant to any provision of this
Agreement, such Member's distributive share of Losses and any items in the
nature of expenses or losses which are specially allocated pursuant to Section
5.3 hereof and the amount of any liabilities of such Member assigned by the
Company or which are secured by any property contributed by such Member to the
Company;
(c) In determining the amount of any liability for purpose of
paragraphs (a) and (b) hereof, there shall be taken into account Section 752(c)
of the Code and any other applicable provisions of the Code and Regulations;
and
(d) The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Section 1.704-1(b) of the
Regulations, and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Members shall determine that it is prudent
to modify the manner in which the Capital Account, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or which
are assumed by the Company or one or more of the Members), are computed in
order to comply with such Regulations, the Members may make such modification,
provided that it is not likely to have a material effect on the amounts
distributable to any Member pursuant to Section 8.3 of the Agreement upon the
dissolution of the Company. The Members also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company capital reflected on the
Company's balance sheet, as computed for book purpose in accordance with
Section 1.704-1(b)(2)(iv)(g) of the Regulations, and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Section 1.704-1(b) of the Regulations.
3.6 INDEBTEDNESS OF THE COMPANY. The Members acknowledge and agree
that the only indebtedness for borrowed money the Company may incur, other than
(i) indebtedness incurred for working capital purposes and (ii) intercompany
indebtedness representating the Excluded Loan Amounts (as defined in the
Convertible Loan Agreement), shall be $3,900,000 which is recourse to KAB (the
"Recourse Indebtedness"). The amount, type and nature of all indebtedness for
borrowed money shall not change without the mutual consent of the Members. If
the assets of the Company are insufficient to extinguish the Recourse
Indebtedness
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<PAGE>
when and if it becomes due or upon liquidation of the Company (not including
any additional capital contributions of SFX under Section 3.2 after such date),
KAB agrees to indemnify and hold the Company and the other Members harmless
for, and to the extent of, the Recourse Indebtedness.
3.7 GUARANTEE OF CERTAIN OBLIGATIONS. Notwithstanding any other
provision of this Agreement, the Company may guaranty, and, to the extent
permitted by law, use any or all of its assets to secure, any obligations of
SFX or any of its affiliates; provided:
(a) SFX shall indemnify and hold KAB harmless for any loss,
costs, or expenses that KAB incurs because of such guarantee;
(b) Such guarantee will not adversely affect or diminish the pro
rata distributions to the Members provided in Article 4; and
(c) SFX will insure that such guarantee does not diminish the
economic interest of KAB in the Company and its assets.
ARTICLE IV
DISTRIBUTIONS
4.1 DISTRIBUTIONS OF CASH FLOW. The cash distribution policy of the
Company shall be as follows:
(a) All distributions, other than in connection with the winding
up of the Company pursuant to Section 8.3 hereof, shall be governed by this
Section 4.1.
(b) Except as otherwise provided in Section 4.1(c) hereof, the
Company shall make distributions of available net cash flow from its operations
and investments, if any, to the Members in accordance with their Percentage
Interests to the extent net cash flow for any given month exceeds the cash
requirements of the Company for the next six (6) month period; provided,
however, in the event the Company is unable to make any distributions as a
result of the prior sentence, the Company may, at the request of a Member, make
an interest free loan in such amount as may be agreed to by such Member and the
Company, provided, that the other Member shall have the right to borrow in
proportionate
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amounts based on its or his Percentage Interest on the same terms (which may be
waived by such Member); provided, further, that the Manager shall be required
to make cash distributions at least quarterly to each Member in accordance with
their Percentage Interests so that the cash distributions made in each quarter
are at least equal to the (i) product of the "Rate" and the "Highest
Allocation" divided by (ii) the Percentage Interest of the Member receiving the
"Highest Allocation." For purposes of this Agreement, the term (i) "Rate" shall
mean the highest combined marginal federal, state and local income tax rate
applicable to any Member divided by four and (ii) "Highest Allocation" shall
mean the taxable income that the Company expects to allocate to a Member during
such year where such allocation divided by such Member's Percentage Interest
yields the highest number so computed for any Member.
(c) For any period in which KAB receives payment from SFX or an
affiliate thereof for services rendered in connection with the operation of the
Company, the distributions to which KAB would have otherwise been entitled
pursuant to Section 4.1(b) hereof shall be reduced, and the distributions to
which SFX would have otherwise been entitled shall be increased, by an amount
equal to the product of KAB's Percentage Interest and the cash compensation
made to KAB from SFX or its affiliate (including for this purpose the
employer's share of Old Age and Survivor's Disability Insurance and Medicare
taxes).
4.2 LIMITATION UPON DISTRIBUTIONS. No distribution shall be made to
Members if prohibited by Article V of the Act.
ARTICLE V
ALLOCATIONS
5.1 PROFITS. Profits, if any, for any Fiscal Year shall be allocated
among the Members in proportion to their Percentage Interests. Notwithstanding
the foregoing, Profits from a transaction or a series of transactions that will
result, or are deemed to result, in the liquidation of the Company, shall be
allocated as follows:
(a) first, to the Members so that, to the extent possible, the
Positive Capital Account balance of each Member divided by the aggregate
Positive Capital
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<PAGE>
Account balances of all Members shall be in a ratio equal to each Member's
Percentage Interest; and
(b) the balance, if any, shall be allocated among the Members in
proportion to their Percentage Interests.
5.2 LOSSES. Losses for any Fiscal Year shall be allocated as set forth
in Section 5.2(a) below, subject to the limitation in Section 5.2(b) below.
(a) Losses for any Fiscal Year, including deductions attributable
to nonrecourse indebtedness of the Company, shall be allocated among the
Members in proportion to their Percentage Interests. Notwithstanding the
foregoing, any deductions attributable to nonrecourse indebtedness upon which a
Member bears the economic risk of loss shall be specially allocated to that
Member in a manner consistent with the Regulations.
(b) The Losses allocated pursuant to Section 5.2(a) above shall
not exceed the maximum amount of Losses that can be so allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end of
any Fiscal Year. In the event some but not all of the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 5.2(a) above, any Losses otherwise allocable to a Member
which would result in such an Adjusted Capital Account Deficit shall instead be
allocated to those other Members which would not have such a deficit in
proportion to such other Members' Percentage Interests; provided, however, that
such Losses may not be so allocated to such other Members to the extent such
allocation would result in any such Members having an Adjusted Capital Account
Deficit at the end of any Fiscal Year.
5.3 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) Special Allocation. Notwithstanding the provisions of Section
5.1 hereof, items of income and gain shall first be specially allocated to SFX
in an amount equal to the amount of cash distributed to SFX pursuant to Section
4.1(c) hereof.
(b) Minimum Gain Chargeback. Items of income and gain shall be
allocated between the Members at such time and in such amounts as necessary to
satisfy the
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<PAGE>
"minimum gain chargeback" requirements of the Regulations. Where such a minimum
gain chargeback would cause a distortion in the economic arrangement of the
Members and it is not expected that the Company will have sufficient other
income to correct that distortion, the Company shall apply for a waiver of the
minimum gain chargeback requirement in accordance with Section 1.704-2(f)(4) of
the Regulations.
(c) Qualified Income Offset. Items of Company income, gain, loss
and deduction shall be allocated in an amount and manner sufficient to satisfy
the "qualified income offset" provisions Section 1.704-1(b)(2)(ii)(d) of the
Regulations.
(d) Curative Allocations. Certain allocations set forth in this
Article V (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other tax items of the
Company pursuant to this Article V (other than the Regulatory Allocations). The
Members shall make such offsetting special allocations of Company income, gain,
loss, or deduction in whatever manner they determine appropriate so that, after
such offsetting allocations are made, each Member's Capital Account balance is,
to the extent possible, equal to the Capital Account balance such Member would
have had if the Regulatory Allocations were not part of this Agreement and all
Company items were allocated pursuant to Sections 5.1 and 5.2 hereof.
5.4 TAX ALLOCATIONS; CODE SECTION 704(c). In accordance with Code
Section 704(c) and the Regulations thereunder, items of income, gain, loss, and
deduction with respect to any property (other than money) contributed to the
capital of the Company shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its initial
value using the traditional method as set forth in Treasury Regulations Section
1.704-3(b).
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<PAGE>
ARTICLE VI
MANAGER: RIGHTS, POWERS, AND DUTIES
6.1 MANAGER. The Company shall be managed by any Person ("Manager")
designated by Members by Majority Vote. SFX is hereby designated to serve as
the Manager. The Manager shall not owe any fiduciary duties to the Company or
any Member, but shall perform its managerial functions in good faith and within
the limits of Sections 6.2 and 6.3 hereof. Any Manager designated by the
Members may, by Majority Vote, be removed and replaced by any other Managers.
6.2 GENERAL POWERS. Subject to Section 6.3, the Manager shall have
full, exclusive and complete discretion, power and authority, subject in all
cases to the other provisions of this Agreement and the requirements of
applicable law, to manage, control, administer and operate the business and
affairs of the Company for the purposes herein stated. Without limiting the
foregoing, the Manager may, subject to the requirements of applicable laws:
(a) carry out all of the transactions contemplated hereunder;
(b) perform all acts, exercise all rights and make all decisions
for and on behalf of the Company;
(c) acquire, manage and dispose of any and all property, real or
personal, whether tangible or intangible, on behalf of the Company, including
through foreclosure or otherwise;
(d) compromise, arbitrate or otherwise adjust claims in favor of
or against the Company and initiate, prosecute and defend any litigation
relating to any Company business;
(e) employ, engage or subcontract with attorneys, accountants,
bookkeepers, underwriters, escrow agents, depositories, agents for collection,
banks, builders and any other service provider as the Manager may determine to
be appropriate and to terminate the services of any such entities, all at such
time or times as the Manager may determine;
(f) negotiate, execute, deliver and perform any and all contracts
and other documents on behalf of the
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<PAGE>
Company, including, but not limited to, promissory notes, security agreements,
contracts of purchase and sale, deeds and assignments and to take any and all
other action, as the Manager deems appropriate, to effectuate any such
transaction;
(g) acquire and enter into any contract of insurance for the
Company that the Manager deems necessary and proper for the protection of the
Company, either for the conservation of any asset of the Company or for any
purpose convenient or beneficial to the Company;
(h) cause the Company enter into contracts and transactions with
SFX or any of its affiliates in accordance with Section 6.3; and
(i) take any and all other actions relating to any asset of the
Company.
In connection with carrying out the foregoing duties, the Manager may appoint
and employ any Person as it deems necessary or advisable as officers
("Officers") of the Company to effectuate any of the foregoing and such
Officers shall exercise such powers and perform such duties as are prescribed
by the Manager.
6.3 LIMITATIONS ON POWERS. Notwithstanding any other provision in this
Agreement, the Manager shall not:
(a) cause the Company to enter into any contracts or transactions
with SFX or any of its affiliates other than on terms which are at least as
favorable to the Company as the Company would have obtained in a bona fide
arm's length transaction;
(b) issue additional equity interests in the Company of any kind
whatsoever without allowing KAB the right to acquire such interest on the same
terms as they are offered or, if such interest is offered to an affiliate of
SFX, on terms that the current Members agree are commercially reasonable;
(c) merge, recapitalize or effect any other material changes in
the Company that would have the effect of reducing KAB's Percentage Interest in
the Company without the consent of KAB;
(d) commit any act or omission which would have a material
adverse impact on the Percentage Interest of
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<PAGE>
KAB in the Company disproportionate to such impact on other Members; and
(e) take any action to amend the Articles of Organization of the
Company.
ARTICLE VII
TRANSFER OF INTERESTS OF MEMBERS
7.1 TRANSFERS. No Member may Transfer all or any portion of such
Member's Interest, except by operation of law. The attempted Transfer of any
Interest in violation of the prohibition contained in this Section 7.1 shall be
deemed invalid, null and void, and of no force or effect, other than to give
rise to a cause of action against the purported transferor for breach of this
Agreement.
ARTICLE VIII
DISSOLUTION
8.1 DISSOLUTION. The Company shall be dissolved and its affairs wound
up in the event that:
(a) The term of the Company as may be provided in this Agreement
expires;
(b) All of the Members agree, by written consent, to dissolve the
Company;
(c) The death, withdrawal, expulsion, bankruptcy or dissolution
of a Member, or the occurrence of any other event which terminates the
continued participation of a Member in the Company.
8.2 WINDING UP. Upon dissolution of the Company, an accounting shall
be made by the Company's independent accountants of the accounts of the Company
and of the Company's assets, liabilities and operations, from the date of the
last previous accounting until the date of dissolution. The Manager, or if the
Manager is unable to act, the other Members, shall proceed to wind up the
affairs of the Company as soon as is practicable.
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<PAGE>
8.3 DISTRIBUTION. The proceeds of any dissolution of the Company shall
be distributed in accordance with the following order of priority;
(a) First, to the payment of the debts and liabilities of the
Company and the expenses of dissolution and liquidation (to the extent that
such order of priority is consistent with the laws of the Commonwealth of
Virginia);
(b) Then, to the establishment of any reserves which the Manager,
or if the Manager is unable to act, the other Members, shall deem reasonably
necessary for payment of such other debts and liabilities of the Company
(contingent or otherwise), as are specified by the Manager, and such reserves
shall be held by a bank or trust company selected by the Manager, as escrow
holder, to be disbursed as directed by the Manager in payment of any of the
specified debts and liabilities or, at the expiration of such period as the
Manager may deem advisable, to be distributed in the manner hereinafter
provided; and
(c) Then, to the Members in accordance with their Positive
Capital Account balances (after giving affect to all contributions,
distributions, allocations and other Capital Account adjustments for all Fiscal
Years, including the Fiscal Year during which such liquidation occurs).
(d) If any assets of the Company are to be distributed in kind,
the net fair market value of such assets as of the date of dissolution shall be
determined by independent appraisal or by agreement of the Members. Such assets
shall be deemed to have been sold as of the date of dissolution for their fair
market value, and the Capital Accounts of the Members shall be adjusted
pursuant to Article V hereof to reflect such deemed sale before the
distribution of the assets in liquidation.
8.4 NO OBLIGATION TO RESTORE NEGATIVE CAPITAL ACCOUNTS. Other than as
provided in Section 3.6, if any Member has a Negative Capital Account (after
giving effect to all contributions, distributions, and allocations for all
Fiscal Years, including the year during which dissolution of the Company
occurs), such Member shall have no obligation to make any contribution to the
capital of the Company with respect to such Negative Capital Account, and the
negative balance of any Member's Capital Account shall not be considered a debt
owed by such Member to the Company or to any other Person for any purposes
whatsoever.
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<PAGE>
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS
9.1 BANK ACCOUNTS. All funds of the Company shall be deposited in one
or more bank accounts opened in the Company's name. The Manager shall determine
the institution or institutions at which the accounts will be opened and
maintained, the types of accounts, and the Persons who will have authority with
respect to the accounts and the funds therein.
9.2 BOOKS AND RECORDS. The Manager shall keep or cause to be kept
complete and accurate books and records of the Company and supporting
documentation of the transactions with respect to the conduct of the Company's
business. The books and records shall be maintained in accordance with
generally accepted United States accounting principles, consistently applied
and shall be available at the Company's principal office for examination by a
Member or the Member's duly authorized representative at any and all reasonable
time during normal business hours.
9.3 ANNUAL ACCOUNTING PERIOD. The annual accounting period of the
Company shall be its Fiscal Year.
9.4 TAX RETURNS.
(a) The Members intend that the Company shall be treated as a
"partnership" for federal, state, local and foreign income and franchise tax
purposes and agree to take all action, including the amendment of this
Agreement and the execution of other documents, as may be required to qualify
for and receive such treatment as a "partnership" for federal income tax
purposes.
(b) Federal, state, local, and foreign income tax returns of the
Company shall be prepared at the direction of the Manager.
9.5 TAX MATTERS PARTNER. SFX shall be the "tax matters partner"
pursuant to Code Section 6231(a)(7) and shall serve in a similar capacity under
any applicable state, local or foreign law, and is authorized to take all
necessary action to qualify as such. The tax matters partner shall represent
the Company on behalf of the Members in connection with all administrative and
judicial proceedings with respect to Company affairs involving or resulting
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<PAGE>
from examinations by any and all federal, state, local or foreign tax
authorities (including, but not limited to, examinations by the Internal
Revenue Service), and may expend Company funds for reasonable professional
services and costs in connection therewith as it deems advisable and necessary;
provided, that except as otherwise provided in this Agreement or by law, the
tax matters partner does not assume any obligations or responsibilities with
respect to the foregoing; provided, further, any settlement or act must adhere
to Section 6.3. The Company will reimburse the tax matters partner for all
reasonable expenses it incurs in fulfilling its duties as such.
9.6 MISCELLANEOUS.
(a) All elections by the Company for federal, state, local and
foreign income and franchise tax purposes shall be determined by the Manager.
(b) In the event of an audit of the tax returns of the Company by
the Internal Revenue Service or any other government agency, the tax matters
partner shall supervise, participate in and retain professionals to participate
in such audit and shall contest, to the extent it, in its sole discretion,
determines appropriate or advantageous, any assertions by such agency that may
be adverse to the Members or the Company; provided, any act must adhere to
Section 6.3.
ARTICLE X
GENERAL PROVISIONS
10.1 ASSURANCES.
(a) Each Member shall execute all such certificates and other
documents and shall do all such filing, recording, publishing, and other acts
as the Manager deems appropriate to comply with the requirements of law for the
formation and operation of the Company and to comply with any laws, rules, and
regulations relating to the acquisition, operation, or holding of the property
of the Company. Without limiting the foregoing, each of KAB and ABS hereby
agrees to provide the Manager with any and all information relating to KAB and
ABS, respectively, (and execute any and all agreements, certificates,
instruments and other
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<PAGE>
documents as reasonably requested by the Manager) in connection with operating
the business of the Company, or to comply with any laws, rules, and regulations
relating to the operation or holding of the property of the Company.
(b) No Member shall, directly or indirectly, take any action,
engage in any activity or have any ownership or management interest in any
Person which may adversely affect the ability of the Company or the other
Member to own, operate, acquire or manage any of their respective existing or
future radio stations.
10.2 COMPLETE AGREEMENT; AMENDMENT. This Agreement constitutes the
complete and exclusive statement of the agreement among the Members with
respect to the subject matter hereof. It supersedes all prior written and oral
statements, including any prior representation, statement, condition, or
warranty, with respect to the subject matter hereof. This Agreement may only be
amended with the consent of all of the Members.
10.3 APPLICABLE LAW. All questions concerning the construction,
validity, and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement shall be governed by the internal law,
not the law of conflicts, of the Commonwealth of Virginia.
10.4 HEADINGS. The headings herein are inserted as a matter of
convenience only, and do not define, limit, or describe the scope of this
Agreement or the intent of the provisions hereof.
10.5 BINDING PROVISIONS. This Agreement is binding upon, and inures to
the benefit of, the parties hereto and their respective successors and
permitted assigns.
10.6 SEPARABILITY OF PROVISIONS. Each provision of this Agreement
shall be considered separable; and if, for any reason, any provision or
provisions herein are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
10.7 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
------------------------------
Name: Howard J. Tytel
Title:
KENNETH A. BROWN, an individual
/s/ Kenneth A. Brown
--------------------------------
TO EVIDENCE ITS AGREEMENT AND
WITHDRAWAL:
ABS COMMUNICATIONS INCORPORATED
By: /s/ Kenneth A. Brown
------------------------------
Name: Kenneth A. Brown
Title:
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<PAGE>
EXHIBIT A
CAPITAL CONTRIBUTIONS
- ------------------------------------------------------------------------------
MEMBERS CAPITAL CONTRIBUTION AGREED FAIR OWNERSHIP
MARKET VALUE PERCENTAGE
- ------------------------------------------------------------------------------
SFX Conversion of Note under [$___________]1 96%
Broadcasting, SFX Convertible Note
Inc. Agreement
[$15,000,000]
All assets, properties,
rights, titles and
privileges of SFX
Broadcasting, Inc.
relating to WMXB-FM
radio station
[$------------]
Purchase Price under the
Purchase and Sale
Agreement
- ------------------------------------------------------------------------------
Kenneth A. Brown A limited partnership $1,700,000 4%
interest representing
__% ownership in ABS
Richmond Partners, L.P.
A limited partnership
interest representing
__% ownership in ABS
Richmond Partners II,
L.P.
==============================================================================
- --------------
(1) Full principal amount of the Convertible Note other than the Excluded Loan
Amounts (as defined in the Convertible Note Agreement).
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<PAGE>
PUT AND CALL AGREEMENT
----------------------
THIS PUT AND CALL AGREEMENT (this "Agreement") is entered into this
17th day of December, 1996, by and among SFX Broadcasting, Inc., a Delaware
corporation ("SFX") and Kenneth A. Brown, an individual ("KAB").
R E C I T A L S
- - - - - - - -
WHEREAS, pursuant to that certain KAB Contribution Agreement, dated as
of December 17, 1996 (the "KAB Contribution Agreement") by and between KAB and
ABS Communications, L.L.C., a Virginia limited liability company (the
"Company"), KAB contributed to the Company the Contributed Interests (as
defined in the KAB Contribution Agreement) and in consideration therefor
increased KAB's capital interest in the Company;
WHEREAS, SFX, KAB and ABS Communications Incorporated ("ABS") have
executed the Amended and Restated Operating Agreement dated as of the date
hereof (the "Amended Operating Agreement") and, pursuant thereto, ABS has
withdrawn from the Company and SFX and KAB have a 96% and 4%, respectively,
Percentage Interest (as defined in the Amended Operating Agreement; all of
KAB's interest in the Company is referred to as "KAB's Interest").
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the SFX Contribution Agreement, dated as of
December 17, 1996 (the "SFX Contribution Agreement") between SFX, the Company
and the other parties thereto that the parties hereto enter into this Agreement
pursuant to which KAB shall have the right to sell, and SFX shall have a right
to purchase, all, but not less than all, of KAB's Interest in accordance with
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
1. Call Option. At any time after the fifth anniversary of the Amended
Operating Agreement (the "Exercise Date"), SFX shall have the right to purchase
all, but not less than all, of KAB's Interest for the Purchase Price calculated
pursuant to Section 3 hereof. The right to purchase KAB's Interest pursuant to
this Section 1 shall be referred to as the "Call Option."
2. Put Option. At any time after the Exercise Date, KAB shall have the
right to sell all, but not less than all, of KAB's Interest to SFX for the
Purchase Price calculated pursuant to Section 3 hereof. The right to sell KAB's
Interest pursuant to this Section 2 shall be referred
<PAGE>
to as the "Put Option" and together with the Call Option, the "Options."
3. Purchase Procedures and Purchase Price. SFX and KAB may exercise
the Call Option and the Put Option, respectively, by giving written notice
thereof to the other party (the "Exercise Notice"). The purchase price (the
"Purchase Price") payable to KAB upon the exercise of the Call Option or the
Put Option, as applicable, shall be an amount equal to the fair market value of
KAB's Interest. SFX and KAB shall consult with one another for a period of ten
(10) business days following the receipt of the applicable Exercise Notice as
to the selection of a mutually acceptable arbitrator, who shall be a person
familiar with valuing radio station assets. If SFX and KAB do not so agree
within such ten (10)-day period, the arbitrator shall be appointed by a third
party selected by each of SFX and KAB. The arbitrator so selected shall then
determine the fair market value of KAB's Interest and shall notify SFX and KAB
of such arbitrator's determination within thirty (30) days following such
arbitrator's selection as arbitrator as described above and the amount of the
Purchase Price as so determined shall be binding upon the parties for all
purposes of this Agreement. In making such determination, the arbitrator shall
first determine the fair market value of the Company (which determination will
include the net working capital of the Company less recorded liabilities
(exclusive of current accounts payable which are included in computing net
working capital)) and then multiply such value by 4%. All of the reasonable
costs of any arbitration (including without limitation attorneys' fees) shall
be borne equally by SFX and KAB.
4. Closing.
(a) The closing (the "Closing") for the purchase and sale of KAB's
Interest pursuant to SFX's exercise of the Call Option or KAB's exercise of the
Put Option shall take place no later than 90 days after receipt by SFX or KAB
of the applicable Exercise Notice or, if later, seven (7) days following the
determination of the Purchase Price in the manner described in Section 3 hereof
and, if applicable, upon receipt by SFX and KAB of all third party consents,
including from the Federal Communications Commission (the "FCC"). The Closing
shall take place at 10:00 a.m. on the date of the Closing at the offices of
Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York
10022. Notwithstanding anything in this Agreement to the contrary, in the event
that applicable FCC rules require prior FCC consent in order to consummate the
Closing, the Closing shall not be consummated without such
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<PAGE>
prior consent having been obtained. It shall be a condition precedent to SFX's
obligation to consummate the Closing, which condition SFX at its option shall
be permitted to waive in writing, that such consent shall have become a "Final
Order." For purposes of this Agreement, a "Final Order" shall mean an FCC
consent or grant as to which the time within which any party in interest other
than the FCC may seek administrative or judicial reconsideration or review of
such consent or grant has expired and no petition for such reconsideration or
review has been timely filed with the FCC or with a court of competent
jurisdiction, and the normal time within which the FCC may review such consent
or grant on its own motion has expired and the FCC has not undertaken such
review.
(b) At the Closing, the Purchase Price shall be paid in cash by SFX
to KAB and KAB shall execute and deliver to SFX such agreements, assignments or
other instruments or documents of transfer as may be requested by SFX as shall
be necessary to evidence or effect the sale, assignment, transfer and
conveyance of KAB's Interest to SFX (including, without limitation, causing
such sale, assignment and transfer to be recorded on the transfer records of
the Company as well as amending the Company's Amended Operating Agreement to
reflect such sale, assignment and transfer) free and clear of all liens and
encumbrances of any kind, nature and description (other than such liabilities
of the Company which may be allocated to KAB's Interest). Notwithstanding the
foregoing, in the event the Closing does not take place by the 90th day
following receipt by SFX or KAB of the applicable Exercise Notice (the "Agreed
Closing Date"), the Purchase Price shall bear interest at an annual rate equal
to the prime or reference rate from time to time of Citibank, N.A., from and
including the Agreed Closing Date to but not including the date of payment of
the Purchase Price. Upon the request of SFX, KAB shall provide to SFX a
certificate to the effect that KAB's Interest being sold by KAB is free and
clear of all liens and encumbrances of any kind, nature and description (other
than such liabilities of the Company which may be allocated to KAB's Interest).
(c) If the Purchase Price is a positive dollar amount, any
obligation of KAB under the Amended Operating Agreement or otherwise to make
additional capital contributions to the Company or to indemnify the Company or
any of its Members shall be extinguished as of the Closing. If the Purchase
Price is an amount less than $0, SFX shall have the option of dissolving and
liquidating the Company rather than effecting the transactions under this
Agreement.
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<PAGE>
If SFX fails to elect such option, the Purchase Price shall be $0.
5. Cooperation. If either the Call Option or the Put Option is
exercised, SFX and KAB shall cooperate fully with each other and take any and
all actions, including actions to obtain the consent, approval or authorization
from the FCC, any other governmental agency or instrumentality or any other
third party, if applicable, necessary or advisable to consummate the
transactions contemplated by this Agreement as expeditiously as practical.
Without limiting the generality of the foregoing, in the event that applicable
FCC rules require prior FCC consent in order to consummate the Closing, the
parties hereto shall, within fifteen (15) days following receipt by SFX or KAB
of the applicable Exercise Notice, file an appropriate application with the FCC
seeking such consent and shall use their best efforts to obtain such consent
and a Final Order thereof promptly.
6. Construction of Agreement. This Agreement shall be construed as a
whole in accordance with its fair meaning and in accordance with the laws of
the Commonwealth of Virginia. The language of the Agreement shall not be
construed for or against any particular party. The headings used herein are for
reference only and shall not affect the construction of this Agreement.
7. Assignment. No party hereto may assign any of its rights or
obligations under this Agreement to any person without the prior written
consent of all of the other parties hereto; provided, however, notwithstanding
the foregoing, SFX shall be permitted to assign all of its rights and
obligations under this Agreement to any of its wholly-owned subsidiaries so
long as SFX fully guarantees the performance of such wholly-owned subsidiary's
obligation; provided, further, that upon the death of KAB, his executor or
personal representative shall have the right to exercise the Put Option and SFX
shall have the right to exercise the Call Option rather than wait for the
dissolution and liquidation of the Company.
8. Sole Agreement. This Agreement and the Master Agreement represent
the sole and entire agreement between the parties and together supersede all
prior agreements, negotiations and discussions between the parties hereto
and/or their respective counsel with respect to the subject matters covered
hereby.
9. Amendment to Agreement. Any amendment to this Agreement must be in
a writing signed by duly autho-
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<PAGE>
rized representatives of the parties hereto and stating the intent of the
parties to amend this Agreement.
10. Notices. Any notice hereunder to SFX shall be delivered by
certified mail or by facsimile transmission to SFX, 150 East 58th Street, New
York New York 10155, Attn. Howard Tytel, fax number (212) 753-3188. Any notice
hereunder to KAB shall be delivered by certified mail or by facsimile
transmission to Kenneth A. Brown, 2002 Millington Court, Richmond, Virginia
23233.
[Signatures to follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
--------------------------------
Name: Howard J. Tytel
Title:
KENNETH A. BROWN
/s/ Kenneth A. Brown
-----------------------------------
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<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
12 5/8% SERIES E CUMULATIVE EXCHANGEABLE PREFERRED
STOCK DUE MAY DUE OCTOBER 31, 2006
OF
SFX BROADCASTING, INC.
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
SFX Broadcasting, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, certifies that pursuant to the authority contained in Article 6 of
its Restated Certificate of Incorporation (the "Certificate of Incorporation")
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, the Board of Directors of the Corporation by
unanimous written consent dated ________ __, 1997 duly approved and adopted the
following resolution which resolution remains in full force and effect on the
date hereof:
RESOLVED, that pursuant to the authority vested in the Board
of Directors by its Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorized and provide for the issue of 12 5/8% Series
E Cumulative Exchangeable Preferred Stock due October 31, 2006 (the "Series E
Preferred Stock"), par value $0.01 per share, with a liquidation preference of
$100.00 per share, consisting of 4,150,000 shares, having the following voting
powers, preferences and relative, participating, optional and other special
rights, and qualifications, limitations and restrictions thereof as follows:
<PAGE>
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in
this Section 1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
Acquired Debt. The term "Acquired Debt" shall mean, with
respect to any specified Person, (i) Indebtedness of any other Person existing
at the time such other Person is merged with or into or became a Subsidiary of
such specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Subsidiary of such specified Person, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such specified Person.
Advertising Business. The term "Advertising Business" shall
mean 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.
Applicable Redemption Price. The term "Applicable Redemption
Price" shall mean a price per share equal to the following redemption prices
(expressed as a percentage of the Liquidation Preference thereof) during the
twelve-month periods commencing on January 15 of the years indicated:
2002.................................................. 106.313%
2003.................................................. 104.734%
2004.................................................. 103.156%
2005.................................................. 101.578%
2006 and thereafter .................................. 100.000%
in each case, together with accrued and unpaid dividends (if any) thereon to
the Redemption Date.
Affiliate. The term "Affiliate" of any specified Person shall
mean 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.
Affiliate Transaction. The term "Affiliate Transaction"
shall have the meaning set forth in Section 8(d) below.
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<PAGE>
Asset Sale. The term "Asset Sale" shall mean (i) the sale,
lease, conveyance or other disposition of any assets (including without
limitation, by way of a sale and leaseback or pursuant to an LMA or similar
arrangement); provided that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Corporation and its Subsidiaries
taken as a whole will be governed by the Sections 7 and 8(c) hereof and (ii)
the issue or sale by the Corporation or any of its Subsidiaries of Equity
Interests of any of the Corporation's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transaction (a) that have a Fair Market Value in excess of $5.0 million or (b)
for aggregate net proceeds in excess of $5.0 million. Notwithstanding the
foregoing: (i) the Pending Dispositions, the Chancellor Exchange and the CBS
Exchange, in each case as described in the Prospectus Supplement dated January
17, 1997, in all material respects, (ii) a transfer of assets by the
Corporation or to another Wholly Owned Subsidiary, (iii) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Corporation or to another Wholly
Owned Subsidiary, (iv) a Restricted Payment that is permitted under Section
8(a) hereof and (v) sales of obsolete equipment in the ordinary course of
business, will not be deemed to be Asset Sales.
Attributable Debt. The term "Attributable Debt" in respect of
a sale and leaseback transaction shall mean, at the time of determination, the
present value (discounted at the rate of interest implicit in such transaction,
determined in accordance with GAAP) of the obligation of the lessee for net
rental payments during the remaining term of the lease included in such sale
and leaseback transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
Bank Facilities. The term "Bank Facilities" shall mean, with
respect to the Corporation, one or more debt facilities (including, without
limitation, the 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 such 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. Indebtedness under Bank Facilities outstanding on the
date on which the Series E Preferred Stock is first issued under the
Certificate of Designations shall be deemed to have been incurred on such date
in reliance on the exception provided by clause (i) under Section 8(b).
Broadcast Business. The term "Broadcast Business" shall mean
any business, the majority of whose revenues are derived from the broadcast of
radio programming.
Business Day. The term "Business Day" shall mean a day other
than a Saturday or Sunday or any federal holiday.
Capital Lease Obligation. The term "Capital Lease Obligation"
shall mean, 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.
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<PAGE>
Capital Stock. The term "Capital Stock" shall mean (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. The term "Cash Equivalents" shall mean (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 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.
Change of Control. The term "Change of Control" shall mean
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 Corporation 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 Corporation, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that 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
Corporation having more than 35% of the combined voting power of all classes of
Voting Stock of the Corporation then outstanding or (iv) the first day on which
a majority of the members of the Board of Directors of the Corporation are not
Continuing Directors.
Change of Control Offer. The term "Change of Control Offer"
shall have the meaning set forth in Section 8(a) below.
Change of Control Payment. The term "Change of Control
Payment" shall have the meaning set forth in Section 7(a) below.
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<PAGE>
Change of Control Payment Date. The term "Change of Control
Payment Date" shall have the meaning set forth in Section 7(e)(ii) below.
Class A Common Stock. The term "Class A Common Stock" shall
mean the Class A Common Stock, par value $.01 per share, of the Corporation.
Class B Common Stock. The term "Class B Common Stock" shall
mean the Class B Common Stock, par value $.01 per share, of the Corporation.
Common Equity. The term "Common Equity" shall mean all shares
now or hereafter authorized of any class of common stock of the Corporation,
including the Class A Common Stock and Class B Common Stock, and any other
stock of the Corporation, howsoever designated, authorized after the Initial
Issue Date, that have the right (subject always to prior rights of any class or
series of preferred stock) to participate in the distribution of the assets and
earnings of the Corporation without limit as to per share amount.
Consolidated Cash Flow. The term "Consolidated Cash Flow"
shall mean, with respect to any Person for any period, the Consolidated Net
Income of such Person for such period plus (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale
by such Person or any of its Subsidiaries during such period (to the extent
such losses were deducted in computing such Consolidated Net Income), plus (ii)
provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) Consolidated
Interest Expense of such Person for such period to the extent any such
Consolidated Interest Expense was deducted in computing such Consolidated Net
Income, plus (iv) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash charges
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income, less (v) all non-cash items increasing Consolidated Net Income for such
period (excluding any such non-cash income to the extent it represents an
accrual of cash income in any future period), in each case, on a consolidated
basis and determined in accordance with GAAP.
Consolidated Indebtedness. The term "Consolidated
Indebtedness" of any Person as of any date of determination shall mean the sum
(without duplication) of (i) the total amount of Indebtedness and Attributable
Debt of such Person and its Subsidiaries, plus (ii) the total amount of other
Indebtedness shown on the balance sheet of the primary obligor on such
Indebtedness, to the extent that such Indebtedness has been Guaranteed by such
Person or one of its Subsidiaries, plus (iii) the aggregate liquidation value
or redemption amount (if larger) of all Disqualified Stock of such Person and
all preferred stock of Subsidiaries of such Person, in each case, determined on
a consolidated basis in accordance with GAAP.
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<PAGE>
Consolidated Interest Expense. The term "Consolidated
Interest Expense" shall mean, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such Guarantee or Lien is called upon) and
(iv) the product of (a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
Consolidated Net Income. The term "Consolidated Net Income"
shall mean, with respect to any Person for any period, the aggregate of the Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; provided that (i) the Net Income
(but not loss) of any Person that is not a Subsidiary or that is accounted for
by the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person or to
a Wholly Owned Subsidiary thereof, (ii) the Net Income of any Subsidiary shall
be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of that Net Income is not at the date
of determination permitted without any prior governmental approval (that has
not been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
Consolidated Net Worth. The term "Consolidated Net Worth"
shall mean, 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 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
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<PAGE>
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.
Continuing Directors. The term "Continuing Directors" shall
mean, as of any date of determination, any member of the Board of Directors of
the Corporation who (i) was a member of such Board of Directors on the Initial
Issue Date 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.
Credit Agreement. The term "Credit Agreement" shall mean that
certain credit agreement by and among the Corporation, the Corporation's
Subsidiaries, as guarantors, the Bank of New York, as agent and the lenders
party thereto, providing for $225 million of revolving credit 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.
Debt to Cash Flow Ratio. The term "Debt to Cash Flow Ratio"
shall mean, as of any date of determination, the ratio of (a) the Consolidated
Indebtedness as of such date to (b) the Consolidated Cash Flow of the
Corporation and its Subsidiaries on a consolidated basis for the four most
recent full fiscal quarters ending immediately prior to such date for which
internal financial statements are available. For purposes of calculating
Consolidated Cash Flow for the computation referred to above, (i) acquisitions
that have been made by the Corporation or any of its Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the date on which such Ratio is being
calculated (the "Calculation Date") shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded.
Default. The term "Default" shall mean any event that is or
with the passage of time or the giving of notice or both would be an Event of
Default.
Disqualified Stock. The term "Disqualified Stock" shall mean
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 mandatory redemption date of the Series E
Preferred Stock.
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<PAGE>
Dividend Payment Date. The term "Dividend Payment Date"
shall have the meaning set forth in Section 2(a) below.
Dividend Period. The term "Dividend Period" shall mean the
period from, and including, the Initial Issue Date to, but not including, the
first Dividend Payment Date and thereafter, each period from, and including,
the preceding Dividend Payment Date to, but not including the next Dividend
Payment Date.
Equity Interests. The term "Equity Interests" shall mean
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 Date. The term "Exchange Date" shall have the
meaning set forth in Section 5(b) below.
Exchange Debentures. The term "Exchange Debentures" shall
mean the Corporations's 12 5/8% Subordinated Exchange Debentures due October 31,
2006 issuable in exchange for the Corporation's Series E Preferred Stock.
Exchange Indenture. The term "Exchange Indenture" shall mean
that certain indenture under which the Exchange Debentures would be issued and
which shall be substantially in the form attached as Annex A hereto.
Executive Officer. The term "Executive Officer" shall mean
any officer of the Corporation that would be deemed to be an "executive
officer" within meaning of the rules and regulations of the Securities and
Exchange Commission.
Existing Indebtedness. The term "Existing Indebtedness" shall
mean all Indebtedness of the Corporation and its Subsidiaries (other than
Indebtedness under the Credit Agreement) in existence on the Initial Issue
Date, until such amounts are repaid.
Existing MMR Indebtedness. The term "Existing MMR
Indebtedness" shall mean all Indebtedness of MMR and its Subsidiaries in
existence at the closing of the MMR Merger, until such amounts are repaid.
Fair Market Value. The term "Fair Market Value" shall mean,
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. The term "GAAP" shall mean 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
8
<PAGE>
approved by a significant segment of the accounting profession, which are in
effect on the Initial Issue Date.
Government Securities. The term "Government Securities" shall
mean 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. The term "Guarantee" shall mean 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.
Holder. The term "Holder" shall mean the record holder of one
or more shares of Series E Preferred Stock, as shown on the books and records
of the Transfer Agent.
Hedging Obligations. The term "Hedging Obligations" shall
mean, 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. The term "Indebtedness" shall mean, with
respect to any Person, 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.
Initial Issue Date. The term "Initial Issue Date" shall mean
the date that shares of Series E Preferred Stock are first issued by the
Corporation.
Investments. The term "Investments" shall mean, 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
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<PAGE>
an acquisition of assets, Equity Interests or other securities by the
Corporation for consideration consisting of Common Equity shall not be deemed
to be an Investment. If the Corporation or any Subsidiary of the Corporation
sells or otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of the Corporation such that, after giving effect to any such sale
or disposition, such Person is no longer a Subsidiary of the Corporation, the
Corporation 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.
Junior Securities. The term "Junior Securities" shall mean
any class of stock ranking junior to the Series E Preferred Stock as to the
payment of dividends and as to rights in liquidation, dissolution or winding up
of the affairs of the Corporation. The Corporation's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock are expressly defined and
included as Junior Securities.
Lien. The term "Lien" shall mean, 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).
Liquidation Preference. The term "Liquidation Preference"
shall mean $50 per share of Series E Preferred Stock.
Local Marketing Agreement or LMA. The terms "Local Marketing
Agreement" or "LMA" shall mean 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. The term "Management
Termination Agreements" shall mean each of (i) the termination agreement
between the Corporation and R. Steven Hicks, dated April 15, 1996, and (ii) the
employment agreement between the Corporation and D. Geoffrey Armstrong,
effective April 15, 1996, in each case, as in effect on the Initial Issue Date.
Mandatory Redemption Date. The term "Mandatory Redemption
Date" shall have the meaning set forth in Section 5(a) below.
Material Broadcast License. The term "Material Broadcast
License" shall mean one or more authorizations issued by the Federal
Communications Commission for the operation
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of AM or FM radio stations that individually or collectively are material to
the financial condition, results of operations or prospects of the Corporation
and its Subsidiaries taken as a whole.
MMR. The term "MMR" shall mean Multi-Market Radio,
Incorporated, a Delaware corporation.
MMR Merger. The term "MMR Merger" shall mean the merger of
SFX Merger Corporation, a Wholly Owned Subsidiary of the Corporation, with and
into MMR, pursuant to which MMR will become a Wholly Owned Subsidiary of the
Corporation.
Net Income. The term "Net Income" shall mean, with respect to
any Person, the net income (loss) of such Person, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with
(a) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (b) the disposition of any securities by
such Person or any of its Subsidiaries or the extinguishment of any
Indebtedness of such person or any of its Subsidiaries and (ii) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
Net Proceeds. The term "Net Proceeds" shall mean the
aggregate cash proceeds received by the Corporation or any of its Subsidiaries
in respect of any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in
any Asset Sale), net of the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees,
and sales commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements),
amounts required to be applied to the repayment of Indebtedness (other than
Senior Debt) secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
New Note Indenture. The term "New Note Indenture" shall mean
the indenture governing the Corporation's 10 3/4% Senior Subordinated Notes due
2006.
New Notes. The term "New Notes" shall mean the Corporation's
10 3/4% Senior Subordinated Notes due 2006.
Obligations. The term "Obligations" shall mean any principal,
interest, penalties, fees (including, but not limited to, reasonable fees and
expenses of counsel), indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
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Officers' Certificate. The term "Officers' Certificate" shall
mean a certificate signed on behalf of the Corporation by two officers of the
Corporation, one of whom must be the Chief Executive Officer, the Chief
Financial Officer, the Treasurer or the principal accounting officer of the
Corporation that meets the requirements of Section 10 hereof.
Pari Passu Debt. The term "Pari Passu Debt" shall mean (i)
the New Notes and (ii) all other Indebtedness that ranks pari passu in right of
payment with the Exchange Debentures.
Parity Securities. The term "Parity Securities" shall mean
any class or series of stock of the Corporation authorized after the Initial
Issue Date that is entitled to receive payment of dividends and to receive
assets upon liquidation, dissolution or winding up of the affairs of the
Corporation on a parity with the Series E Preferred Stock.
Permitted Investments. The term "Permitted Investments" shall
mean (a) any Investment in the Corporation or any Subsidiary of the
Corporation; (b) any Investment in Cash Equivalents; (c) any Investment by the
Corporation or any Subsidiary of the Corporation in a Person, if after such
Investment (i) such Person becomes a Subsidiary of the Corporation 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
Corporation or a Subsidiary of the Corporation; (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 Corporation that is not also a
Subsidiary of the Corporation) 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 Corporation that is not also a Subsidiary of the Corporation)
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.
Permitted Liens. The term "Permitted Liens" shall mean (i)
Liens securing Senior Debt of the Corporation or securing Indebtedness of any
Subsidiary that, in either case, was permitted by the terms of the Exchange
Indenture to be incurred; (ii) Liens in favor of the Corporation; (iii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Corporation or any Subsidiary of the Corporation;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Corporation; (iv) Liens on property
existing at the time of acquisition thereof by the Corporation or any
Subsidiary of the Corporation, provided that such Liens were in existence prior
to the
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contemplation of such acquisition and do not extend to any assets other than
such assets so acquired; (v) Liens existing on the Initial Issue Date; (vi)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; and (vii) Liens incurred in the ordinary course of
business of the Corporation or any Subsidiary of the Corporation with respect
to obligations that do not exceed $10.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Corporation or such Subsidiary.
Permitted Refinancing Debt. The term "Permitted Refinancing
Debt" shall mean any Indebtedness of the Corporation or any of its Subsidiaries
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the
Corporation or any of its Subsidiaries; provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith); (ii)
such Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Exchange Debentures, such
Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Exchange
Debentures on terms at least as favorable to the Holders of Exchange Debenture
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Permitted Refinancing Debt is incurred either by the Corporation or by the
Subsidiary who was the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
Preferred Stock. The term "Preferred Stock," of any Person,
shall mean Capital Stock of such Person of any class or series (however
designated) that ranks prior, as to payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class or series of such Person.
Principal. The term "Principal" shall mean Robert F.X.
Sillerman.
Record Date. The term "Record Date" shall have the meaning
set forth in Section 2(a) below.
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Redemption Date. The term "Redemption Date" shall have the
meaning set forth in Section 5(d) below.
Related Party. The term "Related Party" with respect to the
Principal shall mean (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 in "Change of Control") beneficially holding 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).
Restricted Investments. The term "Restricted Investment"
shall mean an Investment other than a Permitted Investment.
SCMC. The term "SCMC" shall mean Sillerman Communications
Management Corporation, a Delaware corporation.
Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
Senior Securities. The term "Senior Securities" shall mean
any class or series of stock of the Corporation authorized after the Initial
Issue Date ranking senior to the Series E Preferred Stock in respect of the
right to receive dividends and in respect of the right to participate in any
distribution upon liquidation, dissolution or winding up of the affairs of the
Corporation. The shares of Series D Preferred Stock are Senior Securities.
Series D Exchange Notes. The term "Series D Exchange Notes"
shall mean the Corporation's 6 1/2% Subordinated Convertible Exchange Notes due
2007 issuable in exchange for the Corporation's Series D Preferred Stock.
Series D Exchange Note Indenture. The term "Series D Exchange
Note Indenture" shall mean the indenture governing the Corporation's 6 1/2%
Subordinated Convertible Exchange Notes due 2007 issuable in exchange for the
Corporation's Series D Preferred Stock.
Series D Preferred Stock. The term Series D Preferred Stock
shall mean the Corporation's 6 1/2 Series D Cumulative Convertible Exchangeable
Preferred Stock due May 31, 2007.
SFX Merger Company. The term "SFX Merger Company" shall mean
SFX Merger Company, a Delaware corporation.
Shared Facilities Agreement. The term "Shared Facilities
Agreement" shall mean the Shared Facilities Agreement between the Corporation
and SCMC, as in effect on the Initial Issue Date.
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Significant Subsidiary. The term "Significant Subsidiary"
shall mean 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. The term "Subsidiary" shall mean, 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).
Transfer Agent. The term "Transfer Agent" shall mean the
entity designated from time to time by the Corporation to act as the registrar
and transfer agent for the Series E Preferred Stock.
Voting Stock. The term "Voting Stock" shall mean 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.
Voting Rights Trigger Event. The term "Voting Rights Trigger
Event" shall have the meaning set forth in Section 5(b) below.
Weighted Average Life to Maturity. The term "Weighted Average
Life to Maturity" shall mean, when applied to any Indebtedness at any date, the
number of years obtained by dividing (i) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (ii) the then outstanding principal amount of such
Indebtedness.
Wholly Owned Subsidiary. The term "Wholly Owned Subsidiary"
of any Person means a Subsidiary of such Person all of the outstanding Capital
Stock or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or more Wholly
Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of
such Person.
2. Dividends.
(a) The Holders of shares of the Series E Preferred Stock
shall be entitled to receive, when, as and if dividends are declared by the
Board of Directors out of funds of the Corporation legally available therefor,
cumulative preferential dividends from the Initial Issue Date of the Series E
Preferred Stock accruing at the rate per share of $12.625 per annum, payable
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semi-annually in arrears on January 15 and July 15 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
January 1 and July 1 (each, a "Record Date"). Dividends will be payable in
cash, except that on each Dividend Payment Date occurring on or prior to
January 15, 2002, dividends may be paid, at the Corporation's option, by the
issuance of additional shares of Series E Preferred Stock (including fractional
shares) having a aggregate Liquidation Preference equal to the amount of such
dividends. The first dividend payment will be payable on July 15, 1997.
Dividends payable on the Series E 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.
(b) Dividends on the Series E Preferred Stock shall accrue
whether or not the Corporation 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 will accumulate to the extent they are
not paid on the Dividend Payment Date for the period to which they relate.
Accumulated unpaid dividends will bear interest at the rate of 12 5/8% per
annum. The Corporation shall take all actions required or permitted under
Delaware law to permit the payment of dividends on the Series E Preferred
Stock.
(c) No dividend whatsoever shall be declared or paid upon, or
any sum set apart for the payment of dividends upon, any outstanding Series E
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 E Preferred Stock. Unless full cumulative
dividends on all outstanding shares of Series E 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 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 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 Corporation 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 Corporation or any of its Subsidiaries. Holders of the Series E Preferred
Stock will not be entitled to any dividends, whether payable in cash, property
or stock, in excess of the full cumulative dividends as herein described.
3. Distributions Upon Liquidation, Dissolution or
Winding Up.
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation or reduction or decrease in its capital
stock resulting in a distribution of assets to the holders of any class or
series of the Corporation's Capital Stock (a "reduction or decrease in capital
stock"), each Holder of shares of the Series E Preferred Stock shall be
entitled to
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payment out of the assets of the Corporation available for distribution of an
amount equal to the Liquidation Preference per share of Series E Preferred
Stock held by such Holder, plus accrued and unpaid dividends 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 Equity of the Corporation. After payment in full of
the Liquidation Preference and all accrued dividends to which Holders of Series
E Preferred Stock are entitled, such Holders will not be entitled to any
further participation in any distribution of assets of the Corporation.
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 Corporation nor the
consolidation or merger of the Corporation with or into one or more
corporations will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation 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
Corporation or reduction or decrease in capital stock.
4. Redemption by the Corporation
(a) On October 31, 2006 (the "Mandatory Redemption Date"),
the Corporation shall redeem (subject to the legal availability of funds
therefor) all outstanding shares of Series E Preferred Stock at a price in cash
equal to the Liquidation Preference thereof, plus accrued and unpaid dividends
to the date of redemption.
(b) The Series E Preferred Stock may not be redeemed at the
option of the Corporation on or prior to January 15, 2002. The Series E
Preferred Stock may be redeemed, in whole or in part, at the option of the
Corporation on or after January 15, 2002, at the Applicable Redemption Price.
(c) In addition, prior to January 15, 2000, the Corporation
may, at its option, redeem up to 50% of the aggregate of (i) the Liquidation
Preference of the Series E Preferred Stock issued (whether issued or issued in
lieu of cash dividends) less the Liquidation Preference of Series E Preferred
Stock exchanged for Exchange Debentures and (ii) the principal amount of
Exchange Debentures issued (whether issued in exchange for Series E Preferred
Stock of in lieu of cash interest), with the net proceeds of one or more common
equity offerings received on or after the date of original issuance of the
Series E Preferred Stock at a redemption price of 112.625% of the Liquidation
Preference or principal amount, as the case may be, plus accumulated and unpaid
dividends in the case of Series E Preferred Stock and accrued and unpaid
interest in the case of Exchange Debentures; provided, that after any such
redemption, if any Series E Preferred Stock or Exchange Debentures remain
outstanding, at least $50 million in Liquidation Preference or principal
amount, as applicable, of the Series E Preferred Stock or Exchange Debentures,
as the case may be, remain outstanding; and provided further, that any such
redemption shall occur within 75 days of the date of closing of such offering
of common equity of the Corporation.
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(d) In case of redemption of less than all of the shares of
Series E Preferred Stock at the time outstanding, the shares to be redeemed
shall be selected pro rata or by lot as determined by the Corporation in its
sole discretion.
(e) Notice of any redemption shall be sent by or on behalf of
the Corporation not more than 60 days nor less than 30 days prior to the date
specified for redemption in such notice (including the Mandatory Redemption
Date, the "Redemption Date"), by first class mail, postage prepaid, to all
Holders of record of the Series E Preferred Stock at their respective last
addresses as they shall appear on the books of the Corporation; provided,
however, that no failure to give such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of any shares of Series E Preferred Stock except as to the Holder to whom the
Corporation has failed to give notice or except as to the Holder to whom notice
was defective. In addition to any information required by law or by the
applicable rules of any exchange upon which Series E Preferred Stock may be
listed or admitted to trading, such notice shall state: (i) whether such
redemption is being made pursuant to the optional or the mandatory redemption
provisions hereof; (ii) the Redemption Date; (iii) the Applicable Redemption
Price; (iv) the number of shares of Series E Preferred to be redeemed and, if
less than all shares held by such Holder are to be redeemed, the number of such
shares to be redeemed; (v) the place or places where certificates for such
shares are to be surrendered for payment of the Applicable Redemption Price,
including any procedures applicable to redemptions to be accomplished through
book-entry transfers; (vi) that dividends on the shares to be redeemed will
cease to accrue on the Redemption Date; and (vii) that Series E Preferred Stock
called for redemption may be converted at any time before the close of business
on the Redemption Date. Upon the mailing of any such notice of redemption, the
Corporation shall become obligated to redeem at the time of redemption
specified thereon all shares called for redemption.
(f) If notice has been mailed in accordance with Section 4(e)
above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by
the Corporation, separate and apart from its other funds in trust for the pro
rata benefit of the Holders of the shares so called for redemption, so as to
be, and to continue to be available therefor, then, from and after the
Redemption Date, dividends on the shares of the Series E Preferred Stock so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding and shall not have the status of shares of Series E
Preferred Stock, and all rights of the Holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the Applicable
Redemption Price) shall cease. Upon surrender, in accordance with said notice,
of the certificates for any shares so redeemed (properly endorsed or assigned
for transfer, if the Corporation shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the Applicable
Redemption Price. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares without cost to the Holder thereof.
(g) Any funds deposited with a bank or trust company for the
purpose of redeeming Series E Preferred Stock shall be irrevocable except that:
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(i) the Corporation shall be entitled to receive
from such bank or trust company the interest or other earnings, if
any, earned on any money so deposited in trust, and the Holders of any
shares redeemed shall have no claim to such interest or other
earnings; and
(ii) any balance of monies so deposited by the
Corporation and unclaimed by the Holders of the Series E Preferred
Stock entitled thereto at the expiration of two years from the
applicable Redemption Date shall be repaid, together with any interest
or other earnings earned thereon, to the Corporation, and after any
such repayment, the Holders of the shares entitled to the funds so
repaid to the Corporation shall look only to the Corporation for
payment without interest or other earnings.
(h) No Series E Preferred Stock may be redeemed except with
funds legally available for the purpose. The Corporation shall take all actions
required or permitted under Delaware Law to permit any such redemption.
(i) Notwithstanding the foregoing provisions of this Section
4, unless the full cumulative dividends on all outstanding shares of Series E
Preferred Stock shall have been paid or contemporaneously are declared and paid
for all past dividend periods, none of the shares of Series E Preferred Stock
shall be redeemed unless all outstanding shares of Series E Preferred Stock are
simultaneously redeemed.
(j) All shares of Series E Preferred Stock redeemed pursuant
to this Section 4 shall be restored to the status of authorized and unissued
shares of preferred stock, without designation as to series and may thereafter
be reissued as shares of any series of preferred stock other than shares of
Series E Preferred Stock.
5. Exchange.
(a) The Corporation may, at its option on any Dividend
Payment Date, exchange, in whole or in part, on a pro rata basis, the then
outstanding Series E Preferred Stock for Exchange Debentures; provided that
immediately after giving effect to any partial exchange, there shall be
outstanding Series E Preferred Stock with an aggregate liquidation preference
of not less than $50.0 million and not less than $50.0 million in aggregate
principal amount of Exchange Debentures; and, provided further, that (i) on the
date of such exchange there are no accumulated and unpaid dividends on the
Series E Preferred Stock (including the dividend payable on such date) or other
contractual impediments to such exchange; (ii) there shall be legally available
funds sufficient therefor; (iii) such exchange would be permitted under the
terms of the Series D Preferred Stock, to the extent then outstanding, and,
immediately after giving effect to such exchange, no Default or Event of
Default (each as defined in the Exchange Indenture) would exist under the
Exchange Indenture, no default or event of default would exist under the Credit
Agreement, the New Note Indenture or the Series D Exchange Note Indenture and
no default or event of default under any material instrument governing
Indebtedness
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outstanding at the time would be caused thereby; (iv) the Exchange Indenture
has been qualified under the Trust Indenture Act, if such qualification is
required at the time of exchange; and (v) the Corporation shall have delivered
a written opinion to the Exchange Trustee (as defined herein) to the effect
that all conditions to be satisfied prior to such exchange have been satisfied.
The Credit Agreement, the New Note Indenture, the Series D Certificate of
Designations and the Series D Exchange Note Indenture currently restrict the
exchange of the Series E Preferred Stock and may restrict the Corporation's
ability to exchange the Series E Preferred Stock in the future.
(b) The Exchange Debentures shall be issuable in all
appropriate denominations. Notice of the intention to exchange shall be sent by
or on behalf of the Corporation not more than 60 days nor less than 30 days
prior to the date fixed for the exchange (the "Exchange Date"), by first class
mail, postage prepaid, to each Holder of record of Series E Preferred Stock at
its respective last addresses as they shall appear on the books of the
Corporation; provided, however, that no failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the exchange of any shares of Series E Preferred Stock except
as to the Holder to whom the Corporation has failed to give notice or except as
to the Holder to whom notice was defective. In addition to any information
required by law or by the applicable rules of any exchange upon which Series E
Preferred Stock may be listed or admitted to trading, such notice shall 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 E Preferred Stock to be exchanged will cease
to accrue on the Exchange Date. Prior to giving the notice of intention to
exchange, the Corporation shall execute and deliver with a bank or trust
company, with capital, surplus and undivided profits of not less than
$100,000,000, selected by the Corporation, and qualify under the Trust
Indenture Act of 1939, as amended, the Exchange Indenture with such changes as
would not adversely affect any of the voting powers, preferences and relative,
participating, optional and other special rights of any holders of Series E
Preferred Stock as may be required by law or usage.
(c) A Holder delivering Series E Preferred Stock for exchange
will not be required to pay any taxes or duties in respect of the issue or
delivery of Exchange Debentures on exchange but will be required to pay any tax
or duty that may be payable in respect of any transfer involved in the issue or
delivery of the Exchange Debentures in a name other than that of the Holder of
the Series E Preferred Stock. Certificates representing Exchange Debentures
will not be issued or delivered unless all taxes and duties, if any, payable by
the Holder have been paid.
(d) If notice of any exchange has been properly given, and if
on or before the Exchange Date the Exchange Debentures have been duly executed
and authenticated and an amount in cash equal to all accrued and unpaid
dividends thereon to the Exchange Date has been deposited with the Transfer
Agent, then on or after the close of business on the Exchange Date, the shares
of Series E Preferred 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 [exchangeable] preferred stock, but not as Series E
Preferred Stock, and all rights of the Holders thereof as
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stockholders of the Corporation will cease, except the right of the Holders to
receive upon surrender of their certificates the Exchange Debentures and all
accrued and unpaid dividends thereon to the Exchange Date.
(e) As a condition to the exercise of the exchange rights
described in this Section 5, the Corporation shall deliver an opinion to the
Trustee as to the due authorization, execution, delivery and enforceability of
both the Exchange Debentures and the Exchange Debenture Indenture.
6. Voting Rights.
(a) The Holders of record of shares of Series E Preferred
Stock shall not be entitled to any voting rights except as hereinafter provided
in this Section 6 or as otherwise provided by law.
(b) If and upon:
(i) the accumulation of accrued and unpaid dividends
on the outstanding Series E Preferred Stock in an amount equal to six
(6) full quarterly dividends (whether or not consecutive);
(ii) the failure of the Corporation to satisfy any
mandatory redemption or repurchase obligation (including, without
limitation, pursuant to any required Change of Control Offer) with
respect to the Series E Preferred Stock;
(iii) the failure of the Corporation to
make a Change of Control Offer on the terms and in accordance with the
provisions described below in Section 7 hereof;
(vi) the failure of the Corporation to comply with
any of the other covenants or agreements set forth in this Certificate
of Designations and the continuance of such failure for 60 consecutive
days or more; or
(v) 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
Corporation or any of its Subsidiaries (or the payment of which is
guaranteed by the Corporation or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Initial
Issue Date, which default (i) is caused by a failure to pay principal
of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (ii) 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 under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates
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$25.0 million or more (each of the events described in clauses 6(b)(i)
through (v) being referred to herein as a "Voting Rights Trigger
Event");
then the authorized number of members of the Corporation's Board of Directors
will be immediately and automatically increased by two, and the Holders of a
majority of the outstanding shares of Series E Preferred Stock, voting
separately as a class, shall be entitled to elect two directors of the
Corporation.
(c) Whenever such voting right shall have vested, such right
may be exercised initially either at a special meeting of the Holders of Series
E Preferred Stock, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at such
annual meetings or by the written consent of the Holders of Series E Preferred
Stock. Such right of the Holders of Series E Preferred Stock to elect directors
may be exercised until (i) all dividends in arrears shall have been paid in
full and (ii) all other Voting Rights Trigger Events have been cured or waived,
at which time the right of the Holders of Series E Preferred Stock to elect
such number of directors shall cease, the term of such directors previously
elected shall thereupon terminate, and the authorized number of directors of
the Corporation shall thereupon return to the number of authorized directors
otherwise in effect, but subject always to the same provisions for the renewal
and divestment of such special voting rights in the case of any such future
dividend default or defaults or any such failure to make redemption payments.
(d) At any time when such voting right shall have vested in
the Holders of Series E Preferred Stock and if such right shall not already
have been initially exercised, a proper officer of the Corporation shall, upon
the written request of Holders of record of 10% or more of the Series E
Preferred Stock then outstanding, addressed to the Secretary of the
Corporation, call a special meeting of Holders of Series E Preferred Stock.
Such meeting shall be held at the earliest practicable date upon the notice
required for annual meetings of stockholders at the place for holding annual
meetings of stockholders of the Corporation or, if none, at a place designated
by the Secretary of the Corporation. If such meeting shall not be called by the
proper officers of the Corporation within 30 days after the personal service of
such written request upon the Secretary of the Corporation, or within 30 days
after mailing the same within the United States, by registered mail, addressed
to the Secretary of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
Holders of record of 10% of the shares of Series E Preferred Stock then
outstanding may designate in writing a Holder of Series E Preferred Stock to
call such meeting at the expense of the Corporation, and such meeting may be
called by such person so designated upon the notice required for annual
meetings of stockholders and shall be held at the place for holding annual
meetings of the Corporation or, if none, at a place designated by such Holder.
Any Holder of Series E Preferred Stock that would be entitled to vote at such
meeting shall have access to the stock books of the Corporation for the purpose
of causing a meeting of stockholders to be called pursuant to the provisions of
this Section. Notwithstanding the provisions of this paragraph, however, no
such special meeting shall be called if any such request is received less than
90 days before the date fixed for the next ensuing annual or special meeting of
stockholders.
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(e) If the directors so elected by the Holders of Series E
Preferred Stock shall cease to serve as a director before his term shall
expire, the Holders of Series E Preferred Stock then outstanding may, at a
special meeting of the Holders called as provided above, elect a successor to
hold office for the unexpired term of the director whose place shall be vacant.
(f) The Corporation shall not, without the affirmative vote
or consent of the Holders of a majority of the then outstanding shares of
Series E Preferred Stock (with shares held by the Corporation or any of its
Affiliates not being considered to be outstanding for this purpose) amend or
otherwise alter its Certificate of Incorporation in any manner that adversely
affects the rights of Holders of Series E Preferred Stock.
(g) Without the consent of each Holder affected, an amendment
or waiver may not (with respect to any shares of Series E Preferred Stock held
by a non-consenting Holder):
(i) alter the voting rights with respect to the
Series E Preferred Stock or reduce the number of shares of Series E
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 E Preferred Stock
or alter the provisions with respect to the redemption of the Series E
Preferred Stock (other than provisions relating to the covenant
described above in Section 7 hereof);
(iii) reduce the rate of or change the time for
payment of dividends on any share of Series E Preferred Stock;
(iv) waive a default or event of default in the
payment of dividends or on the Series E Preferred Stock;
(v) make any share of Series E Preferred Stock
payable in any form other than that stated in this Certificate of
Designations;
(vi) make any change in the provisions of this
Certificate of Designations relating to waivers of the rights of
Holders of Series E Preferred Stock to receive the Liquidation
Preference, dividends on the Series E Preferred Stock;
(vii) waive a redemption payment with respect to any
share of Series E Preferred Stock (other than a payment required by
the covenant described above in Section 7 hereof); or
(viii) make any change in the foregoing amendment and
waiver provisions.
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(h) The Corporation shall not, without the consent of at
least 66 2/3% of the then outstanding shares of Series E Preferred Stock (with
shares held by the Corporation or its Affiliates not being considered to be
outstanding for this purpose), authorize, create (by way of reclassification or
otherwise) or issue any 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.
(i) In addition, any amendment to the provisions of Section 7
hereof (including the related definitions) will require the consent of the
Holders of at least 75% of the shares of Series E Preferred Stock then
outstanding (with shares held by the Corporation or its Affiliates not being
considered to be outstanding for this purpose) if such amendment would
adversely affect the rights of Holders of Series E Preferred Stock.
(j) The Corporation in its sole discretion may without the
vote or consent of any Holders of the Series E Preferred Stock amend or
supplement this Certificate of Designations:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated
Series E Preferred Stock in addition to or in place of certificated
Series E Preferred Stock; or
(iii) to make any change that would provide any
additional rights or benefits to the Holders of the Series E Preferred
Stock or that does not adversely affect the legal rights or benefits
under this Certificate of Designations of any such Holder.
7. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder
of Series E Preferred Stock shall have the right to require the Corporation to
repurchase all or any part of such Holder's shares of Series E Preferred Stock
(a "Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate Liquidation Preference thereof plus accrued and unpaid dividends, if
any, thereon to the date of purchase (the "Change of Control Payment").
(b) The Change of Control Offer shall include all
instructions and materials necessary to enable Holders to tender their shares
of Series E Preferred Stock.
(c) The Corporation shall 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 shares of Series E Preferred Stock as a result of a
Change of Control.
(d) Within 30 days following any Change of Control, the
Corporation shall mail a notice to each Holder stating:
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(i) that the Change of Control Offer is being made
pursuant to this Section 7 and that all shares of Series E Preferred
Stock tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which
shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date");
(iii) that any share of Series E
Preferred Stock not tendered will continue to accrue dividends;
(iv) that, unless the Corporation fails to pay the
Change of Control Payment, all shares of Series E Preferred Stock
accepted for payment pursuant to the Change of Control Offer shall
cease to accrue dividends after the Change of Control Payment Date;
(v) that Holders electing to have any shares of
Series E Preferred Stock purchased pursuant to a Change of Control
Offer will be required to surrender the shares of Series E Preferred
Stock, with the form entitled "Option of Holder to Elect Purchase"
which shall be included with the Notice of Change of Control
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the
Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Series E
Preferred Stock delivered for purchase, and a statement that such
Holder is withdrawing his election to have such shares purchased; and
(vii) the circumstances and relevant facts regarding
such Change of Control (including, but not limited to, information
with respect to pro forma historical financial information after
giving effect to such Change of Control and information regarding the
Person or Persons acquiring control).
(e) On the Change of Control Payment Date, the Corporation
shall, to the extent lawful, (i) accept for payment all shares of Series E
Preferred Stock properly tendered pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent an amount equal to the Change of Control Payment
in respect of all shares of Series E Preferred Stock so tendered and (iii)
deliver or cause to be delivered to the Transfer Agent shares of Series E
Preferred Stock so accepted together with an Officers' Certificate stating the
aggregate Liquidation Preference of the shares of Series E Preferred Stock or
portions thereof being purchased by the Corporation. The Paying Agent shall
promptly mail to each Holder of Series E Preferred Stock so tendered the Change
of Control Payment for such Series E Preferred Stock and the Transfer Agent
will
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promptly authenticate and mail (or cause to be transferred by book-entry) to
each Holder a new certificate representing the shares of Series E Preferred
Stock equal in Liquidation Preference amount to any unpurchased portion of the
shares of Series E Preferred Stock surrendered, if any. The Corporation shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(f) Prior to complying with the provisions of this Section 7,
but in any event within 90 days following a Change of Control, the Corporation
shall either repay all outstanding Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Indebtedness to
permit the repurchase of Series E Preferred Stock required by this Section 7.
If the Corporation fails to make such repayment or obtain such consents within
such time period, it will result in a Voting Rights Triggering Event, but the
obligation to commence and consummate a Change of Control Offer will be
suspended until such repayment is made or such consents are obtained. If such
consents are not obtained, the Corporation will not repurchase any Series E
Preferred Stock until the 91st day following the retirement of the New Notes.
The Corporation will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
(g) The Corporation shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 7 applicable to a Change of Control
Offer made by the Corporation and purchases all shares of Series E Preferred
Stock validly tendered and not withdrawn under such Change of Control Offer.
8. Certain Covenants.
(a) Restricted Payments. The Corporation shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any other payment or distribution on
account of the Corporation's Parity Securities or Junior Securities (including,
without limitation, any payment in connection with any merger or consolidation
involving the Corporation) or to the direct or indirect holders of the
Corporation's Parity Securities or Junior Securities in their capacity as such
(other than dividends or distributions payable in Capital Stock (other than
Disqualified Stock) of the Corporation); (ii) purchase, redeem or otherwise
acquire or retire for value any Parity Securities or Junior Securities of the
Corporation; (iii) make any payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Junior Securities, except payments of
the Liquidation Preference thereof at final maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Voting Rights Triggering Event shall
have occurred and be continuing or would occur as a
consequence thereof; and
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(b) the Corporation would, at the time of such
Restricted Payment and after giving pro forma effect thereto
as if such Restricted Payment had been made at the beginning
of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness (other than
Permitted Debt) pursuant to the Debt to Cash Flow Ratio test
set forth below under Section 8(b) hereof; and
(c) such Restricted Payment, together with the
aggregate amount of all other Restricted Payments declared or
made after the Initial Issue Date (other than Restricted
Payments permitted by clauses (2), (5), (6) or (10) of the
following paragraph) shall not exceed, at the date of
determination, the sum of (1) an amount equal to the
Corporation's Consolidated Cash Flow from the Initial Issue
Date to the end of the Corporation's most recently ended full
fiscal quarter for which internal financial statements are
available, taken as a single accounting period, less the
product of 1.4 times the Corporation's Consolidated Interest
Expense from the Initial Issue Date to the end of the
Corporation's most recently ended full fiscal quarter for
which internal financial statements are available, taken as a
single accounting period, plus (2) an amount equal to the net
cash proceeds received by the Corporation from the issue or
sale after the Initial Issue Date of Equity Interests of the
Corporation (other than (i) sales of Disqualified Stock and
(ii) Equity Interests sold to any of the Corporation's
Subsidiaries) or of debt securities or Disqualified Stock
(other than the Series D Preferred Stock) of the Corporation
that have been converted into such Equity Interests plus (3)
to the extent that any Restricted Investment that was made
after the Initial Issue Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment
(less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment.
If no Voting Rights Triggering Event shall have occurred and be
continuing as a result thereof, the foregoing provisions will not prohibit: (1)
the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of this Certificate of Designations; (2) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Corporation in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Corporation) of other Equity
Interests of the Corporation (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c)(2) of the preceding paragraph; (3) cash payments made in respect of
fractional shares of Capital Stock not to exceed $100,000 in the aggregate in
any fiscal year; (4) the payment of dividends on the shares of Series D
Preferred Stock in accordance with the terms thereof as in effect on the
Initial Issue Date; (5) the issuance of Series D Exchange Notes in exchange for
the Series D Preferred Stock; provided that such issuance is permitted by
Section 8(b) hereof; (6) the issuance of Exchange Debentures in exchange for
the Series E Preferred Stock; provided that such issuance is permitted by
Section 8(b) hereof; (7) in the event that the Corporation elects to issue the
Series D Exchange Notes in exchange for the Series D Preferred Stock, cash
payments made in lieu of the issuance of Series
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D Exchange Notes having a face amount less than $50 and any cash payments
representing accrued and unpaid dividends in respect thereof, not to exceed
$100,000 in the aggregate in any fiscal year; (8) in the event that the
Corporation elects to issue Exchange Debentures in exchange for Series E
Preferred Stock, cash payments made in lieu of the issuance of Exchange
Debentures having a face amount less than $1,000 and any cash payments
representing accrued and unpaid dividends in respect thereof, not to exceed
$100,000 in the aggregate in any fiscal year; (9) payments made by the
Corporation to SCMC for facilities maintenance and other services and
reimbursements pursuant to the Shared Facilities Agreement, as amended from
time to time, to the extent that such payment do not exceed the amount of
payments which have been due if calculated in accordance with the terms of the
Shared Facilities Agreement as in effect on the Initial Issue Date; (10)
payments by the Corporation pursuant to the Management Termination Agreements
in accordance with the terms thereof as in effect on the Initial Issue Date;
and (11) the redemption by the Corporation of its Series C Preferred Stock in
accordance with the terms thereof as in effect on the Initial Issue Date.
The amount of all Restricted Payments (other than cash) shall be the
Fair Market Value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Board of Directors) on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred by the Corporation or such Subsidiary, as the case may be, pursuant
to the Restricted Payment. Not later than the date of making any Restricted
Payment, the Corporation shall deliver to the Board of Directors an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this covenant were computed,
which calculations may be based upon the Corporation's latest available
financial statements.
(b) Incurrence of Indebtedness and Issuance of Preferred
Stock. The Corporation shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt)
and that the Corporation will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to issue any shares of Preferred Stock;
provided, however, that (i) the Corporation may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and (ii) (A) the
Subsidiaries may guarantee Senior Debt and (B) the Subsidiaries may issue
Preferred Stock other than Disqualified Stock if, in either case, the
Corporation's Debt to Cash Flow Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock or the Guarantee of
such Senior Debt or the issuance of such Preferred Stock, as the case may be,
after giving pro forma effect to such incurrence or issuance or Guarantee as of
such date and to the use of proceeds therefrom as if the same had occurred at
the beginning of the most recently ended four full fiscal quarter period of the
Corporation for which internal financial statements are available, would have
been no greater than 7.0 to 1.
The foregoing provisions will not apply to the incurrence of any of
the following Indebtedness (collectively, "Permitted Debt"):
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(i) the incurrence by the Corporation and its Subsidiaries of
Indebtedness pursuant to one or more Bank Facilities, so long as the aggregate
principal amount of all Indebtedness outstanding under all Bank Facilities does
not, at the time of incurrence, exceed an amount equal to $225.0 million;
(ii) the incurrence by the Corporation and its
Subsidiaries of the Existing Indebtedness;
(iii) Indebtedness under the Exchange Debentures;
(iv) the issuance of Disqualified Stock by the Corporation that by its
terms would not require or permit any payment of dividends or other
distributions that would violate the covenant Section 8(a) above;
(v) the incurrence by the Corporation or any of its Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new Subsidiary;
provided that such Indebtedness was incurred by the prior owner of such assets
or such Subsidiary prior to such acquisition by the Corporation or one of its
Subsidiaries and was not incurred in connection with, or in contemplation of,
such acquisition by the Corporation or one of its Subsidiaries; and provided
further that, after giving pro forma effect to such incurrence of Indebtedness
as of such date and to the use of proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period for which internal financial statements are available, the Corporation's
Debt to Cash Flow Ratio would have been no greater than 7.0 to 1;
(vi) the incurrence by the Corporation or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund, Indebtedness that
was permitted by this Certificate of Designation to be incurred;
(vii) the incurrence by the Corporation or any of its Subsidiaries of
intercompany Indebtedness between or among the Corporation and any of its
Subsidiaries; provided, however, that (i) if the Corporation is the obligor on
such Indebtedness, such Indebtedness is expressly subordinate to the payment in
full of all Obligations with respect to the Exchange Debentures and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Corporation or a Subsidiary
and (B) any sale or other transfer of any such Indebtedness to a Person that is
not either the Corporation or a Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Corporation or such
Subsidiary, as the case may be;
(viii) the incurrence by the Corporation or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Certificate of Designations to be outstanding;
and
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(ix) the incurrence by the Corporation and any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of this
paragraph) in an aggregate principal amount (or accreted value, as applicable)
at any time outstanding not to exceed $10.0 million.
(c) Merger, Consolidation or Sale of Assets. The Corporation
shall not consolidate or merge with or into (whether or not the Corporation 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 Corporation is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Corporation) 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 states, any state thereof or
the District of Columbia; (ii) the Series E Preferred Stock shall be converted
into or exchanged for and shall become shares of such successor, transferee or
resulting Person, having in respect of such successor, transferee or resulting
Person the same powers, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions
thereon, that the Series E Preferred Stock had immediately prior to such
transaction; (iii) immediately after such transaction no Voting Rights
Triggering Event 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 Corporation with or into a Wholly Owned
Subsidiary of the Corporation, the Corporation or the entity or Person formed
by or surviving any such consolidation or merger (if other than the
Corporation), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Corporation immediately preceding the transaction and (B) will, at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt to Cash Flow Ratio set forth in Section 8(b) hereof.
(d) Transactions with Affiliates. The Corporation shall not,
and shall 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 Corporation or the relevant Subsidiary than those that would have been
obtained in a comparable transaction by the Corporation or such Subsidiary with
an unrelated Person and (ii) the Corporation 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
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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 Corporation and/or its
wholly-owned Subsidiaries, (2) the redemption or repurchase of the Existing MMR
Indebtedness, (3) transactions and agreements specifically contemplated by the
Termination and Assignment Agreement between the Corporation and SCMC as in
effect on the Initial Issue Date, (4) payments required by the terms of the
joint lease among the Corporation, SCMC and the landlord thereunder for the
Corporation'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 Initial Issue Date, (5) payments made by the Corporation
to SCMC for the facilities maintenance and other services and reimbursements
pursuant to the Shared Facilities Agreement, (6) payments by the Corporation
pursuant to the Management Termination Agreements and (7) any Permitted
Investments, in each case, shall not be deemed to be Affiliate Transactions.
(e) Payments for Consent. Neither the Corporation nor any of
its Subsidiaries shall, 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 any Series E Preferred Stock for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Certificate of Designations or the Series E Preferred Stock
unless such consideration is offered to be paid and is paid to all Holders of
the Series E 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.
(f) Reports.
(i) Whether or not required by the rules and
regulations of the Securities and Exchange Commission (the
"Commission"), so long as any shares of Series E Preferred Stock are
outstanding, the Corporation shall furnish to the Holders of Series E
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 Corporation 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 Corporation'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
Corporation were required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, the
Corporation shall 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.
(ii) The Corporation shall deliver to the Holders,
within 90 days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the Corporation
and its Subsidiaries during the preceding fiscal year has been made
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under the supervision of the signing officers with a view to
determining whether the Corporations has kept, observed, performed and
fulfilled its obligations under this Certificate of Designations and
further stating, as to each such officer signing such certificate,
that to the best of his or her knowledge the Corporation has kept,
observed, performed and fulfilled each and every covenant contained in
this Certificate of Designations and is not in default in the
performance or observance of any of the terms, provisions and
conditions of this Certificate of Designations (or, if any such
default shall have occurred, describing all such defaults of which he
or she may have knowledge and what action the Corporation is taking or
proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason
of which payments on account of the Liquidation Preference of or
dividends, if any, on the Series E Preferred Stock is prohibited or if
such event has occurred, a description of the event and what action
the Corporation is taking or proposes to take with respect thereto.
(iii) So long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to
Section 8(c)(i) above shall be accompanied by a written statement of
the Corporation's independent public accountants (who shall be a firm
of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has
come to their attention that would lead them to believe that the
Corporation has violated any provisions of this Certificate of
Designations or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person
for any failure to obtain knowledge of any such violation.
(iv) The Corporation shall, so long as any of the
shares of Series E Preferred Stock are outstanding, deliver to the
Holders, forthwith upon any Executive Officer of the Corporation
becoming aware of any default under this Certificate of Designations,
an Officers' Certificate specifying such default and what action the
Corporation is taking or proposes to take with respect thereto.
(g) Conflicts with By-laws. If any provisions of the
Corporation's By-laws conflict in any way with this Certificate of
Designations, the Corporation shall, so long as any of the shares of Series E
Preferred Stock are outstanding, take all necessary actions to amend such
By-laws and thereby resolve the conflict.
9. Payment.
(a) All amounts payable in cash with respect to the Series E
Preferred Stock shall be payable in United States dollars at the office or
agency of the Corporation maintained for such purpose within the City and State
of New York or, at the option of the Corporation, payment of dividends may be
made by check mailed to the Holders of the Series E Preferred Stock at their
respective addresses set forth in the register of Holders of Series E Preferred
Stock
32
<PAGE>
maintained by the Transfer Agent, provided that all cash payments with respect
to the Global Shares (as defined below) and shares of Series E Preferred Stock
the Holders of which have given wire transfer instructions to the Corporation
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Unless otherwise designated by
the Corporation, the Corporation's office or agency in New York shall be the
office of the Paying Agent maintained for such purpose.
(b) Any payment on the Series E 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 next succeeding Business Day with the same force and effect as if made on
such due date.
(c) The Corporation has initially appointed the Transfer
Agent to act as the Paying Agent. The Corporation may at any time terminate the
appointment of any Paying Agent and appoint additional or other Paying Agents,
provided that until the Series E Preferred Stock has been delivered to the
Corporation for cancellation, or moneys sufficient to pay the Liquidation
Preference and accrued dividends on the Series E Preferred Stock have been made
available for payment and either paid or returned to the Corporation as
provided in this Certificate of Designations, it shall maintain an office or
agency in the Borough of Manhattan, The City of New York for surrender of
Series E Preferred Stock.
(d) Dividends payable on the Series E 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.
(e) All moneys deposited with any Paying Agent or then held
by the Corporation in trust for the payment of the Liquidation Preference and
dividends on any shares of Series E Preferred Stock which remain unclaimed at
the end of two years after such payment has become due and payable will be
repaid to the Corporation, and the Holder of such shares of Series E Preferred
Stock will thereafter look only to Corporation for payment thereof.
10. Officers' Certificate.
Each Officers' Certificate provided for in this Certificate
of Designations shall include:
(a) a statement that the officer making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
33
<PAGE>
(c) a statement that, in the opinion of such officer, he or
she has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of
such officer, such condition or covenant has been satisfied.
11. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of
Series E Preferred Stock shall not have any voting powers, preferences and
relative, participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designations (as such Certificate
of Designations may be amended from time to time) and in the Certificate of
Incorporation. The shares of Series E Preferred Stock shall have no preemptive
or subscription rights.
12. Headings of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
13. Severability of Provisions.
If any voting powers, preferences and relative,
participating, optional and other special rights of the Series E Preferred
Stock and qualifications, limitations and restrictions thereof set forth in
this resolution (as such resolution may be amended from time to time) is
invalid, unlawful or incapable of being enforced by reason of any rule of law
or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of Series E Preferred Stock
and qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series E Preferred Stock
and qualifications, limitations and restrictions thereof shall, nevertheless,
remain in full force and effect, and no voting powers, preferences and
relative, participating, optional or other special rights of Series E Preferred
Stock and qualifications, limitations and restrictions thereof herein set forth
shall be deemed dependent upon any other such voting powers, preferences and
relative, participating, optional or other special rights of Series E Preferred
Stock and qualifications, limitations and restrictions thereof unless so
expressed herein.
14. Form of Securities.
(a) The Series E Preferred Stock shall initially be issued in
the form of one or more Global Preferred Shares (the "Global Shares"). The
Global Shares shall be deposited on the Initial Issue Date with, or on behalf
of, The Depository Trust Company (the "Depository")
34
<PAGE>
and registered in the name of Cede & Co., as nominee of the Depository (such
nominee being referred to as the "Global Share Holder").
(b) So long as the Global Share Holder is the registered
owner of any Series E Preferred Stock, the Global Share Holder will be
considered the sole Holder under this Certificate of Designations of any shares
of Series E Preferred Stock evidenced by the Global Shares. Beneficial owners
of shares of Series E Preferred Stock evidenced by the Global Shares shall not
be considered the owners or Holders thereof under this Certificate of
Designations for any purpose. The Corporation shall not have any responsibility
or liability for any aspect of the records of the Depositary relating to the
Series E Preferred Stock.
(c) Payments in respect of the Liquidation Preference,
dividends on any Series E Preferred Stock registered in the name of the Global
Share Holder on the applicable record date shall be payable by the Corporation
to or at the direction of the Global Share Holder in its capacity as the
registered Holder under this Certificate of Designations. The Corporation may
treat the persons in whose names Series E Preferred Stock, including the Global
Shares, are registered as the owners thereof for the purpose of receiving such
payments. The Corporation does not have nor will have any responsibility or
liability for the payments of such amounts to beneficial holders of Series E
Preferred Stock.
(d) Any person having a beneficial interest in a Global Share
may, upon request to the Corporation, exchange such beneficial interest for
Series E Preferred Stock in the form of registered definitive certificates
("Certificated Securities"). Upon any such issuance, the Corporation shall
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). If (i)
the Corporation notifies the Holders in writing that the Depositary is no
longer willing or able to act as a depositary and the Corporation is unable to
locate a qualified successor within 90 days or (ii) the Corporation, at its
option, notifies the Holders in writing that it elects to cause the issuance of
Series E Preferred Stock in the form of Certificated Securities, then, upon
surrender by the Global Share Holder of its Global Shares, Series E Preferred
Stock in such form will be issued to each person that the Global Share Holder
and the Depositary identify as being the beneficial owner of the related Series
E Preferred Stock.
35
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be duly executed by Robert F.X. Sillerman, Executive Chairman,
and attested by Howard J. Tytel, its secretary, this __ day of January, 1997.
SFX BROADCASTING, INC.
By:
-----------------------
Robert F.X. Sillerman
Executive Chairman
ATTEST:
By:
--------------------------
Howard J. Tytel
Secretary
36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SFX BROADCASTING, INC.
12 5/8% SUBORDINATED EXCHANGE DEBENTURES DUE 2006
-----------------
INDENTURE
Dated as of ______ __, ____
-----------------
-----------------
-----------------
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1)..................................................................... 7.10
(a)(2).................................................................... 7.10
(a)(3) ................................................................... N.A.
(a)(4).................................................................... N.A.
(a)(5).................................................................... 7.10
(b) ...................................................................... 7.10
(c) ...................................................................... N.A.
311 (a) ....................................................................... 7.11
(b) ...................................................................... 7.11
(c) ...................................................................... N.A.
312 (a)........................................................................ 2.05
(b)....................................................................... 11.03
(c) ...................................................................... 11.03
313 (a) ....................................................................... 7.06
(b)(1) ................................................................... N.A.
(b)(2) ................................................................... 7.06
(c) ...................................................................... 7.06;11.02
(d)....................................................................... 7.06
314 (a) ....................................................................... 4.03;4.04
(b) ...................................................................... N.A
(c)(1) ................................................................... 11.04
(c)(2) ................................................................... 11.04
(c)(3) ................................................................... N.A.
(d)....................................................................... N.A.
(e) ..................................................................... 11.05
(f)....................................................................... N.A.
315 (a)........................................................................ 7.02,11.02
(b)....................................................................... 7.05,11.02
(c) ..................................................................... 7.01
(d)....................................................................... 7.01
(e)....................................................................... 6.11
316 (a)(last sentence) ........................................................ 2.09
(a)(1)(A)................................................................. 6.05
(a)(1)(B) ................................................................ 6.04
(a)(2) ................................................................... N.A.
(b) ...................................................................... 6.07
(c) ...................................................................... N.A.
317 (a)(1) .................................................................... 6.08
(a)(2).................................................................... 6.09
(b) ...................................................................... 2.04
318 (a)........................................................................ 11.01
(b)....................................................................... N.A.
(c)....................................................................... 11.01
N.A. means not applicable.
</TABLE>
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions....................................................... 1
Section 1.02. Other Definitions................................................. 12
Section 1.03. Incorporation by Reference of Trust Indenture Act................. 12
Section 1.04. Rules of Construction............................................. 13
ARTICLE 2
THE EXCHANGE DEBENTURES
Section 2.01. Form and Dating................................................... 13
Section 2.02. Execution and Authentication...................................... 14
Section 2.03. Registrar and Paying Agent........................................ 14
Section 2.04. Paying Agent to Hold Money in Trust............................... 15
Section 2.05. Holder Lists...................................................... 15
............................................................................ 15
Section 2.06. Replacement Exchange Debentures................................... 15
Section 2.07. Outstanding Exchange Debentures................................... 15
Section 2.08. Treasury Exchange Debentures...................................... 16
Section 2.9. Temporary Exchange Debentures..................................... 16
Section 2.10. Cancellation...................................................... 16
Section 2.11. Defaulted Interest................................................ 17
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee................................................ 17
Section 3.02. Selection of Exchange Debentures to Be Redeemed................... 17
Section 3.03. Notice of Redemption.............................................. 18
Section 3.04. Effect of Notice of Redemption.................................... 19
Section 3.05. Deposit of Redemption or Purchase Price........................... 19
Section 3.06. Exchange Debentures Redeemed or Purchased in Part................. 19
Section 3.07. Optional Redemption............................................... 19
Section 3.08. Mandatory Redemption.............................................. 20
ARTICLE 4
COVENANTS
Section 4.01. Payment of Exchange Debentures.................................... 20
Section 4.02. Maintenance of Office or Agency................................... 20
Section 4.03. Reports........................................................... 21
Section 4.04. Compliance Certificate............................................ 21
Section 4.05. Taxes............................................................. 22
Section 4.06. Stay, Extension and Usury Laws.................................... 22
Section 4.07. Restricted Payments............................................... 22
Section 4.08. Incurrence of Indebtedness and Issuance of Preferred
Stock............................................................. 24
Section 4.09. Transactions with Affiliates...................................... 25
Section 4.10. Continued Existence............................................... 26
Section 4.11. Offer to Repurchase Upon Change of Control........................ 26
i
<PAGE>
Section 4.12. Payments For Consent.............................................. 27
Section 4.13. Asset Sales....................................................... 27
Section 4.14 Liens............................................................. 29
Section 4.15 Dividend and Other Payment Restrictions Affecting
Subsidiaries.
Section 4.16 No Senior Subordinated Debt.
Section 4.18 Limitation on Issuances and Sales of Capital Stock of
Wholly Owned Subsidiaries......................................... 30
Section 4.19 Business Activities............................................... 30
Section 5.01. Merger, Consolidation, or Sale of Assets.......................... 30
Section 5.02. Successor Corporation Substituted................................. 31
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................................. 31
Section 6.02. Acceleration...................................................... 33
Section 6.03. Other Remedies.................................................... 33
Section 6.04. Waiver of Past Defaults........................................... 34
Section 6.05. Control by Majority............................................... 34
Section 6.06. Limitation on Suits............................................... 34
Section 6.07. Rights of Holders of Exchange Debentures to Receive
Payment........................................................... 35
Section 6.08. Collection Suit by Trustee........................................ 35
Section 6.09. Trustee May File Proofs of Claim.................................. 35
Section 6.10. Priorities........................................................ 36
Section 6.11. Undertaking for Costs............................................. 36
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................................. 36
Section 7.02. Rights of Trustee................................................. 37
Section 7.03. Individual Rights of Trustee...................................... 38
Section 7.04. Trustee's Disclaimer.............................................. 38
Section 7.05. Notice of Defaults................................................ 38
Section 7.06. Reports by Trustee to Holders of the Exchange
Debentures........................................................ 38
Section 7.07. Compensation, Reimbursement and Indemnity......................... 39
Section 7.08. Replacement of Trustee............................................ 40
Section 7.09. Successor Trustee by Merger, etc.................................. 41
Section 7.10. Eligibility; Disqualification..................................... 41
Section 7.11. Preferential Collection of Claims Against Company................. 41
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance........................................................ 41
Section 8.02. Legal Defeasance and Discharge.................................... 41
Section 8.03. Covenant Defeasance............................................... 42
Section 8.04. Conditions to Legal or Covenant Defeasance........................ 42
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions..................... 43
Section 8.06. Repayment to the Company.......................................... 44
ii
<PAGE>
Section 8.07. Reinstatement..................................................... 44
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Exchange Debentures................. 45
Section 9.02. With Consent of Holders of Exchange Debentures.................... 45
Section 9.03. Compliance with Trust Indenture Act............................... 47
Section 9.04. Revocation and Effect of Consents................................. 47
Section 9.05. Notation on or Exchange of Exchange Debentures.................... 47
Section 9.06. Trustee to Sign Amendments, etc................................... 47
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate............................................. 47
Section 10.02. Certain Definitions.................................................. 48
Section 10.04. Default on Designated Senior Debt.................................... 49
Section 10.06. When Distribution Must Be Paid Over.................................. 50
Section 10.07. Notice by Company.................................................... 50
Section 10.08. Subrogation.......................................................... 50
Section 10.09. Relative Rights...................................................... 50
Section 10.10. Subordination May Not Be Impaired by Company......................... 51
Section 10.11. Distribution or Notice to Representative............................. 51
Section 10.12. Rights of Trustee and Paying Agent................................... 51
Section 10.13. Authorization to Effect Subordination................................ 52
Section 10.14. Amendments........................................................... 52
Section 11.01. Trust Indenture Act Controls......................................... 52
Section 11.02. Notices.............................................................. 52
Section 11.03. Communication by Holders of Exchange Debentures
with Other Holders of Exchange Debentures............................... 53
Section 11.04. Certificate and Opinion as to Conditions Precedent................... 53
Section 11.05. Statements Required in Certificate or Opinion........................ 54
Section 11.06. Rules by Trustee and Agents.......................................... 54
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.............................................. 54
Section 11.08. Governing Law........................................................ 54
Section 11.09. No Adverse Interpretation of Other Agreements........................ 54
Section 11.10. Successors........................................................... 55
Section 11.11. Severability......................................................... 55
Section 11.12. Counterpart Originals................................................ 55
Section 11.13. Table of Contents, Headings, etc..................................... 55
EXHIBITS
Exhibit A FORM OF EXCHANGE DEBENTURE
</TABLE>
iii
<PAGE>
INDENTURE dated as of _______ __, ____ among SFX Broadcasting, Inc.,
a Delaware corporation (the "Company") and ____________________, a __________
banking corporation, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 12 5/8%
Subordinated Exchange Debentures due 2006 of the Company:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets (including without limitation, by way of a sale and
leaseback or pursuant to an LMA or similar arrangement); provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole will be governed by
Section 4.11 hereof and/or Section 5.01 hereof and not by Section 4.13 hereof
and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause
(i) or (ii), whether in a single transaction or a series of related transaction
(a) that have a Fair Market Value in excess of $5.0 million or (b) for
aggregate net proceeds in excess of $5.0 million. Notwithstanding the
foregoing: (i) the Pending Dispositions, the Chancellor Exchange and the CBS
Exchange, in each case as described in the Prospectus Supplement dated January
17, 1997, in all material respects, (ii) a transfer of assets by the Company or
to another Wholly Owned Subsidiary, (iii) an issuance of Equity Interests
<PAGE>
by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, (iv) a Restricted Payment that is permitted by Section 4.06 hereof
and (v) sales of obsolete equipment in the ordinary course of business, will
not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bank Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the 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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board" or "Board of Directors" means the Board of Directors of the
Company, the members of which are elected by the equity holders of the Company.
"Broadcast Business" means any business, the majority of whose
revenues are derived from the broadcast of radio programming.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a Legal Holiday.
"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 and 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 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
2
<PAGE>
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 the date on which Series E Preferred Shares are
first issued.
"Certificated Exchange Debentures" means Exchange Debentures that
are in the form of the Exchange Debentures attached hereto as Exhibit A, that
do not include the information called for by footnotes 1 and 2 thereof.
"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, (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 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 (iv) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
"Company" means SFX Broadcasting, Inc., a Delaware Corporation.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale by such Person or any of its Subsidiaries during such period
(to the extent such losses were deducted in computing such Consolidated Net
Income), plus (ii) provision for taxes based on income or profits of such
Person and its Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income, plus (iii)
Consolidated Interest Expense of such Person for such period to the extent any
such Consolidated Interest Expense was deducted in computing such Consolidated
Net Income, plus (iv) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash charges
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income, less (v) all non-cash items increasing Consolidated Net Income for such
period (excluding any such non-cash income to the extent it represents an
accrual of cash income in any future period), in each case, on a consolidated
basis and determined in accordance with GAAP.
"Consolidated Indebtedness" of any Person as of any date of
determination means the sum (without duplication) of (i) the total amount of
Indebtedness and Attributable Debt of such Person and its
3
<PAGE>
Subsidiaries, plus (ii) the total amount of other Indebtedness shown on the
balance sheet of the primary obligor on such Indebtedness, to the extent that
such Indebtedness has been Guaranteed by such Person or one of its
Subsidiaries, plus (iii) the aggregate liquidation value or redemption amount
(if larger) of all Disqualified Stock of such Person and all preferred stock of
Subsidiaries of such Person, in each case, determined on a consolidated basis
in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of (i) the consolidated interest expense of such Person
and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such Guarantee or Lien is called upon) and
(iv) the product of (a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or to a Wholly Owned Subsidiary thereof, (ii) the
Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect
of a change in accounting principles shall be excluded.
"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 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 hereof 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
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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.
"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 hereof 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.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Credit Agreement" shall mean that certain credit agreement by and
among the Corporation, the Corporation's Subsidiaries, as guarantors, the Bank
of New York, as agent and the lenders party thereto, providing for $225 million
of revolving credit 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.
"Debt to Cash Flow Ratio" means, as of any date of determination,
the ratio of (a) the Consolidated Indebtedness as of such date to (b) the
Consolidated Cash Flow of the Company and its Subsidiaries on a consolidated
basis for the four most recent full fiscal quarters ending immediately prior to
such date for which internal financial statements are available. For purposes
of calculating Consolidated Cash Flow for the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the date on which such Ratio is being
calculated (the "Calculation Date") shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Exchange Debentures issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Exchange Debentures, until a
successor shall have been appointed and become such pursuant to the applicable
provision of this Indenture, and, thereafter, "Depositary" shall mean or
include such successor.
"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 Exchange Debentures 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).
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Debenture Custodian" means the Trustee, as custodian with
respect to the Exchange Debentures in global form, or any successor entity
thereto.
"Exchange Debentures" means the Company's 12 5/8% Subordinated
Exchange Debentures due 2006 issuable in exchange for the Company's Series E
Preferred Stock.
"Exempt Issuances" has the meaning set forth in Section 11.06 below.
"Existing Indebtedness" means all Indebtedness of the Company and
its Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the Closing Date, until such amounts are repaid.
"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 date hereof.
"Global Exchange Debenture" means an Exchange Debenture that
contains the additional schedule referred to in footnote 1 to the form of the
Exchange Debenture attached hereto as Exhibit A.
"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.
"Holder" means a Person in whose name an Exchange Debenture is
registered.
"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
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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.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form 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.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"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 amendment to the employment
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agreement between the Company and D. Geoffrey Armstrong, effective as of April
15, 1996, in each case, as in effect on the date hereof.
"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.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but no loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions)
or (b) the disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of such person or any of
its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Senior Debt) secured by a Lien on the asset or assets that were the
subject of such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Exchange Debentures by the
Company.
"Offering Circular" means the Offering Circular, dated May 22, 1996,
relating to the Preferred Stock Offering.
"Officer" means, (a) with respect to any Person that is a
corporation, the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any
Vice-President of such Person and (b) with respect to any other Person, the
individuals selected by the Board of such Person to perform functions similar
to those of the officers listed in clause (a).
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"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the Chief Executive
Officer, President or Vice President and one of whom must be the Chief
Financial Officer, the Treasurer or the controller of the Company that meets
the requirements of Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Pari Passu Debt" means Indebtedness that ranks pari passu in right
of payment with the Exchange Debentures.
"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.
"Permitted Liens" means (i) Liens securing Senior Debt of the
Company or securing Indebtedness of any Subsidiary that, in either case, was
permitted by the terms of the Exchange Indenture to be incurred; (ii) Liens in
favor of the Company; (iii) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Subsidiary
of the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition and do not extend to
any assets other than such assets so acquired; (v) Liens existing on the
Closing Date; (vi) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; and (vii) Liens incurred in
the ordinary course of business of the Company or any Subsidiary of the Company
with respect to obligations that do not exceed $10.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary.
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"Permitted Refinancing Debt" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Debt has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Exchange Debentures, such Permitted Refinancing Debt has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Exchange Debentures on terms at least as favorable to the Holders of
Exchange Debenture as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Permitted Refinancing Debt is incurred either by the
Company or by the Subsidiary who was the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business).
"Preferred Stock," of any Person, means Capital Stock of such Person
of any class or series (however designated) that ranks prior, as to payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class or series of such Person.
"Preferred Stock Offering" means the public offering of $225,000,000
in aggregate liquidation preference of the Series E Preferred Stock.
"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) or trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding 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).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration department of the Trustee
(or any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
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"SCMC" means Sillerman Communications Management Company, a Delaware
corporation.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Subordinated Exchange Debentures" means the Company's
10 3/4% Senior Subordinated Exchange Debentures due 2006.
"Series D Exchange Debentures" means the Company's 6 1/2%
Subordinated Convertible Exchange Debentures due 2007 issuable in exchange for
the Company's Series D Preferred Shares.
"Series D Exchange Debenture Indenture" means the indenture
governing the Company's 6 1/2% Subordinated Convertible Exchange Debentures due
2007 issuable in exchange for the Company's Series D Preferred Shares.
"Series D Preferred Stock" means the Company's 6 1/2% Series D
Cumulative Convertible Exchangeable Preferred Stock due May 31, 2007.
"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 date hereof.
"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).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb) as amended as in effect on the date of this Indenture.
"Trading Day" with respect to either the Class A Common Stock or
Exchange Debentures, as the case may be, means any day on which any market
(including, without limitation, any formal or informal over the counter market)
in which the applicable security is then traded and in which a quoted price may
be ascertained is open for business.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
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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.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Affiliate Transaction" ....................... 4.09
"Change of Control Offer"...................... 4.11
"Change of Control Payment" .................. 4.11
"Change of Control Payment Date"............... 4.11
"Covenant Defeasance".......................... 8.03
"Custodian".................................... 6.01
"Designated Senior Debt"....................... 10.02
"distribution"................................. 10.02
"DTC".......................................... 2.03
"Event of Default"............................. 6.01
"Legal Defeasance" ............................ 8.02
"Notice of Default"............................ 6.01
"Outstanding".................................. 8.02
"Paying Agent"................................. 2.03
"Payment Blockage Notice" ..................... 10.04
"Registrar".................................... 2.03
"Representative" .............................. 10.02
"Senior Bank Debt"............................. 10.02
"Senior Debt".................................. 10.02
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Exchange Debentures;
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"indenture security Holder" means a Holder of an Exchange Debenture;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Exchange Debentures means the Company and any
successor obligor upon the Exchange Debentures.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
ARTICLE 2
THE EXCHANGE DEBENTURES
SECTION 2.01. FORM AND DATING.
The Exchange Debentures and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Exchange Debentures may have notations, legends or endorsements required by
law, stock exchange rule or usage. Each Exchange Debenture shall be dated the
date of its authentication. The Exchange Debentures shall be in all appropriate
denominations.
The terms and provisions contained in the Exchange Debentures shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
Exchange Debentures issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the text referred to in
footnote 1 thereto). Exchange Debentures issued in certificated form shall be
substantially in the form of Exhibit A attached hereto (but without including
the
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text referred to in footnote 1 thereto). Each Global Exchange Debenture shall
represent such of the outstanding Exchange Debentures as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Exchange Debentures from time to time endorsed thereon and that the
aggregate amount of outstanding Exchange Debentures represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Exchange Debenture to reflect the
amount of any increase or decrease in the amount of outstanding Exchange
Debentures represented thereby shall be made by the Trustee or the Exchange
Debenture Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Exchange Debentures for the
Company by manual or facsimile signature.
If an Officer whose signature is on an Exchange Debenture no longer
holds that office at the time an Exchange Debenture is authenticated, the
Exchange Debenture shall nevertheless be valid.
An Exchange Debenture shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence
that the Exchange Debenture has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Exchange Debentures for original issue up
to the aggregate principal amount stated in paragraph 4 of the Exchange
Debentures. The aggregate principal amount of Exchange Debentures outstanding
at any time may not exceed such amount.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate the Exchange Debentures. An authenticating agent may
authenticate Exchange Debentures whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to deal
with the Company or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Exchange
Debentures may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Exchange Debentures may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Exchange Debentures and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents. The
term "Registrar" includes any co-registrar and the term "Paying Agent" includes
any additional paying agent. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company shall notify the Trustee in
writing of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company may act as Paying Agent or
Registrar.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Exchange Debentures.
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The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Exchange Debenture Custodian with respect to the
Global Exchange Debentures.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or interest on the Exchange Debentures, and will notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company) shall have no further liability
for the money. If the Company acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Exchange Debentures.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Exchange Debentures and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. REPLACEMENT EXCHANGE DEBENTURES.
If any mutilated Exchange Debenture is surrendered to the Trustee or
either of the Company or the Trustee receives evidence to its satisfaction of
the destruction, loss or theft of any Exchange Debenture, the Company shall
issue and the Trustee, upon the written order of the Company signed by two
Officers of the Company, shall authenticate a replacement Exchange Debenture if
the Trustee's requirements are met. If required by the Trustee or the Company,
an indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may
suffer if a Exchange Debenture is replaced. The Company may charge for their
expenses in replacing an Exchange Debenture.
Every replacement Exchange Debenture is an additional obligation of
the Company and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Exchange Debentures duly issued
hereunder.
SECTION 2.07. OUTSTANDING EXCHANGE DEBENTURES.
The Exchange Debentures outstanding at any time are all the Exchange
Debentures authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Exchange Debenture effected by the Trustee in accordance with the provisions
hereof, and those described in this Section 2.07 as not outstanding. Except as
set forth in Section 2.09
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hereof, a Exchange Debenture does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Exchange Debenture.
If an Exchange Debenture is replaced pursuant to Section 2.06
hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Exchange Debenture is held by a bona fide
purchaser.
If the principal amount of any Exchange Debenture is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest on it
ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, by 10:00 a.m. Eastern Time on a redemption
date or maturity date, money sufficient to pay the Exchange Debentures payable
on that date, then on and after that date such Exchange Debentures shall be
deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.08. TREASURY EXCHANGE DEBENTURES.
In determining whether the Holders of the required principal amount
of Exchange Debentures have concurred in any direction, waiver or consent,
Exchange Debentures owned by the Company or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Exchange Debentures that
the Trustee knows are so owned shall be so disregarded. The Company agrees to
notify the Trustee of the existence of any Exchange Debentures owned by the
Company or any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company.
SECTION 2.9. TEMPORARY EXCHANGE DEBENTURES.
Until Certificated Exchange Debentures are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Exchange
Debentures upon a written order of the Company signed by two Officers of the
Company. Temporary Exchange Debentures shall be substantially in the form of
Certificated Exchange Debentures but may have variations that the Company
considers appropriate for temporary Exchange Debentures and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Certificated Exchange
Debentures in exchange for temporary Exchange Debentures.
Holders of temporary Exchange Debentures shall be entitled to all of
the benefits of this Indenture.
SECTION 2.10. CANCELLATION.
The Company at any time may deliver Exchange Debentures to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Exchange Debentures surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel all
Exchange Debentures surrendered for registration of transfer, exchange,
payment, replacement or cancellation and shall destroy cancelled Exchange
Debentures (subject to the record retention requirement of the Exchange Act).
Certification of the destruction of all cancelled Exchange Debentures shall be
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delivered to the Company unless the Company directs the Trustee to return the
Exchange Debentures to the Company upon written order signed by an Officer of
the Company. The Company may not issue new Exchange Debentures to replace
Exchange Debentures that have been paid or that have been delivered to the
Trustee for cancellation.
SECTION 2.11. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Exchange
Debentures, they shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, in each case at the rate
provided in the Exchange Debentures and in Section 4.01 hereof. The Company
shall notify the Trustee in writing of the amount of defaulted interest
proposed to be paid on each Exchange Debenture and the date of the proposed
payment. The Company shall fix or cause to be fixed each such special record
date and payment date, provided that no such special record date shall be less
than 10 days prior to the related payment date for such defaulted interest. At
least 15 days before the special record date, the Company (or, upon the written
request of the Company, the Trustee in the name and at the expense of the
Company) shall mail or cause to be mailed to Holders a notice that states the
special record date, the related payment date and the amount of such interest
to be paid. Notwithstanding the foregoing, such interest may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Exchange Debentures may be listed, and upon
such notice as may be required by such exchange.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company redeems Exchange Debentures pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days (unless a shorter period may be satisfactory to the Trustee)
but not more than 60 days before a redemption date, an Officers' Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Exchange
Debentures to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Exchange
Debentures pursuant to the provisions of Section 4.11 hereof, it shall furnish
to the Trustee an Officers' Certificate setting forth (i) the Section of this
Indenture pursuant to which the purchase shall occur, (ii) the purchase date,
(iii) the principal amount of Exchange Debentures to be purchased, (iv) the
purchase price and (v) a statement to the effect that a Change of Control has
occurred and the conditions set forth in Section 4.11 have been satisfied, as
applicable.
SECTION 3.02. SELECTION OF EXCHANGE DEBENTURES TO BE REDEEMED.
If less than all of the Exchange Debentures are to be redeemed at
any time, the Trustee shall select the Exchange Debentures to be redeemed among
the Holders of the Exchange Debentures in compliance with the requirements of
the principal national securities exchange, if any, on which the Exchange
Debentures are listed or, if the Exchange Debentures are not so listed, on a
pro rata basis, by
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lot or in accordance with any other method the Trustee deems fair and
appropriate. In the event of partial redemption by lot, the particular Exchange
Debentures to be redeemed shall be selected, unless otherwise provided herein,
not less than 30 nor more than 60 days prior to the redemption date by the
Trustee from the outstanding Exchange Debentures not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of the
Exchange Debentures selected for redemption and, in the case of any Exchange
Debenture selected for partial redemption, the principal amount thereof to be
redeemed. Exchange Debentures and portions of Exchange Debentures selected
shall be in amounts of $100 or whole multiples of $100; except that if all of
the Exchange Debentures of a Holder are to be redeemed, the entire outstanding
amount of Exchange Debentures held by such Holder, even if not a multiple of
$100, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Exchange Debentures called for
redemption also apply to portions of Exchange Debentures called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Exchange Debentures are to be redeemed at its
registered address.
The notice shall identify the Exchange Debentures to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Exchange Debenture is being redeemed in part, the portion
of the principal amount of such Exchange Debenture to be redeemed and
that, after the redemption date upon surrender of such Exchange
Debenture, a new Exchange Debenture or Exchange Debentures in principal
amount equal to the unredeemed portion shall be issued upon cancellation
of the original Exchange Debenture;
(d) the name and address of the Paying Agent;
(e) that Exchange Debentures called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment and interest on Exchange Debentures called for redemption ceases
to accrue on and after the redemption date;
(g) the paragraph of the Exchange Debentures and/or Section
of this Indenture pursuant to which the Exchange Debentures called for
redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Exchange Debentures.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least
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45 days prior to the redemption date, an Officers' Certificate requesting that
the Trustee give such notice and setting forth the information to be stated in
such notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Exchange Debentures called for redemption become irrevocably due and
payable on the redemption date at the redemption price. A notice of redemption
may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE.
On or prior to 10:00 a.m. Eastern Time on the redemption date, the
Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption or purchase price of and accrued interest on
all Exchange Debentures to be redeemed or purchased on that date. The Trustee
or the Paying Agent shall promptly return to the Company any money deposited
with the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption or purchase price of, and accrued interest, if
any, on all Exchange Debentures to be redeemed or purchased.
If Exchange Debentures called for redemption or tendered in a Change
of Control Offer are paid or if the Company has deposited with the Trustee or
Paying Agent money sufficient to pay the redemption or purchase price of, and
unpaid and accrued interest on all Exchange Debentures to be redeemed or
purchased, on and after the applicable redemption or purchase date, interest
ceases to accrue on the Exchange Debentures or the portions of Exchange
Debentures called for redemption or tendered and not withdrawn in a Change of
Control Offer (regardless of whether certificates for such Exchange Debentures
are actually surrendered). If an Exchange Debenture is redeemed or purchased on
or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Exchange Debenture was registered at the close of business
on such record date. If any Exchange Debenture called for redemption or subject
to a Change of Control Offer shall not be so paid upon surrender for redemption
or purchase because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
or purchase date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case, at the rate provided
in the Exchange Debentures and in Section 4.01 hereof.
SECTION 3.06. EXCHANGE DEBENTURES REDEEMED OR PURCHASED IN PART.
Upon surrender of an Exchange Debenture that is redeemed or
purchased in part, the Company shall issue and, upon the Company's written
request, the Trustee shall authenticate for the Holder at the expense of the
Company a new Exchange Debenture equal in principal amount to the unredeemed or
unpurchased portion of the Exchange Debenture surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Exchange Debentures are not redeemable, in whole or in part, at
the Company's option prior to January 15, 2002. On or after January 15, 2002,
the Company may redeem all or any portion of the Exchange Debentures at a
redemption price (expressed as a percentage of the principal amount thereof),
as set forth in the immediately succeeding paragraph, plus accrued and unpaid
interest to the redemption date.
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The redemption price as a percentage of the principal amount shall
be as follows, if the Exchange Debentures are redeemed during the 12-month
period commencing on January 15 of the year set forth below, plus, in each
case, accrued interest thereon to the redemption date:
YEAR PERCENTAGE
---- ----------
2002................................................. 106.313%
2003................................................. 104.734%
2004................................................. 103.156%
2005................................................. 101.578%
2006 and thereafter.................................. 100.000%
In addition, prior to January 15, 2000, the Company may, at its option,
redeem up to 50% of the aggregate of (i) the Liquidation Preference of the
Series E Preferred Stock issued (whether issued or issued in lieu of cash
dividends) less the Liquidation Preference of Series E Preferred Stock
exchanged for Exchange Debentures and (ii) the principal amount of Exchange
Debentures issued (whether issued in exchange for Series E Preferred Stock of
in lieu of cash interest), with the net proceeds of one or more common equity
offerings received on or after the date of original issuance of the Series E
Preferred Stock at a redemption price of 112.625% of the Liquidation Preference
or principal amount, as the case may be, plus accumulated and unpaid dividends
in the case of Series E Preferred Stock and accrued and unpaid interest in the
case of Exchange Debentures; provided, that after any such redemption, if any
Series E Preferred Stock or Exchange Debentures remain outstanding, at least
$50 million in Liquidation Preference or principal amount, as applicable, of
the Series E Preferred Stock or Exchange Debentures, as the case may be, remain
outstanding; and provided further, that any such redemption shall occur within
75 days of the date of closing of such offering of common equity of the
Corporation.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption payments
with respect to the Exchange Debentures.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF EXCHANGE DEBENTURES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Exchange Debentures on the dates and in the manner
provided in the Exchange Debentures. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other than the
Company, holds as of 10:00 a.m. Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due.
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The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Exchange
Debentures to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to
the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Exchange Debentures
may be surrendered for registration of transfer or for exchange and where
notices and demands to or upon the Company in respect of the Exchange
Debentures and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Exchange Debentures may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, the City of New York for such purposes. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof. The Trustee may resign such agency at any time by giving written
notice to the Company no later than 30 days prior to the effective date of such
resignation.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any Exchange Debentures are outstanding, the Company shall furnish to
the Trustee and to the Holders of Exchange Debentures (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the SEC on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "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 SEC 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 SEC, the Company shall file a copy
of all such information and reports with the SEC for public availability
(unless the SEC will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request.
SECTION 4.04. COMPLIANCE CERTIFICATE.
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(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year (which fiscal year, as of the date hereof, ends on
December 31), an Officers' Certificate stating that a review of the activities
of the Company and its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining
whether the Company has kept, observed, performed and fulfilled their
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained
in this Indenture and are not in default in the performance or observance of
any of the terms, provisions and conditions of this Indenture (or, if a Default
or Event of Default shall have occurred, describing all such Defaults or Events
of Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest on the Exchange Debentures
is prohibited or if such event has occurred, a description of the event and
what action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Exchange Debentures are
outstanding, deliver to the Trustee, forthwith upon any Officer of the Company
becoming aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Exchange Debentures.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
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SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of
the Company's Equity Interests in their capacity as such (other than dividends
or distributions payable in Capital Stock (other than Disqualified Stock) of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company or any direct or indirect parent of the
Company; (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Exchange Debentures, except at final maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof, and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have
been permitted to incur at least $1.00 of additional Indebtedness (other
than Permitted Debt) pursuant to the Debt to Cash Flow Ratio test set
forth in the first paragraph of Section 4.08 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments declared or made after the Closing Date
(other than Restricted Payments permitted by clauses (2), (5), (7) or
(12) of the following paragraph) shall not exceed, at the date of
determination, the sum of (1) an amount equal to the Company's
Consolidated Cash Flow from the Closing Date to the end of the Company's
most recently ended full fiscal quarter for which internal financial
statements are available, taken as a single accounting period, less the
product of 1.4 times the Company's Consolidated Interest Expense from the
Closing Date to the end of the Company's most recently ended full fiscal
quarter for which internal financial statements are available, taken as a
single accounting period, plus (2) an amount equal to the net cash
proceeds received by the Company from the issue or sale after the Closing
Date of Equity Interests of the Company (other than (i) sales of
Disqualified Stock and (ii) Equity Interests sold to any of the Company's
Subsidiaries) plus (3) to the extent that any Restricted Investment that
was made after the Closing Date is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment.
If no Default or Event of Default shall have occurred and be continuing
as a result thereof, the foregoing provisions will not prohibit: (1) the
payment of any dividend within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have complied with the
provisions of the Indenture; (2) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company in exchange for, or
out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company (other than
any Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding paragraph;
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(3) cash payments made in respect of fractional shares of Capital Stock not to
exceed $100,000 in the aggregate in any fiscal year; (4) the payment of
dividends on the Series D Preferred Stock in accordance with the terms thereof
as in effect on the Closing Date; (5) the issuance of Series D Exchange
Debentures in exchange for the Series D Preferred Stock; provided that such
issuance is permitted by Section 4.08 hereof; (6) in the event that the Company
elects to issue the Series D Exchange Debentures in exchange for the Series D
Preferred Stock, cash payments made in lieu of the issuance of Series D
Exchange Debentures having a face amount less than $50 and any cash payments
representing accrued and unpaid dividends in respect thereof, not to exceed
$100,000 in the aggregate in any fiscal year; (7) the payment of dividends on
the Series E Preferred Shares in accordance with the terms thereof as in effect
on the Closing Date; (8) the issuance of additional Exchange Debentures in
exchange for the Series E Preferred Stock; provided that such issuance is
permitted by Section 4.08 hereof; (9) in the event that the Company elects to
issue Exchange Debentures in exchange for Series E Preferred Shares, cash
payments made in lieu of the issuance of Exchange Debentures having a face
amount less than $1,000 and any cash payments representing accrued and unpaid
dividends in respect thereof, not to exceed $100,000 in the aggregate in any
fiscal year; (10) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding paragraph;
(11) payments made by the Company to SCMC for facilities maintenance and other
services and reimbursements pursuant to the Shared Facilities Agreement in
accordance with the terms thereof as in effect on the date of this Indenture;
(12) payments by the Company pursuant to the Management Termination Agreements
in accordance with the terms thereof as in effect on the date of this
Indenture; and (13) the redemption by the Company of its Series C Preferred
Stock in accordance with the terms thereof as in effect on the Closing Date.
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee on the date of the Restricted
Payment of the asset(s) or securities proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not
later than the date of making any Restricted Payment, the Company shall deliver
to the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this covenant were computed, which calculations may be based upon the Company's
latest available financial statements.
SECTION 4.08. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt) and that
the Company will not issue any Disqualified Stock and will not permit any of
its Subsidiaries to issue any shares of Preferred Stock; provided, however,
that (i) the Company may incur Indebtedness (including Acquired Debt) or issue
shares of Disqualified Stock and (ii) (A) the Subsidiaries may Guarantee Senior
Debt and (B) the Subsidiaries may issue Preferred Stock (other than
Disqualified Stock) if, in either case, the Company's Debt to Cash Flow Ratio
at the time of incurrence of such Indebtedness or the issuance of such
Disqualified Stock or the Guarantee of such Senior Debt or the issuance of such
Preferred Stock, as the case may be, after giving pro forma effect to such
incurrence or issuance or Guarantee as of such date
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and to the use of proceeds therefrom as if the same had occurred at the
beginning of the most recently ended four full fiscal quarter period of the
Company for which internal financial statements are available, would have been
no greater than 7.0 to 1.
The foregoing provisions will not apply to the incurrence of any of the
following Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company and its Subsidiaries of Indebtedness
pursuant to one or more Bank Facilities, so long as the aggregate principal
amount of all Indebtedness outstanding under all Bank Facilities does not, at
the time of incurrence, exceed an amount equal to $225.0 million;
(ii) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(iii) Indebtedness under the Exchange Debentures;
(iv) the issuance of Disqualified Stock by the Company that by its
terms would not require or permit any payment of dividends or other
distributions that would violate Section 4.07 hereof;
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new Subsidiary;
provided that such Indebtedness was incurred by the prior owner of such assets
or such Subsidiary prior to such acquisition by the Company or one of its
Subsidiaries and was not incurred in connection with, or in contemplation of,
such acquisition by the Company or one of its Subsidiaries; and provided
further that, after giving pro forma effect to such incurrence of Indebtedness
as of such date and to the use of proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period for which internal financial statements are available, the Company's
Debt to Cash Flow Ratio would have been no greater than 7.0 to 1;
(vi) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund, Indebtedness that
was permitted by the terms of this Indenture to be incurred;
(vii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries; provided, however, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinate to the payment in full
of all Obligations with respect to the Exchange Debentures and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Subsidiary and
(B) any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Subsidiary, as the
case may be;
(viii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding; and
(ix) the incurrence by the Company and any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of this
paragraph) in an aggregate principal amount (or accreted value, as applicable)
at any time outstanding not to exceed $10.0 million.
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SECTION 4.09. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall 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
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
Exchange Debentures 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 redemption or repurchase of the Existing
MMR Indebtedness, (3) transactions and agreements specifically contemplated by
the Termination and Assignment Agreement between the Company and SCMC as in
effect on the date hereof, (4) 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 date hereof, (5) payments made by the Company to SCMC for the
facilities maintenance and other services and reimbursements pursuant to the
Shared Facilities Agreements, (6) payments by the Company pursuant to the
Management Termination Agreements and (7) any Restricted Payments and Permitted
Investments that are permitted by Section 4.07 hereof, in each case, shall not
be deemed to be Affiliate Transactions.
SECTION 4.10. CONTINUED EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate, partnership, limited liability company or other existence, and the
corporate, partnership, limited liability company or other existence of each of
its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and any of their respective Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of their
Subsidiaries, if the respective Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its respective Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the
Exchange Debentures.
SECTION 4.11. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Exchange Debentures shall have the right to require the Company to repurchase
all or any part of such Holder's Exchange Debentures pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to
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101% of the principal amount thereof plus, accrued and unpaid interest, if any,
thereon to the date of purchase (the "Change of Control Payment").
(b) Within 10 days following any Change of Control, the Company
shall mail a notice to each Holder, with a copy to the Trustee, stating: (1)
that the Change of Control Offer is being made pursuant to this Section 4.10
and that all Exchange Debentures tendered shall be accepted for payment; (2)
the purchase price and the purchase date, which shall be no later than 30
Business Days from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Exchange Debenture not tendered shall continue to
accrue interest; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Exchange Debentures accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest, after
the Change of Control Payment Date; (5) that Holders electing to have any
Exchange Debentures purchased pursuant to a Change of Control Offer shall be
required to surrender the Exchange Debentures, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Exchange Debentures
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; and (6) that Holders whose Exchange Debentures are being
purchased only in part shall be issued new Exchange Debentures equal in
principal amount to the unpurchased portion of the Exchange Debentures
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof. The Company shall 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 Exchange Debentures in
connection with a Change of Control.
(c) On or prior to 10:00 a.m. Eastern Time on the Change of Control
Payment Date, the Company shall, to the extent lawful, (1) accept for payment
all Exchange Debentures 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 Exchange Debentures or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
Exchange Debentures so accepted together with an Officers' Certificate stating
the aggregate principal amount of Exchange Debentures or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to each Holder
of Exchange Debentures so tendered the Change of Control Payment for such
Exchange Debentures, and the Trustee shall promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new Exchange Debenture
equal in principal amount to any unpurchased portion of the Exchange Debentures
surrendered, if any. Prior to complying with the provisions of this Section
4.09, but in any event within 90 days following a Change of Control, the
Company shall 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 Debentures required by this Section 4.09. The
Company shall publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
(d) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control
Offer made by the Company, and purchases all Exchange Debentures validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.12. PAYMENTS FOR CONSENT.
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Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Exchange Debentures for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Exchange Debentures unless such
consideration is offered to be paid or is paid to all Holders of the Exchange
Debentures that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
SECTION 4.13. ASSET SALES.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Exchange Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Exchange Debentures or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Subsidiary from further liability and (y) any notes or other obligations
received by the Company or any such Subsidiary from such transferee that are
immediately converted by the Company or such Subsidiary into cash (to the
extent of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently
reduce Senior Debt (and to correspondingly reduce commitments with respect
thereto, in the case of Senior Debt that is revolving debt), or (b) to the
acquisition of a controlling interest in another business, the making of a
capital expenditure or the acquisition of other long-term assets, in each case,
in the Broadcast Business or businesses reasonably related thereto. Pending the
final application of any such Net Proceeds, the Company may temporarily reduce
Senior Debt or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Exchange Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company will be required to make an
offer to all Holders of Exchange Debentures and the holders of Pari Passu Debt,
to the extent required by the terms thereof (an "Asset Sale Offer"), to
purchase the maximum principal amount of Exchange Debentures and any such Pari
Passu Debt that may be purchased out of the Excess Proceeds, at an offer price
in cash in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest thereon to the date of purchase, in accordance with the
procedures set forth in the Exchange Indenture or the agreements governing Pari
Passu Debt, as applicable; provided, however, that the Company may only
purchase Pari Passu Debt in an Asset Sale Offer that was issued pursuant to an
indenture having a provision substantially similar to the Asset Sale Offer
provision contained in the Exchange Indenture. To the extent that the aggregate
amount of Exchange Debentures and Pari Passu Debt tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Exchange Debentures and Pari Passu Debt surrendered exceeds the
amount of Excess Proceeds, the Exchange Trustee shall select the Exchange
Debentures and Pari Passu Debt to be purchased on a pro rata basis, based upon
the principal amount thereof surrendered in such Asset Sale Offer. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
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Notwithstanding the immediately preceding paragraph, the Company and its
Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraph if (i) the Company or the applicable Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or other property sold, issued or
otherwise dispose of (as evidenced by a resolution of the Company's Board of
Directors set forth in an Officers' Certificate delivered to the Exchange
Trustee) and (ii) at least 75% of the consideration for such Asset Sale
constitutes assets or other property of a kind usable by the Company and its
Subsidiaries in the business of the Company and its Subsidiaries as conducted
by the Company and its Subsidiaries on the date of the Exchange Indenture;
provided that any consideration not constituting assets or property of a kind
usable by the Company and its Subsidiaries in the business conducted by them on
the date of such Asset Sale received by the Company or any of its Subsidiaries
in connection with any Asset Sale permitted to be consummated under this
paragraph shall constitute Net Proceeds subject to the provisions of the two
succeeding paragraphs.
SECTION 4.14 LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness (other than Senior Debt) on any asset now owned or
hereafter acquired, or on any income or profits therefrom, except Permitted
Liens.
SECTION 4.15 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to
(i)(x) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (y) pay any
indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the Closing Date, (b) the Credit Agreement as in
effect as of the Closing Date, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, and any other agreement governing or relating to Senior Debt, provided
that all such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings and other agreements are
no more restrictive with respect to such dividend and other payment
restrictions than those contained in the Credit Agreement as in effect on the
Closing Date, (c) the New Note Indenture, the New Notes and the subsidiary
guarantees thereof, (d) the Exchange Indenture and the Exchange Debentures, (e)
applicable law, (f) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was incurred
in connection with or in contemplation of such acquisition), which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Exchange Indenture to be incurred, (g) by reason
of customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, or (h) Permitted
Refinancing Debt, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Debt are no more restrictive than those
contained in the agreements governing the Indebtedness being refinanced.
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SECTION 4.16 NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, Guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Exchange Debentures.
SECTION 4.17 SALE AND LEASEBACK TRANSACTIONS
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company may
enter into a sale and leaseback transaction if (i) the Company could have (a)
incurred Indebtedness (other than Permitted Debt) in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Debt to Cash Flow Ratio test set forth in the first paragraph of Section
4.08 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to
Section 4.14 hereof, (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the Fair Market Value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Exchange Trustee) of the property that is the subject of such
sale and leaseback transaction and (iii) the transfer of assets in such sale
and leaseback transaction is permitted by, and the Company applies the proceeds
of such transaction in compliance with Section 4.13 hereof.
SECTION 4.18 LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES.
The Company (i) shall not, and will not permit any Wholly Owned
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Wholly Owned Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 4.13 hereof and (ii) will
not permit any Wholly Owned Subsidiary of the Company to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Subsidiary of the Company; provided that the
Subsidiaries of the Company may issue Preferred Stock (other than Disqualified
Stock) in accordance with Section 4.08 hereof.
SECTION 4.19 BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Subsidiary to, engage in
any business other than (i) the Broadcast Business and such business activities
as are incidental or related thereto and (ii) such other businesses as the
Company or its Subsidiaries are engaged in on the Closing Date.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall 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 entity or
the entity or the Person formed by or surviving any such
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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 Debentures and this 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 (A) shall have a Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction; and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow Ratio
set forth in the first paragraph of the covenant described under Section 4.08
hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest and , if any, on the Exchange
Debentures except in the case of a sale of all of the Company's assets that
meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(i) a default for 30 days in the payment when due of interest
on, the Exchange Debentures (whether or not prohibited by Article 10
hereof);
(ii) a default in payment when due of the principal of or
premium, if any, on the Exchange Debentures (whether or not
prohibited by Article 10 hereof);
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(iii) the failure by the Company to comply with the provisions
described under Sections 4.07, 4.08, 4.09, 4.10 and 5.01 hereof;
(iv) the failure by the Company for 60 days after notice to
comply with any of its other agreements in this Indenture or the
Exchange Debentures;
(v) a 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 hereof, which
default (a) is caused by a failure to pay principal of or premium,
if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) 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 under which there
has been a payment default or the maturity of which has been so
accelerated, aggregates $25.0 million or more;
(vi) the failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which
judgments are not paid, discharged or stayed for a period of 60
days;
(vii) the Company, any Significant Subsidiary of the Company or
any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(d) makes a general assignment for the benefit of
its creditors, or
(e) generally is not paying its debts as they
become due; or
(viii) a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that:
(a) is for relief against the Company, any of its
Significant Subsidiaries or any group of its Subsidiaries that,
taken together, would constitute a Significant Subsidiary in an
involuntary case;
(b) appoints a Custodian of the Company, any of its
Significant Subsidiaries, or any group of its Subsidiaries
that, taken together, would constitute a Significant Subsidiary
or for all or substantially all of the property of the Company,
any of its Significant
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Subsidiaries or any group of its Subsidiaries that, taken
together, would constitute a Significant Subsidiary; or
(c) orders the liquidation of the Company, any of
its Significant Subsidiaries or any group of its Subsidiaries
that, taken together, would constitute a Significant
Subsidiary;
and the order or decree remains unstayed and in effect for
60 consecutive days.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
An Event of Default shall not be deemed to have occurred under clause
(iv) of this Section 6.01 until the Trustee notifies the Company, or the
Holders of at least 25% in principal amount of the then outstanding Exchange
Debentures notify the Company and the Trustee, of the Default and the Company
does not cure the Default within 60 days after receipt of the notice. The
notice must specify the Default, demand that it be remedied and state that the
notice is a "Notice of Default."
In the case of any Event of Default pursuant to the provisions of this
Section 6.01 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 Debentures pursuant to Section 3.07
hereof, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the Exchange
Debentures, anything in this Indenture or in the Exchange Debentures to the
contrary notwithstanding. If an Event of Default occurs prior to January 15,
2002 by reason of any action (or inaction) willfully taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Exchange Debentures prior to January 15, 2002, then the
premium payable for purposes of this paragraph for each of the years beginning
on January 15 of the years set forth below shall be as set forth in the
following table expressed as a percentage of the amount that would otherwise be
due but for the provisions of this sentence, plus accrued interest, to the date
of payment:
Year Percentage
1997.............................................. 114.204%
1998.............................................. 112.626%
1999.............................................. 111.048%
2000.............................................. 109.469%
2001.............................................. 107.891%
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clauses (vii) or (viii) of Section 6.01 hereof) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Exchange Debentures may declare all the Exchange Debentures to be
due and payable immediately. Upon any such declaration, the Exchange Debentures
shall become due and payable immediately. Notwithstanding the foregoing, if an
Event of Default specified in clauses (vii) or (viii) of Section 6.01 hereof
occurs with respect to the Company, any of its Significant Subsidiaries or any
group of its Subsidiaries that, taken together, would constitute a Significant
Subsidiary, such an
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amount shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the then outstanding Exchange Debentures
by written notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been
cured or waived.
In addition, the Company shall promptly notify holders of Senior
Debt if payment of the Exchange Debentures is accelerated because of an Event
of Default.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium and
interest on the Exchange Debentures or to enforce the performance of any
provision of the Exchange Debentures or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Exchange Debentures or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Exchange
Debentures in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or acquiescence
in the Event of Default. All remedies are cumulative to the extent permitted by
law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Exchange Debentures may by notice to the Trustee on behalf
of the Holders of all of the Exchange Debentures waive an existing Default or
Event of Default and its consequences hereunder, except a continuing Default or
Event of Default in the payment of the principal of, premium or interest on,
the Exchange Debentures (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal
amount of the then outstanding Exchange Debentures may rescind an acceleration
and its consequences, including any related payment default that resulted from
such acceleration). Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Exchange Debentures may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Exchange Debentures
or that may involve the Trustee in personal liability and shall be entitled to
the benefit of Section 7.01(c)(iii) hereof.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Exchange Debentures may pursue a remedy with respect
to this Indenture or the Exchange Debentures only if:
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(a) the Holder of a Exchange Debentures gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Exchange Debentures make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Exchange Debentures or Holders of Exchange
Debentures offer and, if requested, provide to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Exchange Debentures do not give the
Trustee a direction inconsistent with the request.
A Holder of a Exchange Debentures may not use this Indenture to prejudice the
rights of another Holder of a Exchange Debentures or to obtain a preference or
priority over another Holder of a Exchange Debentures.
SECTION 6.07. RIGHTS OF HOLDERS OF EXCHANGE DEBENTURES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Exchange Debentures to receive payment of principal, premium
and interest on the Exchange Debentures, on or after the respective due dates
expressed in the Exchange Debentures (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and interest remaining unpaid on the Exchange
Debentures and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents (including
accountants, experts or such other professionals as the Trustee deems
necessary, advisable or appropriate) and counsel (including the allocated costs
of inside counsel)) and the Holders of the Exchange Debentures allowed in any
judicial proceedings relative to the Company (or any other obligor upon the
Exchange Debentures), its creditors or its property and shall be entitled and
empowered to collect, receive and distribute any money or other property
payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee, and in the event
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that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Exchange Debentures or the rights of
any Holder, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Exchange Debentures for amounts due and unpaid
on the Exchange Debentures for principal, premium and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Exchange Debentures for principal, premium and interest,
respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Exchange Debentures pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
of a Exchange Debentures pursuant to Section 6.07 hereof, or a suit by Holders
of more than 10% in principal amount of the then outstanding Exchange
Debentures.
ARTICLE 7
TRUSTEE
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SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise thereof,
as a prudent man would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the TIA and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall be
read into this Indenture or the TIA against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, without investigation, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any statements, certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform on their face to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
gross negligent action, its own gross negligent failure to act, or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to this
Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability
or expense which might be incurred by it in compliance with such request or
direction.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys, accountants, experts
and such other professionals as the Trustee deems necessary, advisable or
appropriate and shall not be responsible for the misconduct or negligence of
any attorney, accountant, expert or other such professional appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficiently
evidenced by a written order signed by an Officer of the Company issuing such
demand, request, direction or notice.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Exchange Debentures and may otherwise deal with the Company
or any Affiliate of the Company with the same rights it would have if it were
not Trustee. However, in the event that the Trustee acquires any conflicting
interest within the meaning of the TIA it must eliminate such conflict within
90 days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Exchange Debentures, it
shall not be accountable for the Company's use of the proceeds from the
Exchange Debentures or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, it shall not be responsible
for the use or application of any money received by any Paying Agent other than
the Trustee, and it shall not be responsible for any statement or recital
herein or any statement in the Exchange Debentures or any other document in
connection with the sale of the Exchange Debentures or pursuant to this
Indenture other than its certificate of authentication.
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SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Exchange
Debentures a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium or interest on any Exchange Debentures, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of the
Holders of the Exchange Debentures.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE EXCHANGE DEBENTURES.
Within 60 days after each ______ beginning with the ______ following
the date of this Indenture, and for so long as Exchange Debentures remain
outstanding, the Trustee shall mail to the Holders of the Exchange Debentures a
brief report dated as of such reporting date that complies with TIA ss. 313(a)
(but if no event described in TIA ss. 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Exchange Debentures shall be mailed to the Company and filed with the SEC and
each stock exchange on which the Exchange Debentures are listed in accordance
with TIA ss. 313(d). The Company shall promptly notify the Trustee when the
Exchange Debentures are listed on any stock exchange.
SECTION 7.07. COMPENSATION, REIMBURSEMENT AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and the rendering by it of
the services required hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by or on behalf of it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's attorneys,
accountants, experts and such other professionals as the Trustee deems
reasonably necessary, advisable or appropriate.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture (including its
duties under Section 9.06 hereof), including the costs and expenses of
enforcing this Indenture against the Company (including this Section 7.07
hereof) and defending itself against or investigating any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its gross negligence or willful misconduct. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend any claim or threatened
claim asserted against the Trustee, and the Trustee shall cooperate in the
defense thereof. The Trustee may have separate counsel and the Company shall
pay the reasonable fees and expenses of such counsel. The Company need not pay
for any settlement made without their consent, which consent shall not be
unreasonably withheld.
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The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a Lien prior to the Exchange Debentures on all money or
property held or collected by the Trustee, except any money held in trust to
pay principal and interest on particular Exchange Debentures. Such Lien shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01 (vii) or (viii) or (ix) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Exchange
Debentures of a majority in principal amount of the then outstanding Exchange
Debentures may remove the Trustee by so notifying the Trustee and the Company
in writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any applicable
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property for the purpose of rehabilitation, conservation or liquidation;
or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Exchange
Debentures may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Exchange Debentures of at least 10% in principal amount of the
then outstanding Exchange Debentures may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Exchange
Debentures who has been a Holder of a Exchange Debentures for at least six
months, fails to comply with Section 7.10 hereof, such
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Holder of a Exchange Debentures may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The Company shall mail a notice of its succession to
Holders of the Exchange Debentures. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Exchange
Debentures upon compliance with the conditions set forth below in this Article
8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
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Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from their obligations with respect to all outstanding Exchange
Debentures on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Exchange Debentures, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all of its other Obligations under such Exchange
Debentures and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the same),
except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of outstanding
Exchange Debentures to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on such Exchange Debentures
when such payments are due, (b) the Company's obligations with respect to such
Exchange Debentures under Article 2 and Section 4.02 hereof, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article 8. Subject
to compliance with this Article 8, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from their
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10
and 5.01 hereof with respect to the outstanding Exchange Debentures on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Exchange Debentures shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Exchange
Debentures shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the "outstanding"
Exchange Debentures, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
(ii) hereof, but, except as specified above, the remainder of this Indenture
and such Exchange Debentures shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(iii) through 6.01(viii) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Exchange Debentures:
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(a) the Company must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders of the Exchange
Debentures, cash in United States 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 on the outstanding Exchange Debentures on the
stated date for payment thereof or on the applicable redemption
date, as the case may be, and the Company must specify whether the
Exchange Debentures are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof,
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 this 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 Debentures 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;
(c) in the case of an election under Section 8.03 hereof,
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 Debentures
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;
(d) 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 Section 6.01 (vii) (viii)
hereof 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);
(e) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than this
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;
(f) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that, as of the date of such
opinion, (A) the trust funds will not be subject to the rights of
holders of Indebtedness other than the Exchange Debentures and (B)
assuming no intervening bankruptcy of the Company between the date
of deposit and 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;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of
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Exchange Debentures over the other creditors of the Company, or with
the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Exchange Debentures shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Exchange Debentures and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
the Holders of such Exchange Debentures of all sums due and to become due
thereon in respect of principal, premium and interest, but such money need not
be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Exchange Debentures.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium or
interest on any Exchange Debentures and remaining unclaimed for two years after
such principal, and premium or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Exchange Debentures shall
thereafter, as a secured creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national editions), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
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If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the obligations of the Company under this Indenture and
the Exchange Debentures, as applicable, shall be revived and reinstated as
though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money
in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium or
interest on any Exchange Debentures following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Exchange Debentures to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF EXCHANGE DEBENTURES.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Exchange Debentures
without the consent of any Holder of a Exchange Debentures:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Exchange Debentures in addition to
or in place of certificated Exchange Debentures;
(c) to provide for the assumption of the Company's obligations to
the Holders of the Exchange Debentures in the case of a merger or
consolidation pursuant to Article 5 hereof, as applicable;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Exchange Debentures or that does not
adversely affect the legal rights hereunder of any Holder of Exchange
Debentures; or
(e) to comply with the requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such amended
or supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of any amended or supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF EXCHANGE DEBENTURES.
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Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture and the Exchange Debentures may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Exchange Debentures then outstanding
(including consents obtained in connection with a purchase of, or tender offer
or exchange offer for the Exchange Debentures), and, subject to Sections 6.04
and 6.07 hereof, any existing Default or Event of Default (other than a Default
or Event of Default in the payment of the principal of, premium or , if any, or
interest on the Exchange Debentures) or compliance with any provision of this
Indenture or the Exchange Debentures may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Exchange
Debentures (including consents obtained in connection with a purchase of, or
tender offer or exchange offer for the Exchange Debentures). Any amendment to
(a) the provisions of Article 10 hereof and (b) Section 4.11 including the
related definitions will require the consent of the Holders of at least 75% in
aggregate principal amount of the Exchange Debentures then outstanding if such
amendment would adversely affect the rights of Holders of Exchange Debentures.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such amended
or supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Exchange
Debentures as aforesaid, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of such amended or supplemental Indenture unless such amended or
supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Exchange
Debentures under this Section 9.02 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of Exchange Debentures
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07
hereof, the Holders of a majority in aggregate principal amount of the Exchange
Debentures then outstanding may waive compliance in a particular instance by
the Company with any provision of this Indenture or the Exchange Debentures.
However, without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Exchange Debentures held by a non-consenting
Holder):
(a) reduce the principal amount of Exchange Debentures whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Exchange Debentures or alter or waive any of the provisions with respect
to the redemption of the Exchange Debentures (except as provided above
with respect to Section 4.11 hereof);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Exchange Debentures;
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(d) waive a Default or Event of Default in the payment of principal
of or premium or interest on the Exchange Debentures (except a rescission
of acceleration of the Exchange Debentures by the Holders of at least a
majority in aggregate principal amount of the then outstanding Exchange
Debentures and a waiver of the payment default that resulted from such
acceleration);
(e) make any Exchange Debentures payable in money other than that
stated in the Exchange Debentures;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Exchange Debentures
to receive payments of principal of or premium, if any, or interest on
the Exchange Debentures;
(g) waive a redemption payment with respect to any Exchange
Debentures (except as provided above with respect to Section 4.11
hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Exchange
Debentures shall be set forth in a amended or supplemental Indenture that
complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Exchange Debentures is a continuing consent by
the Holder of a Exchange Debentures and every subsequent Holder of a Exchange
Debentures or portion of a Exchange Debentures that evidences the same debt as
the consenting Holder's Exchange Debentures, even if notation of the consent is
not made on any Exchange Debentures. However, any such Holder of a Exchange
Debentures or subsequent Holder of a Exchange Debentures may revoke the consent
as to its Exchange Debentures if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF EXCHANGE DEBENTURES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Exchange Debentures thereafter authenticated. The
Company in exchange for all Exchange Debentures may issue and the Trustee shall
authenticate new Exchange Debentures that reflect the amendment, supplement or
waiver.
Failure to make the appropriate notation or to issue a new Exchange
Debentures shall not affect the validity and effect of such amendment,
supplement or waiver.
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SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental Indenture authorized
pursuant to this Article 9 if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental Indenture, the Trustee shall be entitled to receive
and, subject to Section 7.01 hereof, shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
such amendment or supplemental Indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms. The Company may not sign
an amendment or supplemental Indenture until their respective Board of
Directors approves it.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agree, and each Holder by accepting a Exchange
Debentures agrees, that the Indebtedness evidenced by the Exchange Debentures
is subordinated in right of payment, to the extent and in the manner provided
in this Article 10, to the prior payment in full of all Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
SECTION 10.02. CERTAIN DEFINITIONS.
"Designated Senior Debt" means (i) so long as any Senior Bank Debt
is outstanding, the Senior Bank Debt and (ii) thereafter, any other Senior Debt
permitted hereunder, the principal amount of which is $25.0 million or more and
that has been designated by the Company as "Designated Senior Debt."
A "distribution" may consist of cash, securities or other property,
by set-off or otherwise.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Senior Bank Debt" means any 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 this Indenture to be
incurred.
"Senior Debt" means (a) the Senior Bank Debt, (b) all additional
Indebtedness that is permitted under this Indenture that is not by its terms
pari passu with or subordinated to the Exchange Debentures, (c) all Obligations
of the Company with respect to the foregoing clauses (a) and (b), 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 this Indenture. Notwithstanding anything to
the contrary in the foregoing,
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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), (iii) the Series D Exchange Notes or (iv) any Indebtedness
incurred in violation of this Indenture.
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its respective
property, or in an assignment for the benefit of creditors or any marshalling
of the Company's assets and liabilities:
(1) holders of Senior Debt shall 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 of Exchange Debentures shall be entitled to
receive any payment with respect to the Exchange Debentures (except that
Holders may receive (i) securities that are subordinated to at least the
same extent as the Exchange Debentures to (a) Senior Debt and (b) any
securities issued in exchange for Senior Debt and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section
8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as provided
in subsection (1) above) are paid in full, any distribution to which the
Holders of Exchange Debentures would be entitled but for this Article 10
shall be made to holders of Senior Debt (except that Holders may receive
(i) securities that are subordinated to at least the same extent as the
Exchange Debentures to (a) Senior Debt and (b) any securities issued in
exchange for Senior Debt and (ii) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof), as
their interests may appear.
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.
(a) The Company may not make any payment or distribution to the
Trustee or any Holder in respect of the Exchange Debentures and may not acquire
from the Trustee or any Holder any Exchange Debentures for cash or property
(other than (1) securities that are subordinated to at least the same extent as
the Exchange Debentures to (A) Senior Debt and (B) any securities issued in
exchange for Senior Debt and (2) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof) until all principal
and other Obligations with respect to the Senior Debt have been paid in full
if:
(i) a default in the payment of the principal of, premium, if any,
or interest on Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a default specified in Section
10.04(a)(i) hereof, on Designated Senior Debt occurs and is continuing
with respect to Designated Senior Debt that then permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity and the Trustee receives a notice of the default (a "Payment
Blockage Notice") from a Person who may give it
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pursuant to Section 10.12 hereof. If the Trustee receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section 10.04 unless and until (I) at
least 360 days shall have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice and (II) all scheduled payments
of principal, premium and interest on the Exchange Debentures that have
come due (other than by reason of acceleration) have been paid in full in
cash. No default described in this paragraph (ii) that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
(b) The Company may and shall resume payments on and distributions
in respect of the Exchange Debentures and may acquire them (a) in the case of a
default described in Section 10.04(a)(i) hereof, upon the date on which the
default is cured or waived and (b) in the case of a default described in
section 10.04(a)(ii), the earlier of the date on which such default is cured or
waived or 179 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated Senior Debt has been
accelerated.
SECTION 10.05. ACCELERATION OF EXCHANGE DEBENTURES.
If payment of the Exchange Debentures is accelerated because of an
Event of Default, the Company shall promptly notify holders of Senior Debt of
the acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Exchange Debentures at a time when the
Trustee or such Holder, as applicable, has actual knowledge that such payment
is prohibited by Section 10.04 hereof, such payment shall be held by the
Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Debt as their interests may appear or their Representative under the indenture
or other agreement (if any) pursuant to which Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes
to perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 10, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall
be entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.07. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any Obligations
with respect to the Exchange Debentures to violate this Article 10, but failure
to give such notice shall not affect the subordination of the Exchange
Debentures to the Senior Debt as provided in this Article 10.
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SECTION 10.08. SUBROGATION.
After all Senior Debt is paid in full and until the Exchange
Debentures are paid in full, Holders shall be subrogated (equally and ratably
with all other Indebtedness pari passu with the Exchange Debentures) to the
rights of holders of Senior Debt to receive distributions applicable to Senior
Debt to the extent that distributions otherwise payable to the Holders have
been applied to the payment of Senior Debt. A distribution made under this
Article 10 to holders of Senior Debt that otherwise would have been made to
Holders of Exchange Debentures is not, as between the Company and Holders of
Exchange Debentures, a payment by the Company on the Senior Debt.
SECTION 10.09. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Exchange
Debentures and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Exchange
Debentures, the obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on the Exchange
Debentures in accordance with their terms;
(2) affect the relative rights of Holders of Exchange Debentures and
creditors of the Company other than their rights in relation to holders
of Senior Debt; or
(3) prevent the Trustee or any Holder of Exchange Debentures from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Exchange
Debentures.
If the Company fails because of this Article 10 to pay principal of
or interest or , if any, on a Exchange Debentures on the due date, the failure
is still a Default or Event of Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination
of the Indebtedness evidenced by the Exchange Debentures shall be impaired by
any act or failure to act by the Company or any Holder of Exchange Debentures
or by the failure of the Company or any Holder of Exchange Debentures to comply
with this Indenture.
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders
of Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred
to in this Article 10, the Trustee and the Holders of Exchange Debentures shall
be entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Exchange Debentures for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Debt and other Indebtedness of the Company, the amount
thereof or payable thereon,
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the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Exchange Debentures, unless the Trustee shall have
received at its Corporate Trust Office at least five Business Days prior to the
date of such payment written notice of facts that would cause the payment of
any Obligations with respect to the Exchange Debentures to violate this Article
10. Only the Company or a Representative may give such notice. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not the Trustee. Any Agent
may do the same with like rights.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Exchange Debenture by the Holder's acceptance
thereof authorizes and directs the Trustee on the Holder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, the agent under the Credit Agreement (or in the
absence of such agent, the lender) is hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Exchange Debentures.
SECTION 10.14. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision hereof limits, qualifies or conflicts with a
provision of the TIA or another provision that would be required or deemed
under the TIA to be part of and govern this Indenture if this Indenture were
subject thereto, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the TIA that may be so modified
or excluded, the latter provision shall be deemed to apply to this Indenture as
so modified or to be excluded, as the case may be.
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SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to others
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
SFX Broadcasting, Inc.
150 East 58th Street
New York, New York 10155
Telecopier No.: (212) 753-3188
Attention: Howard J. Tytel, Esq.
With a copy to:
Baker & McKenzie
805 Third Avenue
New York, New York 10022
Telecopier No.: (212) 759-9133
Attention: Howard Berkower, Esq.
If to the Trustee:
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders of
Exchange Debenture) shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder of Exchange Debentures shall
be mailed by first class mail, certified or registered, return receipt
requested, or by overnight air courier guaranteeing next day delivery to its
address shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described in TIA ss.
313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder of Exchange Debentures or any defect in it shall not
affect its sufficiency with respect to other Holders of Exchange Debentures.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
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If the Company mails a notice or communication to Holders of
Exchange Debentures, it shall mail a copy to the Trustee and each Agent at the
same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF EXCHANGE DEBENTURES WITH OTHER
HOLDERS OF EXCHANGE DEBENTURES.
Holders of Exchange Debentures may communicate pursuant to TIA ss.
312(b) with other HolderS of Exchange Debentures with respect to their rights
under this Indenture or the Exchange Debentures. The Company, the Trustee, the
Registrar and anyone else shall have the protection of TIA ss. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders of Exchange Debentures. The Registrar or Paying Agent may make
reasonable rules and set reasonable requirements for its functions.
54
<PAGE>
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company,
as applicable, under the Exchange Debentures, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Exchange Debentures by accepting a Exchange Debenture waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Exchange Debentures.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE AND THE EXCHANGE DEBENTURES.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Exchange
Debentures shall bind their successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or the Exchange Debentures
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture, which have been inserted for
convenience of reference only, are not to be considered a part of this
Indenture and shall in no way modify or restrict any of the terms or provisions
hereof.
[Signatures on following page]
55
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Indenture as of the
date first written above.
Very truly yours,
SFX BROADCASTING, INC.
By:
--------------------------------
Name:
Title:
[TRUSTEE]
By:
---------------------------------
Name:
Title:
56
<PAGE>
EXHIBIT A
(Face of Exchange Debenture)
12 5/8% Subordinated Exchange Debentures due 2006
CUSIP:
No. $______________
SFX Broadcasting, Inc.
promise to pay to ________________ or registered assigns, the principal sum of
__________________ Dollars on October 31, 2006.
Interest Payment Dates: January 15 and July 15
Record Dates: ___________ and _____________
Dated:
SFX BROADCASTING, INC.
By:________________________
Name:
Title:
This is one of the Exchange Debentures referred to in within-mentioned
Indenture:
_________________________ ,
as Trustee
By:__________________________________
A-1
<PAGE>
(Back of Exchange Debenture)
12 5/8% Subordinated Exchange Debentures due 2006
[Unless and until it is exchanged in whole or in part for Exchange
Debentures in definitive form, this Exchange Debenture may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. Unless this certificate is presented
by an authorized representative of The Depository Trust Company (55 Water
Street, New York, New York) ("DTC"), to the issuers or their agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as may be requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or
such other entity as may be requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.]1
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. SFX Broadcasting, Inc., a Delaware corporation (the
"Company") promises to pay interest on the principal amount of this Exchange
Debenture at 12 5/8% per annum from the date hereof until maturity. The Company
will pay interest semi-annually on January 15 and July 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Exchange Debentures will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the date of issuance; provided that if there is no existing
Default in the payment of interest, and if this Exchange Debenture is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be July 15, 1997. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company will pay interest on the Exchange
Debentures (except defaulted interest) to the Persons who are registered
Holders of Exchange Debentures at the close of business on the January 1 or
July 1 next preceding the Interest Payment Date, even if such Exchange
Debentures are cancelled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.11 of the Indenture with respect
to defaulted interest. Any such interest installment not punctually paid or
duly provided for shall forthwith cease to be payable to the registered Holders
on such Interest Payment Date, and may be paid to the registered Holders at the
close of business on a special interest payment date to be fixed by the Trustee
for the payment of such defaulted interest, notice
- --------
1. TO BE INCLUDED ONLY IF THE EXCHANGE DEBENTURE IS ISSUED IN GLOBAL FORM.
A-2
<PAGE>
whereof shall be given to the registered Holders not less than 15 days prior to
such special interest payment date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Exchange Debentures may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. The
Exchange Debentures will be payable as to principal, premium and interest at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest and premium on, all Global Exchange Debentures and
all other Exchange Debentures the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent. Such payment shall be
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, ____________, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
may act in any such capacity.
4. INDENTURE. The Company issued the Exchange Debentures under an
Indenture dated as of _________, ____ (the "Indenture") between the Company and
the Trustee. The terms of the Exchange Debentures include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The
Exchange Debentures are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of such terms. The Exchange
Debentures are general obligations of the Company limited to $225,000,000
million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
The Exchange Debentures will not be redeemable at the Company's option
prior to January 15, 2002. Thereafter, the Exchange Debentures will be subject
to redemption at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on January 15, 2002 of the years indicated below:
YEAR PERCENTAGE
2002................................................. 106.313%
2003................................................. 104.734%
2004................................................. 103.156%
2005................................................. 101.578%
2006 and thereafter.................................. 100.000%
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with
respect to the Exchange Debentures.
A-3
<PAGE>
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required
to make an offer (a "Change of Control Offer") to repurchase all or any part of
each Holder's Exchange Debentures at a purchase price equal to 101% of the
principal amount thereof plus, in each case, accrued and unpaid interest and ,
if any, to the date of purchase (in either case, the "Change of Control
Payment"). Within 10 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Exchange Debentures are to be redeemed at its registered address. Exchange
Debentures in denominations larger than $100 may be redeemed in part but only
in whole multiples of $100, unless all of the Exchange Debentures held by a
Holder are to be redeemed. On and after the redemption date interest ceases to
accrue on Exchange Debentures or portions thereof called for redemption.
9. SUBORDINATION. Each Holder by accepting an Exchange Debenture agrees
that the payment of principal of, premium and interest on each Exchange
Debenture is subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, to the prior payment in full of all
Senior Debt (whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed), and that the subordination is for
the benefit of the holders of Senior Debt.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Exchange Debentures are in
registered form without coupons in all appropriate denominations. The transfer
of Exchange Debentures may be registered and Exchange Debentures may be
exchanged as provided in the 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 Indenture. The Company need not
exchange or register the transfer of any Exchange Debenture or portion of a
Exchange Debenture selected for redemption, except for the unredeemed portion
of any Exchange Debenture being redeemed in part. Also, it need not exchange or
register the transfer of any Exchange Debentures for a period of 15 days before
a selection of Exchange Debentures to be redeemed or during the period between
a record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of an Exchange Debenture
may be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Exchange Debentures may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Exchange Debentures, and any existing default or compliance with
any provision of the Indenture or the Exchange Debentures may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Exchange Debentures. Without the consent of any Holder of an
Exchange Debenture, the Indenture or the Exchange Debentures may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Exchange Debentures in addition to or in place of certificated
Exchange Debentures, to provide for the assumption of the Company's obligations
to Holders of the Exchange Debentures in case of a merger or consolidation, to
make any change that would provide any additional rights or benefits
A-4
<PAGE>
to the Holders of the Exchange Debentures or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act. Any amendment to the provisions of
Article 10 of the Indenture and Section 4.11 including, in each case, the
related definitions will require the consent of the Holders of at least 75% in
aggregate principal amount of the Exchange Debentures then outstanding if such
amendment would adversely affect the rights of Holders of Exchange Debentures.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) a default for
30 days in the payment when due of interest on the Exchange Debentures (whether
or not prohibited by Article 10 of the Indenture); (ii) a default in payment
when due of the principal of or premium, if any, on the Exchange Debentures
(whether or not prohibited by Article 10 of the Indenture); (iii) the failure
by the Company to comply with the provisions described under Sections 4.07,
4.08, 4.09, 4.11 and 5.01 of the Indenture; (iv) the failure by the Company for
60 days after notice to comply with any of its other agreements in the
Indenture or the Exchange Debentures; (v) a 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 hereof, which default (a) is caused by a failure
to pay principal of or premium, if any, or interest on such Indebtedness prior
to the expiration of the grace period provided in such Indebtedness on the date
of such default (a "Payment Default") or (b) 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 under which there has been a Payment Default or
the maturity of which has been so accelerated, aggregates $25.0 million or
more; (vi) the failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $10.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries or a group of Subsidiaries that, taken as a whole, 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 Debentures may declare all the Exchange
Debentures to be due and payable. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Exchange Debentures will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Exchange
Debentures except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Exchange
Debentures may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Exchange Debentures 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. The Holders of a majority in aggregate
principal amount of the Exchange Debentures then outstanding by notice to the
Trustee may on behalf of the Holders of all of the Exchange Debentures waive
any existing Default or Event of Default and its consequences under the
Indenture except a continuing Default or Event of Default in the payment of
interest or the principal of, the Exchange Debentures. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
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.
A-5
<PAGE>
15. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for its Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Exchange Debentures or
the Indenture, as applicable, or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting an
Exchange Debenture waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Exchange
Debentures.
17. AUTHENTICATION. This Exchange Debenture shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Exchange Debentures and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Exchange Debentures or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
SFX Broadcasting, Inc.
150 East 58th Street
New York, New York 10155
Attention: Howard J. Tytel
A-6
<PAGE>
ASSIGNMENT FORM
To assign this Exchange Debenture, fill in the form below: (I) or (we)
assign and transfer this Exchange Debenture to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Exchange Debenture on the books of the Company. The agent may
substitute another to act for him.
Date:
Your Signature:_____________________________________
(Sign exactly as your name appears on the face of
this Exchange Debenture)
Signature Guarantee:________________________________
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Exchange Debenture purchased by
the Company pursuant to Section 4.11 or 4.13 of the Indenture, check the box
below:
[ ] Section 4.11 [ ] Section 4.13
If you want to elect to have only part of the Exchange Debenture
purchased by the Company pursuant to Section 4.11 or Section 4.13 of the
Indenture, state the amount you elect to have purchased:
$____________
Date: Your Signature:_______________________________
(Sign exactly as your name appears on the
Exchange Debenture)
Tax Identification No.:_______________________
Signature Guarantee:__________________________
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED EXCHANGE DEBENTURES
The following exchanges of a part of this Global Exchange Debenture
for Certificated Exchange Debentures have been made:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Exchange Signature of
Principal Amount of Principal Amount of Debenture following authorized officer of
this Global Exchange this Global Exchange such decrease (or Trustee or Exchange
Date of Exchange Debenture Debenture increase ) Debenture Custodian
- ---------------------- ----------- ----------- ---------- -------------------
<S> <C> <C> <C> <C>
</TABLE>
A-9
<PAGE>
FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of November 25, 1996, among Liberty Broadcasting, Incorporated, a
Delaware corporation; Liberty Broadcasting Group Incorporated, a Delaware
corporation; Liberty Broadcasting of New York Incorporated, a New York
corporation; Liberty Broadcasting of Albany Incorporated, a New York
corporation; Liberty Broadcasting of Maryland Incorporated, a Maryland
corporation; Liberty Broadcasting of Maryland II Incorporated, a Maryland
corporation; WHJJ, Inc., a Rhode Island corporation; WHFS, Inc., a Maryland
corporation; WHFM, Inc., a New York corporation; WHCN, Inc., a Connecticut
corporation; WHCN-FM, Inc., a Delaware corporation; WSNE, Inc., a Rhode Island
corporation; WSNE-FM, Inc., a Delaware corporation; WMXB, Inc., a Virginia
corporation; WPYX, Inc., a New York corporation; WHJY, Inc., a Rhode Island
corporation; WPOP, Inc., a Connecticut corporation; Musical Heights, Inc., a
Maryland corporation; WGNA, Inc., a New York corporation; WGNA-FM, Inc., a New
York corporation; WGBB, Inc., a New York corporation; Beck-Ross Communications,
Inc., a Delaware corporation; WTRY, Inc., a New York corporation; WXTR, Inc., a
Maryland corporation; WYSR, Inc., a Connecticut corporation; WBLI, Inc., a New
York corporation; WBLI-FM, Inc., a Delaware corporation; WBAB, Inc., a New York
corporation; WZYQ, Inc., a Delaware corporation; WQSI, Inc., a Delaware
corporation; Liberty Acquisition Subsidiary Corporation, a Delaware
corporation; SFX Broadcasting of Central North Carolina, Inc., a Delaware
corporation; and SFX Broadcasting of Hartford, Inc., a Delaware corporation
(collectively, the "Guarantors"), each of which is a direct or indirect
subsidiary of SFX Broadcasting, Inc., a Delaware corporation (the "Company");
and The Chase Manhattan Bank, as trustee under the indenture referred to below
(the "Trustee").
WITNESSETH
WHEREAS, The Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of May 31, 1996, providing
for the issuance of an aggregate principal amount of $450,000,000 of 10 3/4%
Senior Subordinated Notes due 2006 (the "Securities"); and
WHEREAS, Section 4.15 of the Indenture provides that under
certain circumstances the Company is required to cause each Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Guarantor shall unconditionally guarantee all of the Company's Obligations
under the Securities pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, each Guarantor and the Trustee mutually covenant and agree for
the equal and ratable benefit of the holders of the Securities as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. Each Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
obligations under the Securities
- 1 -
<PAGE>
on the terms and subject to the conditions set forth in Article 11 of the
Indenture and to be bound by all other applicable provisions of the Indenture,
including, without limitation, the provisions of Article 10 of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, shareholder or agent of any
Guarantor, as such, shall have any liability for any obligations of the Company
or any Guarantor under the Securities, any Subsidiary Guarantees, the Indenture
or this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of the Securities by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
4. EFFECTIVENESS. This Supplemental Indenture shall be
effective upon execution by the parties hereto.
5. RECITALS. The recitals contained herein shall be taken as
the statements of the Company and the Guarantors and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity of this Supplemental Indenture.
6. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
- 2 -
<PAGE>
7. COUNTERPARTS. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
The Chase Manhattan Bank, as Trustee
By: /s/ Frank Grippo
----------------------------
Name:
Title: Vice President
Liberty Broadcasting, Incorporated
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting Group Incorporated
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 3 -
<PAGE>
Liberty Broadcasting of New York Incorporated
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting of Albany Incorporated
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting of Maryland Incorporated
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting of Maryland II Incorporated
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHJJ, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 4 -
<PAGE>
WHFS, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHFM, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHCN, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHCN-FM, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 5 -
<PAGE>
WSNE, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WSNE-FM, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WMXB, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WPYX, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHJY, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 6 -
<PAGE>
WPOP, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Musical Heights, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WGNA, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WGNA-FM, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 7 -
<PAGE>
WGBB, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Beck-Ross Communications, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WTRY, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WXTR, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WYSR, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 8 -
<PAGE>
W.B.L.I., Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WBLI-FM, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WBAB, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WZYQ, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WQSI, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 9 -
<PAGE>
Liberty Acquisition Subsidiary Corporation
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Central North Carolina, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Hartford, Inc.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 10 -
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of January 10, 1997,
among SFX Broadcasting, Inc. (the "Company"), a Delaware corporation, SFX
Broadcasting of the Southwest, Inc., a Delaware corporation; SFX Broadcasting
of Texas, Inc., a Delaware corporation; SFX Broadcasting of Texas (KRLD),
Inc., a Delaware corporation; SFX Broadcasting of Texas (KRLD) Licensee, Inc.,
a Delaware corporation; SFX Broadcasting of Texas (TSN), Inc., a Delaware
corporation; SFX Broadcasting of Texas (TSN), Licensee, Inc., a Delaware
corporation; KODA-FM Licensee, Inc., a Delaware corporation; KJQY-FM Licensee,
Inc., a Delaware corporation; SFX Broadcasting of Texas (KTCK), Inc., a
Delaware corporation; SFX Broadcasting of Texas (KTCK), Licensee, Inc., a
Delaware corporation; SFX Broadcasting of the Southeast, Inc., a Delaware
corporation; SFX Broadcasting of South Carolina (WMYI), Inc., a Delaware
corporation; SFX Broadcasting of South Carolina (WMYI) Licensee, Inc., a
Delaware corporation; SFX Broadcasting of Mississippi, Inc., a Delaware
corporation; SFX Broadcasting of Mississippi Licensee, Inc., a Delaware
corporation; SFX Broadcasting of South Carolina (WSSL), Inc., a Delaware
corporation; SFX Broadcasting of South Carolina (WSSL) Licensee, Inc., a
Delaware corporation; SFX Broadcasting of Tennessee, Inc., a Delaware
corporation; SFX Broadcasting of Tennessee Licensee, Inc., a Delaware
corporation; SFX Broadcasting of Jackson, Inc., a Delaware corporation; SFX
Broadcasting of Jackson Licensee, Inc., a Delaware corporation; SFX
Broadcasting of North Carolina, Inc., a Delaware corporation; SFX Broadcasting
of North Carolina Licensee, Inc., a Delaware corporation; SFX Broadcasting of
San Diego, Inc., a Delaware corporation; Parker Broadcasting Company, a
California corporation; SFX Broadcasting of San Diego Licensee, Inc., a
Delaware corporation; SFX Acquisition Corporation, a Delaware corporation; SFX
Merger Company, a Delaware corporation; Liberty Broadcasting, Incorporated, a
Delaware corporation; Liberty Broadcasting Group Incorporated, a Delaware
corporation; Liberty Broadcasting of New York Incorporated, a New York
corporation; Liberty Broadcasting of Albany Incorporated, a New York
corporation; Liberty Broadcasting of Maryland Incorporated, a Maryland
corporation; Liberty Broadcasting of Maryland II Incorporated, a Maryland
corporation; WHJJ, Inc., a Rhode Island corporation; WHFS, Inc., a Maryland
corporation; WHFM, Inc., a New York corporation; WHCN, Inc., a Connecticut
corporation; WHCN-FM, Inc., a Delaware corporation; WSNE, Inc., a Rhode Island
corporation; WSNE-FM, Inc., a Delaware corporation; WMXB, Inc., a Virginia
corporation; WPYX, Inc., a New York corporation; WHJY, Inc., a Rhode Island
corporation; WPOP, Inc., a Connecticut corporation; Musical Heights, Inc., a
Maryland corporation; WGNA, Inc., a New York corporation; WGNA-FM, Inc., a New
York corporation; WGBB, Inc., a New York corporation; Beck-Ross
Communications, Inc., a Delaware corporation; WTRY, Inc., a New York
corporation; WXTR, Inc., a Maryland corporation; WYSR, Inc., a Connecticut
corporation; WBLI, Inc., a New York corporation; WBLI-FM, Inc., a Delaware
corporation; WBAB, Inc., a New York corporation; WZYQ, Inc., a Delaware
corporation; WQSI, Inc., a Delaware corporation; Liberty Acquisition
Subsidiary Corporation, a Delaware corporation; SFX Broadcasting of Central
North Carolina, Inc., a Delaware corporation; and SFX Broadcasting of
Hartford, Inc., a Delaware corporation (all of the above entities other than
the Company, the "Guarantors"), and The Chase Manhattan Bank (formerly known
as Chemical Bank), as trustee under the indenture referred to below (the
"Trustee").
<PAGE>
RECITALS
WHEREAS, the Company and the Guarantors have heretofore executed and
delivered to the Trustee an indenture (the "Indenture"), dated as of May 31,
1996, providing for the issuance of an aggregate principal amount of
$450,000,000 of 10 3/4% Senior Subordinated Notes due 2006 (the "Notes");
WHEREAS, Section 9.01 of the Indenture provides that, in order to cure
defects or inconsistencies in the Indenture, the Indenture may be amended or
supplemented without the consent of any Holder of a Note;
WHEREAS, the Company and the Guarantors wish to amend the Indenture to
cure a defect and an inconsistency in Section 4.09 thereof in order to clarify
that Subsidiaries of the Company may guarantee Senior Debt of the Company
incurred in compliance with the provisions of Section 4.09 of the Indenture;
and
WHEREAS, the Company and the Guarantors hereby covenant and represent
that all things necessary have been done to make this Second Supplemental
Indenture a legal, valid and binding agreement of the Company and the
Guarantors in accordance with the terms hereof and of the Indenture.
NOW THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH, that, for
and in consideration of the premises, it is mutually covenanted and agreed as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Capitalized Terms.
Capitalized terms used herein and not otherwise defined herein are used
with the respective meanings ascribed to such terms in the Indenture.
SECTION 102. Effectiveness.
This Second Supplemental Indenture shall become effective, and shall
bind the parties hereto, upon its execution by the parties hereto.
SECTION 103. Incorporation of Second Supplemental Indenture into Indenture.
This Second Supplemental Indenture is executed by the Company, the
Guarantors and the Trustee pursuant to the provisions of Section 9.01 of the
Indenture, and the terms and conditions hereof shall be deemed to be part of
the Indenture for all purposes upon the effectiveness of this
- 2 -
<PAGE>
Second Supplemental Indenture. The Indenture, as amended and supplemented by
this Second Supplemental Indenture, is in all respects hereby adopted,
ratified and confirmed.
SECTION 104. Effect of Headings.
The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
SECTION 105. Governing Law.
The internal law of the State of New York shall govern and be used to
construe this Second Supplemental Indenture.
SECTION 106. Counterparts.
This Second Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.
SECTION 107. Recitals.
The recitals contained herein shall be taken as the statements of the
Company and the Guarantors, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Second Supplemental Indenture.
ARTICLE TWO
AMENDMENTS TO PROVISIONS OF INDENTURE
SECTION 201. Covenants
The first paragraph of Section 4.09 of the Indenture is hereby amended
in its entirety to read as follows:
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of Preferred
Stock; provided, however, that (A) (i) the Company may incur
Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and (ii) the Subsidiaries may guarantee Senior
Debt and (B) a Guarantor may issue shares of Preferred Stock
(other than shares of Preferred Stock that are convertible into
or exchangeable for any other class of Capital Stock) if, in
either case, the Company's Debt to Cash
- 3 -
<PAGE>
Flow Ratio at the time of the incurrence of such Indebtedness or
the issuance of such Disqualified Stock or the guarantee of such
Senior Debt or the issuance of such Preferred Stock, as the case
may be, after giving pro forma effect to such incurrence or
issuance or guarantee as of such date and to the use of proceeds
therefrom as if the same had occurred at the beginning of the
most recently ended four full fiscal quarter period of the
Company for which internal financial statements are available,
would have been no greater than 7.0 to 1.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Supplemental Indenture as of the date first above written.
The Chase Manhattan Bank, SFX Broadcasting, Inc.
as Trustee
By: /s/ Frank Grippo By: /s/ Howard J. Tytel
---------------------------- --------------------------------------
Name: Name: Howard J. Tytel
Title: Title: Executive Vice President
SFX Broadcasting of the Southwest, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 4 -
<PAGE>
SFX Broadcasting of Texas, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Texas (KRLD), Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Texas (KRLD)
Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Texas (TSN), Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 5 -
<PAGE>
SFX Broadcasting of Texas (TSN)
Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
KODA-FM Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
KJQY-FM Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Texas (KTCK), Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Texas (KTCK)
Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 6 -
<PAGE>
SFX Broadcasting of The Southeast, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of South Carolina (WMYI),
Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of South Carolina (WMYI)
Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Mississippi, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 7 -
<PAGE>
SFX Broadcasting of Mississippi Licensee,
Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of South Carolina
(WSSL), Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of South Carolina (WSSL)
Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Tennessee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 8 -
<PAGE>
SFX Broadcasting of Tennessee Licensee,
Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Jackson, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Jackson Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of North Carolina, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 9 -
<PAGE>
SFX Broadcasting of North Carolina
Licensee, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of San Diego, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Parker Broadcasting Company
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of San Diego Licensee,
Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 10 -
<PAGE>
SFX Acquisition Corporation
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Merger Company
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting, Incorporated
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting Group Incorporated
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting of New York
Incorporated
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-11-
<PAGE>
Liberty Broadcasting of Albany
Incorporated
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting of Maryland
Incorporated
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Broadcasting of Maryland II
Incorporated
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHJJ, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHFS, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-12-
<PAGE>
WHFM, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHCN, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHCN-FM, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WSNE, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WSNE-FM, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-13-
<PAGE>
WMXB, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WPYX, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WHJY, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WPOP, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Musical Heights, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-14-
<PAGE>
WGNA, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WGNA-FM, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WGBB, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Beck-Ross Communications, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WTRY, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-15-
<PAGE>
WXTR, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WYSR, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
W.B.L.I., Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WBLI-FM, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WBAB, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-16-
<PAGE>
WZYQ, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
WQSI, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
Liberty Acquisition Subsidiary Corporation
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Central North
Carolina, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SFX Broadcasting of Hartford, Inc.
By: /s/ Howard J. Tytel
--------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
-17-
<PAGE>
- ------------------------------------------------------------------------------
SFX BROADCASTING, INC.,
Issuer
to
THE CHASE MANHATTAN BANK,
Trustee
----------
SECOND SUPPLEMENTAL INDENTURE
Dated as of January 10, 1997
Supplemental to
Indenture Dated as of May 31, 1996
---------
10-3/4% SENIOR SUBORDINATED NOTES DUE 2006
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS.......................................................... 2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.... 2
Section 101. Capitalized Terms............................ 2
SECTION 102. Effectiveness................................ 2
SECTION 103. Incorporation of Second Supplemental
Indenture into Indenture................... 2
SECTION 104. Effect of Headings........................... 3
SECTION 105. Governing Law................................ 3
SECTION 106. Counterparts................................. 3
SECTION 107. Recitals..................................... 3
ARTICLE TWO
AMENDMENTS TO PROVISIONS OF INDENTURE...................... 3
SECTION 201. Covenants.................................... 3
Testimonium
Signatures
(ii)
<PAGE>
THIRD SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture"), dated as of January 13, 1997, among MULTI-MARKET RADIO, INC., a
Delaware corporation; SOUTHERN STARR BROADCASTING GROUP, INC., a Delaware
corporation; SOUTHERN STARR OF ARKANSAS, INC., an Arkansas corporation;
GENERAL COMMUNICORP, INC., a Connecticut corporation; GENERAL BROADCASTING OF
CONNECTICUT, INC., a Connecticut corporation; SOUTHERN STARR OF MISSISSIPPI,
INC., a Mississippi corporation; SOUTHERN STARR COMMUNICATIONS, INC., a
Delaware corporation; SOUTHERN STARR LIMITED PARTNERSHIP, a partnership
organized in Delaware; MULTI-MARKET RADIO OF AUGUSTA, INC., a Delaware
corporation; MULTI-MARKET RADIO OF MYRTLE BEACH, INC., a Delaware corporation;
MULTI-MARKET RADIO OF NORTHAMPTON, INC., a Delaware corporation; MULTI-MARKET
RADIO OF HARTFORD, INC., a Delaware corporation; MULTI- MARKET RADIO OF
SPRINGFIELD, INC., a Delaware corporation; SOUTHERN STARR MANAGEMENT, INC., a
Delaware corporation; GENERAL BROADCASTING OF FLORIDA, INC., a Florida
corporation; and GENERAL BROADCASTING CORP., a Connecticut corporation (each a
"Guarantor"), each of which is a direct or indirect subsidiary of SFX
Broadcasting, Inc., a Delaware corporation (the "Company"); and The Chase
Manhattan Bank, as trustee under the indenture referred to below (the
"Trustee").
WITNESSETH
WHEREAS, The Company has heretofore executed and delivered
to the Trustee an indenture (the "Indenture"), dated as of May 31, 1996,
providing for the issuance of an aggregate principal amount of $450,000,000 of
10 3/4% Senior Subordinated Notes due 2006 (the "Securities"); and
WHEREAS, Section 4.15 of the Indenture provides that under
certain circumstances the Company is required to cause each Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Guarantor shall unconditionally guarantee all of the Company's
Obligations under the Securities pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, each Guarantor and the Trustee mutually covenant and agree for
the equal and ratable benefit of the holders of the Securities as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. Each Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
obligations under the Securities on the terms and subject to the conditions
set forth in Article 11 of the Indenture and to be bound by all other
applicable provisions of the Indenture, including, without limitation, the
provisions of Article 10 of the Indenture.
- 1 -
<PAGE>
3. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, shareholder or agent of any
Guarantor, as such, shall have any liability for any obligations of the
Company or any Guarantor under the Securities, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each holder of the
Securities by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the
Securities. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
4. EFFECTIVENESS. This Supplemental Indenture shall be
effective upon execution by the parties hereto.
5. RECITALS. The recitals contained herein shall be taken as
the statements of the Company and the Guarantors and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity of this Supplemental Indenture.
6. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
- 2 -
<PAGE>
7. COUNTERPARTS. The parties may sign any number of copies
of this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
THE CHASE MANHATTAN
BANK, N.A., as Trustee
By: /s/ Frank Grippo
----------------------------
Name: Frank Grippo
Title: Vice President
MULTI-MARKET RADIO, INC.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SOUTHERN STARR
BROADCASTING
GROUP, INC.
By: /s/ Howard J. Tytel
----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 3 -
<PAGE>
SOUTHERN STARR OF
ARKANSAS, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
GENERAL COMMUNICORP,
INC.
By: /s/ Howard J. Tytel
------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
GENERAL BROADCASTING OF
CONNECTICUT, INC.
By: /s/ Howard J. Tytel
------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SOUTHERN STARR OF
MISSISSIPPI, INC.
By: /s/ Howard J. Tytel
------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 4 -
<PAGE>
SOUTHERN STARR
COMMUNICATIONS, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SOUTHERN STARR LIMITED
PARTNERSHIP (By SOUTHERN
STARR COMMUNICATIONS,
INC., as general partner
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
MULTI-MARKET RADIO OF
AUGUSTA, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
MULTI-MARKET RADIO OF
MYRTLE BEACH, INC.
By: /s/ Howard J. Tytel
Name: Howard J. Tytel
Title: Executive Vice President
- 5 -
<PAGE>
MULTI-MARKET RADIO OF
NORTHAMPTON, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 6 -
<PAGE>
MULTI-MARKET RADIO OF
HARTFORD, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
MULTI-MARKET RADIO OF
SPRINGFIELD, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
SOUTHERN STARR
MANAGEMENT, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
GENERAL BROADCASTING OF
FLORIDA, INC.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 7 -
<PAGE>
GENERAL BROADCASTING
CORP.
By: /s/ Howard J. Tytel
-----------------------------
Name: Howard J. Tytel
Title: Executive Vice President
- 8 -
<PAGE>
STOCK OPTION AGREEMENT
This Agreement, effective May 9, 1996, between SFX BROADCASTING, INC., a
Delaware corporation (the "Company"), and MICHAEL G. FERREL ("Grantee"),
WHEREAS, Grantee provides significant services to the Company; and
WHEREAS, the Company desires to provide an incentive to Grantee to
encourage stock ownership in the Company and to continue to provide services to
the Company; and
WHEREAS, the achievement of these goals will be assisted by the grant of a
non-qualified option to purchase shares of the Company's Class A Common Stock,
$.01 par value (the "Class A Common Stock");
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option. The Company hereby grants to Grantee, subject to the
terms and conditions herein set forth, the right and option to purchase from
the Company all or any part of an aggregate of 50,000 shares of Class A Common
Stock at the purchase price of $33.75 per share, such option to be exercisable
as hereinafter provided.
2. Terms and Conditions. The option evidenced hereby is subject to the
following terms and conditions:
(a) Expiration Date. The option shall expire on May 9, 2001.
(b) Exercise of Option. The option shall vest on the date first set forth
above. The options may be exercised, in whole or in part, at any time
before the expiration date of the option as provided in paragraph (a)
above. Any exercise shall be accompanied by a written notice to the
Company specifying the number of shares as to which the option is
being exercised.
(c) Payment of Purchase Price. At the time of any exercise, Grantee shall
deliver to the Company, together with the notice provided in
paragraph (b) above, the full amount of the purchase price therefor
either by bank cashier's check or certified check payable to the
Company or at the discretion of the Company, in Class A Common Stock
of the Company, or any combination of cash or Class A Common Stock.
For purposes hereof, the Fair Market Value per share of Class A
Common Stock shall be the closing price of publicly traded Class A
Common Stock on the national securities exchange on which the Class A
Common Stock is listed (if the Class A Common Stock is so listed or
on the NASDAQ National Market System (if the Class A Common Stock is
regularly quoted on the
<PAGE>
NASDAQ National Market System)), or, if not so listed or regularly
quoted, the mean between the closing bid and ask prices of publicly
traded Class A Common Stock in the over-the-counter market, or, if
such bid and ask prices shall not be available, as reported by any
nationally recognized quotation service selected by the Company, or
as determined by the Company in a manner consistent with the
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). The optionee shall also deliver written representation that
(i) the Class A Common Stock being acquired is purchased for
investment and not for distribution; (ii) the Class A Common Stock
being acquired has not been registered under the Securities Act of
1933, as amended; and (iii) the Class A Common Stock being acquired
will not be sold or transferred unless there is an effective
Registration Statement for such Class A Common Stock or unless, in
the opinion of counsel, such sale or transfer is not in violation of
the Securities Act of 1933, as amended.
(d) Transferability of Option and Shares Acquired Upon Exercise of
Option. This option shall be transferable only by will or the laws of
descent and distribution and shall be exercisable during the
Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee. Except as limited by applicable
securities laws, shares of Class A Common Stock acquired upon
exercise of this option hereunder shall be freely tradeable.
(e) Adjustment of the Changes in the Stock. In the event the shares of
Class A Common Stock, as presently constituted, shall be changed into
or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification,
split, reverse split, combination of shares, or otherwise), or if the
number of such shares of Class A Common Stock shall be increased
through the payment of a stock dividend, then there shall be
substituted for or added to each share of Class A Common Stock
theretofore appropriated, the number and kind of shares of stock or
other securities into which each outstanding share of Class A Common
Stock shall be so changed, or to which each such share shall be
entitled, as the case may be. Outstanding options shall also be
appropriately amended as to price and other terms as may be necessary
to reflect the foregoing events. In the event there shall be any
other change in the number or kind of the outstanding shares of the
Class A Common Stock, or of any stock or other securities into which
such Class A Common Stock shall have been changed, or for which it
shall have been exchanged, then, if the Board of Directors shall, in
its sole discretion, determine that such change equitably requires an
adjustment in any option theretofore granted or which may be granted,
such adjustments shall be made in accordance with such determination.
Fractional shares resulting from any adjustment in options may be
settled in cash or otherwise as the
<PAGE>
Company shall determine. Notice of any adjustment shall be given by
the Company to each holder of an option which shall have been so
adjusted and such adjustment (whether or not such notice is given)
shall be effective and binding for all purposes thereafter.
3. Grantee to Have No Rights as a Stockholder. No Grantee of any option
shall have any rights as a stockholder with respect to any shares subject to his
or her option prior to the date on which he or she is recorded as the holder of
such shares on the records of the Company. No Grantee of any option shall have
the rights of a stockholder until he or she has paid in full the option price.
4. Notice. Notice to the Company shall be deemed given if in writing and
mailed to the Secretary of the Company at its principal executive offices by
first class, certified mail at the then principal office of the Company.
5. Governing Law. Except to the extent preempted by Federal law, this
Agreement shall be construed and enforced in accordance with, and governed by,
the laws of the State of Delaware, determined without regard to its conflict of
interest rules.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year written above.
SFX BROADCASTING, INC.
By: /s/ D. Geoffrey Armstrong
--------------------------------
D. Geoffrey Armstrong
Chief Operating Officer
/s/ Michael G. Ferrel
--------------------------------
Michael G. Ferrel
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 10, 1996)
2,250,000 SHARES
SFX BROADCASTING, INC. [LOGO]
12 5/8% SERIES E CUMULATIVE EXCHANGEABLE PREFERRED STOCK
SFX Broadcasting, Inc. (the "Company") hereby offers 2,250,000 shares of
its 12 5/8% Series E Cumulative Exchangeable Preferred Stock, par value $.01
per share (the "Series E Preferred Stock").
Dividends on the Series E Preferred Stock will accrue from the date of
issuance and will be payable semi-annually, commencing July 15, 1997, at a
rate per annum of 12 5/8% of the liquidation preference per share. Dividends
may be paid, at the Company's option, on any dividend payment date occurring
on or prior to January 15, 2002, either in cash or by the issuance of
additional shares of Series E Preferred Stock (including fractional shares)
having an aggregate liquidation preference equal to the amount of such
dividends. The liquidation preference of the Series E Preferred Stock will be
$100.0 per share. Subject to certain conditions, the shares of Series E
Preferred Stock are exchangeable in whole or in part on a pro rata basis, at
the option of the Company, on any dividend payment date, for the Company's 12
5/8% Senior Subordinated Exchange Debentures due 2006 (including any such
securities paid in lieu of cash interest, as described herein, the "Exchange
Debentures"); provided that, immediately after giving effect to any such
partial exchange, there shall be outstanding shares of Series E Preferred
Stock with an aggregate liquidation preference of not less than $50.0 million
and not less than $50.0 million in aggregate principal amount of Exchange
Debentures. The Series E Preferred Stock is redeemable at the Company's
option, in whole or in part, at any time on or after January 15, 2002, at the
redemption prices set forth herein, plus accumulated and unpaid dividends to
the date of redemption. In addition, prior to January 15, 2000 the Company
may, at its option, redeem up to 50% of the aggregate of (i) the liquidation
preference of the Series E Preferred Stock issued (whether initially issued
or issued in lieu of cash dividends) less the liquidation preference of
Series E Preferred Stock exchanged for Exchange Debentures and (ii) the
principal amount of Exchange Debentures issued (whether issued in exchange
for Series E Preferred Stock or in lieu of cash interest), with the net
proceeds of one or more common equity offerings received on or after the date
of original issuance of the Series E Preferred Stock at a redemption price of
112.625% of the liquidation preference or principal amount, as the case may
be, plus accumulated and unpaid dividends in the case of Series E Preferred
Stock and accrued and unpaid interest in the case of Exchange Debentures;
provided, that after any such redemption, if any Series E Preferred Stock or
Exchange Debentures remain outstanding, at least $50.0 million in liquidation
preference or principal amount, as applicable, of such securities remain
outstanding. The Company is required, subject to certain conditions, to
redeem all of the Series E Preferred Stock outstanding on October 31, 2006,
at a redemption price equal to 100% of the liquidation preference thereof,
plus accumulated and unpaid dividends to the date of redemption. Upon the
occurrence of a Change of Control (as defined herein), each holder of Series
E Preferred Stock may, subject to certain conditions, require the Company to
offer to purchase all of that holder's shares of Series E Preferred Stock at
a price equal to 101% of the liquidation preference thereof, plus accumulated
and unpaid dividends to the date of purchase. The Series E Preferred Stock
will rank junior to the Company's outstanding 6-1/2% Series D Cumulative
Convertible Exchangeable Preferred Stock due May 31, 2007 (the "Series D
Preferred Stock"), and senior to all other outstanding classes or series of
capital stock, with respect to dividend rights and rights on liquidation of
the Company. The Company's outstanding preferred stock and debt agreements
restrict the payment of cash dividends on the Series E Preferred Stock. As of
December 31, 1996, there were outstanding $149.5 million in aggregate
liquidation preference of shares of Series D Preferred Stock ranking senior
to the Series E Preferred Stock.
Interest on the Exchange Debentures will be payable at a rate of 12 5/8%
per annum and will accrue from the date of issuance thereof. Interest on the
Exchange Debentures will be payable semi-annually in cash or, at the option
of the Company, on or prior to January 15, 2002, in additional Exchange
Debentures, in arrears on each January 15 and July 15 commencing on the first
such date after the exchange of the shares of Series E Preferred Stock for
such Exchange Debentures. The Exchange Debentures mature on October 31, 2006,
and are redeemable, at the option of the Company, in whole or in part, on or
after January 15, 2002, at the redemption prices set forth herein, plus
accrued and unpaid interest to the date of redemption. Upon the occurrence of
a Change of Control, each holder of Exchange Debentures may require the
Company to, subject to certain conditions, offer to purchase all of that
holder's Exchange Debentures at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest on the date of purchase. The
Exchange Debentures will be subordinated to all existing and future Senior
Debt (as defined herein) of the Company. The Exchange Debentures will rank
pari passu with the Company's existing 10.75% Senior Subordinated Notes due
2006 ("New Notes") and will rank senior to any 61/2% Exchange Notes due May
31, 2007 (the "Series D Exchange Notes") issued in exchange for any
outstanding shares of Series D Preferred Stock; however, the Exchange
Debentures will be effectively subordinated to indebtedness and other
liabilities of the Company's subsidiaries. On a pro forma basis, after giving
effect to this offering and anticipated borrowings under the Credit Agreement
(as defined herein) as though such transactions had occurred on September 30,
1996, there would have been $138.0 million of Senior Debt of the Company
outstanding and the Company's subsidiaries would have had $725.0 million of
indebtedness and other liabilities.
SEE "RISK FACTORS," BEGINNING ON PAGE S-21 OF THIS PROSPECTUS SUPPLEMENT
AND ON PAGE 4 OF THE ACCOMPANYING PROSPECTUS, FOR A DISCUSSION OF CERTAIN
RISK FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS.
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 SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
- ------------ ---------------- ---------------------- --------------------
<S> <C> <C> <C>
Per Share .. $100.00 $3.75 $96.25
- ------------ ---------------- ---------------------- --------------------
Total ....... $225,000,000 $8,437,500 $216,562,500
- ------------ ---------------- ---------------------- --------------------
</TABLE>
- -----------------------------------------------------------------------------
(1) Plus accumulated dividends, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters (as defined
herein) against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated at
$2,250,000.
The shares of Series E Preferred Stock are offered by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to approval of certain legal matters by counsel. It
is expected that delivery of the shares of Series E Preferred Stock will be
made on or about January 23, 1997, at the offices of BT Securities
Corporation, New York, New York.
BT SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
The date of this Prospectus Supplement is January 17, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES E PREFERRED STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
"Broadcast Cash Flow" means net revenues (including, where applicable,
fees earned or to be earned on a pro forma basis by the Company pursuant to
the SCMC Termination Agreement (as defined herein) and concert revenues less
concert costs of Delsener/Slater (as defined herein)) less station operating
expenses. "EBITDA" means 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. The difference
between Broadcast Cash Flow and EBITDA is that EBITDA reflects the impact of
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. 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.
Unless the context requires otherwise, the term "operate," as used in
connection with the Company's radio station activities, includes the
provision of programming and the sale of advertising pursuant to a local
marketing agreement ("LMA") and the sale of advertising pursuant to a joint
sales agreement ("JSA").
Unless otherwise indicated herein, data with respect to (i) market rank,
station revenue rank, combined market revenue share and total number of
stations in a market have been prepared by BIA Publications, Inc. based upon
estimates derived from surveys of radio station general managers and owners
and (ii) station rank among target demographics have been derived from
surveys of persons in the target demographic cited, and audience share and
combined audience share have been derived from persons over the age of 12,
listening Monday through Sunday, 6 a.m. to 12 midnight, based upon The
Arbitron Company's Summer 1996 Radio Market Report (or, if not included
therein, the Spring 1996 Radio Market Report) as provided by The Arbitron
Company ("Arbitron").
S-2
<PAGE>
SUMMARY
The following summary is qualified by, and should be read in conjunction
with, the more detailed information and consolidated financial statements and
notes thereto appearing elsewhere in this Prospectus Supplement, in the
accompanying Prospectus and in the documents incorporated by reference
herein. Certain capitalized terms used herein have the meanings assigned to
them in the Glossary located at pages S-18 to S-20 of this Prospectus
Supplement. As used in this Prospectus Supplement, except under the caption
"Description of Series E Preferred Stock" or where the context otherwise
requires, the "Company" refers to SFX Broadcasting, Inc., a Delaware
corporation, and its subsidiaries, after giving effect to the Pending
Acquisitions and the Pending Dispositions (each as defined herein). See
"Agreements Related to the Pending Acquisitions and the Pending
Dispositions." Investors should consider carefully the information set forth
under "Risk Factors" in this Prospectus Supplement and in the accompanying
Prospectus.
THE COMPANY
The Company is one of the largest radio station groups in the United
States and currently owns or operates 68 radio stations in 20 markets. Upon
consummation of the Pending Acquisitions and the Pending Dispositions, the
Company will own or operate 76 radio stations (59 FM and 17 AM stations) in
22 markets organized into five regional groups. The Company will be diverse
in terms of format and geographic markets and will rank number one or two in
1995 combined market revenues in 17 of its 22 markets and will own or operate
two or more stations in 21 of these markets. In addition, the Company
recently acquired a concert promotion company and believes this acquisition
will create cross-promotional and other revenue-enhancing opportunities with
certain of the Company's radio stations. On a pro forma basis, after giving
effect to the Transactions (as defined in the Glossary) as of January 1,
1995, the Company would have had net revenues, Broadcast Cash Flow and EBITDA
of $239.2 million, $88.1 million and $80.6 million, respectively, for the
year ended December 31, 1995, and $192.0 million, $76.0 million and $70.0
million, respectively, for the nine months ended September 30, 1996.
The radio broadcasting industry has experienced significant growth and
consolidation as a result of positive economic conditions and a favorable
regulatory environment. The Company participated in this growth and
consolidation by the acquisition of 58 stations since its initial public
offering in 1993. The Company has also achieved significant growth in
Broadcast Cash Flow through acquiring radio stations and enhancing the
stations' financial performance, both by increasing revenues and by
controlling or eliminating expenses. On a same-station basis for the
Company's existing stations, assuming that all acquisitions and dispositions
had been completed as of January 1, 1995, net revenues and Broadcast Cash
Flow would have increased 9% and 20%, respectively, for the nine months ended
September 30, 1996, over the corresponding period in 1995.
S-3
<PAGE>
The following chart sets forth certain information with respect to the
Company's stations after giving effect to the Pending Acquisitions and the
Pending Dispositions:
<TABLE>
<CAPTION>
NUMBER OF
STATIONS
OPERATED
FOLLOWING 1995 1995
NUMBER OF PENDING COMBINED COMBINED COMBINED
STATIONS NUMBER OF ACQUISITIONS MARKET MARKET MARKET
MARKET CURRENTLY STATIONS TO AND PENDING AUDIENCE REVENUE REVENUE
MARKET RANK OPERATED(1) BE ACQUIRED DISPOSITIONS SHARE SHARE RANK(2)
- --------------------------- -------- ----------- ----------- ------------ ---------- ---------- ----------
AM FM
----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Providence, RI .......... 31 3 -- 1 2 17.4% 28.3% 2
Hartford, CT ............ 41 4 1 1 4 25.7% 26.8% 2
Albany, NY .............. 57 5 -- 2 3 22.6% 32.4% 1
Springfield/Northampton, MA 76 3 -- 1 2 12.9% 28.9% 1
New Haven, CT ........... 95 2 -- -- 2 13.3%(3) 49.7% 1
MID-SOUTH ATLANTIC REGION
Charlotte, NC ........... 37 2 -- -- 2 11.8% 13.6% 3
Greensboro, NC .......... 42 4 -- 2 2 11.9% 13.7% 4
Nashville, TN ........... 44 2 -- -- 2 22.0% 27.3% 1
Greenville-Spartanburg, SC 59 4 -- 1 3 27.8% 43.4% 1
MID-ATLANTIC REGION
Pittsburgh, PA .......... 19 -- 4 -- 4 27.4% 25.1% 1
Indianapolis, IN ........ 36 -- 3 1 2 19.4% 25.2% 2
Raleigh-Durham, NC ...... 50 4 -- -- 4 25.8% 35.8% 1
Richmond, VA ............ 56 1 4 -- 5 24.3% 38.3% 2
SOUTHERN REGION
Jacksonville, FL ........ 53 6 2(4) 2 4 32.4% 44.8% 1
Daytona Beach, FL ....... 93 1 -- -- 1 8.9%(4) 33.3% 1
Jackson, MS ............. 118 6 -- 2 4 27.9% 56.0% 1
Biloxi, MS .............. 134 2 -- -- 2 22.4%(4) 34.6% 1
SOUTHWEST REGION
Dallas, TX .............. 7 -- 2 -- 2 5.4% 5.8% 5
Houston, TX ............. 9 2 2 1 3 13.2% 15.8% 2
San Diego, CA ........... 15 2 -- -- 2 9.1% 10.1% 4
Tucson, AZ .............. 62 4 -- 2 2 23.9% 26.2% 1
Wichita, KS ............. 91 3 -- 1 2 16.5% 21.0% 3
----------- ----------- ----- -----
Total ................. 60 18 17 59
</TABLE>
- ------------
(1) Does not include eight radio stations which are currently owned by the
Company and are to be transferred in the Pending Dispositions, the
Chancellor Exchange and the CBS Exchange (each as defined herein). See
"Agreements Related to the Pending Acquisitions and the Pending
Dispositions."
(2) Ranks radio stations currently operated and radio stations anticipated
to be operated by the Company upon the consummation of the Pending
Acquisitions and Pending Dispositions against radio stations actually
owned and operated in 1995 by other market participants.
(3) Based upon Arbitron's Spring 1996 Radio Market Report.
(4) The Company currently provides programming and sells advertising on
these stations pursuant to an LMA.
S-4
<PAGE>
OPERATING STRATEGY
The Company seeks to maximize its Broadcast Cash Flow by employing its
operating strategy, which has the following principal components:
Operate Highly Ranked Stations. The Company believes that highly ranked
stations, measured in terms of combined market audience share, provide
important competitive advantages. Highly ranked stations generally receive a
disproportionately large share of their market's advertising revenues because
such stations are regarded as an efficient means of targeting advertising
dollars at well-defined audiences. Such stations can better capitalize on the
operating leverage inherent in the radio industry because the costs of
operating a radio station are generally fixed and, therefore, increased
revenues generally result in disproportionately larger increases in Broadcast
Cash Flow. For example, the stations in Pittsburgh and Indianapolis to be
acquired in the Secret Communications Acquisition (as defined herein) have
significantly higher combined revenue shares than their combined audience
shares.
Assemble Market Clusters with Regional Concentrations. The Company intends
to capitalize on the recently enacted Telecommunications Act of 1996 (the
"Recent Legislation") by continuing to assemble and operate a cluster of
stations in each of its principal markets. The Company believes that, by
controlling a larger share of the total advertising inventory in a particular
market, it can offer advertisers attractive packages of advertising options.
The Company also believes that its cluster approach will allow it to operate
its stations with more highly skilled local management teams and eliminate
duplicative operating and overhead expenses. By assembling market clusters
with a regional concentration, the Company believes that it will be able to
increase revenues by targeting regionally-based advertisers and capturing a
larger share of their advertising budgets. The Pending Acquisitions will
strengthen the Company's existing clusters of stations and create additional
clusters within regions in which it already operates.
Enhance Revenues and Control Costs. The Company seeks to maximize
Broadcast Cash Flow by employing management techniques to enhance revenues
while maintaining strict cost controls. Key elements of the Company's
strategy include:
Aggressive Sales and Inventory Management. In each of its market clusters,
the Company utilizes sophisticated sales reporting systems to monitor its
sales activity and to formulate and implement pricing and inventory
controls. The Company believes that controlling a larger share of the
total advertising inventory in a particular market enhances its ability to
identify market trends and optimize pricing and inventory management.
Targeted Programming. The Company utilizes extensive market research to
refine the programming at each of its stations and to position each of the
stations within a particular cluster to maximize the total audience share
and market revenue of the cluster as a whole. The Company's cluster
approach is designed to afford it the flexibility either to develop strong
programming formats for its market leading stations or to develop
independently successful program formats to meet the needs of particular
market conditions.
Strict Cost Controls. The Company's management imposes strict financial
reporting requirements and expense budget limitations on each of its
stations. In addition, management maintains a centralized accounting
system which allows it to monitor the performance and operations of each
of its stations. Such centralization allows the Company to achieve expense
savings in certain areas, including purchasing and administrative
expenses. The Company also achieves expense savings through the
elimination of certain duplicative costs within its markets and market
clusters.
Leverage Regional Management Structure. The Company emphasizes both
regional and local management of its radio stations. In July 1996, in
anticipation of its rapid growth, the Company implemented a new regional
management structure. The regional operations are currently managed under the
direction of five regional vice presidents, each of whom reports directly to
the Company's Chief Executive Officer and Chief Operating Officer. Each of
these regional vice presidents is an experienced
S-5
<PAGE>
executive with over 15 years of radio broadcasting experience. Through this
regional management structure, the Company believes that it will be able to
more readily transfer the programming and sales successes of individual
stations and clusters to other stations and clusters within the same region.
The Company believes that regional management and coordination will enable it
to maximize the benefits of operating a national station franchise while
maintaining controls over local operations. Local management is primarily
responsible for building and developing a sales team capable of converting
the station's audience rankings into revenues. The Company's general managers
and sales managers are motivated through incentive compensation based
primarily upon their station's cash flow performance. The stations to be
acquired in the Pending Acquisitions (as defined herein) are in regions where
the Company has already established a regional management structure.
Generate Incremental Cash Flow Through Complementary Businesses. The
Company intends to selectively pursue acquisitions of, and other business
arrangements with, complementary businesses that effectively leverage the
Company's core capabilities as one of the largest radio station groups in the
United States. This strategy is reflected in the recent acquisition of
Delsener/Slater, a concert promotion company, that the Company believes will
create cross-promotional and other revenue-enhancing opportunities with
certain radio stations owned and operated by the Company. The Company is
currently considering certain other complementary acquisitions, including
additional concert promotion companies.
MANAGEMENT
The Company's senior management team is comprised of Robert F.X.
Sillerman, Executive Chairman, Michael G. Ferrel, Chief Executive Officer, D.
Geoffrey Armstrong, Chief Operating Officer, and Thomas P. Benson, Chief
Financial Officer. The Company's senior management has substantial experience
in operating radio stations in markets of all sizes, identifying attractive
acquisition candidates and integrating acquired radio stations. Corporate
management continuously provides local management with advice and support in
the development of advertising and marketing strategies, sales force training
and motivation techniques.
PENDING ACQUISITIONS AND PENDING DISPOSITIONS
In October 1996, the Company entered into an agreement with Secret
Communications Limited Partnership, a privately-held entity ("Secret
Communications"), pursuant to which the Company agreed to acquire
substantially all of the assets used in the operation of nine radio stations
located in Indianapolis, Indiana, Pittsburgh, Pennsylvania, and Cleveland,
Ohio for $300.0 million. Two of the radio stations in Pittsburgh are not yet
owned by Secret Communications but are anticipated to be acquired prior to
the consummation of the acquisition, and Secret Communications currently
provides services to these stations pursuant to an LMA. Management of the
Company believes that the acquisition offers significant opportunity to
improve revenues at the acquired stations. In the Pittsburgh market,
management anticipates that the Company will benefit from several recent
actions taken by Secret Communications, including the adoption of a new
format at one station, completion of a facilities swap which resulted in
another station moving to a stronger signal with improved coverage of the
market area and consolidation of certain selling and administrative functions
between the two stations currently owned by Secret Communications and the two
stations which Secret Communications began to operate under an LMA in June
1996. The parties have reached an agreement in principle to amend the
purchase agreement to provide that the Cleveland stations will not be
acquired by the Company and the purchase price will be reduced to $255.0
million (the "Secret Communications Acquisition"). See "Agreements Related to
the Pending Acquisitions and the Pending Dispositions--Secret Communications
Acquisition."
In addition, pursuant to separate agreements, the Company has also agreed
to: (i) acquire a 96% interest in four radio stations operating in Richmond,
Virginia, where the Company currently owns one station (the "Richmond
Acquisition"); (ii) exchange one radio station operating in Washington,
D.C./Baltimore, Maryland, for two radio stations operating in Dallas, Texas
(the "CBS Exchange"); (iii) acquire one radio station operating in Hartford,
Connecticut, where the Company currently owns four
S-6
<PAGE>
stations (the "Hartford Acquisition"); (iv) acquire two radio stations
operating in Houston, Texas, where the Company currently owns two stations
(the "Texas Coast Acquisition"); (v) exchange four radio stations owned by
the Company and located on Long Island, New York, for two radio stations
operating in Jacksonville, Florida, where the Company currently owns four
stations, and a cash payment (the "Chancellor Exchange"); and (vi) sell one
radio station operating in Little Rock, Arkansas (the "Little Rock
Disposition"), and two radio stations operating in Myrtle Beach, South
Carolina (the "Myrtle Beach Disposition").
The Secret Communications Acquisition, the Richmond Acquisition, the CBS
Exchange, the Hartford Acquisition, the Texas Coast Acquisition and the
Chancellor Exchange are referred to herein collectively as the "Pending
Acquisitions." The Little Rock Disposition and the Myrtle Beach Disposition
are referred to herein collectively as the "Pending Dispositions."
The Company anticipates that it will consummate all of the Pending
Acquisitions and the Pending Dispositions as follows:
<TABLE>
<CAPTION>
CASH PURCHASE ANTICIPATED DATE OF
TRANSACTION (SALE) PRICE(1) CONSUMMATION
- ---------------------------------- ------------------ -------------------
(IN MILLIONS)
<S> <C> <C>
Hartford Acquisition .............. $25.5 1st quarter 1997
Texas Coast Acquisition ........... 41.5 (2) 1st quarter 1997
Little Rock Disposition ........... (4.1) 1st quarter 1997
Myrtle Beach Disposition .......... (5.1) 1st quarter 1997
CBS Exchange ...................... -- 1st quarter 1997
Richmond Acquisition .............. 40.4 2nd quarter 1997
Chancellor Exchange ............... (11.0) 2nd quarter 1997
Secret Communications Acquisition 255.0 (3) 3rd quarter 1997
</TABLE>
- ------------
(1) Represents the gross cash sale or purchase price for the corresponding
transaction. Certain of these amounts do not reflect amounts advanced
or placed in escrow, payable over a period of time, or to be paid in
stock of the Company.
(2) Includes amounts payable in respect of certain ancillary agreements.
Does not include certain additional contingent liabilities.
(3) Does not include certain additional contingent liabilities.
The timing and completion of the Pending Acquisitions and the Pending
Dispositions are subject to a number of conditions, certain of which are
beyond the Company's control. Each of the Pending Acquisitions and each of
the Pending Dispositions is subject to the approval of the Federal
Communications Commission (the "FCC"). Additionally, the Department of
Justice, Antitrust Division (the "Antitrust Division") has indicated its
intention to review matters related to the concentration of ownership within
markets even when the ownership in question is permitted under the provisions
of the Recent Legislation. While the Company believes that each of the
Pending Acquisitions and the Pending Dispositions does not substantially
lessen competition, there can be no assurance that the Antitrust Division
will not take a contrary position, which could delay or prevent the
consummation of any or all of the Pending Acquisitions or require the Company
to restructure its ownership in the relevant market or markets. The Company's
ability to consummate the Pending Acquisitions is also subject to the
availability of funds under the Company's $225.0 million senior credit
facility (the "Credit Agreement") and the consummation of this Preferred
Stock Offering. See "Risk Factors--Risks Related to the Pending Acquisitions
and the Pending Dispositions" and "Agreements Related to the Pending
Acquisitions and the Pending Dispositions" in this Prospectus Supplement and
"Risk Factors--Extensive Regulation of Radio Broadcasting" in the
accompanying Prospectus.
S-7
<PAGE>
FINANCING PLAN
The Company's plan for financing the Pending Acquisitions is set forth
below:
<TABLE>
<CAPTION>
<S> <C>
SOURCES OF FUNDS:
Preferred Stock Offering .......... $225,000,000
Credit Agreement(1) ............... 152,200,000
Chancellor Exchange ............... 11,000,000
Pending Dispositions(2) ........... 1,100,000
--------------
Total sources of funds .......... $389,300,000
==============
USES OF FUNDS:
Repayment of Credit Agreement(1) .. $ 50,000,000
Richmond Acquisition(3) ........... 22,300,000
Secret Communications
Acquisition(4) .................... 240,000,000
Hartford Acquisition(5) ........... 23,000,000
Texas Coast Acquisition(6) ........ 39,000,000
Fees and expenses(7) .............. 15,000,000
--------------
Total uses of funds ............. $389,300,000
==============
</TABLE>
- ------------
(1) The Company will utilize $50.0 million of the proceeds of the Preferred
Stock Offering to pay down the outstanding balance (which currently
bears interest at rates of 8.25% to 8.50% per annum) under the Credit
Agreement. The Company anticipates that this amount will be borrowed to
finance a portion of the Secret Communications Acquisition. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
(2) The portion of the sale price to be received in the first six months
following the Myrtle Beach Disposition is approximately $500,000. The
purchase price of the Little Rock Disposition is $4.1 million, of which
$3.5 million has been paid pursuant to an LMA and will be applied
against the purchase price. See "Agreements Related to the Pending
Acquisitions and the Pending Dispositions--Little Rock Disposition."
(3) Excludes certain operating expenditures of approximately $1.6 million,
which have been paid by the Company. Also excludes $14.5 million which
the Company has advanced to finance the acquisition of two stations and
$2.0 million which has been deposited in escrow in order to secure the
Company's obligations under the acquisition agreement. See "Agreements
Related to the Pending Acquisitions and the Pending
Dispositions--Richmond Acquisition."
(4) The purchase price of the Secret Communications Acquisition is $255.0
million, subject to certain adjustments. Of this amount, $15.0 million
has been segregated pursuant to a letter of credit which secures the
Company's obligations under the purchase agreement. Assumes execution
of an amendment to the purchase agreement, which, in addition to
reducing the purchase price to $255.0 million, will provide that the
Company is not obligated to consummate the Secret Communications
Acquisition prior to July 15, 1997. See "Agreements Related to the
Pending Acquisitions and the Pending Dispositions--Secret
Communications Acquisition."
(5) Assumes no adjustment to the purchase price of the Hartford Acquisition
of $25.5 million. Of this amount, $2.5 million has been deposited by
the Company in escrow in order to secure its obligations under the
purchase agreement. See "Agreements Related to the Pending Acquisitions
and the Pending Dispositions--Hartford Acquisition."
(6) The purchase price of the Texas Coast Acquisition is $38.0 million. Of
this amount, $2.5 million has been deposited by the Company in escrow
accounts in order to secure its obligations under the purchase
agreement. In addition, the Company is obligated to pay (i) $3.5
million (of which the seller has agreed to bear $250,000) for
environmental recovery and (ii) approximately $214,000 in the first
year (a total of $1.5 million over seven years) under a noncompetition
agreement. These amounts do not include certain additional contingent
liabilities relating to the environmental recovery. See "Agreements
Related to the Pending Acquisitions and the Pending Dispositions--Texas
Coast Acquisition."
(7) Consists of fees and expenses of the Preferred Stock Offering and the
Credit Agreement of approximately $11.0 million and of the Pending
Acquisitions of approximately $4.0 million.
S-8
<PAGE>
The Company currently anticipates borrowing $152.2 million under the
Credit Agreement in the third quarter of 1997 to consummate the Secret
Communications Acquisition. The availability of such borrowings will be
subject to meeting certain financial tests contained in the Credit Agreement
relating to the cash flow of the Company's stations. There can be no
assurance, however, that the Company will have adequate borrowing capacity
under the Credit Agreement. If the Company's borrowing capacity under the
Credit Agreement is not sufficient to finance the Secret Communications
Acquisition, the Company will be required to either seek modification of the
Credit Agreement or obtain alternative financing in order to consummate the
Secret Communications Acquisition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Risk Factors--Risks Related to the Pending Acquisitions and
the Pending Dispositions."
The consummation of the Pending Acquisitions and the Pending Dispositions
is subject to a number of conditions, certain of which are beyond the
Company's control, and there can be no assurance that such transactions will
be completed on the terms described herein or at all. See "Risk
Factors--Risks Related to Pending Acquisitions and Dispositions." If any of
the Pending Acquisitions is not consummated or if any additional acquisition
opportunities arise, the Company may apply the proceeds intended to finance
certain of the Pending Acquisitions for other acquisitions, to reduce
indebtedness or for working capital and other corporate purposes. Although
the Company currently has no agreements or commitments for additional
acquisitions other than the Pending Acquisitions, pursuant to the Company's
expansion strategy, it intends to continue to seek additional acquisitions.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
S-9
<PAGE>
THE OFFERING
Securities Offered ..... 2,250,000 shares of 12 5/8% Series E
Cumulative Exchangeable Preferred Stock, par
value $.01 per share, plus any additional
shares of such stock issued from time to
time in lieu of cash dividends.
Issue Price ............ $100.0 per share, plus accumulated and
unpaid dividends, if any, from January 23,
1997 (the "Issue Date").
Dividends .............. At a rate equal to 12 5/8% per annum of the
liquidation preference per share, payable
semi-annually beginning July 15, 1997, and
accumulating from the Issue Date. The
Company, at its option, may pay dividends on
any dividend payment date occurring on or
before January 15, 2002, either in cash or
by the issuance of additional shares of
Series E Preferred Stock having an aggregate
liquidation preference equal to the amount
of such dividends.
Dividend Payment Dates . January 15 and July 15, commencing July 15,
1997.
Ranking ................ The Series E Preferred Stock will, with
respect to dividend rights and rights on
liquidation, winding-up and dissolution of
the Company, rank junior to the Company's
Series D Preferred Stock, of which $149.5
million in aggregate liquidation preference
was outstanding as of December 31, 1996. The
Series E Preferred Stock will, with respect
to dividend rights and rights on
liquidation, winding-up and dissolution of
the Company, rank senior to all other
classes of common stock and preferred stock
of the Company outstanding upon consummation
of the Preferred Stock Offering.
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 E
Preferred Stock will have a liquidation
preference of $100.0 per share plus accrued
and unpaid dividends, 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, the common
stock of the Company, but excluding the
Series D Preferred Stock. See "Description
of Series E Preferred Stock and Exchange
Debentures--Description of Series E
Preferred Stock--Liquidation Rights."
Mandatory Redemption ... The Company is required, subject to certain
conditions, to redeem all of the Series E
Preferred Stock outstanding on October 31,
2006, at a redemption price equal to 100% of
the liquidation preference thereof, plus
accumulated and unpaid dividends to the date
of redemption.
S-10
<PAGE>
Optional Redemption .... The Series E Preferred Stock is redeemable,
at the option of the Company, in whole or in
part, at any time on or after January 15,
2002, at the redemption prices set forth
herein, plus, without duplication,
accumulated and unpaid dividends to the date
of redemption. In addition, prior to January
15, 2000 the Company may, at its option,
redeem up to 50% of the aggregate of (i) the
liquidation preference of the Series E
Preferred Stock issued (whether initially
issued or issued in lieu of cash dividends)
less the liquidation preference of Series E
Preferred Stock exchanged for Exchange
Debentures and (ii) the principal amount of
Exchange Debentures issued (whether issued
in exchange for Series E Preferred Stock or
in lieu of cash interest), with the net
proceeds of one or more common equity
offerings received on or after the date of
original issuance of the Series E Preferred
Stock at a redemption price of 112.625% of
the liquidation preference or principal
amount, as the case may be, plus accumulated
and unpaid dividends in the case of Series E
Preferred Stock and accrued and unpaid
interest in the case of Exchange Debentures;
provided, that after any such redemption, if
any Series E Preferred Stock or Exchange
Debentures remain outstanding, at least
$50.0 million in liquidation preference or
principle amount, as applicable, of such
securities remain outstanding.
Exchange Rights ........ On any Dividend Payment Date, the Company
may, at its option, exchange, in whole or in
part, on a pro rata basis, the outstanding
Series E Preferred Stock for the Exchange
Debentures upon payment of all accrued and
unpaid dividends; provided that immediately
after giving effect to any such partial
exchange, there shall be outstanding shares
of Series E Preferred Stock (whether
initially issued or issued in lieu of cash
dividends) with an aggregate liquidation
preference of not less than $50.0 million
and not less than $50.0 million in aggregate
principal amount of Exchange Debentures. The
Company's ability to exercise the exchange
option is subject to compliance with its
debt agreements.
Change of Control ...... In the event of a Change of Control, the
Company will, subject to the prior repayment
or the obtaining of consents from the
holders of all outstanding Indebtedness
under the Credit Agreement and the New Notes
(as defined herein), offer to purchase all
outstanding shares of Series E Preferred
Stock at a purchase price equal to 101% of
the liquidation preference thereof, plus
accumulated and unpaid dividends to the date
of purchase. The Company will be required to
either repay such outstanding Indebtedness
or obtain such consents within 90 days of
any change of control. There can be no
assurance that the Company will have
sufficient funds to purchase all of the
shares of Series E Preferred Stock in the
event of a Change of Control or that the
Company would be able to obtain financing
for such purpose on favorable terms, or at
all. See "Risk Factors--Ability to Finance
Change of Control Repurchase" and
"Description of Series E Preferred Stock and
Exchange
S-11
<PAGE>
Debentures--Description of Series E
Preferred Stock--Change of Control" in this
Prospectus Supplement and "Risk
Factors--Change of Control" in the
accompanying Prospectus.
Voting ................. The Series E Preferred Stock will be
non-voting, except as otherwise required by
law and as specified in the Certificate of
Designations (as defined herein). Upon the
Company's failure to meet certain
obligations to holders of Series E Preferred
Stock, the holders of Series E Preferred
Stock will be entitled to elect two
additional members to the Company's Board of
Directors.
Certain Restrictive
Provisions ............. The Certificate of Designations will contain
certain restrictive provisions that, among
other things, limit the ability of the
Company and its subsidiaries to incur
additional Indebtedness (as defined herein),
pay dividends or make certain other
restricted payments, enter into certain
transactions with affiliates, or merge or
consolidate with any other person.
The Exchange Debentures
Issue .................. 12 5/8% Senior Subordinated Exchange
Debentures due 2006 issuable in exchange for
the Series E Preferred Stock in an aggregate
principal amount equal to the liquidation
preference of the shares of Series E
Preferred Stock so exchanged, plus any
additional Exchange Debentures issued from
time to time in lieu of cash interest
through the date of such exchange (the
"Exchange Date").
Maturity ............... October 31, 2006.
Interest Rate and
Payment Dates .......... The Exchange Debentures will bear interest
at a rate of 12 5/8% per annum. Interest
will accrue from the date of issuance or
from the most recent interest payment date
to which interest has been paid or provided
for. Interest will be payable semi-annually
in cash (or, at the option of the Company on
or prior to January 15, 2002, in additional
Exchange Debentures having a principal
amount equal to the amount of interest so
paid) in arrears on each January 15 and July
15, commencing with the first such date
after the applicable Exchange Date.
Ranking ................ The Exchange Debentures will be general
unsecured obligations of the Company and
will be subordinated in right of payment to
all existing and future Senior Debt of the
Company. In addition, the Exchange
Debentures will not be guaranteed by any of
the Company's subsidiaries and will,
therefore, be effectively subordinated to
all existing and future Indebtedness of the
Company's subsidiaries. The Exchange
Debentures will rank pari passu with the New
Notes and will rank senior to any 61/2%
Exchange Notes due May 31, 2007, issued in
exchange for any of the Company's
outstanding shares of Series D Preferred
Stock. As of September 30, 1996, the total
amount of Senior
S-12
<PAGE>
Debt of the Company, pro forma for the
Transactions, would have been $138.0 million
and the total amount of indebtedness and
other liabilities of the Company's
subsidiaries (including their guarantees of
the New Notes) would have been $725.0
million. The Exchange Debentures will rank
pari passu or senior to any class or series
of Indebtedness that expressly provides that
it ranks pari passu or subordinate to the
Exchange Debentures, as the case may be.
Optional Redemption .... The Exchange Debentures are redeemable, at
the option of the Company, in whole or in
part, at any time on or after January 15,
2002, at the redemption prices set forth
herein, plus, without duplication,
accumulated and unpaid interest to the date
of redemption. In addition, prior to January
15, 2000 the Company may, at its option,
redeem up to 50% of the aggregate of (i) the
liquidation preference of the Series E
Preferred Stock issued (whether initially
issued or issued in lieu of cash dividends)
less the liquidation preference of Series E
Preferred Stock exchanged for Exchange
Debentures and (ii) the principal amount of
Exchange Debentures issued (whether issued
in exchange for Series E Preferred Stock or
in lieu of cash interest), with the net
proceeds of one or more common equity
offerings received on or after the date of
original issuance of the Series E Preferred
Stock at a redemption price of 112.625% of
the liquidation preference or principal
amount, as the case may be, plus accumulated
and unpaid dividends in the case of Series E
Preferred Stock and accrued and unpaid
interest in the case of Exchange Debentures;
provided, that after any such redemption, if
any Series E Preferred Stock or Exchange
Debentures remain outstanding, at least $50
million in liquidation preference or
principle amount, as applicable, of such
securities remain outstanding.
Change of Control ...... In the event of a Change of Control, the
Company will, subject to certain conditions,
be required to offer to purchase all
outstanding Exchange Debentures at a
purchase price equal to 101% of the
principal amount thereof, plus accrued and
unpaid interest to the date of purchase.
There can be no assurance that the Company
will have sufficient funds to purchase all
the Exchange Debentures in the event of a
Change of Control or that the Company would
be able to obtain financing for such purpose
on favorable terms, if at all. See "Risk
Factors--Ability to Finance Change of
Control Repurchase" and "Description of
Series E Preferred Stock and Exchange
Debentures--Description of Exchange
Debentures--Change of Control" in this
Prospectus Supplement and "Risk
Factors--Change of Control" in the
accompanying Prospectus.
Certain Covenants ...... The indenture governing the Exchange
Debentures (the "Exchange Indenture") will
contain certain covenants that, among other
things, limit the ability of the Company and
its subsidiaries to incur additional
Indebtedness, pay dividends or make
S-13
<PAGE>
certain other restricted payments,
consummate certain asset sales, enter into
certain transactions with affiliates, incur
indebtedness that is subordinate in right of
payment to any Senior Debt and senior in
right of payment to the Exchange Debentures,
incur liens, impose restrictions on the
ability of a subsidiary to pay dividends or
make certain payments to the Company and its
subsidiaries, merge or consolidate with any
other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or
substantially all of their assets to any
other person.
RISK FACTORS
See "Risk Factors" in this Prospectus Supplement and in the accompanying
Prospectus for a discussion of certain risk factors that should be considered
in evaluating an investment in the Series E Preferred Stock.
S-14
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Summary Consolidated Financial Data of the Company and predecessors
include the historical financial statements of Capstar Communications, Inc.,
a predecessor of the Company ("Capstar"), and the historical financial
statements of the Company since its formation on February 26, 1992. The
Summary Consolidated Financial Data as of September 30, 1996, and for the
nine months ended September 30, 1996 and 1995, have been derived from the
unaudited consolidated financial statements and notes thereto of the Company
which are incorporated herein by reference. The pro forma summary data as of
September 30, 1996, and for the year ended December 31, 1995, and the nine
months ended September 30, 1996 and 1995, are derived from the unaudited pro
forma condensed combined financial statements which, in the opinion of the
Company, reflect all adjustments necessary for a fair presentation of the
transactions for which such pro forma financial information is given.
Operating results for the nine months ended September 30, 1996, are not
necessarily indicative of the results that may be achieved for the fiscal
year ending December 31, 1996. The historical consolidated financial results
for the Company are not comparable from year to year because of the
acquisition and disposition of various radio stations by the Company during
the periods covered. See "Unaudited Pro Forma Condensed Combined Financial
Statements."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------ -----------------------------------------
PRO FORMA FOR PRO FORMA
THE FOR THE
TRANSACTIONS(8) TRANSACTIONS(8)
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
1991 1992 1993 1994 1995 1995 1995 1996 1996
-------- -------- --------- ------- -------- ------------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues(1) .......... $13,442 $15,003 $ 34,233 $55,556 $76,830 $239,246 $55,328 $ 92,840 $191,957
Station operating expenses 9,105 9,624 21,555 33,956 51,039 151,159 36,556 61,448 115,948
Depreciation,
amortization, duopoly
integration
costs and acquisition
related costs(2) ........ 3,726 3,208 4,475 5,873 9,137 40,379 5,672 10,663 30,946
Corporate expenses ....... 726 769 1,808 2,964 3,797 7,500 2,838 4,475 6,017
Non-recurring charges
including adjustments to
broadcast rights
agreement(3)(4) ......... -- -- 13,980 -- 5,000 1,061 5,000 27,489 26,930
-------- -------- --------- ------- -------- ------------- --------- --------- ----------------
Operating income (loss) .. (115) 1,402 (7,585) 12,763 7,857 39,147 5,262 (11,235) 12,116
Other (income) loss/net .. (124) (17) 121 (650) (1,003) (451) -- (83)
Interest expense,
including amortization
of deferred financing
costs ................... 4,241 3,610 7,351 9,332 12,903 61,362 9,515 18,849 46,422
Minority interest ........ -- -- -- -- -- 2 -- -- (13)
-------- -------- --------- ------- -------- ------------- --------- --------- ----------------
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) (21,214) (3,802) (30,084) (34,210)
Income tax expense
(benefit) ............... -- -- 1,015 1,474 -- -- -- -- --
Extraordinary loss on debt
retirement .............. -- -- 1,665 -- -- -- -- -- --
Cumulative effect of a
change in accounting
principle ............... -- -- 182 -- -- -- -- -- --
-------- -------- --------- ------- -------- ------------- --------- --------- ----------------
Net income (loss) ........ (4,232) (2,208) (17,781) 1,836 (4,396) (21,214) (3,802) (30,084) (34,210)
Redeemable preferred stock
dividends and
accretion(5) ............ 302 385 557 348 291 38,362 219 3,551 28,872
-------- -------- --------- ------- -------- ------------- --------- --------- ----------------
Net income (loss)
applicable to common
stock ................... $(4,534) $(2,593) $(18,338) $ 1,488 $(4,687) $(59,576) $(4,021) $(33,635) $(63,082)
======== ======== ========= ======= ======== ============= ========= ========= ================
Net income (loss) per
share ................... $ (3.85) $ (2.20) $ (7.08) $ 0.26 $ (0.71) $ (7.06) $ (0.62) $ (4.55) $ (6.83)
======== ======== ========= ======= ======== ============= ========= ========= ================
Weighted average common
shares outstanding ...... 1,179 1,179 2,589 5,792 6,596 8,436 6,532 7,394 9,234
Ratio of earnings to fixed
charges(6) .............. -- -- -- 1.4x -- -- -- -- --
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(6) ............ -- -- -- 1.3x -- -- -- -- --
OTHER OPERATING DATA:
Broadcast Cash Flow (7) .. $ 4,337 $ 5,379 $ 12,678 $21,600 $25,791 $ 88,087 $18,772 $ 31,392 $ 76,009
EBITDA (7) ............... 3,611 4,610 10,870 18,636 21,994 80,587 15,934 26,917 69,992
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1996
----------------------------------------------------- ----------------------------
PRO FORMA FOR
THE PENDING
TRANSACTIONS
AS OF
SEPTEMBER 30,
ACTUAL 1996(9)
1991 1992 1993 1994 1995 (UNAUDITED) (UNAUDITED)
--------- --------- --------- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . $ 96 $ 657 $ 10,287 $ 3,194 $ 11,893 $ 40,139 $ 2,241
Current assets ............. 3,065 4,515 31,273 28,367 32,505 103,884 64,353
Total assets ............... 37,367 36,127 152,871 145,808 187,337 725,929 1,190,836
Long-term debt ............. 38,828 39,011 81,627 81,516 81,850 451,922 589,922
Redeemable Preferred Stock:
Series A Preferred Stock . 2,839 3,892 917 -- -- -- --
Series B Preferred Stock . 133 -- 2,784 2,466 1,735 1,889 1,889
Series C Preferred Stock . -- -- -- -- 1,550 1,614 1,614
Series D Preferred Stock . -- -- -- -- -- 149,500 149,500
Series E Preferred Stock . -- -- -- -- -- -- 214,313
Stockholders' equity ....... (6,951) (9,411) 48,598 48,856 83,061 25,079 97,079
</TABLE>
- ------------
(1) Net revenues on a pro forma basis includes $3,584,000 and $2,645,000 of
fees from Triathlon Broadcasting Company ("Triathlon") for the year
ended December 31, 1995 and the nine months ended September 30, 1996,
respectively, that would have been received by the Company had the SCMC
Termination Agreement been in effect as of January 1, 1995. Future fees
may be lesser or greater based upon the future acquisition and
financing activities of Triathlon.
(2) Includes $1,400,000 and $355,000 of duopoly integration costs incurred
during the year ended December 31, 1995 and the nine months ended
September 30, 1996.
(3) Represents in 1993 the non-cash non-recurring charge related to the
valuation of the common stock issued to the Company's founders at the
Company's initial public offering in September 1993 and certain pooling
costs related to the merger of Capstar with and into a subsidiary of
the Company.
(4) Amounts for the nine months ended September 30, 1996 reflect
non-recurring charges related to the Company's termination agreement
with R. Steven Hicks, a former executive officer of the Company (the
"Hicks Agreement"), the Armstrong Agreement (as defined herein) and the
SCMC Termination Agreement.
(5) Includes dividends on preferred stock which the Company redeemed in
1993, accretion on outstanding redeemable preferred stock, dividends on
the Series D Preferred Stock and assumed dividends on the Series E
Preferred Stock.
(6) For purposes of computing the ratio of earnings to combined fixed
charges and preferred stock dividends and the ratio of earnings to
fixed charges, "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 combined fixed charges and
preferred stock dividends by $33,635,000, $4,687,000, $15,476,000,
$2,593,000 and $4,534,000 for the nine months ended September 30, 1996
and the years ended December 31, 1995, 1993, 1992 and 1991,
respectively. Pro forma earnings for the nine months ended September
30, 1996 and the year ended December 31, 1995, would have been
insufficient to cover combined fixed charges and preferred stock
dividends by $63,082,000 and $59,576,000, respectively, pro forma for
the Transactions. Earnings were insufficient to cover fixed charges by
$30,084,000, $4,396,000, $14,919,000, $2,208,000 and $4,232,000 during
the nine months ended September 30, 1996 and the years ended December
31, 1995, 1993, 1992 and 1991, respectively. Pro forma earnings for the
nine months ended September 30, 1996 and the year ended December 31,
1995, would have been insufficient to cover fixed charges by
$34,310,000 and $21,244,000, respectively, pro forma for the
Transactions.
(7) "Broadcast Cash Flow" means net revenues (including, where applicable,
fees earned or to be earned on a pro forma basis by the Company
pursuant to the SCMC Termination Agreement and concert revenues less
concert costs of Delsener/Slater) less station operating expenses.
"EBITDA" means net income (loss) before (i) extraordinary items, (ii)
provisions for income taxes, (iii) interest (income) expense, (iv)
other (income) expense,
S-16
<PAGE>
(v) cumulative effects of changes in accounting principles, (vi)
depreciation, amortization, duopoly integration costs and acquisition
related costs, and (vii) non-recurring charges. The difference between
Broadcast Cash Flow and EBITDA is that EBITDA reflects the impact of
corporate expenses. Although Broadcast Cash Flow and EBITDA are not
measures of performance calculated in accordance with 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. 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.
On a pro forma basis giving effect to the Transactions, Broadcast Cash
Flow attributable to the fees earned pursuant to the SCMC Termination
Agreement and concert revenues less concert costs of Delsener/Slater
would have been $9,609,000 and $8,349,000 for the year ended December
31, 1995, and for the nine months ended September 30, 1996,
respectively.
(8) The unaudited pro forma Statement of Operations Data for the nine
months ended September 30, 1996, and the year ended December 31, 1995,
are presented as if the Company had completed the Transactions as of
January 1, 1995. The term "Transactions" is defined in the Glossary.
(9) The unaudited pro forma Balance Sheet Data at September 30, 1996, is
presented as if the Company had completed as of September 30, 1996, the
Pending Transactions as of September 30, 1996. The term "Pending
Transactions as of September 30, 1996" is defined in the Glossary.
S-17
<PAGE>
GLOSSARY
"Acquisitions" means, collectively, the Recent Acquisitions and the
Pending Acquisitions.
"Albany Acquisition" means the acquisition, consummated in January 1997,
of substantially all of the assets used in the operation of WYSR-FM,
operating in Albany, New York.
"Broadcast Cash Flow" is defined as net revenues (including, where
applicable, fees earned or to be earned on a pro forma basis by the Company
pursuant to the SCMC Termination Agreement and concert revenues less concert
costs of Delsener/Slater) less station operating expenses.
"CBS Exchange" means the pending exchange by the Company of radio station
WHFS-FM, operating in Washington, D.C./Baltimore, Maryland, for KTXQ-FM and
KRRW-FM, both operating in Dallas, Texas, and owned by CBS, Inc.
"Chancellor Exchange" means the pending exchange of the Company's radio
stations WBAB-FM, WHFM-FM, WBLI-FM and WGBB-AM, each operating on Long
Island, New York, for WFYV-FM and WAPE-FM, both operating in Jacksonville,
Florida, and a payment to the Company of $11.0 million in cash.
"Credit Agreement" means the definitive credit agreement the Company
entered into in November 1996, which increases amounts available under its
senior credit facility to $225.0 million.
"Dallas Disposition" means the sale, consummated in October 1996, of radio
station KTCK-AM, operating in Dallas, Texas.
"Delsener/Slater Acquisition" means the acquisition, consummated in
January 1997, of Delsener/ Slater Enterprises, Ltd., a concert promotion
company, and certain affiliated entities (collectively, "Delsener/Slater").
"Dispositions" means, collectively, the Recent Dispositions and the
Pending Dispositions.
"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.
"Greensboro Acquisition" means the acquisition, consummated in November
1996, of substantially all of the assets of WHSL-FM, operating in Greensboro,
North Carolina.
"Greenville Acquisition" means the acquisition, consummated in June 1996,
of substantially all of the assets of WROQ-FM, operating in
Greenville-Spartanburg, South Carolina.
"Hartford Acquisition" means the pending acquisition by the Company of
WWYZ-FM, which operates in Hartford, Connecticut.
"Houston Exchange" means the exchange, consummated in December 1996, 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.
"Jackson Acquisitions" means, collectively, the acquisitions, consummated
in the third quarter of 1996, of substantially all of the assets of WJDX-FM,
WSTZ-FM and WZRX-AM, each operating in Jackson, Mississippi.
"Liberty Acquisition" means the acquisition, consummated in July 1996, of
Liberty Broadcasting Incorporated, which owned and operated or provided
programming to or sold 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.
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<PAGE>
"Little Rock Disposition" means the pending sale of KOLL-FM, operating in
Little Rock, Arkansas, to Triathlon.
"Louisville Acquisition" means the acquisition, consummated in September
1996, from Prism of substantially all of the assets of WVEZ-FM, WTFX-FM and
WWKY-AM, each operating in Louisville, Kentucky.
"Louisville Dispositions" means the sale, consummated in October 1996, of
the three stations acquired in the Louisville Acquisition.
"MMR Merger" means the merger, consummated in November 1996, of a
wholly-owned subsidiary of the Company with and into MMR, as a result of
which MMR became a wholly-owned subsidiary of the Company.
"Myrtle Beach Disposition" means the pending sale of WYAK-FM and WMYB-FM,
both operating in Myrtle Beach, South Carolina.
"Pending Acquisitions" means, collectively, the Chancellor Exchange, the
Richmond Acquisition, the CBS Exchange, the Secret Communications
Acquisition, the Hartford Acquisition and the Texas Coast Acquisition.
"Pending Dispositions" means, collectively, the Little Rock Disposition
and the Myrtle Beach Disposition.
"Pending Transactions as of September 30, 1996" means, collectively, the
Pending Acquisitions, the Pending Dispositions, the Greensboro Acquisition,
the Dallas Disposition, the MMR Merger, the Houston Exchange, the
Delsener/Slater Acquisition and the Albany Acquisition.
"Prism Acquisition" means the acquisition, consummated in the third
quarter of 1996, of substantially all of the assets of Prism 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.
"Private Placement" means the Company's private placement in May 1996 of
$149.5 million in aggregate liquidation preference of Series D Preferred
Stock and of $450.0 million in aggregate principal amount of New Notes.
"Raleigh-Greensboro Acquisitions" means the acquisition, consummated in
June 1996, of substantially all of the assets of WMFR-AM, WMAG-FM and
WTCK-AM, each operating in Greensboro, North Carolina, and WTRG-FM and
WRDU-FM, both operating in Raleigh, North Carolina.
"Recent Acquisitions" means, collectively, the MMR Merger, the Greensboro
Acquisition, the Liberty Acquisition, the Prism Acquisition, the Jackson
Acquisitions, the Greenville Acquisition, the Louisville Acquisition, the
Raleigh-Greensboro Acquisitions, the Houston Exchange, the Albany
Acquisition, the Delsener/Slater Acquisition, and the acquisitions of WTDR-FM
and WLYT-FM, both operating in Charlotte, North Carolina, KTCK-FM, operating
in Dallas, Texas, and KYXY-FM, operating in San Diego, California.
"Recent Dispositions" means, collectively, the Washington Dispositions,
the Louisville Dispositions and the Dallas Disposition.
"Recent Transactions as of September 30, 1996" means, collectively, the
Liberty Acquisition, the Prism Acquisition, the Jackson Acquisitions, the
Greenville Acquisition, the Raleigh-Greenboro Acquisitions, the acquisitions
of WLYT-FM, operating in Charlottte, North Carolina, KTCK-FM, operating in
Dallas, Texas, and KYXY-FM, operating in San Diego, California, the
Washington Dispositions and the Louisville Dispositions.
"Richmond Acquisition" means the pending acquisition of a 96% interest in
ABS Communications L.L.C., which owns or will acquire WVGO-FM, WLEE-FM,
WKHK-FM and WBZU-FM, each operating in Richmond, Virginia.
S-19
<PAGE>
"Secret Communications Acquisition" means the pending acquisition of
WFBQ-FM, WRZX-FM and WNDE-AM, each operating in Indianapolis, Indiana, and
WDVE-FM, WXDX-FM, WDSY-FM and WJJJ-FM, each operating in Pittsburgh,
Pennsylvania.
"Tender Offer" means a tender offer, consummated in May 1996, pursuant to
which the Company repurchased $79.4 million of the $80.0 million in principal
amount of 11.375% Senior Subordinated Notes due 2000 outstanding.
"Transactions" means, collectively, the Acquisitions, the Dispositions,
the Preferred Stock Offering, borrowings under the Credit Agreement, the
Private Placement and the Tender Offer; the implementation of the Hicks
Agreement, the Armstrong Agreement and the SCMC Termination Agreement; and
the repayment of the Company's former credit facility.
"Washington Dispositions" means the sale, consummated in July 1996, of
three of the stations acquired from Liberty Broadcasting, each operating in
the Washington, D.C./Baltimore, Maryland market.
S-20
<PAGE>
RISK FACTORS
An investment in the shares of Series E Preferred Stock offered hereby
involves a high degree of risk. Prospective investors should consider
carefully, in addition to the other information contained in and incorporated
in this Prospectus Supplement (including the financial statements and notes
thereto) and the accompanying Prospectus, the following factors in connection
with an investment in the shares of Series E Preferred Stock offered hereby.
This Prospectus Supplement and the accompanying Prospectus contain
forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in
the forward-looking statements. Factors that could cause such a difference
include, but are not limited to, those discussed below or in the "Risk
Factors" section of the accompanying Prospectus, as well as those contained
in "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and those discussed elsewhere in this Prospectus Supplement or
the accompanying Prospectus.
RISKS RELATED TO THE PENDING ACQUISITIONS AND THE PENDING DISPOSITIONS
Consummation of each of the Pending Acquisitions and the Pending
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
Pending Acquisitions and the Pending Dispositions is dependent upon the prior
approval by the lenders under the Credit Agreement. The Antitrust Division
has indicated its 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 each of the Pending Acquisitions and the Pending Dispositions does not
substantially lessen competition, there can be no assurance that the
Antitrust Division will not take a contrary position, which could delay or
prevent the consummation of any or all of the Pending Acquisitions or require
the Company to restructure its ownership in the relevant market or markets.
See "--Extensive Regulation of Radio Broadcasting" in the accompanying
Prospectus. For a more complete description of the conditions precedent to
the consummation of each transaction, see "Agreements Related to the Pending
Acquisitions and the Pending Dispositions."
The Company will require financing in addition to the Preferred Stock
Offering in order to consummate the Pending Acquisitions, which the Company
anticipates obtaining through borrowings under the Credit Agreement, and
proceeds from the Chancellor Exchange and the Pending Dispositions. The
Company will require funding under the Credit Agreement of approximately
$152.2 million in order to consummate the Secret Communications Acquisition
in the third quarter of 1997. The ability of the Company to borrow such
amount under the Credit Agreement will be subject to meeting certain
financial tests dependent on the cash flow of the Company, giving effect to
the consummation of the pending acquisitions and dispositions of the Company.
There can be no assurance that the Company will have adequate borrowing
capacity under the Credit Agreement. If the Company's borrowing capacity
under the Credit Agreement is not sufficient to finance the Secret
Communications Acquisition, the Company will be required to either seek
modification of the Credit Agreement or obtain alternative financing. There
can be no assurance that the Company will be able to obtain additional
financing or such modification on terms acceptable to the Company or at all.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
As a result of the foregoing, there can be no assurance as to when the
Pending Acquisitions or the Pending 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
Pending Acquisitions or the Pending Dispositions will conform to the
assumptions used in the preparation of the Unaudited Pro Forma Condensed
Combined Financial Statements included herein. In analyzing the Unaudited Pro
Forma Condensed Combined Financial Statements and other information,
prospective investors should consider that the Pending Acquisitions or the
Pending Dispositions may not be consummated at all or on the terms described
herein, and the Pending Acquisitions or the Pending Dispositions, if
consummated, may be subject to substantial delay.
S-21
<PAGE>
SUBSTANTIAL LEVERAGE; INABILITY TO SERVICE OBLIGATIONS
In connection with the Acquisitions, the Company has incurred and will
incur significant amounts of indebtedness. As of September 30, 1996, the
Company's consolidated indebtedness would have been approximately $589.9
million on a pro forma basis after giving effect to the Transactions. In
addition, subject to the restrictions contained in the instruments governing
the Company's indebtedness and preferred stock, the Company may incur
additional indebtedness from time to time to finance acquisitions, for
capital expenditures or for other purposes. For the year ended December 31,
1995, and the nine months ended September 30, 1996, on a pro forma basis
after giving effect to the Transactions as if they had all occurred on
January 1, 1995, the Company's earnings (defined as earnings before income
taxes and fixed charges) would have been insufficient to cover its fixed
charges (defined as interest on all indebtedness and amortization of deferred
financing costs) by $21.2 million and $34.3 million, respectively, and would
have been insufficient to cover its combined fixed charges and preferred
stock dividends by $59.6 million and $63.1 million, respectively.
The degree to which the Company is leveraged could have material
consequences to the Company and the holders of shares of the Company's stock,
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 the Series E Preferred Stock
and will not be available for other purposes, (iii) the agreements governing
the Company's long-term debt contain, and the Exchange Indenture and the
Series D Exchange Note Indenture 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 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, to make dividend, conversion or
redemption payments on its 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 these 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 this Preferred Stock Offering, borrowings under the Credit
Agreement and the Chancellor Exchange, will be adequate to meet the Company's
anticipated future requirements for working capital, capital expenditures and
scheduled interest, principal, dividend, and redemption payments through
1998. There can be no assurance that the Company will be able to borrow under
the Credit Agreement, 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 to enable 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 indebtedness, 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. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
LIMITATIONS ON ABILITY TO PAY DIVIDENDS; RESTRICTIONS ON EXCHANGE
The terms of the Series D Preferred Stock provide that the Company may not
declare or pay any cash dividends or make any cash distributions in respect
of the Series E Preferred Stock until all accrued and
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<PAGE>
unpaid dividends on the Series D Preferred Stock have been declared and paid
or set aside. Additionally, the Credit Agreement prohibits the payment of
cash dividends on the Series E Preferred Stock, and the indenture governing
the New Notes (the "New Note Indenture") restricts the Company's ability to
pay cash dividends on the Series E Preferred Stock unless certain financial
tests (including a ratio of debt to cash flow) and an additional restricted
payments test are met. There can be no assurance that the Company will be
able to meet the tests required by the Credit Agreement or the New Note
Indenture so as to be able to pay cash dividends on the Series E Preferred
Stock. For all dividend payment dates through and including January 15, 2002,
the Company may, at its option, pay dividends on the Series E Preferred Stock
by issuing additional shares of Series E Preferred Stock with the aggregate
liquidation preference equal to the amount of such dividends. The Company
does not currently intend to pay cash dividends on the Series E Preferred
Stock.
The ability of the Company to exchange Series E Preferred Stock for
Exchange Debentures is subject to compliance with the Company's debt
agreements. The Credit Agreement and the indenture governing the New Notes
currently prohibit the issuance of the Exchange Debentures. There can be no
assurance that the Company will be permitted to issue any Exchange Debentures
in exchange for Series E Preferred Stock.
RANKING OF THE SERIES E PREFERRED STOCK; SUBORDINATION OF THE EXCHANGE
DEBENTURES
The Series E Preferred Stock will rank junior in right of payment upon
liquidation to all existing and future indebtedness of the Company and to the
Series D Preferred Stock. As of December 31, 1996, there were outstanding
$149.5 million in aggregate liquidation preference of shares of Series D
Preferred Stock. The Series E Preferred Stock will rank senior in right of
payment upon liquidation to the common stock of the Company and the shares of
Series B Redeemable Preferred Stock (the "Series B Preferred Stock"). The
payment of principal, premium, if any, and interest on, and any other amounts
owing in respect of, the Exchange Debentures, if issued, will be subordinated
to the prior payment in full of all existing and future Senior Debt of the
Company. As of September 30, 1996, on a pro forma basis after giving effect
to the Transactions, approximately $138.0 million of Senior Debt would have
been outstanding and the Company would have available to it approximately
$87.0 million of additional borrowing capacity under the Credit Agreement
(subject to compliance with the financial tests contained therein).
Additional Senior Debt may be incurred by the Company from time to time
subject to certain restrictions contained in the Credit Agreement and the New
Note Indenture. In the event of the bankruptcy, liquidation, dissolution,
reorganization or other winding up of the Company, the assets of the Company
will be available to pay obligations on the Exchange Debentures 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 Debentures. See
"Description of Series E Preferred Stock--Description of the Exchange
Debentures--Subordination."
ABILITY TO FINANCE CHANGE OF CONTROL REPURCHASE
If events occur which constitute a change of control for purposes of the
applicable certificate of designations or indenture, then the holders of
Series D Preferred Stock, Series E Preferred Stock, Series D Exchange Notes
or Exchange Debentures may require the Company to purchase all such
securities then outstanding. This repurchase would be at a price, in cash,
equal to 101% of the liquidation preference or principal amount thereof (or,
in the case of the Series D Preferred Stock or the Series D Exchange Notes,
in shares of Class A Common Stock valued at 95% of the Current Market Price,
as defined in the applicable certificate of designations or indenture) plus
accumulated and unpaid dividends or interest, if any, to the date of
purchase. The right of holders of the Series E Preferred Stock to require
such a repurchase is subject to the prior repayment, or the obtaining of
consents from the holders of, Indebtedness under the Credit Agreement and the
New Notes. There can be no assurance that the Company would be able to obtain
the funds required by it to effect the repurchase through a refinancing of
such securities or otherwise, or that the repurchase of such securities would
be permitted under the Company's credit facility or other debt instruments or
that the Company would be successful in obtaining any such consents. See
"Description of Series E Preferred Stock and Exchange Debentures--Description
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of Series E Preferred Stock--Change of Control" and "Description of Series E
Preferred Stock and Exchange Debentures--Description of the Exchange
Debentures--Repurchase at the Option of Holders."
CERTAIN TAX CONSIDERATIONS
Distributions on the Series E Preferred Stock, whether paid in cash or in
additional shares of Series E Preferred Stock, will be taxable as ordinary
dividend income to the extent that the cash or fair market value of the
additional shares of Series E Preferred Stock on the date of distribution
does not exceed the Company's current and accumulated earnings and profits. A
holder's initial tax basis in any additional shares of Series E Preferred
Stock distributed by the Company in lieu of cash dividend payments on the
Series E Preferred Stock will equal the fair market value of such shares on
their date of distribution. In addition, depending on the issue price of
shares of Series E Preferred Stock on the date of their issuance, holders may
be required to include additional amounts of income based on the difference
between (x) the issue price of such shares on the date of their issuance and
(y) the amount payable in redemption of such shares, unless the difference is
de minimis under the applicable standard (such difference being referred to
as "Redemption Premium"). See "Certain Federal Income Tax
Considerations--Redemption Premium." Shares of Series E Preferred Stock that
bear Redemption Premium generally will have different tax characteristics
from other shares of Series E Preferred Stock and might trade separately,
which might adversely affect the liquidity of such shares.
Upon an exchange of shares of Series E Preferred Stock for cash or
Exchange Debentures, the holder generally should have capital gain or loss
equal to the difference between the cash or issue price of the Exchange
Debentures received and the holder's adjusted basis in the shares of Series E
Preferred Stock redeemed, unless the exchange has the effect of a dividend.
For a discussion of how to determine the issue price of the Exchange
Debentures, see "Certain Federal Income Tax Considerations--Original Issue
Discount." Holders should also note that if shares of Series E Preferred
Stock are exchanged for Exchange Debentures and the stated redemption price
at maturity of such Exchange Debentures exceeds their issue price by more
than a de minimis amount, the Exchange Debentures will be treated as having
original issue discount ("OID") equal to the entire amount of such excess.
The Company is allowed to exchange the Series E Preferred Stock for
Exchange Debentures from time to time. Because the determination of the issue
price of the Exchange Debentures depends on several factors (such as, whether
the Exchange Debentures or the Series E Preferred Stock are traded on an
established securities market at the time of the exchange, the trading price,
and whether the Exchange Debentures bear "adequate stated interest" at the
time of the exchange), it is possible that Exchange Debentures issued at
different times will have different issue prices. To the extent the Exchange
Debentures have different issue prices, they may have different tax
characteristics from each other (for example, the amount of OID on such
Exchange Debentures may vary) and may trade separately, which may adversely
affect the liquidity of such Exchange Debentures.
For a discussion of these and other relevant tax issues, see "Certain
Federal Income Tax Considerations."
FRAUDULENT CONVEYANCE
Various state and federal fraudulent conveyance laws have been enacted for
the protection of creditors and may be utilized by a court to subordinate or
avoid the Exchange Debentures in favor of other existing or future creditors
of the Company. If a court in a lawsuit commenced on behalf of any unpaid
creditor of the Company, or by the Company as a Chapter 11 debtor in
possession, or by a representative of the Company's creditors with standing
were to find that, at the time the Company issued the Exchange Debentures,
the Company (x) intended to hinder, delay or defraud any existing or future
creditor or (y) did not receive fair consideration or reasonably equivalent
value for issuing such Exchange Debentures and the Company (i) was insolvent,
(ii) was rendered insolvent by reason of such issuance, (iii) was engaged or
about to engage in a business or transactions for which its remaining assets
constituted unreasonably small capital or (iv) intended to incur, or believed
that it would incur, debts
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beyond its ability to pay such debts as they matured, the court may, upon
appropriate proof, void the Company's obligations under the Exchange
Debentures and void such transactions. In such event, claims of the holders
of such Exchange Debentures could be subordinated to claims of the other
creditors of the Company.
ABSENCE OF PUBLIC MARKET
There is no existing market for the Series E Preferred Stock or the
Exchange Debentures. The Company does not intend to list the Series E
Preferred Stock or the Exchange Debentures on a national securities exchange
or to seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. Accordingly, no assurance can
be given that an active market will develop for any of the Series E Preferred
Stock or the Exchange Debentures or as to the liquidity of any trading market
for the Series E Preferred Stock or the Exchange Debentures. If a trading
market does not develop or is not maintained, holders of the Series E
Preferred Stock or the Exchange Debentures may experience difficulty in
reselling such Series E Preferred Stock or Exchange Debentures or may be
unable to sell them at all. Future trading prices of the Series E Preferred
Stock or the Exchange Debentures will depend on many factors, including,
among other things, prevailing interest rates, the Company's operating
results and the market for similar securities. The Underwriters have advised
the Company that they currently intend to make a market in the Series E
Preferred Stock and the Exchange Debentures, in the event that the Exchange
Debentures are issued upon exchange of the Series E Preferred Stock. However,
the Underwriters are not obligated to do so and any market making may be
discontinued at any time without notice.
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CAPITALIZATION
The following table sets forth: (i) the actual capitalization of the
Company at September 30, 1996, and (ii) the pro forma capitalization of the
Company at September 30, 1996, giving effect to the Transactions.
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, 1996
----------------------------
(IN THOUSANDS)
PRO FORMA FOR
ACTUAL THE
(UNAUDITED) TRANSACTIONS
----------- ---------------
Cash and cash equivalents ....................................... $ 40,139 $ 2,241
----------- ---------------
DEBT:
Credit Agreement ............................................... -- 138,000
New Notes ...................................................... 450,000 450,000
Old Notes and other ............................................ 1,922 1,922
----------- ---------------
Total debt .................................................... 451,922 589,922
----------- ---------------
REDEEMABLE PREFERRED STOCK:
Series B Preferred Stock ....................................... 1,889 1,889
Series C Preferred Stock ....................................... 1,614 1,614
Series D Preferred Stock ....................................... 149,500 149,500
Series E Preferred Stock ....................................... -- 214,313 (1)
STOCKHOLDERS' EQUITY:
Class A Common Stock, $.01 par value,
100,000,000 shares authorized, 6,431,897 shares outstanding as
of September 30, 1996 actual, and 8,063,087 shares pro forma(2) 64 81
Class B Common Stock, $.01 par value,
1,000,000 shares authorized, 856,126 shares outstanding as of
September 30, 1996 actual, and 1,064,936 shares pro forma .... 10 12
Class C Common Stock, $.01 par value,
1,200,000 shares authorized, none issued and outstanding ..... -- --
Treasury stock; 170,192 shares at September 30, 1996
actual and pro forma .......................................... (6,393) (6,393)
Additional paid-in capital ..................................... 108,898 180,879
Accumulated deficit ............................................ (77,500) (77,500)
----------- ---------------
Total stockholders' equity .................................... 25,079 97,079
----------- ---------------
Total capitalization ......................................... $630,004 $1,054,317
=========== ===============
</TABLE>
- ------------
(1) The Series E Preferred Stock is recorded net of fees and expenses.
(2) Does not include (i) shares issuable upon conversion of the Series D
Preferred Stock, (ii) shares issuable, subject to certain
conditions, upon conversion of the Class B Common Stock, and (iii)
shares issuable upon the exercise of outstanding options and
warrants.
S-26
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following financial statements and notes thereto contain
forward-looking statements that involve risks and uncertainties. The actual
results of the Company may differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are
not limited to, risks and uncertainties relating to the ability of the
Company to achieve cost savings, revenue of stations owned or to be acquired,
the need for additional financing, consummation of the Pending Acquisitions
or the Pending Dispositions, integration of the Acquisitions, and the
management of growth. See "Risk Factors" in this Prospectus Supplement and
the accompanying Prospectus. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that
may be made to reflect any future events or circumstances.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The Unaudited Pro Forma Condensed
Combined Financial Statements are based upon, and should be read in
conjunction with, the historical financial statements and the respective
notes to such financial statements incorporated herein by reference. The pro
forma information does not purport to be indicative of the results that would
have been reported had such events actually occurred on the dates specified,
nor is it indicative of the Company's future results if the aforementioned
transactions are completed. 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. The Unaudited Pro Forma Statement of
Operations data include adjustments to station operating expenses to reflect
anticipated savings that management believes it will be able to achieve
through the implementation of its strategy. However, there can be no
assurance that the Company will be able to achieve such savings.
The Unaudited Pro Forma Condensed Combined Balance Sheet at September 30,
1996 is presented as if the Company had completed the Recent and Pending
Transactions as of September 30, 1996. No adjustment has been made to the
Unaudited Pro Forma Condensed Combined Balance Sheet for the Houston
Exchange, the Louisville Dispositions or the CBS Exchange, as they will be
recorded at historical cost.
The Unaudited Pro Forma Condensed Combined Statements of Operations for
the year ended December 31, 1995 and the nine months ended September 30, 1996
are presented as if the Company had completed the Transactions as of January
1, 1995. MMR's acquisition of WMYB-FM, operating in Myrtle Beach, South
Carolina, and the Albany Acquisition have not been reflected in the Unaudited
Pro Forma Condensed Combined Statement of Operations as they would not have a
material impact.
S-27
<PAGE>
SFX BROADCASTING, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
RECENT TRANSACTIONS
------------------------
SFX PRO FORMA
BROADCASTING, DALLAS MMR DELSENER/ FOR THE
INC. AS DISPOSITION MERGER GREENSBORO SLATER PRO FORMA RECENT
REPORTED (1) (2) ACQUISITION ACQUISITION ADJUSTMENTS(3) TRANSACTIONS
------------- ------------- --------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets ... $103,884 $12,412 $(26,058) $ 484 $5,554 (484)(a) $ 72,439
(22,453)(b)
(900)(c)
Property and
equipment, net .. 65,308 (1,155) 2,580 1,164 2,240 -- 70,137
Intangible assets,
net .............. 516,402 (9,003) 131,837 1,252 -- 3,584 (a) 663,476
18,404 (b)
1,000 (c)
Other assets ...... 40,335 (2) (13,532) -- 38 (6,000)(a) 20,739
(100)(c)
------------- ------------- --------- ----------- ----------- ------------ ------------
Total assets ...... $725,929 $ 2,252 $ 94,827 $2,900 $7,832 $ (6,949) $826,791
============= ============= ========= =========== =========== ============ ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PENDING TRANSACTIONS (OTHER THAN THE
SECRET COMMUNICATIONS ACQUISITION)
--------------------------------------------------
PRO FORMA FOR THE
RECENT AND PENDING
TRANSACTIONS
OFFERING AND (OTHER THAN THE
CHANCELLOR RICHMOND PRO FORMA SECRET SECRET
EXCHANGE ACQUISITION HARTFORD TEXAS COAST ADJUSTMENTS COMMUNICATIONS COMMUNICATIONS
(4) (5) ACQUISITION ACQUISITION (3) ACQUISITION) ACQUISITION(6)
---------- ------------- ----------- ----------- ------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets ... $ 11,000 $ 3,119 $1,472 $2,440 $ 214,313 (d) $ 185,353 $ 8,235
(6,071)(e)
(40,800)(f)
(3,119)(f)
(25,500)(g)
(41,500)(h)
(2,440)(h)
Property and
equipment, net .. -- 1,680 38 153 -- 72,008 5,644
Intangible assets,
net .............. (11,000) 9,533 -- -- 6,071 (e) 774,625 42,261
31,142 (f)
32,957 (g)
42,446 (h)
Other assets ...... -- 62 -- 549 (500)(h) 20,850 105
---------- ------------- ----------- ----------- ------------- ------------------ --------------
Total assets ...... $ -- $14,394 $1,510 $3,142 $ 206,999 $1,052,836 $56,245
========== ============= =========== =========== ============= ================== ==============
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
PRO FORMA RECENT AND
ADJUSTMENTS PENDING
(3) TRANSACTIONS
------------ ------------
<S> <C> <C>
ASSETS
Current assets ... $ 138,000 (i) $ 64,353
(8,235)(i)
(255,000)(k)
(4,000)(j)
Property and
equipment, net .. -- 77,652
Intangible assets,
net .............. 206,990 (k) 1,027,876
4,000 (j)
Other assets ...... -- 20,955
------------ ------------
Total assets ...... $ 81,755 $1,190,836
============ ============
</TABLE>
S-28
<PAGE>
<TABLE>
<CAPTION>
RECENT TRANSACTIONS
-----------------------
SFX PRO FORMA
BROADCASTING, DALLAS MMR DELSENER/ PRO FORMA FOR THE
INC. AS DISPOSITION MERGER GREENSBORO SLATER ADJUSTMENTS RECENT
REPORTED (1) (2) ACQUISITION ACQUISITION (3) TRANSACTIONS
------------- ------------- -------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities . $ 39,011 $2,310 $ 1,283 $ 171 $ 808 (171)(a) $ 43,830
418 (b)
Other liabilities ... 830 (58) -- -- 10 2,547 (b) 3,329
Long-term debt (incl.
current portion):
Credit Agreement ... -- -- -- -- -- -- --
New Notes ........... 450,000 -- -- -- -- -- 450,000
Acquired company
debt ............... -- -- -- -- -- -- --
Other debt ........... 1,922 -- -- -- -- -- 1,922
Deferred taxes ....... 56,084 -- 21,544 -- -- -- 77,628
Minority interest ... -- -- -- -- -- -- --
Redeemable preferred
stock:
Series B Preferred
Stock .............. 1,889 -- -- -- -- -- 1,889
Series C Preferred
Stock .............. 1,614 -- -- -- -- -- 1,614
Series D Preferred
Stock .............. 149,500 -- -- -- -- -- 149,500
Series E Preferred
Stock .............. -- -- -- -- -- -- --
Stockholders' equity 25,079 -- 72,000 2,729 7,014 (2,729)(a) 97,079
(7,014)(b)
------------- ------------- -------- ----------- ----------- ------------- ------------
Total liabilities and
stockholders' equity $725,929 $2,252 $94,827 $2,900 $7,832 $(6,949) $826,791
============= ============= ======== =========== =========== ============= ============
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PENDING TRANSACTIONS (OTHER THAN THE
SECRET COMMUNICATIONS ACQUISITION)
---------------------------------------------------
PRO FORMA FOR THE
RECENT AND PENDING
OFFERING AND TRANSACTIONS
CHANCELLOR RICHMOND PRO FORMA (OTHER THAN THE SECRET
EXCHANGE ACQUISITION HARTFORD TEXAS COAST ADJUSTMENTS SECRET COMMISSIONS COMMUNICATIONS
(4) (5) ACQUISITION ACQUISITION (3) ACQUISITION) ACQUISITION(6)
---------- ------------- ----------- ----------- ------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities . $-- $ 592 $ 423 $ 239 $ (592)(f) $ 44,467 $ 1,556
214 (h)
(239)(h)
Other liabilities ... -- -- -- -- 934 (h) 4,263 --
Long-term debt (incl.
current portion):
Credit agreement ... -- -- -- -- -- -- --
New Notes ........... -- -- -- -- -- 450,000 --
Acquired company
debt ............... -- 19,236 -- -- (19,236)(f) -- --
Other debt ........... -- -- -- -- -- 1,922 --
Deferred taxes ....... -- -- -- 27 8,544 (g) 86,172 --
(27)(h)
Minority interest ... -- -- -- -- 1,617 (f) 1,617 --
Redeemable preferred
stock:
Series B Preferred
Stock .............. -- -- -- -- -- 1,889 --
Series C Preferred
Stock .............. -- -- -- -- -- 1,614 --
Series D Preferred
Stock .............. -- -- -- -- -- 149,500 --
Series E Preferred
Stock .............. -- -- -- -- 214,313 (d) 214,313 --
Stockholders' equity -- (5,434) 1,087 2,876 97,079 54,689
5,434 (f)
(1,087)(g)
(2,876)(h)
---------- ------------- ----------- ----------- ------------- ------------------ --------------
Total liabilities and
stockholders' equity $-- $14,394 $1,510 $3,142 $206,999 $1,052,836 $56,245
========== ============= =========== =========== ============= ================== ==============
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
PRO FORMA RECENT AND
ADJUSTMENTS PENDING
(3) TRANSACTIONS
----------- ------------
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities . $ (1,556)(k) $ 44,467
Other liabilities ... -- 4,263
Long-term debt (incl.
current portion):
Credit Agreement ... 138,000 (i) 138,000
New Notes ........... -- 450,000
Acquired company
debt ............... -- --
Other debt ........... -- 1,922
Deferred taxes ....... -- 86,172
Minority interest ... -- 1,617
Redeemable preferred
stock:
Series B Preferred
Stock .............. -- 1,889
Series C Preferred
Stock .............. -- 1,614
Series D Preferred
Stock .............. -- 149,500
Series E Preferred
Stock .............. -- 214,313
Stockholders' equity (54,689)(k) 97,079
----------- ------------
Total liabilities and
stockholders' equity $ 81,755 $1,190,836
=========== ============
</TABLE>
S-29
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(1) Dallas Disposition
To reflect the Dallas Disposition for $13,400,000 in cash to the Company.
The prior owner has commenced litigation against the Company due to the
parties' inability to agree on the amount of a contingent payment due the
prior owner. Should the ultimate payment exceed approximately $2,900,000, the
Company will recognize a loss on the disposal.
<TABLE>
<CAPTION>
DALLAS
SALE PROCEEDS KTCK-AM DISPOSITION
--------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets .............................. $13,400 $ (988) $12,412
Property and equipment, net ................. -- (1,155) (1,155)
Intangible assets, net ...................... -- (9,003) (9,003)
Other assets ................................ -- (2) (2)
--------------- ----------- -------------
Total assets ............................... $13,400 $(11,148) $ 2,252
=============== =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ......................... $ -- $ 2,310 $ 2,310
Other liabilities ........................... -- (58) (58)
Stockholders' equity ........................ 13,400 (13,400) --
--------------- ----------- -------------
Total liabilities and stockholders' equity $13,400 $(11,148) $ 2,252
=============== =========== =============
</TABLE>
(2) MMR Merger
Reflects the consummation of the merger of the Company with MMR for
approximately $72,000,000 in the Company's equity securities, repayment of
MMR's outstanding debt, and contribution of a loan between the Company and
MMR.
<TABLE>
<CAPTION>
MULTI-MARKET RADIO, INC.
--------------------------------------------------------
AS MMR PRO FORMA
REPORTED DISPOSITIONS(A) ADJUSTMENTS MMR MERGER
---------- --------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets ............................. $12,252 $ 950 $ 7,562 (b) $(26,058)
(43,322)(c)
(3,500)(d)
Property and equipment, net ................ 3,454 (874) -- 2,580
Intangible assets, net ..................... 64,132 (4,036) 63,241 (e) 131,837
5,000 (c)
3,500 (d)
Other assets ............................... 4,434 2,403 (20,369)(f) (13,532)
---------- --------------- ------------- ------------
Total assets .............................. $84,272 $(1,557) $ 12,112 $ 94,827
========== =============== ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ........................ $ 2,324 $ -- $ (1,041)(c) $ 1,283
Other liabilities .......................... 3,500 (3,500) -- --
Long-term debt ............................. 57,650 -- (37,281)(c) --
(20,369)(f)
Deferred taxes ............................. 7,241 -- 14,303 (e) 21,544
Stockholders' equity ....................... 13,557 1,943 7,562 (b) 72,000
(7,562)(e)
56,500 (e)
---------- --------------- ------------- ------------
Total liabilities and stockholders' equity $84,272 $(1,557) $ 12,112 $ 94,827
========== =============== ============= ============
</TABLE>
S-30
<PAGE>
------------
(a) Represents the pending Myrtle Beach Disposition for a sale price of
$4,252,000 (present value of payments to be received) $350,000 of which
has been received subsequent to September 30, 1996, as a deposit, and
the pending Little Rock Disposition for $4,100,000, $3,500,000 of which
has been received as a deposit. No gain or loss will be recognized by
the Company in connection with these transactions.
(b) The MMR Class A Warrants exercised subsequent to September 30, 1996
provided net cash proceeds of approximately $7,562,000.
(c) Repayment of approximately $38,000,000 of existing MMR indebtedness,
including accrued interest, and approximately $5,000,000 related to
prepayment premiums.
(d) Acquisition costs associated with the MMR Merger are $3,500,000.
(e) To reflect the MMR Merger, based on the stock price of the Company's
Class A Common Stock of $34 per share.
(f) To reflect a contribution of a loan between the Company and MMR.
(3) Offering and Pro Forma Adjustments
a. To reflect the Greensboro Acquisition for $6,000,000 in cash (which had
been deposited by the Company with the seller prior to September 30,
1996), the recording of the related excess of the purchase price paid
over the net book value of the assets carried on the adjusted balance
sheet of $3,584,000 and the adjustments to remove the current assets of
$484,000, current liabilities of $171,000, and stockholders' equity of
$2,729,000.
b. To reflect the Delsener/Slater Acquisition for $25,418,000, $19,953,000
in cash plus future payments with a net present value of $2,965,000
($418,000 of which is payable within one year), an additional payment
of $2,500,000 for working capital and other purchase price adjustments,
the recording of related excess of the purchase price paid over net
book value of the assets carried on the adjusted balance sheet of
$18,404,000, and an adjustment to remove the stockholders' equity of
$7,014,000.
c. To reflect the Albany Acquisition for $1,000,000 in cash, net of
deposit of $100,000.
d. For purposes of the pro forma financial statements, the Company has
assumed the issuance of $225,000,000 of Series E redeemable preferred
stock which, net of fees and expenses will yield net proceeds of
$214,313,000.
e. To reflect additional acquisition costs related to the Pending
Transactions as of September 30, 1996.
f. To reflect the Richmond Acquisition for $40,800,000 in cash, the
recording of the related excess of the purchase price paid over the net
book value of the assets carried on the adjusted balance sheet of
$31,142,000, the minority interest of $1,617,000 and adjustments to
remove current assets of $3,119,000, current liabilities of $592,000,
long-term debt of $19,236,000 and stockholders' deficit of $5,434,000.
In addition, the Company entered into an agreement with one of the
sellers under which it may owe a contingent payment. See "Agreements
Relating to the Pending Acquisitions and the Pending
Dispositions--Richmond Acquisition".
g. To reflect the Hartford Acquisition for $25,500,000 in cash (including
working capital), the recording of related excess of the purchase price
paid over net book value of the assets carried on the adjusted balance
sheet of $32,957,000 and the related incremental deferred taxes of
$8,544,000, and an adjustment to remove the stockholders' equity of
$1,087,000.
h. To reflect the Texas Coast Acquisition for $43,148,000, $42,000,000 in
cash (net of deposit of $500,000) and future payments with a net
present value of $1,148,000 ($214,000 of which is payable within one
year), the recording of the related excess of the purchase price paid
over the net book value of the assets carried on the adjusted balance
sheet of $42,446,000 and adjustments to remove current assets of
$2,440,000, current liabilities of $239,000, deferred taxes of $27,000
and stockholders' equity of $2,876,000.
i. For purposes of the pro forma financial statements, the Company has
assumed borrowings of $138,000,000 under the Credit Agreement.
j. To reflect fees and expenses associated with borrowings under the
Credit Agreement.
k. To reflect the Secret Communications Acquisition for $255,000,000 in
cash, the related excess of the purchase price paid over net book value
of the assets carried on the adjusted balance sheet
S-31
<PAGE>
of $206,990,000 and the adjustments to remove $8,235,000 of current
assets and $1,556,000 of current liabilities which are not being
assumed, and an adjustment to remove the stockholders' equity of
$54,689,000.
(4) Chancellor Exchange
To reflect the $11,000,000 of cash to be received by the Company in the
Chancellor Exchange. No gain or loss will be recognized because the cash and
the fair market value of the stations received equals the carrying value of
the station exchanged.
(5) Richmond Acquisition
To reflect the acquisition of a 96% interest in a limited liability
corporation which will acquire the assets of radio stations WKHK-FM, WBZU-FM
and WVGO-FM/WLEE-FM, for cash payments by the Company of approximately
$38,800,000 ($14,500,000 of which was loaned to ABS subsequent to September
30, 1996). See "Agreements Related to the Pending Acquisitions and the
Pending Dispositions--Richmond Acquisition".
<TABLE>
<CAPTION>
WVGO-FM/ RICHMOND
WKHK-FM WBZU-FM WLEE-FM ACQUISITION
--------- --------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets ............................. $ 2,644 $ 286 $ 189 $ 3,119
Property and equipment, net ................ 189 920 571 1,680
Intangible assets, net ..................... 4,818 1,047 3,668 9,533
Other assets ............................... -- 62 -- 62
--------- --------- ---------- -------------
Total assets .............................. $ 7,651 $ 2,315 $4,428 $14,394
========= ========= ========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ........................ $ 190 $ 184 $ 218 $ 592
Long-term debt ............................. 12,011 4,200 3,025 19,236
Stockholders' equity ....................... (4,550) (2,069) 1,185 (5,434)
--------- --------- ---------- -------------
Total liabilities and stockholders' equity $ 7,651 $ 2,315 $4,428 $14,394
========= ========= ========== =============
</TABLE>
(6) Secret Communications Acquisition
To reflect the Secret Communications Acquisition for $255,000,000.
<TABLE>
<CAPTION>
SECRET
SECRET THIRD PARTY COMMUNICATIONS
COMMUNICATIONS STATIONS(A) ACQUISITION
-------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets .............................. $ 8,018 $ 217 $ 8,235
Property and equipment, net ................. 4,580 1,064 5,644
Intangible assets, net ...................... 42,075 186 42,261
Other assets ................................ 105 -- 105
-------------- ------------- --------------
Total assets ............................... $54,778 $1,467 $56,245
============== ============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ......................... $ 1,556 $ -- $ 1,556
Stockholders' equity ........................ 53,222 1,467 54,689
-------------- ------------- --------------
Total liabilities and stockholders' equity $54,778 $1,467 $56,245
============== ============= ==============
</TABLE>
(a) Reflects the balance sheets of WDSY-FM and WJJJ-FM (the "Third Party
Stations") which Secret is expected to have acquired prior to the
consummation of the Secret Communications Acquisition.
S-32
<PAGE>
SFX BROADCASTING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
RECENT ACQUISITIONS AND DISPOSITIONS
LIBERTY
ACQUISITION PRISM
SFX INCLUDING ACQUISITION
BROADCASTING, WASHINGTON INCLUDING
INC. AS DISPOSITIONS LOUISVILLE
REPORTED MMR MERGER(1) (2) DISPOSITIONS(3)
------------- ------------------- ------------ -------------
<S> <C> <C> <C> <C>
Net broadcast
revenues ........ $ 92,840 $16,550 $24,992 $13,511
Concert revenue,
net ............. -- -- -- --
Station and other
operating
expenses ........ 61,448 9,145 17,774 10,897
Depreciation,
amortization and
acquisition
related costs .. 10,663 4,080 5,150 1,241
Corporate
expenses ........ 4,475 939 1,478 808
Other ............ 27,489 887 -- --
------------- ------------------- ------------ -------------
Operating income
(loss) .......... (11,235) 1,499 590 565
Net interest
expense,
including
amortization of
deferred
financing costs 18,849 -- 3,326 773
Other expense
(income) ........ -- -- 5,935 --
Income tax
expense
(benefit) ....... -- -- (3,378) --
Minority interest
income (loss) .. -- -- -- --
------------- ------------------- ------------ -------------
Net income (loss)
before
extraordinary
loss ............ (30,084) 1,499 (5,293) (208)
Preferred stock
dividend
requirement ..... 3,551 -- -- --
------------- ------------------- ------------ -------------
Net income (loss)
before
extraordinary
loss applicable
to common shares $(33,635) $ 1,499 $(5,293) $ (208)
============= =================== ============ =============
Net loss before
extraordinary
loss per common
share ........... $ (4.55)
Average common
shares
outstanding ..... 7,394
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PENDING ACQUISITIONS AND DISPOSITIONS (OTHER THAN THE SECRET
COMMUNICATIONS ACQUISITION)
-----------------------------------------------------------------
GREENSBORO,
RALEIGH- PRO FORMA
GREENSBORO, HOUSTON FOR THE
GREENVILLE EXCHANGE RECENT
AND JACKSON AND DALLAS DELSENER/ PRO FORMA ACQUISITIONS
ACQUISITIONS DISPOSITION SLATER ADJUSTMENTS AND
(4) (5) ACQUISITION (6) DISPOSITIONS
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net broadcast
revenues ........ $ 4,728 $(7,664) $ -- $ 2,895 (a) $147,852*
Concert revenue,
net ............. -- -- 5,454*** -- 5,454
Station and other
operating
expenses ........ 2,869 (8,954) 608 (2,821)(b) 90,966
Depreciation,
amortization and
acquisition
related costs .. 1,492 (283) 733 (735)(c) 23,393
391 (d)
243 (e)
418 (f)
Corporate
expenses ........ 111 90 -- (2,487)(g) 5,414
Other ............ -- (1,435) -- -- 26,941
------------ ----------- ----------- ----------- ------------
Operating income
(loss) .......... 256 2,918 4,113 7,886 6,592
Net interest
expense,
including
amortization of
deferred
financing costs 382 (1,486) 60 (25,224)(h) 34,341
36,281 (h)
1,198 (h)
182 (m)
Other expense
(income) ........ (11,948) -- -- (5,935)(i) (28)
11,920 (i)
Income tax
expense
(benefit) ....... 45 772 -- 2,561 (i) --
Minority interest
income (loss) .. -- -- -- -- --
------------ ----------- ----------- ----------- ------------
Net income (loss)
before
extraordinary
loss ............ 11,777 3,632 4,053 (13,097) (27,721)
Preferred stock
dividend
requirement ..... -- -- -- 4,017 (j) 7,568
------------ ----------- ----------- ----------- ------------
Net income (loss)
before
extraordinary
loss applicable
to common shares $ 11,777 $ 3,632 $ 4,053 $(17,114) $ (35,289)
============ =========== =========== =========== ============
Net loss before
extraordinary
loss per common
share ........... $ (3.82)
Average common
shares
outstanding ..... 9,234**
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA FOR
THE RECENT AND
PENDING
ACQUISITIONS AND
DISPOSITIONS
CBS OFFERING AND (OTHER THAN THE
RICHMOND CHANCELLOR TEXAS COAST EXCHANGE HARTFORD PRO FORMA SECRET COMM.
ACQUISITION(7) EXCHANGE(8) ACQUISITION (9) ACQUISITION ADJUSTMENTS(6) ACQ.)
------------ ---------- ----------- -------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues ........ $7,055 $ (769) $3,041 $ 18 $3,796 $ -- $160,993*
Concert revenue,
net ............. -- -- -- -- -- -- 5,454
Station and other
operating
expenses ........ 6,059 (1,247) 2,150 1,382 2,895 (1,304)(b) 100,901
Depreciation,
amortization and
acquisition
related costs .. 799 (206) 39 -- 5 1,333 (c) 25,522
159 (l)
Corporate
expenses ........ 788 (1,026) -- -- -- 603 (g) 6,017
238 (g)
Other ............ -- -- (11) -- -- -- 26,930
------------ ---------- ----------- -------- ----------- ------------ ----------------
Operating income
(loss) .......... (591) 1,710 863 (1,364) 896 (1,029) 7,077
Net interest
expense,
including
amortization of
deferred
financing costs 936 (7) -- -- 11 (777)(h) 34,564
60 (m)
Other expense
(income) ........ -- (1) (51) -- (3) -- (83)
Income tax
expense
(benefit) ....... -- (2) -- 679 -- (677)(i) --
Minority interest
income (loss) .. -- -- -- -- -- (13)(k) (13)
Net income (loss)
before
extraordinary
loss ............ (1,527) 1,720 914 (2,043) 888 378 (27,391)
Preferred stock
dividend
requirement ..... -- -- -- -- -- 21,304 (j) 28,872
------------ ---------- ----------- -------- ----------- ------------ ----------------
Net income (loss)
before
extraordinary
loss applicable
to common shares $(1,527) $1,720 $914 $(2,043) $888 $(20,926) $(56,263)
============ ========== =========== ======== =========== ============ ================
Net loss before
extraordinary
loss per common
share ........... $ (6.09)
Average common
shares
outstanding ..... 9,234**
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
RECENT AND
PENDING
SECRET PRO FORMA ACQUISITIONS
COMMUNICATIONS ADJUSTMENTS AND
ACQUISITION(10) (6) DISPOSITIONS
-------------- ----------- ------------
<S> <C> <C> <C>
Net broadcast
revenues ........ $25,510 $ -- $186,503*
Concert revenue,
net ............. -- -- 5,454
Station and other
operating
expenses ........ 15,047 -- 115,948
Depreciation,
amortization and
acquisition
related costs .. 2,580 2,844 (c) 30,946
Corporate
expenses ........ -- -- 6,017
Other ............ -- -- 26,930
-------------- ----------- ------------
Operating income
(loss) .......... 7,883 (2,844) 12,116
Net interest
expense,
including
amortization of
deferred
financing costs -- 11,858 (h) 46,422
Other expense
(income) ........ 1,175 (1,175)(n) (83)
Income tax
expense
(benefit) ....... -- -- --
Minority interest
income (loss) .. -- -- (13)
Net income (loss)
before
extraordinary
loss ............ 6,708 (13,527) (34,210)
Preferred stock
dividend
requirement ..... -- -- 28,872
-------------- ----------- ------------
Net income (loss)
before
extraordinary
loss applicable
to common shares $6,708 $(13,527) $(63,082)
============== =========== ============
Net loss before
extraordinary
loss per common
share ........... $ (6.83)
Average common
shares
outstanding ..... 9,234**
</TABLE>
- ------------
* Includes $2,895 of fees from Triathlon; see Note 6(a).
** Represents average shares outstanding for the nine months ended
September 30, 1996 plus the 1,840 shares issued in the MMR Merger.
*** Comprised of $40,444 of concert and related revenue, net of concert
costs of $34,990. The Company is currently evaluating alternative
classification presentations of the Delsener/Slater Acquisition.
S-33
<PAGE>
SFX BROADCASTING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
RECENT ACQUISITIONS AND DISPOSITIONS
---------------------------------------------------------------------------------------
GREENSBORO,
LIBERTY RALEIGH-
ACQUISITION PRISM GREENSBORO, HOUSTON
SFX INCLUDING ACQUISITION GREENVILLE EXCHANGE
BROADCASTING, WASHINGTON INCLUDING AND JACKSON AND DALLAS DELSENER/
INC. AS DISPOSITIONS LOUISVILLE ACQUISITIONS DISPOSITION SLATER
REPORTED MMR MERGER(1) (2) DISPOSITIONS(3) (4) (5) ACQUISITION
------------- ----------------- ------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET BROADCAST
REVENUES ........ $ 76,830 $21,757 $50,518 $26,959 $18,463 $(9,967) $ --
CONCERT REVENUE,
NET ............. -- -- -- -- -- -- 6,025****
STATION AND OTHER
OPERATING
EXPENSES ........ 51,039 12,088 32,781 22,411 15,570 (9,689) 912
DEPRECIATION,
AMORTIZATION AND
ACQUISITION
RELATED COSTS .. 9,137** 4,230 9,092 2,232 2,947 (124) 750
CORPORATE
EXPENSES ........ 3,797 1,253 4,653 2,027 265 120 --
OTHER ............ 5,000 1,114 -- -- -- (5,000) --
------------- ----------------- ------------ ------------- ------------ ----------- -----------
OPERATING INCOME
(LOSS) .......... 7,857 3,072 3,992 289 (319) 4,726 4,363
NET INTEREST
EXPENSE,
INCLUDING
AMORTIZATION OF
DEFERRED
FINANCING
COSTS ........... 12,253 -- 7,275 1,565 948 (1,841) 144
OTHER EXPENSE
(INCOME) ........ -- -- -- (200) (201) (498) --
INCOME TAX
EXPENSE
(BENEFIT) ....... -- -- (2,725) -- 562 -- --
MINORITY INTEREST
INCOME (LOSS) .. -- -- -- -- -- -- --
------------- ----------------- ------------ ------------- ------------ ----------- -----------
NET INCOME (LOSS) (4,396) 3,072 (558) (1,076) (1,628) 7,065 4,219
PREFERRED STOCK
DIVIDEND
REQUIREMENT ..... 291 -- -- -- -- -- --
------------- ----------------- ------------ ------------- ------------ ----------- -----------
NET INCOME (LOSS)
APPLICABLE TO
COMMON SHARES .. $ (4,687) $ 3,072 $ (558) $(1,076) $(1,628) $ 7,065 $ 4,219
============= ================= ============ ============= ============ =========== ===========
NET LOSS PER
COMMON
SHARE ........... $ (0.71)
AVERAGE COMMON
SHARES
OUTSTANDING ..... 6,596
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE RECENT
PRO FORMA ACQUISITIONS
ADJUSTMENTS AND
(6) DISPOSITIONS
----------- ------------
<S> <C> <C>
NET BROADCAST
REVENUES ........ $ 5,035 (a) $189,595*
CONCERT REVENUE,
NET ............. -- 6,025
STATION AND OTHER
OPERATING
EXPENSES ........ 1,323 (a) 121,295
(5,140)(b)
DEPRECIATION,
AMORTIZATION AND
ACQUISITION
RELATED COSTS .. 978 (a) 30,029
(878)(c)
782 (d)
325 (e)
558 (f)
CORPORATE
EXPENSES ........ (7,065)(g) 5,095
45 (a)
OTHER ............ -- 1,114
----------- ------------
OPERATING INCOME
(LOSS) .......... 14,107 38,087
NET INTEREST
EXPENSE,
INCLUDING
AMORTIZATION OF
DEFERRED
FINANCING
COSTS ........... (20,776)(h) 49,821
48,375 (h)
1,598 (h)
280 (m)
OTHER EXPENSE
(INCOME) ........ -- (899)
INCOME TAX
EXPENSE
(BENEFIT) ....... 2,163 (i) --
MINORITY INTEREST
INCOME (LOSS) .. -- --
----------- ------------
NET INCOME (LOSS) (17,533) (10,835)
PREFERRED STOCK
DIVIDEND
REQUIREMENT ..... 9,665 (j) 9,956
----------- ------------
NET INCOME (LOSS)
APPLICABLE TO
COMMON SHARES .. $(27,198) $ (20,791)
=========== ============
NET LOSS PER
COMMON
SHARE ........... $ (2.46)
AVERAGE COMMON
SHARES
OUTSTANDING ..... 8,436***
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PENDING ACQUISITION AND DISPOSITIONS
(OTHER THAN THE SECRET COMMUNICATIONS ACQUISITION)
----------------------------------------------------------------
PRO FORMA FOR
THE RECENT AND
PENDING
ACQUISITIONS
AND
DISPOSITIONS
CBS OFFERING AND (OTHER THAN
RICHMOND CHANCELLOR TEXAS COAST EXCHANGE HARTFORD PRO FORMA THE SECRET
ACQUISITION(7) EXCHANGE(8) ACQUISITION (9) ACQUISITION ADJUSTMENTS(6) COMM. ACQ.)
------------ ---------- ----------- -------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET BROADCAST
REVENUES ........ $9,213 $(3,882) $4,081 $(1,442) $4,923 $ -- $202,488*
CONCERT REVENUE,
NET ............. -- -- -- -- -- -- 6,025
STATION AND OTHER
OPERATING
EXPENSES ........ 8,097 (2,442) 2,981 1,854 4,985 (3,092)(b) 133,678
DEPRECIATION,
AMORTIZATION AND
ACQUISITION
RELATED COSTS .. 1,410 (275) 53 -- 48 1,807 (c) 33,285
213 (l)
CORPORATE
EXPENSES ........ 650 (1,460) -- 214 -- 2,405 (g) 7,500
596 (g)
OTHER ............ -- -- (58) -- 5 -- 1,061
------------ ---------- ----------- -------- ----------- ------------ --------------
OPERATING INCOME
(LOSS) .......... (944) 295 1,105 (3,510) (115) (1,929) 32,989
NET INTEREST
EXPENSE,
INCLUDING
AMORTIZATION OF
DEFERRED
FINANCING
COSTS ........... 1,415 (17) -- -- 4 (1,402)(h) 49,914
93 (m)
OTHER EXPENSE
(INCOME) ........ 43 -- -- (152) -- -- (1,008)
INCOME TAX
EXPENSE
(BENEFIT) ....... -- -- 48 31 7 (86)(i) --
MINORITY INTEREST
INCOME (LOSS) .. -- -- -- -- -- 2 (k) 2
------------ ---------- ----------- -------- ----------- ------------ --------------
NET INCOME (LOSS) (2,402) 312 1,057 (3,389) (126) (536) (15,919)
PREFERRED STOCK
DIVIDEND
REQUIREMENT ..... -- -- -- -- -- 28,406 (j) 38,362
------------ ---------- ----------- -------- ----------- ------------ --------------
NET INCOME (LOSS)
APPLICABLE TO
COMMON SHARES .. $(2,402) $ 312 $1,057 $(3,389) $(126) $(28,942) $ (54,281)
============ ========== =========== ======== =========== ============ ==============
NET LOSS PER
COMMON
SHARE ........... $ (6.43)
AVERAGE COMMON
SHARES
OUTSTANDING ..... 8,436***
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
RECENT AND
PENDING
SECRET PRO FORMA ACQUISITIONS
COMMUNICATIONS ADJUSTMENTS AND
ACQUISITION(10) (6) DISPOSITIONS
-------------- ----------- ------------
<S> <C> <C> <C>
NET BROADCAST
REVENUES ........ $30,733 $ -- $233,221*
CONCERT REVENUE,
NET ............. -- -- 6,025
STATION AND OTHER
OPERATING
EXPENSES ........ 17,481 -- 151,159
DEPRECIATION,
AMORTIZATION AND
ACQUISITION
RELATED COSTS .. 3,496 3,598 (C) 40,379
CORPORATE
EXPENSES ........ 1,249 (1,249)(G) 7,500
OTHER ............ -- -- 1,061
-------------- ----------- ------------
OPERATING INCOME
(LOSS) .......... 8,507 (2,349) 39,147
NET INTEREST
EXPENSE,
INCLUDING
AMORTIZATION OF
DEFERRED
FINANCING
COSTS ........... 2,067 (2,067)(H) 61,362
11,448 (H)
OTHER EXPENSE
(INCOME) ........ 5 -- (1,003)
INCOME TAX
EXPENSE
(BENEFIT) ....... -- -- --
MINORITY INTEREST
INCOME (LOSS) .. -- -- 2
-------------- ----------- ------------
NET INCOME (LOSS) 6,435 (11,730) (21,214)
PREFERRED STOCK
DIVIDEND
REQUIREMENT ..... -- -- 38,362
-------------- ----------- ------------
NET INCOME (LOSS)
APPLICABLE TO
COMMON SHARES .. $6,435 $(11,730) $ (59,576)
============== =========== ============
NET LOSS PER
COMMON
SHARE ........... $ (7.06)
AVERAGE COMMON
SHARES
OUTSTANDING ..... 8,436***
</TABLE>
- ------------
* Includes $3,584 of fees from Triathlon; see Note 6(a).
** Includes $1,400 of duopoly integration costs.
*** Represents total shares outstanding at December 31, 1995 plus the
1,840 shares issued in the MMR Merger.
**** Comprised of a $48,646 of concert and related revenue, net of concert
costs of $42,621. The Company is currently evaluating alternative
classification presentations for the Delsener/Slater Acquisition.
S-34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(1) MMR Merger
Reflects the net effect of the historical operations of MMR as adjusted
for acquisitions and dispositions.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------------------------------
MMR
AS MMR HARTFORD PRO FORMA MMR
REPORTED DISPOSITIONS(a) ACQUISITION ADJUSTMENTS MERGER
---------- --------------- ------------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net broadcast revenues ..... $15,242 $(1,521) $2,829 $ -- $16,550
Station operating expenses . 9,346 (1,593) 2,040 (648)(b) 9,145
Depreciation/amortization .. 1,221 (138) 277 2,655 (c) 4,080
65 (d)
Corporate expenses .......... 1,844 -- -- 939 (e) 939
(1,844)(e)
Non-cash compensation ....... 262 -- -- 625 (g) 887
---------- --------------- ------------- ------------- ---------
Operating income (loss) .... 2,569 210 512 (1,792) 1,499
Interest expense ............ 4,185 -- 274 (4,459)(f) --
Other expense (income) ..... 5,985 (1,577) (12) (4,396)(f) --
Income tax expense (benefit) -- -- 7 (7)(f) --
---------- --------------- ------------- ------------- ---------
Net income (loss) ........... $(7,601) $ 1,787 $ 243 $ 7,070 $ 1,499
========== =============== ============= ============= =========
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------------
SOUTHERN
MMR STARR--
AS MMR HARTFORD 1ST QUARTER PRO FORMA MMR
REPORTED DISPOSITIONS(A) ACQUISITION 1995 ADJUSTMENTS MERGER
---------- --------------- ------------- ------------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net broadcast revenues ..... $18,288 $(3,647) $4,424 $2,692 $ -- $21,757
Station operating expenses . 11,026 (3,223) 3,286 1,863 (864)(b) 12,088
Depreciation/amortization .. 1,750 (386) 227 327 2,225 (c) 4,230
87 (d)
Corporate expenses .......... 1,666 -- -- -- 1,253 (e) 1,253
(1,666)(e)
Non-cash compensation ....... 281 -- -- -- 833 (g) 1,114
---------- --------------- ------------- ------------- ------------- ---------
Operating income (loss) .... 3,565 (38) 911 502 (1,868) 3,072
Interest expense ............ 4,966 -- 502 -- (5,468)(f) --
Other expense (income) ..... (11) -- (14) -- 25 (f) --
Income tax expense (benefit) (59) -- 48 -- 11 (f) --
---------- --------------- ------------- ------------- ------------- ---------
Net income (loss) ........... $(1,331) $ (38) $ 375 $ 502 $ 3,564 $ 3,072
========== =============== ============= ============= ============= =========
</TABLE>
- ------------
(a) Reflects the elimination of the operations of stations WRSF-FM, sold
in March 1996, WRXR-FM and WKBG-FM, sold in July 1996, and the pending
Little Rock Disposition and Myrtle Beach Disposition.
S-35
<PAGE>
(b) Reflects cost savings of $648,000 and $864,000 for the nine months
ended September 30, 1996 and the year ended December 31, 1995,
respectively, anticipated to be achieved in connection with the MMR
Hartford Acquisition, consisting principally of the elimination of
certain duplicative technical sales and general and administrative
functions due to operating a cluster of stations in the Hartford
market.
(c) Reflects $2,655,000 and $2,225,000 for the nine months ended
September 30, 1996 and the year ended December 31, 1995, respectively,
in amortization of intangible assets recorded in connection with the
MMR Merger, Myrtle Beach Acquisition, MMR Hartford Acquisition, related
incremental deferred taxes and change in amortization periods.
(d) Amortization of $65,000 and $87,000 for acquisition costs associated
with the MMR Merger for the nine months ended September 30, 1996 and
the year ended December 31, 1995, respectively.
(e) To record incremental corporate overhead charges of $939,000 and
$1,253,000 associated with the MMR Merger for the nine months ended
September 30, 1996 and the year ended December 31, 1995, respectively,
and to eliminate MMR's existing corporate overhead of $1,844,000 and
$1,666,000 for the nine months ended September 30, 1996 and the year
ended December 31, 1995, respectively.
(f) Elimination of a nonrecurring loss (income) of $4,396,000 and
($25,000) for the nine months ended September 30, 1996 and the year
ended December 31, 1995, respectively, interest expense of $4,459,000
and $5,468,000 for the nine months ended September 30, 1996 and the
year ended December 31, 1995, respectively, and income tax expense
(benefit) of $7,000 and ($11,000) for the nine months ended September
30, 1996 and the year ended December 31, 1995, respectively.
(g) Reflects non-cash compensation charge for the issuance of shares of
the Series A and Series B Convertible Preferred Stock of MMR. The
shares of Series A and Series B stock were issued to certain officers
and advisors of MMR in July and November 1996, respectively, and
converted into Class A Common Stock of the Company upon consummation of
the MMR Merger. Certain of the shares issued pursuant to the Series A
and Series B conversions which were issued to individuals currently
employed by the Company are being held in escrow and will be released
in five equal annual installments ending in April 2001.
(2) Liberty Acquisition
Reflects the net effect of the historical operations of the Liberty
Stations (as defined herein) adjusted for the Washington Dispositions.
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------
LIBERTY AS WASHINGTON LIBERTY
REPORTED DISPOSITIONS ACQUISITION
------------ -------------- -------------
(IN THOUSANDS)
Net broadcast revenues ... $25,966 $ (974) $24,992
Station operating expenses 19,337 (1,563) 17,774
Depreciation/amortization 5,926 (776) 5,150
Corporate expenses ........ 1,566 (88) 1,478
------------ -------------- -------------
Operating income (loss) .. (863) 1,453 590
Interest expense .......... 3,467 (141) 3,326
Other expense ............. 5,935 -- 5,935
Income tax benefit ........ (3,378) -- (3,378)
------------ -------------- -------------
Net income (loss) ......... $(6,887) $ 1,594 $(5,293)
============ ============== =============
S-36
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------
LIBERTY AS BECK ROSS WASHINGTON LIBERTY
REPORTED ACQUISITION* DISPOSITIONS ACQUISITION
------------ -------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues ... $51,407 $2,486 $(3,375) $50,518
Station operating expenses 34,725 2,121 (4,065) 32,781
Depreciation/amortization 10,429 40 (1,377) 9,092
Corporate expenses ........ 4,653 -- -- 4,653
------------ -------------- -------------- -------------
Operating income .......... 1,600 325 2,067 3,992
Interest expense .......... 7,373 -- (98) 7,275
Income tax benefit ........ (2,725) -- -- (2,725)
------------ -------------- -------------- -------------
Net income (loss) ......... $(3,048) $ 325 $ 2,165 $ (558)
============ ============== ============== =============
</TABLE>
- ------------
* Represents the acquisition by Liberty of radio stations WBLI-FM,
WHCN-FM and WSNE-FM from Beck-Ross Communications, Inc. in 1995.
(3) Prism Acquisition
Reflects the net effect of the historical operations of the Prism
Acquisition adjusted for the Louisville Dispositions.
NINE MONTHS ENDED SEPTEMBER 30, 1996
-----------------------------------------
PRISM AS LOUISVILLE PRISM
REPORTED DISPOSITIONS ACQUISITION
---------- -------------- -------------
(IN THOUSANDS)
Net broadcast revenues ... $16,859 $(3,348) $13,511
Station operating expenses 13,373 (2,476) 10,897
Depreciation/amortization 1,599 (358) 1,241
Corporate expenses ........ 808 -- 808
---------- -------------- -------------
Operating income (loss) .. 1,079 (514) 565
Interest expense .......... 773 -- 773
---------- -------------- -------------
Net income (loss) ......... $ 306 $ (514) $ (208)
========== ============== =============
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------
PRISM AS LOUISVILLE PRISM
REPORTED DISPOSITIONS ACQUISITION
---------- -------------- -------------
(IN THOUSANDS)
Net broadcast revenues ... $32,572 $(5,613) $26,959
Station operating expenses 26,979 (4,568) 22,411
Depreciation/amortization 2,946 (714) 2,232
Corporate expenses ........ 2,027 -- 2,027
---------- -------------- -------------
Operating income (loss) .. 620 (331) 289
Interest expense .......... 1,565 -- 1,565
Other income .............. (200) -- (200)
---------- -------------- -------------
Net loss .................. $ (745) $ (331) $ (1,076)
========== ============== =============
S-37
<PAGE>
(4) Greensboro, Raleigh-Greensboro, Greenville and Jackson Acquisitions
Reflects the net effect of the combined historical operations of the
Greensboro Acquisition, the Raleigh-Greensboro Acquisitions, the Greenville
Acquisition and the Jackson Acquisitions.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------
RALEIGH-
GREENSBORO AND
GREENSBORO GREENVILLE JACKSON
ACQUISITIONS ACQUISITION ACQUISITIONS TOTAL
-------------- ------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .... $3,619 $ 639 $470 $ 4,728
Station operating expenses 2,264 271 334 2,869
Depreciation/amortization . 1,168 244 80 1,492
Corporate expenses ......... 4 107 -- 111
-------------- ------------- -------------- ----------
Operating income ........... 183 17 56 256
Interest expense ........... 59 323 -- 382
Other income ............... (51) (11,897) -- (11,948)
Income tax expense ......... 45 -- -- 45
-------------- ------------- -------------- ----------
Net income ................. $ 130 $ 11,591 $ 56 $ 11,777
============== ============= ============== ==========
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------
RALEIGH-
GREENSBORO AND
GREENSBORO GREENVILLE JACKSON
ACQUISITIONS ACQUISITION ACQUISITIONS TOTAL
-------------- ------------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .... $12,688 $4,074 $1,701 $18,463
Station operating expenses 10,982 3,238 1,350 15,570
Depreciation/amortization . 2,325 514 108 2,947
Corporate expenses ......... -- 195 70 265
-------------- ------------- -------------- ---------
Operating income (loss) ... (619) 127 173 (319)
Interest expense ........... 156 792 -- 948
Other expense (income) .... (203) 2 -- (201)
Income tax expense ......... 562 -- -- 562
-------------- ------------- -------------- ---------
Net income (loss) .......... $(1,134) $ (667) $ 173 $(1,628)
============== ============= ============== =========
</TABLE>
(5) Houston Exchange and Dallas Disposition
To reflect the exchange of KRLD-AM and the Texas State Networks for
KKRW-FM in the Houston Exchange, and the sale of KTCK-AM in the Dallas
Disposition.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 31, 1996
-----------------------------------------------------------------------------------------
HOUSTON EXCHANGE AND
DISPOSITIONS ACQUISITION ADJUSTMENTS* DALLAS DISPOSITION
---------------------------------- ------------- -------------- ----------------------
KRLD-AM TSN KTCK-AM KKRW-FM
---------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net broadcast revenues ... $(8,873) $(2,223) $(2,136) $5,568 $ -- $(7,664)
Station operating expenses (7,862) (1,812) (2,487) 3,207 -- (8,954)
Depreciation/amortization (1,036) (186) (283) 66 1,156 (283)
Corporate expenses ........ -- -- -- 90 -- 90
Other ..................... (1,600) 0 165 -- -- (1,435)
---------- ---------- ---------- ------------- -------------- ----------------------
Operating income (loss) .. 1,625 (225) 469 2,205 (1,156) 2,918
Interest expense .......... (1,183) (299) (4) -- -- (1,486)
Income tax expense ........ -- -- -- 772 -- 772
---------- ---------- ---------- ------------- -------------- ----------------------
Net income (loss) ......... $ 2,808 $ 74 $ 473 $1,433 $(1,156) $ 3,632
========== ========== ========== ============= ============== ======================
</TABLE>
S-38
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------------------
HOUSTON EXCHANGE AND
DISPOSITIONS ACQUISITION ADJUSTMENTS* DALLAS DISPOSITION
---------------------------------- ------------- -------------- ----------------------
KRLD-AM TSN KTCK-AM KKRW-FM
---------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net broadcast revenues .... $(9,792) $(3,196) $(4,096) $7,117 $ -- $(9,967)
Station operating expenses (8,881) (2,261) (3,714) 5,167 -- (9,689)
Depreciation/amortization . (1,350) (725) (124) 371 1,704 (124)
Corporate expenses ......... -- -- -- 120 -- 120
Other ...................... (5,000) -- -- -- -- (5,000)
---------- ---------- ---------- ------------- -------------- ----------------------
Operating income (loss) ... 5,439 (210) (258) 1,459 (1,704) 4,726
Interest expense ........... (1,433) (403) (5) -- -- (1,841)
Other income ............... -- -- (323) (175) -- (498)
---------- ---------- ---------- ------------- -------------- ----------------------
Net income (loss) .......... $ 6,872 $ 193 $ 70 $1,634 $(1,704) $ 7,065
========== ========== ========== ============= ============== ======================
</TABLE>
- ------------
(*) To reflect historical depreciation and amortization of KRLD-AM and the
Texas State Networks and the disposition of KTCK-AM.
(6) Pro Forma Adjustments
a. Reflects the results during the year ended December 31, 1995 of radio
stations (located in San Diego, Charlotte--WLYT only, and Dallas)
acquired and fees of $3,584,000 and $2,895,000 incurred by Triathlon
and payable to SCMC for the year ended December 31, 1995 and the nine
months ended September 30, 1996, respectively, of which $2,584,000 and
$2,020,000, respectively, represent fees based upon acquisition and
financing activities in the respective periods. Future fees may be
lesser or greater based upon future acquisition and financing activity
by Triathlon. Minimum annual fees will be $1,000,000 per year.
b. Reflects anticipated cost savings realized to date and expected to be
realized following the Liberty Acquisition, the Chancellor Exchange,
the Prism Acquisition, the Jackson Acquisitions, the Richmond
Acquisition, the Texas Coast Acquisition and Hartford Acquisition,
consisting principally of the elimination of certain duplicative
technical, sales and general and administrative functions due to
operating a cluster of stations in each of its principal markets, a
reduction of employee benefit costs and commission rates and the
elimination of programming personnel due to automation and
simulcasting.
Also reflected are the adjustment of Delsener/Slater officers'
salaries to reflect new employment contracts, the elimination of
non-recurring losses of Delsener/Slater and the elimination of certain
salaries and expenses of employee-shareholders in connection with the
Hartford Acquisition.
While management believes that such cost savings and the elimination
of non-recurring expenses are reasonably achievable, the Company's
ability to achieve such cost savings and to eliminate the
non-recurring expenses is subject to numerous factors, many of which
are beyond the Company's control. These factors may include
difficulties in integrating the acquired stations and the incurrence
of unanticipated severance, promotional or other costs and expenses.
There can be no assurance that the Company will realize all such cost
savings. See also "Risk Factors" contained in this Prospectus
Supplement and the accompanying Prospectus.
c. Reflects increase (decrease) in amortization of intangible assets
resulting from the purchase price allocation and change in amortization
period:
S-39
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------
INCREASE DUE DECREASE DUE
TO PURCHASE TO CHANGE IN
PRICE AMORTIZATION NET INCREASE
ALLOCATION PERIODS (DECREASE)
-------------- -------------- --------------
(IN THOUSANDS)
Liberty Acquisition ........... $1,117 $(2,984) $(1,867)
Prism Acquisition ............. 870 (641) 229
Raleigh-Greensboro, Greenville
and Jackson Acquisitions .... 612 (646) (34)
Albany Acquisition ............ 18 0 18
Delsener/Slater Acquisition .. 919 0 919
--------------
Net Decrease for Recent
Acquistions .................. $ (735)
==============
Richmond Acquisition .......... $ 546 $ (465) $ 81
Texas Coast Acquisition ...... 795 0 795
Hartford Acquisition .......... 457 0 457
--------------
Net Increase for Pending
Acquisitions (other than the
Secret Communications
Acquisition) ................. $ 1,333
==============
Secret Communications
Acquisition .................. $3,880 $(1,036) $ 2,844
==============
(RESTUBBED TABLE CONTINUED FROM ABOVE)
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------
INCREASE DUE DECREASE DUE
TO PURCHASE TO CHANGE IN
PRICE AMORTIZATION NET INCREASE
ALLOCATION PERIODS (DECREASE)
-------------- -------------- --------------
Liberty Acquisition ........... $2,235 $(4,799) $(2,564)
Prism Acquisition ............. 1,606 (1,186) 420
Raleigh-Greensboro, Greenville
and Jackson Acquisitions .... 1,235 (1,220) 15
Albany Acquisition ............ 25 0 25
Delsener/Slater Acquisition .. 1,226 0 1,226
-------------- --------------
Net Decrease for Recent
Acquistions .................. $ (878)
-------------- ==============
Richmond Acquisition .......... $ 728 $ (642) $ 86
Texas Coast Acquisition ...... 1,061 0 1,061
Hartford Acquisition .......... 610 0 610
-------------- --------------
Net Increase for Pending
Acquisitions (other than the
Secret Communications
Acquisition) ................. $ 1,757
-------------- ==============
Secret Communications
Acquisition .................. $5,174 $(1,576) $ 3,598
-------------- ==============
d. Reflects $391,000 and $782,000 in amortization of goodwill arising from
the deferred taxes recorded in connection with the Liberty Acquisition
for the six months prior to the purchase date and the year ended December
31, 1995, respectively.
e. Amortization of $243,000 and $325,000 for acquisition costs associated
with the Recent and Pending Acquisitions for the nine months ended
September 30, 1996 and the year ended December 31, 1995, respectively.
f. To reflect $418,000 and $558,000 in amortization relating to the present
value of the Triathlon consulting fees assigned to the Company under the
SCMC Termination Agreement for the nine months ended September 30, 1996
and the year ended December 31, 1995, respectively.
g. To record incremental corporate overhead charges of $1,803,000 and
$2,405,000 for the nine months ended September 30, 1996 and the year
ended December 31, 1995, respectively, relating to increases in
personnel, professional fees and administrative expenses associated with
the increased size of the Company due to the Recent and Pending
Acquisitions and the elimination of $2,249,000 and $7,718,000 for the
nine months ended September 30, 1996 and the year ended December 31,
1995, respectively, of the corporate overhead of the sellers.
h. To reflect interest expense of $36,281,000 and $48,375,000 for the nine
months ended September 30, 1996 and the year ended December 31, 1995,
respectively, related to the $450,000,000 of New Notes at 10.75%,
amortization of deferred financing costs of $1,198,000 and $1,598,000 for
the nine months ended September 30, 1996 and the year ended December 31,
1995, respectively, interest expense of $11,858,000 and $11,448,000
relating to the borrowings from the Credit Agreement at 8.25% for the
nine months ended September 30, 1996 and the year ended December 31,
1995, respectively, and elimination of existing interest expense (net of
interest on other debt) of $26,001,000 and $24,245,000 related to the
Company and the sellers for the nine months ended September 30, 1996 and
the year ended December 31, 1995, respectively.
i. Elimination of acquisition related costs of $5,935,000 recorded on the
income statement of Liberty for the nine months ended September 30, 1996,
a gain on the sale of assets of $11,920,000 recorded on the books of ABS
Greenville Partners, L.P. for the nine months ended September 30, 1996
and net income tax benefits of $1,884,000 and $2,077,000 for the nine
months ended September 30, 1996 and the year ended December 31, 1995,
respectively.
j. To record the incremental Series D Preferred Stock dividend and the
assumed Series E Preferred Stock issuance to finance a portion of the
Pending Acquisitions at a rate of 6.5% and 12 5/8%, respectively.
S-40
<PAGE>
k. To record minority interest income (loss) related to the Richmond
Acquisition of ($13,000) and $2,000 for the nine months ended September
30, 1996 and the year ended December 31, 1995, respectively.
l. Reflects $159,000 and $213,000 in amortization of goodwill arising from
the deferred taxes recorded in connection with the Hartford Acquisition
for the nine months ended September 30, 1996 and the year ended December
31, 1995, respectively.
m. To record interest expense of $242,000 and $373,000 for the nine months
ended September 30, 1996 and the year ended December 31, 1995,
respectively, in connection with the long-term payments due for the
Delsener/Slater Acquisition and the Texas Coast Acquisition.
n. Elimination of LMA fees paid by Secret Communications for the Third Party
Stations.
(7) Richmond Acquisition
Reflects the net effect of the combined historical operations of radio
stations WKHK-FM, WBZU-FM and WVGO-FM/WLEE-FM acquired in the Richmond
Acquisition.
NINE MONTHS ENDED SEPTEMBER 30, 1996
-----------------------------------------------
WVGO-FM/ RICHMOND
WKHK-FM WBZU-FM WLEE-FM ACQUISITION
--------- --------- ---------- -------------
(IN THOUSANDS)
Net broadcast revenues ... $3,984 $ 866 $ 2,205 $ 7,055
Station operating expenses 2,648 1,119 2,292 6,059
Depreciation/amortization 187 154 458 799
Corporate expenses ........ 273 88 427 788
--------- --------- ---------- -------------
Operating income (loss) .. 876 (495) (972) (591)
Interest expense .......... 571 202 163 936
--------- --------- ---------- -------------
Net income (loss) ......... $ 305 $ (697) $(1,135) $(1,527)
========= ========= ========== =============
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------
WVGO-FM/ RICHMOND
WKHK-FM WBZU-FM WLEE-FM ACQUISITION
--------- ---------- ---------- -------------
(IN THOUSANDS)
Net broadcast revenues ... $4,478 $ 849 $ 3,886 $ 9,213
Station operating expenses 3,154 1,561 3,382 8,097
Depreciation/amortization 253 243 914 1,410
Corporate expenses ........ 245 77 328 650
--------- ---------- ---------- -------------
Operating income (loss) .. 826 (1,032) (738) (944)
Interest expense .......... 811 287 317 1,415
Other expense ............. -- -- 43 43
--------- ---------- ---------- -------------
Net income (loss) ......... $ 15 $(1,319) $(1,098) $(2,402)
========= ========== ========== =============
S-41
<PAGE>
(8) Chancellor Exchange
Reflects the pending transfer of WBAB-FM, WHFM-FM, WBLI-FM, and WGBB-FM
("Long Island Disposition") in exchange for WFYV-FM and WAPE-FM
("Jacksonville Acquisition") in the Chancellor Exchange.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------------------
LONG ISLAND JACKSONVILLE CHANCELLOR
DISPOSITION ACQUISITION ADJUSTMENTS EXCHANGE
------------- -------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues ... $(5,108) $4,764 $(425)** $ (769)
Station operating expenses (3,923) 2,676 -- (1,247)
Depreciation/amortization (1,429) 876 347* (206)
Corporate expenses ........ (1,026) -- -- (1,026)
------------- -------------- ------------- ------------
Operating income (loss) .. 1,270 1,212 (772) 1,710
Interest expense .......... (7) -- -- (7)
Other expense (income) ... (1) -- -- (1)
Income tax expense ........ (2) -- -- (2)
------------- -------------- ------------- ------------
Net income (loss) ......... $ 1,280 $1,212 $(772) $ 1,720
============= ============== ============= ============
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------
LONG ISLAND JACKSONVILLE CHANCELLOR
DISPOSITION ACQUISITION ADJUSTMENTS EXCHANGE
------------- -------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues ... $(11,511) $7,629 $ -- $(3,882)
Station operating expenses (7,282) 4,840 -- (2,442)
Depreciation/amortization (2,682) 1,491 916* (275)
Corporate expenses ........ (1,460) -- -- (1,460)
------------- -------------- ------------- ------------
Operating income (loss) .. (87) 1,298 (916) 295
Interest expense .......... (17) -- -- (17)
Income tax expense ........ -- -- -- --
------------- -------------- ------------- ------------
Net income (loss) ......... $ (70) $1,298 $(916) $ 312
============= ============== ============= ============
</TABLE>
- ------------
* To reflect historic depreciation of the stations that are the subject
of the Long Island Disposition net of decrease in amortization due to
the exchange allocation.
** To eliminate LMA payment received for the Long Island stations for the
month of July 1996.
S-42
<PAGE>
(9) CBS Exchange
To reflect the net effect of the exchange of WHFS-FM for KTXQ-FM and
KRRW-FM in the CBS Exchange.
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------
KTXQ-FM WHFS-FM CBS
KRRW-FM DISPOSAL ADJUSTMENTS* EXCHANGE
--------- ---------- -------------- ----------
(IN THOUSANDS)
Net broadcast revenues ... $7,447 $7,429 $ -- $ 18
Station operating expenses 5,340 3,958 -- 1,382
Depreciation/amortization 169 997 828 --
--------- ---------- -------------- ----------
Operating income (loss) .. 1,938 2,474 (828) (1,364)
Income tax expense ........ 679 -- -- 679
--------- ---------- -------------- ----------
Net income (loss) ......... $1,259 $2,474 $(828) $(2,043)
========= ========== ============== ==========
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------
KTXQ-FM WHFS-FM CBS
KRRW-FM DISPOSAL ADJUSTMENTS* EXCHANGE
--------- ---------- -------------- ----------
(IN THOUSANDS)
Net broadcast revenues ... $8,534 $9,976 $ -- $(1,442)
Station operating expenses 7,254 5,400 -- 1,854
Depreciation/amortization 1,129 1,638 509 --
Corporate expenses ........ 214 -- -- 214
--------- ---------- -------------- ----------
Operating income .......... (63) 2,938 (509) (3,510)
Other income (loss) ....... (152) -- -- (152)
Income tax expense ........ 31 -- -- 31
--------- ---------- -------------- ----------
Net income (loss) ......... $ 58 $2,938 $(509) $(3,389)
========= ========== ============== ==========
- ------------
* To eliminate depreciation of KTXQ-FM and KRRW-FM and reflect depreciation
of WHFS-FM.
(10) Secret Communications Acquisition
Reflects the Secret Communications Acquisition after the pending
acquisition of the Third Party Stations by Secret Communications. The results
of the Third Party Stations for the nine months ended September 30, 1996
reflect five months of results under the current owner and four months of
operations under Secret Communications through an LMA, which Secret entered
with the current owner on June 1, 1996.
The Company has identified nonrecurring marketing costs of approximately
$580,000 in 1996 at the Pittsburgh stations. These costs have not been
reflected as a pro forma adjustment.
S-43
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------
SECRET
SECRET THIRD PARTY COMMUNICATIONS
COMMUNICATIONS STATIONS ACQUISITION
-------------- ------------- --------------
(IN THOUSANDS)
Net broadcast revenues ... $21,335 $4,175 $25,510
Station operating expenses 12,511 2,536 15,047
Depreciation/amortization 2,482 98 2,580
-------------- ------------- --------------
Operating income .......... 6,342 1,541 7,883
Other expenses (income) .. -- 1,175 1,175
-------------- ------------- --------------
Net income ................ $ 6,342 $ 366 $ 6,708
============== ============= ==============
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------
SECRET
SECRET THIRD PARTY COMMUNICATIONS
COMMUNICATIONS STATIONS ACQUISITION
-------------- ------------- --------------
(IN THOUSANDS)
Net broadcast revenues ... $27,071 $3,662 $30,733
Station operating expenses 14,632 2,849 17,481
Depreciation/amortization 3,296 200 3,496
Corporate expenses ........ 1,249 -- 1,249
-------------- ------------- --------------
Operating income .......... 7,894 613 8,507
Interest expense .......... 2,067 -- 2,067
Other income .............. 5 -- 5
-------------- ------------- --------------
Net income ................ $ 5,822 $ 613 $ 6,435
============== ============= ==============
S-44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is not a complete discussion of the financial condition and
results of operations of the Company. For a complete discussion see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, as amended, and Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, June 30 and September 30, 1996,
each of which have been incorporated by reference herein.
The following discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk
Factors" and those appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus, including, without limitation, risks and
uncertainties relating to leverage, the need for additional funds,
consummation of the Pending Acquisitions or the Pending Dispositions,
integration of the Pending Acquisitions, the ability of the Company to
achieve certain cost savings, the management of growth, the popularity of
radio as a broadcasting and advertising medium and changing consumer tastes.
The Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for funds has historically been to fund the
acquisition of radio stations and, to a lesser extent, capital expenditures
and the redemption of outstanding securities. The Company's principal sources
of funds for these requirements have historically been the proceeds from
offerings of equity and debt securities, borrowings under credit agreements
and, to a significantly lesser extent, cash flows from operations.
For a discussion of the Company's historical cash flows, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended, and Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, June 30 and September 30, 1996, each of
which have been incorporated by reference herein.
Recent Acquisitions and Dispositions. Since January 1, 1996, the Company
has consummated a number of acquisitions and dispositions.
In early 1996, the Company acquired radio stations WTDR-FM and WLYT-FM
(formerly WEZC-FM), both operating in Charlotte, North Carolina, for an
aggregate purchase price of $24.8 million. The primary sources of funds for
this acquisition were proceeds from the Company's public offering in June
1995 and funds available under the Old Credit Agreement.
In the Greenville Acquisition, consummated in June 1996, the Company
acquired substantially all of the assets of WROQ-FM, operating in Greenville,
South Carolina, for approximately $14.0 million.
Also in June 1996, pursuant to the Raleigh-Greensboro Acquisition, the
Company acquired substantially all of the assets of WTRG-FM and WRDU-FM, both
operating in Raleigh, North Carolina, and WMFR-AM, WMAG-FM and WTCK-AM
(formerly WWWB-AM), each operating in Greensboro, North Carolina, for
approximately $36.8 million.
Pursuant to the Jackson Acquisitions, in July 1996, the Company acquired
substantially all of the assets of WJDX-FM, Jackson, Mississippi, for a
purchase price of approximately $3.0 million and, in August 1996,
substantially all of the assets used in the operation of radio stations
WSTZ-FM and WZRX-AM, each operating in Jackson, Mississippi, for an aggregate
purchase price of approximately $3.5 million.
In July 1996, the Company acquired from Prism, a privately-held radio
broadcasting company, substantially all of the assets used in the operation
of eight FM and five AM radio stations located in four markets: Jacksonville,
Florida; Raleigh, North Carolina; Tucson, Arizona; and Wichita, Kansas. In
S-45
<PAGE>
September 1996, the Company also acquired from Prism substantially all of
the assets of three radio stations operating in Louisville, Kentucky, upon
renewal of the FCC licenses of such stations, pursuant to the Louisville
Acquisition. The total purchase price for the Prism Acquisition and the
Louisville Acquisition was approximately $105.3 million. In October 1996, the
Company sold the Louisville stations (the "Louisville Dispositions") for
$18.5 million. The Company recognized no gain or loss on the Louisville
Dispositions. The Louisville stations are classified as assets held for sale
on the September 30, 1996, balance sheet.
In July 1996, the Company acquired Liberty Broadcasting for a purchase
price of approximately $227.0 million, plus $10.5 million for working capital
(the "Liberty Acquisition"). Liberty Broadcasting was a privately-held radio
broadcasting company which owned and operated or provided programming to or
sold advertising on behalf of 14 FM and six AM radio stations (the "Liberty
Stations") operating in six markets: Washington, DC/Baltimore, Maryland;
Nassau-Suffolk, New York; Providence, Rhode Island; Hartford, Connecticut;
Albany, New York; and Richmond, Virginia.
In July 1996, the Company sold three of the Liberty Stations operating in
the Washington, D.C./Baltimore, Maryland market (the "Washington
Dispositions") for $25.0 million.
In November 1996, the Company consummated the Greensboro Acquisition,
pursuant to which it purchased one station operating in Greensboro, North
Carolina, for a purchase price of $6.0 million. This amount was paid in full
in the third quarter of 1996.
The Greenville Acquisition, Raleigh-Greensboro Acquisition, Jackson
Acquisitions, Prism Acquisition, Liberty Acquisition and Greensboro
Acquisition were primarily funded with proceeds from the Private Placement.
In November 1996, the Company consummated the Dallas Disposition, pursuant
to which it sold one radio station operating in Dallas, Texas for a net
consideration of $13.4 million. The Company has a contractual obligation to
make certain payments to Cardinal Communications LP ("Cardinal"), the prior
owner of KTCK-AM, upon the sale of the station by the Company. Cardinal has
commenced litigation against the Company due to the parties' inability to
agree on the amount of the contingent payment due upon sale. In the event
that the contingent payment exceeds approximately $2.9 million, the Company
will record a loss on the transaction.
On November 22, 1996, the Company consummated the MMR Merger, pursuant to
which it acquired MMR in exchange for capital stock of the Company having a
value of approximately $72 million. Concurrently with the consummation of the
MMR Merger, the Company paid approximately $43.0 million to satisfy
outstanding indebtedness of MMR from borrowings under the Credit Agreement.
MMR was organized in 1992 by Robert F.X. Sillerman, Chairman of the Board,
Chief Executive Officer and controlling stockholder of the Company, Michael
G. Ferrel, Chief Executive Officer and a Director of the Company, and Howard
J. Tytel, a Director and Executive Vice President of the Company. Mr.
Sillerman owned a substantial equity interest in MMR which was exchanged for
common stock of the Company upon the consummation of the MMR Merger.
In December 1996, the Company consummated the Houston Exchange, pursuant
to which it exchanged the assets of one radio station operating in Dallas,
Texas, along with the Texas State Networks, for the assets of another radio
station operating in Houston, Texas. There was no cash consideration paid by
the Company or the other party pursuant to the Houston Exchange.
Also in December 1996, the Company loaned to ABS Communications L.L.C.
("ABS") $14.5 million to finance the purchase by ABS of two radio stations
operating in Richmond, Virginia, in connection with the Richmond Acquisition.
The Company has also paid a $2.0 million deposit to ABS pursuant to its
agreement to purchase a 96% interest in ABS. The primary source of funds for
this loan was borrowings under the Credit Agreement.
In January 1997, the Company consummated the Delsener/Slater Acquisition,
pursuant to which it purchased Delsener/Slater, a concert promotion company,
for an aggregate consideration of approxi-
S-46
<PAGE>
mately $24.0 million. Of this amount, $3.0 million is to be paid, without
interest, over five years, and $1.0 million is to be paid, without interest,
over ten years. The deferred payments are subject to acceleration in certain
circumstances. The primary source of funds for this acquisition was
borrowings under the Credit Agreement.
Also in January 1997, the Company consummated the Albany Acquisition,
pursuant to which it purchased one radio station operating in Albany, New
York, for a purchase price of $1.0 million. The primary source of funds for
this acquisition was borrowings under the Credit Agreement.
Pending Acquisitions and Dispositions. In October 1996, the Company
entered into an agreement with Secret Communications, pursuant to which the
Company agreed to acquire substantially all of the assets used in the
operation by Secret Communications of nine radio stations located in three
markets (Indianapolis, Indiana, Pittsburgh, Pennsylvania, and Cleveland,
Ohio). Two of the radio stations operating in Pittsburgh are not yet owned by
Secret Communications but are anticipated to be acquired prior to the
consummation of the Secret Communications Acquisition, and Secret
Communications currently provides programming and sells advertising on these
stations pursuant to an LMA. The purchase price of the acquisition is $300.0
million, subject to certain downward adjustments, of which the Company has
segregated $15.0 million pursuant to a letter of credit to secure its
obligations under the purchase agreement.
In January 1997, the parties reached an agreement in principle to amend
the purchase agreement to provide that the purchase price will be reduced
from $300.0 million to $255.0 million and that the Cleveland stations will
not be transferred. In addition, if (i) at any time prior to the date 12
months from the execution of the amendment, Secret Communications enters into
a binding agreement to sell the Cleveland stations at a price less than $45.0
million and (ii) such disposition is consummated prior to March 31, 1998, the
Company will be required to pay, at closing, the difference between the sale
price and $45.0 million, but in no event more than $5.0 million. Upon
execution of the amendment, $10.0 million of the amount segregated pursuant
to the letter of credit will be paid to Secret Communications as a deposit,
and the remaining $5.0 million will also be so paid on May 30, 1997.
In addition, the Company has also entered into separate agreements
regarding the Richmond Acquisition, the CBS Exchange, the Hartford
Acquisition and the Texas Coast Acquisition. The aggregate purchase price of
these acquisitions is approximately $107.7 million, of which the Company has
deposited $8.0 million in escrow to secure its obligations under these
agreements.
The Company has also entered into agreements regarding the Chancellor
Exchange, the Little Rock Disposition and the Myrtle Beach Disposition. The
aggregate cash sale price of these transactions is $20.2 million, of which
the purchasers have deposited in escrow or paid $3.5 million.
S-47
<PAGE>
The Company anticipates that it will consummate all of the Pending
Acquisitions and the Pending Dispositions as follows:
CASH PURCHASE ANTICIPATED DATE OF
TRANSACTION (SALE) PRICE(1) CONSUMMATION
- ---------------------------------- --------------- -------------------
(IN MILLIONS)
Hartford Acquisition .............. $ 25.5 1st quarter 1997
Texas Coast Acquisition ........... 41.5(2) 1st quarter 1997
Little Rock Disposition ........... (4.1) 1st quarter 1997
Myrtle Beach Disposition .......... (5.1) 1st quarter 1997
CBS Exchange ...................... -- 1st quarter 1997
Richmond Acquisition .............. 40.4 2nd quarter 1997
Chancellor Exchange ............... (11.0) 2nd quarter 1997
Secret Communications Acquisition 255.0(3) 3rd quarter 1997
- ------------
(1) Represents the gross cash sales or purchase price for the corresponding
transaction. Certain of these amounts do not reflect amounts advanced
or placed in escrow, payable over a period of time or payable in stock
of the Company.
(2) Includes amounts payable in respect of certain ancillary agreements.
Does not include certain additional contingent liabilities.
(3) Does not include certain additional contingent liabilities.
The timing and completion of each of the above transactions are subject to
a number of closing conditions, certain of which are beyond the Company's
control. Each of the Pending Acquisitions and the Pending Dispositions is
subject to the approval of the FCC. Additionally, the Antitrust Division has
indicated its 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 each of the Pending Acquisitions and the Pending Dispositions does not
substantially lessen competition, there can be no assurance that the
Antitrust Division will not take a contrary position, which could delay or
prevent the consummation of any of the Pending Acquisitions or require the
Company to restructure its ownership in the relevant market or markets. See
"Risk Factors--Risks Related to Pending Acquisitions and the Pending
Dispositions" and "Agreements Related to the Pending Acquisitions and the
Pending Dispositions" in this Prospectus Supplement and "Risk
Factors--Extensive Regulation of Radio Broadcasting" in the accompanying
Prospectus.
The Company intends to finance the Pending Acquisitions from the proceeds
of the Preferred Stock Offering, the Chancellor Exchange, the Pending
Dispositions and the borrowings under the Credit Agreement. See "Risk
Factors--Risks Related to the Pending Acquisitions and the Pending
Dispositions."
The Company is also required to make a payment of $1.0 million in 1997 to
redeem the outstanding shares of Series B Preferred Stock.
Sources of Liquidity. In October 1993, the Company issued $80.0 million in
aggregate principal amount of the Old Notes, which have a maturity date of
October 1, 2000. The Old Notes are senior subordinated obligations of the
Company and are subordinated in right of payment to all existing and future
Senior Debt of the Company (including the Credit Agreement). In May 1996, the
Company completed the Tender Offer, in which it purchased approximately $79.4
million in principal amount of the $80.0 million in principal amount of the
Old Notes then outstanding. The Company also entered into a supplemental
indenture amending the terms of the Old Note Indenture.
In May 1996, the Company issued New Notes in an aggregate principal amount
of $450.0 million (the "Note Offering"). Interest on the New Notes accrues at
the rate of 10.75% per year and is payable on May 15 and November 15 of each
year. The New Notes are general senior subordinated unsecured obligations of
the Company. The New Notes are guaranteed on a senior subordinated basis by
each of the Company's
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subsidiaries. The New Note Indenture contains certain covenants which limit
the ability of the Company and certain of its subsidiaries to, among other
things, incur additional indebtedness, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, incur indebtedness that is senior in right of
payment to the New Notes, incur liens, impose restrictions on the ability of
a subsidiary to pay dividends or make certain payments to the Company and its
subsidiaries, merge or consolidate with any other person or dispose of all or
substantially all of the assets of the Company.
Concurrently with the Note Offering, the Company sold in a private
placement 2,990,000 shares of Series D Preferred Stock aggregating $149.5
million in liquidation preference (the "Series D Preferred Stock Offering").
Dividends of $0.8125 per share of Series D Preferred Stock are payable
quarterly in cash. Accumulated unpaid dividends bear interest at the annual
rate of 6.5%. The shares of Series D Preferred Stock are convertible into
shares of Class A Common Stock at any time prior to May 31, 2007, unless
previously redeemed or repurchased, at a conversion price of $45.51 per share
(equivalent to a conversion rate of 1.0987 shares of Class A Common Stock per
share of Series D Preferred Stock), subject to adjustment in certain events.
The shares of Series D Preferred Stock are exchangeable in full (but not in
part), at the Company's option, subject to compliance with covenants
contained in the Company's debt agreements, for Series D Exchange Notes. The
Certificate of Designations of the Series D Preferred Stock contains certain
covenants which, among other things, limit the ability of the Company and its
subsidiaries to engage in transactions with their affiliates.
On November 22, 1996, the Company entered into the Credit Agreement, a
senior revolving credit facility providing for borrowings of up to $225.0
million. Borrowings under the Credit Agreement may be used to finance
permitted acquisitions, for working capital and general corporate purposes,
and for letters of credit up to $20.0 million. The facility converts into a
five-year term loan on September 30, 1998, with repayment due in quarterly
installments commencing December 31, 1998, and with the final payment due
September 30, 2003. The principal will be amortized by 5% in 1998, 15% in
1999, 20% in 2000, 20% in 2001, 22% in 2002 and 18% in 2003. Interest on the
funds borrowed under the Credit Agreement is based on a floating rate
selected by the Company of either (i) the higher of (a) the Bank of New
York's prime rate and (b) the federal funds rate plus 0.5%, plus a margin
which varies from 0.25% to 1.5%, based on the Company's then-current leverage
ratio, or (ii) the LIBOR rate plus a margin which varies from 1.5% to 2.75%,
based on the Company's then-current leverage ratio. The Company must prepay
certain outstanding borrowings in advance of their scheduled due dates in
certain circumstances. The Company must also pay annual commitment fees of
0.5% of the unutilized total commitments under the Credit Agreement. The
Company's obligations under the Credit Agreement are secured by substantially
all of its assets, including property, stock of subsidiaries and accounts
receivable, and are guaranteed by the Company's subsidiaries. As of January
15, 1997, the Company had aggregate borrowings under the Credit Agreement of
$50.0 million.
The Company will require financing in addition to the Preferred Stock
Offering in order to consummate the Pending Acquisitions, which the Company
anticipates obtaining through borrowings under the Credit Agreement and
proceeds from the Chancellor Exchange and the Pending Dispositions. There can
be no assurance that the Chancellor Exchange or the Pending Dispositions will
be successfully consummated. The Company will require funding pursuant to the
Credit Agreement of approximately $152.2 million in order to consummate the
Secret Communications Acquisition which it expects to occur in the third
quarter of 1997. The Credit Agreement prohibits the Company from utilizing
funds available thereunder unless the Company meets certain specified
financial tests, such as total leverage and senior leverage ratios and pro
forma interest expense. The ability of the Company to meet such tests is
dependent on the cash flow of the Company, giving effect to the consummation
of the acquisitions and dispositions of the Company. There can be no
assurance that the Company will have adequate borrowing capacity under the
Credit Agreement. If the Company's borrowing capacity under the Credit
Agreement is not sufficient to finance the Secret Communications Acquisition,
the Company will be required to either seek modification of the Credit
Agreement or obtain alternative financing. There can be no assurance that the
Company will be able to obtain additional financing or such modification on
terms acceptable to the
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Company or at all. If the Company is unable to consummate the Pending
Acquisitions because of its failure to obtain financing or for any other
reason, it may forfeit deposits up to an aggregate amount of approximately
$22.0 million. See "Risk Factors--Risks Related to the Pending Acquisitions
and the Pending Dispositions."
As a result of the foregoing, there can be no assurance as to when the
Pending Acquisitions or the Pending 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
Pending Acquisitions or the Pending Dispositions will conform to the
assumptions used in the preparation of the Unaudited Pro Forma Condensed
Combined Financial Statements included herein. In analyzing the Unaudited Pro
Forma Condensed Combined Financial Statements and other information,
prospective investors should consider that the Pending Acquisitions or the
Pending Dispositions may not be consummated at all or on the terms described
herein, and the Pending Acquisitions or the Pending Dispositions, if
consummated, may be subject to substantial delay.
The Company expects that any additional acquisitions will be financed
through funds generated from operations, cash on hand, funds which may be
available under the Credit Agreement and additional debt and equity
financing. The availability of additional acquisition financing cannot be
assured, and, depending on the terms of the proposed acquisition financing,
could be restricted by the terms of the Credit Agreement, the debt incurrence
test under the New Note Indenture, the Series D Preferred Stock and/or the
Series E Preferred Stock.
The Company's ability to make scheduled payments of principal of, to pay
interest on or to refinance, its debt (including the New Notes and the
Company's borrowings under the Credit Agreement), to make dividend payments
on the Series D Preferred Stock and the Series E Preferred Stock and to
redeem the Series B Preferred Stock, the Series C Preferred Stock, the Series
D Preferred Stock and the Series E 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 these 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 Preferred Stock Offering, the Chancellor
Exchange and borrowings under the Credit Agreement, will be adequate to meet
the Company's anticipated future requirements for working capital, capital
expenditures and scheduled interest, principal, dividend and redemption
payments through at least 1998. However, the Company's borrowings under the
Credit Agreement 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 Chancellor
Exchange or the Pending Dispositions will be consummated, that the Company
will be able to borrow under the Credit Agreement, 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 to enable the Company to
service its debt, to make dividend, 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 the New Notes, or the
aggregate liquidation preference of the Series E Preferred Stock and the
Series D 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. See "Risk Factors" in this Prospectus Supplement and in the
accompanying Prospectus.
CHARGES TO OPERATIONS
Pursuant to an agreement between the Company and D. Geoffrey Armstrong,
the Company's Chief Operating Officer (the "Armstrong Agreement"), Mr.
Armstrong's employment may be terminated by either party during the one-month
period commencing on November 22, 1997 upon 30 days' written notice. If his
employment agreement is terminated, Mr. Armstrong will receive a payment of
$1.2 million pursuant to the provisions of his employment agreement which are
currently deferred, and the Company will purchase all of his outstanding
options under the Company's stock option plans for an amount equal
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to the difference between (x) the number of such options multiplied by the
respective exercise price of such options and (y) the number of such options
multiplied by the greater of $40.00 and the average trading price of a share
of Class A Common Stock during the 20 days prior to five days before the
effective date of the termination of the employment agreement. In the event
that the Company is required to purchase Mr. Armstrong's options, based upon
a repurchase price of $40.00 per share, the Company will make a payment to
Mr. Armstrong of approximately $3.25 million. See "Unaudited Pro Forma
Condensed Combined Financial Statements."
The Company's Compensation Committee, Independent Directors and Mr.
Sillerman have agreed that the Company will 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. The employment agreement, which has not yet
been finalized, will include the issuance of stock options or their
equivalent both upon the execution of the employment agreement and in the
event of a Change of Control of the Company in amounts to be determined by
the Board of Directors and the Compensation Committee. The initial grant of
such stock options or their equivalent will be at an exercise price
determined on the date of the Compensation Committee's original agreement as
to the new employment agreement. Depending upon the ultimate form and amount
of stock options or their equivalent granted under the employment agreement,
the Company may incur compensation charges in 1996 or later years. See
"Certain Relationships and Related Transactions--Employment Agreements with
Messrs. Sillerman and Ferrel."
The Acquisitions will be accounted for using the purchase method of
accounting and the intangible assets created in the purchase transactions
will be amortized against future earnings of the combined companies. The
amount of such amortization will be substantial and will continue to affect
the Company's operating results in the future. These expenses, however, do
not result in an outflow of cash by the Company and do not impact the
Company's Broadcast Cash Flow.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion is incomplete and should be read in conjunction
with the "Certain Relationships and Related Transactions" sections set forth
in (i) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended, (ii) MMR's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, as amended, and (iii) the Joint Proxy
Statement/Prospectus attached as Exhibit 99.1 to the Company's Current Report
on Form 8-K filed on November 27, 1996, with the Commission, which sections
are incorporated by reference herein. The section includes a description of
the various transactions between the Company and its affiliates as required
by the rules and regulations of the Commission.
RELATIONSHIP OF THE COMPANY WITH SCMC
Prior to April 1996, SCMC, a corporation controlled by Mr. Sillerman, had
been engaged by the Company from time to time for advisory services with
respect to specific transactions. In April 1996, the Company and SCMC entered
into the SCMC Termination Agreement, pursuant to which SCMC assigned to the
Company its rights to receive fees payable by each of MMR and Triathlon to
SCMC in respect of consulting and marketing services to be performed on
behalf of such companies by SCMC, except for fees related to certain
transactions pending at the date of such agreement, and the Company and SCMC
terminated the arrangement pursuant to which SCMC performed financial
consulting services for the Company. Upon consummation of the MMR Merger,
SCMC's agreement with MMR was terminated. Prior to consummation of the MMR
Merger, MMR paid an annual fee of $500,000 to SCMC, and Triathlon currently
pays SCMC an annual fee of $300,000 (which shall increase to $500,000 at such
time as Triathlon has used an amount equal to the net proceeds of its last
public offering in the manner contemplated by the registration statement
filed in connection therewith). In addition, Triathlon has agreed to advance
to SCMC an amount of $500,000 per year in connection with services to be
rendered by SCMC (however, if the agreement between SCMC and Triathlon is
terminated or if an unaffiliated person acquires a majority of the capital
stock of Triathlon, then the unearned fees must be repaid). Pursuant to the
SCMC Termination Agreement, SCMC has agreed to continue to provide consulting
and marketing services to Triathlon until the expiration of their agreement
on June 1, 2005, and not to perform any consulting or investment banking
services for any person or entity, other than Triathlon, in the radio
broadcasting industry or in any business which uses technology for the audio
transmission of information or entertainment. In consideration of the
foregoing agreements, the Company issued to SCMC warrants to purchase up to
600,000 shares of Class A Common Stock at an exercise price, subject to
adjustment, of $33.75 (the market price at the time the financial consulting
arrangement was terminated). The Company also forgave a $2.0 million loan
made by the Company to SCMC on January 23, 1995, plus accrued and unpaid
interest thereon. Pursuant to such agreement, Mr. Sillerman has agreed with
the Company that he will supervise, subject the direction of the Board of
Directors, the performance of the financial consulting and other services
previously performed by SCMC for the Company. In addition, the Company has
hired or intends to hire a number of persons previously employed by SCMC.
On April 15, 1996, Furman Selz delivered its written opinion to the
Independent Committee that, as of the date of such opinion, the consideration
to be offered by the Company to SCMC pursuant to the SCMC Termination
Agreement was fair, from a financial point of view, to the Company. In
rendering its opinion, Furman Selz relied on, among other things, a schedule
prepared by Mr. Sillerman of projected fees payable to SCMC by each of the
Company, MMR and Triathlon. Furman Selz's opinion was delivered for the use
and benefit of the Independent Committee in its consideration of the SCMC
Termination Agreement.
Each engagement of SCMC by the Company has been subject to the affirmative
recommendation of the Audit Committee. SCMC has been engaged by and received
fees from the Company for advisory services, including the assumption of
certain obligations such as the provision of legal services. The Company paid
to SCMC advisory fees of $4.0 million in connection with the Liberty
Acquisition, the Prism Acquisition, the Greenville Acquisition, the Jackson
Acquisitions, the Greensboro Acquisition and the Raleigh-Greensboro
Acquisitions. In addition, the Company paid SCMC, on behalf of MMR, a
non-refundable fee of $2.0 million for investment banking services provided
to MMR in connection with the MMR Merger.
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None of the Pending Acquisitions or Pending Dispositions predate the SCMC
Termination Agreement, and therefore no fees are payable to SCMC in respect
of any Pending Acquisitions or Pending Dispositions.
EMPLOYMENT AGREEMENTS WITH MESSRS. SILLERMAN AND FERREL
The Company's Compensation Committee, Independent Directors and Mr.
Sillerman have agreed that the Company will 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. Mr. Sillerman's annual base pay under the
agreement will be $400,000, initially, subject to periodic adjustments. The
Board of Directors has also approved an additional compensation provision,
pursuant to which Mr. Sillerman is to receive a one-time $1.25 million
payment, subject to recoupment by the Company ratably to the extent that Mr.
Sillerman does not remain employed by the Company for a ten-year period. The
Board of Directors and the Compensation Committee also approved a $1.25
million loan to Mr. Sillerman, which loan will be a full-recourse obligation
of Mr. Sillerman and bear interest. Mr. Sillerman has indicated his intention
to use the proceeds from the loan to acquire additional common equity in the
Company.
The employment agreement, which has not yet been finalized, will include
the issuance of stock options or their equivalent both upon the execution of
the employment agreement and in the event of a Change of Control of the
Company in amounts to be determined by the Board of Directors and the
Compensation Committee. The initial grant of such stock options or their
equivalent will be at an exercise price determined on the date of the
Compensation Committee's original agreement as to the new employment
agreement. Depending upon the ultimate form and amount of stock options or
their equivalent granted under the employment agreement, the Company may
incur compensation charges in 1996 or later years. It is anticipated that,
except as described above, the provisions of Mr. Sillerman's employment
agreement, including those with respect to changes of control of the Company,
will be similar to those in his existing employment agreement.
The Company has entered into an employment agreement with Michael G.
Ferrel, pursuant to which Mr. Ferrel has agreed to serve as the Company's
President and Chief Executive Officer for a period of five years from
November 1996. The Company has agreed to pay Mr. Ferrel an annual base
salary of $300,000 for the first year, which increases by five percent in
each subsequent year. Additionally, Mr. Ferrel's employment agreement
provides for an annual bonus equal to the greater of $75,000 or an amount
determined by the Company's Compensation Committee based upon the Company's
achievement of certain performance goals as set by the Board of Directors.
Prior to entering into his employment agreement, Mr. Ferrel was granted
fully-vested options to purchase up to 50,000 shares Class A Common Stock at
an exercise price of $33.75 per share. Upon entering into his employment
agreement, Mr. Ferrel was paid a cash bonus of $500,000 and was granted
fully-vested options to purchase up to 30,000 shares of the Company's Class A
Common Stock. The Company made an interest-bearing loan to Mr. Ferrel of
$300,000 and paid Mr. Ferrel relocation expenses totaling $25,000. Mr. Ferrel
used the proceeds from the bonus payment and loan to pay tax liabilities
related to certain performance-based stock awards earned by Mr. Ferrel during
his employment as Chief Executive Officer and President of MMR. The loan is
payable in full upon the termination of Mr. Ferrel's employment with the
Company. The Company also agreed to grant to Mr. Ferrel, in each of the next
four succeeding years, fully-vested options to purchase up to 30,000 shares
of the Company's Class A Common Stock at their fair market value at the time
of each grant.
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AGREEMENTS RELATED TO THE PENDING ACQUISITIONS
AND THE PENDING DISPOSITIONS
The following is a summary of certain terms of the agreements related to
the Pending Acquisitions and the Pending Dispositions. This summary is not
intended to be complete and is subject to, and qualified in its entirety by
reference to, the agreements, copies of which have been filed as exhibits to
the documents and reports filed by the Company with the Commission and are
incorporated herein or in the accompanying Prospectus by reference.
SECRET COMMUNICATIONS ACQUISITION
On October 15, 1996, the Company entered into an Asset Purchase Agreement
with Secret Communications, pursuant to which the Company agreed to acquire
substantially all of the assets used in the operation of nine radio stations
located in three markets: WFBQ-FM, WRZX-FM and WNDE-AM, each operating in
Indianapolis, Indiana; WDVE-FM, WXDX-FM, WDSY-FM and WJJJ-FM, each operating
in Pittsburgh, Pennsylvania; and WTAM-AM and WLTF-FM, both operating in
Cleveland, Ohio. Secret Communications does not yet own WDSY-FM and WJJJ-FM
(the "Third-Party Stations"), but currently provides programming and sells
advertising on the Third-Party Stations pursuant to an LMA. Secret
Communications has entered into an agreement to acquire these two stations
from a third party and it is anticipated that the acquisition of the
Third-Party Stations by Secret Communications will occur prior to the
consummation of the Secret Communications Acquisition.
The purchase price pursuant to the purchase agreement is $300.0 million.
The Company segregated $15.0 million pursuant to a letter of credit delivered
in escrow in order to secure its obligations under the purchase agreement.
The consummation of the Secret Communications Acquisition is subject to
certain closing conditions, including: (i) the acquisition by Secret
Communications of the Third-Party Stations shall have been consummated, (ii)
no injunction or restraining order prohibiting the consummation of the Secret
Communications Acquisition shall have been issued by any court of competent
jurisdiction, (iii) any applicable waiting period under the HSR Act shall
have expired or been terminated, (iii) the FCC shall have consented to the
acquisition of the stations by the Company, (iv) Secret Communications shall
have received consents to the assignment to the Company of the material
contracts relating to the stations, (v) all representations and warranties of
Secret Communications and the Company shall be true and correct as of the
closing of the transaction, and (vi) there shall have been no material breach
by Secret Communications or the Company of any of their covenants or
agreements set forth in the purchase agreement. The consummation of the
Secret Communications Acquisition is scheduled to occur on the tenth business
day after the FCC consent becomes final and non-appealable. An application
seeking FCC consent to the assignment of the stations to the Company was
filed with the FCC on October 31, 1996. The HSR Act notification relating to
the Secret Communications Acquisition was filed in January 1996, and the
related waiting period has not yet expired. The Secret Communications
Acquisition is anticipated to be consummated in the third quarter of 1997.
The purchase agreement may be terminated by either party (i) if the
consummation of the Secret Communications Acquisition does not occur before
September 30, 1997 (unless such date is extended by the parties), or (ii) at
any time, if the purchase agreement relating to the Third-Party Stations is
terminated.
In January 1997, the parties reached an agreement in principle to amend
the purchase agreement. Pursuant to this amendment, the Cleveland stations
will not be transferred, and the purchase price will be reduced to $255.0
million. Based on unaudited financial information provided to the Company by
management of Secret Communications, the Company believes that the cash flow
attributable to the Cleveland stations was less than $1.5 million for the
year ended December 31, 1996. If (i) at any time prior to the date 12 months
from the execution of the amendment, Secret Communications enters into a
binding agreement to sell the Cleveland stations at a price less than $45.0
million and (ii) such disposition is consummated prior to March 31, 1998, the
Company will be required to pay, at closing, the difference
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between the sale price and $45.0 million, but in no event more than $5.0
million. In addition, the parties have agreed that, upon execution of the
amendment, $10.0 million of the amount segregated pursuant to the letter of
credit will be paid to Secret Communications as a deposit, and the remaining
$5.0 million will also be so paid on May 30, 1997. The amendment will further
provide that the Secret Communications Acquisition will be consummated on the
later of (i) July 15, 1997, if all necessary consents have been obtained and,
if applicable, have become final and non-appealable, or (ii) the tenth
business day after the FCC consent becomes final and non-appealable.
RICHMOND ACQUISITION
In December 1996, the Company entered into an agreement which provided
that the Company will enter into a series of transactions to acquire a 96%
interest in ABS from Kenneth Brown and ABS Communications, Inc. ABS had
previously agreed to acquire WLEE-FM and WVGO-FM, both operating in Richmond,
Virginia, from a third party for $14.5 million. The Company loaned $14.5
million to ABS in December 1996, enabling ABS to consummate its acquisition
of WLEE-FM and WVGO-FM. Pursuant to the Richmond Acquisition the Company has
paid a deposit of $2.0 million in escrow for the benefit of the sellers.
The consummation of the Richmond Acquisition will be effected as follows:
(i) the Company will convert the $14.5 million loan into an equity interest
in ABS; (ii) Mr. Brown will contribute to ABS $1.7 million of his interest in
two partnerships which own WKHK-FM and WBZU-FM, both operating in Richmond,
Virginia; (iii) the Company will contribute to ABS $21.3 million plus an
amount equal to Net Working Capital (as defined in the letter of intent) to
finance ABS's acquisition of the remaining interests in the two partnerships;
(iv) the Company will contribute WMXB-FM, operating in Richmond, Virginia, to
ABS; and (v) the Company will repay certain outstanding deposits, debts and
expenses incurred by Mr. Brown.
The Company has also agreed to pay to Mr. Brown, five years after the
consummation of the Richmond Acquisition, an amount equal to the greater of
(i) the appreciation in value of 100,000 shares of Class A Common Stock over
the five-year period or (ii) the difference of (a) 20% of the value of
WLEE-FM, WVGO-FM, WKHK-FM, WBZU-FM and WMXB-FM, less (b) $78,189,501. This
deferred payment will be canceled or reduced if Mr. Brown terminates his
employment prior to the expiration of the five-year period. In addition, at
any time subsequent to the fifth anniversary of the consummation of the
Richmond Acquisition, the Company shall have the option to purchase from Mr.
Brown, and Mr. Brown will have the right to sell to the Company, his 4%
interest in ABS for a cash price equal to 4% of the independently determined
market value of the five stations.
The consummation of the Richmond Acquisition is subject to the prior
approval of the FCC and the expiration or termination of any applicable
waiting period under the HSR Act. The FCC application relating to the
assignment of these stations is expected to be filed by the second quarter of
1997. The HSR Act notification relating to the Richmond Acquisition is
anticipated to be filed in the first quarter of 1997. The Richmond
Acquisition is anticipated to be consummated in the second quarter of 1997.
CBS EXCHANGE
On September 25, 1996, the Company entered into an agreement with CBS
Inc., pursuant to which the Company agreed to exchange substantially all of
the assets of WHFS-FM, serving the Baltimore, Maryland, and Washington, D.C.
markets, for substantially all of the assets of KTXQ-FM and KRRW-FM, both
operating in Dallas, Texas. The CBS Exchange is intended to qualify as a
like-kind exchange under Section 1031 of the Code. The agreement provides
that the CBS Exchange must be consummated by June 30, 1997. The consummation
of the CBS Exchange is subject to certain closing conditions, including,
among others, the approval of the boards of directors of CBS Inc. and
Westinghouse Electric Corporation, the prior receipt of approval from the FCC
and the expiration or termination of any applicable waiting period under the
HSR Act. An application seeking FCC consent to the assignment of these
stations was filed with the FCC on October 17, 1996. The HSR Act notification
relating to the CBS Exchange was filed in the fourth quarter of 1996 and the
related waiting period has expired. The CBS Exchange is anticipated to be
consummated in the first quarter of 1997.
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HARTFORD ACQUISITION
On October 23, 1996, the Company entered into an agreement to acquire the
outstanding shares of WWYZ, Inc. ("WWYZ") and an affiliated entity for $25.5
million, subject to adjustment based on WWYZ's working capital under certain
circumstances. WWYZ owns and operates radio station WWYZ-FM, operating in
Hartford, Connecticut. The Company has deposited $2.5 million in escrow to
secure its obligations under the purchase agreement, of which up to $800,000
is payable to the sellers of WWYZ in certain circumstances if the
consummation of the Hartford Acquisition is delayed past February 1, 1997.
The Hartford Acquisition is subject to the prior approval of the FCC and the
expiration or termination of any applicable waiting period under the HSR Act.
An application seeking FCC consent to the assignment of WWYZ-FM to the
Company was filed with the FCC on November 12, 1996. No HSR filing is
required for the Hartford Acquisition. The Hartford Acquisition is
anticipated to be consummated in the first quarter of 1997.
CHANCELLOR EXCHANGE
The Company has entered into an agreement with Chancellor with respect to
the Chancellor Exchange, pursuant to which the Company will exchange
substantially all of the assets of WBAB-FM, WHFM-FM, WBLI-FM and WGBB-AM,
each operating on Long Island, New York, for substantially all of the assets
of WAPE-FM and WFYV-FM, both operating in Jacksonville, Florida (both of
which are to be acquired by Chancellor) and a payment to the Company in the
amount of $11.0 million. The Company may, if it so elects, specify certain
other like-kind property in lieu of the cash payment. The Chancellor Exchange
is conditioned on, among other things, the prior receipt of FCC approval and
the expiration or termination of any applicable waiting period under the HSR
Act. If Chancellor is unable to acquire the Jacksonville stations, the
Company may delay consummation of the Chancellor Exchange for up to 24 months
and shall, under certain circumstances, designate alternate station(s) to be
exchanged by Chancellor or sell Chancellor the Long Island stations for an
aggregate price of $54.0 million. If all of the closing conditions are met
but a party fails to consummate the transaction, the other party may compel
specific performance, demand a break-up fee, or require the sale of certain
of the breaching party's stations. The Company does not expect to recognize a
gain or loss on the Chancellor Exchange. Until the consummation of the
Chancellor Exchange, the Company and Chancellor will provide programming and
sell advertising pursuant to LMAs on the Jacksonville radio stations and the
Long Island radio stations, respectively. If the Company delays consummation
of the Chancellor Exchange due to Chancellor's inability to acquire the
Jacksonville stations, or if Chancellor fails to consummate the Chancellor
Exchange under certain circumstances, the Company may impose a monthly LMA
fee with respect to the Long Island Stations of $500,000. The FCC granted its
consent to the assignment of these stations on October 7, 1996. The HSR Act
notification relating to the Chancellor Exchange was filed on September 25,
1996. Under the HSR Act, the Antitrust Division has requested additional
information from the Company relating to the Chancellor Exchange. The Company
expects to substantially comply with the request for additional information
in February 1997. There can be no assurance that the Chancellor Exchange, as
presently structured, will not be challenged or further substantially
reviewed by the Antitrust Division, or that the Chancellor Exchange will be
consummated as presently structured. The Chancellor Exchange is anticipated
to be consummated in the second quarter of 1997.
LITTLE ROCK DISPOSITION
On July 15, 1996, MMR entered into an agreement to sell substantially all
of the assets of KOLL-FM, operating in Little Rock, Arkansas, to Triathlon
for a purchase price of $4.1 million. Triathlon and MMR entered into an LMA,
pursuant to which Triathlon provides programming and sells advertising on
KOLL-FM, and MMR received a payment of $3.5 million pursuant to the LMA,
which will be applied against the purchase price of the station. MMR and
Triathlon obtained an appraisal that the station is valued at $4.1 million
from a nationally recognized appraisal firm. This agreement was assumed by
the Company upon the consummation of the MMR Merger. The FCC consented to the
assignment of KOLL-FM to Triathlon on September 5, 1996. No HSR filing is
required for the Little Rock Disposition, and it is anticipated to be
consummated in the first quarter of 1997.
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MYRTLE BEACH DISPOSITION
On September 30, 1996, MMR agreed to sell WMYB-FM and WYAK-FM, which also
operates in Myrtle Beach, South Carolina, to Pinnacle Broadcasting Company
for a price of $5.125 million, payable over a period of four years. This
agreement was assumed by the Company upon the consummation of the MMR Merger.
An application seeking FCC consent to the assignment of WMYB-FM and WYAK-FM
to Pinnacle Broadcasting Company was filed with the FCC on October 15, 1996.
No HSR filing is required for the Myrtle Beach Disposition, and it is
anticipated to be consummated in the first quarter of 1997.
TEXAS COAST ACQUISITION
MMR entered into a purchase agreement regarding the Texas Coast
Acquisition with Texas Coast Broadcasting, Inc. ("Texas Coast"), pursuant to
which MMR agreed to acquire substantially all of the assets (other than the
real property upon which the radio tower is located) of KQUE-FM and KNUZ-AM,
both operating in Houston, Texas, for an aggregate purchase price of $43.0
million, including payments in connection with a non-competition agreement
and certain environmental matters related to the real property containing the
radio tower. The aggregate purchase price is comprised of: a base purchase
price of $38.0 million; aggregate payments in respect of a non-competition
agreement of $1.5 million, payable over seven years; and payments to an
industrial recovery company for remediation of an identified environmental
problem related to the property upon which the radio tower is located of $3.5
million (of which the seller has agreed to bear $250,000). In addition, the
Company may be required to make contingent payments of up to $750,000 payable
over ten years to the industrial recovery company. The Company deposited in
escrow $2.0 million to secure MMR's obligation under the purchase agreement
and $500,000 in escrow (which amount was matched by the seller) in respect of
the environmental problem, which may be applied against the purchase price if
not used. If the sale is not consummated for any reason, other than (i)
termination of the agreement in accordance with its terms, (ii) a default by
Texas Coast or (iii) failure of a condition precedent, then Texas Coast shall
be entitled to retain the $2.5 million placed in escrow. This agreement was
assumed by the Company upon the consummation of the MMR Merger. Because of
the identified environmental problem, the Company has elected to lease the
radio tower and obtain indemnification secured by an insurance bond with
respect to such property. The consummation of the Texas Coast Acquisition is
conditioned upon, among other things, the expiration or termination of any
applicable waiting period under the HSR Act. The FCC granted its consent to
the assignment of KQUE-FM and KNUZ-AM to the Company on April 24, 1996. The
HSR Act notification relating to the Texas Coast Acquisition is anticipated
to be filed in the first quarter of 1997. The Texas Coast Acquisition is
anticipated to be consummated in the first quarter of 1997.
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DESCRIPTION OF SERIES E PREFERRED STOCK AND EXCHANGE DEBENTURES
DESCRIPTION OF SERIES E PREFERRED STOCK
General
The following is a summary of certain terms of the Series E Preferred
Stock offered hereby. The terms of the Series E Preferred Stock will be 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 will include the Certificate of
Designations, including the definitions therein of certain terms used below.
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions."
Pursuant to the Certificate of Designations, 4,150,000 shares of Series E
Preferred Stock with a liquidation preference of $100.0 per share (the
"Liquidation Preference") will be authorized for issuance in the Preferred
Stock Offering. The Series E Preferred Stock will, when issued, be fully paid
and nonassessable, and Holders thereof will have no preemptive rights in
connection therewith.
The Liquidation Preference of the Series E Preferred Stock is not
necessarily indicative of the price at which the Series E Preferred Stock
will actually trade at or after the time of their issuance, and the Series E
Preferred Stock may trade at prices below its Liquidation Preference. The
market price of the Series E 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" in this
Prospectus Supplement and in the accompanying Prospectus.
The transfer agent for the Series E Preferred Stock will be 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.
As used in this Description of Series E Preferred Stock and Exchange
Debentures, the term "Company" shall refer to SFX Broadcasting, Inc.,
excluding its Subsidiaries.
Ranking
The Series E Preferred Stock will rank junior in right of payment of the
Series D Preferred Stock of the Company as to dividends and upon liquidation,
dissolution or winding up of the Company. The Series E Preferred Stock will
rank senior in right of payment to all other classes 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 will provide that
the Company may not, without the consent of the Holders of at least
two-thirds of the then-outstanding Series E 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 E 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 the Series E Preferred Stock will be 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 E Preferred Stock accruing at the rate per
share of $12.625 per annum, payable semi-annually in arrears on January 15
and July 15 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 January 1 and July 1 (each, a
"Record Date"). Dividends will be payable in cash, except that on each
Dividend Payment Date occurring on or prior to January 15, 2002, dividends
may be paid, at the Company's option, by the issuance of additional shares of
Series E
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Preferred Stock (including fractional shares) having an aggregate
Liquidation Preference equal to the amount of such dividends. The first
dividend payment will be payable on July 15, 1997. Dividends payable on the
Series E 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. For a
discussion of certain federal income tax considerations relevant to the
payment of dividends on the Series E Preferred Stock, see "Certain Federal
Income Tax Considerations--Dividends on Series E Preferred Stock."
Dividends on the Series E Preferred Stock will 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 will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate. Accumulated unpaid
dividends will bear interest at the rate of 12.625% per annum. The
Certificate of Designations will provide that the Company will take all
actions required or permitted under Delaware law to permit the payment of
dividends on the Series E Preferred Stock.
No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding Series E 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 E Preferred Stock. Unless full cumulative
dividends on all outstanding shares of Series E 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 E 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 E Preferred Stock will not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described.
The shares of Series D Preferred Stock are Senior Securities. Unless full
cumulative dividends on all outstanding 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 for such payment, the
Company will be prohibited from paying any dividend or making any other
distribution on or in respect of the Series E Preferred Stock. See "Risk
Factors--Limitations on Ability to Pay Dividends; Restrictions on Exchange."
In addition, the Credit Agreement, the New Note Indenture, the Series D
Certificate of Designations and the Series D Exchange Note Indenture contain
restrictions on the ability of the Company to pay dividends on the Series E
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. See "Risk Factors--Limitations on Ability to Pay
Dividends; Restrictions on Exchange."
Voting Rights
Holders of record of the Series E Preferred Stock will have no voting
rights, except as required by law and as provided in the Certificate of
Designations. The Certificate of Designations will provide that upon (a) the
accumulation of accrued and unpaid dividends on the outstanding Series E
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 E
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 "--Change of Control"; (d) the failure of the Company to
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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; or (e) 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 Closing Date, which default (i) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior
to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (ii) 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 under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$25.0 million 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"),
then 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 E 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
E 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 any
Senior Securities, or any obligation or security convertible into or
evidencing 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 E Preferred Stock, in each case, voting as a separate class.
Exchange
The Company may, at its option on any Dividend Payment Date, exchange, in
whole or in part, on a pro rata basis, the then-outstanding shares of Series
E Preferred Stock for Exchange Debentures; provided that immediately after
giving effect to any partial exchange, there shall be outstanding Series E
Preferred Stock with an aggregate liquidation preference of not less than
$50.0 million and not less than $50.0 million in aggregate principal amount
of Exchange Debentures; and, provided further, that (i) on the date of such
exchange there are no accumulated and unpaid dividends on the Series E
Preferred Stock (including the dividend payable on such date) or other
contractual impediments to such exchange; (ii) such exchange would be
permitted under the terms of the Series D Preferred Stock, to the extent then
outstanding, and, immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Exchange Indenture) would
exist under the Exchange Indenture, no default or event of default would
exist under the Credit Agreement, the New Note Indenture or the Series D
Exchange Note Indenture and no default or event of default under any material
instrument governing Indebtedness outstanding at the time would be caused
thereby; (iii) the Exchange Indenture has been qualified under the Trust
Indenture Act, if such qualification is required at the time of exchange; and
(iv) the Company shall have delivered a written opinion to the Exchange
Trustee (as defined herein) to the effect that all conditions to be satisfied
prior to such exchange have been satisfied. The Credit Agreement, the New
Note Indenture, the Series D Certificate of Designations and the Series D
Exchange Note Indenture currently restrict the exchange of the Series E
Preferred Stock and may restrict the Company's ability to exchange the Series
E Preferred Stock in the future.
The Exchange Debentures 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 E 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 E 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 Series E 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
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the Exchange Date the Exchange Debentures have been duly executed and
authenticated and an amount in cash or additional Series E Preferred Stock
(as applicable) equal to all accrued and unpaid dividends, 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 Series E 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
preferred stock, but not as Series E 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
Debentures and all accrued and unpaid dividends, if any, thereon to the
Exchange Date.
Redemption
Mandatory Redemption
On October 31, 2006 (the "Mandatory Redemption Date"), the Company will be
required to redeem (subject to the legal availability of funds therefor) all
outstanding shares of Series E Preferred Stock at a price in cash equal to
the Liquidation Preference thereof, plus accrued and unpaid dividends, if
any, to the date of redemption. The Credit Agreement, the New Note Indenture,
the Series D Certificate of Designations and the Series D Exchange Note
Indenture currently restrict the redemption of the Series E Preferred Stock
and may restrict the Company's ability to redeem the Series E Preferred Stock
in the future. The Company will not be required to make sinking fund payments
with respect to the Series E Preferred Stock. The Certificate of Designations
will provide that the Company will take all actions required or permitted
under Delaware law to permit such redemption.
Optional Redemption
The Series E Preferred Stock may be redeemed, in whole or in part, at the
option of the Company on or after January 15, 2002, at the redemption prices
specified below (expressed as percentages of the Liquidation Preference
thereof), in each case, together with accrued and unpaid dividends, 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 January
15 of each of the years set forth below:
REDEMPTION
YEAR RATE
- -------------------- ------------
2002 ................ 106.313%
2003 ................ 104.734%
2004 ................ 103.156%
2005 ................ 101.578%
2006 and thereafter 100.000%
In addition, prior to January 15, 2000 the Company may, at its option,
redeem up to 50% of the aggregate of (i) the liquidation preference of the
Series E Preferred Stock issued (whether issued or issued in lieu of cash
dividends) less the liquidation preference of Series E Preferred Stock
exchanged for Exchange Debentures and (ii) the principal amount of Exchange
Debentures issued (whether issued in exchange for Series E Preferred Stock or
in lieu of cash interest), with the net proceeds of one or more common equity
offerings received on or after the date of original issuance of the Series E
Preferred Stock at a redemption price of 112.625% of the liquidation
preference or principal amount, as the case may be, plus accumulated and
unpaid dividends in the case of Series E Preferred Stock and accrued and
unpaid interest in the case of Exchange Debentures; provided, that after any
such redemption, if any Series E Preferred Stock or Exchange Debentures
remain outstanding, at least $50 million in liquidation preference or
principle amount, as applicable, of Series E Preferred Stock or Exchange
Debentures, as the case may be, remain outstanding; and provided further,
that any such redemption shall occur within 75 days of the date of closing of
such offering of common equity of the Company.
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The Credit Agreement, the New Note Indenture, the Series D Certificate of
Designations and the Series D Exchange Note Indenture currently restrict the
redemption of the Series E Preferred Stock and may restrict the Company's
ability to redeem the Series E Preferred Stock in the future.
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 the Series E 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 E Preferred Stock held by such
Holder, plus accrued and unpaid dividends, 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, if any, to which Holders of
Series E 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 will not contain any provision requiring
funds to be set aside to protect the Liquidation Preference of the Series E
Preferred Stock, although such Liquidation Preference will be substantially
in excess of the par value of the Series E Preferred Stock.
Change of Control
Upon the occurrence of a Change of Control, each Holder of Series E
Preferred Stock will have the right to require the Company to repurchase all
or any part of such Holder's shares of Series E 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, if any, thereon to the date of purchase (the
"Change of Control Payment").
The Certificate of Designations will provide that, subject to the
provisions of the following paragraph, 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 E 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 E 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 E 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 E Preferred Stock or portions
thereof so tendered and (3) deliver or cause to be delivered to the Transfer
Agent the Series E Preferred Stock so accepted together with an Officers'
Certificate stating the aggregate Liquidation Preference of the shares of
Series E Preferred Stock or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Series E Preferred
Stock so tendered the Change of Control Payment for such Series E 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 Series E Preferred Stock equal in Liquidation Preference
amount to any unpurchased portion of the Series E Preferred Stock
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surrendered, if any. The Certificate of Designations 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 Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Indebtedness to permit the repurchase of
Series E Preferred Stock required by this covenant. If the Company fails to
make such repayment or obtain such consents within such time period, it will
result in a Voting Rights Triggering Event, but the obligation to commence
and consummate a Change of Control Offer will be suspended until such
repayment is made or such consents are obtained. The Certificate of
Designations will also provide that, if such consents are not obtained, the
Company will not repurchase any Series E Preferred Stock until the 91st day
following the retirement of the New Notes. 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 will be 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 E Preferred Stock to require that the Company
repurchase or redeem the Series E Preferred Stock in the event of a takeover,
recapitalization or similar transaction.
The Credit Agreement prohibits the Company from purchasing any Series E
Preferred Stock prior to its maturity, and also provides that certain change
of control events with respect to the Company constitute a default
thereunder. The New Note Indenture, the Series D Certificate of Designations
and the Series D Exchange Note Indenture also contain restrictions on the
ability of the Company to repurchase Series E 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 E Preferred Stock, the Company could seek the consent
of its lenders to the purchase of Series E 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 Series E Preferred Stock. In such case, the
Holders of a majority of the outstanding shares of Series E 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 E Preferred Stock upon a Change of Control 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 E 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 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 (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,"
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there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Series E Preferred Stock to
require the Company to repurchase such Series E 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
Restricted Payments
The Certificate of Designations will provide that the Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any other payment or distribution on
account of the Company's Parity Securities or Junior Securities (including,
without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of
the Company's Parity Securities or Junior Securities in their capacity as
such (other than dividends or distributions payable in Capital Stock (other
than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value any Parity Securities or Junior Securities of the
Company; (iii) make any payment on, or purchase, redeem, defease or otherwise
acquire or retire for value any Junior Securities, except payments of the
Liquidation Preference thereof at final maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Debt) pursuant to the Debt to Cash Flow Ratio test set forth in
the first paragraph of the covenant described below under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the Closing Date (other
than Restricted Payments permitted by clauses (2), (5), (6) or (10) of the
following paragraph) shall not exceed, at the date of determination, the
sum of (1) an amount equal to the Company's Consolidated Cash Flow from
the Closing Date to the end of the Company's most recently ended full
fiscal quarter for which internal financial statements are available,
taken as a single accounting period, less the product of 1.4 times the
Company's Consolidated Interest Expense from the Closing Date to the end
of the Company's most recently ended full fiscal quarter for which
internal financial statements are available, taken as a single accounting
period, plus (2) an amount equal to the net cash proceeds received by the
Company from the issue or sale after the Closing Date of Equity Interests
of the Company (other than (i) sales of Disqualified Stock and (ii) Equity
Interests sold to any of the Company's Subsidiaries) or of debt
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securities or Disqualified Stock (other than the Series D Preferred
Stock) of the Company that have been converted into such Equity Interests
plus (3) to the extent that any Restricted Investment that was made after
the Closing Date is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
If no Voting Rights Triggering Event shall have occurred and be continuing
as a result thereof, the foregoing provisions will not prohibit: (1) the
payment of any dividend within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have complied with the
provisions of the Certificate of Designations; (2) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(2) of the preceding paragraph; (3) cash payments made in
respect of fractional shares of Capital Stock not to exceed $100,000 in the
aggregate in any fiscal year; (4) the payment of dividends on the Series D
Preferred Stock in accordance with the terms thereof as in effect on the
Closing Date; (5) the issuance of Series D Exchange Notes in exchange for the
Series D Preferred Stock; provided that such issuance is permitted by the
covenant described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" (6) the issuance of Exchange Debentures in
exchange for the Series E Preferred Stock; provided that such issuance is
permitted by the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock;" (7) in the event that the
Company elects to issue the Series D Exchange Notes in exchange for the
Series D Preferred Stock, cash payments made in lieu of the issuance of
Series D Exchange Notes having a face amount less than $50 and any cash
payments representing accrued and unpaid dividends in respect thereof, not to
exceed $100,000 in the aggregate in any fiscal year; (8) in the event that
the Company elects to issue Exchange Debentures in exchange for Series E
Preferred Stock, cash payments made in lieu of the issuance of Exchange
Debentures having a face amount less than $1,000 and any cash payments
representing accrued and unpaid dividends in respect thereof, not to exceed
$100,000 in the aggregate in any fiscal year; (9) payments made by the
Company to SCMC for facilities maintenance and other services and
reimbursements pursuant to the Shared Facilities Agreement, as amended from
time to time, to the extent that such payments do not exceed the amount of
payments which would have been due if calculated in accordance with the terms
of the Shared Facility Agreement as in effect on the Closing Date; (10)
payments by the Company pursuant to the Management Termination Agreements in
accordance with the terms thereof as in effect on the Closing Date and (11)
the redemption by the Company of its Series C Preferred Stock in accordance
with the terms thereof as in effect on the Closing Date.
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value (evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Board of Directors) on the date
of the Restricted Payment of the asset(s) or securities proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant
to the Restricted Payment. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Board of Directors an Officers'
Certificate stating that such Restricted Payment is permitted and setting
forth the basis upon which the calculations required by this covenant were
computed, which calculations may be based upon the Company's latest available
financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Certificate of Designations will provide that the Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) and that the Company will
not issue any Disqualified Stock and will not permit any of its Subsidiaries
to issue any shares of Preferred Stock; provided, however, that (i) the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and (ii) (A) the Subsidiaries may guarantee Senior Debt
and (B) the Subsidiaries may issue Preferred Stock (other than
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Disqualified Stock) if, in either case, the Company's Debt to Cash Flow
Ratio at the time of incurrence of such Indebtedness or the issuance of such
Disqualified Stock or the Guarantee of such Senior Debt or the issuance of
such Preferred Stock, as the case may be, after giving pro forma effect to
such incurrence or issuance or Guarantee as of such date and to the use of
proceeds therefrom as if the same had occurred at the beginning of the most
recently ended four full fiscal quarter period of the Company for which
internal financial statements are available, would have been no greater than
7.0 to 1.
The foregoing provisions will not apply to the incurrence of any of the
following Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company and its Subsidiaries of Indebtedness
pursuant to one or more Bank Facilities, so long as the aggregate
principal amount of all Indebtedness outstanding under all Bank Facilities
does not, at the time of incurrence, exceed an amount equal to $225.0
million;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) Indebtedness under the Exchange Debentures;
(iv) the issuance of Disqualified Stock by the Company that by its terms
would not require or permit any payment of dividends or other
distributions that would violate the covenant described above under the
caption "--Restricted Payments";
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Subsidiary; provided that such Indebtedness was incurred by the prior
owner of such assets or such Subsidiary prior to such acquisition by the
Company or one of its Subsidiaries and was not incurred in connection
with, or in contemplation of, such acquisition by the Company or one of
its Subsidiaries; and provided further that, after giving pro forma effect
to such incurrence of Indebtedness as of such date and to the use of
proceeds therefrom as if the same had occurred at the beginning of the
most recently ended four full fiscal quarter period for which internal
financial statements are available, the Company's Debt to Cash Flow Ratio
would have been no greater than 7.0 to 1;
(vi) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Certificate of Designation to be
incurred;
(vii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinate to the
payment in full of all Obligations with respect to the Exchange Debentures
and (ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Subsidiary
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be;
(viii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Certificate of Designations to be
outstanding; and
(ix) the incurrence by the Company and any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $10.0 million.
Merger, Consolidation or Sale of Assets
The Certification of Designation 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
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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
states, any state thereof or the District of Columbia; (ii) the Series E
Preferred Stock shall be converted into or exchanged for and shall become
shares of such successor, transferee or resulting Person, having in respect
of such successor, transferee or resulting Person the same powers,
preferences and relative participating, optional or other special rights and
the qualifications, limitations or restrictions thereon, that the Series E
Preferred Stock had immediately prior to such transaction; (iii) immediately
after such transaction no Voting Rights Triggering Event 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 (A)
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 and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow
Ratio set forth in the first paragraph of the covenant described under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Certificate of Designations 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 obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person and (ii) the Company 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) redemption or repurchase of the Existing MMR Indebtedness,
(3) transactions and agreements specifically contemplated by the Termination
and Assignment Agreement between the Company and SCMC as in effect on the
Closing Date, (4) 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, (5) payments made by the Company to SCMC for facilities
maintenance and other services and reimbursements pursuant to the Shared
Facilities Agreement, (6) payments and other transactions by the Company
pursuant to the Management Termination Agreements and (7) any Permitted
Investment, in each case, shall not be deemed to be Affiliate Transactions.
Payments for Consent
The Certificate of Designations 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 dividend or other distribution, fee or
otherwise, to any Holder of Series E 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 E Preferred Stock unless such
consideration is offered to be paid and is paid to all Holders of the
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Series E 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 will provide that, whether or not required
by the rules and regulations the Commission, so long as any shares of Series
E Preferred Stock are outstanding, the Company will furnish to the Holders of
Series E 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.
Transfer and Exchange
A Holder may transfer or exchange Series E 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 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 Series E Preferred Stock held by a non-consenting
Holder): (i) alter the voting rights with respect to the Series E Preferred
Stock or reduce the number of shares of Series E 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
Series E Preferred Stock or alter the provisions with respect to the
redemption of the Series E Preferred Stock (other than provisions relating to
the covenant described above under the caption "--Change of Control"), (iii)
reduce the rate of or change the time for payment of dividends on any Series
E Preferred Stock, (iv) waive a default in the payment of dividends on the
Series E Preferred Stock, (v) make any Series E Preferred Stock payable in
any form 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 E Preferred Stock to receive the
Liquidation Preference or dividends on the Series E Preferred Stock, (vii)
waive a redemption payment with respect to any Series E Preferred Stock
(other than a payment required by the covenant described above under the
caption "--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 "--Change of Control" including the related
definitions will require the consent of the Holders of at least 75% of the
shares of Series E Preferred Stock then outstanding if such amendment would
adversely affect the rights of Holders of Series E Preferred Stock.
Notwithstanding the foregoing, without the consent of any Holder of Series
E 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 E Preferred
Stock in addition to or in place of certificated Series E Preferred Stock or
to make any change that would provide any additional rights or benefits to
the Holders of Series E Preferred Stock or that does not adversely affect the
legal rights under the Certificate of Designations of any such Holder.
Reissuance
Series E Preferred Stock redeemed or otherwise acquired by the Company
will assume the status of authorized but unissued preferred stock and may
thereafter be reissued in the same manner as the other authorized but
unissued preferred stock, but not as Series E Preferred Stock.
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DESCRIPTION OF THE EXCHANGE DEBENTURES
The Exchange Debentures will, if and when issued, be issued pursuant to an
indenture (the "Exchange Indenture") between the Company and the trustee
thereunder (the "Exchange Trustee"). The terms of the Exchange Debentures
include those stated in the Exchange Indenture and those made part of the
Exchange Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Exchange Debentures will be subject
to all such terms, and Holders of Exchange Debentures are referred to the
Exchange Indenture and the Trust Indenture Act for a statement thereof. The
following summary of certain provisions of the Exchange Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Exchange Indenture, including the definitions therein of certain terms used
below. The definitions of certain terms used in the Exchange Indenture and in
the following summary are set forth below under "--Certain Definitions."
The Exchange Debentures will rank senior in right of payment to the Series
D Exchange Notes. The Exchange Debentures will rank pari passu in right of
payment with the New Notes. The Exchange Debentures will be subordinated in
right of payment to all Senior Debt, including borrowings under the New
Credit Agreement.
Certain operations of the Company are conducted through its Subsidiaries
and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the
Exchange Debentures.
Principal, Maturity and Interest
The Exchange Debentures will be limited in aggregate principal amount to
$415 million and will mature on October 31, 2006. Interest on the Exchange
Debentures will accrue at the rate of 12.625% per annum and will be payable
semi-annually in arrears on each January 15 and July 15 (each, an "Interest
Payment Date") to Holders of record on the immediately preceding January 1
and July 1 (each, an "Exchange Debenture Record Date"). Interest will be
payable in cash, except that on each Interest Payment Date occurring prior to
January 15, 2002, interest may be paid, at the Company's option, by the
issuance of additional Exchange Debentures having an aggregate principal
amount equal to the amount of such interest. Interest on the Exchange
Debentures will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The Exchange Debentures will be issued in all appropriate
denominations.
Subordination
The payment of principal of, premium on, if any, and interest on the
Exchange Debentures will be subordinated in right of payment, as set forth in
the Exchange Indenture, to the prior payment in full of all Senior Debt,
whether outstanding on the date of the Exchange 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 the
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 Debentures; 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 Debentures 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 Debentures (except as described above) if (i) a default in the
payment of the principal of, premium, if any, or interest
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on Designated Senior Debt occurs and is continuing 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 Debentures may and shall be resumed (a)
in the case of a payment default, upon the date on which such default is
cured or waived and (b) in the case of a nonpayment default, the earlier of
the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been accelerated. No
new period of payment blockage may be commenced unless and until (1) 360 days
have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (2) all scheduled payments of principal, premium, if any,
interest on the Exchange Debentures that have come due have been paid in
full. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Exchange Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice.
The Exchange Indenture will further require that the Company promptly
notify the holders of Senior Debt if payment of the Exchange Debentures 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
September 30, 1996, after giving pro forma effect to the Transactions, the
Company would have had approximately $138.0 million of Senior Debt
outstanding. The Exchange Indenture will limit, subject to certain financial
tests, the amount of additional Indebtedness, including Senior Debt, that the
Company and its Subsidiaries may incur. See "--Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock."
"Designated Senior Debt" means (i) so long as any Senior Bank Debt is
outstanding, the Senior Bank Debt and (ii) thereafter, any other Senior Debt
permitted under the Exchange 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 any 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 Indenture to
be incurred.
"Senior Debt" means (a) the Senior Bank Debt, (b) all additional
Indebtedness that is permitted under the Exchange Indenture that is not by
its terms pari passu with or subordinated to the Exchange Debentures, (c) all
Obligations of the Company with respect to the foregoing clauses (a) and (b),
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 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), (iii) the Series D
Exchange Notes or (iv) any Indebtedness incurred in violation of the Exchange
Indenture.
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Optional Redemption
The Exchange Debentures will be subject to redemption after January 15,
2002, at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest, if any, thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on January 15 of the years indicated
below:
REDEMPTION
YEAR RATE
- -------------------- ------------
2002 ................ 106.313%
2003 ................ 104.734%
2004 ................ 103.156%
2005 ................ 101.578%
2006 and thereafter 100.000%
In addition, prior to January 15, 2000 the Company may, at its option,
redeem up to 50% of the aggregate of (i) the liquidation preference of the
Series E Preferred Stock issued (whether initially issued or issued in lieu
of cash dividends) less the liquidation preference of Series E Preferred
Stock exchanged for Exchange Debentures and (ii) the principal amount of
Exchange Debentures issued (whether issued in exchange for Series E Preferred
Stock or in lieu of cash interest), with the net proceeds of one or more
common equity offerings received on or after the date of original issuance of
the Series E Preferred Stock at a redemption price of 112.625% of the
liquidation preference or principal amount, as the case may be, plus
accumulated and unpaid dividends in the case of Series E Preferred Stock and
accrued and unpaid interest in the case of Exchange Debentures; provided,
that after any such redemption, if any Series E Preferred Stock or Exchange
Debentures remain outstanding, at least $50 million in liquidation preference
or principle amount, as applicable, of Series E Preferred Stock or Exchange
Debentures, as the case may be, remain outstanding; and provided further,
that any such redemption shall occur within 75 days of the date of closing of
such offering of common equity of the Company.
The Credit Agreement, the New Note Indenture, the Series D Certificate of
Designations and the Series D Exchange Note Indenture currently restrict the
redemption of the Exchange Debentures and may restrict the Company's ability
to redeem the Exchange Debentures in the future.
Selection and Notice
If less than all of the Exchange Debentures are to be redeemed at any
time, selection of Exchange Debentures for redemption will be made by the
Exchange Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Exchange Debentures are
listed, or, if the Exchange Debentures are not so listed, on a pro rata
basis, by lot or by such method as the Exchange Trustee shall deem fair and
appropriate. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder
of Exchange Debentures to be redeemed at its registered address. If any
Exchange Debenture is to be redeemed in part only, the notice of redemption
that relates to such Exchange Debenture shall state the portion of the
principal amount thereof to be redeemed. A new Exchange Debenture in
principal amount equal to the unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original Exchange
Debenture. On and after the redemption date, interest ceases to accrue on
Exchange Debentures or portions of them called for redemption.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Exchange
Debentures will have the right to require the Company to repurchase all or
any part of such Holder's Exchange Debentures pursuant to the offer described
below (the "Change of Control Offer") at an offer price in cash equal to
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101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within ten 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 Exchange
Debentures pursuant to the procedures required by the Exchange 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 Debentures 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 Exchange Debentures 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 Exchange Debentures or portions thereof so tendered and (3) deliver or
cause to be delivered to the Exchange Trustee the Exchange Debentures so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Exchange Debentures or portions thereof being purchased
by the Company. The Paying Agent will promptly mail to each Holder of
Exchange Debentures so tendered the Change of Control Payment for such
Exchange Debentures, and the Exchange Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Exchange
Debenture equal in principal amount to any unpurchased portion of the
Exchange Debentures surrendered, if any. The Exchange 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 Debentures 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 will be applicable
whether or not any other provisions of the Exchange Indenture are applicable.
Except as described above with respect to a Change of Control, the Exchange
Indenture does not contain provisions that permit the Holders of the Exchange
Debentures to require that the Company repurchase or redeem the Exchange
Debentures in the event of a takeover, recapitalization or similar
transaction.
The Credit Agreement prohibits the Company from purchasing any Exchange
Debenture prior to its maturity, and also provides that certain change of
control events with respect to the Company will constitute a default
thereunder. The New Note Indenture, the Series D Certificate of Designations
and the Series D Exchange Note Indenture also contain restrictions on the
ability of the Company to repurchase Series E 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 Debentures, the Company could seek the consent of
its lenders to the purchase of Exchange Debentures 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 Debentures. In such case, the Company's
failure to purchase tendered Exchange Debentures would constitute an Event of
Default under the Exchange Indenture which would, in turn, constitute a
default under the Credit Agreement. In such circumstances, the subordination
provisions in the Exchange Indenture would likely restrict payments to the
Holders of Exchange Debentures. See "Risk Factors--Ability to Finance Change
of Control Repurchase" in the Prospectus Supplement and "Risk Factors--Change
of Control" in the accompanying Prospectus.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Exchange Indenture applicable to a Change of Control Offer made
by the Company and purchases all Exchange Debentures 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
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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 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 (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
Debentures to require the Company to repurchase such Exchange Debentures 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 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) or trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding 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).
Asset Sales
The Exchange Indenture will provide that the Company will not, and will
not permit any of its Subsidiaries to, engage in any Asset Sale unless (i)
the Company (or the Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value
(evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Exchange Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least
75% of the consideration therefor received by the Company or such Subsidiary
is in the form of cash; provided that the amount of (x) any liabilities (as
shown on the Company's or such Subsidiary's most recent balance sheet), of
the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Exchange Debentures
or any guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company
or such Subsidiary from further liability and (y) any notes or other
obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary
into cash (to the extent of the cash received), shall be deemed to be cash
for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently
reduce Senior Debt (and to correspondingly reduce commitments with respect
thereto, in the case of Senior Debt that is revolving debt), or (b) to the
acquisition of a controlling interest in another business, the making of a
capital expenditure or the acquisition of other long-term assets, in each
case, in the Broadcast Business or businesses reasonably
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related thereto. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce Senior Debt or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Exchange Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all Holders of
Exchange Debentures and the holders of Pari Passu Debt, to the extent
required by the terms thereof (an "Asset Sale Offer"), to purchase the
maximum principal amount of Exchange Debentures and any such Pari Passu Debt
that may be purchased out of the Excess Proceeds, at an offer price in cash
in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase, in accordance with the
procedures set forth in the Exchange Indenture or the agreements governing
Pari Passu Debt, as applicable; provided, however, that the Company may only
purchase Pari Passu Debt in an Asset Sale Offer that was issued pursuant to
an indenture having a provision substantially similar to the Asset Sale Offer
provision contained in the Exchange Indenture. To the extent that the
aggregate amount of Exchange Debentures and Pari Passu Debt tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Company may use
any remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of Exchange Debentures and Pari Passu Debt
surrendered exceeds the amount of Excess Proceeds, the Exchange Trustee shall
select the Exchange Debentures and Pari Passu Debt to be purchased on a pro
rata basis, based upon the principal amount thereof surrendered in such Asset
Sale Offer. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
Notwithstanding the immediately preceding paragraph, the Company and its
Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraph if (i) the Company or the applicable Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or other property sold, issued
or otherwise dispose of (as evidenced by a resolution of the Company's Board
of Directors set forth in an Officers' Certificate delivered to the Exchange
Trustee) and (ii) at least 75% of the consideration for such Asset Sale
constitutes assets or other property of a kind usable by the Company and its
Subsidiaries in the business of the Company and its Subsidiaries as conducted
by the Company and its Subsidiaries on the date of the Exchange Indenture;
provided that any consideration not constituting assets or property of a kind
usable by the Company and its Subsidiaries in the business conducted by them
on the date of such Asset Sale received by the Company or any of its
Subsidiaries in connection with any Asset Sale permitted to be consummated
under this paragraph shall constitute Net Proceeds subject to the provisions
of the two succeeding paragraphs.
Certain Covenants
Restricted Payments
The Exchange Indenture will provide that the Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's Equity Interests in their
capacity as such (other than dividends or distributions payable in Capital
Stock (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company
or any direct or indirect parent of the Company; (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Exchange Debentures,
except at final maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter
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period, have been permitted to incur at least $1.00 of additional
Indebtedness (other than Permitted Debt) pursuant to the Debt to Cash Flow
Ratio test set forth in the first paragraph of the covenant described
below under caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the Closing Date (other
than Restricted Payments permitted by clauses (2), (5), (7) or (12) of the
following paragraph) shall not exceed, at the date of determination, the
sum of (1) an amount equal to the Company's Consolidated Cash Flow from
the Closing Date to the end of the Company's most recently ended full
fiscal quarter for which internal financial statements are available,
taken as a single accounting period, less the product of 1.4 times the
Company's Consolidated Interest Expense from the Closing Date to the end
of the Company's most recently ended full fiscal quarter, for which
internal financial statements are available, taken as a single accounting
period, plus (2) an amount equal to the net cash proceeds received by the
Company from the issue or sale after the Closing Date of Equity Interests
(other than (i) sales of Disqualified Stock and (ii) Equity Interests sold
to any of the Company's Subsidiaries) plus (3) to the extent that any
Restricted Investment that was made after the Closing Date is sold for
cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less
the cost of disposition, if any) and (B) the initial amount of such
Restricted Investment.
If no Default or Event of Default shall have occurred and be continuing
immediately as a result thereof, the foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Exchange Indenture; (2) the redemption, repurchase,
retirement or other acquisition of any Equity Interests of the Company in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Equity Interests of the
Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(2) of the
preceding paragraph; (3) cash payments made in respect of fractional shares
of Capital Shares not to exceed $100,000 in the aggregate in any fiscal year;
(4) the payment of dividends on the Series D Preferred Stock in accordance
with the terms thereof as in effect on the Closing Date; (5) the issuance of
the Series D Exchange Notes in exchange for the Series D Preferred Stock;
provided that such issuance is permitted by the covenant described below
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock;" (6) in the event that the Company elects to issue the Series D
Exchange Notes in exchange for the Series D Preferred Stock, cash payments
made in lieu of the issuance of Series D Exchange Notes having a face amount
less than $50 and any cash payments representing accrued and unpaid dividends
in respect thereof, not to exceed $100,000 in the aggregate in any fiscal
year; (7) the payment of dividends on the Series E Preferred Stock in
accordance with the terms thereof as in effect on the Closing Date; (8) the
issuance of additional Exchange Debentures in exchange for the Series E
Preferred Stock; provided that such issuance is permitted by the covenant
described below under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock;" (9) in the event that the Company elects to issue the
Exchange Debentures in exchange for the Series E Preferred Stock, cash
payments made in lieu of the issuance of Exchange Debentures having a face
amount less than $1,000 and any cash payments representing accrued and unpaid
dividends in respect thereof, not to exceed $100,000 in the aggregate in any
fiscal year; (10) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than to
a Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) of the preceding paragraph;
(11) payments made by the Company to SCMC for facilities maintenance and
other services and reimbursements pursuant to the Shared Facilities Agreement
in accordance with the terms thereof as in effect on the date of the Exchange
Indenture; (12) payments by the Company pursuant to the Management
Termination Agreements in accordance with the terms thereof as in effect on
the date of the Exchange Indenture; and (13) the redemption by the Company of
its Series C Preferred Stock in accordance with the terms thereof as in
effect on the Closing Date.
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The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value (evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Exchange Trustee) on the date of
the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Exchange Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this covenant were computed, which
calculations may be based upon the Company's latest available financial
statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Exchange Indenture will provide that the Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue
any Disqualified Stock and will not permit any of its Subsidiaries to issue
any shares of Preferred Stock; provided, however, that (i) the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock and (ii) (A) the Subsidiaries may Guarantee Senior Debt and (B) the
Subsidiaries may issue Preferred Stock (other than Disqualified Stock) if, in
either case, the Company's Debt to Cash Flow Ratio at the time of incurrence
of such Indebtedness or the issuance of such Disqualified Stock or the
Guarantee of Such Senior Debt or the issuance of such Preferred Stock, as the
case may be, after giving pro forma effect to such incurrence or issuance or
Guarantee as of such date and to the use of proceeds therefrom as if the same
had occurred at the beginning of the most recently ended four full fiscal
quarter period of the Company for which internal financial statements are
available, would have been no greater than 7.0 to 1.
The foregoing provisions will not apply to the incurrence of any of the
following Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company and its Subsidiaries of Indebtedness
pursuant to one or more Bank Facilities, so long as the aggregate
principal amount of all Indebtedness outstanding under all Bank Facilities
does not, at the time of incurrence, exceed an amount equal to $225.0
million;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) Indebtedness under the Exchange Debentures;
(iv) the issuance of Disqualified Stock by the Company that by its terms
would not require or permit any payment of dividends or other
distributions that would violate the covenant described above under the
caption "--Restricted Payments";
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Subsidiary; provided that such Indebtedness was incurred by the prior
owner of such assets or such Subsidiary prior to such acquisition by the
Company or one of its Subsidiaries and was not incurred in connection
with, or in contemplation of, such acquisition by the Company or one of
its Subsidiaries and provided further that, after giving pro forma effect
to such incurrence of Indebtedness as of such date and to the use of
proceeds therefrom as if the same had occurred at the beginning of the
most recently ended four full fiscal quarter period for which internal
financial statements are available, the Company's Debt to Cash Flow Ratio
would have been no greater than 7.0 to 1;
(vi) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Exchange Indenture to be incurred;
(vii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinate to the
payment in full of all Obligations with respect to the Exchange Debentures
and (ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held
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by a Person other than the Company or a Subsidiary and (B) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Subsidiary, as the
case may be;
(viii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Exchange Indenture to be outstanding; and
(ix) the incurrence by the Company and any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $10.0 million.
Liens
The Exchange Indenture will provide that the Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien securing Indebtedness (other than Senior
Debt) on any asset now owned or hereafter acquired, or on any income or
profits therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Exchange Indenture will provide that the Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Subsidiary to (i)(x) pay dividends or make
any other distributions to the Company or any of its Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (y) pay any indebtedness owed to the Company
or any of its Subsidiaries, (ii) make loans or advances to the Company or any
of its Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the Closing Date, (b) the Credit Agreement as in effect as of the
Closing Date, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof, and
any other agreement governing or relating to Senior Debt, provided that all
such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings and other agreements are
no more restrictive with respect to such dividend and other payment
restrictions than those contained in the Credit Agreement as in effect on the
Closing Date, (c) the New Note Indenture, the New Notes and the subsidiary
guarantees thereof, (d) the Exchange Indenture and the Exchange Debentures,
(e) applicable law, (f) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired, provided that, in the case
of Indebtedness, such Indebtedness was permitted by the terms of the Exchange
Indenture to be incurred, (g) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, or (h) Permitted Refinancing Debt, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Debt are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets
The Exchange 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
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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
Debentures and the Exchange Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the Exchange 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 (A)
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 and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow
Ratio test set forth in the first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
Transactions with Affiliates
The Exchange 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 obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Exchange 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) redemption or repurchase of the Existing MMR
Indebtedness, (3) transactions and agreements specifically contemplated by
the Termination and Assignment Agreement between the Company and SCMC as in
effect on the Closing Date, (4) 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, (5) payments made by the Company to SCMC for
facilities maintenance and other services and reimbursements pursuant to the
Shared Facilities Agreement, (6) payments and other transactions by the
Company pursuant to the Management Termination Agreements and (7) any
Restricted Payments and Permitted Investments that are permitted by the
provisions of the Exchange Indenture described above under the caption
"--Certain Covenants--Restricted Payments," in each case, shall not be deemed
to be Affiliate Transactions.
No Senior Subordinated Debt
The Exchange Indenture will provide that the Company will not incur,
create, issue, assume, Guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Exchange
Debentures.
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Sale and Leaseback Transactions
The Exchange Indenture will provide that the Company will not, and will
not permit any of its Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company could have (a) incurred Indebtedness (other
than Permitted Debt) in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Debt to Cash Flow Ratio
test set forth in the first paragraph of the covenant described above under
the caption "--Certain Covenants--Incurrence of Additional Indebtedness and
Issuance of Preferred Stock" and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described above under the caption
"--Certain Covenants--Liens," (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the Fair Market Value (as
determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Exchange Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer
of assets in such sale and leaseback transaction is permitted by, and the
Company applies the proceeds of such transaction in compliance with, the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales."
Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries
The Exchange Indenture will provide that the Company (i) will not, and
will not permit any Wholly Owned Subsidiary of the Company to, transfer,
convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly
Owned Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of
such Wholly Owned Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "--Repurchase
at the Option of Holders--Asset Sales," and (ii) will not permit any Wholly
Owned Subsidiary of the Company to issue any of its Equity Interests (other
than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Wholly Owned
Subsidiary of the Company; provided that the Subsidiaries of the Company may
issue Preferred Stock (other than Disqualified Stock) in accordance with the
covenant described under "--Incurrence of Indebtedness and Issuance of
Preferred Stock."
Business Activities
The Company will not, and will not permit any Subsidiary to, engage in any
business other than (i) the Broadcast Business and such business activities
as are incidental or related thereto and (ii) such other businesses as the
Company or its Subsidiaries are engaged in on the Closing Date.
Payments for Consent
The Exchange 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
any Exchange Debentures for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Exchange Indenture or the
Exchange Debentures unless such consideration is offered to be paid or is
paid to all Holders of the Exchange Debentures 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 Exchange Indenture will provide that, whether or not required by the
rules and regulations of the Commission, so long as any Exchange Debentures
are outstanding, the Company will furnish to the Exchange Trustee and to the
Holders of Exchange Debentures (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 a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information
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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.
Events of Default and Remedies
The Exchange 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 the Exchange Debentures (whether or not prohibited by the
subordination provisions of the Exchange Indenture); (ii) default in payment
when due of the principal of or premium, if any, on the Exchange Debentures
(whether or not prohibited by the subordination provisions of the Exchange
Indenture); (iii) failure by the Company to comply with the provisions
described under the captions "--Repurchase at the Option of Holders--Change
of Control," "--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments, "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" or "--Certain
Covenants--Merger, Consolidation or Sale of Assets;" (iv) failure by the
Company for 60 days after notice to comply with any of its other agreements
in the Exchange Indenture or the Exchange Debentures; (v) 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 Indenture,
which default (a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a "Payment
Default") or (b) 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 under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $25.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating
in excess of $10.0 million, which judgments are not paid, discharged or
stayed for a period of 60 days; and (vii) 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 Exchange Trustee or
the Holders of at least 25% in principal amount of the then outstanding
Exchange Debentures may declare all the Exchange Debentures 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 Debentures will become due and payable without
further action or notice. Holders of the Exchange Debentures may not enforce
the Exchange Indenture or the Exchange Debentures except as provided in the
Exchange Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Exchange Debentures may direct the
Exchange Trustee in its exercise of any trust or power. The Exchange Trustee
may withhold from Holders of the Exchange Debentures 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 Debentures
pursuant to the optional redemption provisions of the Exchange 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 Debentures.
If an Event of Default occurs prior to January 15, 2002 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 Debentures prior to January 15,
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2002, then the premium specified in the Exchange Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Exchange Debentures.
The Holders of a majority in aggregate principal amount of the Exchange
Debentures then outstanding by notice to the Exchange Trustee may on behalf
of the Holders of all of the Exchange Debentures waive any existing Default
or Event of Default and its consequences under the Exchange Indenture except
a continuing Default or Event of Default in the payment of interest on, or
the principal of, the Exchange Debentures.
The Company is required to deliver to the Exchange Trustee annually a
statement regarding compliance with the Exchange Indenture, and the Company
is required upon becoming aware of any Default or Event of Default, to
deliver to the Exchange Trustee a statement specifying such Default or Event
of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Exchange Debentures or the Exchange Indenture, as applicable, or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Exchange Debentures by accepting an Exchange
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Exchange Debentures. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against
public policy.
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 Debentures
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Exchange Debentures to receive payments in respect of the principal of,
premium, if any, interest on such Exchange Debentures when such payments are
due from the trust referred to below, (ii) the Company's obligations with
respect to the Exchange Debentures concerning issuing temporary Exchange
Debentures, registration of Exchange Debentures, mutilated, destroyed, lost
or stolen Exchange Debentures 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 Exchange 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 Debentures. 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
Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Exchange Trustee, in trust, for
the benefit of the Holders of the Exchange Debentures, 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,
interest on the outstanding Exchange Debentures on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must
specify whether the Exchange Debentures 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 Exchange Trustee an opinion of counsel in
the United States reasonably acceptable to the Exchange 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 Debentures will
not recognize income, gain or loss for
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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 Exchange Trustee an opinion of counsel in the United States
reasonably acceptable to the Exchange Trustee confirming that the Holders of
the outstanding Exchange Debentures 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 Exchange 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 must have
delivered to the Exchange Trustee an opinion of counsel to the effect that,
as of the date of such opinion, (A) the trust funds will not be subject to
rights of holders of Indebtedness other than the Exchange Debentures 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
Debentures 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 Exchange Trustee an Officers' Certificate stating
that the deposit was not made by the Company with the intent of preferring
the Holders of Exchange Debentures 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 Exchange
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 Debentures in accordance with
the Exchange Indenture. The Registrar and the Exchange 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 Indenture. The Company is not
required to transfer or exchange any Exchange Debenture selected for
redemption. Also, the Company is not required to transfer or exchange any
Exchange Debenture for a period of 15 days before a selection of Exchange
Debentures to be redeemed.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Exchange
Indenture or the Exchange Debentures may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the
Exchange Debentures then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Exchange Debentures), and any existing default or compliance with any
provision of the Exchange Indenture or the Exchange Debentures may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Exchange Debentures (including consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Exchange
Debentures).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Exchange Debentures held by a non-consenting
Holder): (i) reduce the principal amount of Exchange Debentures whose Holders
must consent to an amendment, supplement or waiver, (ii) reduce the principal
of or change the fixed maturity of any Exchange Debenture or alter the
provisions with respect
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to the redemption of the Exchange Debentures (other than provisions relating
to the covenants described above under the caption "--Repurchase at the
Option of Holders"), (iii) reduce the rate of or change the time for payment
of interest on any Exchange Debenture, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Exchange Debentures (except a rescission of acceleration of the Exchange
Debentures by the Holders of at least a majority in aggregate principal
amount of the Exchange Debentures and a waiver of the payment default that
resulted from such acceleration), (v) make any Exchange Debenture payable in
money other than that stated in the Exchange Debentures, (vi) make any change
in the provisions of the Exchange Indenture relating to waivers of past
Defaults or the rights of Holders of Exchange Debentures to receive payments
of principal of or premium, if any, or interest on the Exchange Debentures,
(vii) waive a redemption payment with respect to any Exchange Debenture
(other than a payment required by one of the covenants described above under
the caption "--Repurchase at the Option of Holders") or (viii) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to (a) the provisions of Article [10] of the Exchange Indenture
(which relate to subordination) and (b) the covenants described under the
caption "--Repurchase at Option of Holders" including, in each case, the
related definitions will require the consent of the Holders of at least 75%
in aggregate principal amount of the Exchange Debentures then outstanding if
such amendment would adversely affect the rights of Holders of Exchange
Debentures.
Notwithstanding the foregoing, without the consent of any Holder of
Exchange Debentures, the Company and the Exchange Trustee may amend or
supplement the Exchange Indenture or the Exchange Debentures to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Exchange
Debentures in addition to or in place of certificated Exchange Debentures, to
provide for the assumption of the Company's obligations to Holders of
Exchange Debentures 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 Debentures or that does not adversely affect the legal rights under
the Exchange Indenture of any such Holder, or to comply with requirements of
the Commission in order to maintain the qualification of the Exchange
Indenture under the Trust Indenture Act.
Concerning the Exchange Trustee
The Exchange Indenture contains certain limitations on the rights of the
Exchange 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 Exchange
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 Debentures will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the
Exchange Trustee, subject to certain exceptions. The Exchange Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Exchange 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 Exchange Trustee will be under no obligation
to exercise any of its rights or powers under the Exchange Indenture at the
request of any Holder of Exchange Debentures, unless such Holder shall have
offered to the Exchange Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives a copy of this Prospectus Supplement may obtain a copy
of the Company's Amended and Restated Certificate of Incorporation, the
Certificate of Designations and the Exchange Indenture without charge by
writing to SFX Broadcasting, Inc., 150 East 58th Street, 19th Floor, New
York, New York 10155, Attention: Timothy Klahs, Director of Investor
Relations.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Certificate of
Designations and Exchange Indenture. Reference is made to the Certificate of
Designations and the Exchange Indenture for a full disclosure of all such
terms, as well as any other capitalized terms used herein for which no
definition is provided.
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"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or
in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including without limitation, by way of a sale and leaseback or
pursuant to an LMA or similar arrangement); provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole will be governed by the
provisions described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants -- Merger,
Consolidation or Sale of Assets" and not by the provision of the Asset Sale
covenant, and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a
series of related transaction (a) that have a Fair Market Value in excess of
$5.0 million or (b) for aggregate net proceeds in excess of $5.0 million.
Notwithstanding the foregoing: (i) the Pending Dispositions, the Chancellor
Exchange and the CBS Exchange, in each case as described in this Prospectus
Supplement in all material respects, (ii) a transfer of assets by the Company
or to another Wholly Owned Subsidiary, (iii) an issuance of Equity Interests
by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, (iv) a Restricted Payment that is permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments"
and (v) sales of obsolete equipment in the ordinary course of business, will
not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including
any period for which such lease has been extended or may, at the option of
the lessor, be extended).
"Bank Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the 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 such 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.
Indebtedness under Bank Facilities outstanding on the date on which the
Series E Preferred Stock is first issued under the Certificate of
Designations shall be deemed to have been incurred on such date in reliance
on the exception provided by clause (i) under the covenant described under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
"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.
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"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 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 the date on which Series E Preferred Stock is first
issued.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale by such Person or any of its Subsidiaries during such period
(to the extent such losses were deducted in computing such Consolidated Net
Income), plus (ii) provision for taxes based on income or profits of such
Person and its Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net Income,
plus (iii) Consolidated Interest Expense of such Person for such period to
the extent any such Consolidated Interest Expense was deducted in computing
such Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents
an accrual of or reserve for cash charges in any future period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, less (v) all non-cash items
increasing Consolidated Net Income for such period (excluding any such
non-cash income to the extent it represents an accrual of cash income in any
future period), in each case, on a consolidated basis and determined in
accordance with GAAP.
"Consolidated Indebtedness" of any Person as of any date of determination
means the sum (without duplication) of (i) the total amount of Indebtedness
and Attributable Debt of such Person and its Subsidiaries, plus (ii) the
total amount of other Indebtedness shown on the balance sheet of the primary
obligor on such Indebtedness, to the extent that such Indebtedness has been
Guaranteed by such Person or one of its Subsidiaries, plus (iii) the
aggregate liquidation value or redemption amount (if larger) of all
Disqualified Stock of such Person and all preferred stock of Subsidiaries of
such Person, in each case, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts
and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and
its Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee
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or Lien is called upon) and (iv) the product of (a) all cash dividend
payments (and non-cash dividend payments in the case of a Person that is a
Subsidiary) on any series of preferred stock of such Person, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, on a consolidated basis
and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, determined on a consolidated basis in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall
be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or to a Wholly Owned Subsidiary thereof,
(ii) the Net Income of any Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"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 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.
"Credit Agreement" means that certain credit agreement by and among the
Company, the Company's Subsidiaries, as guarantors, the Bank of New York, as
agent and the lenders party thereto, providing for up to $225 million of
revolving credit 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.
"Debt to Cash Flow Ratio" means, as of any date of determination, the
ratio of (a) the Consolidated Indebtedness as of such date to (b) the
Consolidated Cash Flow of the Company and its Subsidiaries on a consolidated
basis for the four most recent full fiscal quarters ending immediately prior
to such date for which internal financial statements are available. For
purposes of calculating Consolidated Cash Flow for the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the date on which such
Ratio is being calculated (the "Calculation Date") shall be deemed to have
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
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"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
mandatory redemption date of the Series E Preferred Stock.
"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 Debentures" means the Company's 12 5/8% Senior Subordinated
Exchange Debentures due 200 issuable in exchange for the Company's Series E
Preferred Stock.
"Existing Indebtedness" means all Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the Closing Date, until such amounts are repaid.
"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.
"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, 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 form 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
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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.
"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, Incorporated, 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.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but
not loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions
and any tax sharing arrangements), amounts required to be applied to the
repayment of Indebtedness (other than Senior Debt) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
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"New Note Indenture" means the indenture governing the Company's 10 3/4%
Senior Subordinated Notes due 2006.
"New Notes" means the Company's 10-3/4% Senior Subordinated Notes due
2006.
"Obligations" means any principal, interest, penalties, fees (including,
but not limited to, reasonable fees and expenses of counsel),
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Pari Passu Debt" means (i) the New Notes and (ii) all other Indebtedness
that ranks pari passu in right of payment with the Exchange Debentures.
"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 Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of
Holders--Asset Sales;" (e) 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;
(f) any Investment received involuntarily; (g) 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 (g) that are at the time outstanding, not to exceed $20 million and
(h) 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 (h) that are at the time
outstanding, not to exceed $15 million.
"Permitted Liens" means (i) Liens securing Senior Debt of the Company or
securing Indebtedness of any Subsidiary that, in either case, was permitted
by the terms of the Exchange Indenture to be incurred; (ii) Liens in favor of
the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition and do not extend to
any assets other than such assets so acquired; (v) Liens existing on the
Closing Date; (vi) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor; and (vii) Liens
incurred in the ordinary course of business of the Company or any Subsidiary
of the Company with respect to obligations that do not exceed $10.0 million
at any one time outstanding and that (a) are not incurred in connection with
the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the
aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary.
"Permitted Refinancing Debt" means any Indebtedness of the Company or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection
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therewith); (ii) such Permitted Refinancing Debt has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Exchange Debentures, such Permitted Refinancing Debt has a final maturity
date later than the final maturity date of, and is subordinated in right of
payment to, the Exchange Debentures on terms at least as favorable to the
Holders of Exchange Debenture as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Permitted Refinancing Debt is incurred
either by the Company or by the Subsidiary who was the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Preferred Stock," of any Person, means Capital Stock of such Person of
any class or series (however designated) that ranks prior, as to payment of
dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares
of Capital Stock of any other class or series of such Person.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"SCMC" means Sillerman Communications Management Company, a Delaware
corporation.
"Series D Exchange Notes" means the Company's 6-1/2% Subordinated
Convertible Exchange Notes due 2007 issuable in exchange for the Company's
Series D Preferred Stock.
"Series D Exchange Note Indenture" means the indenture governing the
Company's 6-1/2% Subordinated Convertible Exchange Notes due 2007 issuable in
exchange for the Company's Series E Preferred Stock.
"Series D Preferred Stock" means the Company's 6-1/2% Series D Cumulative
Convertible Exchangeable Preferred Stock due May 31, 2007.
"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.
"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).
"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.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (ii)
the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Baker & McKenzie, counsel to the Company, the following
discussion summarizes the material federal income tax considerations relevant
to the purchase, ownership and disposition of the Series E Preferred Stock
and the Exchange Debentures by the initial holders thereof, but does not
purport to be a complete analysis of all the potential tax effects thereof.
This summary deals only with initial investors who hold the Series E
Preferred Stock and Exchange Debentures 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, tax exempt
entities and persons holding Series E Preferred Stock or the Exchange
Debentures as part of a "straddle," "hedge" or "conversion transaction")
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"), which may change,
possibly with retroactive effect. Certain proposed tax legislation, if
enacted in substantially the same form as proposed, may affect some of the
tax consequences discussed herein. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY
DIFFER, EACH PROSPECTIVE PURCHASER OF SERIES E PREFERRED STOCK 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.
Although the matter is not entirely free from doubt, for federal income
tax purposes the Series E Preferred Stock should be treated as equity and the
Exchange Debentures should be treated as indebtedness. The Company intends to
treat the Series E Preferred Stock and the Exchange Debentures consistent
with the foregoing classification, and the balance of the discussion is based
on the assumption that such treatment will be respected.
DIVIDENDS ON SERIES E PREFERRED STOCK
Dividends paid on the Series E Preferred Stock, whether paid in cash or in
additional shares of Series E Preferred Stock, will be taxable as ordinary
income to the extent that the amount of cash or the fair market value of the
additional shares of Series E Preferred Stock on the date of distribution
does not exceed 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 E 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 E 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
E 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.
A shareholder's initial tax basis in any additional shares of Series E
Preferred Stock distributed by the Company ("Dividend Shares") will equal the
fair market value of such Dividend Shares on the date of their distribution.
A shareholder's holding period for such Dividend Shares will commence with
their distribution, and will not include his holding period for the shares of
Series E Preferred Stock with respect to which the Dividend Shares were
distributed.
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 shares of Series E Preferred Stock which are 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
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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 E 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 E
Preferred Stock and the Series E 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).
The Clinton Administration has proposed legislation that would reduce the
dividends-received deduction from 70% to 50% and increase the holding period
required to take such a deduction. Subsequently, in August 1996, President
Clinton announced an intention to seek legislation that would eliminate the
dividends-received deduction for certain types of preferred stock that have
characteristics similar to debt. Based on a description of this proposal, the
Series E Preferred Stock might be the type of preferred stock to which this
limitation would apply. 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 E Preferred Stock by the "nontaxed
portion" of any "extraordinary dividend" if the holder has not held its
Series E 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 E Preferred Stock would
include a dividend that (i) equals or exceeds 5% of the holder's adjusted tax
basis in the Series E 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 E 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 E
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 redemption of the Series E
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
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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.
The Clinton Administration has also proposed legislation that 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 E PREFERRED STOCK.
REDEMPTION PREMIUM
If the redemption price of the Series E Preferred Stock to be paid by the
Company on the Mandatory Redemption or Optional Redemption of the Series E
Preferred Stock exceeds, by more than a de minimis amount, 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 term of
the Series E Preferred Stock cannot be called for redemption under an
economic accrual method similar to the method described under the third
paragraph under "Original Issue Discount." The issue price of the Series E
Preferred Stock issued for money is the price at which a substantial amount
of such stock is sold. It is not clear how the issue price of Dividend Shares
should be determined. One possible interpretation is to determine the issue
price based on the fair market value of the Dividend Shares at the time of
issuance. Alternatively, it may be determined based on the method used in
determining the issue price of the Exchange Debentures under the principles
discussed under "Certain Federal Income Tax Consequences--Original Issue
Discount" with respect to the Exchange Debentures. A redemption premium will
generally be considered de minimis as long as it is less than the redemption
price of the Series E Preferred Stock multiplied by 1/4 of 1% multiplied by
the number of years until the issuer must redeem the preferred stock.
For purposes of determining whether such constructive distribution
treatment applies, the Mandatory Redemption and the Optional Redemption are
tested separately. Constructive distribution treatment is required if either
(or both) of these tests is satisfied. Because the issue price of the Series
E Preferred Stock at original issuance will equal the Mandatory Redemption
Price, no redemption premium will arise as a result of the Mandatory
Redemption feature with respect to such stock. However, because the issue
price of the Dividend Shares may be determined based on the fair market value
of such Dividend Shares at the time of the distribution, it is possible that
such Dividend Shares will be issued with a redemption premium large enough to
give rise to dividend treatment under the above rules.
Pursuant to recently issued regulations (the "Section 305(c)
Regulations"), such economic accrual will arise due to the Optional
Redemption only if, based on all of the facts and circumstances as of the
date the Series E Preferred Stock are issued, redemption pursuant to the
Optional Redemption 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 the Optional
Redemption 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
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certainty at this time. Thus, no assurance can be given as to the treatment
of the redemption premium with respect to the Series E Preferred Stock under
the Section 305(c) Regulations.
Shares of Series E Preferred Stock that are subject to the Section 305(c)
rules concerning redemption premium generally will have different tax
characteristics than shares of Series E Preferred Stock that are not subject
to the Section 305(c) rules and might trade separately, which might adversely
affect the liquidity of such shares.
REDEMPTION, SALE AND EXCHANGE OF SERIES E PREFERRED STOCK
A redemption of Series E Preferred Stock for cash (whether pursuant to the
Mandatory Redemption, or the Optional Redemption), a sale of Series E
Preferred Stock or an exchange of shares of Series E Preferred Stock for
Exchange Debentures will be a taxable event.
A redemption of Series E 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 E 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 reduction in his proportionate interest in the
Company (including any ownership of common stock and any shares
constructively owned), that shareholder should generally be regarded as
having suffered a meaningful reduction in his interest in the Company.
Satisfaction of the "complete termination" and "substantially
disproportionate" exceptions is dependent upon compliance with the respective
objective tests set forth in sections 302 (b)(3), and 302(b)(2) of the Code.
If the redemption is not treated as a distribution taxable as a dividend,
or if Series E Preferred Stock is sold, the redemption or sale of the Series
E 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 E Preferred Stock redeemed or sold. 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 E Preferred Stock exceeded one year.
An exchange of Series E Preferred Stock for Exchange Debentures at the
option of the Company will be subject to the same general rules as a
redemption for cash, including the rules for treating the redemption as a
dividend or as a sale or exchange. If the exchange of Series E Preferred
Stock for Exchange Debentures is treated as a dividend, the amount of the
dividend would be the "issue price" of the Exchange Debentures (to the extent
of the Company's current or accumulated earnings and profits) determined in
the manner described below for purposes of computing original issue discount
(if any) on the Exchange Debentures. If the exchange of Series E Preferred
Stock is not treated as a dividend, the exchanging shareholder would
recognize gain or loss equal to the difference between the issue price of
Exchange Debentures and the shareholder's adjusted tax basis in the Series E
Preferred Stock. If neither the Series E Preferred Stock nor the Exchange
Debentures are regularly traded on an established securities market, gain
realized on the exchange of Series E Preferred Stock for Exchange Debentures
may qualify for installment sale treatment.
If the amount received in a redemption of Series E 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 by the amount of cash or the issue price of the Exchange
Debentures, as the case may be, received by the shareholder. The
shareholder's adjusted tax basis in the redeemed Series E 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 Debentures received in the redemption or will
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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 E Preferred Stock for debentures or cash constitutes a
distribution taxable as a dividend, it may constitute an "extraordinary
dividend" to a corporate shareholder and be subject to the rules described
above. See "--Dividends on Series E Preferred Stock."
ORIGINAL ISSUE DISCOUNT
If the shares of Series E Preferred Stock are exchanged for Exchange
Debentures at a time when the stated redemption price at maturity of such
Exchange Debentures exceeds their issue price 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 Debentures will be
treated as having original issue discount ("OID") equal to the entire amount
of such excess. If the Exchange Debentures are traded on an established
securities market within the meaning of section 1273(b)(3) of the Code, the
issue price of the Exchange Debentures will be their fair market value as of
the issue date. Similarly, if the Series E Preferred Stock, but not the
Exchange Debentures issued and exchanged therefor, is traded on an
established securities market at the time of the exchange, then the issue
price of each Exchange Debenture should be the fair market value of the
Series E Preferred Stock at the time of the exchange. If neither the Series E
Preferred Stock nor the Exchange Debentures are traded on an established
securities market, and absent any "potentially abusive situation," the issue
price of the Exchange Debentures will be their stated principal amount, or,
in the event the Exchange Debentures 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.
The Company is allowed to exchange the Series E Preferred Stock for
Exchange Debentures from time to time. Because the determination of the issue
price of the Exchange Debentures depends on several factors as described
above, it is possible that Exchange Debentures issued at different times will
have different issue prices. To the extent the Exchange Debentures have
different issue prices, they may have different tax characteristics from each
other (for example, the amount of OID on such Exchange Debentures may vary),
and may trade separately, which may adversely affect the liquidity of such
Exchange Debentures.
The "stated redemption price at maturity" of the Exchange Debentures would
equal the total of all payments under the Exchange Debentures, other than
payments of "qualified stated interest." "Qualified stated interest"
generally is stated interest that is unconditionally payable in cash or other
property (other than debt instruments of the issuer such as the Exchange
Debentures) at least annually at a single fixed rate. Therefore, Exchange
Debentures that are issued when the Company has the option to pay interest
for certain periods in additional Exchange Debentures should be treated as
having been issued without any qualified stated interest. Accordingly, the
sum of all interest payable pursuant to the stated interest rate on such
Exchange Debentures over the entire term should be included (along with the
stated principal) in the stated redemption price at maturity of such Exchange
Debentures. On the other hand, if the Exchange Debentures are issued after
January 15, 2002 when the Company does not have the option to pay interest
with additional Exchange Debentures, then stated interest would qualify as
qualified stated interest and none of such stated interest would be included
in the stated redemption price at maturity of the Exchange Debentures.
A holder of an Exchange Debenture 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 Debenture, even if the cash to which such income is
attributable would not be received until maturity or redemption of the
Exchange Debenture. 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 Debenture and more OID for later years.
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An additional Exchange Debenture (an "Interest Payment Debenture") issued
in payment of interest with respect to an Exchange Debenture will not be
considered as a payment made on the Exchange Debenture and will be aggregated
with the Exchange Debenture for purposes of computing and accruing OID on the
Exchange Debenture. As between the Exchange Debenture and the related
Interest Payment Debenture, the adjusted issue price of the Exchange
Debenture would be allocated between the Exchange Debenture and the Interest
Payment Debenture in proportion to their respective principal amounts. That
is, upon the issuance of an Interest Payment Debenture, the Exchange
Debenture and the Interest Payment Debenture would be treated as initially
having the same adjusted issue price and inherent amount of OID per dollar of
principal amount. The Exchange Debenture and the Interest Payment Debenture
derived therefrom would be treated as having the same yield to maturity.
Similar treatment would be applied to any Exchange Debentures issued on
Interest Payment Debentures.
If the Exchange Debentures are not issued with OID, because they are
issued after January 15, 2002, stated interest would be included in income by
a holder in accordance with such holder's usual method of accounting. In all
other cases, all stated interest will be treated as payments on the Exchange
Debentures under the OID rules discussed above, and will not be included
again when paid or accrued.
If the Exchange Debentures are issued with OID and the Company were found
to have had an intention to call the Exchange Debentures before maturity, any
gain realized on a sale, exchange or redemption of Exchange Debentures 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 Debentures. The Company cannot predict whether it would have an
intention to call the Exchange Debentures before their maturity at the time,
if ever, it issues the Exchange Debentures.
If issued with OID, the Exchange Debentures 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 E Preferred Stock may apply.
BOND PREMIUM ON EXCHANGE DEBENTURES
If the shares of Series E Preferred Stock are exchanged for Exchange
Debentures at a time when the issue price of such Exchange Debentures exceeds
the amount payable at the maturity date (or earlier redemption date, if
appropriate) of the Exchange Debentures, such excess will be deductible,
subject to certain limitations with respect to individuals, by the holder of
such Exchange Debentures as amortizable bond premium over the term of the
Exchange Debentures (taking into account earlier call dates, as appropriate),
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 Debentures 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 Debentures rather than as a separate deduction item unless
otherwise provided in future regulations.
REDEMPTION OR SALE OF EXCHANGE DEBENTURES
Generally, any redemption or sale of Exchange Debentures 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 Debentures. The
tax basis of a holder who received an Exchange Debenture in exchange for
Series E Preferred Stock will generally be equal to the issue price of the
Exchange Debenture on the date the Exchange Debenture is issued (or, in the
case of an Exchange Debenture received as to which the holder thereof as
entitled to installment sale treatment, the adjusted tax basis of the Series
E Preferred Stock exchanged) plus any OID on the Exchange Debenture included
in the holder's income prior to sale or redemption of the Exchange Debenture,
reduced by any amortizable bond premium applied against the holder's income
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prior to sale or redemption of the Exchange Debenture and payment other than
payment of qualified stated interest. 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 Debentures were issued to call them before maturity,
the gain would be ordinary income to the extent of any unamortized OID.
BACKUP WITHHOLDING
Under section 3406 of the Code and applicable Treasury regulations, a
holder of Series E Preferred Stock or Exchange Debentures 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 E Preferred Stock or Exchange Debentures,
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 E Preferred Stock, any payment of
interest or principal pursuant to the terms of the Exchange Debentures, or
any payment of proceeds of a redemption of Series E Preferred Stock or
Exchange Debentures, 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 E Preferred Stock or Exchange Debentures 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.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the
treatment of purchasers that acquire the Series E Preferred Stock or the
Exchange Debentures other than through purchasing the Series E Preferred
Stock at the time of original issuance at the issue price, including those
provisions of the Code relating to the treatment of "market discount." For
example, the market discount provisions of the Code may require a subsequent
purchaser of an Exchange Debenture at a market discount to treat all or a
portion of any gain recognized upon sale or other disposition of the Exchange
Debenture as ordinary income and to defer a portion of any interest expense
that would otherwise be deductible on any indebtedness incurred or maintained
to purchase or carry such Exchange Debenture until the holder disposes of the
Exchange Debenture in a taxable transaction.
As a further example, a holder of an Exchange Debenture issued with OID
who purchases such Exchange Debenture for an amount that is greater than its
adjusted issue price but equal to or less than the sum of all payments
payable on the Exchange Debenture after the purchase date (other than
payments, if any, of qualified stated interest) will be considered to have
purchased such Exchange Debenture at an "acquisition premium." Under the
acquisition premium rules, the amount of OID which such holder must include
in income with respect to such Exchange Debenture for any taxable year will
be reduced by the portion of such acquisition premium properly allocable to
such year.
EACH PROSPECTIVE HOLDER OF SERIES E PREFERRED STOCK OR EXCHANGE DEBENTURES
SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO
HIM OF THE SERIES E PREFERRED STOCK OR EXCHANGE DEBENTURES 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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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") among the Company and BT Securities Corporation,
Goldman, Sachs & Co. and Lehman Brothers Inc. (collectively, the
"Underwriters"), the Underwriters, severally and not jointly, have agreed to
purchase, and the Company has agreed to sell to the several Underwriters, all
of the Series E Preferred Stock offered hereby.
The Underwriting Agreement provides that the obligation of the
Underwriters to pay for and accept delivery of the Series E Preferred Stock
is subject to the approval of certain legal matters by counsel and to various
other conditions. The nature of each Underwriter's obligations is such that
each is committed to purchase the number of shares of Series E Preferred
Stock set forth opposite its name if it purchases any.
NUMBER OF
UNDERWRITERS SHARES
- ------------------------- -----------
BT Securities Corporation 1,350,000
Goldman, Sachs & Co. .... 450,000
Lehman Brothers Inc. .... 450,000
-----------
Total .................. 2,250,000
===========
The Underwriters propose to offer the Series E Preferred Stock directly to
the public at the public offering price set forth on the cover page hereof,
and to certain dealers at such price less a concession not in excess of
$.0025 per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $.00125 per share. After the initial public
offering of the Series E Preferred Stock, the public offering price and other
selling terms may be changed.
The Company does not intend to apply for listing of the Series E Preferred
Stock on a national securities exchange, but has been advised by the
Underwriters that they currently intend to make a market in the Series E
Preferred Stock, as permitted by applicable laws and regulations. The
Underwriters are not obligated, however, to make a market in the Series E
Preferred Stock, and any such market making may be discontinued at any time
by one or all of the Underwriters at the sole discretion of such
Underwriters. There can be no assurance that an active public market for the
Series E Preferred Stock will develop.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company has been informed by the Underwriters that they will not
confirm sales to any account over which they exercise discretionary authority
without prior specific consent.
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<PAGE>
PROSPECTUS
$500,000,000
SFX BROADCASTING, INC. [LOGO]
DEBT SECURITIES, PREFERRED STOCK AND CLASS A COMMON STOCK
---------
SFX Broadcasting, Inc. (the "Company") may from time to time offer,
together or separately, its (i) debt securities (the "Debt Securities") which
may be either senior debt securities (the "Senior Debt Securities") or
subordinated debt securities (the "Subordinated Debt Securities"), (ii)
shares of its preferred stock, par value $.01 per share (the "Preferred
Stock"), and (iii) shares of its Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"), in amounts, at prices and on terms to be
determined at the time of the offering. The Debt Securities, Preferred Stock
and Class A Common Stock are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $500,000,000 in aggregate
initial public offering price. Certain specific terms of the particular
Securities in respect of which this Prospectus is being delivered will be set
forth in an accompanying Prospectus Supplement (the "Prospectus Supplement"),
including, where applicable, (i) in the case of Debt Securities, the specific
title, aggregate principal amount, the denomination, maturity, premium, if
any, the interest, if any (which may be at a fixed or variable rate), the
time and method of calculating payment of interest, if any, the place or
places where principal of (and premium, if any) and interest, if any, on such
Debt Securities will be payable, any terms of redemption at the option of the
Company or the holder, any sinking fund provisions, terms for any conversion
into Class A Common Stock, the initial public offering price, listing (if
any) on a securities exchange or quotation (if any) on an automated quotation
system, acceleration, if any, and other terms and (ii) in the case of
Preferred Stock, the specific title, the aggregate number of shares offered,
any dividend (including the method of calculating payment of dividends),
liquidation, redemption, voting and other rights, any terms for any
conversion or exchange into Class A Common Stock or Debt Securities, the
initial public offering price, listing (if any) on a securities exchange or
quotation (if any) on an automated quotation system and other terms. If so
specified in the applicable Prospectus Supplement, Debt Securities of a
series may be issued in whole or in part in the form of one or more temporary
or permanent global securities.
The Class A Common Stock is quoted on the Nasdaq National Market under the
trading symbol "SFXBA." Any Class A Common Stock sold pursuant to a
Prospectus Supplement will be quoted on the Nasdaq National Market, subject
to official notice of issuance.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities, when issued, will be subordinated in right of
payment to all Senior Debt (as defined in the applicable Prospectus
Supplement) of the Company.
The Prospectus Supplement will contain information concerning certain
United States federal income tax considerations, if applicable to the
Securities offered.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement relating to such Securities. Any
statement contained in this Prospectus will be deemed to be modified or
superseded by any inconsistent statement contained in an accompanying
Prospectus Supplement.
SEE "RISK FACTORS," BEGINNING ON PAGE 4, FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS.
---------
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 Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of the Company or any dealers or underwriters are involved
in the sale of the Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any
applicable commissions or discounts will be set forth in or may be calculated
from the Prospectus Supplement with respect to such Securities. See "Plan of
Distribution" for possible indemnification arrangements with agents, dealers
and underwriters.
---------
The date of this Prospectus is December 10, 1996.
<PAGE>
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES, THE UNDERWRITERS
MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICES OF SUCH SECURITIES, OTHER SECURITIES OF THE COMPANY OR ANY SECURITIES
THE PRICES OF WHICH MAY BE USED TO DETERMINE PAYMENTS ON SUCH SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus or a Prospectus
Supplement in connection with the offering described herein and therein, and
any information or representations not contained herein or therein must not
be relied upon as having been authorized by the Company or by any
underwriter, dealer or agent. This Prospectus may not be used to consummate
sales of Securities unless accompanied by a Prospectus Supplement relating to
such Securities. Neither this Prospectus nor any Prospectus Supplement shall
constitute an offer to sell or a solicitation of an offer to buy any of the
Securities covered by this Prospectus in any jurisdiction to any person to
whom it is unlawful to make such offer of solicitation in such jurisdiction.
The delivery of this Prospectus and the applicable Prospectus Supplement at
any time does not imply that the information herein is correct as of any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 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 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.
2
<PAGE>
INCORPORATION 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, and November 27, 1996; and
(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.
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 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 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 any such document not specifically described above. Request for
such documents should be directed to SFX Broadcasting, Inc., 150 East 58th
Street, 19th Floor, New York, New York 10155, Attention: Timothy Klahs,
Director of Investor Relations; telephone number (212) 407-9191.
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RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus or any Prospectus Supplement, 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 or any
Prospectus Supplement 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, the
consummation of acquisitions and dispositions, integration of acquired
stations, leverage, limitations on the payment of dividends, regulation of
radio broadcasting and other factors. 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 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 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. 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. 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
Securities, borrowings under the senior credit facility and proceeds from
dispositions. The ability of the Company to issue certain Securities or
borrow under the 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 Company's senior credit facility
entered into on November 22, 1996. 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 the senior credit facility.
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 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 elimination of
non-recurring expenses as a result of the acquisitions. While management
believes that such cost savings and the 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.
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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 its continuing to hold,
and, in connection with acquisitions of radio stations, on it obtaining prior
FCC consent to assignments or transfers of control of broadcasting 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, 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, that would cause Robert F.X.
Sillerman, 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 Company intends to seek such consent.
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 broadcast stations, and affect the ability of the Company to acquire
additional radio broadcast stations or finance such acquisitions. In
particular, as of November 25, 1996, the FCC has outstanding 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 acquisitions, 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 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.
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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 and the integration
of these stations into the Company's operations. The Company's borrowings
under the 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 the outstanding 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.
LIMITATIONS ON ABILITY TO PAY DIVIDENDS
The Company has never paid, and does not anticipate that in the
foreseeable future it will pay, any dividends on its Common Stock. Certain of
the Company's debt instruments include covenants restricting the Company's
ability to pay dividends or to make certain other distributions to
stockholders. In connection with the offering of any dividend-paying
Preferred Stock hereby, the applicable Prospectus Supplement will set forth
the amount available for distribution as of the end of the most recent fiscal
period under the Company's debt instruments.
In addition to the above restrictions imposed on the payment of dividends,
under Delaware law the Company is permitted to pay cash dividends on its
capital stock, only out of its surplus or, in the event that it has no
surplus, out its net profits for the year in which a dividend is declared or
for the immediately preceding fiscal year. Surplus is defined as the excess
of a company's total assets over the sum of its total liabilities plus the
par value of its outstanding capital stock. In order to pay dividends in
cash, the Company must have surplus or net profits equal to the full amount
of the cash dividend at the time such dividend is declared. In determining
the Company's ability to pay dividends, Delaware law permits the board of
directors of the Company to revalue the Company's assets and liabilities from
time to time to their fair market values in order to create surplus. The
Company cannot predict what the value of its assets or the amount of its
liabilities will be in the future and, accordingly, there can be no assurance
that the Company will be able to pay cash dividends on new issues of capital
stock.
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.
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
will rely principally on dividends or advances from its subsidiaries to
provide the funds necessary for, among other things, the payment of dividends
and redemption payments on Preferred Stock and principal of and any interest
or premium on any Debt Securities and other indebtedness of the Company. The
Company's subsidiaries are subject to state-law restrictions on their ability
to pay dividends to the Company, such as those set forth with respect to the
Company in "--Limitations on Ability to Pay
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Dividends." Any right of the holders of the Debt Securities to participate in
the assets of any of the subsidiaries upon such subsidiary's liquidation or
recapitalization will be effectively subordinated to the claims of such
subsidiary's creditors and preferred stockholders (if any), except to the
extent the Company is itself recognized as a creditor of such subsidiary.
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, 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 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
7
<PAGE>
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 to other technologies; and (v) challenges to license renewals.
CONTROL BY MANAGEMENT
As of November 25, 1996, Mr. Sillerman, a Director 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 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 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 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 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
("Series D Preferred Stock") are unpaid in an aggregate amount equal to six
full quarterly dividends and in certain other circumstances, the holders of
the Series D Preferred Stock, 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.
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
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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 and
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 States 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.
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 and D. Geoffrey Armstrong. The Company has entered into a five-year
employment agreement with each of Messrs. Sillerman and Armstrong, effective
as of April 1, 1995. It is anticipated that the Company will enter into an
employment agreement with Mr. Ferrel. 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, entitling him to receive substantial payments. 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 of
1934, as amended (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
November 25, 1996, 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"),
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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. See "Description
of Equity Securities--Certain Provisions of Certificate of Incorporation,
Bylaws and Statute--Foreign Ownership."
THE COMPANY
The Company is one of the largest radio station groups in the United
States and, as of November 25, 1996, owns and operates, provides programming
to or sells advertising on behalf of 69 radio stations in 20 markets. The
Company is diverse in terms of format and geographic markets. The Company was
organized in 1992 by Mr. Sillerman, the Executive Chairman and principal
stockholder of the Company, along with others. The principal executive
offices of the Company are located at 150 East 58th Street, 19th Floor, New
York, New York 10155 and its telephone number is (212) 407-9191.
USE OF PROCEEDS
Except as otherwise set forth in a Prospectus Supplement, the net proceeds
from the sale of the Securities will be used for future acquisitions (some of
which may already be contemplated) and other general corporate purposes,
including working capital, the repayment of existing debt and/or the
repurchase of securities of the Company. The precise amounts and timing of
the application of such net proceeds for such purposes will depend upon a
variety of factors, including the Company's funding requirements and the
availability of alternative sources of funding. The Company routinely reviews
acquisition opportunities. Any proposal to use proceeds from any offering of
Securities will be disclosed in the Prospectus Supplement relating to such
offering.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratios (deficiencies) of
earnings to fixed charges and earnings to combined fixed charges and
preferred stock dividends for each of the periods set forth below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- -------------------------------------------
1996 1995 1995 1994 1993 1992
----------- ---------- ---------- ------ ----------- ----------
(ALL AMOUNTS, EXCEPT RATIOS, IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Ratio (Deficiency) of Earnings to Fixed
Charges ............................... $(30,084) $(3,802) $(4,396) 1.3x $(14,919) $(2,208)
Ratio (Deficiency) of Earnings to
Combined Fixed Charges and Preferred
Stock Dividends ....................... (33,635) (4,021) (4,687) 1.3x (15,476) (2,593)
</TABLE>
For purposes of computing the ratio (deficiency) of earnings to fixed
charges and the ratio of earnings to combined fixed charges and preferred
stock dividends, "earnings" consist of pretax income from continuing
operations plus fixed charges (excluding capitalized interest). "Fixed
charges" represent interest incurred (whether expensed or capitalized),
amortization of debt expense, and that portion of rental expense on operating
leases deemed to be the equivalent of interest.
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DESCRIPTION OF DEBT SECURITIES
GENERAL
Debt Securities Offered
Debt Securities may be issued from time to time under one or more
indentures, each dated as of a date on or prior to the issuance of the Debt
Securities to which it relates. Senior Debt Securities and Subordinated Debt
Securities may be issued pursuant to separate indentures (respectively, a
"Senior Indenture" and a "Subordinated Indenture"), in each case between the
Company and a trustee (a "Trustee"), which may be the same Trustee, and in
the form that has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part, subject to such amendments or supplements as
may be adopted from time to time. The Senior Indenture and the Subordinated
Indenture, as amended or supplemented from time to time, are sometimes
referred to individually as an "Indenture" and collectively as the
"Indentures." Each Indenture will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made hereunder
relating to the Debt Securities and the Indentures are summaries of the
anticipated provisions thereof, do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the
provisions of the applicable Indenture, including the definitions therein of
certain terms and those terms made part of such Indenture by reference to the
TIA, as in effect on the date of such Indenture, and to such Debt Securities.
Copies of the forms of the Indentures are filed as exhibits to the
Registration Statement of which this Prospectus is a part. See "Available
Information." Certain capitalized terms used below and not defined have the
respective meanings assigned to them in the applicable Indenture.
Existing Indebtedness
Certain of the Company's existing debt instruments impose, and future debt
instruments may impose, certain restrictions on the Company, including
restrictions on the payment of dividends, incurrence of debt and consummation
of certain acquisitions and dispositions, and require the Company to maintain
certain financial ratios. The Company's 10 3/4% Senior Subordinated Notes Due
2006 (the "1996 Notes") are general unsecured obligations of the Company and
are subordinated in right of payment to certain other debt of the Company.
The indenture governing the 1996 Notes contains certain covenants which
restrict the ability of the Company to make certain payments, incur
additional indebtedness, pay dividends, make other distributions, incur
certain liens, merge, consolidate, transfer substantially all of its assets,
enter into certain transactions with affiliates, engage in sale and leaseback
transactions, issue or sell capital stock of a subsidiary and engage in
certain business activities. As of November 25, 1996, the Company has
outstanding $450.0 million in aggregate principal amount of 1996 Notes.
The Company's senior credit facility, as in effect on November 25, 1996,
provides the Company with the ability to borrow up to $225.0 million under
certain circumstances. The senior credit facility is secured by a pledge of
all of the capital stock of the Company's subsidiaries and by a security
interest in substantially all of the assets of the Company and its
subsidiaries. Certain covenants in the senior credit facility restrict the
Company's ability to make offerings of equity or debt securities, pay
dividends, consolidate, merge, effect certain asset sales and enter new lines
of business. In addition, the Company is obligated to comply with certain
financial ratios. Borrowings under the senior credit facility bear interest
at a variable rate. As of November 25, 1996, the Company has outstanding
borrowings under the senior credit facility of $15.0 million, which currently
bear interest at an annual rate of 9.75%.
TERMS
The Debt Securities will be unsecured obligations of the Company. The
Indebtedness (as such term is defined in the applicable Prospectus
Supplement) represented by (i) Senior Debt Securities will rank pari passu in
right of payment with all other unsecured and unsubordinated Indebtedness of
the Company and (ii) Subordinated Debt Securities will be subordinated in
right of payment to the prior payment in full of all Senior Debt of the
Company. See "--Ranking." The particular terms of the Debt Securities offered
by a Prospectus Supplement will be described in such Prospectus Supplement,
along with any applicable modifications of or additions to the general terms
of the Debt Securities as described herein and in the
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applicable Indenture and any applicable United States federal income tax
considerations. Accordingly, for a description of the terms of any series of
Debt Securities, reference must be made to both the Prospectus Supplement
relating thereto and the description of the Debt Securities set forth in this
Prospectus.
Each Indenture will provide for the issuance by the Company from time to
time of its Debt Securities in one or more series. The aggregate principal
amount of Debt Securities which may be issued under each Indenture will be
unlimited and each Indenture will set forth the specific terms of any series
of Debt Securities or provide that such terms shall be set forth in, or
determined pursuant to, an authorizing resolution and/or a supplemental
indenture, if any, relating to such series.
The specific terms of each series of Debt Securities will be set forth in
the applicable Prospectus Supplement relating thereto, including, without
limitation, the following, as applicable:
1. the title of such Debt Securities (which shall distinguish the Debt
Securities of that particular series from securities of any other series) and
whether such Debt Securities are Senior Debt Securities or Subordinated Debt
Securities;
2. the aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount that may be authenticated and delivered under
an Indenture;
3. the price or prices (expressed as a percentage of the principal amount
thereof) at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof payable
upon declaration of acceleration of the maturity thereof, or, if applicable,
the portion of the principal amount of such Debt Securities that is
convertible into Class A Common Stock or the method by which any such portion
shall be determined;
4. if convertible into Class A Common Stock, the terms on which such Debt
Securities are convertible, including the initial conversion price, the
conversion period, any events requiring an adjustment of the applicable
conversion price and any requirements relating to the reservation of such
shares of Class A Common Stock for purposes of conversion;
5. the date or dates on which the principal of such Debt Securities will
be payable and, if applicable, the terms on which such maturity may be
extended;
6. the rate or rates (which may be fixed or variable) at which such Debt
Securities will bear interest, if any;
7. the date or dates from which any such interest will accrue, the dates
on which any such interest will be payable, the record dates for such
interest payment dates, the persons to whom such interest shall be payable,
and the basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
8. the place or places where the principal of and interest, if any, on
such Debt Securities will be payable, where such Debt Securities may be
surrendered for registration of transfer, conversion or exchange and where
notices or demands to or upon the Company in respect of such Debt Securities
and the applicable Indenture may be served;
9. the period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt Securities may,
pursuant to any optional or mandatory redemption provisions, be redeemed, as
a whole or in part, at the option of the Company;
10. the dates, if any, on which, and the price or prices at which, the
Debt Securities of the series will be repurchased by the Company at the
option at the Holders thereof and other detailed terms and provisions of such
repurchase obligations;
11. the denominations in which the Debt Securities of the series shall be
issuable;
12. the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any Sinking Fund (as defined in the
applicable Indenture) or analogous provision or at the option of a holder
thereof, and the period or periods within which, the price or prices at which
and the other terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant to such
obligations;
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13. whether the payments of principal of or interest, if any, on such Debt
Securities may be determined with reference to an index, formula or other
method and the manner in which such amounts shall be determined;
14. whether the Debt Securities are issued at a discount below their
principal amount and provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity
thereof ("Original Issue Discount Debt Securities") and material United
States federal income tax, accounting and other considerations applicable to
such Original Issue Discount Debt Securities;
15. whether the interest, if any, on the Debt Securities is to be payable,
at the election of the Company or a holder thereof, in cash or additional
Debt Securities of such series ("PIK Debt Securities") and the period or
periods within which, and the terms and conditions upon which, such election
may be made, and material United States federal income tax, accounting and
other considerations applicable to such PIK Debt Securities;
16. provisions, if any, granting special rights to the holders of Debt
Securities of any series upon the occurrence of such events as may be
specified;
17. any deletions from, modifications of or additions to the Events of
Default (as defined below) of the Company with respect to Debt Securities of
any series, whether or not such Events of Default are consistent with the
Events of Default described herein;
18. whether Debt Securities of any series are to be issuable initially in
temporary global form and whether any Debt Securities of any series are to be
issuable in permanent global form and, if so, whether beneficial owners of
interests in any such security in permanent global form may exchange such
interests for Debt Securities of such series and of like tenor of any
authorized form and denomination and the circumstances under which any such
exchanges may occur, if other than in the manner provided in the applicable
Indenture, and, if Debt Securities of the series are to be issuable as a
Global Debt Security (as defined below), the identity of the depository for
such series;
19. the applicability, if any, of the legal defeasance and covenant
defeasance provisions of the applicable Indenture to the Debt Securities of
such series;
20. any additions to or changes in the covenants set forth herein that
apply to Debt Securities of the series; and
21. any other terms of the series (which terms shall not be inconsistent
with the provisions of the Indenture under which the Debt Securities are
issued).
Reference is made to the applicable Prospectus Supplement for information
with respect to any deletions from, modifications of or additions to the
Events of Default or covenants of the Company that are described below,
including any addition of a covenant or other provision providing event risk
or similar protection.
PRINCIPAL, MATURITY AND INTEREST
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of each series will be issued only in registered form,
without coupons, in all appropriate denominations as may be set forth in the
applicable Indenture or specified in, or pursuant to, an authorizing
resolution and/or supplemental indenture, if any, relating to such series of
Debt Securities.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
any authorized denomination of other Debt Securities of the same series and
of a like aggregate principal amount and tenor upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee or at the
office of any registrar designated by the Company for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any
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registrar designated by the Company for such purpose. No service charge will
be made for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with certain transfers and exchanges. The
Company may change any registrar without notice.
RANKING
Senior Debt Securities
The Senior Debt Securities will constitute unsecured senior obligations of
the Company and will rank pari passu in right of payment with all other
unsecured senior obligations of the Company. However, the Senior Debt
Securities will be effectively subordinated in right of payment to all
secured Indebtedness of the Company to the extent of the value of the assets
securing such Indebtedness and will be effectively subordinated to all
indebtedness and other liabilities (including trade payables) of the
Company's Subsidiaries. In addition, substantially all of the assets of the
Company are owned by its subsidiaries. Therefore, the Company's rights and
the rights of its creditors, including holders of Debt Securities, to
participate in the assets of any Subsidiary upon the Subsidiary's liquidation
or recapitalization will be subject to the prior claims of the Subsidiary's
creditors, including the lenders under the Company's senior credit facilty.
See "Risk Factors--Holding Company Structure; Dependence Upon Operations of
Subsidiaries."
Subordinated Debt Securities
Unless otherwise provided in the applicable Prospectus Supplement, the
payment of principal of, premium on, if any, and interest on any Subordinated
Debt Securities will be subordinated in right of payment, as set forth in the
applicable Subordinated Indenture, to the prior payment in full of all Senior
Debt, whether outstanding on the date of the Subordinated Indenture or
thereafter incurred.
Unless otherwise provided in the applicable Prospectus Supplement, 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 marshalling of Company's
assets and liabilities, the holders of Senior Debt will be entitled to
receive payment in full of principal (and premium, if any) and interest, if
any, 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 of
Subordinated Debt Securities will be entitled to receive any payment with
respect to the Subordinated Debt Securities; and until the principal (and
premium, if any) and interest, if any, with respect to Senior Debt are paid
in full, any distribution to which the Holders of Subordinated Debt
Securities would be entitled will be made to the Holders of Senior Debt
(except that, in either case, Holders of Subordinated Debt Securities may
receive (i) securities that are subordinated at least to the same extent as
the Subordinated Debt Securities 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").
Unless otherwise provided in the applicable Prospectus Supplement, the
Company also may not make any payment upon or in respect of the Subordinated
Debt Securities (except as described above) if (i) a default in the payment
of the principal of, premium, if any, or interest on Designated Senior Debt
(as such term is defined in the applicable Prospectus Supplement) occurs and
is continuing 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
Subordinated Debt Securities may and shall be resumed (i) in the case of a
payment default, upon the date on which such default is cured or waived and
(ii) in the case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new period of payment
blockage may be
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commenced unless and until (i) 360 days have elapsed since the effectiveness
of the immediately prior Payment Blockage Notice and (ii) all scheduled
payments of principal of, premium on, if any, and interest on the
Subordinated Debt Securities that have come due have been paid in full. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice.
The Subordinated Indenture will further require that the Company promptly
notify the holders of Senior Debt if payment of the Subordinated Debt
Securities 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 of Subordinated Debt Securities 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. Unless otherwise specified in the applicable Prospectus
Supplement, the Subordinated Indenture will not limit the amount of
additional Indebtedness, including Senior Debt, that the Company and its
Subsidiaries may incur. In addition, substantially all of the assets of the
Company are owned by its subsidiaries. Therefore, the Company's rights and
the rights of its creditors, including holders of Debt Securities, to
participate in the assets of any subsidiary upon the subsidiary's liquidation
or recapitalization will be subject to the prior claims of the subsidiary's
creditors, including the lenders under the Company's senior credit facility.
See "Risk Factors--Holding Company Structure; Dependence Upon Operations of
Subsidiaries."
CONVERSION
The terms and conditions, if any, upon which any series of Debt Securities
will be convertible into Class A Common Stock will be set forth in the
Prospectus Supplement relating thereto. Such terms will include the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the Holders of
such series of Debt Securities or at the option of the Company, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such series of Debt Securities.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants
in respect of any series of Debt Securities.
EVENTS OF DEFAULT AND REMEDIES
Unless otherwise provided in the applicable Prospectus Supplement, each
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 any
Debt Securities of such series (whether or not prohibited by the
subordination provisions, if any, of such Indenture); (ii) default in payment
when due of the principal of or premium, if any, on any Debt Securities of
such series (whether or not prohibited by the subordination provisions, if
any, of such Indenture); (iii) failure by the Company to comply with the
certain enumerated covenants and provisions that will be described in the
applicable Prospectus Supplement; (iv) failure by the Company for 60 days
after notice to comply with any of its other agreements in such Indenture or
any Debt Securities of such series; (v) 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 such Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in
such Indebtedness on the date of such default (a "Payment Default") or (b)
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 under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates an amount in excess of the amount specified in the
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applicable Prospectus Supplement; (vi) failure by the Company or any of its
Subsidiaries to pay final judgments aggregating in an amount in excess of the
amount specified in the applicable Prospectus Supplement, which judgments are
not paid, discharged or stayed for a period of 60 days; and (vii) certain
events of bankruptcy or insolvency with respect to the Company, any of its
Significant Subsidiaries (as such term is defined in the applicable
Prospectus Supplement) or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary.
If any Event of Default with respect to a series of Debt Securities occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Debt Securities of such series may declare all
the Debt Securities of such series 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 Debt Securities
will become due and payable without further action or notice. Holders of any
Debt Securities of a particular series may not enforce the Indenture pursuant
to which they were issued or the applicable Debt Securities except as
provided in such Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Debt Securities of a
particular series may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Debt Securities 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 had elected to redeem any Debt Securities of such
series pursuant to any optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to
the extent permitted by law upon the acceleration of the Debt Securities. If
an Event of Default occurs prior to certain dates to be designated in the
Indenture 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 any Debt Securities of such series prior to such date or
dates, then any premium shall also become immediately due and payable to the
extent permitted by law upon the acceleration of any Debt Securities of such
series.
The Holders of a majority in aggregate principal amount of any Debt
Securities of a particular series then outstanding may by notice to the
Trustee on behalf of the Holders of all of such Debt Securities waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest
on, or the principal of, any such Debt Securities.
The Company will be required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company will be
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.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee or stockholder of the Company, as such,
shall have any liability for any obligations of the Company under any Debt
Securities of any series or any Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder
of Debt Securities by accepting a Debt Security waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Debt Securities. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that
such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in the Prospectus Supplement, the Company may,
at its option and at any time, elect to have all of its obligations
discharged with respect to the outstanding Debt Securities of any series
("Legal Defeasance") except for (i) the rights of Holders of outstanding Debt
Securities of such
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series to receive payments in respect of the principal of, premium, if any,
and interest on such Debt Securities when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to the
issuance of temporary Debt Securities, registration of Debt Securities,
replacement of mutilated, destroyed, lost or stolen Debt Securities and
maintenance of an office or agency for payment and of money for security
payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Trustee's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the 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 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 Debt Securities. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "--Events
of Default and Remedies" will no longer constitute an Event of Default with
respect to the Debt Securities.
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 Debt Securities to be defeased, cash in U.S.
Dollars, non-callable Government Securities (as such term is defined in the
applicable Prospectus Supplement), 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 on the outstanding Debt Securities to be defeased (in the case of
Legal Defeasance) and all Debt Securities (in the case of Covenant
Defeasance) on the stated maturity or on the applicable redemption date, as
the case may be, and the Company must specify whether the Debt Securities are
being defeased to maturity or to a particular redemption date; (ii) in the
case of Legal Defeasance, the Company must deliver 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 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 Debt Securities to
be defeased 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 must deliver to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Debt Securities 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 with respect to the series to be defeased 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 is a party or by which the Company is bound; (vi) the Company must
have delivered to the Trustee an opinion of counsel to the effect that, as of
the date of such opinion, (A) the trust funds will not be subject to rights
of holders of Indebtedness other than the Debt Securities, 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 Debt Securities 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 (as such term is defined
in the applicable Indenture) stating that the deposit was not made by the
Company with the intent of preferring the Holders of Debt Securities over the
other creditors of the Company with the intent of defeating, hindering,
delaying or
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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
Unless otherwise provided in the Prospectus Supplement, a Holder may
transfer or exchange Debt Securities in accordance with the applicable
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 other government charges
required by law or permitted by the applicable Indenture. The Company is not
required to transfer or exchange any Debt Security selected for redemption.
Also, the Company is not required to transfer or exchange any Debt Security
for a period of 15 days before a selection of Debt Securities to be redeemed.
AMENDMENT, SUPPLEMENT AND WAIVER
Unless otherwise provided in the Prospectus Supplement and except as
provided in the next two succeeding paragraphs, the Indenture or the Debt
Securities may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of such Debt Securities then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Debt Securities),
and any existing default or compliance with any provision of the Indenture or
the Debt Securities may be waived with the consent of the Holders of a
majority in principal amount of such then-outstanding Debt Securities
(including consents obtained in connection with a purchase of, or tender
offer or exchange offer for, such Debt Securities).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Debt Securities held by a non-consenting Holder):
(i) reduce the principal amount of Debt Securities whose Holders must consent
to an amendment, supplement or waiver, (ii) reduce the principal of or change
the fixed maturity of any Debt Security or alter the provisions with respect
to the redemption of the Debt Securities (other than provisions relating to
repurchase at the option of the holder), (iii) reduce the rate of or change
the time for payment of interest on any Debt Security, (iv) waive a Default
or Event of Default in the payment of principal of or premium, if any, or
interest on the Debt Securities (except a rescission of acceleration of a
particular series of Debt Securities by the Holders of at least a majority in
aggregate principal amount of the outstanding Debt Securities of such series
and a waiver of the payment default that resulted from such acceleration),
(v) make any Debt Security payable other than as stated in the Debt
Securities, (vi) make any change in the provisions of the applicable
Indenture relating to waivers of past Defaults or the rights of Holders of
Debt Securities to receive payments of principal of or premium, if any, or
interest on the Debt Securities, (vii) waive a redemption payment with
respect to any Debt Security (other than a payment required pursuant to a
repurchase at the option of the holder) or (viii) make any change in the
foregoing amendment and waiver provisions. In addition, any amendment to (a)
any provisions of the applicable Indenture which relate to subordination and
(b) the any covenants relating to a repurchase at the option of the holder
including, in each case, the related definitions, will require the consent of
the Holders of at least 75% in aggregate principal amount of the Debt
Securities of such series then outstanding if such amendment would adversely
affect the rights of Holders of Debt Securities of such series.
Notwithstanding the foregoing, without the consent of any Holder of Debt
Securities, the Company and the Trustee may amend or supplement the Indenture
or the Debt Securities to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Debt Securities in addition to or in place of
certificated Debt Securities, to provide for the assumption of the Company's
obligations to Holders of Debt Securities in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Debt Securities or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to maintain the qualification of the
Indenture under the TIA.
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THE TRUSTEE
The Trustee for each series of Debt Securities will be identified in the
applicable Prospectus Supplement. Each Indenture will contain certain
limitations on the right of a Trustee thereunder, as 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 holders of a majority in principal amount of all outstanding Debt
Securities of a series (or if more than one series is affected thereby, of
all series so affected, voting as a single class) will have the right to
direct the time, method and place of conducting any proceeding for exercising
any remedy or power available to the Trustee for such series.
In case an Event of Default shall occur (and shall not be cured) under any
Indenture relating to a series of Debt Securities and is known to the Trustee
under such Indenture, such Trustee shall exercise such of the rights and
powers vested in it by such Indenture and use the same degree of care and
skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs. Subject to such provisions,
no Trustee will be under any obligation to exercise any of its rights or
powers under the applicable Indenture at the request of any of the Holders of
Debt Securities unless they shall have offered to such Trustee security and
indemnity satisfactory to it.
GOVERNING LAW
Unless otherwise stated in the applicable Prospectus Supplement, the
Indenture and the Debt Securities will be governed by the laws of the State
of New York.
BOOK-ENTRY, DELIVERY AND FORM
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a global Debt
Security (the "Global Debt Security") will be described in the Prospectus
Supplement relating to that series. The Company anticipates that the
following provisions will apply to all depositary arrangements.
Any such Global Debt Security will be deposited on the date of the closing
of the sale of such series of Debt Securities (each, a "Closing Date") with,
or on behalf of, The Depositary 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 Debt Security 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, 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 through the
Depositary's Participants or the Depositary's Indirect Participants.
Unless otherwise provided in the Prospectus Supplement, the Company
expects that pursuant to procedures established by the Depositary (i) upon
deposit of the Global Debt Security, the Depositary will credit the accounts
of Participants designated by the underwriters, if any, with portions of the
principal amount of the Global Debt Security and (ii) ownership of the Debt
Securities evidenced by the Global Debt Security will be shown on, and the
transfer of ownership thereof will be 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 securities that they own. Consequently, the ability to
transfer Debt Securities evidenced by the Global Debt Security will be
limited to such extent.
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So long as the Global Debt Security Holder is the registered owner of any
Debt Securities, the Global Debt Security Holder will be considered the sole
Holder under the Indenture of any series of Debt Securities evidenced by such
Global Debt Security. Beneficial owners of Debt Securities evidenced by such
Global Debt Security will not be considered the owners or Holders thereof
under the Indenture for any purpose, including with respect to the giving of
any directions, instructions or approvals to the Trustee thereunder. Neither
the Company nor the Trustee will 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 Debt Securities.
Payments in respect of the principal of, premium, if any, and interest on
any Debt Securities registered in the name of the Global Debt Security Holder
on the applicable record date will be payable by the Trustee to or at the
direction of the Global Debt Security Holder in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee may treat the persons in whose names Debt Securities,
including the Global Debt Security, are registered as the owners thereof for
the purpose of receiving such payments. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment
of such amounts to beneficial owners of Debt Securities. The Depositary will
credit 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 Debt Securities will be governed by standing
instructions and customary practice and will be the responsibility of the
Depositary's Participants or the Depositary's Indirect Participants.
Certificated Securities
Unless otherwise provided in the Prospectus Supplement, subject to certain
conditions, any person having a beneficial interest in the Global Debt
Security may, upon request to the Trustee, exchange such beneficial interest
for Debt Securities in the form of a definitive registered certificate
("Certificated Securities"). Upon any such issuance, the Trustee 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 Trustee 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 Trustee in writing that it elects to
cause the issuance of Debt Securities in the form of Certificated Securities
under the Indenture, then, upon surrender by the Global Debt Security Holder
of its Global Debt Security, Debt Securities in such form will be issued to
each person that the Global Debt Security Holder and the Depositary identify
as being the beneficial owner of the related Debt Securities.
Neither the Company nor the Trustee will be liable for any delay by the
Global Debt Security Holder or the Depositary in identifying the beneficial
owners of Debt Securities and the Company and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the Global
Debt Security Holder or the Depositary for all purposes.
Same-Day Settlement and Payment
Unless otherwise provided in the Prospectus Supplement, the Indenture will
require that payments in respect of the Debt Securities (excluding non-cash
payments in respect of PIK Debt Securities) represented by the Global Debt
Security (including principal, premium, if any, and interest) be made by wire
transfer of immediately available funds to the accounts specified by the
Global Debt Security Holder. Any series of Debt Securities represented by the
Global Debt Security are expected to trade in the Depositary's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in
such Debt Securities will, therefore, be required by the Depositary to be
settled in immediately available funds. The Company expects that any
secondary trading in the Certificated Securities will also be settled in
immediately available funds.
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DESCRIPTION OF EQUITY SECURITIES
GENERAL
The Certificate of Incorporation provides that the aggregate number of
shares of all classes of stock that the Company has authority to issue is
121,210,000 shares, consisting of 111,200,000 shares of common stock, par
value $.01 per share, and 10,010,000 shares of preferred stock, par value
$.01 per share. The Company's authorized shares of common stock consist of
100,000,000 shares of Class A Common Stock, 10,000,000 shares of Class B
Common Stock and 1,200,000 shares of Class C Common Stock, par value $.01 per
Share ("Class C Common Stock"). Of the Company's 10,010,000 authorized shares
of preferred stock, 4,000 shares have been designated as Series B Redeemable
Preferred Stock ("Series B Preferred Stock"), 2,000 shares have been
designated as Series C Redeemable Convertible Preferred Stock ("Series C
Preferred Stock") and 2,990,000 shares have been designated as 6 1/2% Series
D Cumulative Convertible Exchangeable Preferred Stock due May 31, 2007
("Series D Preferred Stock").
As of November 25, 1996, the issued and outstanding common stock and
preferred stock of the Company was approximately as follows:
<TABLE>
<CAPTION>
NUMBER OF
CLASS OF STOCK SHARES
- ------------------------ -----------
<S> <C>
Series B Preferred Stock 1,000
Series C Preferred Stock 2,000
Series D Preferred Stock 2,990,000
Class A Common Stock ... 8,063,347
Class B Common Stock ... 1,064,936
</TABLE>
All issued and outstanding shares are fully-paid and non-assessable.
The shares of Series B Preferred Stock are entitled to a liquidation
preference of $1,000 per share, ranking senior to the Company's common stock,
and are not entitled to receive dividends or to vote, except as otherwise
required by law. The Company is obligated to redeem the outstanding shares of
Series B Preferred Stock in October 1997 at a price per share equal to the
liquidation preference.
The shares of Series C Preferred Stock are entitled to a liquidation
preference of $1,000 per share and cumulative annual dividends of 6.0% of
their liquidation preference, as to both of which they rank senior to the
Company's common stock and the Series B Preferred Stock. The Series C
Preferred Stock does not have any voting rights, except as otherwise required
by law. The Company is entitled to redeem the Series C Preferred Stock prior
to September 1998, and the holders of Series C Preferred Stock are entitled
after September 2000 to cause the Company to purchase their Series C
Preferred Stock in whole or in part, at a price per share equal to the
liquidation preference, plus accrued and unpaid dividends. If an event of
default under the Certificate of Designations of the Series C Preferred Stock
occurs and is not timely cured, the holders of Series C Preferred Stock may
convert their shares into a number of shares of Class A Common Stock equal to
the quotient of (i) the number of shares of Series C Preferred Stock then
outstanding, divided by (ii) 75% of the average closing bid and ask price per
share of Class A Common Stock for the immediately prior 30-day period.
The shares of Series D Preferred Stock are entitled to a liquidation
preference of $50 per share and cumulative annual dividends of 6.5% of their
liquidation preference, as to both of which they rank senior to the Company's
common stock, the Series B Preferred Stock and the Series C Preferred Stock.
The Series D Preferred Stock does not have any voting rights, except as
required by law and except that, upon the Company's failure to meet certain
obligations to the holders of Series D Preferred Stock, the holders thereof
will be entitled to elect two additional members to the Company's Board of
Directors. The Series D Preferred Stock is subject to mandatory redemption in
May 2007, at a price per share equal to the liquidation preference, plus
accrued and unpaid dividends. The Series D Preferred Stock is redeemable at
the Company's option after June 1999 at the redemption prices set forth in
the Certificate of Designations of the Series D Preferred Stock. The holders
of Series D Preferred Stock may convert each such share into 1.0987 shares of
Class A Common Stock at any time prior to their redemption. At the
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Company's option, the Series D Preferred Stock is exchangeable into 6 1/2%
Convertible Subordinated Exchange Notes due 2007, which will contain
substantially the same terms, covenants and conditions as the Series D
Preferred Stock, as well as customary events of default provisions. Upon a
Change of Control (as defined in the Certificate of Designations of the
Series D Preferred Stock), the holders of Series D Preferred Stock may,
subject to certain conditions and restrictions, require the Company to
repurchase their shares at 101% of their liquidation preference, plus accrued
and unpaid dividends, payable in cash or in shares of Class A Common Stock.
The Certificate of Designations of the Series D Preferred Stock contains
certain convenants which, among other things, limit the ability of the
Company and its subsidiaries to engage in transactions with their affiliates.
PREFERRED STOCK
Terms
The following description of the Preferred Stock summarizes certain
general terms and provisions of each series of Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of a particular series
of Preferred Stock will be summarized in the Prospectus Supplement relating
to such series. The summaries of the terms of the Preferred Stock below and
in any Prospectus Supplement do not, and will not, purport to be complete and
are subject to, and qualified in their entirety by reference to, the
Company's Certificate of Incorporation (as it may be amended from time to
time) and the certificate of designations establishing a series of Preferred
Stock (each, a "Certificate of Designations"), which will be filed with the
Commission as an exhibit to or incorporated by reference in the Registration
Statement of which this Prospectus forms a part, at or prior to the time of
the issuance of such series of Preferred Stock.
The Board of Directors is authorized (without further stockholder action)
to provide for issuance of the Preferred Stock of the Company from time to
time, in one or more series, and to fix the dividend rate, conversion or
exchange rights, voting rights, terms of redemption, redemption price or
prices, liquidation preferences and qualifications, limitations and
restrictions thereof with respect to each series.
An applicable Prospectus Supplement will set forth or describe other
specific terms regarding each series of Preferred Stock offered thereby,
including, without limitation:
1. the title and stated value of such Preferred Stock;
2. the number of shares of such Preferred Stock offered, the liquidation
preference per share and the initial offering price of such Preferred Stock;
3. the dividend rate, period and/or payment date applicable to such
Preferred Stock;
4. the date from which dividends on such Preferred Stock shall accumulate,
if applicable;
5. whether the shares of Preferred Stock may be issued at a discount below
their liquidation preference ("Original Issue Discount Preferred Stock"), and
material United States federal income tax, accounting and other
considerations applicable to Original Issue Discount Preferred Stock.
6. whether the dividends, if any, on the Preferred Stock are to be
payable, at the election of the Company or a holder thereof, in cash or in
additional shares of Preferred Stock ("PIK Preferred Stock") and the period
or periods within which, and the terms and conditions upon which, such
election may be made, and material United States federal income tax,
accounting and other considerations applicable to such PIK Preferred Stock;
7. the provision for a sinking fund, if any, for such Preferred Stock;
8. the provision for redemption, if applicable, of such Preferred Stock;
9. any listing of such Preferred Stock on any securities exchange or any
quotation on an automated quotation system;
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10. the terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Class A Common Stock or exchangeable for Debt
Securities, including the conversion price or exchange rate, as the case may
be (or the manner of calculation thereof);
11. a discussion of federal tax considerations applicable to such
Preferred Stock;
12. the relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company;
13. any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series or Preferred Stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the affairs
of the Company;
14. the voting powers, if any, of such Preferred Stock, in addition to
those set forth below; and
15. any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
The Preferred Stock will have no preemptive rights. All of the Preferred
Stock, upon payment in full therefor, will be fully-paid and nonassessable.
Dividends
Unless otherwise set forth in an applicable Prospectus Supplement, the
holders of the Preferred Stock of each series shall be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of the
funds of the Company legally available therefor, dividends at such rate and
on such dates and on such terms as shall be set forth in the Prospectus
Supplement relating to such series. Different series of the Preferred Stock
may be entitled to dividends at different rates or based upon different
methods of determination. Such rate may be fixed or variable or both. Each
such dividend will be payable to the holders of record as they appear on the
stock books of the Company on such record dates as will be fixed by the Board
of Directors of the Company or a duly authorized committee thereof. Dividends
on any series of the Preferred Stock may be cumulative or noncumulative, as
provided in the Prospectus Supplement relating thereto.
Ranking
The Preferred Stock to which any Prospectus Supplement may relate, except
as set forth in such Prospectus Supplement, will rank junior in right of
payment to the Series D Preferred Stock of the Company as to dividends and
upon liquidation, dissolution or winding up of the Company. The Preferred
Stock will rank senior in right of payment to the Company's common stock as
to dividends and upon liquidation, dissolution or winding up of the Company,
except as set forth in the Prospectus Supplement relating thereto.
Conversion
The terms and conditions, if any, upon which any series of Preferred Stock
will be convertible into Class A Common Stock will be set forth in the
Prospectus Supplement relating thereto. Such terms will include the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
such series of Preferred Stock or at the option of the Company, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such series of Preferred Stock.
Exchange
The Prospectus Supplement may provide that the Company may, at its option,
exchange, in whole or in part, any series of Preferred Stock for Debt
Securities. The terms, notice and procedures for any such exchange will be
set forth in the applicable Prospectus Supplement.
Voting Rights
Unless otherwise provided in the applicable Prospectus Supplement, holders
of record of each series of Preferred Stock will have no voting rights,
except as required by law and as provided in the applicable Certificate of
Designations.
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Redemption Provisions
The Preferred Stock of each series will have such optional or mandatory
redemption terms, if any, as shall be set forth in the applicable Prospectus
Supplement.
Certain Covenants
The applicable Prospectus Supplement will describe any material covenants
in respect of any series of Preferred Stock.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for the
Preferred Stock will be designated in the applicable Prospectus Supplement.
The registrar for shares of Preferred Stock will send notices to stockholders
of any meetings at which holders of the Preferred Stock have the right to
elect directors of the Company or to vote on any other matter.
COMMON STOCK
Dividends
No dividends have ever been paid on the Company's common stock, and none
are anticipated to be paid in the foreseeable future. However, holders 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, unless the same dividend is simultaneously declared or
paid on each share of the other classes of common stock. In the case of any
stock dividend, holders of shares 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 shares of Class B Common Stock (payable in shares of
Class B Common Stock) and the holders of shares of Class C Common Stock
(payable in shares of Class C Common Stock). The Company's ability to pay
dividends is limited by the terms of its senior credit facility. See "Risk
Factors--Limitations on Ability to Pay Dividends."
Voting Rights
Holders 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 (currently three) of
the Company's directors (each, a "Class A Director"). 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 (as
defined in the Certificate of Incorporation). 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. 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.
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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. Except as required by
law, the holders of Class C Common Stock have no voting rights.
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of any class of common stock is required to approve,
among other things, a change in the designations, preferences or limitations
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 and Class C 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 and
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 (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 and Class C 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 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.
Transfer Agent and Registrar
The transfer agent and registrar for the Class A Common Stock and Class B
Common Stock is Chase Mellon Shareholder Services LLC.
The foregoing descriptions of the preferred stock and common stock are
summaries, and reference is herein made to the detailed provisions of the
Certificate of Incorporation (including, without limitation, the Certificate
of Designations relating to any series of preferred stock, filed hereafter
and incorporated by reference herein) and the Company's Bylaws, copies of
which are incorporated by reference herein.
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION, BYLAWS AND STATUTE
Limitation of Directors' Liability and Indemnification
The General Corporation Law of the State of Delaware (the "DGCL") 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 the DGCL. In addition, the
Certificate of Incorporation provides that if the DGCL 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 DGCL, as so amended. The effect of
this provision is to eliminate the rights of
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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. In addition, the Certificate of
Incorporation and the Bylaws provide for indemnification of directors by the
Company in certain circumstances.
Section 203 of the DGCL
The Company is subject to the "business combination" statute of the DGCL,
an anti-takeover law enacted in 1988. In general, Section 203 of the DGCL
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 a person became an "interested
stockholder," unless (i) 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," (ii)
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
shares outstanding those shares owned (1) by persons who are directors and
also officers and (2) 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 (iii) 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 66% 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 acquirers 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, 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 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
the
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Company's equity securities 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.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters, which may
include, without limitation, Goldman, Sachs & Co., Lehman Brothers Inc. and
BT Securities Corporation, for public offering and sale by them, and also may
sell Securities directly to investors or to other purchasers or through
dealers or agents. Any such underwriter, dealer or agent involved in the
offer and sale of the Securities will be named in an applicable Prospectus
Supplement.
The distribution of the Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Sales of Class A Common
Stock offered hereby may be effected from time to time in one or more
transactions on the Nasdaq National Market or in negotiated transactions or a
combination of such methods of sale.
In connection with distributions of Class A Common Stock or otherwise, the
Company may enter into hedging transactions with broker-dealers in connection
with which such broker-dealers may sell Class A Common Stock registered
hereunder in the course of hedging through short sales the positions they
assume with the Company.
In connection with the sale of Securities, underwriters, dealers or agents
may receive compensation from the Company or from purchasers of Securities
for whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents who participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Securities by them may be deemed to be underwriting discounts
and commissions, under the Securities Act. Any such underwriter, dealer or
agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement. Unless otherwise indicated
in a Prospectus Supplement, an agent will be acting on a best effort basis
and a dealer will purchase Securities as a principal, and may then resell
such Securities at varying prices to be determined by the dealer.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company against and contribution toward
certain civil liabilities, including liabilities under the Securities Act,
and to reimbursement by the Company for certain expenses.
If so indicated in a Prospectus Supplement, the Company will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase Securities from the Company at the public offering price set forth
in the Prospectus Supplement pursuant to delayed delivery contracts providing
for payment and delivery on a specified date in the future. Such contracts
will be subject to only those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission
payable for solicitation of such offers.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for the Company in the
ordinary course of business.
The Securities may or may not be listed on a national securities exchange
or quoted on an automated quotation system (other than the Class A Common
Stock, which is quoted on the Nasdaq National Market). Any Class A Common
Stock sold pursuant to a Prospectus Supplement will be listed on the Nasdaq
National Market, subject to official notice of issuance. Any underwriters to
whom Securities are
27
<PAGE>
sold by the Company for public offering and sale may make a market in such
Securities, but such underwriters will not be obligated to do so and may
discontinue any market-making activities at any time without notice. No
assurances can be given that there will be an active trading market for the
Securities.
Each of Goldman, Sachs & Co., Lehman Brothers Inc. and BT Securities
Corporation have provided, and continue to provide, investment banking
services to the Company for which they have received customary fees.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Baker & McKenzie, New York, New York. Mr. Tytel, 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 & 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. The validity of the Securities offered hereby will be
passed upon for any underwriters or agents by Latham & Watkins, New York, New
York.
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, the financial statements of KKRW-FM (a division of
CBS, Inc.) at December 31, 1995 and 1994, and for the years then ended, the
consolidated financial statements of MMR at December 31, 1995 and 1994, and
for the years then ended, the financial statements of WKSS 95.7-FM (a
division of Precision Media Corporation) at December 31, 1995 and 1994, and
for the years then ended and the financial statements of KTXQ-FM and KRRW-FM
(divisions of CBS Inc.) 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, 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, 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 financial statements of ABS Greenville Partners, L.P. at December 31,
1995, and for the year then ended, incorporated by reference herein, have
been audited by Cheely Burcham Eddins Rokenbrod & Carroll, independent
auditors, as set forth 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 financial statements of Texas Coast Broadcasters, Inc. at December 31,
1995 and 1994, and for the years then ended, incorporated by reference
herein, have been audited by Mohle, Adams, Till, Guidry & Wallace, LLP,
independent auditors, as set forth 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.
28
<PAGE>
The combined balance sheets of the Secret Communications Stations:
Cleveland, Ohio, Indianapolis, Indiana, and Pittsburgh, Pennsylvania at June
30, 1996 and 1995, and the related combined statements of operations and cash
flows for the year ended June 30, 1996, and the eleven-month period ended
June 30, 1995, 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.
29
<PAGE>
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH
THIS PROSPECTUS SUPPLEMENT RELATES, NOR DO THEY CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT UNAUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING 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 THE DATE HEREOF.
---------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Supplement
Certain Definitions and Market and Industry
Data .......................................... S-2
Summary ........................................ S-3
Risk Factors ................................... S-21
Capitalization ................................. S-26
Unaudited Pro Forma Condensed Combined
Financial Statements .......................... S-27
Management's Discussion and Analysis of
Financial Condition and Results of Operations S-45
Certain Relationships and Related Transactions S-52
Agreements Related to the Pending Acquisitions
and the Pending Dispositions .................. S-54
Description of Series E Preferred Stock ....... S-58
Certain Federal Income Tax Considerations ..... S-91
Underwriting ................................... S-98
Prospectus
Available Information .......................... 2
Incorporation by Reference ..................... 3
Risk Factors ................................... 4
The Company .................................... 10
Use of Proceeds ................................ 10
Ratios of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Stock Dividends ..................... 10
Description of Debt Securities ................. 11
Description of Equity Securities ............... 21
Plan of Distribution ........................... 27
Legal Matters .................................. 28
Experts ........................................ 28
</TABLE>
PROSPECTUS SUPPLEMENT
2,250,000 SHARES
SFX BROADCASTING, INC. [LOGO]
12 5/8% SERIES E CUMULATIVE
EXCHANGEABLE PREFERRED STOCK
BT SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
JANUARY 17, 1997
<PAGE>
SFX Broadcasting Inc. [LOGO]
For further information:
Timothy J. Klahs
Director, Investor Relations
SFX Broadcasting, Inc.
FOR IMMEDIATE RELEASE (212) 407-9126
SFX BROADCASTING COMPLETES SWAP OF DALLAS-BASED KRLD(AM) AND
TEXAS STATE NETWORKS FOR KKRW(FM) IN HOUSTON
NEW YORK, December 6, 1996 -- SFX Broadcasting, Inc. (NASDAQ: SFXBA) and CBS
Radio, a division of CBS, Inc., today jointly announced that they have
completed the exchange of their respective radio stations in Dallas and Houston
as outlined in the asset exchange agreement entered into on May 7, 1996. As a
result, SFX will acquire KKRW(FM) in exchange for KRLD(AM) and the Texas State
Networks.
In addition to KKRW(FM), SFX already owns KODA(FM), the number one ranking
station in Houston, which is the country's ninth largest metro market. The
company has also agreed to acquire KQUE(FM) and KNUZ(AM) in a separate
transaction expected to close in the first quarter of 1997.
Commenting on the exchange, Robert F. X. Sillerman, Executive Chairman of SFX
Broadcasting, said, " This transaction is a cooperative one benefitting both
CBS and SFX, and from our perspective we are very pleased to be adding KKRW to
our Houston roster. It is the number one ranking station among men, and when
joined with KODA, the top ranking station among women, will create a powerful
combination. The addition of this station will be an excellent complement to
our already solid position in the growing Houston market, and we look forward
to managing this dynamic station. We anticipate that the opportunities for
revenue generation and cost savings will be even further enhanced when we
complete the expected addition of our third and fourth stations in this market
during the next quarter."
With the anticipated consummation of all previously announced transactions, SFX
will own and operate or provide services to the following 78 radio stations in
23 markets:
- list of stations follows -
<PAGE>
Dallas, TX Greensboro, NC Tucson, AZ
KTXQ-FM*** WMAG-FM KWFM-FM
KRRW-FM*** WHSL-FM KRQQ-FM
Houston, TX WTCK-AM KNST-AM
KKRW-FM WMFR-AM KCEE-AM
KODA-FM Nashville, TN Springfield/Northampton,
KQUE-FM*** WSIX-FM MA
KNUZ-AM*** WRVW-FM WHMP-FM
San Diego, CA Raleigh-Durham, NC WPKX-FM
KPLN-FM WRSN-FM WHMP-AM
KYXY-FM WTRG-FM Witchita, KS
Pittsburgh, PA WDCG-FM KRZZ-FM
WDVE-FM*** WRDU-FM KKRD-FM
WXDX-FM*** Jacksonville, FL KNSS-AM
WDSY-FM*** WFYV-FM** New Haven, CT
WJJJ-FM*** WAPE-FM** WPLR-FM
Cleveland, OH WKQL-FM WYBC-FM*
WLTF-FM*** WIVY-FM Daytona Beach, FL
WTAM-AM*** WOKV-AM WGNE-FM
Providence, RI WBWL-AM Jackson, MS
WSNE-FM Richmond, VA WKTF-FM
WHJY-FM WMXB-FM WMSI-FM
WHJJ-AM WVGO-FM*** WSTZ-FM
Indianapolis, IN WLEE-FM*** WJDX-FM
WFBQ-FM*** WKHK-FM*** WJDS-AM
WRZX-FM*** WBZU-FM*** WZRX-AM
WNDE-AM*** Albany, NY Biloxi, MS
Charlotte, NC WGNA-FM WKNN-FM
WLYT-FM WPYX-FM WMJY-FM
WTDR-FM WTRY-FM
Hartford, CT WGNA-AM
WHCN-FM WTRY-AM
WMRQ-FM Greenville-Spartanburg, SC
WKSS-FM WMYI-FM
WWYZ-FM*** WSSL-FM
WPOP-AM WROQ-FM
WGVL-AM
* Joint Selling Agreement (JSA)
** Local Marketing Agreement (LMA) with a contract to acquire
*** Under contract to be acquired
Under contract to be sold or swapped by SFX are WHFM(FM), WBAB(FM), WBLI(FM)
and WGBB-AM in Long Island, NY; WHFS(FM) in Washington, DC/Baltimore,
MD;WYAK(FM) and WMYB(FM) in Myrtle Beach, SC; and KOLL(FM) in Little Rock, AR.
<PAGE>
SFX Broadcasting Inc. [LOGO]
For further information:
Timothy J. Klahs
Director, Investor Relations
SFX Broadcasting, Inc.
FOR IMMEDIATE RELEASE (212) 407-9126
SFX BROADCASTING COMPLETES ACQUISITION OF THIRD ALBANY FM STATION
NEW YORK, January 6, 1996 -- SFX Broadcasting, Inc. (NASDAQ: SFXBA) announced
today that it has completed its acquisition of radio station WYSR-FM serving
the Albany, New York market from Jarad Broadcasting Company of New York, Inc.
for $1.0 million.
In addition to this station, SFX owns WGNA-FM, WPYX-FM, WGNA-AM and WTRY-AM,
all serving Albany, which is the fifty-seventh largest metro market. SFX will
return the newly acquired station to its traditional '60s and early '70s oldies
format as well as bring back its simulcast with WTRY-AM, an arrangement that
was abandoned two years ago under Jarad ownership. In light of these changes,
the station will be re-christened WTRY-FM.
Commenting on the transaction, Robert F. X. Sillerman, Executive Chairman of
SFX Broadcasting, said, "With the completion of this transaction we anticipate
developing the full potential of this station and bringing its performance up
to the level of our other two successful FM stations, number one ranked WGNA
playing country music and number three ranked WPYX playing album oriented rock.
This group of three FM and two AM stations will offer advertisers an excellent
diversity of formats with which to target their audience."
With the anticipated consummation of all previously announced transactions, SFX
will own and operate or provide services to the following 78 radio stations in
23 markets:
- list of stations follows -
<PAGE>
Dallas, TX Greensboro, NC Tucson, AZ
KTXQ-FM*** WMAG-FM KWFM-FM
KRRW-FM*** WHSL-FM KRQQ-FM
Houston, TX WTCK-AM KNST-AM
KKRW-FM WMFR-AM KCEE-AM
KODA-FM Nashville, TN Springfield/Northampton,
KQUE-FM*** WSIX-FM MA
KNUZ-AM*** WRVW-FM WHMP-FM
San Diego, CA Raleigh-Durham, NC WPKX-FM
KPLN-FM WRSN-FM WHMP-AM
KYXY-FM WTRG-FM Witchita, KS
Pittsburgh, PA WDCG-FM KRZZ-FM
WDVE-FM*** WRDU-FM KKRD-FM
WXDX-FM*** Jacksonville, FL KNSS-AM
WDSY-FM*** WFYV-FM** New Haven, CT
WJJJ-FM*** WAPE-FM** WPLR-FM
Cleveland, OH WKQL-FM WYBC-FM*
WLTF-FM*** WIVY-FM Daytona Beach, FL
WTAM-AM*** WOKV-AM WGNE-FM
Providence, RI WBWL-AM Jackson, MS
WSNE-FM Richmond, VA WKTF-FM
WHJY-FM WMXB-FM WMSI-FM
WHJJ-AM WVGO-FM*** WSTZ-FM
Indianapolis, IN WLEE-FM*** WJDX-FM
WFBQ-FM*** WKHK-FM*** WJDS-AM
WRZX-FM*** WBZU-FM*** WZRX-AM
WNDE-AM*** Albany, NY Biloxi, MS
Charlotte, NC WGNA-FM WKNN-FM
WLYT-FM WPYX-FM WMJY-FM
WTDR-FM WTRY-FM
Hartford, CT WGNA-AM
WHCN-FM WTRY-AM
WMRQ-FM Greenville-Spartanburg, SC
WKSS-FM WMYI-FM
WWYZ-FM*** WSSL-FM
WPOP-AM WROQ-FM
WGVL-AM
* Joint Selling Agreement (JSA)
** Local Marketing Agreement (LMA) with a contract to acquire
*** Under contract to be acquired
Under contract to be sold or swapped by SFX are WHFM(FM), WBAB(FM), WBLI(FM)
and WGBB-AM in Long Island, NY; WHFS(FM) in Washington, DC/Baltimore,
MD;WYAK(FM) and WMYB(FM) in Myrtle Beach, SC; and KOLL(FM) in Little Rock, AR.
<PAGE>
SFX Broadcasting Inc. [LOGO]
For further information:
Timothy J. Klahs
Director, Investor Relations
SFX Broadcasting, Inc.
FOR IMMEDIATE RELEASE (212) 407-9126
SFX BROADCASTING COMPLETES ACQUISITION
OF LEADING CONCERT PROMOTION/PRODUCTION COMPANY
NEW YORK, January 7, 1997 -- SFX Broadcasting, Inc. (NASDAQ: SFXBA) today
announced that it has completed its acquisition of privately-owned
Delsener/Slater Enterprises, Ltd. for approximately $20 million of cash, plus
$4 million of future payments. The cash portion of the transaction was provided
by existing cash reserves of the company and by borrowing on its $225 million
line of credit, which remains substantially undrawn.
Based in New York City and founded in 1966, Delsener/Slater is a leading
promoter of contemporary music concerts and one of the nation's five largest
concert production companies. It has produced more outdoor concert events than
any other company in the United States, and it maintains long-term exclusive
rights to several important promotional venues. Delsener/Slater is now an
independent division of SFX and will retain its current name, management and
corporate location.
Commenting on the transaction, Robert F. X. Sillerman, Executive Chairman of
SFX Broadcasting, Inc., said, "The completion of this transaction represents
the start of an exciting new chapter for the combined companies. The
traditional ability of SFX to broadcast recorded music over our radio stations
combined with our new delivery channel for live musical entertainment creates
many exciting promotional opportunities. Each of the entities will benefit from
its association with a premier name in a closely related area of the music
business, but the benefits go beyond mere association. Delsener/Slater will
have the opportunity to extend its geographical reach beyond the Northeast,
where it has historically operated, and deliver its promotional efforts over a
nationwide system of radio stations. For its part, SFX will now be able to
further strengthen its listenership with the added dimension of providing those
listeners with the fresh excitement of concert promotion."
With the anticipated consummation of all previously announced transactions, SFX
will own and operate or provide services to the following 78 radio stations in
23 markets:
- list of stations follows -
<PAGE>
Dallas, TX Greensboro, NC Tucson, AZ
KTXQ-FM*** WMAG-FM KWFM-FM
KRRW-FM*** WHSL-FM KRQQ-FM
Houston, TX WTCK-AM KNST-AM
KKRW-FM WMFR-AM KCEE-AM
KODA-FM Nashville, TN Springfield/Northampton,
KQUE-FM*** WSIX-FM MA
KNUZ-AM*** WRVW-FM WHMP-FM
San Diego, CA Raleigh-Durham, NC WPKX-FM
KPLN-FM WRSN-FM WHMP-AM
KYXY-FM WTRG-FM Witchita, KS
Pittsburgh, PA WDCG-FM KRZZ-FM
WDVE-FM*** WRDU-FM KKRD-FM
WXDX-FM*** Jacksonville, FL KNSS-AM
WDSY-FM*** WFYV-FM** New Haven, CT
WJJJ-FM*** WAPE-FM** WPLR-FM
Cleveland, OH WKQL-FM WYBC-FM*
WLTF-FM*** WIVY-FM Daytona Beach, FL
WTAM-AM*** WOKV-AM WGNE-FM
Providence, RI WBWL-AM Jackson, MS
WSNE-FM Richmond, VA WKTF-FM
WHJY-FM WMXB-FM WMSI-FM
WHJJ-AM WVGO-FM*** WSTZ-FM
Indianapolis, IN WLEE-FM*** WJDX-FM
WFBQ-FM*** WKHK-FM*** WJDS-AM
WRZX-FM*** WBZU-FM*** WZRX-AM
WNDE-AM*** Albany, NY Biloxi, MS
Charlotte, NC WGNA-FM WKNN-FM
WLYT-FM WPYX-FM WMJY-FM
WTDR-FM WTRY-FM
Hartford, CT WGNA-AM
WHCN-FM WTRY-AM
WMRQ-FM Greenville-Spartanburg, SC
WKSS-FM WMYI-FM
WWYZ-FM*** WSSL-FM
WPOP-AM WROQ-FM
WGVL-AM
* Joint Selling Agreement (JSA)
** Local Marketing Agreement (LMA) with a contract to acquire
*** Under contract to be acquired
Under contract to be sold or swapped by SFX are WHFM(FM), WBAB(FM), WBLI(FM)
and WGBB-AM in Long Island, NY; WHFS(FM) in Washington, DC/Baltimore,
MD;WYAK(FM) and WMYB(FM) in Myrtle Beach, SC; and KOLL(FM) in Little Rock, AR.
