<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT JUNE 30, 1998
(Date of earliest event reported -- June 15, 1998)
REGENT COMMUNICATIONS, INC.
(Exact name of registrant as specified in charter)
DELAWARE 333-46435 31-1492857
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
50 EAST RIVERCENTER BOULEVARD
SUITE 180
COVINGTON, KENTUCKY 41011
(Address of principal executive offices)
(606) 292-0030
(Registrant's telephone number, including area code)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On June 15, 1998, Regent Communications, Inc. (the "Company") acquired
control of 31 radio stations located in California, Arizona, Michigan and Ohio
through acquisitions of assets or stock for cash or by way of merger
transactions. The cash needed for these transactions was provided by bank
financing from the Company's senior credit facility with Bank of Montreal,
Chicago Branch, General Electric Capital Corporation and Bank One, Indianapolis,
NA, and by the proceeds from the sale of shares of the Company's convertible
preferred stock, most of which having full voting rights. Additional shares of
the Company's convertible preferred stock with full voting rights were issued in
the merger transactions.
Prior to these transactions, approximately 51.5% of the Company's
outstanding voting stock was held by Terry S. Jacobs. As a result of these
transactions, Mr. Jacobs now holds approximately 5.8% of the outstanding voting
stock of the Company. The Company's voting stock is now dispersed among numerous
stockholders with no single stockholder holding a majority. The Company's
largest single stockholder is Blue Chip Capital Fund II Limited Partnership
("Blue Chip"), which holds 1,702,718 shares of the Series C Convertible
Preferred Stock of the Company, representing approximately 23% of the Company's
outstanding voting stock. John H. Wyant is a beneficial owner and manager of the
general partner of Blue Chip as well as a beneficial owner and manager of the
general partner of Miami Valley Venture Fund L.P. ("Miami Valley"), which holds
300,479 shares of the Series C Convertible Preferred Stock of the Company. All
of these shares of Series C Convertible Preferred Stock were issued in exchange
for shares of common stock of Faircom Inc. in the merger of Faircom Inc. with
the Company on June 15, 1998. See Item 2 below. The Faircom Inc. common stock
was acquired by Blue Chip and Miami Valley upon conversion prior to the merger
of $7,500,000 in principal amount of subordinated notes of Faircom Inc.
Together, Blue Chip and Miami Valley hold approximately 27% of the Company's
outstanding voting stock.
The Company's next largest stockholder is Waller-Sutton Media Partners,
L.P. ("Waller-Sutton"), which purchased on June 15, 1998 1,000,000 shares of the
Series F Convertible Preferred Stock of the Company for $5,000,000 and acquired
an additional 400,640 shares of the Series C Convertible Preferred Stock of the
Company by having purchased for $1,500,000 certain subordinated notes of Faircom
Inc. which were ultimately converted into the Company's Series C Convertible
Preferred Stock in the merger of Faircom with the Company. See Item 2 below.
Waller-Sutton is managed by Waller-Sutton Management Group, Inc., of which
William H. Ingram is Chairman of the Board of Directors. Mr. Ingram holds
personally 50,000 shares of the Series F Convertible Preferred Stock of the
Company which he acquired on June 15, 1998 at $5.00 per share. These combined
holdings of Waller-Sutton and Mr. Ingram constitute approximately 19.5% of the
outstanding voting shares of the Company, not including warrants held by
Waller-Sutton and Mr. Ingram to purchase a total of 660,000 shares of the
Company's common stock for $5.00 per share. The exercise of these warrants could
increase Waller-Sutton's and Mr. Ingram's combined voting interest in the
Company to approximately 26%. Waller-Sutton and Mr. Ingram have agreed, subject
to certain conditions, to purchase an additional 1,050,000 shares of the Series
F Convertible Preferred Stock of the Company at $5.00 per share to finance
future acquisitions. Should this purchase occur, Waller-Sutton's and Mr.
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Ingram's combined voting interest in the Company, assuming exercise of their
warrants in full, could increase to approximately 30.7%.
In conjunction with these transactions, holders of approximately 82% of
the outstanding voting stock of the Company entered into a Second Amended and
Restated Stockholders' Agreement (the "Stockholders' Agreement") by which the
parties to the Stockholders' Agreement agreed to vote all of their shares for
the election of a specific group of seven individuals (to be identified from
time to time) as the Board of Directors of the Company. Initially, this group
will consist of Terry S. Jacobs, William L. Stakelin, Joel M. Fairman, William
H. Ingram, Richard Patterson, R. Glen Mayfield, and John H. Wyant, and the
voting agreements contained in the Stockholders' Agreement will assure their
election. These voting agreements are to remain in effect until the Company has
completed an underwritten public offering of the Company's common stock at not
less than $12.00 per share (equitably adjusted for any stock splits, reverse
stock splits, or stock dividends) and generating not less than $25,000,000 of
gross proceeds to the Company (excluding the effect of any over-allotment
option).
Under the terms of the Stockholders' Agreement, the Company has agreed
that, for so long as Waller-Sutton and the other purchasers of the Series F
Convertible Preferred Stock of the Company, and their permitted transferees, own
10% or more of the voting stock of the Company, the Company may not take or
permit to occur (and the parties to the Stockholders' Agreement will not consent
to, authorize or vote for) any of the following events or actions, unless such
has been approved in advance, in writing, by Waller-Sutton:
(a) any merger or consolidation of the Company with any other
entity, and any merger or consolidation of any subsidiary of the Company with
any other entity other than the Company or another wholly-owned subsidiary of
the Company;
(b) the purchase or lease by the Company or any subsidiary
thereof of any business or assets, other than the purchase or lease of assets in
the ordinary course of business (not to include the purchase or lease of any
radio broadcasting station or Federal Communications Commission ("FCC")
license), or the execution of any agreement providing for the purchase, lease,
construction or management of or in respect of radio broadcasting stations
(including time brokerage agreements and local marketing agreements and the
like);
(c) the sale of any assets of the Company or any subsidiary
thereof, or the execution of any agreement in respect thereof (other than the
sale of advertising time and excess or obsolete furniture, fixtures or equipment
in the ordinary course of business);
(d) the issuance or sale of any equity or debt securities of
the Company or any subsidiary thereof or any rights to acquire any of such
equity or debt securities (including options and warrants) or the issuance or
sale of stock appreciation or other "phantom" stock rights, other than permitted
issuances pursuant to existing agreements, or the execution of any agreements in
respect thereof;
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(e) the incurrence or assumption of any indebtedness for
borrowed money, secured by a lien, or pursuant to guaranties by the Company or
any subsidiary thereof, other than indebtedness permitted under the Company's
current senior debt facility;
(f) any change of control of the Company;
(g) any amendment to the Company's 1998 Management Stock
Option Plan or the adoption of any other stock option, stock purchase or
restricted stock appreciation right plan;
(h) any amendment to the Amended and Restated Certificate of
Incorporation or By-Laws of the Company;
(i) the execution by the Company or any party to the
Stockholders' Agreement of any voting, voting trust, registration rights or
stockholders agreements with respect to the Company or any of its shares of
capital stock (other than the Stockholders' Agreement and a Registration Rights
Agreement of even date therewith); or
(j) the execution by the Company of any contract or agreement
for the construction or management of radio stations.
The Stockholders' Agreement also provides for the obligation of the
Company to repurchase shares of the Company's convertible preferred stock held
by the parties to the Stockholders' Agreement after five years from date of
issuance if Waller-Sutton requests that the Company repurchase the Eligible Put
Shares (as defined therein) held by Waller-Sutton. In the event the Company
should fail to repurchase such shares within the time requirements set forth in
the Stockholders' Agreement (from a minimum of six months to as long as one
year, depending on the circumstances), Waller-Sutton would have the right under
the Stockholders' Agreement to require the election of such additional designees
of Waller-Sutton to the Board of Directors of the Company such that, after
giving effect thereto, the designees of Waller-Sutton elected to the Board under
the terms of the Stockholders' Agreement would constitute a majority of the
members of the Board. The exercise of such "put" rights could likely result in a
change of control of the Company.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 15, 1998, the Company consummated the following acquisitions:
1. The Company acquired all of the outstanding capital stock of Faircom
Inc., a Delaware corporation ("Faircom"), which, through its wholly-owned
subsidiaries, owns radio stations WFNT(AM) and WCRZ(FM) in Flint, Michigan;
WWBN(FM) in Tuscola, Michigan, a community north of Flint; WMAN(AM) and WYHT(FM)
in Mansfield, Ohio and WSWR(FM) in Shelby, Ohio, adjoining Mansfield. The
acquisition was accomplished by a merger of Faircom with and into Regent Merger
Corp., a wholly-owned subsidiary of the Company. The consideration paid to the
Faircom stockholders for the Faircom stock was 3,720,796 shares of the Company's
Series C Convertible Preferred Stock (stated value $5.00 per share). Options
outstanding at the time of the merger for the purchase of shares of Faircom's
common stock were
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converted at the time of the merger into options for the purchase, on equivalent
terms, of 274,045 shares of Regent's Series C Convertible Preferred Stock. Upon
consummation of the merger, Joel M. Fairman, President of Faircom, became a Vice
Chairman and a Director of the Company, and the Company entered into an
agreement with Mr. Fairman providing for a two-year employment period and a
one-year consulting period, with annual compensation of $190,000, discretionary
annual bonuses, discretionary stock option awards, ownership of a term life
insurance policy paid for by the Company, an automobile allowance and certain
other benefits. John H. Wyant, an affiliate of Faircom's largest stockholder at
the time of the merger, became a director of the Company upon consummation of
the merger.
2. The Company acquired all of the outstanding capital stock of The
Park Lane Group, a California corporation which, through its wholly-owned
subsidiaries, owns radio stations KQMS(AM) and KSHA(FM) in Redding, California;
KPPL(FM), KFMF(FM) and KALF(FM) in Chico, California; KVOY(AM) and KTPI(FM) in
Palmdale, California; KROY(AM) and KATJ(FM) in Victorville, California; KAAA(AM)
and KZZZ(FM) in Kingman, Arizona; KOWL(AM) and KRLT(FM) in Lake Tahoe,
California; and KVNA(AM), KVNA(FM) and KZGL(FM) in Flagstaff, Arizona. The
purchase price for the stock was $17,467,737, paid in cash to the stockholders
of The Park Lane Group. In addition, at the time of the acquisition, the Company
entered into a one-year Consulting and Non-Competition Agreement with James H.
Levy, the President of The Park Lane Group, providing for the payment of a
consulting fee of $200,000 to Mr. Levy.
3. The Company acquired all of the outstanding capital stock of Alta
California Broadcasting, Inc. ("Alta") by virtue of a merger of Alta with and
into Regent Acquisition Corp., a wholly-owned subsidiary of the Company. The
purchase price for the stock was $2,000,000, paid in the form of $1,000,000 in
cash and 200,000 shares of the Company's Series E Convertible Preferred Stock
(stated value $5.00 per share). Of the 200,000 shares of Series E Convertible
Preferred Stock, 194,750 shares were issued to the seller, Redwood Broadcasting,
Inc.(of which 20,000 shares are currently being held in escrow pursuant to an
indemnification agreement between the Company and the seller), and 5,250 shares
were issued to Miller Capital Corp. as partial payment of commissions due and
payable to it by the seller. Prior to the merger, Alta was the owner, operator
and licensee of radio station KDRG(FM) in Shingleton, California and, through
its subsidiary, Northern California Broadcasting, Inc., KNNN(FM) in Central
Valley, California. Prior to the merger, Alta also acquired from Power Surge,
Inc., an affiliate of Alta, all of the assets used in the operation of radio
stations KRRX(FM) (formerly KARZ(FM)) in Burney, California and KNRO(AM) in
Redding, California.
4. The Company (through Regent Broadcasting of Kingman, Inc., a
wholly-owned subsidiary of the Company, and its wholly-owned subsidiary, Regent
Licensee of Kingman, Inc.) acquired from Continental Radio Broadcasting, L.L.C.
the FCC licenses and related assets used in the operation of radio stations
KFLG-AM and KFLG-FM in Bullhead City, Arizona. The purchase price for these
assets (other than the accounts receivable) was approximately $3,622,000 in
cash. The Company separately acquired the accounts receivable of these stations
for an additional cash purchase price of approximately $130,000.
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5. The Company acquired all of the outstanding capital stock of Topaz
Broadcasting, Inc. ("Topaz") by virtue of a merger of Topaz with and into Regent
Broadcasting of Victorville, Inc., a wholly-owned subsidiary of the Company
("Regent-Victorville"). Immediately following the merger, Regent-Victorville
acquired the assets used in the operation of radio station KIXA(FM) in Lucerne
Valley, California pursuant to an Asset Purchase Agreement between Topaz and
RASA Communications Corp. The consideration paid for the Topaz stock was 242,592
shares of the Company's Series E Convertible Preferred Stock (stated value $5.00
per share).
6. The Company acquired, through Regent Broadcasting of Victorville,
Inc., a wholly-owned subsidiary of the Company, and Regent Licensee of
Victorville, Inc., its wholly-owned subsidiary, the FCC licenses and related
assets used in the operation of radio stations KIXW(AM) and KZXY(FM) in Apple
Valley, California. The purchase price for these stations was $5,995,500 in
cash.
The terms of each of the foregoing acquisitions were arrived at and
agreed upon through arms' length negotiations between the parties. The Company
intends to continue to use the assets acquired in the foregoing acquisitions in
a manner consistent with their use prior to their acquisition by the Company.
The sources for the cash portion of the consideration paid by the
Company in the foregoing transactions, aggregating approximately $53,030,000
(including approximately $4,000,000 of transaction costs) were $34,400,000
borrowed under the Company's Credit Agreement with Bank of Montreal, Chicago
Branch, General Electric Capital Corporation and Bank One, Indianapolis, NA
("Credit Agreement"), $18,250,000 in additional equity from the sale of the
Company's convertible preferred stock, and approximately $380,000 of Company
funds. See Item 5 below.
ITEM 5. OTHER EVENTS.
New Debt
In order to finance the foregoing acquisitions and to provide
additional working capital, the Company borrowed $34,400,000 under its Credit
Agreement on June 15, 1998.
Additional Equity Capitalization.
On June 15, 1998, the Company issued additional equity as follows, the
proceeds of which were used to fund the Company's acquisitions completed on that
date:
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1. The Company issued to the purchasers set forth below a total of
2,050,000 shares of its Series F Convertible Preferred Stock at a purchase price
of $5.00 per share, and in conjunction therewith, issued to such purchasers
warrants to purchase a total of 860,000 shares of the Company's Common Stock at
$5.00 per share.
<TABLE>
<CAPTION>
Number of Shares Number of Warrants
Name of Purchaser Purchased Received
<S> <C> <C>
Waller-Sutton Media Partners, L.P. 1,000,000 650,000
WPG Corporate Development
Associates V, L.P. 562,900 112,580
WPG Corporate Development
Associates (Overseas) V, L.P. 87,100 17,420
General Electric Capital Corporation 250,000 50,000
River Cities Capital Fund Limited
Partnership 100,000 20,000
William H. Ingram 50,000 10,000
</TABLE>
These purchasers also have committed to purchase, on a pro rata basis, an
additional 2,050,000 shares of the Company's Series F Convertible Preferred
Stock at $5.00 per share to fund future acquisitions by the Company.
In addition, Waller-Sutton purchased $1,500,000 of certain Class A and
Class B Faircom Subordinated Notes from Blue Chip and Miami Valley, which were
converted into shares of Faircom's common stock and then exchanged in the merger
of Faircom and Regent Merger Corp. for 400,640 shares of the Company's Series C
Convertible Preferred Stock.
2. General Electric Capital Corporation ("GE Capital") paid $3,900,000
cash to complete its purchase of shares of the Company's Series B Senior
Convertible Preferred Stock, pursuant to the terms of its Stock Purchase
Agreement and Promissory Note dated December 8, 1997. In addition, the Company
issued to GE Capital a warrant to purchase 50,000 shares of the Company's Common
Stock at $5.00 per share.
3. BMO Financial, Inc. paid $3,900,000 cash for 780,000 shares of the
Company's Series D Convertible Preferred Stock.
4. William L. Stakelin, a member of the Company's Board of Directors,
as well as its President, Chief Operating Officer and Secretary, purchased
20,000 shares of the Company's Series A Convertible Preferred Stock at a
purchase price of $5.00 per share.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Pursuant to generally accepted accounting principles, Faircom
Inc. was deemed the "accounting acquirer" in the merger that was consummated on
June 15, 1998 between Faircom
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Inc. and the Company and, thus, the historical financial statements of Faircom
Inc. have become the historical financial statements of the Company. The Form
10-K of Faircom Inc. for the year ended December 31, 1997 and the Form 10-Q of
Faircom Inc. for the quarter ended March 31, 1998, including all exhibits
thereto, as filed with the Securities and Exchange Commission on March 30, 1998
and May 14, 1998, respectively, are incorporated herein by this reference.
The Company is not filing the financial statements required by
this Item 7(a) with this initial report. The Company intends to file such
financial statements by amendment not later than 60 days after the date that the
initial report on Form 8-K must be filed.
(b) PROFORMA FINANCIAL INFORMATION.
The Company is not filing the pro forma financial information
required by this Item 7(b) with this initial report. The Company intends to file
such pro forma financial information by amendment not later than 60 days after
the date that the initial report on Form 8-K must be filed.
(c) EXHIBITS.
The Exhibit Index following the signature page hereof constitutes a
list of all Exhibits filed with or incorporated by reference in this Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REGENT COMMUNICATIONS, INC.
Date: June 30, 1998 By: /s/ TERRY S. JACOBS
------------------------------------
Terry S. Jacobs, Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
The following exhibits are filed, or incorporated by reference where
indicated, as part of this Current Report of Form 8-K:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
2(a)* Agreement of Merger among Faircom Inc., Regent Merger Corp.,
Regent Communications, Inc., Blue Chip Capital Fund II Limited
Partnership and Miami Valley Venture Fund L.P. dated as of
December 5, 1997, as amended (previously filed as Exhibit 2(a)
to the Registrant's Form S-4 Registration Statement No.
333-46435 effective May 7, 1998 and incorporated herein by
this reference).
The following exhibits to the foregoing Agreement of Merger
are omitted as not material; the Company will furnish
supplementally a copy of any omitted schedule to the
Commission upon request:
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
1(j) Faircom Licenses
1(k) Faircom Senior Debt
1(x) Form of Amended and Restated Certificate of Incorporation of Regent
Communications, Inc.
1(bb) Regent Licenses
1(ff) Regent Subsidiaries
4(a) Certificate of Incorporation of Subsidiary
4(b) By-Laws of Subsidiary
10(a) Form of Regent Option Agreement
12B Rule 145 Letter
13(b)(3) Form of Redemption and Warrant Agreement
21(a) Capital Stock of Faircom Subsidiaries
21(b) Faircom Options
21(f) Faircom Affiliates
21(g) Rights to Acquire Securities (Faircom)
21(i) Title to Faircom Broadcast Assets
21(k-1) Faircom Contracts
21(m-1) Faircom Key Employees
21(m-2) Faircom Accounts and Safe Deposit Boxes
21(o) Faircom Related Transactions
21(p) Faircom Taxes
21(q) Faircom Employee Benefit Plans
21(r) Faircom Compliance with Commission Regulations
21(s) Faircom Tangible Personal Property
21(t) Faircom Real Property
21(u) Faircom Environmental
</TABLE>
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<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
21(v) Faircom Insurance
21(bb) Faircom Litigation
21(ee) Faircom Intellectual Property
21(hh) Certain Changes (Faircom)
21(ii) Faircom Personnel
21(kk) Faircom Outstanding Debt
22(a) Information Regarding Regent Subsidiaries
22(f) Regent Affiliates
22(g) Rights to Acquire Securities (Regent)
22(i) Title to Regent Assets
22(k-1) Regent Contracts
22(m-1) Regent Key Employees
22(o) Regent Related Transactions
22(p) Regent Taxes
22(q) Regent Employee Benefit Plans
22(r) Regent Compliance with Commission Regulations
22(s) Regent Tangible Personal Property
22(t) Regent Real Property
22(u) Regent Environmental
22(v) Regent Insurance
22(bb) Regent Litigation
22(dd) Regent Required Consents
22(ee) Regent Intellectual Property
22(hh) Certain Changes (Regent)
22(ii) Regent Personnel
22(kk) Regent Outstanding Debt
22(ll) Exceptions to Negative Covenants
27c) Form of Opinion of Fulbright & Jaworski L.L.P.
28(b) Form of Opinion of Strauss & Troy
34 Form of Employment Agreement
</TABLE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
2(b)* Agreement of Merger dated as of December 17, 1997 among Regent
Communications, Inc., Regent Broadcasting of Victorville, Inc.
and Topaz Broadcasting, Inc. (previously filed as Exhibit 2(b)
to the Registrant's Form S-4 Registration Statement No.
333-46435 effective May 7, 1998 and incorporated herein by
this reference).
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The following schedules to the foregoing Agreement of Merger
are omitted as not material; the Company will furnish
supplementally a copy of any omitted schedule to the
Commission upon request:
Schedule Description
1(c)(ix) Excluded Assets
1(f) Attributes of Series E Preferred Stock
20(f) Interests in Other Businesses
20(g) Rights to Acquire Securities
20(j) Financials
20(k-1) Contracts
20(k-2) Trade Agreements
20(m-1) Employees with Annual Compensation over
$20,000
20(m-2) Topaz Bank Accounts
20(o) Debts and Obligations to Stockholder
20(p) Tax Exceptions
20(q) Employee Benefit Plans and Other
Arrangement
20(s) Tangible Personal Property
20(t) Environmental
20(u) Insurance
20(v) Compliance with Law
20(z) Litigation
20(cc) Intellectual Property
20(ff) Employees
20(gg) Debt of Topaz
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
2(c)* Asset Purchase Agreement dated December 17, 1997 between
Regent Broadcasting of Victorville, Inc. and Ruby
Broadcasting, Inc. (previously filed as Exhibit 2(c) to the
Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
The following schedules to the foregoing Asset Purchase
Agreement are omitted as not material; the Company will
furnish supplementally a copy of any omitted schedule to the
Commission upon request:
Schedule Description
1.2.9 Miscellaneous Excluded Assets
7.4 FCC Licenses and Exceptions
7.7 Personal Property
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Schedule Description
7.8 Leases and Real Property Exceptions
7.9 Assumed Contracts
7.11 Environmental Matters
7.12 Intellectual Property
7.13 Financial Statements
7.14 Employees
7.15 Litigation
7.16 Compliance with Law
7.17 Employee Benefit Plans and Other Arrangements
7.19 Changes Not in the Ordinary Course
A Deposit Escrow Agreement
B Time Brokerage Agreement
C Assignment and Assumption Agreement
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
2(d)* Asset Purchase Agreement dated December 9, 1997 between Regent
Broadcasting of Kingman, Inc. and Continental Radio
Broadcasting, L.L.C. (previously filed as Exhibit 2(d) to the
Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
The following schedules and exhibits to the foregoing Asset
Purchase Agreement are omitted as not material; the Company
will furnish supplementally a copy of any omitted schedule to
the Commission upon request:
Schedule Description
1.2.9 Miscellaneous Excluded Assets
7.4 Stations Licenses, Etc.
7.7 Tangible Personal Property
7.8 Real Property
7.9 Contracts (including identification
of Material Contracts)
7.11 Environmental Matters
7.12 Intellectual Property
7.13 Financial Statements
7.14 Personnel Information
7.15 Litigation
7.16 Compliance With Laws
7.17 Employee Benefit Plans
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Exhibit Description
A Indemnification Escrow Agreement
B Deposit Escrow Agreement
C Agreement re Allocation of Purchase Price
D Assignment and Assumption Agreement
E Opinion of Seller's Corporate Counsel
F Opinion of Seller's FCC Counsel
G Opinion of Buyer's Counsel
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
2(e)* Stock Purchase Agreement dated as of June 16, 1997 among
Regent Communications, Inc. and the shareholders of The Park
Lane Group, as amended (previously filed as Exhibit 2(e) to
the Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
The following exhibits to the foregoing Stock Purchase
Agreement are omitted as not material; the Company will
furnish supplementally a copy of any omitted schedule to the
Commission upon request:
Exhibit Description
A Deposit Escrow Agreement
C Opinion of Counsel for Sellers
D Form of FCC Opinion
E Opinion of Counsel for Buyer
F Consulting and Non-Competition Agreement
G Time Brokerage Agreement
H Required Consents
2(f)* Agreement of Merger among Alta California Broadcasting, Inc.,
Regent Acquisition Corp. and Regent Communications, Inc. dated
October 10, 1997 (previously filed as Exhibit 2(f) to the
Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
The following exhibits to the foregoing Agreement of Merger
are omitted as not material; the Company will furnish
supplementally a copy of any omitted schedule to the
Commission upon request:
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Exhibit Description
1(c)(x) Exceptions to Broadcast Assets
1(d) Consolidated 1997 Budget Projections
1(k) Licenses
20(f) Affiliates of Alta
20(g) Exceptions to Rights to Acquire Securities
20(i) Exceptions to Title to Broadcast Assets
20(k-1) List of Contracts Relative to the Stations
20(k-2) List of Balances of Trade Accounts
20(k-3) Percentages
20(m-1) Employees exceeding $20,000
20(m-2) Bank Accounts of Alta
20(o) Related Transactions
20(p) Taxes
20(q) Employee Benefit Plans
20(x) Compliance with FCC Regulations
20(s) Personal Property
20(t) Real Property
20(u) Environmental Matters
20(v) Insurance
20(bb) Litigation
20(ee) Intellectual Property
20(ii) Personnel Information
20(jj) Outstanding Debt
20(kk) Certain Negative Convenants
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
4(a) Amended and Restated Certificate of Incorporation of Regent
Communications, Inc.
4(b)* Amended and Restated By-Laws of Regent Communications, Inc.
(previously filed as Exhibit 3(b) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(c) Second Amended and Restated Stockholders' Agreement dated as
of June 15, 1998 among Regent Communications, Inc., Terry S.
Jacobs, William L. Stakelin, Waller-Sutton Media Partners,
L.P., William H. Ingram, WGP Corporate Development Associates
V, L.P., WGP Corporate Development Associates (Overseas) V,
L.P., River Cities Capital Fund Limited Partnership, BMO
Financial, Inc., General Electric Capital Corporation, Joel M.
Fairman, Miami Valley Venture Fund II Limited Partnership, and
Blue Chip Capital Fund II Limited Partnership (excluding
exhibits not deemed material or filed separately in executed
form).
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EXHIBIT
NUMBER EXHIBIT DESCRIPTION
4(d) Stock Purchase Agreement dated June 15, 1998 among Regent
Communications, Inc., Waller-Sutton Media Partners, L.P., WPG
Corporate Development Associates V, L.P., WPG Corporate
Development Associates (Overseas) V, L.P., General Electric
Capital Corporation, River Cites Capital Fund Limited
Partnership and William H. Ingram (excluding exhibits not
deemed material or filed separately in executed form).
4(e) Registration Rights Agreement dated June 15, 1998 among Regent
Communications, Inc., PNC Bank, N.A., Trustee, Waller-Sutton
Media Partners, L.P., WPG Corporate Development Associates V,
L.P., WPG Corporate Development Associates (Overseas) V, L.P.,
BMO Financial, Inc., General Electric Capital Corporation,
River Cites Capital Fund Limited Partnership, Terry S. Jacobs,
William L. Stakelin, William H. Ingram, Blue Chip Capital Fund
II Limited Partnership, Miami Valley Venture Fund L.P. and
Thomas Gammon (excluding exhibits not deemed material or filed
separately in executed form).
4(f) Warrant for the Purchase of 650,000 Shares of Common Stock
issued by Regent Communications, Inc. to Waller-Sutton Media
Partners, L.P. dated June 15, 1998 (See Note 1 below).
4(g) Warrant for the Purchase of 50,000 Shares of Common Stock
issued by Regent Communications, Inc. to General Electric
Capital Corporation dated June 15, 1998.
4(h) Agreement to Issue Warrant dated as of June 15, 1998 between
Regent Communications, Inc. and General Electric Capital
Corporation (excluding exhibits not deemed material or filed
separately in executed form).
20(a) Form 10-K of Faircom Inc. for the year ended December 31,
1997, including all exhibits thereto, as filed with the
Securities and Exchange Commission on March 30, 1998.
20(b) Form 10-Q of Faircom Inc. for the quarter ended March 31,
1998, including all exhibits thereto, as filed with the
Securities and Exchange Commission on May 14, 1998.
20(c) Executive Employment Agreement dated June 15, 1998 between
Regent Communications, Inc. and Joel M. Fairman (excluding
exhibits not deemed material or filed separately in
executed form).
20(d) Consulting and Non-Competition Agreement between Regent
Communications, Inc. and James H. Levy.
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*Incorporated by reference.
Notes:
1. Six substantially identical Warrants for the purchase of shares of
Registrant's common stock were issued as follows:
Waller-Sutton Media Partners, L.P. 650,000
WPG Corporate Development Associates V, L.P. 112,580
WPG Corporate Development Associates (Overseas) V, L.P. 17,420
General Electric Capital Corporation 50,000
River Cites Capital Fund Limited Partnership 20,000
William H. Ingram 10,000
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<PAGE> 1
EXHIBIT 4(a)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REGENT COMMUNICATIONS, INC.
Regent Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies that the
Corporation was originally incorporated under the name "JS Communications, Inc."
on November 4, 1996, and that its original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on the same date. The
Corporation further certifies that the Corporation changed its named from JS
Communications, Inc. to Regent Communications, Inc. upon the filing with the
Secretary of State of Delaware of a Certificate of Amendment on May 16, 1997.
The Corporation further certifies that this Amended and Restated Certificate of
Incorporation amends and restates the provisions previously filed with the
Secretary of State of the State of Delaware.
FIRST: Name. The name of the Corporation is Regent Communications, Inc.
SECOND: Registered Office and Registered Agent. The registered office
of the Corporation in the State of Delaware is 1209 Orange Street, New Castle
County, Wilmington, Delaware 19801. The Registered Agent at the same address is
The Corporation Trust Company.
THIRD: Purposes. The purposes of the Corporation are to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Capital Stock.
A. Authorized Capital Stock. The total number of shares of all classes
of stock which the Corporation shall have authority to issue is Fifty Million
(50,000,000) shares, consisting of a class of Thirty Million (30,000,000) shares
of Common Stock, par value of $.01 per share, and a class of Twenty Million
(20,000,000) shares of Preferred Stock, par value of $.01 per share.
B. Common Stock. The Common Stock shall have full voting rights and
other characteristics of common stock recognized under the General Corporation
Law of the State of Delaware subject to the rights and preferences of Preferred
Stock; provided, however, in the event the Corporation holds (directly or
indirectly) a license or franchise from the Federal Communications Commission to
conduct its business and such license or franchise is conditioned upon some or
all of the holders of its capital stock possessing prescribed qualifications,
such Common Stock and the Preferred Stock shall be subject to redemption by the
Corporation, to the extent necessary to prevent the loss of such license or
franchise or to reinstate it, for cash, property or rights, including other
securities of the Corporation, at such time or times as the Board of Directors
determines upon notice and following the same procedures as are applicable to
redemption of Preferred Stock at a redemption price equal to the
<PAGE> 2
greater of the amount of its liquidation preference or its fair market value;
and provided further, that the Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of a series of Common Stock designated Series B Common
Stock consisting of such number of shares constituting said series as the Board
of Directors shall determine from time to time, each share to be convertible at
any time at the option of the holder in the same manner and subject to the same
conditions as were applicable to a voluntary conversion of the Series D
Convertible Preferred Stock set forth in Section 7 of Subpart G of this Article
FOURTH into one share of Common Stock (subject to equitable adjustment for stock
splits, reverse stock splits, common stock dividends and the like), and such
Series B Common Stock, having the restricted voting rights applicable to the
Series D Convertible Preferred Stock set forth in Section 3 of Subpart G of this
Article FOURTH and constituting the series of Common Stock issuable upon a
mandatory conversion of the Series D Convertible Preferred Stock pursuant to
Section 7[c][i] of Subpart G of this Article FOURTH, and by filing a certificate
pursuant to the applicable law of the State of Delaware to fix the number of
shares to be included in such Series B Common Stock and to set forth the
restricted voting and conversion rights thereof.
C. Preferred Stock. The Board of Directors is authorized, subject to
the limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
[1] The number of shares constituting that series and the
distinctive designation of that series;
[2] The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on
shares of that series;
[3] Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
[4] Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
[5] Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
[6] Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
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[7] The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of
shares of that series;
[8] Any other relative rights, preferences and limitations of
that series.
D. Designation of Series A Convertible Preferred Stock. A series of the
Preferred Stock of the Corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as "Series A Convertible
Preferred Stock" (the "Series A Preferred") and the number of shares
constituting such series shall be 620,000 shares. The stated value of the Series
A Preferred shall be $5 per share, the original per share issue price (the
"Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series A Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series A Preferred at the rate of $.35 per share per annum. No interest
shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by this Amended
Certificate of Incorporation, as amended or restated from time to time (the
"Certificate of Incorporation"), subject to restrictions contained in this
Certificate of Incorporation the holders of Series A Preferred shall be entitled
to vote on all matters submitted to a vote of the Corporation's stockholders.
Except as otherwise required by law or provided by this Certificate of
Incorporation or by the Board of Directors pursuant to Subpart C of this Article
FOURTH, the holders of the Series A Preferred, shall vote together with the
holders of all other series of the Corporation's voting preferred stock and the
holders of the Corporation's Common Stock as one class with one vote per share
(in the case of Preferred Stock, subject to adjustments as provided in Section 7
below and if convertible into Common Stock, one vote per share of Common Stock
into which such convertible Preferred Stock is then convertible) on all matters
submitted to a vote of the Corporation's stockholders.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series A Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series A Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for
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<PAGE> 4
consideration any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred, provided that
the Corporation may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any such junior stock, (B) pay
dividends on or make any other distributions on any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred, except dividends paid ratably on the Series A Preferred and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled,
(C) redeem or purchase or otherwise acquire for consideration any stock ranking
on a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior to the Series
A Preferred or in satisfaction of contractual obligations to do so entered into
with the written consent of the holders of a majority of outstanding shares of
Series A Preferred (including, without limitation, in satisfaction of the
provisions contained in the Stockholders' Agreement), or (D) purchase or
otherwise acquire for consideration any shares of the Series A Preferred, or any
shares of stock ranking on a parity with the Series A Preferred except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series of classes, or except pursuant
to the provisions of the Stockholders' Agreement. As used in this Amended and
Restated Certificate of Incorporation, the term "Stockholders' Agreement" shall
mean that certain Second Amended and Restated Stockholders' Agreement, dated in
June, 1998, among the Corporation and certain of its stockholders, as the same
may be further amended, restated or modified from time to time. All references
to the Stockholders' Agreement shall be applicable as long as the Stockholders'
Agreement remains in effect.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series A Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series A Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred
unless, prior thereto, the holders of Series A Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred, except distributions made ratably on the Series A Preferred and all
other such parity stock in
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<PAGE> 5
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series A Preferred
shall be convertible at any time at the option of the holder thereof,
in the manner hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series A
Preferred shall be convertible at the option of the Board of Directors,
under the conditions hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation. The Board of
Directors of the Corporation may require conversion of all shares of
the Series A Preferred into shares of Common Stock in preparation for
or upon any of the following:
[i] A public offering of equity securities of the
Corporation of at least $10,000,000 in gross proceeds;
[ii] A private placement of equity securities of the
Corporation of at least $25,000,000 in gross proceeds;
[iii] A private placement of equity securities of the
Corporation of at least $10,000,000 in gross proceeds under
circumstances where the investor(s) reasonably believe the
conversion of the Series A Preferred is necessary to achieve
its (their) investment objectives;
[iv] A merger of the Corporation with another
corporation or other entity, whether or not the Corporation is
a survivor of such transaction whereby as a result the
stockholders of the Corporation hold less than 50% of the
outstanding capital stock of the surviving entity; or
[v] An acquisition of equity securities of the
Corporation in one transaction or in a series of related
transactions which results in a transfer of majority voting
control of the Corporation.
[c] The number of shares of Common Stock into which each share
of the Series A Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series A
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series A Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying
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<PAGE> 6
(a) the number of shares of Common Stock into which such share
was convertible immediately prior to the occurrence of such
event by (b) a fraction, the numerator of which is the sum of
(I) the number of shares of Common Stock into which such share
was convertible immediately prior to the occurrence of such
event plus (II) the number of shares of Common Stock which
such holder would have been entitled to receive in connection
with the occurrence of such event had such share been
converted immediately prior thereto, and the denominator of
which is the number of shares of Common Stock determined in
accordance with clause (I) above. An adjustment made pursuant
to this subparagraph [c][i] shall become effective (a) in the
case of any such dividend, immediately after the close of
business on the record date for the determination of holders
of Common Stock entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of business on
the day immediately prior to the day upon which such corporate
action becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series A Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series A Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b(ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series A Preferred shall: (A) issue any options,
warrants, or other rights (excluding those issued in exchange
for options to purchase common stock in Faircom Inc. pursuant
to the terms of a merger, and excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the aggregate number of
outstanding shares of Common Stock and other equity securities
of the Corporation exercisable for the purchase of, or
convertible into, Common Stock computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance; (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less
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than the then fair market value of a share of Common Stock at
the date of such issuance; or (C) issue or sell additional
shares of Common Stock for consideration representing less
than the then fair market value of the Common Stock at the
date of such issuance; then the number of shares of Common
Stock into which each share of the Series A Preferred is
convertible shall be adjusted so that, thereafter, until
further adjusted, the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying (w) the
number of shares of Common Stock into which such shares are
convertible immediately prior to the occurrence of such event
by (x) a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding prior to such issuance
plus the number of additional shares of Common Stock issuable
upon exercise of such options, warrants, or rights, or
exchangeable or convertible securities, or the additional
number of shares of Common Stock issued at such time, and the
denominator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
shares of Common Stock that either (y) the sum of the
aggregate exercise price of the total number of shares of
Common Stock issuable upon exercise of such options, warrants,
or rights, or upon conversion or exchange of such convertible
securities, and the aggregate amount of consideration, if any,
received or receivable by the Corporation for such options,
warrants, or rights, or convertible or exchangeable
securities, or (z) the aggregate consideration received in
connection with the sale of shares of its Common Stock for
less than the then fair market value, as the case may be,
would purchase at the then fair market value.
[iv] In the event that, at any time, or from time to
time, after the issuance such share of the Series A Preferred,
the Common Stock issuable upon conversion of the Series A
Preferred Stock is changed into the same or a different number
of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series A Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series A Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time after the
issuance such share of the Series A Preferred there is a
capital reorganization of the Common Stock other than a
recapitalization, subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this Section
7) or a merger or consolidation of the Corporation with or
into another corporation, or the sale of all, or substantially
all, of the Corporations' properties and assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the
holders of the Series A Preferred shall thereafter be entitled
to receive upon conversion of the Series A Preferred the
number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such
capital reorganization, merger,
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<PAGE> 8
consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Section 7 with respect to the rights of the holders of
Series A Preferred after the reorganization, merger,
consolidation, or sale to the end that the provisions of this
Section 7 shall be applicable after that event and be as
nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which caused an
adjustment pursuant to this Section 7 to be made, if any
thereof shall not have been exercised, the number of shares of
Common Stock into which each share of the Series A Preferred
is convertible shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (a) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange privileges and (b)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Corporation upon
such exercise plus the aggregate consideration, if any,
actually received by the Corporation for the issuance, sale or
grant of all such rights, options, warrants or conversion or
exchange privileges, whether or not exercised.
[d] If any adjustment in the number of shares of Common Stock
into which each share of the Series A Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series A Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series A Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series A Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [d] shall be made to the
nearest one-hundredth of a share.
[e] Subject to the limitation in Section 7[h] below, the
holder of any shares of the Series A Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series A Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if
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applicable, payment of all transfer taxes, the Corporation shall
deliver or cause to be delivered (i) certificates representing the
number of validly issued, fully paid and nonassessable shares of Common
Stock of the Corporation to which the holder of the Series A Preferred
so converted shall be entitled and (ii) if less than the full number of
shares of the Series A Preferred evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares
converted. Such conversions shall be deemed to have been made at the
close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of
the Series A Preferred to be converted so that the rights of the holder
thereof shall cease except for the right to receive Common Stock of the
corporation in accordance herewith and any accumulated, accrued or
unpaid dividends pursuant to paragraph [g] below,, and the converting
holder shall be treated for all purposes as having become the record
holder of such Common Stock of the Corporation at such time.
[f] The Series A Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series A Preferred, setting forth the date of such
conversion and the material terms of the triggering event. As promptly
as practicable after such notice, and in any event within five business
days after the surrender of certificates for the Series A Preferred (if
required by the Board of Directors), the Corporation shall deliver or
cause to be delivered to each holder of Series A Preferred certificates
representing the number of validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation to which such holder of the
Series A Preferred so converted shall be entitled. Such conversion
shall be deemed to have been made at the close of business on the date
set forth in such notice of mandatory conversion so that the rights of
the holder thereof shall cease with or without surrender of
certificates for the Series A Preferred, except for the right to
receive Common Stock of the Corporation in accordance herewith and any
accumulated, accrued or unpaid dividends pursuant to paragraph [g]
below,, and the converting holder shall be treated for all purposes as
having become the record holder of such Common Stock of the Corporation
at such time.
[g] Upon conversion of any shares of the Series A Preferred
pursuant to paragraphs [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series A Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series A Preferred
entitled to receive payment of such dividend.
[h] Shares of the Series A Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[i] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series A Preferred.
[j] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
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of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
[k] The provisions in paragraph [c][ii] above shall not apply
to, and no adjustment shall be made as a result of, a reverse stock
split of Common Stock made by the Corporation on December 1, 1997.
SECTION 8. REDEMPTION.
[a] The Corporation may, at the election of its Board of
Directors, at any time or from time to time, redeem the whole or part
of the Series A Preferred, at the Stated Value, plus an amount equal to
all unpaid dividends thereon, including accrued dividends, whether or
not declared, to the date of redemption. In case the Corporation shall
elect to redeem less than all the Series A Preferred, the Corporation
shall select pro rata the shares so to be redeemed, except that if the
Board of Directors determines in its reasonable business judgment that
to do so by lot would be in the best interests of the Corporation, then
the shares so to be redeemed shall be selected by lot in such manner as
shall be prescribed by the Board of Directors.
[b] Notice of every such redemption shall be mailed, first
class postage prepaid, not less than thirty (30) nor more than sixty
(60) days prior to the date fixed for redemption ("Redemption Date"),
to each holder of record of the shares to be redeemed, at his or her
address as the same appears on the record of stockholders; but neither
failure to mail any such notice to one or more such holders nor any
defect in any such notice shall affect the sufficiency of the
proceedings for redemptions as to other holders. Each such notice shall
state the Redemption Date; the number of shares of Series A Preferred
to be redeemed, and, if less than all the shares of Series A Preferred
held by such holder are to be redeemed, the manner of selecting by lot
the shares to be redeemed; the place or places where such shares are to
be surrendered for payment; that dividends on the shares to be redeemed
will cease on such Redemption Date; and the effect of such redemption
on the right of conversion.
[c] Notice having been mailed as aforesaid, from and after the
Redemption Date, all dividends on the shares so called for redemption
shall cease to accrue, said shares shall no longer be deemed to be
outstanding, all rights of the holders thereof as stockholders of the
Corporation (except the right to receive payment for the shares, the
right to receive declared dividends pursuant to Section 7[g] above, and
the right to convert such shares into shares of Common Stock of the
Corporation until the close of business on the third business day
preceding the Redemption Date, as provided in Section 7) shall cease,
and, upon surrender in accordance with said notice of the certificates
for any such shares (properly endorsed or assigned for transfer, if the
Board of Directors shall so require), such shares shall be redeemed by
the Corporation in accordance with this Section 8. In connection with
the determination of the amount of dividends accruing with respect to
any conversion in the period between a notice of redemption and the
Redemption Date, on a date which is not a Quarterly Dividend Payment
Date, the amount of any such dividends shall be prorated based upon the
number of days which have elapsed since the immediately preceding
Quarterly Dividend Payment Date (excluding such Quarterly Dividend
Payment Date itself).
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SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series A Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series A Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series A Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series A Preferred a notice stating that the number of shares into
which the shares of Series A Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series A
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
9, nor shall such failure affect the validity, rights or preferences of any
shares of the Series A Preferred.
SECTION 10. RANKING.
The Series A Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series A Preferred, and
except for the Series C Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
SECTION 11. DIRECTORSHIP.
The holders of the Series A Preferred, as a class, shall be entitled to
be represented on the Board of Directors by one Director (the "Series A
Director") who, upon nomination by such holders, as a class, will stand for
election by voting by the holders of the Preferred Stock (subject to limitations
in this Article FOURTH or established by the Board of Directors pursuant to
Section C of this Article FOURTH) and holders of Common Stock together, except
under circumstances where the number of individuals nominated for election
exceeds the number of Directors to be elected. In the event the number of
individuals nominated for election exceeds the number of Directors to be elected
then the holders of the Series A Preferred shall have the sole right to vote
for, elect and remove the individual nominated by them, as a class, to serve as
the Series A Director, and in such event the further right to vote for, elect or
remove any of the other Directors who are not to be elected solely by the
holders of another class or series of Preferred Stock. The Series A Director,
upon being elected, will serve for the same term and have the same voting powers
as other Directors. In addition, the Series A Director shall serve as a member
of the Compensation, Audit, and Nominating Committees of the Board of Directors
(or any other committee of the Board performing such functions), which
Committees will be composed of at least one Director, in addition to the Series
A Director, who is not an employee of the Corporation.
E. Designation of Series B Senior Convertible Preferred Stock. A series
of the Preferred Stock of the corporation is hereby created and authorized, and
the designations, amount and stated value of such series of Preferred Stock and
the voting powers, preferences and relative, participating,
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optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series B Senior
Convertible Preferred (the "Series B Preferred") and the number of shares
constituting such series shall be 1,000,000 shares. The stated value of the
Series B Preferred shall be $5 per share, the original per share issue price
(the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series B Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series B Preferred at the rate of $.35 per share per annum; provided,
however, such rate shall be increased to $.45 per share per annum immediately
upon but only for the period during which the ratio of (a) the sum of (i) the
Corporation's Consolidated Total Debt plus (ii) the aggregate Stated Value of
the then outstanding shares of Series B Preferred to (b) the Corporation's
Adjusted Consolidated Operating Cash Flow for any four fiscal quarter period
ending as of the last day of any fiscal quarter of the Corporation exceeds, as a
result of the incurrence by the Corporation of additional debt, 7.75 to 1.00. No
interest shall be paid on accrued but unpaid dividends. For purposes of this
Section, the terms "Consolidated Total Debt" and "Adjusted Consolidated
Operating Cash Flow" shall have the meanings given those terms in that certain
Credit Agreement, dated as of November 14, 1997, as amended through June 11,
1998, among the Corporation, the Lenders listed therein, General Electric
Capital Corporation (as Documentation Agent), and Bank of Montreal, Chicago
Branch (as Agent) (not taking into account any modification or amendment of such
definitions at any time after June 11, 1998 not consented to in writing by
holders of the Series B Preferred and irrespective of the termination of such
Credit Agreement).
SECTION 3. VOTING RIGHTS.
Except as provided herein or otherwise required by law, the voting
power of the Corporation shall be vested in the holders of shares of Common
Stock, Series A Preferred, Series C Preferred, Series E Preferred, Series F
Preferred, and such other series of voting preferred stock as are from time to
time designated, and the holders of shares of Series B Preferred and the Series
D Preferred shall have no voting power except that with respect to the events
described below, the holders of the Series A Preferred, the Series B Preferred,
the Series C Preferred, the Series D Preferred, the Series E Preferred, Series
F. Preferred, and all other series of voting preferred stock as are from time to
time designated to have such voting rights, and the holders of the Corporation's
Common Stock shall vote together as one class with one vote per share (in the
case of Preferred Stock, subject to adjustments as provided in Section 7 below
and if convertible into Common Stock, one vote per share of Common Stock into
which such convertible Preferred Stock is then convertible), to the extent such
of the following events are otherwise subject to the vote of any holders of
capital stock of the Corporation pursuant to the requirements of the Delaware
General Corporation Law:
[a] any amendment of this Amended and Restated Certificate of
Incorporation;
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[b] a sale of all or substantially all of the assets of the
Corporation;
[c] the dissolution, liquidation or termination of the
Corporation;
[d] any acquisition of, or merger of the Corporation with,
another corporation or other entity, whether or not the Corporation is
a survivor of such transaction;
[e] any change in the fundamental nature of the business of
the Corporation;
[f] any transaction with affiliates, except upon fair and
reasonable terms comparable to an arms-length transaction; and
[g] any change in the Corporation's capital structure in a
manner that dilutes the ownership interest of the holders of Series B
Preferred.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series B Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series B Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred, except dividends paid
ratably on the Series B Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series B
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series B Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series B
Preferred, or (D) purchase or otherwise acquire for consideration any shares of
the Series B Preferred, or any shares of stock ranking on a parity with the
Series B Preferred except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series of classes.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series B Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series
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<PAGE> 14
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, or otherwise in accordance with Delaware General Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred unless, prior thereto, the holders of Series B Preferred shall have
received the Stated Value per share, plus an amount equal to unpaid dividends
thereon, including accrued dividends, whether or not declared, to the date of
such payment or (B) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series B
Preferred, except distributions made ratably on the Series B Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series B Preferred
shall be convertible at any time at the option of the holder thereof,
in the manner hereinafter set forth, into one-half (1/2) fully paid and
nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series B
Preferred shall be convertible at the option of the Board of Directors
into one-half (1/2) fully paid and nonassessable share of Common Stock
of the Corporation in the event of, and concurrently with the closing
of, a public offering of Common Stock of the Corporation at a per share
price of at least $12.00 (subject to adjustment for stock splits, stock
dividends, reverse stock splits and the like) with gross proceeds to
the Corporation of at least $25,000,000 (excluding the effect of any
over-allotment option).
[c] The number of shares of Common Stock into which each share
of the Series B Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series B
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series B Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of
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Common Stock determined in accordance with clause (I) above.
An adjustment made pursuant to this subparagraph [c][i] shall
become effective (a) in the case of any such dividend,
immediately after the close of business on the record date for
the determination of holders of Common Stock entitled to
receive such dividend, or (b) in the case of any such
subdivision, at the close of business on the day immediately
prior to the day upon which such corporate action becomes
effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series B Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series B Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b[ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series B Preferred shall: (A) issue any options,
warrants, or other rights entitling the holder thereof to
subscribe for, or purchase, Common Stock at a price per share
which, when added to the amount of consideration received or
receivable by the Corporation for such options, warrants, or
other rights, is less than the then fair market value per
share of the Common Stock at the date of such issuance (other
than stock options issued in exchange for options to purchase
common stock in Faircom Inc. pursuant to the terms of a merger
and options to purchase Common Stock issued to management of
the Corporation exercisable for up to the lesser of 2,000,000
shares of Common Stock (subject to adjustment pursuant to
provisions applicable to the options in the case of stock
splits, reverse stock splits and the like) or that number of
shares of Common Stock equal to fifteen percent (15%) of the
aggregate number of outstanding shares of Common Stock and
other equity securities of the Corporation exercisable for the
purchase of, or convertible into, Common Stock computed on a
fully-diluted basis); (B) issue or sell securities of the
Corporation convertible into, or exchangeable for, Common
Stock at a price per share which, when added to the amount of
consideration received or receivable, from the Corporation for
such exchangeable or convertible securities, is less than the
then fair market value of a share of Common Stock at the date
of such issuance; or (C) issue or sell additional shares of
Common Stock for consideration representing less than the then
fair market value of the Common Stock at the date of such
issuance; then the number of shares of Common Stock into which
each share of the Series B Preferred is convertible shall be
adjusted so that, thereafter, until further adjusted, the
holder of each share thereof shall be entitled to receive,
upon the conversion thereof, the number of shares of
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Common Stock determined by multiplying (w) the number of
shares of Common Stock into which such shares are convertible
immediately prior to the occurrence of such event by (x) a
fraction, the numerator of which shall be the number of shares
of Common Stock outstanding prior to such issuance plus the
number of additional shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or exchangeable
or convertible securities, or the additional number of shares
of Common Stock issued at such time, and the denominator of
which shall be the number of shares of Common Stock
outstanding prior to such issuance plus the number of shares
of Common Stock that either (y) the sum of the aggregate
exercise price of the total number of shares of Common Stock
issuable upon exercise of such options, warrants, or rights,
or upon conversion or exchange of such convertible securities,
and the aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
[iv] In the event that, at any time, or from time to
time, after the issuance of such share of the Series B
Preferred, the Common Stock issuable upon conversion of the
Series B Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series B Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series B Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time after the
issuance of such share of the Series B Preferred there is a
capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this Section
7) or a merger or consolidation of the Corporation with or
into another corporation, or the sale of all, or substantially
all, of the Corporation's properties and assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the
holders of the Series B Preferred shall thereafter be entitled
to receive upon conversion of the Series B Preferred the
number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the
application of the provisions of this Section 7 with respect
to the rights of the holders of Series B Preferred after the
reorganization, merger, consolidation, or sale to the end that
the provisions of this Section 7 shall be applicable after
that event and be as nearly equivalent as may be practicable.
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[vi] Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which caused an
adjustment pursuant to this Section 7 to be made, if any
thereof shall not have been exercised, the number of shares of
Common Stock into which each share of the Series B Preferred
is convertible shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (a) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange privileges and (b)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Corporation upon
such exercise plus the aggregate consideration, if any,
actually received by the Corporation for the issuance, sale or
grant of all such rights, options, warrants or conversion or
exchange privileges, whether or not exercised.
[d] If any adjustment in the number of shares of Common Stock
into which each share of the Series B Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series B Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series B Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series B Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [d] shall be made to the
nearest one-hundredth of a share.
[e] Subject to the limitation in Section 7[h] below, the
holder of any shares of the Series B Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series B Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(I) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series B Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series B Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
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certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series B Preferred to be
converted so that the rights of the holder thereof shall cease except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[f] The Series B Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series B Preferred, setting forth the date of such
conversion and the material terms of the triggering public offering. As
promptly as practicable after such notice, and in any event within five
business days after the surrender of certificates for the Series B
Preferred (if required by the Board of Directors), the Corporation
shall deliver or cause to be delivered to each holder of Series B
Preferred certificates representing the number of validly issued, fully
paid and nonassessable shares of Common Stock of the Corporation to
which such holder of the Series B Preferred so converted shall be
entitled. Such conversion shall be deemed to have been made at the
close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series B Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[g] Upon conversion of any shares of the Series B Preferred
pursuant to paragraphs [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series B Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series B Preferred
entitled to receive payment of such dividend.
[h] Shares of the Series B Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[i] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series B Preferred.
[j] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
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SECTION 8. REDEMPTION.
[a] The Corporation may, at the election of its Board of
Directors, at any time or from time to time, redeem the whole or part
of the Series B Preferred, at the Stated Value, plus an amount equal to
all unpaid dividends thereon, including accrued dividends, whether or
not declared, to the date of redemption. In case the Corporation shall
elect to redeem less than all the Series B Preferred, the Corporation
shall select pro rata the shares so to be redeemed, except that if the
Board of Directors determines in its reasonable business judgment that
to do so by lot would be in the best interests of the Corporation, then
the shares so to be redeemed shall be selected by lot in such manner as
shall be prescribed by the Board of Directors.
[b] Notice of every such redemption shall be mailed, first
class postage prepaid, not less than thirty (30) nor more than sixty
(60) days prior to the date fixed for redemption ("Redemption Date"),
to each holder of record of the shares to be redeemed, at his or her
address as the same appears on the record of stockholders; but neither
failure to mail any such notice to one or more such holders nor any
defect in any such notice shall affect the sufficiency of the
proceedings for redemptions as to other holders. Each such notice shall
state the Redemption Date; the number of shares of Series B Preferred
to be redeemed, and, if less than all the shares of Series B Preferred
held by such holder are to be redeemed, the manner of selecting by lot
the shares to be redeemed; the place or places where such shares are to
be surrendered for payment; that dividends on the shares to be redeemed
will cease on such Redemption Date; and the effect of such redemption
on the right of conversion.
[c] Notice having been mailed as aforesaid, from and after the
Redemption Date, all dividends on the shares so called for redemption
shall cease to accrue, said shares shall no longer be deemed to be
outstanding, all rights of the holders thereof as stockholders of the
Corporation (except the right to receive payment for the shares, and
the right to convert such shares into shares of Common Stock of the
Corporation until the close of business on the third business day
preceding the Redemption Date, as provided in Section 7) shall cease,
and, upon surrender in accordance with said notice of the certificates
for any such shares (properly endorsed or assigned for transfer, if the
Board of Directors shall so require), such shares shall be redeemed by
the Corporation in accordance with this Section 8. In connection with
the determination of the amount of dividends accruing with respect to
any conversion in the period between a notice of redemption and the
Redemption Date, on a date which is not a Quarterly Dividend Payment
Date, the amount of any such dividends shall be prorated based upon the
number of days which have elapsed since the immediately preceding
Quarterly Dividend Payment Date (excluding such Quarterly Dividend
Payment Date itself)
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series B Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series B Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series B Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series B Preferred a notice stating that the number of shares into
which the
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shares of Series B Preferred are convertible has been adjusted and setting forth
the new number of shares into which each share of the Series B Preferred is
convertible as a result of such adjustment and when such adjustment will become
effective. Notwithstanding the foregoing, the Corporation shall incur no
liability for its failure to take any action set forth in this Section 9, nor
shall such failure affect the validity, rights or preferences of any shares of
the Series B Preferred.
SECTION 10. RANKING.
The Series B Preferred shall rank senior to the Common Stock, the
Series A Preferred, the Series C Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock of
the Corporation hereafter created, as to the payment of dividends and the
distribution of assets and rights upon liquidation, dissolution or winding up of
the Corporation.
F. Designation of Series C Convertible Preferred Stock. A series of the
Preferred Stock of the corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series C Convertible
Preferred (the "Series C Preferred") and the number of shares constituting such
series shall be 4,000,000 shares. The stated value of the Series C Preferred
shall be $5 per share, the original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series C Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series C Preferred at the rate of $.35 per share per annum. No interest
shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by the Certificate of
Incorporation, subject to restrictions contained in this Certificate of
Incorporation the holders of Series C Preferred shall be entitled to vote on all
matters submitted to a vote of the Corporation's stockholders. Except as
otherwise required by law or provided by this Certificate of Incorporation or by
the Board of Directors pursuant to Subpart C of this Article FOURTH, the holders
of the Series C Preferred shall vote together with the holders of all other
series of the Corporation's voting preferred stock and the holders of the
Corporation's Common Stock as one class with one vote per share (in the case of
Preferred Stock, subject to adjustments as provided in Section 7 below and if
convertible into Common Stock, one vote per share of Common Stock into which
such convertible Preferred Stock is then convertible) on all matters submitted
to a vote of the Corporation's stockholders.
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SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series C Preferred as provided in
section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series C Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series C
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C Preferred, except dividends paid
ratably on the Series C Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series C
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series C Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series C Preferred
(including, without limitation, in satisfaction of the provisions contained in
the Stockholders' Agreement), or (D) purchase or otherwise acquire for
consideration any shares of the Series C Preferred, or any shares of stock
ranking on a parity with the Series C Preferred except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series of classes, or except pursuant to the provisions of the
Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series C Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series C Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series C Preferred
unless, prior thereto, the holders of Series C Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series C
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Preferred, except distributions made ratably on the Series C Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. OPTIONAL CONVERSION.
Each share of the Series C Preferred may be converted at any time, at
the option of the holder thereof, into shares of Common Stock of the
Corporation, on the terms and conditions set forth below in this Section 7:
[a] Subject to the provisions for adjustment hereinafter set
forth, each share of the Series C Preferred shall be convertible at the
option of the holder thereof, in the manner hereinafter set forth, into
one (1) fully paid and nonassessable share of Common Stock of the
Corporation.
[b] The number of shares of Common Stock into which each share
of the Series C Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series C
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series C Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock
determined in accordance with clause (I) above. An adjustment
made pursuant to this subparagraph b[i] shall become effective
(a) in the case of any such dividend, immediately after the
close of business on the record date for the determination of
holders of Common Stock entitled to receive such dividend, or
(b) in the case of any such subdivision, at the close of
business on the day immediately prior to the day upon which
such corporate action becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series C Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series C Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was
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<PAGE> 23
convertible immediately prior to the occurrence of such event
by (b) a fraction, the numerator of which is the number of
shares which the holder would have owned after giving effect
to such event had such share been converted immediately prior
to the occurrence of such event and the denominator of which
is the number of shares of Common Stock into which such share
was convertible immediately prior to the occurrence of such
event. An adjustment made pursuant to this subparagraph b[ii]
shall become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series C Preferred shall: (A) issue any options,
warrants, or other rights (excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the aggregate number of
outstanding shares of Common Stock and other equity securities
of the Corporation exercisable for the purchase of, or
convertible into, Common Stock computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance: (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series C Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (w) the number of shares of Common
Stock into which such shares are convertible immediately prior
to the occurrence of such event by (x) a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
additional shares of Common Stock issuable upon exercise of
such options, warrants, or rights, or exchangeable or
convertible securities, or the additional number of shares of
Common Stock issued at such time, and the denominator of which
shall be the number of shares of Common Stock outstanding
prior to such issuance plus the number of shares of Common
Stock that either (y) the sum of the aggregate exercise price
of the total number of shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or upon
conversion or exchange of such convertible securities, and the
aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
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[iv] In the event that, at any time, or from time to
time, after the issuance of such share of the Series C
Preferred, the Common Stock issuable upon conversion of the
Series C Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series C Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series C Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time after the
issuance of such share of the Series C Preferred there is a
capital reorganization of the Common Stock other than a
recapitalization, subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this Section
7) or a merger or consolidation of the Corporation with or
into another corporation, or the sale of all, or substantially
all, of the Corporations' properties and assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the
holders of the Series C Preferred shall thereafter be entitled
to receive upon conversion of the Series C Preferred the
number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the
application of the provisions of this Section 7 with respect
to the rights of the holders of Series C Preferred after the
reorganization, merger, consolidation, or sale to the end that
the provisions of this Section 7 shall be applicable after
that event and be as nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which caused an
adjustment pursuant to this Section 7 to be made, if any
thereof shall not have been exercised, the number of shares of
Common Stock into which each share of the Series C Preferred
is convertible shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (a) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange privileges and (b)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Corporation upon
such exercise plus the aggregate consideration, if any,
actually received by the Corporation for the issuance, sale or
grant of all such rights, options, warrants or conversion or
exchange privileges, whether or not exercised.
[c] If any adjustment in the number of shares of Common Stock
into which each share of the Series C Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
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which each share of the Series C Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series C Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series C Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [c] shall be made to the
nearest one-hundredth of a share.
[d] The holder of any shares of the Series C Preferred may
convert such shares into shares of Common Stock by surrendering for
such purpose to the Corporation, at its principal office or at such
other office or agency maintained by the Corporation for that purpose,
a certificate or certificates representing the shares of Series C
Preferred to be converted (or if such certificate or certificates
cannot be found, an affidavit of lost securities in form and substance
acceptable to the Corporation) accompanied by a written notice stating
that such holder elects to convert all or a specified number of such
shares in accordance with the provisions of this Section 7 and
specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series C Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series C Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series C Preferred to be
converted so that the rights of the holder thereof shall cease except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [e] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[e] Upon conversion of any shares of the Series C Preferred,
the holder thereof shall be entitled to receive any accumulated,
accrued or unpaid dividends in respect of the shares so converted,
including any dividends on such shares of the Series C Preferred
declared prior to such conversion if such holder held such shares on
the record date fixed for the determination of holders of the Series C
Preferred entitled to receive payment of such dividend.
[f] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series C Preferred.
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[g] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. MANDATORY CONVERSION.
Each share of the Series C Preferred shall be converted, at the option
of the Board of Directors, into shares of Common Stock of the Corporation, on
the terms and conditions set forth below in this Section 8:
[a] Subject to the provisions for adjustment set forth in
Section 7, which shall also apply to conversions pursuant to this
Section 8, each share of the Series C Preferred shall be convertible at
the option of the Board of Directors, under the conditions hereinafter
set forth, into one (1) fully paid and nonassessable share of Common
Stock of the Corporation.
[b] The Board of Directors of the Corporation may require
conversion of all shares of the Series C Preferred into shares of
Common Stock upon any of the following events if, and only if, all
other outstanding shares of Preferred Stock of the Corporation, other
than those which rank senior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred, are
concurrently either redeemed or converted:
[i] A public offering of equity securities of the
Corporation of at least $10,000,000 in gross proceeds;
[ii] A private placement of equity securities of the
Corporation of at least $25,000,000 in gross proceeds;
[iii] A private placement of equity securities of the
Corporation of at least $10,000,000 in gross proceeds under
circumstances where the investor(s) reasonably believe the
conversion of the Series C Preferred is necessary to achieve
its (their) investment objectives;
[iv] A merger of the Corporation with another
corporation or other entity, whether or not the Corporation is
a survivor of such transaction whereby as a result the
stockholders of the Corporation hold less than 50% of the
outstanding capital stock of the surviving entity; or
[v] An acquisition of equity securities of the
Corporation in one transaction or in a series of related
transactions which results in a transfer of majority voting
control of the Corporation.
[c] The Series C Preferred shall convert to Common Stock of
the Corporation automatically upon notice in writing to the
stockholders, including all holders of the Series C Preferred, setting
forth the date of such conversion and the material terms of the
triggering
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<PAGE> 27
event. As promptly as practicable after such notice, and in any event
within five business days after the surrender of certificates for the
Series C Preferred (if required by the Board of Directors), the
Corporation shall deliver or cause to be delivered to each holder of
Series C Preferred certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock of the
Corporation to which such holder of the Series C Preferred so converted
shall be entitled. Such conversion shall be deemed to have been made at
the close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series C Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [d] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[d] Upon conversion of the Series C Preferred, the holder
thereof shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series C Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series C Preferred
entitled to receive payment of such dividend.
[e] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series C Preferred.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series C Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series C Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series C Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series C Preferred a notice stating that the number of shares into
which the shares of Series C Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series C
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
9, nor shall such failure affect the validity, rights or preferences of any
shares of the Series C Preferred.
SECTION 10. RANKING.
The Series C Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series C Preferred, and
except for the Series A Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
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SECTION 11. DIRECTORSHIP.
The holders of the Series C Preferred, as a class, shall be entitled to
be represented on the Board of Directors by one Director (the "Series C
Director") who, upon nomination by such holders, as a class, will stand for
election by voting by the holders of the Preferred Stock entitled to vote for
the election of directors (subject to limitations in this Article FOURTH or
established by the Board of Directors pursuant to Section C of this Article
FOURTH) and holders of Common Stock together, except under circumstances where
the number of individuals nominated for election exceeds the number of Directors
to be elected. In the event the number of individuals nominated for election
exceeds the number of Directors to be elected, then the holders of the Series C
Preferred shall have the sole right to vote for, elect and remove the individual
nominated by them, as a class, to serve as the Series C Director, and in such
event the further right to vote for, elect or remove any of the other Directors
who are not to be elected solely by the holders of another class or series of
Preferred Stock.. The Series C Director, upon being elected, will serve for the
same term and have the same voting powers as other Directors. The right to elect
the Series C Director pursuant to the terms hereof shall be exercisable by the
holders of a majority of the Series C Preferred at their option upon at least 60
days notice to the Corporation; provided, however, if the Corporation is subject
to the reporting requirements of the Securities Exchange Act of 1934, such
notice must be provided on or before the date established by the Corporation for
the submission of proposals pursuant to the proxy rules promulgated under the
Securities Exchange Act of 1934. The Series C Director, if not an employee of
the Corporation, shall serve as a member of the Compensation, Audit, and
Nominating Committees of the Board of Directors (or any other Committee of the
Board performing such functions), which Committees will be composed of at least
one Director, in addition to the Series C Director, who is not an employee of
the Corporation.
G. Designation of Series D Convertible Preferred Stock. A series of the
Preferred Stock of the corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series D Convertible
Preferred (the "Series D Preferred") and the number of shares constituting such
series shall be 1,000,000 shares. The stated value of the Series D Preferred
shall be $5 per share, the original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series D Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series D Preferred at the rate of $.35 per share per annum. No interest
shall be paid on accrued but unpaid dividends.
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SECTION 3. VOTING RIGHTS.
Except as provided herein or otherwise required by law, the voting
power of the Corporation shall be vested in the holders of shares of Common
Stock, Series A Preferred, Series C Preferred, Series E Preferred, Series F
Preferred, and such other series of voting preferred stock as are from time to
time designated, and the holders of shares of Series B Preferred and the Series
D Preferred shall have no voting power, except that with respect to the events
described below, the holders of the Series A Preferred, the Series B Preferred,
the Series C Preferred, the Series D Preferred, the Series E Preferred, the
Series F Preferred, and all other series of voting preferred stock as are from
time to time designated to have such voting rights, and the holders of the
Corporation's Common Stock shall vote together as one class with one vote per
share (in the case of Preferred Stock, subject to adjustments as provided in
Section 7 below and if convertible into Common Stock, one vote per share of
Common Stock into which such convertible Preferred Stock is then convertible),
to the extent such of the following events are otherwise subject to the vote of
any holders of capital stock of the Corporation:
[a] any amendment of this Amended and Restated Certificate of
Incorporation, including the same as it may hereafter be amended or
restated, which (i) authorizes, or modifies the rights, preferences or
terms of, any security that is or would be senior in any respect to the
Series D Preferred, (ii) modifies any of the rights, preferences or
terms of the Series D Preferred, or (iii) would otherwise significantly
and adversely affect the Series D Preferred.
[b] a sale of all or substantially all of the assets of the
Corporation;
[c] the dissolution, liquidation or termination of the
Corporation;
[d] any merger of the Corporation with another corporation or
entity, whether or not the Corporation is the survivor;
[e] any material change in the fundamental nature of the
business of the Corporation;
[f] any transaction with affiliates, except upon fair and
reasonable terms comparable to an arms-length transaction; and
[g] any change in the Corporation's capital structure in a
manner that dilutes the economic interest of the holders of Series D
Preferred.
At such time as the holders of the Series D Preferred shall have
obtained the consent (which does not need to have become final) of the Federal
Communications Commission to the exercise by the holders of the Series D
Preferred of the voting rights set forth below or at such time as the consent of
the Federal Communications Commission is not necessary under applicable law,
rule or regulation (in the opinion of counsel acceptable to the Board of
Directors), then on the election of a majority of the holders of the Series D
Preferred, in addition to voting rights required by law, the holders of Series D
Preferred shall be entitled to vote on all matters submitted to a vote of the
Corporation's stockholders in accordance with the next sentence. Except as
otherwise required by
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law or this Certificate of Incorporation, the holders of the Series D Preferred
and the holders of the Corporation's Common Stock shall vote together as part of
the same class and each of the outstanding shares of the Series D Preferred
shall have a number of votes per share on a matter equal to the quotient of (a)
the lesser of (1) the number of shares of Common Stock into which the
outstanding shares of Series D Preferred are then convertible, and (2) the
difference between (A) the product of (i) the fraction equal to 0.049 divided by
0.951, multiplied by (ii) the sum of the number of votes entitled to be a cast
by the Corporation's Common Stock and any Series of Preferred (other than the
Series D Preferred) which votes as a class with the Corporation's Common Stock
on such matter minus (B) the number of shares of the Corporation's Common Stock
issued pursuant to Section 7[a][i] of this Subarticle G of Article 4 (fully
adjusted to reflect the events described in Section 7[c][i] and [ii], divided by
(b) the number of outstanding shares of Series D Preferred. It is the intention
of this provision that it should be construed consistently with the limitations
to which bank holding companies and foreign banks treated as bank holding
companies are subject with respect to the ownership or control of voting
securities under the Bank Holding Company Act of 1956, as amended.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series D Preferred as provided in
section 2 are in arrears,, thereafter and until dividends, including all accrued
dividends, on shares of the Series D Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series D
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series D Preferred, except dividends paid
ratably on the Series D Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series D
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series D Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series D Preferred
(including, without limitation, in satisfaction of the provisions contained in
the Stockholders' Agreement), or (D) purchase or otherwise acquire for
consideration any shares of the Series D Preferred, or any shares of stock
ranking on a parity with the Series D Preferred except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series of classes or except pursuant to the provisions of the
Stockholders' Agreement.
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SECTION 5. REACQUIRED SHARES.
Any shares of the Series D Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series D Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series D Preferred
unless, prior thereto, the holders of Series D Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series D
Preferred, except distributions made ratably on the Series D Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to Section 7[c] and to the
provisions for adjustment hereinafter set forth, each share of the
Series D Preferred shall be convertible at the option of the holder
thereof, in the manner hereinafter set forth, into one (1) fully paid
and nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series D
Preferred shall be convertible at the option of the Board of Directors,
under the conditions hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation in the event of,
and concurrently with the closing of, a public offering of Common Stock
(or Series B Common Stock if required pursuant to clause [c][i] below)
of the Corporation at a per share price of at least $12.00 (subject to
adjustment for stock splits, stock dividends, reverse stock splits and
the like) with gross proceeds to the Corporation of at least
$25,000,000 (excluding the effect of any over-allotment option).
[c] Shares of Series D Preferred may be converted by a holder
pursuant to Section 7[a] or at the option of the Board of Directors
pursuant to Section 7[b]only:
[i] To acquire shares of Common Stock; provided,
however, that to the extent necessary to prevent the holders
of Series D Preferred Stock from being in violation of any
applicable law or regulation, all shares issuable to such
holder on conversion of Series D Preferred, together with all
of the shares of Common Stock
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previously acquired on conversion of Series D Preferred under
this provision (fully adjusted to reflect the events described
in Section 7[c]), shall, at the time and as a condition of
such conversion, be designated Series B Common Stock, which
will have all of the characteristics of the Common Stock with
the sole exception that the voting rights of such Series B
Common Stock shall be subject to the same voting rights
limitations as are applicable to the Series D Preferred
pursuant to Section 3 above and will be convertible at any
time into Common Stock at the option of the holder in the same
manner and subject to the same conditions as were applicable
to a voluntary conversion of the Series D Preferred set forth
in this Section 7; or
[ii] In a widely dispersed public distribution of the
resulting Common Stock; or
[iii] In connection with a private placement in which
no one party directly or indirectly acquires the right to
purchase in excess of 2% of the Common Stock; or
[iv] In an assignment to one or more financial
intermediaries (e.g., broker-dealer or investment banker) for
the purpose of conducting a widely dispersed distribution of
the resulting Common Stock on behalf of the holder; or
[v] On effectiveness of an amendment to or repeal of
the Bank Holding Company Act of 1956, as amended (including
any replacement law, "BHCA"), or the International Banking Act
of 1978, as amended ("IBA"), as a result of which a bank
holding company (as defined in the BHCA) and a foreign bank
with a U.S. branch or agency may acquire the resulting shares
of Common Stock without limitation; or
[vi] On receipt and finality of an order approving
the transaction from the Board of Governors of the Federal
Reserve System (including any successor agency responsible for
supervision and enforcement under the BHCA or IBA, "FRB")
under the BHCA or the IBA.
[d] The number of shares of Common Stock into which each share
of the Series D Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series D
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series D Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted
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immediately prior thereto, and the denominator of which is the
number of shares of Common Stock determined in accordance with
clause (I) above. An adjustment made pursuant to this
subparagraph [d][i] shall become effective (a) in the case of
any such dividend, immediately after the close of business on
the record date for the determination of holders of Common
Stock entitled to receive such dividend, or (b) in the case of
any such subdivision, at the close of business on the day
immediately prior to the day upon which such corporate action
becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series D Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series D Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph d[ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series D Preferred shall: (A) issue any options,
warrants, or other rights (excluding those issued in exchange
for options to purchase common stock in Faircom Inc. pursuant
to the terms of a merger, and excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the aggregate number of
outstanding shares of Common Stock and other equity securities
of the Corporation exercisable for the purchase of, or
convertible into, Common Stock computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance; (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series D Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be
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<PAGE> 34
entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying (w) the
number of shares of Common Stock into which such shares are
convertible immediately prior to the occurrence of such event
by (x) a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding prior to such issuance
plus the number of additional shares of Common Stock issuable
upon exercise of such options, warrants, or rights, or
exchangeable or convertible securities, or the additional
number of shares of Common Stock issued at such time, and the
denominator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
shares of Common Stock that either (y) the sum of the
aggregate exercise price of the total number of shares of
Common Stock issuable upon exercise of such options, warrants,
or rights, or upon conversion or exchange of such convertible
securities, and the aggregate amount of consideration, if any,
received or receivable by the Corporation for such options,
warrants, or rights, or convertible or exchangeable
securities, or (z) the aggregate consideration received in
connection with the sale of shares of its Common Stock for
less than the then fair market value, as the case may be,
would purchase at the then fair market value.
[iv] In the event that, at any time, or from time to
time, after the issuance of such share of the Series D
Preferred, the Common Stock issuable upon conversion of the
Series D Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series D Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series D Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time after the
issuance of such share of the Series D Preferred, there is a
capital reorganization of the Common Stock other than a
recapitalization, subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this Section
7) or a merger or consolidation of the Corporation with or
into another corporation, or the sale of all, or substantially
all, of the Corporations' properties and assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the
holders of the Series D Preferred shall thereafter be entitled
to receive upon conversion of the Series D Preferred the
number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the
application of the provisions of this Section 7 with respect
to the rights of the holders of Series D Preferred after the
reorganization, merger, consolidation, or sale to the end that
the provisions of this Section 7 shall be applicable after
that event and be as nearly equivalent as may be practicable.
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[vi] Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which caused an
adjustment pursuant to this Section 7 to be made, if any
thereof shall not have been exercised, the number of shares of
Common Stock into which each share of the Series D Preferred
is convertible shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (a) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange privileges and (b)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange
privileges, whether or not exercised.
[e] If any adjustment in the number of shares of Common Stock
into which each share of the Series D Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series D Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series D Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series D Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [e] shall be made to the
nearest one-hundredth of a share.
[f] Subject to the limitation in Section 7[i] below, the
holder of any shares of the Series D Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series D Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series D Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series D Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or
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<PAGE> 36
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares
converted. Such conversions shall be deemed to have been made at the
close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of
the Series D Preferred to be converted so that the rights of the holder
thereof shall cease except for the right to receive Common Stock of the
Corporation in accordance herewith and any accumulated, accrued or
unpaid dividends pursuant to paragraph [h] below,, and the converting
holder shall be treated for all purposes as having become the record
holder of such Common Stock of the Corporation at such time.
[g] The Series D Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series D Preferred, setting forth the date of such
conversion and the material terms of the triggering public offering. As
promptly as practicable after such notice, and in any event within five
business days after the surrender of certificates for the Series D
Preferred (if required by the Board of Directors), the Corporation
shall deliver or cause to be delivered to each holder of Series D
Preferred certificates representing the number of validly issued, fully
paid and nonassessable shares of Common Stock of the Corporation to
which such holder of the Series D Preferred so converted shall be
entitled. Such conversion shall be deemed to have been made at the
close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series D Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [h] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[h] Upon conversion of any shares of the Series D Preferred
pursuant to paragraph [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series D Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series D Preferred
entitled to receive payment of such dividend.
[i] Shares of the Series D Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[j] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series D Preferred.
[k] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
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SECTION 8. REDEMPTION.
[a] The Corporation may, at the election of its Board of
Directors, at any time or from time to time, redeem the whole or part
of the Series D Preferred, at the Stated Value, plus an amount equal to
all unpaid dividends thereon, including accrued dividends, whether or
not declared, to the date of redemption. In case the Corporation shall
elect to redeem less than all the Series D Preferred, the Corporation
shall select pro rata the shares so to be redeemed, except that if the
Board of Directors determines in its reasonable business judgment that
to do so by lot would be in the best interests of the Corporation, then
the shares so to be redeemed shall be selected by lot in such manner as
shall be prescribed by the Board of Directors.
[b] Notice of every such redemption shall be mailed, first
class postage prepaid, not less than thirty (30) nor more than sixty
(60) days prior to the date fixed for redemption ("Redemption Date"),
to each holder of record of the shares to be redeemed, at his or her
address as the same appears on the record of stockholders; but neither
failure to mail any such notice to one or more such holders nor any
defect in any such notice shall affect the sufficiency of the
proceedings for redemptions as to other holders. Each such notice shall
state the Redemption Date; the number of shares of Series D Preferred
to be redeemed, and, if less than all the shares of Series D Preferred
held by such holder are to be redeemed, the manner of selecting by lot
the shares to be redeemed; the place or places where such shares are to
be surrendered for payment; that dividends on the shares to be redeemed
will cease on such Redemption Date; and the effect of such redemption
on the right of conversion.
[c] Notice having been mailed as aforesaid, from and after the
Redemption Date, all dividends on the shares so called for redemption
shall cease to accrue, said shares shall no longer be deemed to be
outstanding, all rights of the holders thereof as stockholders of the
Corporation (except the right to receive payment for the shares, the
right to receive declared dividends pursuant to Section 7[g] above, and
the right to convert such shares into shares of Common Stock of the
Corporation until the close of business on the third business day
preceding the Redemption Date, as provided in Section 7) shall cease,
and, upon surrender in accordance with said notice of the certificates
for any such shares (properly endorsed or assigned for transfer, if the
Board of Directors shall so require), such shares shall be redeemed by
the Corporation in accordance with this Section 8. In connection with
the determination of the amount of dividends accruing with respect to
any conversion in the period between a notice of redemption and the
Redemption Date, on a date which is not a Quarterly Dividend Payment
Date, the amount of any such dividends shall be prorated based upon the
number of days which have elapsed since the immediately preceding
Quarterly Dividend Payment Date (excluding such Quarterly Dividend
Payment Date itself).
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series D Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series D Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series D Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and
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when such adjustment will become effective and (B) promptly mail to the holders
of record of the outstanding shares of the Series D Preferred a notice stating
that the number of shares into which the shares of Series D Preferred are
convertible has been adjusted and setting forth the new number of shares into
which each share of the Series D Preferred is convertible as a result of such
adjustment and when such adjustment will become effective. Notwithstanding the
foregoing, the Corporation shall incur no liability for its failure to take any
action set forth in this Section 9, nor shall such failure affect the validity,
rights or preferences of any shares of the Series D Preferred.
SECTION 10. RANKING.
The Series D Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series D Preferred, and
except for the Series A Preferred, the Series C Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
H. Designation of Series E Convertible Preferred Stock. A series of the
Preferred Stock of the Corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as "Series E Convertible
Preferred Stock" (the "Series E Preferred") and the number of shares
constituting such series shall be 5,000,000 shares. The stated value of the
Series E Preferred shall be $5 per share, the original per share issue price
(the "Stated Value") .
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series E Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series E Preferred at the rate of $.35 per share per annum. No interest
shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by this Amended
Certificate of Incorporation, as amended or restated from time to time (the
"Certificate of Incorporation"), subject to restrictions contained in this
Certificate of Incorporation the holders of Series E Preferred shall be entitled
to vote on all matters submitted to a vote of the Corporation's stockholders.
Except as otherwise required by law or provided by this Certificate of
Incorporation or by the Board of Directors pursuant to Subpart C
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of this Article FOURTH, the holders of the Series E Preferred shall vote
together with the holders of all other series of the Corporation's voting
preferred stock and the holders of the Corporation's Common Stock as one class
with one vote per share (in the case of Preferred Stock, subject to adjustments
as provided in Section 7 below and if convertible into Common Stock, one vote
per share of Common Stock into which such convertible Preferred Stock is then
convertible) on all matters submitted to a vote of the Corporation's
stockholders.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series E Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series E Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series E
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series E Preferred, except dividends paid
ratably on the Series E Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series E
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series E Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of aggregate outstanding shares of Series A
Preferred and Series E Preferred outstanding as of the date of the creation of
such contractual obligations (including, without limitation, in satisfaction of
the provisions contained in the Stockholders' Agreement), or (D) purchase or
otherwise acquire for consideration any shares of the Series E Preferred or any
shares of stock ranking on a parity with the Series E Preferred except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series of classes or except pursuant to
the provisions of the Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series E Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
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Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series E Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series E Preferred
unless, prior thereto, the holders of Series E Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series E
Preferred, except distributions made ratably on the Series E Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. OPTIONAL CONVERSION.
Each share of the Series E Preferred may be converted at any time, at
the option of the holder thereof, into shares of Common Stock of the
Corporation, on the terms and conditions set forth below in this Section 7:
[a] Subject to the provisions for adjustment hereinafter set
forth, each share of the Series E Preferred shall be convertible at the
option of the holder thereof, in the manner hereinafter set forth, into
one (1) fully paid and nonassessable share of Common Stock of the
Corporation.
[b] The number of shares of Common Stock into which each share
of the Series E Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series E
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series E Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock
determined in accordance with clause (I) above. An adjustment
made pursuant to this subparagraph [b][i] shall become
effective (a) in the case of any such dividend, immediately
after the close of business on the record date for the
determination of holders of Common Stock entitled to receive
such dividend, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day
upon which such corporate action becomes effective.
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[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series E Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series E Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b(ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series E Preferred shall: (A) issue any options,
warrants, or other rights (excluding those issued in exchange
for options to purchase common stock in Faircom Inc. pursuant
to the terms of a merger, and excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the equity aggregate number
of outstanding shares of Common Stock and other securities of
the Corporation exercisable for the purchase of, or
convertible into, Common Stock, computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance; (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series E Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (w) the number of shares of Common
Stock into which such shares are convertible immediately prior
to the occurrence of such event by (x) a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
additional shares of Common Stock issuable upon exercise of
such options, warrants, or rights, or exchangeable or
convertible securities, or the additional number of shares of
Common Stock issued at such time, and the
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denominator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
shares of Common Stock that either (y) the sum of the
aggregate exercise price of the total number of shares of
Common Stock issuable upon exercise of such options, warrants,
or rights, or upon conversion or exchange of such convertible
securities, and the aggregate amount of consideration, if any,
received or receivable by the Corporation for such options,
warrants, or rights, or convertible or exchangeable
securities, or (z) the aggregate consideration received in
connection with the sale of shares of its Common Stock for
less than the then fair market value, as the case may be,
would purchase at the then fair market value.
[iv] In the event that, at any time, or from time to
time, after the issuance of such share of the Series E
Preferred, the Common Stock issuable upon conversion of the
Series E Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series E Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series E Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time after the
issuance of such share of the Series E Preferred there is a
capital reorganization of the Common Stock other than a
recapitalization, subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this Section
7) or a merger or consolidation of the Corporation with or
into another corporation, or the sale of all, or substantially
all, of the Corporations' properties and assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the
holders of the Series E Preferred shall thereafter be entitled
to receive upon conversion of the Series E Preferred the
number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the
application of the provisions of this Section 7 with respect
to the rights of the holders of Series E Preferred after the
reorganization, merger, consolidation, or sale to the end that
the provisions of this Section 7 shall be applicable after
that event and be as nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which caused an
adjustment pursuant to this Section 7 to be made, if any
thereof shall not have been exercised, the number of shares of
Common Stock into which each share of the Series E Preferred
is convertible shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (a) the only shares of
Common Stock so issued were the shares of
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Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges, whether or not
exercised.
[c] If any adjustment in the number of shares of Common Stock
into which each share of the Series E Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series E Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series E Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series B Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [c] shall be made to the
nearest one-hundredth of a share.
[d] The holder of any shares of the Series E Preferred may
convert such shares into shares of Common Stock by surrendering for
such purpose to the Corporation, at its principal office or at such
other office or agency maintained by the Corporation for that purpose,
a certificate or certificates representing the shares of Series E
Preferred to be converted (or if such certificate or certificates
cannot be found, an affidavit of lost securities in form and substance
acceptable to the Corporation) accompanied by a written notice stating
that such holder elects to convert all or a specified number of such
shares in accordance with the provisions of this Section 7 and
specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series E Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series E Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series E Preferred to be
converted so that the rights of the holder thereof shall cease except
for the right to receive Common Stock of the corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [e] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
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[e] Upon conversion of any shares of the Series E Preferred,
the holder thereof shall be entitled to receive any accumulated,
accrued or unpaid dividends in respect of the shares so converted,
including any dividends on such shares of the Series E Preferred
declared prior to such conversion if such holder held such shares on
the record date fixed for the determination of holders of the Series E
Preferred entitled to receive payment of such dividend.
[f] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series E Preferred.
[g] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. MANDATORY CONVERSION.
Each share of the Series E Preferred shall be converted, at the option
of the Board of Directors, into shares of Common Stock of the Corporation, on
the terms and conditions set forth below in this Section 8:
[a] Subject to the provisions for adjustment set forth in
Section 7, which shall also apply to conversions pursuant to this
Section 8, each share of the Series E Preferred shall be convertible at
the option of the Board of Directors, under the conditions hereinafter
set forth, into one (1) fully paid and nonassessable share of Common
Stock of the Corporation.
[b] The Board of Directors of the Corporation may require
conversion of all shares of the Series E Preferred into shares of
Common Stock in preparation for or upon any of the following:
[i] A public offering of equity securities of the
Corporation of at least $10,000,000 in gross proceeds;
[ii] A private placement of equity securities of the
Corporation of at least $25,000,000 in gross proceeds;
[iii] A private placement of equity securities of the
Corporation of at least $10,000,000 in gross proceeds under
circumstances where the investor(s) reasonably believe the
conversion of the Series E Preferred is necessary to achieve
its (their) investment objectives;
[iv] A merger of the Corporation with another
corporation or other entity, whether or not the Corporation is
a survivor of such transaction whereby as a result the
stockholders of the Corporation hold less than 50% of the
outstanding capital stock of the surviving entity; or
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[v] An acquisition of equity securities of the
Corporation in one transaction or in a series of related
transactions which results in a transfer of majority voting
control of the Corporation.
[c] The Series E Preferred shall convert to Common Stock of
the Corporation automatically upon notice in writing to the
stockholders, including all holders of the Series E Preferred, setting
forth the date of such conversion and the material terms of the
triggering event. As promptly as practicable after such notice, and in
any event within five business days after the surrender of certificates
for the Series E Preferred (if required by the Board of Directors), the
Corporation shall deliver or cause to be delivered to each holder of
Series E Preferred certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock of the
Corporation to which such holder of the Series E Preferred so converted
shall be entitled. Such conversion shall be deemed to have been made at
the close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series E Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [d] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[d] Upon conversion of the Series E Preferred, the holder
thereof shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series E Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series E Preferred
entitled to receive payment of such dividend.
[e] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series E Preferred.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series E Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series E Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series E Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series E Preferred a notice stating that the number of shares into
which the shares of Series E Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series E
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
9, nor shall such failure affect the validity, rights or preferences of any
shares of the Series E Preferred.
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SECTION 10. RANKING.
The Series E Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series E Preferred, and
except for the Series A Preferred, the Series C Preferred, the Series D
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
I. Designation of Series F Convertible Preferred Stock. A series of the
Preferred Stock of the Corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series F Convertible
Preferred (the "Series F Preferred") and the number of shares constituting such
series shall be 4,100,000 shares. The stated value of the Series F Preferred
shall be $5 per share, the original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series F Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series F Preferred at the rate of $.50 per share per annum; provided,
however, that if and to the extent that the holder of a share of the Series F
Preferred does not receive a cash dividend on any given Quarterly Dividend
Payment Date in full payment of the accrued and unpaid dividend on such share of
the Series F Preferred or any previously cumulated dividend on such share for
the period ending on such Quarterly Dividend Payment Date and beginning on the
immediately preceding Quarterly Dividend Payment Date (or, if such share was
first issued during such period, beginning on the date of such issuance), such
unpaid portion of such dividend shall be cumulative and shall itself accrue,
whether or not declared and whether or not the Corporation has at the time funds
legally available for such purpose, from and after such date, until the date so
paid in full, dividends on a daily basis at a rate of 10% per annum, compounded
quarterly. No interest shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by this Amended
Certificate of Incorporation, as amended or restated from time to time (the
"Certificate of Incorporation"), subject to restrictions contained in this
Certificate of Incorporation the holders of Series F Preferred shall be entitled
to vote on all matters submitted to a vote of the Corporation's stockholders.
Except as otherwise required by law or provided by this Certificate of
Incorporation or by the Board of Directors pursuant to Subpart C
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of this Article FOURTH, the holders of the Series F Preferred, shall vote
together with the holders of all other series of the Corporation's voting
preferred stock and the holders of the Corporation's Common Stock as one class
with one vote per share (in the case of Preferred Stock, subject to adjustments
as provided in Section 7 below and if convertible into Common Stock, one vote
per share of Common Stock into which such convertible Preferred Stock is then
convertible) on all matters submitted to a vote of the Corporation's
stockholders. Further, this Certificate of Incorporation may not be amended to
change the liquidation preference, conversion rate, dividend rate or voting, put
or redemption rights of any series of the Corporation's Preferred Stock without
the approval of the holders of a majority of the outstanding shares of the
Series F Preferred, voting as a separate class.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series F Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series F Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series F
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series F Preferred, except dividends paid
ratably on the Series F Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series F
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series F Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series F Preferred
(including, without limitation, in satisfaction of the provisions contained in
the Stockholders' Agreement), or (D) purchase or otherwise acquire for
consideration any shares of the Series F Preferred, or any shares of stock
ranking on a parity with the Series F Preferred except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors (including the Series F Directors voting as part of the majority),
after consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall unanimously
determine in good faith will result in fair and equitable treatment among the
respective series of classes or except pursuant to the provisions of the
Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series F Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
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SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series F Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series F Preferred
unless, prior thereto, the holders of Series F Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series F
Preferred, except distributions made ratably on the Series F Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series F Preferred
shall be convertible at any time at the option of the holder thereof,
in the manner hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series F
Preferred shall be convertible at the option of the Board of Directors
into one (1) fully paid and nonassessable share of Common Stock of the
Corporation in the event of, and concurrently with the closing of, a
public offering of Common Stock of the Corporation at a per share price
of at least $12.00 (subject to adjustment for stock splits, stock
dividends, reverse stock splits and the like) with gross proceeds to
the Corporation of at least $25,000,000 (excluding the effect of any
over-allotment option).
[c] The number of shares of Common Stock into which each share
of the Series F Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series F
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series F Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of
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<PAGE> 49
Common Stock determined in accordance with clause (I) above.
An adjustment made pursuant to this subparagraph [c][i] shall
become effective (a) in the case of any such dividend,
immediately after the close of business on the record date for
the determination of holders of Common Stock entitled to
receive such dividend, or (b) in the case of any such
subdivision, at the close of business on the day immediately
prior to the day upon which such corporate action becomes
effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series F Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series F Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b[ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series F Preferred shall: (A) issue any options,
warrants, or other rights (excluding those issued in exchange
for options to purchase common stock in Faircom Inc. pursuant
to the terms of a merger, and excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the aggregate number of
outstanding shares of Common Stock and other equity securities
of the Corporation exercisable for the purchase of, or
convertible into, Common Stock, computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance; (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series F Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common
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<PAGE> 50
Stock determined by multiplying (w) the number of shares of
Common Stock into which such shares are convertible
immediately prior to the occurrence of such event by (x) a
fraction, the numerator of which shall be the number of shares
of Common Stock outstanding prior to such issuance plus the
number of additional shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or exchangeable
or convertible securities, or the additional number of shares
of Common Stock issued at such time, and the denominator of
which shall be the number of shares of Common Stock
outstanding prior to such issuance plus the number of shares
of Common Stock that either (y) the sum of the aggregate
exercise price of the total number of shares of Common Stock
issuable upon exercise of such options, warrants, or rights,
or upon conversion or exchange of such convertible securities,
and the aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
[iv] In the event that, at any time, or from time to
time, after the issuance of such share of the Series F
Preferred, the Common Stock issuable upon conversion of the
Series F Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series F Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series F Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time after the
issuance of such share of the Series F Preferred, there is a
capital reorganization of the Common Stock other than a
recapitalization, subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this Section
7) or a merger or consolidation of the Corporation with or
into another corporation, or the sale of all, or substantially
all, of the Corporations' properties and assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the
holders of the Series F Preferred shall thereafter be entitled
to receive upon conversion of the Series F Preferred the
number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the
application of the provisions of this Section 7 with respect
to the rights of the holders of Series F Preferred after the
reorganization, merger, consolidation, or sale to the end that
the provisions of this Section 7 shall be applicable after
that event and be as nearly equivalent as may be practicable.
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[vi] Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which caused an
adjustment pursuant to this Section 7 to be made, if any
thereof shall not have been exercised, the number of shares of
Common Stock into which each share of the Series F Preferred
is convertible shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (a) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange privileges and (b)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange
privileges, whether or not exercised.
[d] If any adjustment in the number of shares of Common Stock
into which each share of the Series F Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series F Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series F Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series F Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [d] shall be made to the
nearest one-hundredth of a share.
[e] Subject to the limitation in Section 7[h] below, the
holder of any shares of the Series F Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series F Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series F Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series F Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
certificates less the number of shares
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converted. Such conversions shall be deemed to have been made at the
close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of
the Series F Preferred to be converted so that the rights of the holder
thereof shall cease except for the right to receive Common Stock of the
Corporation in accordance herewith and any accumulated, accrued or
unpaid dividends pursuant to paragraph [g] below, and the converting
holder shall be treated for all purposes as having become the record
holder of such Common Stock of the Corporation at such time.
[f] The Series F Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series F Preferred, setting forth the date of such
conversion and the material terms of the triggering public offering. As
promptly as practicable after such notice, and in any event within five
business days after the surrender of certificates for the Series F
Preferred (if required by the Board of Directors), the Corporation
shall deliver or cause to be delivered to each holder of Series F
Preferred certificates representing the number of validly issued, fully
paid and nonassessable shares of Common Stock of the Corporation to
which such holder of the Series F Preferred so converted shall be
entitled. Such conversion shall be deemed to have been made at the
close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series F Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[g] Upon conversion of any shares of the Series F Preferred
pursuant to paragraph [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted (whether or not
declared or otherwise payable as of such date of conversion), including
any dividends on such shares of the Series F Preferred declared prior
to such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series F Preferred
entitled to receive payment of such dividend.
[h] Shares of the Series F Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[i] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series F Preferred.
[j] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
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SECTION 8. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series F Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series F Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series F Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series F Preferred a notice stating that the number of shares into
which the shares of Series F Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series F
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
8, nor shall such failure affect the validity, rights or preferences of any
shares of the Series F Preferred.
SECTION 9. RANKING.
The Series F Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series F Preferred, and
except for the Series A Preferred, the Series C Preferred, the Series D
Preferred, the Series E Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
SECTION 10. DIRECTORSHIPS.
The holders of the Series F Preferred, as a class, shall be entitled to
be represented on the Board of Directors by two Directors (the "Series F
Directors") who, upon nomination by such holders, as a class, will stand for
election by voting by the holders of the Preferred Stock (subject to limitations
in this Article FOURTH or established by the Board of Directors pursuant to
Section C of this Article FOURTH) and holders of Common Stock together, except
under circumstances where the number of individuals nominated for election
exceeds the number of Directors to be elected. In the event the number of
individuals nominated for election exceeds the number of Directors to be
elected, then the holders of the Series F Preferred shall have the sole right to
vote for, elect and remove the individuals nominated by them, as a class, to
serve as the Series F Directors, and in such event the further right to vote
for, elect or remove any of the other Directors who are not to be elected solely
by the holders of another class or series of Preferred Stock. The Series F
Directors, upon being elected, will serve for the same term and have the same
voting powers as other Directors. The right to elect the Series F Directors
pursuant to the terms hereof shall be exercisable by the holders of a majority
of the Series F Preferred at their option upon at least 60 days notice to the
Corporation; provided, however, if the Corporation is subject to the reporting
requirements of the Securities Exchange Act of 1934, such notice must be
provided on or before the date established by the Corporation for the submission
of proposals pursuant to the proxy rules promulgated under the Securities Act of
1934. One of the Series F Directors shall serve as a
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member of the Compensation Committee and the other shall serve as a member of
the Audit and Nominating Committees of the Board of Directors (or such other
Committees of the Board performing such functions), which Committees will be
composed of at least one Director, in addition to the Series F Director, who is
not an employee of the Corporation.
FIFTH: Incorporator. The name and mailing address of the incorporator
is Terry Jacobs, 50 East RiverCenter Boulevard, Covington, Kentucky 41011, whose
powers as incorporator have ceased by virtue of the election of the Board of
Directors.
SIXTH: Elimination of Director Liability. A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended after the filing of the Certificate of
Incorporation of which this Article is a part to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
SEVENTH: Right to Indemnification.
A. Indemnification. The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party, or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding"), by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another Corporation or of a partnership, joint venture, trust, enterprise or
non-profit entity, including service with respect to employee benefit plans,
against all liability and loss suffered and expenses reasonably incurred by such
person. The Corporation shall be required to indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
B. Prepayment of Expenses. The Corporation shall pay the expenses of
directors and executive officers of the Corporation, and may pay the expenses of
all other officers, employees or agents of the Corporation, incurred in
defending any proceeding, in advance of its final disposition, provided,
however, that the payment of expenses incurred by a director, officer, employee
or agent in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the director, officer, employee or agent
to repay all amounts advanced if it should be ultimately determined that the
director, officer, employee or agent is not entitled to be indemnified under
this Article SEVENTH or otherwise.
C. Claims. If a claim for indemnification or payment of expenses under
this Article is not paid in full within sixty days after a written claim
therefor has been received by the Corporation, the
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claimant may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the Corporation shall have the burden
of proving that the claimant was not entitled to the requested indemnification
or payment of expenses under applicable law.
D. Non-Exclusivity of Rights. The rights conferred on any person by
this Article SEVENTH shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
E. Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another Corporation, partnership, joint venture,
trust, enterprise or nonprofit entity, shall be reduced by any amount such
person may collect as indemnification from such other Corporation, partnership,
joint venture, trust, enterprise or non-profit enterprise.
F. Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article SEVENTH shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
EIGHTH: Bylaws. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to make, alter or repeal bylaws of the Corporation.
*******
The Corporation further certifies:
II. That at a meeting of the Board of Directors of Regent
Communications, Inc. resolutions were duly adopted setting forth the foregoing
Amended and Restated Certificate of Incorporation, declaring adoption of the
same to be advisable and submitting it to the shareholders of said corporation
for approval.
III. That thereafter, pursuant to resolution of its Board of Directors,
consents of the stockholders of the corporation were executed, in accordance
with Section 228 of the General Corporation Law of the State of Delaware, by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Pursuant to Section
228 of the General Corporation Law of the State of Delaware, written notice has
been given to stockholders who have not consented in writing.
IV. That said amendment was duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
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IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by Terry S. Jacobs, its Chairman, and William L. Stakelin, its Secretary,
this 11th day of, June 1998.
By:
------------------------------
Terry S. Jacobs, Chairman
ATTEST:
-----------------------------------
William L. Stakelin, Secretary
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Exhibit 4(c)
REGENT COMMUNICATIONS, INC.
---------------------------
SECOND AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
THIS SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this
"Agreement"), is made and entered into as of June 15, 1998 by and among REGENT
COMMUNICATIONS, INC., a Delaware corporation (the "Company"), TERRY S. JACOBS
("Jacobs"), WILLIAM L. STAKELIN ("Stakelin"), PNC BANK, N.A., a national banking
association, as trustee ("PNC"), WALLER-SUTTON MEDIA PARTNERS, L.P., a Delaware
limited partnership ("Waller-Sutton"), WILLIAM H. INGRAM ("Ingram"), WPG
CORPORATE DEVELOPMENT ASSOCIATES V, L.P., a Delaware limited partnership, and
WPG CORPORATE DEVELOPMENT ASSOCIATES V (OVERSEAS), L.P., a Delaware limited
partnership (collectively, "WP&G"), RIVER CITIES CAPITAL FUND LIMITED
PARTNERSHIP, a Delaware limited partnership ("River Cities"), BMO FINANCIAL,
INC., a Delaware corporation ('"BMO"), GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("GE Capital"), JOEL M. FAIRMAN ("Fairman"), MIAMI VALLEY
VENTURE FUND L.P., an Ohio limited partnership ("Miami Valley"), and BLUE CHIP
CAPITAL FUND II LIMITED PARTNERSHIP, an Ohio limited partnership ("Blue Chip").
W I T N E S S E T H:
WHEREAS, Jacobs, Stakelin, River Cities, BMO and GE Capital, the
holders of all of the Company's capital stock which is issued and outstanding
immediately prior to the consummation of the transactions described below, are
parties to a First Amended and Restated Stockholders' Agreement among them,
dated as of December 8, 1997 (the "Existing Stockholders' Agreement");
WHEREAS, pursuant to the consummation, on the date hereof (the "Closing
Date"), of the merger (the "Merger") of Faircom Inc. ("Faircom") and Regent
Merger Corp. ("RMC") pursuant to that certain Agreement of Merger, dated as of
December 5, 1997, among Faircom, RMC and the Company, as amended, the
outstanding shares of common stock of Faircom have been converted into the right
to receive shares of Series C Preferred Stock;
WHEREAS, as holders of record of Faircom common stock on the Closing
Date, Fairman, Miami Valley, Blue Chip and Waller-Sutton are to receive shares
of Series C Preferred Stock as a result of the Merger;
WHEREAS, on the Closing Date, Waller-Sutton, Ingram, WP&G, GE Capital
and River Cities (collectively, the "Series F Purchasers") are to purchase
certain shares of Series F Preferred Stock pursuant to the terms of a Stock
Purchase Agreement, dated as of June 15, 1998, by and among the Company and the
Series F Purchasers (the "Series F Preferred Stock Purchase Agreement");
<PAGE> 2
WHEREAS, pursuant to the terms of the Series F Preferred Stock Purchase
Agreement, the Series F Purchasers are obligated to purchase, from time to time
after the Closing Date, certain additional shares of Series F Preferred Stock,
subject to the terms and provisions thereof;
WHEREAS, pursuant to a Stock Purchase Agreement, dated as of December
8, 1997, BMO has heretofore purchased 220,000 shares of Series D Preferred Stock
and on the Closing Date, BMO shall purchase an additional 780,000 shares of
Series D Preferred Stock;
WHEREAS, on or prior to the Closing Date, GE Capital shall pay all
amounts due to the Company in connection with the purchase by it of 1,000,000
shares of Series B Preferred Stock pursuant to a Stock Purchase Agreement dated
as of December 8, 1997 (the "Series B Preferred Stock Purchase Agreement");
WHEREAS, in connection with the foregoing transactions and certain
matters related thereto on the Closing Date, the Company is to issue certain
warrants to the Series F Purchasers and is to issue certain stock options to
Jacobs and Stakelin; and
WHEREAS, the Company and the Stockholders deem it desirable to enter
into this Agreement in order to amend and restate in its entirety the Existing
Stockholders' Agreement, to add certain additional parties thereto and to set
forth certain agreements among themselves granting certain rights and imposing
certain restrictions on themselves, the Company and the shares of capital stock
in the Company now or at any time held by the Stockholders or issuable to the
Stockholders upon the exercise of any options or warrants now or at any time
held by the Stockholders (collectively, the "Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree that the Existing Stockholders' Agreement is hereby amended and restated
in its entirety as follows:
1. DEFINITIONS. As used in this Agreement:
"Additional Put Notice" as defined in Section 7(b).
"Additional Put Stockholder" as defined in Section 7(b).
"Affiliate" as applied to any Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. The term "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 vote
10% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 10% or more of the ownership interest, beneficial or otherwise) of
such Person or otherwise to direct or cause the
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direction of the management and policies of that Person, whether through the
ownership of Voting Stock or other ownership interest, by contract or otherwise.
"Agreed Value" means such amount as shall be agreed to by the Required
Stockholders and the Company as the total fair market value of the Company,
valued as a going-concern; provided, however, that such agreement by the Company
to the amount determined as Agreed Value must be approved by a majority of the
directors of the Company who are not nominated by Waller-Sutton or any
Additional Put Stockholder.
"Amended and Restated Charter" shall mean the amended and restated
certificate of incorporation of the Company, as in effect on the date hereof or
as hereinafter further amended in accordance with the provisions hereof and
thereof.
"Beneficially Own" or "Beneficial Ownership" shall, as to any Person,
be determined or computed in the manner provided under Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended, but on a fully-diluted
and as converted basis.
"Change of Control" means the appointment of any person other than
Jacobs or Stakelin as President, Chief Executive Officer or Chief Operating
Officer of the Company or the acquisition by any Person or related group of
Persons of direct or indirect beneficial ownership of more than 35% of the
outstanding Voting Stock.
"Closing Date" means the date hereof.
"Common Stock" means the common stock of the Company, $.01 par value.
"Common Stock Value" as defined in Section 7(d)(i)(3) below.
"Eligible Put Shares" means any Shares other than (i) Series C
Preferred Stock, (ii) Common Stock (other than (1) Common Stock issued to
Waller-Sutton upon conversion of Series C Preferred Stock, (2) Common Stock
issued on exercise of the GE Warrant or (3) Common Stock issued on exercise of
the Series F Warrants, which exercise occurs after the date the Triggering Put
Notice is given and provided that the Warrants so exercised were included among
the Put Shares), (iii) warrants or options other than the Series F Warrants,
(iv) the Company's 7% Series E Convertible Preferred Stock, $.01 par value, and
(v) any series of preferred stock first created by the Board of Directors after
the date hereof.
"Exempt Transfer" as defined in Section 8 below.
"Existing Loan Agreement" shall mean the Credit Agreement, dated as of
November 14, 1997, among the Company, the lenders listed therein, GE Capital as
Documentation Agent, and Bank of Montreal, Chicago Branch, as Agent, as amended
by a First Amendment thereto dated February 16, 1998 and a Second Amendment
dated June 11, 1998, as in effect on the date hereof.
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"Fairman Employment Period" means the "Employment Period," as defined
in that certain employment agreement, dated as of the Closing Date, between the
Company and Joel M. Fairman, as originally executed or thereafter amended with
the consent of Waller-Sutton (the "Fairman Agreement").
"Indebtedness" of any Person shall mean the principal of, premium, if
any, and unpaid interest on: (a) indebtedness for money borrowed from others;
(b) indebtedness guaranteed, directly or indirectly, in any manner by such
Person, or in effect guaranteed, directly or indirectly, in any manner by such
Person through an agreement, contingent or otherwise, to supply funds to, or in
any other manner invest in, the debtor, or to purchase indebtedness, or to
purchase and pay for property if not delivered or pay for services if not
performed, primarily for the purpose of enabling the debtor to make payment of
the indebtedness or to assure the owners of the indebtedness against loss; (c)
all indebtedness secured by any mortgage, lien, pledge, charge or other
encumbrance upon property owned by such Person, even though such Person has not
in any manner become liable for the payment of such indebtedness; (d) all
indebtedness of such Person created or arising under any conditional sale, lease
(intended primarily as a financing device) or other title retention or security
agreement with respect to property acquired by such Person even though the
rights and remedies of the seller, lessor or lender under such agreement or
lease in the event of default may be limited to repossession or sale of such
property; and (e) renewals, extensions and refundings of any such indebtedness.
"Immediate Family" means, as to any individual, (i) such individual's
spouse, children, parents or siblings, and (ii) the respective executors,
administrators, conservators, guardians or custodians during the minority of
such persons.
"Jacobs Employment Period" means the "Employment Period," as defined in
that certain Executive Employment Agreement, effective as of March 1, 1998,
between the Company and Jacobs as in effect on the Closing Date or thereafter
amended with the consent of Waller-Sutton.
"Management Stockholder" means either or both of Jacobs and Stakelin
and any Transferee of either of them, other than pursuant to an Exempt Transfer
of the type referred to in clauses (iii) and (iv) of the definition thereof.
"Maximum Number" means, in the case of each of Jacobs and Stakelin, the
lesser of (i) 733,333 (subject to adjustment in the case of stock splits, stock
dividends, reverse stock splits and the like occurring from and after the
Closing Date) and (ii) a number of shares of Common Stock equal to 5.5% of the
sum of (x) the number of shares of Common Stock then outstanding and (y) the
number of shares of Common Stock issuable upon the conversion of all outstanding
shares of capital stock of the Company convertible into Common Stock or issuable
upon the exercise of all outstanding options or warrants to acquire Common Stock
or preferred stock convertible into Common Stock.
"Permitted Indebtedness" means (i) Indebtedness incurred by the Company
under the Existing Loan Agreement in accordance with (and without giving effect
to any material waiver or modification
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<PAGE> 5
of), the terms thereof, and (ii) Indebtedness to the extent permitted under the
Existing Loan Agreement (without giving effect to any material waiver or
modification thereof).
"Permitted Issuances" means any of the following: (i) the issuance of
additional shares of Series F Preferred Stock pursuant to the Series F Preferred
Stock Purchase Agreement; (ii) the issuance of shares of Common Stock on the
conversion of any shares of Preferred Stock or any other shares of convertible
securities of the Company which are outstanding as of the date hereof or the
issuance of which is approved by Waller-Sutton; (iii) the issuance of shares of
Common Stock or Preferred Stock upon the exercise of currently outstanding
options or warrants to purchase Common Stock or Preferred Stock, or upon the
exercise of options or warrants which are issued after the date hereof with the
approval of Waller-Sutton; and (iv) the grant and/or exercise of options under
the Company's 1998 Management Stock Option Plan (provided that the number of
shares of Common Stock issued or issuable to either Stakelin or Jacobs in
respect of all options granted under the Company's 1998 Management Stock Option
Plan shall not exceed the Maximum Number).
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Preferred Stock" means any or all of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Series F Preferred Stock.
"Put Closing" as defined in Section 7(a).
"Put Shares" as defined in Section 7(c).
"Qualified Financing" as defined in Section 7(g)(ii) below.
"Qualified Public Offering" means an underwritten public offering of
Common Stock of the Company (i) at not less than $12 per share of Common Stock
(equitably adjusted for any stock splits, reverse stock splits or stock
dividends occurring after the date hereof), and (ii) generating not less than
$25,000,000 of gross proceeds payable to the Company (excluding the effect of
any over-allotment option).
"Redemption and Warrant Agreement" means that certain Amended and
Restated Redemption and Warrant Agreement, dated as of March 31, 1998, among the
Company, Blue Chip, Miami Valley and Faircom.
"Required Stockholders" means Waller-Sutton and such other Stockholders
as shall (together with Waller-Sutton) Beneficially Own more than 50% of the Put
Shares (other than Put Shares Beneficially Owned by the Management
Stockholders).
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
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"Series A Director" means the one director entitled to be nominated to
serve by the holders of Series A Preferred Stock, voting separately as a class,
pursuant to the provisions of Article FOURTH, Paragraph D, Section 11, of the
Amended and Restated Charter.
"Series A Preferred Stock" means the Company's 7% Series A Convertible
Preferred Stock, $.01 par value, together with all shares of Common Stock issued
upon conversion of such shares.
"Series B Preferred Stock" means the Company's 7% Series B Senior
Convertible Preferred Stock, $.01 par value, together with all shares of Common
Stock issued upon conversion of such shares.
"Series B Preferred Stock Purchase Agreement" as defined in the
recitals hereto.
"Series C Director" means the one director entitled to be nominated to
serve by the holders of Series C Preferred Stock, voting separately as a class,
pursuant to the provisions of Article FOURTH, Paragraph F, Section 11, of the
Amended and Restated Charter.
"Series C Preferred Stock" means the Company's 7% Series C Convertible
Preferred Stock, $.01 par value, together with all shares of Common Stock issued
upon conversion of such shares.
"Series D Preferred Stock" means the Company's 7% Series D Convertible
Preferred Stock, $.01 par value, together with all shares of Common Stock issued
upon conversion of such shares.
"Series F Directors" means the two directors entitled to be nominated
to serve by the holders of Series F Preferred Stock, voting separately as a
class, pursuant to the provisions of Article FOURTH, Paragraph I, Section 11, of
the Amended and Restated Charter.
"Series F Preferred Stock" means the Company's 10% Series F Convertible
Preferred Stock, $.01 par value, together with all shares of Common Stock issued
upon conversion of such shares.
"Series F Preferred Stock Purchase Agreement" as defined in the
recitals hereto.
"Shares" as defined in the recitals hereto; provided, however, that as
to any particular securities of the Company, such shall cease to be "Shares"
hereunder, when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act, and such
securities shall have been disposed of under such registration statement, (ii)
they shall have been distributed to the public pursuant to Rule 144 under the
Securities Act in accordance with the terms hereof or (iii) they shall have
ceased to be outstanding.
"Stakelin Employment Period" means the "Employment Period," as defined
in that certain Executive Employment Agreement, effective as of March 1, 1998,
between the Company and Stakelin, as in effect on the Closing Date or thereafter
amended with the consent of Waller-Sutton.
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"Stockholder" means any Person who is a party to this Agreement or is a
successor or assign thereof contemplated by Section 13 below.
"Triggering Put Notice" as defined in Section 7(a).
"Voting Stock" of any Person means securities of any class or classes
of such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to elect or vote for the election of the directors of
such Person.
"Warrants" means (i) the warrants to purchase 860,000 shares of Common
Stock (subject to adjustment as provided therein) issued to the Series F
Purchasers pursuant to the terms of the Series F Stock Purchase Agreement (the
"Series F Warrants"), and (ii) the warrant to purchase 50,000 shares of Common
Stock (subject to adjustment as provided therein) issued to GE Capital pursuant
an Agreement to Issue Warrant, dated the date hereof, between the Company and GE
Capital (the "GE Warrant").
2. BOARD OF DIRECTORS.
(a) From and after the date of this Agreement and until the
provisions of this Section 2 cease to be effective, each Stockholder shall vote
or cause to be voted all Voting Stock and any other voting securities of the
Company over which such Stockholder has Beneficial Ownership or voting control
and shall take all other necessary or desirable actions within its control
(whether in its capacity as a stockholder, director, member of a committee of
the Board of Directors or officer of the Company or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:
(i) the number of directors constituting the entire Board of
Directors of the Company (the "Board") shall be the number of persons entitled
to be designated to serve on the Board in accordance with the provisions of
Section 2(a)(ii) below (subject to increase as provided in Section 7(j) below);
(ii) the following persons shall at all times constitute the
members of the Board and shall be elected to the Board at each annual meeting of
the Stockholders of the Company:
(1) Jacobs, during the Jacobs Employment Period;
(2) Stakelin, during the Stakelin Employment Period;
(3) Fairman, during the Fairman Employment Period and for
up to two years thereafter if his nomination as a director shall be approved by
the Board of Directors;
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(4) two persons designated by Waller-Sutton, who initially
shall be William H. Ingram and Richard Patterson (and who shall constitute the
Series F Directors);
(5) one person designated by River Cities, who shall
initially be R. Glen Mayfield (and who shall constitute the Series A Director);
and
(6) one person designated by Blue Chip, who shall initially
be John H. Wyant (and who shall constitute the Series C Director); and
(7) such additional persons who Waller-Sutton shall have
the right to designate pursuant to Section 7(j) below;
(iii) the removal from the Board (with or without cause) of any
representative designated hereunder by any person or group of persons at any
time while such person or group shall be entitled to serve on, or designate a
representative to serve on, the Board under clause (ii) above, shall only be at
such person's or group's written request (and at times when the person or
representative is not entitled to so serve on the Board, such person or
representative may be removed, with or without cause, by vote of the Board or
the Stockholders, or if requested by Waller-Sutton, shall resign immediately);
and
(iv) if any representative designated hereunder by any person or
group for any reason ceases to serve as a member of the Board during his term of
office at any time while such person or group shall be entitled to serve on, or
designate a representative to serve on, the Board under clause (ii) above, the
resulting vacancy on the Board shall be filled by a representative designated by
such person or group, as provided hereunder.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with his duties as a director,
including, without limitation, attending the meetings of the Board and any
committee thereof.
(c) Each of GE Capital, BMO and WP&G shall have the right, so long
as it Beneficially Owns at least 50% of the Shares owned by it as of the date
hereof (computed on an "as converted basis" and including, in the case of each
of WP&G and GE Capital, Shares which it may be obligated to purchase under the
Series F Preferred Stock Purchase Agreement and Shares issuable upon the
exercise of outstanding warrants) to have a non-voting observer present at each
meeting of the Board. The Company shall pay the reasonable out-of-pocket
expenses incurred by each non-voting observer in connection with his or her
attendance at Board meetings.
(d) If any party fails to designate a representative to fill a
directorship or if any directorship remains unfilled following the designation
of persons pursuant to the terms of this Section 2, or if a party is no longer
entitled or available to serve as a director as provided in this Section 2, the
number of directors constituting the entire Board shall be reduced accordingly.
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3. CONFLICTING AGREEMENTS. Each Stockholder represents that he has not
granted and is not a party to any proxy, voting trust or other agreement which
is inconsistent with or conflicts with the provisions of this Agreement, and no
Stockholder shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with or conflicts with the provisions of this
Agreement. No Stockholder shall act, for any reason, as a member of a group or
in concert or enter into any agreement or arrangement with any other person in
connection with the acquisition, disposition or voting of Shares in any manner
which is inconsistent with the provisions of this Agreement. Without limitation,
GE Capital hereby agrees that, so long as the Merger shall have occurred, the
provisions of Section 11(f) of the Series B Preferred Stock Purchase Agreement
relating to certain redemption obligations of the Company are null and void and
of no further force or effect and Blue Chip and Miami Valley agree that the
provisions of paragraphs 3 through 6 of the Redemption and Warrant Agreement are
null and void and of no further force or effect, and no warrants have been
issued or are issuable by the Company thereunder. In addition, the Company and
each Stockholder shall, from time to time, grant such waivers and execute such
consents, proxies or other instruments, and make such filings with and seek such
consents and approvals from governmental authorities or other Persons, as may be
necessary to give effect to or carry out the provisions of this Agreement.
4. CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation and bylaws of the Company may be amended in any manner permitted
thereunder, except that neither the certificate nor the bylaws shall be amended
in any manner that would conflict with, or be inconsistent with, the provisions
of this Agreement.
5. ACTIONS CONSISTENT WITH AGREEMENT. The Company shall not circumvent
this Agreement by taking any action through a subsidiary or affiliate that would
be prohibited under this Agreement.
6. WALLER-SUTTON APPROVAL RIGHTS. The Company and each Stockholder
hereby covenants and agrees that, for so long as the Series F Purchasers,
together with: (i) any Person that is a direct or indirect partner of any Series
F Purchaser that is a partnership, (ii) any Person that is a direct or indirect
member of any Series F Purchaser that is a limited liability company, and (iii)
any Affiliate of any thereof (the Persons referred to in clauses (i), (ii) and
(iii) above shall hereinafter be called "Waller-Sutton Permitted Transferees"),
collectively Beneficially Own, 10% or more of the Voting Stock, the Company
shall not take or permit to occur, and the Stockholders shall not consent to,
authorize or vote for, any of the following events or actions, unless such has
been approved in advance, in writing, by Waller-Sutton:
(a) any merger or consolidation of the Company with any other
entity, and any merger or consolidation of any subsidiary of the Company with
any other entity other than the Company or another wholly-owned subsidiary of
the Company;
(b) the purchase or lease by the Company or any subsidiary
thereof of any business or assets, other than the purchase or lease of assets in
the ordinary course of business (it being
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<PAGE> 10
understood, however, that the purchase or lease of any radio broadcasting
station or Federal Communications Commission ("FCC") license is not a purchase
or lease in the ordinary course), or the execution of any agreement providing
for the purchase, lease, construction or management of or in respect of radio
broadcasting stations (including time brokerage agreements and local marketing
agreements and the like);
(c) the sale of any assets of the Company or any subsidiary
thereof, or the execution of any agreement in respect thereof (other than the
sale of advertising time and excess or obsolete furniture, fixtures or equipment
in the ordinary course of business);
(d) the issuance or sale of any equity or debt securities of the
Company or any subsidiary thereof or any rights to acquire any of such equity or
debt securities (including options and warrants) or the issuance or sale of
stock appreciation or other "phantom" stock rights, other than Permitted
Issuances, or the execution of any agreements in respect thereof;
(e) the incurrence or assumption of any Indebtedness by the
Company or any Subsidiary thereof, other than Permitted Indebtedness;
(f) any Change of Control;
(g) any amendment to the Company's 1998 Management Stock Option
Plan or the adoption of any other stock option, stock purchase or restricted
stock or stock appreciation right plan;
(h) any amendment to the Amended and Restated Charter or to the
by-laws of the Company;
(i) the execution by the Company or any Stockholder of any
voting, voting trust, registration rights or stockholders agreements with
respect to the Company or any of its shares of capital stock (other than this
Agreement and the Registration Rights Agreement); and
(j) the execution by the Company of any contract or agreement
for the construction or management of radio stations.
Subject to compliance by the Company and the other Stockholders with
the provisions of the final two sentences of this paragraph, Waller-Sutton
agrees that, upon receipt by the Company of an opinion of counsel reasonably
acceptable to Waller-Sutton, that the exercise of one or more of its rights
under this Section 6 is reasonably likely to constitute a transfer of control by
the Company within the meaning of the Communications Act of 1934, as amended
(the "Communications Act") or the rules and regulations of the FCC thereunder (a
"Transfer Opinion"), Waller-Sutton shall forbear from exercising such rights
until such time as the FCC has (a) agreed that such exercise would not
constitute a transfer of control or (b) given its consent to such transfer of
control (either event hereinafter referred to as "FCC Approval"). In the event
that the Company receives a Transfer
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<PAGE> 11
Opinion, the Company and the other Stockholders shall promptly take such
actions, or cause such actions to be taken, that may be necessary or desirable
to obtain FCC Approval, including, without limitation, the execution and
delivery of all applications, certificates, instruments and other documents that
may be requested by the FCC or Waller-Sutton in connection with obtaining FCC
Approval, and the filing of petitions for rehearing, reconsideration and/or
judicial review, all at the cost and expense of the Company. The Company and the
other Stockholders each hereby further agrees that, at all times during the
period in which Waller-Sutton is required to forbear from exercising its rights
under this Section 6, each will take all actions necessary to prevent the
occurrence of any of the events set forth in subsections 6(a) through 6(j)
above.
7. PUT RIGHTS.
(a) At any time after the fifth anniversary of the date hereof,
Waller-Sutton shall have the right to send a written notice to the Company (the
"Triggering Put Notice"), advising the Company that Waller-Sutton and the
Affiliates of Waller-Sutton named in such Triggering Put Notice require the
Company to purchase all of the Eligible Put Shares Beneficially Owned by such
parties pursuant to the provisions of this Section 7. The Triggering Put Notice
shall specify the place and date for the closing (the "Put Closing") of the
purchase of Shares by the Company, which shall be no less than 90 days after the
date of the Triggering Put Notice.
(b) The Company shall send a copy of the Triggering Put Notice to
each of the other Stockholders within 5 days of the receipt thereof by the
Company, and each such Stockholder shall have a period of twenty (20) days from
the date of the Triggering Put Notice to send a written notice to the Company
(each, an "Additional Put Notice") advising the Company that such Stockholder
(each Stockholder delivering an Additional Put Notice, an "Additional Put
Stockholder") desires the Company to purchase all of the Eligible Put Shares
Beneficially Owned by such Stockholder, such purchases to occur at the Put
Closing.
(c) The Triggering Put Notice and each Additional Put Notice shall
specify the exact number and class of Eligible Put Shares which the Stockholder
transmitting the same shall desire the Company to purchase, (which shall
constitute all of the Eligible Put Shares Beneficially Owned by such
Stockholders), including all Warrants held by the Stockholder (the Eligible Put
Shares to be so purchased by the Company are hereinafter referred to as the "Put
Shares").
(d) (i) If an Agreed Value has been determined and the Put Closing
does not occur in connection with or following the sale of all or substantially
all of the assets of the Company, the purchase price to be paid by the Company
for each Put Share shall be as follows:
(1) the purchase price for each Put Share which constitutes
a share of Preferred Stock shall equal the sum of the accrued and unpaid
dividends in respect of such share of Preferred Stock through the date of the
Put Closing and the greater of (x) the liquidation preference in respect of such
share of Preferred Stock (excluding accrued and unpaid dividends) and
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(y) the Common Stock Value of the number of shares of Common Stock into which a
share of Preferred Stock may be converted as of the date of the Triggering Put
Notice;
(2) the purchase price for a Warrant shall equal the Common
Stock Value minus the exercise price per share of Common Stock payable upon
exercise of such Warrant, times the number of whole shares of Common Stock
issuable upon the exercise of such Warrant; and
(3) the purchase price for each Put Share which constitutes
a share of Common Stock shall equal the Common Stock Value thereof computed
under (A), (B) or (C) below, as applicable.
(A) The "Common Stock Value" of a share of Common Stock
will equal the amount that would be distributed to a holder of a share of Common
Stock if the Company were liquidated following the sale by the Company of all of
its assets for an amount equal to the Agreed Value of the Company, assuming that
no preferred stock is converted and no options or warrants have been exercised,
and following (i) the payment by the Company of all accrued and unpaid dividends
in respect of all outstanding preferred stock of the Company as of the date the
Agreed Value is determined, and (ii) the amount of all other liquidating
distributions that would be payable in respect of outstanding preferred stock
upon liquidation thereof.
(B) In the event the Common Stock Value computed
pursuant to clause (A) above is greater than the Stated Value (as defined in the
Certificate of Incorporation of the Company) of any class of preferred stock, or
is twice the Stated Value of the Series B Preferred Stock, then the Common Stock
Value shall be recomputed assuming that all preferred stock with a Stated Value
which is lower than the Common Stock Value (or one-half the Common Stock Value,
in the case of the Class B Preferred Stock) has been converted (such preferred
stock shall be referred to as being "in-the-money"). Such recomputed value shall
be equal to the amount that would be distributed to a holder of a share of
Common Stock if the Company were liquidated following the sale by the Company of
all of its assets for an amount equal to the Agreed Value of the Company, and
following (i) the payment by the Company of all accrued and unpaid dividends in
respect of all outstanding preferred stock of the Company (including
"in-the-money" Preferred Stock) as of the date the Agreed Value is determined,
and (ii) the amount of all other liquidating distributions that would be payable
in respect of such outstanding preferred stock that is not "in-the-money" upon
liquidation thereof.
(C) In the event the Common Stock Value determined
pursuant to clause (A) above, or, if applicable, clause (B) above, is greater
than the exercise price of any outstanding options or warrants, then the Common
Stock Value shall be recomputed assuming that all outstanding options or
warrants with an exercise price which is lower than the Common Stock Value have
been exercised immediately prior to such liquidating distribution and that the
purchase price paid upon any such exercise was available to the Company for
distribution in liquidation.
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(ii) If an Agreed Value has not been determined or if the Put
Closing is to occur in connection with or following the sale of all or
substantially all of the assets of the Company, the purchase price for the Put
Shares shall equal the amount distributable in respect thereof under the Amended
and Restated Charter in connection with the liquidation and dissolution of the
Company following the sale of all or substantially all of its assets.
(iii) The Company will notify each Stockholder in writing of the
determination of Agreed Value promptly after the determination thereof.
(e) The purchase price for the Put Shares shall be payable in full
at the Put Closing, by wire transfer of immediately available funds to such
accounts as shall be designated by the respective Stockholders, or in such other
form of consideration as shall be acceptable to Waller-Sutton. Subject to the
provisions of section 7(f) below, the Put Closing shall occur on the date
designated by Waller-Sutton in the Triggering Put Notice. Subject to the
provisions of Section 7(f) below, the Company shall be obligated to purchase all
of the Put Shares on such closing date, and simultaneously with such purchase
the Company shall (to the extent such are not among the Put Shares) pay all
accrued and unpaid dividends on the outstanding Series B Preferred Stock.
(f) The date of the Put Closing shall be postponed in the following
circumstances: (i) if the Company and Waller-Sutton are unable to agree upon the
Agreed Value of the Company within 90 days of the date of the Triggering Put
Notice (in which case the Board of Directors shall promptly proceed to sell the
Company, and the Put Closing shall be held on such date or dates as shall be
selected by Waller- Sutton, no later than the day following the date that the
Company shall have been sold (whether pursuant to a merger, a sale of all or
substantially all of its capital stock, assets or otherwise), or (ii) if, within
10 days after an Agreed Value has been determined, the Company shall send a
written notice to Waller-Sutton and the Additional Put Stockholders advising
such parties that (x) the Company believes that it will be necessary for the
Company to be sold (whether pursuant to a merger, a sale of all or substantially
all of its capital stock, assets or otherwise) to pay the purchase price for the
Put Shares, or (y) the Company will seek to pay the purchase price for the Put
Shares out of the proceeds of a Qualified Financing. Any notice sent pursuant to
this Section 7(f) shall be approved by the Board of Directors (excluding
Waller-Sutton's and the Additional Put Stockholders' nominees to the Board of
Directors).
(g) (i) If the date of the Put Closing shall have been postponed
pursuant to notice from the Company pursuant to Section 7(f)(ii)(y) above, then
the Company shall be obligated to take such steps as are necessary to cause a
Qualified Financing to be consummated within 3 months of the date of the notice
given under Section 7(f)(ii)(y), and within one business day after the
consummation of a Qualified Financing, the Company shall have used the net
available proceeds therefrom to pay the full purchase price for the Put Shares
and to pay all accrued and unpaid dividends on the outstanding Series B
Preferred Stock as required pursuant to the last sentence of Section 7(e).
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(ii) As used herein, a Qualified Financing shall mean a debt or
equity financing, the net proceeds of which are sufficient (after repayment of
any Indebtedness required to be repaid in connection therewith) to pay the
purchase price of the Put Shares in full.
(h) In all other circumstances where the date of the Put Closing
shall have been postponed pursuant to Section 7(f) above, the Company shall be
obligated to take the following steps within the time periods specified below:
(i) within 4 months after the date of the Triggering Put Notice,
the Company shall have engaged a broker to market, solicit bids and the form of
bids to be solicited for and otherwise facilitate the sale of the Company,
whether by way of merger of the Company with any other Person, by way of a
single sale of all or substantially all of the capital stock or assets of the
Company, or as separate sales of one or more of the Company's radio stations
(every such transaction, a "sale transaction"), such broker to be experienced in
the marketing and sale of radio stations, and such broker, the terms of its
engagement and the form of bids to be solicited and the structure of the
transaction to be reasonably acceptable to Waller-Sutton, and the broker and the
Company shall have prepared an offering memorandum for the sale of the Company
(which offering memorandum shall specify the date that bids must be received)
and shall have distributed such offering memorandum to all Persons who are
reasonably likely to have a bona fide interest in engaging (and the financial
capacity to engage) in such sale transaction or transactions (as reasonably
determined by the broker and Waller-Sutton);
(ii) within 6 months after the date of the Triggering Put
Notice, the Company shall have received any and all bids from potential buyers,
shall have sent copies of all such bids to Waller- Sutton, and, unless otherwise
consented to by Waller-Sutton, shall have closed the solicitation for bids, and,
if such solicitation for bids is closed, the Company shall have received at
least one (or one set, in the case of bids for less than all of its radio
stations) covering all or substantially all of its assets or capital stock;
(iii) within 8 months after the date of the Triggering Put
Notice, the Company shall have entered into one or more Qualified Purchase and
Sale Agreements for the sale of the Company or all or substantially all of its
assets. A "Qualified Purchase and Sale Agreement" shall mean one or more
purchase and sale agreements, duly executed by one or more financially
responsible purchasers, reasonably acceptable to Waller-Sutton, providing for
the purchase of the Company or one or more radio stations in a sale transaction
for an aggregate purchase price, payable in full in cash or in such other form
of consideration as shall be acceptable to Waller-Sutton at closing, and which
provides for a final "drop dead" date for closing, including all extensions for
transfer approvals, of no later than four months after the date of execution
thereof, and which provides no financing contingency therein for the benefit of
the purchaser and is otherwise in form and substance acceptable to
Waller-Sutton; and
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(iv) within one business day after the closing of Qualified
Purchase and Sale Agreements for the Company or all or substantially all of the
Company's radio stations, the Company shall have used the net available proceeds
therefrom to purchase all of the Put Shares.
(i) Waller-Sutton shall have the right, by written notice to the
Company and each other Additional Put Stockholder (the "Rescission Notice"), to
rescind the Triggering Put Notice and all Additional Put Notices (and upon the
giving of such Rescission Notice in accordance with the terms hereof, the
Triggering Put Notice and each Additional Put Notice shall automatically be null
and void and of no further force or effect), provided, however, that the
Rescission Notice may not be given at any time (x) while the Company is a party
to a binding agreement in respect of or after the Company has consummated a
Qualified Financing, or (y) while the Company is a party to a binding Qualified
Purchase and Sale Agreement(s) or has consummated transactions pursuant thereto
providing for aggregate consideration to the Company equal to more than $25
million. If a Rescission Notice is given, Waller-Sutton shall have the right at
any time after the expiration of 12 months from the date of the Rescission
Notice to again invoke the provisions of this Section 7, and the Stockholders
shall have the right to give Additional Put Notices in respect thereof.
(j) If the Company shall fail to take any of the actions set forth
above within the time frames required or shall otherwise default in any of its
obligations under this Section 7, and such action shall not be taken or such
default shall not be cured to the satisfaction of Waller-Sutton, within 15 days
of the date of any written notice from Waller-Sutton to the Company with respect
thereto, such shall be deemed a "Put Default." During the continuation of a Put
Default, Waller-Sutton may require the Company and the other Stockholders to
elect such additional designees of Waller-Sutton to the Board such that, after
giving effect thereto, the designees of Waller-Sutton elected to the Board
pursuant to the provisions of Section 2(a)(ii)(4) above and this Section 7(j)
shall constitute a majority of the members of the Board. Without limitation, to
the extent then required under applicable law, the Company shall, if so
requested by Waller- Sutton, make such filings with the Federal Communications
Commission and/or the Securities and Exchange Commission and mail such materials
to its Stockholders as shall be necessary to enable Waller- Sutton to designate
a majority of the members of the Board, and the Stockholders shall vote their
shares of Voting Stock in such manner as shall be necessary to give effect to
the foregoing. It is expressly agreed that the designees of Waller-Sutton on the
Board shall be empowered to take such action as shall be necessary or
appropriate to cause the Put Closing to occur as soon as possible, including
causing a sale of all or substantially all of the assets of the Company, or
alternatively to effect a sale of the Company or a merger by the Company with
another entity.
(k) In no event shall the Company be required to consummate any sale
pursuant to this Section 7 which would require repayment of any outstanding
indebtedness of the Company unless (i) such indebtedness of the Company is
repaid on the date of consummation of such sale, (ii) the holders of the
indebtedness required to be repaid out of the proceeds of any such sale consent
to such sale, or (iii) the purchaser agrees to assume all such indebtedness not
being repaid, in accordance with the terms of the agreements governing such
indebtedness, and no default or event of default under such agreements results
from such assumption.
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8. DISPOSITION OF SHARES. No Management Stockholder shall transfer,
sell, convey, exchange, pledge or otherwise dispose of ("Transfer") any Shares
of the Company except in connection with a sale of all or substantially all of
the outstanding stock of the Company or a merger of the Company with another
Person. Notwithstanding the foregoing, a Management Stockholder shall be
entitled to effect any of the following transfers (each an "Exempt Transfer"):
(i) Transfers by a Management Stockholder to an entity wholly owned by him at
all times following such Transfer; (ii) Transfers pursuant to applicable laws of
descent and distribution to members of such Management Stockholder's Immediate
Family, or Transfers during the lifetime of such Management Stockholder to such
Management Stockholder's spouse, adult children or to a trust whose
beneficiaries are members of such Management Stockholder's Immediate Family,
(iii) Transfers approved by a majority of the Board of Directors of the Company
(which, for as long as Waller-Sutton shall have approval rights pursuant to
Section 6 above, shall include the Series F Directors), (iv) prior to a
Qualified Public Offering, Transfers of a number of Shares up to the "Maximum
Amount" (as defined below), computed cumulatively for all Transfers made under
this clause (iv) from and after the date hereof, and (v) following a Qualified
Public Offering, the greater of the Maximum Amount or 25% of the sum of (1) the
number of shares of Common Stock that such Management Stockholder would have
owned as of such date had he not effected any Transfers prior to such date and
(2) the number of shares of Common Stock issuable on conversion of Series A
Preferred Stock that such Management Stockholder would have owned as of such
date had he not effected any Transfers prior to such date, but excluding any
shares of Common Stock issuable on exercise of any options or warrants held by
such Management Stockholder on such date (the sum of (1) and (2) being such
Management Stockholder's "Holdings"), computed cumulatively for all Transfers
made under this clause (v) from and after the date hereof; provided that, in the
case of Exempt Transfers of the types referenced in clauses (i) and (ii) above,
the restrictions contained in this Section 8 will continue to be applicable to
Shares and the transferee of such Shares must have agreed in writing to be bound
by the terms and conditions of this Agreement applicable to the Stockholder. For
purposes hereof, the "Maximum Amount" shall be equal to such Management
Stockholder's Holdings, multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock (computed on an as-converted and
fully-diluted basis) sold or otherwise disposed of by Waller-Sutton (other than
to Waller-Sutton Permitted Transferees) since the date hereof, and the
denominator of which shall be the number of shares of Common Stock (computed on
an as-converted and fully-diluted basis but excluding any shares of Common Stock
that may become issuable on exercise of a Series F Warrant) that would have been
held by Waller-Sutton on the date of such Transfer, if Waller- Sutton had not
previously sold or otherwise disposed of any Shares. The foregoing shall not
apply to or prevent the exercise by a Management Stockholder of the options
granted to him under the 1998 Management Stock Option Plan on a "cashless" or
net basis.
9. SALE OF THE COMPANY.
(a) If a majority of the Board (including in such majority the
directors appointed by Waller-Sutton), and Waller-Sutton and other Stockholders
Beneficially Owning, together with Waller- Sutton, a majority of the Voting
Stock, approve a sale of all or substantially all of the assets or capital stock
of the Company (the "Approved Sale"), then each Stockholder shall vote for,
consent
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<PAGE> 17
to and raise no objections against such Approved Sale. If the Approved Sale is
structured as (i) a merger or consolidation, each Stockholder shall waive any
dissenters rights, appraisal rights or similar rights such holder may have in
connection with such merger or consolidation or (ii) a sale of stock, each shall
agree to sell all of his Shares and rights to acquire Shares on the terms and
conditions so approved. Each Stockholder shall take all necessary or desirable
actions in connection with the consummation of the Approved Sale as reasonably
requested by the Company and Waller-Sutton.
(b) The obligations of the Stockholders with respect to an Approved
Sale are subject to the satisfaction of the following conditions: (i) upon the
consummation of the Approved Sale, each Stockholder holding the same class of
Shares shall receive the same form of consideration and the same amount of
consideration (based on the number of Shares held) and (ii) each holder of then
currently exercisable rights to acquire shares of Common Stock shall be given an
opportunity to do one of the following: (A) to exercise such rights prior to the
consummation of the Approved Sale, (B) to receive in exchange for such rights
consideration equal to the amount determined by multiplying (1) the same amount
of consideration per share of Common Stock received by holders of Common Stock
in connection with the Approved Sale less the exercise price per share of Common
Stock of such rights to acquire such Common Stock by (2) the number of shares of
Common Stock represented by such rights or (C) to receive in exchange for such
rights, rights to acquire shares of common stock of the surviving corporation
under equivalent terms through a tax-free exchange with the surviving
corporation if the Approved Sale is structured as a merger or consolidation
which otherwise constitutes a tax-free reorganization as to such Stockholder and
such exchange does not adversely affect the tax-free treatment of the Approved
Sale.
(c) In no event shall the Company be required to consummate any sale
pursuant to this Section 9 which would require repayment of any outstanding
indebtedness of the Company unless (i) the net proceeds of such sale would be
sufficient to repay all of such indebtedness of the Company, (ii) the holders of
the indebtedness required to be repaid out of the proceeds of any such sale
consent to such sale, or (iii) the purchaser agrees to assume all such
indebtedness not being repaid, in accordance with the terms of the agreements
governing such indebtedness, and no default or event of default under such
agreements results from such assumption.
10. TAG-ALONG RIGHT. In addition to the rights granted under Section 7
above, in the event that Waller-Sutton and other Stockholders (including
Waller-Sutton) Beneficially Owning more than fifty percent (50%) of the Common
Stock subject to this Agreement (each a "Selling Stockholder"), desire to
transfer, sell, convey, exchange or otherwise dispose of ("Transfer") any Shares
pursuant to a bona fide offer from a third party (the "Buyer"), then such
Selling Stockholders shall notify the Stockholders who are not Selling
Stockholders ("Tag-Along Stockholders"), in writing, of such offer and its terms
and conditions (the "Transfer Notice"). Upon receipt of such Transfer Notice,
each Tag-Along Stockholder shall have the right to sell to the Buyer, on the
same terms and conditions as the Selling Stockholders, that number of Shares of
the Company's capital stock subject to this Agreement equal to the product
attained by multiplying (a) the number of Shares held by the Tag-Along
Stockholder times (b) the quotient derived by dividing (i) the number of Shares
which otherwise would have been sold by the Selling Stockholders to the Buyer by
(ii) the total number of
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<PAGE> 18
Shares held by such Selling Stockholders and the number of Shares held by the
Tag-Along Stockholders who have elected to participate in such Transfer
(assuming, in the case of sales of Common Stock of the Company, full conversion
of all shares of preferred stock of the Company held by the Selling Stockholders
and each Tag-Along Stockholder exercising its rights under this Section 10). If
more than one Tag-Along Stockholder elects to sell Shares pursuant to this
Section 10, they may do so pro rata based on the number of Shares held by each
of them or in such other proportions as they may agree. The Tag-Along
Stockholders' right to sell pursuant to this Section 10 can be exercised by
delivery of written notice to the Selling Stockholders within 10 business days
following delivery of the Transfer Notice. Any Tag-Along Stockholder who fails
to notify the Selling Stockholders within such 10 business days shall be deemed
to have waived its rights under this Section 10.
11. DRAG-ALONG RIGHT. In the event that Waller-Sutton and other
Stockholders (including Waller-Sutton) Beneficially Owning more than fifty
percent (50%) of the Common Stock subject to this Agreement (each a
"Transferring Stockholder") wish to Transfer in a bona fide arms' length sale
all of the Shares held by the Transferring Stockholders to any person or persons
who are not Affiliates of the Transferring Stockholders (the "Proposed
Transferee"), the Transferring Stockholders shall have the right, subject to
applicable law, to require all the remaining Stockholders to sell to the
Proposed Transferee all of the Shares then owned by such remaining Stockholders
(including any warrants or options to acquire capital stock of the Company). The
amount and type of consideration to be paid by the Proposed Transferee to the
Transferring Stockholders and the remaining Stockholders shall be the same
(less, in the case of options or warrants, the exercise price for such options
or warrants, and in the case of convertible preferred stock shall be based on
the greater of the liquidation preference thereof or on the amount that would be
received if such preferred stock were converted into Common Stock immediately
prior to the closing of such Transfer). In addition, the terms and conditions
upon which the remaining Stockholders shall Transfer their Shares shall be the
same as those received by Transferring Stockholders holding the same class of
capital stock.
12. SUBSCRIPTION RIGHT. If at any time the Company proposes to issue
equity securities of any kind (the term "equity securities" shall include for
these purposes any warrants, options or other rights to acquire equity
securities and debt securities convertible into equity securities) of the
Company and any Series F Purchaser is to be a purchaser thereof (other than the
issuance of equity securities (i) upon conversion of any preferred stock
pursuant to the Company's Certificate of Incorporation, (ii) to the public in a
firm commitment underwriting pursuant to a registration statement filed under
the Securities Act, (iii) pursuant to the acquisition of another Person by the
Company by merger, purchase of substantially all of the assets or outstanding
capital stock or other form of transaction or (iv) pursuant to an employee stock
option plan, stock bonus plan, stock purchase plan or other management equity
program), then, as to each Stockholder, the Company shall: (i) give written
notice setting forth in reasonable detail (1) the designation and all of the
terms and provisions of the securities proposed to be issued (the "Proposed
Securities"), (2) the price and other terms of the proposed sale of such
securities, (3) the amount of such securities proposed to be issued and (4) such
other information as the Stockholder may reasonably request in order to evaluate
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<PAGE> 19
the proposed issuance; and (ii) offer to issue to each such Stockholder a
portion of the Proposed Securities equal to a percentage determined by dividing
(x) the number of shares of Common Stock Beneficially Owned by such Stockholder,
assuming conversion in full of any convertible securities held by such
Stockholder and exercise of any options or warrants held by such Stockholder, by
(y) the total number of shares of Common Stock then outstanding, including for
purposes of this calculation all shares of Common Stock issuable upon conversion
in full of any then outstanding convertible securities or upon exercise in full
of any outstanding options or warrants.
Each such Stockholder must exercise its purchase right hereunder within
10 days after receipt of such notice from the Company. If all of the Proposed
Securities offered to such Stockholder are not fully subscribed by such
Stockholder, the remaining Proposed Securities will not be reoffered to the
Stockholders purchasing their full allotment. To the extent that the Company
offers two or more securities in units, Stockholders must purchase such units as
a whole and will not be given the opportunity to purchase only one of the
securities making up such unit.
Upon expiration of the offering period described above, the Company
will be free to sell such Proposed Securities that the Stockholders have not
elected to purchase during the 90 days following such expiration on terms and
conditions not more favorable to the purchasers thereof than offered to such
holders. Any Proposed Securities offered or sold by the Company to Persons
including a Series F Purchaser after such 90 day period must be reoffered to the
Stockholders pursuant to these terms.
13. REPRESENTATIONS AND WARRANTIES.
(a) Each Stockholder represents and warrants the following with
respect to himself, herself or itself, as the case may be:
(i) AUTHORIZATION. All corporate action on the part of each
Stockholder which is not an individual necessary for the authorization,
execution, delivery and performance by such Stockholder of this Agreement has
been taken. This Agreement is a legal, valid and binding Obligation of each
Stockholder, enforceable against such Stockholder in accordance with its terms.
(ii) NO VIOLATION. The execution and delivery of this Agreement
will not (with or without notice or passage of time or both) (a) conflict with
or result in a breach of any provision of the certificate of incorporation or
bylaws of a Stockholder which is not an individual, (b) result in a default,
give rise to any right of termination, cancellation or acceleration, or require
any consent or approval, under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, loan, factoring arrangement, license,
agreement, lease or other instrument or obligation to which a Stockholder is a
party or by which it or any of its assets may be bound, or (c) violate any law,
judgment, order, writ, injunction, decree, statute, rule or regulation of any
court, administrative agency, bureau, board, commission, office, authority,
department or other governmental entity applicable to such Stockholder or any of
its, his or her assets.
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<PAGE> 20
14. TERMINATION OF CERTAIN PROVISIONS. The provisions of Sections 2, 7,
10, 11 and 12 of this Agreement will terminate upon the closing of a Qualified
Public Offering. In addition, this Agreement, or any portion thereof, may be
terminated with the written agreement of the Company, Waller-Sutton and
Stockholders (including Waller-Sutton) Beneficially Owning more than 50% of the
Common Stock Beneficially Owned by all Stockholders.
15. VOTING. The Stockholders agree that GE Capital shall not vote its
shares of Series F Preferred Stock (or any shares of Common Stock issued on
conversion thereof) and that such shares will not be counted as shares of Series
F Preferred (or Common Stock, as the case may be) that are entitled to vote on
any matters except in respect of the following extraordinary events which are
submitted to the holders of the Preferred Stock of the Company for vote or
approval under the Amended and Restated Charter upon which GE Capital shall be
entitled to vote:
(a) any amendment to the Amended and Restated Charter;
(b) a sale of all or substantially all of the assets of the
Company;
(c) the dissolution, liquidation or termination of the Company;
(d) any acquisition of, or merger of the Company with, another
corporation or other entity, whether or not the Company is a survivor of such
transaction;
(e) any change in the fundamental nature of the business of the
Company;
(f) any transaction with affiliates, except upon fair and
reasonable terms comparable to an arms-length transaction; and
(g) any change in the Company's capital structure in a manner that
dilutes the ownership interest of the holders of the Series F Preferred Stock.
The provisions of this Section 15 shall remain in effect with respect to GE
Capital's shares of Series F Preferred Stock (and the shares of Common Stock
issued on conversion thereof) until the occurrence of either of the following:
(1) transfer of such Series F Preferred Stock (or the shares of Common Stock
issued on conversion thereof) to a third party unaffiliated with GE Capital or
(2) delivery to the Company of an opinion of counsel, in form reasonably
satisfactory to the Stockholders, to the effect that, as a result of (a) changes
in the ownership or attribution rules ("Rules") of the FCC or (b) changes in GE
Capital's circumstances, there is no longer a need or desire on the part of GE
Capital to insulate its ownership interest in the Series F Preferred Stock (or
the shares of Common Stock issued on conversion thereof) from attribution under
the FCC Rules.
16. CONSENT TO AMENDMENTS; WAIVERS. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written agreement of the Company, Waller-Sutton and
Stockholders (including Waller-Sutton) holding not less than fifty
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<PAGE> 21
percent (50%) of the Common Stock Beneficially Owned by all Stockholders. Any
waiver, permit, consent or approval of any kind or character on the part of any
such holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing.
17. WALLER-SUTTON. The term Waller-Sutton, as used herein, shall mean
Waller-Sutton or any Permitted Waller-Sutton Transferee to whom Waller-Sutton
has transferred any Shares; provided, however, that in the event Waller-Sutton
sells all or substantially all of its Shares to Persons other than Permitted
Waller-Sutton Transferees, then (i) the term "Waller-Sutton," as used in Section
7 hereof (and in respect of defined terms used in said Section 7), shall refer
to any Stockholder or Stockholders Beneficially Owning more than 30% of the
Series F Preferred Stock then outstanding, and (ii) the term "Waller-Sutton," as
used in any other Section of this Agreement (and in respect of defined terms
used therein), shall refer to any Stockholder or Stockholders Beneficially
Owning more than 50% of the Series F Preferred Stock then outstanding.
18. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed or
not, provided, that in the case of an assignment, such assignment shall be made
in conjunction with a Transfer of Shares, such assignment shall specifically
provide that the assignee shall assume all obligations of the assigning
Stockholder, and such assignee shall execute and deliver to the Company and the
other Stockholders a counterpart of this Agreement. Notwithstanding the
foregoing, no purchaser of Shares sold pursuant to an effective registration
statement filed by the Company or in an unsolicited open market transaction
effected pursuant to Rule 144 shall be subject to the provisions hereof or
deemed a Stockholder hereunder.
19. LEGEND ON CERTIFICATES. All Series A Preferred Stock, Series B
Preferred Stock, Series D Preferred Stock and Series F Preferred Stock of the
Company, and all Series C Preferred Stock and all Common Stock of the Company
now or hereafter owned by the parties to this Agreement, shall be subject to the
provisions of this Agreement and the certificates representing said shares shall
bear substantially the following legends (except that the certificate
representing the Series C Preferred Stock shall not bear the first legend set
forth below):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any State (the "Securities Laws"). These
securities may not be offered, sold, transferred, pledged or
hypothecated in the absence of registration under applicable
Securities Laws, or the availability of an exemption therefrom.
This certificate will not be transferred on the books of the
Corporation or any transfer agent acting on behalf of the
Corporation except upon the receipt of an opinion of counsel,
satisfactory to the Corporation, that the proposed transfer is
exempt from the registration requirements of all applicable
Securities Laws,
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<PAGE> 22
or the receipt of evidence, satisfactory to the Corporation, that
the proposed transfer is the subject of an effective registration
statement under all applicable Securities Laws."
"The Corporation is subject to restrictions contained in the
Federal Communications Act, as amended. The securities evidenced by
this certificate may not be sold, transferred, assigned or
hypothecated if, as a result thereof, the issuer would be in
violation of that act."
"The securities represented by this certificate are subject to the
terms of that certain Second Amended and Restated Stockholders'
Agreement dated as of June 15, 1998, among Regent Communications,
Inc. and certain of its stockholders, as the same may be amended
from time to time."
20. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
21. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
22. NOTICES. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the addresses shown on
the signature pages hereof, or such other address as any party hereto designates
by written notice to the Company, and shall be deemed to have been given upon
delivery, if delivered personally, three days after mailing, if mailed, or one
business day after delivery to the courier, if delivered by overnight courier
service.
23. GOVERNING 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 laws of the State of
Delaware.
24. FINAL AGREEMENT. This Agreement constitutes the complete agreement
of the parties concerning the matters referred to herein.
25. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of Counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
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<PAGE> 23
26. NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be used against any party.
27. REMEDIES. The parties hereto shall have all rights and remedies set
forth in this Agreement and all rights and remedies available under any
applicable law. The parties hereto agree and acknowledge that money may not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may, in its sole discretion, apply to any court of law or equity of
competent jurisdiction for specific performance or injunctive relief (without
posting bond or other security) in order to enforce, or prevent any violations
of, the provisions of this Agreement.
28. CERTAIN EXPENSES. The Company agrees to pay all reasonable expenses
of Waller-Sutton (including reasonable fees, charges and disbursements of its
counsel) incurred in connection with (i) any amendment, supplement, modification
or waiver of or to any provisions of this Agreement (including, without
limitation, a response to a request by the Company or any Stockholder for a
consent to any action otherwise prohibited hereunder), or consent to any
departure by the Company or any Stockholder from, the terms of any provision of
this Agreement; and (ii) any matters arising hereunder, including without
limitation the reasonable expenses of Waller-Sutton incurred to monitor or
confirm the performance by the Company or any Stockholder of or compliance by
the Company or any Stockholder with all agreements and covenants on its part to
be performed or complied with or incurred in connection with or in respect of
any of the rights granted to Waller-Sutton hereunder. The Company shall also pay
all costs and expenses incurred in connection with or arising out of the
purchase by it of the Put Shares.
29. WALLER-SUTTON CONSENT. Whenever this Agreement shall require or
contemplate the consent or approval of Waller-Sutton to or in respect of any
matter, such consent or approval may be given or withheld in the sole discretion
of Waller-Sutton and, if given, must be evidenced by a written instrument duly
executed by or on behalf of Waller-Sutton expressly setting forth the specific
matter approved or consented to.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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The parties hereto have executed this Agreement on the date first set
forth above.
THE COMPANY:
REGENT COMMUNICATIONS, INC.
By:
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Title: CHAIRMAN & CEO
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Address: 50 E. RIVER CENTER BLVD.
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SUITE #180
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COVINGTON, KY 41011
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TELECOPIER NO: (606) 292-0352
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TERRY S. JACOBS
Address: 6561 MADEIRA HILLS DR.
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CINCINNATI, OH 45243
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TELECOPIER NO: ( ) -
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WILLIAM L. STAKELIN
Address: 1870 MADISON ROAD
---------------------------------
CINCINNATI, OHIO 45231
------------------------------------------
TELECOPIER NO: ( ) -
------------------------------------------
-24-
<PAGE> 25
<TABLE>
<S> <C>
RIVER CITIES CAPITAL FUND LIMITED
PARTNERSHIP
By: River Cities Management Limited Partnership,
General Partner
By: Mayson, Inc., General Partner
By:
------------------------------------
R. Glen Mayfield, Vice President
Address: 221 East Fourth Street
------------------------------------
Suite 2250
------------------------------------
Cincinnati, Ohio 45202
------------------------------------
BMO FINANCIAL, INC.
By:
---------------------------------------------
Title:
---------------------------------------
Address: 430 Park Avenue
------------------------------------------------
New York, New York 10028
------------------------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
---------------------------------------------
Senior Vice President
Address: 3379 Peachtree Road, N.E.
---------------------------------------
Suite 600
------------------------------------------------
Atlanta, GA 30326
------------------------------------------------
PNC BANK, N.A., as Trustee
By:
---------------------------------------------
Address: 201 East Fifth Street
---------------------------------------
Fifth Floor
------------------------------------------------
Cincinnati, OH 45202
------------------------------------------------
Attn: Patricia S. Grelle
------------------------------------------------
</TABLE>
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<PAGE> 26
<TABLE>
<S> <C>
WALLER-SUTTON MEDIA PARTNERS, L.P.
By: Waller-Sutton Media, L.L.C., its General
Partner
By:
----------------------------------------
Address: c/o Waller-Sutton Management
---------------------------------------
Group, Inc.
------------------------------------------------
1 Rockefeller Plaza, Suite 3300
------------------------------------------------
New York, NY 10020
------------------------------------------------
Attention: Cathy M. Brienza
------------------------------------------------
Telecopier No: (212) 218-4355
------------------------------------------------
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Attention: Ronald Greenberg, Esq.
Telecopier No: (212) 698-7825
------------------------------------------------
WILLIAM H. INGRAM
Address: c/o Waller-Sutton Management
---------------------------------------
Group, Inc.
------------------------------------------------
1 Rockefeller Plaza, Suite 3300
------------------------------------------------
New York, NY 10020
------------------------------------------------
Telecopier No: (212) 218-4355
------------------------------------------------
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Attention: Ronald Greenberg, Esq.
Telecopier No: (212) 698-7825
</TABLE>
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<PAGE> 27
<TABLE>
<S> <C>
WPG CORPORATE DEVELOPMENT
ASSOCIATES V, L.P.,
By:
---------------------------------------------
Address: One New York Plaza
---------------------------------------
New York, New York 10004-1950
------------------------------------------------
WPG CORPORATE DEVELOPMENT
ASSOCIATES V (OVERSEAS), L.P.
By:
---------------------------------------------
Address: c/o BankAmerica Trust & Banking Corp.
---------------------------------------
(Cayman) Ltd.
------------------------------------------------
BankAmerica House
------------------------------------------------
Fort Street
------------------------------------------------
George Town, Grand Cayman
------------------------------------------------
Cayman Islands
------------------------------------------------
BLUE CHIP CAPITAL FUND II LIMITED
PARTNERSHIP
By: Blue Chip Venture Company, Ltd.,
its general partner
By:
----------------------------------------
Address: 2000 PNC Center
----------------------------------
201 East Fifth Street
-------------------------------------------
Cincinnati, Ohio 45202
-------------------------------------------
Attn: John H. Wyant
-------------------------------------------
Telecopier No: (513) 723-2306
-------------------------------------------
</TABLE>
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<PAGE> 28
<TABLE>
<S> <C>
MIAMI VALLEY VENTURE FUND L.P.
By: Blue Chip Venture Company of Dayton, Ltd.,
its special limited partner
By:
----------------------------------------
John H. Wyant
Manager
Address: 2000 PNC Center
----------------------------------
201 East Fifth Street
-------------------------------------------
Cincinnati, Ohio 45202
-------------------------------------------
Attn: John H. Wyant
-------------------------------------------
Telecopier No: (513) 723-2306
-------------------------------------------
------------------------------------------------
JOEL M. FAIRMAN
Address: 333 Glen Head Road
----------------------------------------
Suite 220
------------------------------------------------
Old Brookville, NY 11545
------------------------------------------------
Telecopier no: (516) 676-2631
------------------------------------------------
</TABLE>
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<PAGE> 1
Exhibit 4(d)
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND AMONG
REGENT COMMUNICATIONS, INC.,
WALLER-SUTTON MEDIA PARTNERS, L.P.,
AND
THE PURCHASERS NAMED HEREIN
- --------------------------------------------------------------------------------
DATED AS OF JUNE 15, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
<S> <C> <C>
DEFINITIONS.......................................................................................................1
1.1 DEFINITIONS..............................................................................................1
1.2 ACCOUNTING TERMS; FINANCIAL STATEMENTS..................................................................11
1.3 KNOWLEDGE OF THE COMPANY................................................................................11
ARTICLE 2
PURCHASE AND SALE OF THE PREFERRED STOCK.........................................................................11
2.1 PURCHASE AND SALE OF THE SHARES.........................................................................11
2.2 CLOSINGS................................................................................................12
2.3 DEFAULT SHARES..........................................................................................13
2.4 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING...........................................................15
2.5 FEES AND EXPENSES.......................................................................................16
2.6 TAG-ALONG RIGHT.........................................................................................16
ARTICLE 3
CONDITIONS TO THE OBLIGATION OF THE PURCHASERS
TO PURCHASE THE SHARES...........................................................................................17
3.1 REPRESENTATIONS AND WARRANTIES..........................................................................18
3.2 COMPLIANCE WITH THIS AGREEMENT..........................................................................18
3.3 COMPLIANCE WITH THE ACQUISITION DOCUMENTS; CLOSING THEREUNDER; NO DEFAULTS
........................................................................................................18
3.4 SECRETARY'S CERTIFICATE.................................................................................18
3.5 DOCUMENTS...............................................................................................18
3.6 PURCHASE OF SHARES PERMITTED BY APPLICABLE LAWS.........................................................19
3.7 OPINION OF COUNSEL......................................................................................19
3.8 APPROVAL OF COUNSEL TO THE PURCHASERS...................................................................19
3.9 CONSENTS AND APPROVALS..................................................................................19
3.10 REGISTRATION RIGHTS AGREEMENT...........................................................................19
3.11 STOCKHOLDERS' AGREEMENT.................................................................................19
3.12 CERTIFICATE OF INCORPORATION AND BY-LAWS................................................................20
3.13 NO MATERIAL JUDGMENT OR ORDER...........................................................................20
3.14 GOOD STANDING CERTIFICATE...............................................................................20
3.15 PRO FORMA BALANCE SHEET.................................................................................20
3.16 STOCK OPTION PLAN.......................................................................................20
3.17 D & O INSURANCE.........................................................................................20
3.18 FUTURE ACQUISITION AGREEMENTS...........................................................................20
3.19 SALE OF SERIES A, SERIES B AND SERIES D PREFERRED STOCK.................................................21
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.20 KEY-MAN INSURANCE.......................................................................................21
3.21 FAIRCOM CONVERTIBLE NOTE PURCHASE AGREEMENT.............................................................21
3.22 EXECUTIVE EMPLOYMENT AGREEMENTS.........................................................................21
3.23 COMPLIANCE WITH STATE SECURITIES LAWS...................................................................21
3.24 CONVERSION OF FAIRCOM CONVERTIBLE NOTES.................................................................21
3.25 SBA COMPLIANCE..........................................................................................21
ARTICLE 4
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
TO ISSUE AND SELL THE SHARES.....................................................................................22
4.1 REPRESENTATIONS AND WARRANTIES..........................................................................22
4.2 COMPLIANCE WITH THIS AGREEMENT..........................................................................22
4.3 STOCKHOLDERS' AGREEMENT.................................................................................22
4.4 CONVERSION OF FAIRCOM CONVERTIBLE NOTES.................................................................22
4.5 COMPLIANCE WITH STATE SECURITIES LAWS...................................................................22
ARTICLE 5
REPRESENTATIONS AND WARRANTIES...................................................................................23
5.1 EXISTENCE AND POWER.....................................................................................23
5.2 AUTHORIZATION: NO CONTRAVENTION.........................................................................23
5.3 GOVERNMENTAL AUTHORIZATION: THIRD PARTY CONSENTS........................................................23
5.4 BINDING EFFECT..........................................................................................24
5.5 NO LEGAL BAR............................................................................................24
5.6 LITIGATION .............................................................................................24
5.7 COMPLIANCE WITH LAWS....................................................................................24
5.8 NO DEFAULT OR BREACH....................................................................................24
5.9 TITLE TO PROPERTIES.....................................................................................24
5.10 USE OF REAL PROPERTY....................................................................................24
5.11 TAXES...................................................................................................25
5.12 FINANCIAL CONDITION.....................................................................................25
5.13 ERISA ..................................................................................................26
5.14 DISCLOSURE..............................................................................................26
5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS....................................................................27
5.16 ENVIRONMENTAL MATTERS...................................................................................27
5.17 INVESTMENT COMPANY/GOVERNMENT REGULATIONS...............................................................28
5.18 SUBSIDIARIES............................................................................................28
5.19 CAPITALIZATION..........................................................................................29
5.20 PRIVATE OFFERING........................................................................................29
5.21 BROKER'S, FINDER'S OR SIMILAR FEES......................................................................30
5.22 LABOR RELATIONS.........................................................................................30
5.23 EMPLOYEE BENEFIT PLANS..................................................................................30
5.24 PATENTS, TRADEMARKS. ETC................................................................................30
5.25 POTENTIAL CONFLICTS OF INTEREST.........................................................................31
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
5.26 TRADE RELATIONS.........................................................................................31
5.27 OUTSTANDING BORROWINGS..................................................................................32
5.28 MATERIAL CONTRACTS......................................................................................32
5.29 INSURANCE...............................................................................................32
5.30 SOLVENCY................................................................................................33
5.31 COMPLIANCE WITH EACH ACQUISITION DOCUMENT; CLOSINGS THEREUNDER; NO DEFAULTS
........................................................................................................33
5.32 COMMISSION DOCUMENTS....................................................................................33
5.33 INCORPORATION OF REPRESENTATIONS AND WARRANTIES OF PARTIES TO THE ACQUISITION
DOCUMENTS...............................................................................................33
5.34 SMALL BUSINESS CONCERN..................................................................................33
5.35 COMPLIANCE WITH LOAN AGREEMENT..........................................................................34
5.36 YEAR 2000 COMPLIANCE....................................................................................34
5.37 RADIO STATIONS KCBQ (AM) AND WSSP (FM)..................................................................34
5.38 FAIRCOM DEBT............................................................................................35
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS.....................................................................................35
6.1 AUTHORIZATION; NO CONTRAVENTION.........................................................................35
6.2 BINDING EFFECT..........................................................................................35
6.3 NO LEGAL BAR............................................................................................36
6.4 EXPERIENCE..............................................................................................36
6.5 PURCHASE FOR OWN ACCOUNT................................................................................36
6.6 EXEMPTION...............................................................................................37
6.7 ACCREDITED INVESTOR.....................................................................................37
6.8 NO PUBLIC MARKET........................................................................................37
6.9 ERISA...................................................................................................37
6.10 BROKER'S, FINDER'S OR SIMILAR FEES......................................................................37
ARTICLE 7
INDEMNIFICATION..................................................................................................38
7.1 INDEMNIFICATION.........................................................................................38
7.2 LIMITATIONS ON INDEMNIFICATION..........................................................................39
7.3 NOTIFICATION............................................................................................39
7.4 REGISTRATION RIGHTS AGREEMENT...........................................................................40
ARTICLE 8
AFFIRMATIVE COVENANTS............................................................................................40
8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION..............................................................40
8.2 PRESERVATION OF CORPORATE EXISTENCE.....................................................................44
8.3 PAYMENT OF OBLIGATIONS..................................................................................44
8.4 COMPLIANCE WITH LAWS....................................................................................45
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
8.5 INSPECTION; COMPLIANCE WITH SMALL BUSINESS INVESTMENT ACT...............................................45
8.6 MAINTENANCE OF INSURANCE................................................................................45
8.7 BOOKS AND RECORDS.......................................................................................46
8.8 USE OF PROCEEDS.........................................................................................46
8.9 BOARD NOMINEES..........................................................................................46
8.10 GRANTING OF OPTIONS.....................................................................................46
8.11 BUSINESS ACTIVITIES.....................................................................................47
8.12 BOARD CONSENT...........................................................................................47
8.13 RESERVATION OF SHARES...................................................................................47
ARTICLE 9
MISCELLANEOUS....................................................................................................48
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................................................48
9.2 NOTICES.................................................................................................48
9.3 SUCCESSORS AND ASSIGNS..................................................................................49
9.4 AMENDMENT AND WAIVER....................................................................................49
9.5 SIGNATURES AND COUNTERPARTS.............................................................................50
9.6 HEADINGS................................................................................................50
9.7 GOVERNING LAW...........................................................................................50
9.8 JURISDICTION............................................................................................50
9.9 SEVERABILITY............................................................................................51
9.10 RULES OF CONSTRUCTION...................................................................................51
9.11 ENTIRE AGREEMENT........................................................................................51
9.12 CERTAIN EXPENSES........................................................................................51
9.13 PUBLICITY...............................................................................................51
9.14 FURTHER ASSURANCES......................................................................................52
9.15 OBLIGATIONS OF THE PARTIES..............................................................................52
</TABLE>
<PAGE> 6
STOCK PURCHASE AGREEMENT
AGREEMENT (the "Agreement"), dated as of June 15, 1998, by and among
REGENT COMMUNICATIONS, INC. (the "Company"), a Delaware corporation,
WALLER-SUTTON MEDIA PARTNERS, L.P. ("Waller-Sutton"), a Delaware limited
partnership, and the other purchasers from time to time listed on Schedule I
hereto (each of Waller-Sutton and such other purchasers individually, a
"Purchaser" and collectively, the "Purchasers").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company wishes to sell to the Purchasers, and the
Purchasers wish to purchase from the Company, an aggregate of 4,100,000 shares
of its Series F Convertible Preferred Stock, $0.01 par value per share (the
"Series F Preferred Stock"), for an aggregate purchase price of $20,500,000,
upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"ACQUISITIONS" shall mean the acquisition by the Company or any
wholly-owned Subsidiary of 31 radio stations in nine markets to be consummated
on the First Closing Date in accordance with and pursuant to the Acquisition
Documents.
"ACQUISITION DOCUMENTS" shall mean the following agreements,
collectively: (i) Agreement of Merger among Faircom Inc., Regent Merger Corp.
and the Company, dated as of December 5, 1997, as amended by First Amendment to
Agreement of Merger dated April 7, 1998, and by a Second Amendment to Agreement
of Merger dated April 24, 1998; (ii) Stock Purchase Agreement, dated June 16,
1997, among the Company and the Shareholders of The Park Lane Group, as amended
by First Amendment to Stock Purchase Agreement, dated February 2, 1998, and by a
Second Amendment to Stock Purchase Agreement, dated as of May 1, 1998, among the
Company and the Shareholders of The Park Lane Group; (iii) Agreement of Merger,
dated as of December 17, 1997, among the Company, Regent Broadcasting of
Victorville, Inc. and Topaz Broadcasting, Inc., as amended by an
Amendment to Agreement of Merger dated as of June __, 1998; (iv) Asset Purchase
Agreement, dated December 17, 1997, between Regent Broadcasting of Victorville,
Inc. and Ruby Broadcasting, Inc., as amended by an Amendment to Purchase
Agreement
<PAGE> 7
dated as of June __, 1998; (v) Asset Purchase Agreement, dated December 9, 1997,
between Regent Broadcasting of Kingman, Inc. and Continental Radio Broadcasting,
L.L.C.; and (vi) Agreement of Merger, dated October 10, 1997, among Alta
California Broadcasting, Inc., a California corporation ("Alta California"),
Regent Acquisition Corp. and the Company, as amended by an Amendment No. 1
thereto, dated as of June 10, 1998, among Regent Acquisition Corp., Alta
California and Alta California Broadcasting, Inc., a Delaware corporation and a
wholly-owned subsidiary of Alta California (the "Alta Merger Agreement"); in
each case, as the same may be amended or further amended from time to time as
permitted by the provisions of this Agreement.
"ADDITIONAL CLOSING(S)" shall have the meaning assigned to that
term in Section 2.2 hereof.
"ADDITIONAL CLOSING DATE(S)" shall have the meaning assigned to
that term in Section 2.2 hereof.
"ADDITIONAL DEFAULT SHARES" shall have the meaning assigned to that
term in Section 2.3(e) hereof.
"ADDITIONAL OPTION PERIOD" shall have the meaning assigned to that
term in Section 2.3(e) hereof.
"ADDITIONAL SHARES" shall have the meaning assigned to that term in
Section 2.1 hereof.
"AFFILIATE" shall mean any Person (a) directly or indirectly
controlling, controlled by, or under common control with, the Company, (b)
directly or indirectly owning or holding five percent (5%) or more of any equity
interest in the Company, or (c) five percent (5%) or more of whose voting stock
or other equity interest is directly or indirectly owned or held by the Company.
For purposes of this definition, "control" (including with correlative meanings,
the terms "controlling," "controlled by" and under "common control with") shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Agreement, including the exhibits and
schedules attached hereto, as the same may be amended, supplemented or modified
in accordance with the terms hereof.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to
that term in Section 5.12 hereof.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
-2-
<PAGE> 8
"BY-LAWS" shall mean, unless the context in which it is used
otherwise requires, the by-laws of the Company, as in effect on the applicable
Closing Date.
"CERTIFICATE OF AMENDMENT" shall mean the amendment and restatement
of the certificate of incorporation of the Company, which, among other things,
sets forth the terms, limitations and relative rights and preferences of the
Series F Preferred Stock, substantially in the form attached hereto as Exhibit
A.
"CERTIFICATE OF INCORPORATION" shall mean the certificate of
incorporation of the Company (as amended), as in effect on the applicable
Closing Date.
"CLOSING" shall mean the First Closing, any Additional Closing or
the Default Shares Closing, as the case may be.
"CLOSING DATE" shall mean the First Closing Date, any Additional
Closing Date or the Default Shares Closing Date, as the case may be.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"COMMISSION" shall mean the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"COMMISSION DOCUMENTS" shall have the meaning set forth in Section
5.32 hereof.
"COMMON STOCK" shall mean shares of common stock, par value $0.01
per share, of the Company, or any other capital stock of the Company into which
such stock is reclassified or reconstituted.
"COMPANY" shall mean Regent Communications, Inc., a Delaware
corporation.
"COMMUNICATIONS ACT" shall mean the Communications Act of 1934, as
amended, and the rules and regulations of the FCC thereunder.
"CONDITION OF THE COMPANY" shall mean the assets, business,
properties, results of operations or financial condition of the Company or any
of its Subsidiaries.
"CONTINGENT OBLIGATION" as applied to any Person, shall mean any
direct or indirect liability, contingent or otherwise, of that Person: (i) with
respect to any Indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect
-3-
<PAGE> 9
thereto; (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 foreign exchange contract, currency swap agreement,
interest rate swap agreement or other similar agreement or arrangement designed
to alter the risks of that Person arising from fluctuations in currency values
or interest rates. Contingent Obligations shall include (a) the direct or
indirect guaranty, endorsement (other 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 required regardless of nonperformance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.
"CONTRACTUAL OBLIGATIONS" shall mean as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"CRISLER AMENDMENT" shall mean that agreement, in form and
substance satisfactory to Waller-Sutton, that reduces the compensation payable
to The Crisler Company, L.P. ("Crisler") in respect of the Additional Shares in
the manner set forth therein.
"DEFAULT SHARES" shall have the meaning assigned to that term in
Section 2.3 hereof.
"DEFAULT SHARES CLOSING" shall have the meaning assigned to that
term in Section 2.3 hereof.
"DEFAULT SHARES CLOSING DATE" shall have the meaning assigned to
that term in Section 2.3 hereof.
"DEFINED BENEFIT PLAN" shall mean a defined benefit plan within the
meaning of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded
or unfunded, qualified or non-qualified (whether or not subject to ERISA or the
Code).
"ENVIRONMENTAL LAWS" shall mean any Federal, state, territorial,
provincial or local law, common law doctrine, rule, order, decree, judgment,
injunction, license, permit or regulation relating to environmental matters,
including those pertaining to land use, air, soil, surface water, ground water
(including the protection, cleanup, removal, remediation or damage thereof),
public or employee health or safety or any other environmental matter, together
with any other laws (Federal, state, territorial, provincial or local) relating
to emissions, discharges, releases or threatened releases of any pollutant or
contaminant including, without limitation, medical, chemical, biological,
-4-
<PAGE> 10
biohazardous or radioactive waste and materials, into ambient air, land, surface
water, groundwater, personal property or structures, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, discharge or handling of any contaminant, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. 9601 ET SEQ.), the Hazardous Material Transportation
Act (49 U.S.C. 1801 ET SEQ.), the Resource Conservation and Recovery Act (42
U.S.C. 6901 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C. 1251 ET
SEQ.), the Clean Air Act (42 U.S.C. 1251 ET SEQ.), the Toxic Substances Control
Act (15 U.S.C. 2601 ET SEQ.), and the Occupational Safety and Health Act (29
U.S.C. 651 ET SEQ.), as such laws have been, or are, amended, modified or
supplemented heretofore or from time to time hereafter and any analogous future
Federal, or present or future state or local laws, statutes and regulations
promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any Person that is treated as a single
employer with the Company or any of its Subsidiaries under Section 414(b), (c),
(m) or (o) of the Code.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"EXECUTIVE EMPLOYMENT AGREEMENTS" shall mean the separate
Employment Agreements between Terry S. Jacobs and William Stakelin and the
Company each dated as of March 1 ,1998, copies of which are attached hereto as
Exhibit B.
"EXERCISABLE SHARES" shall have the meaning assigned to that term
in Section 8.14 hereof.
"FAIRCOM CONVERTIBLE NOTE PURCHASE AGREEMENT" shall mean the
agreement dated the date hereof between Waller-Sutton, Blue Chip Capital Fund II
Limited Partnership ("Blue Chip") and Miami Valley Venture Fund L.P. ("Miami")
pursuant to which Waller-Sutton is to purchase on the First Closing Date from
Blue Chip and Miami $1,500,000 aggregate principal amount of Faircom Convertible
Notes as set forth therein..
"FAIRCOM CONVERTIBLE NOTES" shall mean the Class A Convertible
Subordinated Promissory Notes and Class B Convertible Subordinated Promissory
Notes of Faircom, Inc.
"FCC" shall mean the Federal Communications Commission or any
similar agency then having jurisdiction to enforce the Communications Act.
"FINANCIAL STATEMENTS" shall mean the Audited Financial Statements
and the Unaudited Financial Statements.
-5-
<PAGE> 11
"FIRST CLOSING" shall have the meaning assigned to that term in
Section 2.2 hereof.
"FIRST CLOSING DATE" shall have the meaning assigned to that term
in Section 2.2 hereof.
"FUTURE ACQUISITION AGREEMENT" shall mean any agreement approved by
the Board of Directors and by Waller-Sutton pursuant to the provisions of the
Stockholders' Agreement relating to the acquisition by the Company or any
Subsidiary of one or more radio stations, whether by means of the purchase by
the Company or such Subsidiary of stock or assets of, or a merger or
consolidation by the Company or such Subsidiary with, any other Person or
otherwise.
"GAAP" shall mean generally accepted accounting principles in
effect from time to time within the United States.
"GOVERNMENTAL AUTHORITY" shall mean the government of any nation,
state, city, locality or other political subdivision of any thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"HAZARDOUS MATERIALS" shall mean those substances which are
regulated by or form the basis of liability under any Environmental Laws.
"INDEBTEDNESS" shall mean as to any Person (a) all obligations of
such Person for borrowed money (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, unfunded credit commitments,
letters of credit and bankers' acceptances, whether or not matured), (b) all
obligations of such Person evidenced by notes, bonds, debentures or similar
instruments, (c) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable and accrued
commercial or trade liabilities arising in the ordinary course of business, (d)
all interest rate and currency swaps, caps, collars and similar agreements or
hedging devices under which payments are obligated to be made by such Person,
whether periodically or upon the happening of a contingency, (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (f)
all obligations of such Person under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (g) all indebtedness secured
by any Lien (other than Liens in favor of lessors under leases other than leases
included in clause (f)) 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 non-recourse to the credit of that Person, and (h) any
Contingent Obligation of such Person.
"INITIAL SHARES" shall have the meaning assigned to that term in
Section 2.1 hereof.
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<PAGE> 12
"INVESTOR WARRANT SHARES" shall mean the shares of common stock
issued upon exercise of the Investor Warrants.
"INVESTOR WARRANTS" shall mean detachable warrants in the form
attached hereto as Exhibit C to purchase 860,000 shares of Common Stock at $5.00
per share (subject to adjustment for dividends, subdivisions, combinations or
reclassifications and the like), which warrants shall be exercisable for 10
years from the First Closing.
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences)
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease obligation, or any financing lease having
substantially the same economic effect as any of the foregoing.
"MAJORITY PURCHASERS" shall mean at the time of determination
Waller-Sutton and such other Purchasers as shall, together with Waller-Sutton,
hold a majority of the then issued and outstanding shares of Series F Preferred
Stock.
"OUTSTANDING BORROWINGS" shall mean all Indebtedness of the Company
and its Subsidiaries for money borrowed that is outstanding at the relevant time
of determination.
"PERSON" shall mean any individual, firm, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"PLANS" shall have the meaning assigned to that term in Section
5.23 hereof.
"PREFERRED STOCK" shall mean shares of preferred stock, par value
$.01 per share, of the Company including, but not limited to, shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock.
"PRO FORMA BALANCE SHEET" shall mean the pro forma consolidated
balance sheet of the Company and its Subsidiaries delivered pursuant to Article
3 hereof.
"PURCHASER CLOSING NOTICE" shall have the meaning assigned to that
term in Section 2.2(c) hereof.
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"PURCHASER PRO RATA SHARE" shall mean, as to any Purchaser, the
amount (expressed as a percentage) obtained by dividing (x) the Purchaser Share
Commitment of such Purchaser by (y) the sum of the Purchaser Share Commitments
of all Purchasers.
"PURCHASER SHARE COMMITMENT" shall mean, as to any Purchaser, the
aggregate number of shares of Series F Preferred Stock which such Purchaser is
obligated to purchase hereunder (including any Initial Shares), which number is
set forth alongside such Purchaser's name on the signature page hereto.
"QUALIFIED PUBLIC OFFERING" shall mean the sale by the Company
pursuant to a registration statement on Form S-1 or other Form under the
Securities Act, of shares of Common Stock at a price per share not less than
$12.00 (subject to appropriate adjustment in the event of any stock split,
recapitalization, reclassification or the like) and providing gross proceeds to
the Company of not less than $25 million in the aggregate (exclusive of any such
proceeds received upon exercise of any "over-allotment option" granted to the
underwriters of such offering).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement substantially in the form attached hereto as Exhibit D.
"REMAINING SHARE COMMITMENT" shall mean, as to any Purchaser and as
of any date of determination thereof, the Purchaser Share Commitment of such
Purchaser, less the number of shares of Series F Preferred Stock (exclusive of
Default Shares and Additional Default Shares) theretofore purchased by such
Purchaser pursuant to this Agreement.
"REQUIRED CONSENTS" shall mean the authorizations, consents or
approvals listed on Schedule 5.2 hereto.
"REQUIREMENTS OF LAW" shall mean as to any Person, the certificate
or articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule, regulation, right,
privilege, qualification, license or franchise or determination of an arbitrator
or a court or other Governmental Authority (including without limitation, the
Federal Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder, and all Federal and State securities laws, and the rules
and regulations promulgated thereunder), in each case applicable or binding upon
such Person or any of its property or to which such Person or any of its
property is subject or pertaining to any or all of the transactions contemplated
or referred to herein.
"SECURITIES" shall mean the Shares and the Investor Warrants.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
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"SERIES A PREFERRED STOCK" shall mean shares of Series A
Convertible Preferred Stock, par value $.01 per share, of the Company.
"SERIES A PURCHASE AGREEMENT" shall mean the Stock Purchase
Agreement, dated December 1, 1997, between the Company and William L. Stakelin.
"SERIES B PREFERRED STOCK" shall mean shares of Series B Senior
Convertible Preferred Stock, par value $.01 per share, of the Company.
"SERIES B PURCHASE AGREEMENT" shall mean the Stock Purchase
Agreement, dated December 8, 1997, between the Company and General Electric
Capital Corporation.
"SERIES C PREFERRED STOCK" shall mean shares of Series C
Convertible Preferred Stock, par value $.01 per share, of the Company.
"SERIES D PREFERRED STOCK" shall mean shares of Series D
Convertible Preferred Stock, par value $.01 per share, of the Company.
"SERIES D PURCHASE AGREEMENT" shall mean the Stock Purchase
Agreement, dated December 8, 1997, between the Company and BMO Financial, Inc.
"SERIES E PREFERRED STOCK" shall mean shares of Series E
Convertible Preferred Stock, par value $.01 per share, of the Company.
"SERIES F PREFERRED STOCK" shall have the meaning assigned to that
term in the first Whereas clause hereof.
"SHARES" shall have the meaning assigned to that term in Section
2.1 hereof.
"SOLVENT" shall mean, with respect to the Company and its
Subsidiaries considered as a whole, based on the Financial Statements, that (i)
the assets and the property of the Company and its Subsidiaries, considered as a
whole, exceed the aggregate liabilities (including contingent and unliquidated
liabilities) of the Company and its Subsidiaries, considered as a whole, (ii)
after giving effect to the transactions contemplated by this Agreement, the
Company and its Subsidiaries, considered as a whole, will not be left with
unreasonably small capital, and (iii) after giving effect to the transactions
contemplated by this Agreement, the Company and its Subsidiaries, considered as
a whole, are able to both service and pay their liabilities as they mature and
are, in fact, doing so. In computing the amount of contingent or unliquidated
liabilities at any time, such liabilities will be computed as the amount that,
in light of all the facts and circumstances existing at such time, represents
the amount that is likely to become an actual or matured liability.
"STOCKHOLDERS' AGREEMENT" shall mean the Amended and Restated
Stockholders' Agreement, substantially in the form attached hereto as Exhibit E.
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"STOCK OPTION PLAN" shall mean the 1998 Management Stock Option
Plan of the Company, a copy of which is attached hereto as Exhibit F.
"STOCK OPTIONS" shall have the meaning assigned to that term in
Section 5.19 hereof.
"SUBSIDIARY" shall mean, with respect to any Person, a corporation
or other entity (i) of which 50% or more of the voting power of the voting
equity securities or equity interest is owned, directly or indirectly, by such
Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company or (ii) with respect to which such Person, directly or indirectly,
has the power to elect a majority of the board of directors or similar governing
body, or otherwise direct the management and/or operations thereof.
"TRANSACTION DOCUMENTS" shall mean collectively, this Agreement,
the Registration Rights Agreement, the Stockholders' Agreement, the Faircom
Convertible Note Purchase Agreement, the Certificate of Incorporation, the
Certificate of Amendment, and the By-laws.
"TERMINATION DATE" shall mean the earliest to occur of (i) June 15,
2001, (ii) the occurrence of a Change of Control (as defined in the
Stockholders' Agreement) which is not consented to or approved by Waller-Sutton,
or (iii) the occurrence of any Triggering Event.
"TRIGGERING EVENT" shall mean any one or series of related
transactions that would result in (i) a sale to any Person other than the
Company or any Subsidiary thereof of all or substantially all of the Series F
Preferred Stock or the Common Stock, (ii) the consummation of a tender offer for
more than 20% of the outstanding shares of Common Stock (computed on a
fully-diluted and as converted basis) made by any Person other than the Company,
(iii) the consummation of a Qualified Public Offering by the Company of any
shares of capital stock thereof, (iv) a sale of all or substantially all of the
assets or business of the Company or (v) a merger of the Company with or into
another entity, or a recapitalization or reorganization of the Company, if in
any such case the shares of Series F Preferred Stock and/or Common Stock would
cease to be outstanding or if the holders of shares of Series F Preferred Stock
or Common Stock would receive in consideration for their shares of Series F
Preferred Stock or Common Stock, as the case may be, as a result of such
transaction, securities of any successor entity.
"UNAUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to
that term in Section 5.12 hereof.
1.2 ACCOUNTING TERMS; FINANCIAL STATEMENTS. For purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to such terms in conformity with GAAP. Financial statements
and other information furnished to Purchasers pursuant to this Agreement shall
be prepared in accordance with GAAP as in effect at the time of such
preparation. No Accounting Changes (as defined below) shall affect any financial
covenants, standards or terms in this Agreement; PROVIDED that the Company shall
prepare footnotes to each
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<PAGE> 16
compliance certificate and the financial statements required to be delivered
hereunder that show the differences between the financial statements delivered
(which reflect such Accounting Changes) and a separate calculation of financial
covenant compliance without reflecting such Accounting Changes). "ACCOUNTING
CHANGES" means: (a) changes in accounting principles required by GAAP and
implemented by the Company; (b) changes in accounting principles recommended by
the Company's certified public accountants and implemented by the Company; and
(c) changes in carrying value of the Company's or any of its Subsidiaries'
assets, liabilities or equity accounts resulting from adjustments that were
applicable to, but not included in, the Pro Forma Balance Sheet. All such
adjustments resulting from expenditures made subsequent to the First Closing
Date (including, without limitation, capitalization of costs and expenses or
payment of pre-closing date liabilities) shall be treated as expenses in the
period the expenditures are made.
1.3 KNOWLEDGE OF THE COMPANY. All references to the knowledge of the
Company or to facts known by the Company shall mean actual knowledge of, or
notice to, (i) the Chairman, Chief Executive Officer, President, Chief Financial
Officer, Vice President-Finance or any other executive officer of the Company or
any Subsidiary or any division of the Company or any Subsidiary and (ii) with
respect to representations and warranties made as of the date hereof and as of
the First Closing only, any director of the Company or any Subsidiary of the
Company.
ARTICLE 2
PURCHASE AND SALE OF THE PREFERRED STOCK
----------------------------------------
2.1 PURCHASE AND SALE OF THE SHARES.
(a) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue and sell to the Purchasers, and each of the
Purchasers agrees that it will acquire from the Company, on the First Closing
Date, that number of shares of Series F Preferred Stock set forth opposite each
Purchaser's name on Schedule 1 hereto (the "Initial Shares") and the number of
Investor Warrants set forth opposite such Purchaser's name on Schedule 1. The
Initial Shares shall have the powers, rights and preferences set forth in the
Certificate of Amendment. The aggregate purchase price for the Initial Shares
and the Investor Warrants shall be $10,250,000, and the purchase price to be
paid by each Purchaser for the Initial Shares and Investor Warrants to be
purchased by it shall equal the product of (i) $5.00 and (ii) the number of
Initial Shares set forth opposite such Purchaser's name on Schedule 1.
(b) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue and sell to the Purchasers, and each of the
Purchasers agrees that it will acquire from the Company, on one or more
Additional Closing Dates, that number of shares of Series F Preferred Stock that
bears the same proportion to the total number of shares of Series F Preferred
Stock being sold on such Additional Closing Date as the number of Initial Shares
purchased by such Purchaser bears to 2,050,000, at a purchase price of $5.00 per
share, it being understood that the aggregate
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number of shares of Series F Preferred Stock to be issued and sold on all
Additional Closing Dates shall not exceed 2,050,000 (the "Additional Shares").
The Additional Shares shall have the powers, rights and preferences set forth in
the Certificate of Amendment. No Purchaser shall be obligated to purchase, at
any Additional Closing, a number of Additional Shares which exceeds such
Purchaser's Remaining Share Commitment. The price of $5.00 per share set forth
herein with respect to the Additional Shares, as well as the maximum number of
Additional Shares to be sold hereunder, are subject to adjustment in the case of
any stock split, reverse stock split or the like with respect to the Series F
Preferred Stock.
(c) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue and sell, in accordance with the provisions of
Section 2.3 hereof, on the Default Shares Closing Date, the Default Shares. The
Default Shares shall have the powers, rights and preferences set forth in the
Certificate of Amendment. The aggregate purchase price for the Default Shares
shall be equal to the purchase price per share for such Default Shares times the
number of Default Shares being purchased. The Initial Shares, the Additional
Shares and the Default Shares shall be collectively referred to herein as the
"Shares".
2.2 CLOSINGS.
(a) The issuance and purchase of the Initial Shares and the
Investor Warrants shall take place at the closing (the "First Closing") to be
held at the offices of Rubin Baum Levin Constant & Friedman, 30 Rockefeller
Plaza, New York, NY 10112, at 10:00 a.m., Eastern Daylight Savings Time, on or
before June 15, 1998, or at such other time and place as the Company and the
Purchasers may agree in writing (the "First Closing Date"). At the First
Closing, the Company shall deliver to the Purchasers the Initial Shares and the
Investor Warrants against delivery by the Purchasers to the Company of the
purchase price therefor, payable by wire transfer of immediately available funds
to an account or accounts of the Company designated in writing by the Company.
(b) The issuance and purchase of the Additional Shares shall take
place at one or more closings (each, an "Additional Closing") to be held at the
offices of Rubin Baum Levin Constant & Friedman, 30 Rockefeller Plaza, New York,
NY 10112, at 10:00 a.m. on an Additional Closing Date or at such other time and
place as the Company and the Purchasers may agree in writing (each, an
"Additional Closing Date"); provided, however, that in no event shall any
Additional Closing Date be later than the Termination Date. Each of the
following shall be an Additional Closing Date: (i) any date specified in a
written notice given by the Company to the Purchasers at least 20 Business Days
in advance specifying that the Company requires the proceeds from the sale of
Additional Shares for a purpose permitted by Section 8.8 hereof (which notice
shall include a reasonably detailed breakdown of the proposed use of such
proceeds), and (ii) any date specified in a Purchaser Closing Notice given under
Section 2.2(c). At each Additional Closing, the Company shall deliver to the
Purchasers the Additional Shares to be purchased at such Additional Closing
against delivery by the Purchasers to the Company of the purchase price
therefor, payable by wire transfer of immediately available funds to an account
or accounts of the Company designated in writing by the Company.
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<PAGE> 18
(c) Upon receipt by the Purchasers of notice, pursuant to Section
8.1(m) hereof, of a proposed Triggering Event (a "Triggering Event Notice"),
then each such Purchaser severally shall have the right, but not the obligation,
upon written notice to the Company (each such notice, a "Purchaser Closing
Notice") given not later than 30 days following Purchaser's receipt of the
Triggering Event Notice, to require the Company to sell to such Purchaser up to
such number of Additional Shares as shall equal the sum of (x) such Purchaser's
Remaining Share Commitment plus (y) the number of Additional Shares, if any, as
such Purchaser may have the right to acquire pursuant to Section 2.3(e) hereof.
Any Purchaser who shall have delivered a Purchaser Closing Notice pursuant to
this Section 2.2(c) shall be under a binding obligation to purchase and pay for
all the Additional Shares covered by such Purchaser Closing Notice on an
Additional Closing Date specified in such Purchaser Closing Notice, subject only
to, and no later than contemporaneously with or immediately preceding, the
consummation of the transaction resulting in such Triggering Event.
(d) Notwithstanding anything to the contrary contained in this
Agreement, if on or before April 15, 2001 there shall not have occurred one or
more Additional Closings resulting in the purchase of the maximum number of
shares of Series F Preferred Stock to be purchased by the Purchasers pursuant to
this Agreement, then each Purchaser severally shall have the right, but not the
obligation, upon delivery of a Purchaser Closing Notice to the Company and the
other Purchasers not later than May 15, 2001, to require the Company to sell to
such Purchaser up to such number of Additional Shares as shall equal the sum of
(x) such Purchaser's Remaining Share Commitment plus (y) the number of
Additional Shares, if any, as such Purchaser may have the right to acquire
pursuant to Section 2.3(e) hereof. Any Purchaser who shall have delivered a
Purchaser Closing Notice pursuant to this Section 2.2(d) shall be under a
binding obligation to purchase and pay for all the Additional Shares covered by
such Purchaser Closing Notice on an Additional Closing Date specified in such
Purchaser Closing Notice, which shall be no later than June 15, 2001. The
provisions of this Section 2.2(d) shall not apply if the Termination Date shall
have occurred on or prior to April 15, 2001.
(e) The issuance and purchase of the Default Shares shall take
place as set forth in Section 2.3(c) hereof.
2.3 DEFAULT SHARES.
(a) If any Purchaser (a "Defaulting Purchaser") fails or refuses to
purchase and pay for the number of Additional Shares agreed to be purchased by
such Purchaser at any Additional Closing, the Company shall immediately give
notice thereof to the Purchasers other than the Defaulting Purchaser (the
"Non-Defaulting Purchasers").
(b) Waller-Sutton shall have the option, which must be exercised by
written notification to the Company and the other Non-Defaulting Purchasers
within ten (10) Business Days of receipt of the notice set forth in Section
2.3(a) hereof (the "Option Period"), to purchase all or any portion of the
Additional Shares which the Defaulting Purchaser failed or refused to purchase
(the "Default Shares"). If Waller-Sutton fails to notify the Company and the
other Non-Defaulting
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Purchasers of its intent to exercise such option, or if such option is exercised
by Waller-Sutton for fewer than all of the Default Shares, then the Company
shall so notify all of the other Non-Defaulting Purchasers no later than two (2)
Business Days after the expiration of the Option Period, and the remaining
Non-Defaulting Purchasers shall have the option, which must be exercised by
written notification to the Company and all other Non-Defaulting Purchasers
within five (5) Business Days after the date of the aforesaid notice from the
Company, to purchase the remaining Default Shares in the same proportions as
their purchases of the Initial Shares, or in such proportions as such
Non-Defaulting Purchasers may otherwise agree, all upon the price, terms and
conditions set forth herein.
(c) If the Non-Defaulting Purchasers (or any of them) elect to
exercise their option to purchase some or all of the Default Shares, the
issuance and purchase of such Default Shares shall take place at a closing (the
"Default Shares Closing") to be held at the principal executive offices of the
Company at 10:00 a.m., local time, within twenty (20) Business Days following
the expiration of the Option Period (the "Default Shares Closing Date"). At each
Default Shares Closing, the Company shall deliver to the Non-Defaulting
Purchasers the Default Shares to be purchased at such Default Shares Closing
against delivery by the Non-Defaulting Purchasers to the Company of the purchase
price therefor, payable by wire transfer of immediately available funds to an
account or accounts of the Company designated in writing by the Company.
(d) In addition to and not in limitation of the right of the
Non-Defaulting Purchasers to purchase Default Shares pursuant to this Section
2.3, each Non-Defaulting Purchaser shall have the option, which must be
exercised by written notification to the Company, the Defaulting Purchaser and
the other Non-Defaulting Purchasers not later than 90 days after expiration of
the Option Period, to purchase from the Defaulting Purchaser a portion of the
Shares, Investor Warrants and Investor Warrant Shares then owned or held by the
Defaulting Purchaser (or, in the case of Investor Warrants and Investor Warrant
Shares, by any transferee of the Defaulting Purchaser), such portion to be equal
to a fraction, the numerator of which is the Purchaser Share Commitment of the
applicable Non-Defaulting Purchaser and the denominator of which is the
aggregate Purchaser Share Commitment of all Non-Defaulting Purchasers, or in
such other proportions as the Non-Defaulting Purchasers so electing may
otherwise agree, at a price equal to $2.50 times the number of shares being
purchased by the Non-Defaulting Purchaser. If the Non- Defaulting Purchasers (or
any of them) elect to exercise their option to purchase the Shares, Investor
Warrants and Investor Warrant Shares of a Defaulting Purchaser or transferee
pursuant to this Section 2.3(d), the sale and purchase of such Shares, Investor
Warrants and Investor Warrant Shares shall take place at a closing to be held at
the principal executive offices of the Company at 10:00 a.m., local time, on the
tenth (10th) Business Day following expiration of the 90-day period referred to
above in this Section 2.3(d). At each such closing, the Defaulting Purchaser
shall deliver or cause to be delivered to the Non- Defaulting Purchasers who
shall have exercised the purchase option provided for herein, the Shares,
Investor Warrants and Investor Warrant Shares to be purchased by such
Non-Defaulting Purchasers against delivery by such Non-Defaulting Purchasers of
the purchase price therefor, payable by wire transfer of immediately available
funds to an account or accounts designated in writing by the Defaulting
Purchaser.
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<PAGE> 20
(e) Notwithstanding anything to the contrary contained in this
Agreement, following any default by a Defaulting Purchaser hereunder, such
Defaulting Purchaser shall not be relieved of its obligation to purchase
Additional Shares up to its full Purchaser Share Commitment; provided, however,
that such Defaulting Purchaser shall have no right following such a default to
require the Company to sell any Additional Shares to such Defaulting Purchaser.
In the event an Additional Closing pursuant to this Article 2 shall be scheduled
to take place following a default by a Defaulting Purchaser, the Company shall
so notify the Non-Defaulting Purchasers, which notice shall specify the number
of Shares that the Defaulting Purchaser is obligated to purchase at such
Additional Closing. Upon receipt of any such notice, Waller- Sutton shall have
the option (which must be exercised by written notification to the Company and
the other Non-Defaulting Purchasers within ten (10) Business Days of receipt of
the notice referred to in this Section 2.3(e) hereof (the "Additional Option
Period"), to purchase all or any portion of the Additional Shares to be
purchased by the Defaulting Purchaser (the "Additional Default Shares"). If
Waller-Sutton fails to notify the Company and the other Non-Defaulting
Purchasers of its intent to exercise such option, or if such option is exercised
by Waller-Sutton for fewer than all of the Additional Default Shares, then the
Company shall so notify all of the other Non-Defaulting Purchasers no later than
three (3) Business Days after the date of the aforesaid notice from the Company,
and the remaining Non-Defaulting Purchasers shall have the option, which must be
exercised by written notification to the Company and all other Non-Defaulting
Purchasers within five (5) Business Days after the date of the aforesaid notice
from the Company, to purchase the remaining Additional Default Shares in the
same proportions as their purchases of the Initial Shares, or in such
proportions as such Non-Defaulting Purchasers may otherwise agree, all upon the
price, terms and conditions set forth herein.
2.4 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING. Each of the parties
hereto agrees to take reporting and other positions with respect to the Shares
which are consistent with the purchase price of the Shares set forth herein for
all financial accounting purposes, unless otherwise required by applicable GAAP
or Commission rules (in which case the parties agree only to take positions
inconsistent with the purchase price of the Shares set forth herein provided
that the Purchasers have consented thereto, which consent shall not be
unreasonably withheld). Each of the parties to this Agreement agrees to take
reporting and other positions with respect to the Shares which are consistent
with the purchase price of the Shares set forth herein for all other purposes,
including without limitation, for all Federal, state and local tax purposes.
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2.5 FEES AND EXPENSES.
(a) The Company shall pay (i) a transaction structuring fee of
$475,000 to Waller- Sutton Management Group, Inc., of which $325,000 shall be
paid at the First Closing and $150,000 shall be paid prior to December 31, 1998,
and (ii) at each of the Closings, to the extent not previously paid, an amount
equal to the out-of-pocket expenses (including, without limitation, attorneys'
fees, charges and disbursements, consultants' fees and expenses and due
diligence expenses) of the Purchasers incurred at any time from and after
February 13, 1998 in connection with (A) the negotiation, execution, delivery
and filing of the Transaction Documents and any amendments or modifications
thereto and (B) the transactions contemplated by the Transaction Documents,
provided, however, that the Company shall only be responsible to pay the
attorneys' fees and expenses of one firm of counsel representing all of the
Purchasers, which firm shall be selected by Waller-Sutton.
(b) The Company shall pay Waller-Sutton Management Group, Inc. a
monitoring fee at the rate of $75,000 per annum, payable quarterly in advance,
as follows: (i) on the First Closing for the period from the First Closing Date
to and including June 30, 1998 and (ii) on July 1, 1998 and on the first day of
each calendar quarter thereafter.
2.6 TAG-ALONG RIGHT. In the event that any Purchaser beneficially
owning more than two percent (2%) of the issued and outstanding Common Stock of
the Company, computed on a fully diluted and as converted basis (each a "Selling
Stockholder"), desires to transfer, sell, convey, exchange or otherwise dispose
of ("Transfer") a number of shares of the Series F Preferred Stock, or shares of
Common Stock issued on conversion thereof (collectively, the "Subject Shares"),
which, together with any Transfers of Subject Shares made in transactions other
than Exempt Transactions (as defined below)within the immediately preceding 12
months, total at least ten percent (10%) of the number of Initial Shares
purchased by such Purchaser hereunder pursuant to a bona fide offer from a third
party (the "Buyer") in a transaction not constituting an Exempt Transaction,
then the Selling Stockholder shall notify all holders of the Series F Preferred
Stock who beneficially own at least two percent (2%) of the issued and
outstanding Common Stock of the Company, computed on a fully diluted and as
converted basis ("Tag- Along Stockholders"), in writing, of such offer and its
terms and conditions (the "Transfer Notice"). The Transfer Notice shall also set
forth whether the Buyer is only purchasing Series F Preferred Stock or if the
Buyer is willing to purchase both Series F Preferred Stock and Common Stock.
Upon receipt of such Transfer Notice, each Tag-Along Stockholder shall have the
right to elect to sell to the Buyer, on the same terms and conditions as the
Selling Stockholder, shares of Series F Preferred Stock or, in the event the
Buyer will purchase shares of Common Stock, both shares of Preferred Stock and
shares of Common Stock. In the event Buyer will purchase Common Stock, a
Tag-Along Stockholder shall be entitled to convert any other classes of the
Company's preferred stock into and exercise any warrants or options held by such
Tag-Along Stockholder for shares of Common Stock prior to any sale of Common
Stock to the Buyer. The number of shares of Preferred Stock and Common Stock
that each Tag-Along Stockholder shall be entitled to sell shall each be equal to
the product attained by multiplying (a) the number of shares of Series F
Preferred Stock or Common Stock (computed on an as converted basis) held by the
Tag- Along Stockholder times (b) the quotient derived by dividing (i) the number
of shares of Series F
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<PAGE> 22
Preferred Stock or Common Stock which otherwise would have been sold by the
Selling Stockholder to the Buyer by (ii) the total number of shares of Series F
Preferred Stock or Common Stock (computed on an as converted basis) held by such
Selling Stockholder and the number of shares of Series F Preferred Stock or
Common Stock (computed on an as converted basis) held by the Tag-Along
Stockholders who have elected to participate in such Transfer, with the intent
that the Selling Stockholder and each Tag-Along Stockholder shall participate
pro rata in the sale of shares of Series F Preferred Stock and/or Common Stock
to the Buyer. If more than one Tag-Along Stockholder elects to sell shares of
Series F Preferred Stock or Common Stock pursuant to this Section 2.6, they may
do so pro rata, based on the number of shares of Series F Preferred Stock or
Common Stock (computed on an as converted basis) held by each of them or in such
other proportions as they may agree. The Tag-Along Stockholders' right to sell
pursuant to this Section 2.6 shall be exercised by delivery of written notice to
the Selling Stockholder within 10 Business Days following delivery of the
Transfer Notice. Any Tag-Along Stockholder who fails to notify the Selling
Stockholder within such 10 Business Days shall be deemed to have waived its
rights under this Section 2.6. As used herein, the term "Exempt Transaction"
shall mean any Transfer by a Purchaser (1) pursuant to Sections 9, 10 or 11 of
the Stockholders' Agreement, (2) pursuant to or in connection with a
registration statement filed under the Registration Rights Agreement, (3) made
under Rule 144 of the Securities Act, or (4) to (i) a direct or indirect partner
of such Purchaser if it is a partnership, (ii) a direct or indirect member of
such Purchaser if it is a limited liability company, or (iii) an Affiliate. The
Purchasers agree that the tag-along rights provided by this Section 2.6 shall be
not be applicable to any Transfer as to which the terms of Sections 9, 10 or 11
of the Stockholders' Agreement apply.
ARTICLE 3
CONDITIONS TO THE OBLIGATION OF THE PURCHASERS
----------------------------------------------
TO PURCHASE THE SHARES
----------------------
The obligation of the Purchasers to purchase the Initial Shares, the
Investor Warrants, the Additional Shares or the Default Shares, as the case may
be, to pay the purchase prices therefor at the applicable Closing and to perform
any other obligations hereunder shall be subject to the satisfaction (unless
waived by the Purchasers or, in the case of any Closing occurring after the
First Closing, by the Majority Purchasers) of the following conditions on or
before the applicable Closing Date (it being understood and agreed that, with
respect to the First Closing, all of the conditions set forth in this Article 3
must be satisfied as of such Closing, and that with respect to each subsequent
Closing, only the conditions set forth in Sections 3.1, 3.2, 3.4, 3.5, 3.6, 3.7,
3.8, 3.9, 3.13, 3.14, 3.15, 3.17, 3.18 and 3.21 must be satisfied as of such
Additional Closing Date). In connection with the Additional Closings, the
Company shall be permitted to update the Schedules referred to in Sections 5.15
(except in respect of clause (ix) thereof), 5.18, 5.19, 5.24, 5.27, 5.28 and
5.29 in order to reflect any changes that may result from any acquisitions of
radio stations by the Company pursuant to Future Acquisition Agreements, or as
otherwise consented to by Waller-Sutton. No Purchaser shall be obligated to
purchase any of the Shares to be purchased by it at the First Closing hereunder
unless the purchase and sale of each of the other Shares required to be
purchased at the First Closing
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hereunder occurs simultaneously therewith. However, with respect to each
Additional Closing, the obligations of each Purchaser to purchase the Additional
Shares to be purchased by it shall be separate and independent.
3.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Article 5 hereof shall be true and correct in all
material respects at and as of the date hereof and the applicable Closing Date
as if made at and as of such date, and the Purchasers shall have received a
certificate, dated as of the applicable Closing Date, signed by the Chairman of
the Board, the President of the Company or the Company's Chief Financial
Officer, certifying compliance with this condition.
3.2 COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the applicable Closing Date, and the Purchasers shall have received a
certificate, dated as of the applicable Closing Date, signed by the Chairman of
the Board, the President, the Vice President-Finance or the Chief Financial
Officer of the Company, certifying compliance with this condition.
3.3 COMPLIANCE WITH THE ACQUISITION DOCUMENTS; CLOSING THEREUNDER; NO
DEFAULTS. Each of the parties to the Acquisition Documents shall have performed
and complied with in all material respects all of the agreements and conditions
contemplated under the applicable Acquisition Document to which it is a party
and the agreements, instruments and other documents delivered thereunder or
contemplated thereby, and there shall be no material default by any such party
thereunder. The Acquisition Documents shall not have been amended in any respect
or any condition to closing thereunder waived by any party, in any case without
the prior written consent of Waller-Sutton, and the transactions contemplated by
each of the Acquisition Documents shall have been consummated in accordance with
its respective terms. The Purchasers shall have received such certificates or
other evidence as they may reasonably request to establish compliance with this
condition.
3.4 SECRETARY'S CERTIFICATE. The Purchasers shall have received a
certificate from the Company, dated the date of the applicable Closing Date, and
signed by the Secretary or an Assistant Secretary of the Company, certifying (a)
that the attached copies of the Certificate of Incorporation and By-laws are
true, complete and correct and remain unamended and in full force and effect,
(b) that the attached copies of the resolutions of the Board of Directors of the
Company approving the Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby, are true, complete and correct and
remain unamended and in full force and effect, and (c) as to the incumbency and
specimen signature of each officer or member of the Company executing any
Transaction Document to which it is a party or any other document delivered in
connection herewith on behalf of the Company.
3.5 DOCUMENTS. The Purchasers shall have received true, complete and
correct copies of such agreements, schedules, exhibits, certificates, documents,
financial information, projections
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and filings as they may reasonably request in connection with or relating to the
transactions contemplated hereby and by the Acquisition Documents and any Future
Acquisition Agreement, all in form and substance satisfactory to the Purchasers.
3.6 PURCHASE OF SHARES PERMITTED BY APPLICABLE LAWS. The acquisition of
and payment for the Shares to be acquired by the Purchasers hereunder and the
consummation of the transactions contemplated hereby and by the other
Transaction Documents (a) shall not be prohibited by any Requirement of Law, (b)
shall not subject the Purchasers to any penalty or other onerous condition under
or pursuant to any Requirement of Law, and (c) shall be permitted under all
Requirements of Law to which the Purchasers or the transactions contemplated by
or referred to herein or in the other Transaction Documents are subject; and the
Purchasers shall have received such certificates or other evidence as they may
reasonably request to establish compliance with this condition.
3.7 OPINION OF COUNSEL. The Purchasers shall have received an opinion
of outside counsel to the Company (which shall include special FCC counsel to
the Company), dated the applicable Closing Date, relating to the transactions
contemplated by or referred to herein, in form and substance reasonably
acceptable to the Purchasers.
3.8 APPROVAL OF COUNSEL TO THE PURCHASERS. All actions and proceedings
hereunder and all agreements, schedules, exhibits, certificates, financial
information, filings and other documents required to be delivered by the Company
or any Subsidiary hereunder or in connection with the consummation of the
transactions contemplated hereby, and all other related matters, shall have been
in form and substance acceptable to Rubin Baum Levin Constant & Friedman,
counsel to the Purchasers, in its reasonable judgment (including, without
limitation, the opinions of counsel referred to in Section 3.7 hereof).
3.9 CONSENTS AND APPROVALS. All consents, exemptions, authorizations,
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons in respect of all Requirements of Law and with respect to
those Contractual Obligations of the Company or any Subsidiary necessary,
desirable, or required in connection with the execution, delivery or performance
(including, without limitation, the issuance of Common Stock upon conversion of
the Shares) by the Company or any Subsidiary, or enforcement against the Company
or any Subsidiary, of the Transaction Documents to which it is a party shall
have been obtained and shall be in full force and effect as of the applicable
Closing Date.
3.10 REGISTRATION RIGHTS AGREEMENT. The Company and all of the parties
thereto other than the Purchasers shall have duly executed and delivered the
Registration Rights Agreement.
3.11 STOCKHOLDERS' AGREEMENT. The Stockholders' Agreement shall have
been duly executed and delivered by all of the parties thereto other than the
Purchasers.
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<PAGE> 25
3.12 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company shall have
amended its Certificate of Incorporation and By-laws, in form and substance
satisfactory to the Purchasers, and the Certificate of Amendment shall have been
duly filed with the Secretary of State of the State of Delaware.
3.13 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the
applicable Closing Date any judgment or order of a court of competent
jurisdiction or any ruling of any Governmental Authority or any condition
imposed under any Requirement of Law which, in the judgment of the Purchasers,
would prohibit the purchase of the Shares hereunder or subject the Purchasers to
any penalty or other onerous condition under or pursuant to any Requirement of
Law if the Shares were to be purchased hereunder.
3.14 GOOD STANDING CERTIFICATE. The Company shall have delivered to the
Purchasers as of the Closing Date, a good standing certificate or the equivalent
thereof for the Company and each of its Subsidiaries for each of their
respective jurisdictions of incorporation or organization, as the case may be,
and all other jurisdictions where they are required to be qualified to do
business.
3.15 PRO FORMA BALANCE SHEET. The Company shall have delivered to the
Purchasers as of the end of the month preceding each subsequent Additional
Closing Date a pro forma consolidated balance sheet of the Company and its
Subsidiaries, certified by the chief executive officer of the Company that such
pro forma balance sheet fairly presents the pro forma adjustments reflecting the
consummation of the transactions contemplated by this Agreement , the
Transaction Documents and the relevant Future Acquisition Agreements to be
consummated as of each such Closing Date, including, without limitation, all
material fees and expenses in connection therewith.
3.16 STOCK OPTION PLAN. As of the First Closing Date, the Company shall
have adopted, and the requisite number of stockholders shall have approved, the
Stock Option Plan. The Purchasers shall have received such certificates or other
evidence as they may reasonably request to establish compliance with this
condition.
3.17 D & O INSURANCE. The Company shall have in place as of the
applicable Closing Date an insurance policy providing directors' and officers'
liability insurance coverage for each of the members of the Board of Directors
of the Company in an aggregate amount of not less than $5 million. The
Purchasers shall have received such certificates or other evidence as they may
reasonably request to establish compliance with this condition.
3.18 FUTURE ACQUISITION AGREEMENTS. Subject to the provisions of
Section 2.2(c), as of each Additional Closing Date, the Company and/or its
Subsidiaries shall have entered into written agreements for the acquisition of
one or more radio stations or other assets or properties satisfactory to
Waller-Sutton, and the Company shall have delivered to the Purchasers, in a form
reasonably satisfactory to Waller- Sutton, evidence that the transactions
contemplated thereby shall have been (or on such Additional Closing Date are
being) consummated.
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3.19 SALE OF SERIES A, SERIES B AND SERIES D PREFERRED STOCK. The
closing of the sale of the Series A Preferred Stock, Series B Preferred Stock
and Series D Preferred Stock shall have been consummated in accordance with the
terms of the Series A Purchase Agreement, the Series B Purchase Agreement and
the Series D Purchase Agreement, respectively, without amendment or waiver of
any terms thereof without the prior written approval of Waller-Sutton.
3.20 KEY-MAN INSURANCE. As of the earlier of (i) two (2) months after
the First Closing Date or (ii) the Additional Closing Date next succeeding the
First Closing, the Company shall have in place a keyman term life insurance
policy that is renewable on an annual basis with a reputable and financially
sound insurer on each of the lives of Terry S. Jacobs and William L. Stakelin in
the face amount of not less than $1,000,000. The Purchasers shall have received
such certificates or other evidence as they may reasonably request to establish
compliance with this condition.
3.21 FAIRCOM CONVERTIBLE NOTE PURCHASE AGREEMENT. The closing of the
sale of the Faircom Convertible Notes shall have been consummated in accordance
with the terms of the Faircom Convertible Note Purchase Agreement, without
amendment or waiver of any of the terms thereof without the prior written
approval of Waller-Sutton, and the Company shall have issued to Waller-Sutton
400,640 shares of Series C Preferred Stock in respect of the shares of common
stock of Faircom issuable to Waller-Sutton upon conversion of the Faircom
Convertible Notes purchased by Waller-Sutton thereunder.
3.22 EXECUTIVE EMPLOYMENT AGREEMENTS. The Company and each of Terry S.
Jacobs and William L. Stakelin, respectively, shall have executed and delivered
the Executive Employment Agreement to which he is a party.
3.23 COMPLIANCE WITH STATE SECURITIES LAWS. The Company shall have
obtained (having used its reasonable best efforts to obtain) all permits and
qualifications required by any state for the offer and sale of the Shares or
shall have the availability of exemptions therefrom.
3.24 CONVERSION OF FAIRCOM CONVERTIBLE NOTES. All of the Faircom
Convertible Notes shall have been converted into common stock of Faircom Inc.
3.25 SBA COMPLIANCE. The Company shall have provided to River Cities
information necessary for the preparation of a Portfolio Financing Report on SBA
Form 1031, if River Cities is a Purchaser hereunder.
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<PAGE> 27
ARTICLE 4
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
TO ISSUE AND SELL THE SHARES
----------------------------
The obligations of the Company to issue and sell the Initial Shares,
the Investor Warrants, the Additional Shares or the Default Shares, as the case
may be, and perform its other obligations hereunder relating thereto shall be
subject to the satisfaction as determined by, or waived by, the Company of the
following conditions on or before the applicable Closing Date:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchasers contained in Article 6 hereof shall be true and correct in all
material respects at and as of the date hereof and the applicable Closing Date,
as if made at and as of such date, and the Company shall have received a
certificate, dated as of the applicable Closing Date, signed by each Purchaser
certifying that such representations and warranties made by such Purchaser are
true and correct at and as of the date hereof and at and as of such Closing
Date, as if made at and as of such date.
4.2 COMPLIANCE WITH THIS AGREEMENT. Each of the Purchasers shall have
performed and complied with all of the respective agreements and conditions set
forth or contemplated herein that are required to be performed or complied with
by such Purchaser on or before the applicable Closing Date, and the Company
shall have received a certificate, dated as of the applicable Closing Date,
signed by each Purchaser certifying that such Purchaser has so performed and so
complied with such agreements and conditions.
4.3 STOCKHOLDERS' AGREEMENT. The Stockholders' Agreement shall have
been duly executed and delivered by the Purchasers.
4.4 CONVERSION OF FAIRCOM CONVERTIBLE NOTES. All of the Faircom
Convertible Notes purchased by Waller-Sutton pursuant to the Faircom Convertible
Note Purchase Agreement shall have been converted into common stock of Faircom
Inc.
4.5 COMPLIANCE WITH STATE SECURITIES LAWS. The Company shall have
obtained (having used its reasonable best efforts to obtain) all permits and
qualifications required by any state for the offer and sale of the Shares or
shall have the availability of exemptions therefrom.
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<PAGE> 28
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company hereby represents and warrants to the Purchasers, which
representations and warranties shall be deemed to be repeated as of the First
Closing Date (after giving effect to the transactions contemplated by this
Agreement and the Acquisition Documents) and as of each Additional Closing Date
(after giving effect to the transactions contemplated by this Agreement and any
Future Acquisition Agreement), as follows:
5.1 EXISTENCE AND POWER. The Company and each of its Subsidiaries: (a)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, as the case may
be; (b) has all requisite power and authority to own and operate its property,
to lease the property it operates as lessee and to conduct the business in which
it is currently, or is currently proposed to be, engaged; (c) is duly qualified,
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the failure to do so
would not have a material adverse effect on the Condition of the Company; and
(d) has the power and authority to execute, deliver and perform its obligations
under each Transaction Document to which it is or will be a party.
5.2 AUTHORIZATION: NO CONTRAVENTION. The execution, delivery and
performance by the Company of each Transaction Document to which it is a party
and the consummation of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Shares and Investor Warrants:
(a) have been duly authorized by all necessary corporate action; (b) do not
contravene the terms of the Certificate of Incorporation, Bylaws, or any
amendment thereto; and (c) upon receipt of the Required Consents, will not
violate, conflict with or result in any breach or contravention of or the
creation of any Lien under, any Contractual Obligation of the Company or any
Subsidiary (except as set forth on Schedule 5.2) or any Requirement of Law
applicable to the Company or any Subsidiary.
5.3 GOVERNMENTAL AUTHORIZATION: THIRD PARTY CONSENTS. No approval,
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by, or enforcement against, the Company of the Transaction Documents
to which it is a party or the consummation of the transactions contemplated
hereby or thereby other than those which have been obtained and are in full
force and effect as of the date hereof and other than routine filings to be made
with the FCC or under state or Federal securities laws which are not required to
be made until following the First Closing Date (and which shall be made on or
prior to the due date therefor). Without limiting the generality of the
foregoing, all licenses, permits, approvals and consents required to be obtained
from the FCC for the operation of
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<PAGE> 29
the radio stations owned or operated by the Company or any of its Subsidiaries
have been obtained and are in full force and effect.
5.4 BINDING EFFECT. Each of the Transaction Documents to which it is a
party has been duly executed and delivered by the Company, and constitutes the
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
relating to enforceability.
5.5 NO LEGAL BAR. Neither the execution, delivery and performance of
the Transaction Documents nor the issuance of or performance of the terms of the
Shares will violate any Requirement of Law or any Contractual Obligation of the
Company or any Subsidiary. Neither the Company nor any Subsidiary has previously
entered into any agreement which will remain in effect following the First
Closing, granting any rights to any Person which are inconsistent with the
rights to be granted by the Company in the Transaction Documents.
5.6 LITIGATION. Except as set forth on Schedule 5.6, there are no legal
actions, suits, proceedings, claims or disputes pending or, to the Company's
knowledge, threatened, at law, in equity, in arbitration or before any
Governmental Authority against or affecting the Company or any Subsidiary. No
injunction, writ, temporary restraining order, decree or any order of any nature
has been issued by any court or other Governmental Authority purporting to
enjoin or restrain the execution, delivery or performance of the Transaction
Documents.
5.7 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.7, the
Company and its Subsidiaries are in compliance with all Requirements of Law
applicable to them. Without limiting the generality of the foregoing, there have
been duly and timely made all filings which are required to be made with respect
to the radio stations owned or operated by the Company or any of its
Subsidiaries under the Communications Act, and the Company and each of its
Subsidiaries are in all respects in compliance with such Act.
5.8 NO DEFAULT OR BREACH. Except as set forth on Schedule 5.8, neither
the Company nor any Subsidiary is in, and the incurrence of the obligations of
the Company contemplated by the Transaction Documents do not constitute, nor
with the giving of notice or lapse of time or both would constitute, a default
under or with respect to any Contractual Obligation of the Company or any
Subsidiary in any respect.
5.9 TITLE TO PROPERTIES. Except as set forth on Schedule 5.9, the
Company and/or each of its Subsidiaries has good record and marketable title in
fee simple to, or holds interests as lessee or licensee under leases or licenses
in full force and effect in, all real property reflected on the Financial
Statements or used in connection with its business.
5.10 USE OF REAL PROPERTY. Except as set forth on Schedule 5.10, the
owned and leased real properties reflected on the Financial Statements or used
in connection with the business of the
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Company and its Subsidiaries, are used and operated in compliance and conformity
with all applicable leases, contracts, commitments, licenses and permits, to the
extent that the failure so to conform would, individually or in the aggregate,
adversely affect the Condition of the Company; neither the Company nor any
Subsidiary has received notice of violation of any applicable zoning or building
regulation, ordinance or other law, order, regulation or requirement relating to
the operations of the Company or any Subsidiary; and there is no such violation.
Except as set forth on Schedule 5.10, all buildings that are owned or covered by
leases reflected on the Financial Statements or used in connection with the
business of the Company or any Subsidiary, substantially conform with all
applicable ordinances, codes, regulations and requirements, and no law or
regulation presently in effect or condition precludes or materially restricts
continuation of the present use of such properties. Except as set forth on
Schedule 5.10, each of the leases for real properties reflected on the Financial
Statements or used in connection with the business of the Company or any
Subsidiary is in full force and effect and the Company and its Subsidiaries
enjoy peaceful and undisturbed possession thereunder. There is no default on the
part of the Company or any Subsidiary or event or condition which with notice or
lapse of time, or both, would constitute a default on the part of the Company or
any Subsidiary under any of such leases.
5.11 TAXES. Except as set forth on Schedule 5.11, the Company and its
Subsidiaries have filed or caused to be filed, or have properly filed extensions
for, all tax returns which are required to be filed and have paid or caused to
be paid all taxes required to be paid by them and all assessments received by
them to the extent that such taxes have become due, except taxes the validity or
amount of which is being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been set aside. The Company and
each of its Subsidiaries have paid or caused to be paid, or have established
reserves that the Company reasonably believes to be adequate in all material
respects for, all tax liabilities applicable to the Company and its Subsidiaries
for all fiscal years which have not been examined and reported on by the taxing
authorities (or closed by applicable statutes).
5.12 FINANCIAL CONDITION.
(a) The Company has delivered to the Purchasers true and complete
copies of (i) the consolidated audited balance sheet of the Company and its
Subsidiaries, and the related statements of income, stockholders' equity and
cash flow, for the fiscal year ended December 31, 1997 (the "Audited Financial
Statements") and (ii) the consolidated unaudited balance sheet of the Company
and its Subsidiaries, and the related statements of income, stockholders' equity
and cash flow, for the fiscal quarter ended March 31, 1998 (the "Unaudited
Financial Statements"). The Financial Statements fairly present, in all material
respects, the financial position of the Company and its Subsidiaries as of the
dates thereof, and the results of operations and cash flows of the Company and
its Subsidiaries as of the dates or for the periods set forth therein, all in
conformity with GAAP consistently applied during the period involved, except as
otherwise set forth in the notes thereto and subject, in the case of the
Unaudited Financial Statements, to the absence of footnotes and normal year-end
audit adjustments.
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<PAGE> 31
(b) The Company has not received any letters from any of its
certified public accountants to the management of the Company other than the
auditor's opinion letter that will accompany the above-referenced Audited
Financial Statements.
(c) Each Pro Forma Balance Sheet to be delivered to the Purchasers
pursuant to this Agreement shall set forth the assets and liabilities of the
Company and its Subsidiaries on a pro forma consolidated basis after taking into
account the consummation of the transactions contemplated in this Agreement and
the Acquisition Agreements (and, in the case of any Additional Closing, any
Future Acquisition Agreement). Each such Pro Forma Balance Sheet shall have been
prepared by the Company in accordance with GAAP and shall fairly present in all
material respects the assets and liabilities of the Companies and its
Subsidiaries on a consolidated basis, reflecting the consummation of the
transactions contemplated by this Agreement and the Acquisition Agreements (and,
in case of any Additional Closing, any Future Acquisition Agreement) and based
on the assumptions set forth therein.
(d) The projections of the Company and its Subsidiaries on a
consolidated basis heretofore delivered to the Purchasers by Waller-Sutton
Management Group, Inc. at the request of the Company and referred to in a
Co-Investment Opportunity Memorandum dated March 13, 1998 are based on
assumptions which were reasonable when made and such assumptions and projections
are reasonable on the date hereof and neither the Company nor any of its
Subsidiaries, as of the date of this Agreement, has delivered to any Person or
has in its possession any later dated projections.
5.13 ERISA. The execution and delivery of this Agreement and the other
Transaction Documents, the purchase and sale of the Shares hereunder and the
consummation of the transactions contemplated hereby and thereby will not result
in any prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code.
5.14 DISCLOSURE.
(a) Agreement and Other Documents. This Agreement, together with
all exhibits and schedules hereto, and the agreements, certificates and other
documents furnished to the Purchasers by the Company and its Subsidiaries in
connection with the transactions contemplated by this Agreement, the Commission
Documents, the Acquisition Documents and any Future Acquisition Agreement do not
or will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Material Adverse Effects. Except for matters relating to the
broadcast industry generally, there is no fact known to the Company, which the
Company has not disclosed to the Purchasers in writing which materially
adversely affects or, insofar as the Company can reasonably foresee, could
materially adversely affect, the Condition of the Company or the ability of the
Company or any Subsidiary to perform its or their obligations under the
Transaction Documents, or any agreement or other document contemplated thereby
to which any of them is a party.
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<PAGE> 32
5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1998,
except as set forth on Schedule 5.15 or as provided pursuant to the terms of the
Acquisition Documents, neither the Company nor any Subsidiary has (i) issued any
stock, bonds or other corporate securities except for the securities being
issued pursuant to the terms of the Transaction Documents, (ii) borrowed any
amount or incurred any liabilities (absolute or contingent), other than in the
ordinary course of business, in excess of $25,000, (iii) discharged or satisfied
any lien or incurred or paid any obligation or liability (absolute or
contingent), other than in the ordinary course of business, in excess of
$25,000, (iv) declared or made any payment or distribution to stockholders or
purchased or redeemed any shares of its capital stock or other securities, (v)
mortgaged, pledged or subjected to lien any of its assets, tangible or
intangible, (vi) sold, assigned or transferred any of its tangible assets other
than the sale of excess or obsolete inventory or equipment in the ordinary
course of business, or canceled any debts or claims, (vii) sold, assigned or
transferred any patents, trademarks, trade names, copyrights, trade secrets or
other intangible assets, (viii) suffered any losses of property, or waived any
rights of substantial value, (ix) suffered any material adverse change in the
Condition of the Company, (x) expended any material amount, granted any bonuses
or extraordinary salary increases, (xi) entered into any transaction involving
consideration in excess of $50,000 except as otherwise contemplated hereby or by
the Transaction Documents or (xii) entered into any agreement or transaction, or
amended or terminated any agreement, with an Affiliate. To the knowledge of the
Company after reasonable investigation, no material adverse change in the
Condition of the Company is threatened or reasonably likely to occur.
5.16 ENVIRONMENTAL MATTERS. Except as described on Schedule 5.16:
(a) The property, assets and operations of the Company and each
Subsidiary are and have been in compliance with all applicable Environmental
Laws; there are no Hazardous Materials stored or otherwise located in, on or
under any of the property or assets of the Company or any Subsidiary, including,
without limitation, the groundwater except in compliance with applicable
Environmental Laws; and there have been no releases or threatened releases of
Hazardous Materials in, on or under any property adjoining any of the property
or assets of the Company or any Subsidiary which have not been remediated to the
satisfaction of the appropriate Governmental Authorities.
(b) None of the property, assets or operations of the Company or
any Subsidiary is the subject of any Federal, state or local investigation
evaluating whether (i) any remedial action is needed to respond to a release or
threatened release of any Hazardous Materials into the environment or (ii) any
release or threatened release of any Hazardous Materials into the environment is
in contravention of any Environmental Law.
(c) Neither the Company nor any Subsidiary has received any notice
or claim, nor are there pending, threatened or reasonably anticipated, lawsuits
or proceedings against any of them, with respect to violations of an
Environmental Law or in connection with the presence of or exposure to any
Hazardous Materials in the environment or any release or threatened release of
any Hazardous Materials into the environment, and neither the Company nor any
Subsidiary is or was the owner or operator of any property which (i) pursuant to
any Environmental Law has been placed on any list
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of Hazardous Materials disposal sites, including, without limitation, the
"National Priorities List" or "CERCLIS List," (ii) has, or had, any subsurface
storage tanks located thereon, or (iii) has ever been used as or for a waste
disposal facility, a mine, a gasoline service station or, other than for
petroleum substances stored in the ordinary course of business, a petroleum
products storage facility.
(d) Neither the Company nor any Subsidiary has any present or
contingent liability in connection with the presence either on or off the
property or assets of the Company or Subsidiary of any Hazardous Materials in
the environment or any release or threatened release of any Hazardous Materials
into the environment.
5.17 INVESTMENT COMPANY/GOVERNMENT REGULATIONS. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any Subsidiary is subject to regulation
under the Public Utility Holding Company Act of 1935, as amended, the Federal
Power Act, the Interstate Commerce Act, or any federal or state statute or
regulation limiting its ability to incur Indebtedness.
5.18 SUBSIDIARIES.
(a) Schedule 5.18 sets forth a complete and accurate list of all
of the Subsidiaries of the Company, together with their respective jurisdictions
of incorporation or organization. Except as set forth on Schedule 5.18, each
such Subsidiary is wholly owned by the Company. All of the outstanding shares of
capital stock of the Subsidiaries that are corporations are validly issued,
fully paid and nonassessable. Except as set forth on Schedule 5.18, as of the
Closing Date, all of the outstanding shares of capital stock of, or other
ownership interests in, each of the Subsidiaries are and will be owned by the
Company free and clear of any Liens, claims, charges or encumbrances. Except as
set forth on Schedule 5.18, no Subsidiary has outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating the Subsidiary to issue, transfer or sell any securities
of the Subsidiary.
(b) Except as set forth on Schedule 5.18, the Company does not own
of record or beneficially, directly or indirectly, (i) any shares of outstanding
capital stock or securities convertible into capital stock of any other
corporation, or (ii) any participating interest in any limited liability
company, partnership, joint venture or other non-corporate business enterprises.
5.19 CAPITALIZATION.
(a) As of the First Closing Date, the authorized capital stock of
the Company will consist of Thirty Million (30,000,000) shares of Common Stock
and Twenty Million (20,000,000) shares of Preferred Stock. As of the First
Closing Date and after giving effect to the transactions contemplated by this
Agreement and the Acquisition Documents, the number of shares of each class or
series of the capital stock of the Company outstanding or reserved for issuance
will be as set forth on Schedule 5.19 hereof. The outstanding warrants and all
outstanding shares of capital stock of the Company have been duly authorized by
all necessary corporate action. All outstanding shares of
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capital stock of the Company are, and the shares of Common Stock issuable upon
conversion of the Preferred Stock and upon exercise of the Investor Warrants,
when issued in accordance with the respective terms and conditions of each
series thereof, will be validly issued, fully paid and nonassessable. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class or series of authorized capital stock of
the Company are as set forth in the Certificate of Incorporation, and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws. Schedule 5.19 provides an accurate list, after giving effect to
the transactions contemplated by this Agreement, of (A) all holders of any of
the issued and outstanding Preferred Stock or Common Stock, together with the
number of shares held by each (except, in the case of holders of Series C
Preferred Stock, only holders of more than 5% thereof shall be listed), and (B)
all of the holders of warrants, options, rights and securities convertible into
Common Stock of the Company, together with the number of shares of Common Stock
or Preferred Stock to be issued upon the exercise or conversion of such
warrants, options, rights and convertible securities.
(b) On each applicable Closing Date, except for the Stock Options,
the outstanding shares of Preferred Stock, the outstanding options and warrants
set forth on Schedule 5.19 and other securities issued hereafter in accordance
with action by the Board of Directors of the Company taken in compliance with
the Stockholders' Agreement, there will be no outstanding securities convertible
into or exchangeable for capital stock of the Company or any Subsidiary or,
except as contemplated in the other Transaction Documents (including, without
limitation, the Stockholders' Agreement) or in any Future Acquisition Agreement,
options, warrants or other rights to purchase or subscribe to capital stock of
the Company or any Subsidiary, or contracts, commitments, agreements,
understandings or arrangements of any kind to which the Company or any
Subsidiary is a party relating to the issuance of any capital stock of the
Company or any Subsidiary, any such convertible or exchangeable securities or
any such options, warrants or rights.
5.20 PRIVATE OFFERING. No form of general solicitation or general
advertising was used by the Company or any Subsidiary, or their representatives
in connection with the offer or sale of the Shares. Assuming the accuracy of the
representations and warranties of the Purchasers contained in Article VI hereof,
no registration of the Shares or the Common Stock issuable upon the conversion
of the Shares pursuant to the provisions of the Securities Act or applicable
state securities or "blue sky" laws will be required by the offer, sale or
issuance of the Shares pursuant to this Agreement or the Common Stock issuable
upon conversion of the Shares. The Company agrees that neither the Company, nor
anyone acting on its behalf, will offer or sell the Shares or any other security
so as to require the registration of the Shares or the Common Stock issuable
upon conversion of the Shares pursuant to the provisions of the Securities Act
or any state securities or "blue sky" laws, unless such securities or the Common
Stock issuable upon conversion of the Shares are so registered.
5.21 BROKER'S, FINDER'S OR SIMILAR FEES. Except for the fees referred
to in Schedule 5.21 hereof, there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with
the Company or any Subsidiary.
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5.22 LABOR RELATIONS. Neither the Company nor any Subsidiary has
committed or is engaged in any unfair labor practice. Except as set forth in
Schedule 5.22, there is (a) no unfair labor practice complaint pending or
threatened against the Company or any Subsidiary before the National Labor
Relations Board and no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is so pending or threatened, (b) no
strike, labor dispute, slowdown or stoppage pending or threatened against the
Company or any Subsidiary, and (c) no union representation question existing
with respect to the employees of the Company or any Subsidiary and no union
organizing activities are taking place. Neither the Company nor any Subsidiary
is a party to any collective bargaining agreement.
5.23 EMPLOYEE BENEFIT PLANS. Neither the Company nor any Subsidiary nor
any ERISA Affiliate has any actual or contingent, direct or indirect, liability
in respect of any employee benefit plan (as defined in Section 3(3) of ERISA) or
other employee benefit arrangement (collectively, the "Plans"), other than those
liabilities with respect to such Plans specifically described on Schedule
5.23(a). Schedule 5.23(a) sets forth all Plans relating to the Company. The
Company has delivered to the Purchasers accurate and complete copies of all of
the Plans. All of the Plans are in substantial compliance with all applicable
Requirements of Law. Except as set forth on Schedule 5.23(b), no "prohibited
transaction," as defined in Section 406 of ERISA and Section 4975 of the Code,
has occurred in respect of any of the Plans, and no civil or criminal action
brought pursuant to Part 5 of Title I of ERISA is pending or, to the best
knowledge of the Company, is threatened against any fiduciary of any such Plan.
No Plan: (i) is subject to Title IV of ERISA, or is otherwise a Defined Benefit
Plan, or is a multiple employer plan (within the meaning of Section 413(c) of
the Code); or (ii) provides for post-retirement welfare benefits or a "parachute
payment" (within the meaning of Section 280G(b) of the Code).
5.24 PATENTS, TRADEMARKS. ETC. The Company and its Subsidiaries own or
are licensed or otherwise have the right to use all patents, trademarks, service
marks, trade names, copyrights, licenses, franchises and other rights
(collectively, the "Rights") being used to conduct their businesses as now
operated (a complete list of licenses or other contracts relating to the
Company's and its Subsidiaries' Rights and of registrations of patents,
trademarks, service marks and copyrights including any applications therefor
constituting such Rights, is attached hereto as Schedule 5.24). No Right or
product, process, method, substance or other material presently sold by or
employed by the Company or any Subsidiary, or which the Company or any
Subsidiary contemplates selling or employing, infringes upon the Rights that are
owned by others. Except as set forth on Schedule 5.24, no litigation is pending
and no claim has been made against the Company or any Subsidiary or, to the
knowledge of the Company, is threatened, contesting the right of the Company or
any Subsidiary to sell or use any Right or product, process, method, substance
or other material presently sold by or employed by the Company or any
Subsidiary. Neither the Company nor any Subsidiary has asserted any claim of
infringement, misappropriation or misuse by any Person of any Rights owned by
the Company or any Subsidiary or to which it has exclusive use. Except as set
forth on Schedule 5.24, no employee, officer or consultant of the Company or any
Subsidiary has any proprietary, financial or other interest in any Rights owned
or used by the Company or any Subsidiary in their businesses. Except as set
forth on Schedule 5.24, neither the Company nor any Subsidiary has any
obligation to
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compensate any Person for the use of any Rights and neither the Company nor any
Subsidiary has granted any license or other right to use any of the Rights of
the Company or any Subsidiary, whether requiring the payment of royalties or
not. The Company and its Subsidiaries have taken all reasonable measures to
protect and preserve the security, confidentiality and value of their Rights,
including trade secrets and other confidential information. All trade secrets
and other confidential information of the Company and its Subsidiaries are not
part of the public domain or knowledge, nor have they been used, divulged or
appropriated for the benefit of any Person other than the Company or any
Subsidiary or otherwise to the detriment of the Company or any Subsidiary. No
employee or consultant of the Company or Subsidiary has used any trade secrets
or other confidential information of any other Person in the course of his work
for the Company or any Subsidiary. No patent, invention, device, principle or
any statute, law, rule, regulation, standard or code is pending or proposed
which would restrict the Company's or any Subsidiary's ability to use any of the
Rights.
5.25 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on Schedule
5.25, no officer or director of the Company or any Subsidiary: (a) owns,
directly or indirectly, any interest in (excepting less than 5% stock holdings
for investment purposes in securities of publicly held and traded companies), or
is an officer, director, employee or consultant of, any Person that is engaged
in a broadcasting business in the Applicable Region or is engaged in business as
a lessor, lessee, supplier, distributor, sales agent or customer of, or lender
to or borrower from, the Company or any Subsidiary; (b) owns, directly or
indirectly, in whole or in part, any tangible or intangible property that the
Company or any Subsidiary uses in the conduct of business; or (c) has any cause
of action or other claim whatsoever against, or owes or has advanced any amount
to, the Company or any Subsidiary, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date hereof.
As used herein, the term "Applicable Region" shall mean (i) as to either of
Messrs. Jacobs or Stakelin, anywhere in the United States, and (ii) as to any
other officer or director, any market in which the Company or any Subsidiary is
engaged in business.
5.26 TRADE RELATIONS. Except as set forth on Schedule 5.26, there
exists no actual or, to the knowledge of the Company, threatened termination,
cancellation or limitation of, or any adverse modification or change in, the
business relationship of the Company or any Subsidiary or its business with any
customer or any group of customers whose purchases are individually or in the
aggregate material to the business of the Company or any Subsidiary, or with any
material supplier, and there exists no present condition or state of facts or
circumstances that would materially adversely affect the Condition of the
Company or prevent the Company or any Subsidiary from conducting its business
after the consummation of the transactions contemplated by this Agreement, in
substantially the same manner in which such business has heretofore been
conducted.
5.27 OUTSTANDING BORROWINGS. Schedule 5.27 lists (i) the amount of all
Outstanding Borrowings of the Company and its Subsidiaries as of the closing of
the transactions contemplated hereby, (ii) the Liens that relate to such
Outstanding Borrowings and that encumber the assets of the Company or any
Subsidiary, (iii) the name of each lender thereof, and (iv) the amount of any
unfunded commitments available to the Company in connection with any Outstanding
Borrowings.
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5.28 MATERIAL CONTRACTS. Neither the Company nor any Subsidiary is a
party to any Contractual Obligation, or is subject to any charge, corporate
restriction, judgment, injunction, decree, or Requirement of Law, which
materially adversely affects or could reasonably be determined to materially
adversely affect the Condition of the Company. Schedule 5.28 lists all
contracts, agreements and commitments of the Company and each Subsidiary as of
the First Closing Date, whether written or oral, other than (a) the Transaction
Documents and the Acquisition Documents, (b) contracts entered into in the
ordinary course of business, and (c) any other contracts, agreements and
commitments of the Company or any Subsidiary that do not extend beyond one year
and involve the receipt or payment of not more than $15,000. With respect to
each contract, agreement and commitment of the Company and its Subsidiaries
required to be set forth on Schedule 5.28, the Company has delivered to the
Purchasers a full and complete copy of all agreements and understandings between
the parties thereto with respect to the subject matter thereof and all
transactions related thereto, and there are no agreements or understandings,
oral or written, or side agreements not contained therein that relate to or
modify the substance thereof. Each contract or agreement to which the Company or
any subsidiary is a party (i) has been duly authorized by all necessary
corporate and other action on the part of the Company and each Subsidiary which
is a party thereto, (ii) was validly executed and delivered by the Company and
each such Subsidiary, and (iii) is the legal, valid and binding obligation of
the Company and each such Subsidiary and their successors, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting creditors' rights generally and by general principles of equity
relating to enforceability. Each of such documents is in full force and effect,
none of their provisions has been waived by any party thereto and there are no
defaults thereunder or notice of defaults delivered pursuant thereto.
5.29 INSURANCE. Schedule 5.29 accurately summarizes all of the
insurance policies or programs of the Company and its Subsidiaries in effect as
of the date hereof, and indicates the insurer's name, policy number, expiration
date, amount of coverage, type of coverage, annual premiums, exclusions and
deductibles, and also indicates any self-insurance program that is in effect.
All such policies are in full force and effect, are underwritten by financially
sound and reputable insurers, are sufficient for all applicable Requirements of
Law and otherwise are in compliance with the criteria set forth in Section 8.6
hereof. All such policies will remain in full force and effect and will not in
any way be affected by, or terminate or lapse by reason of any of the
transactions contemplated hereby.
5.30 SOLVENCY. The Company and its Subsidiaries are Solvent.
5.31 COMPLIANCE WITH EACH ACQUISITION DOCUMENT; CLOSINGS THEREUNDER; NO
DEFAULTS. Except as set forth on Schedule 5.31, each of the parties to each
Acquisition Agreement has performed and complied with all of the agreements and
conditions contemplated under such Acquisition Agreement and the agreements,
instruments and other documents delivered thereunder or contemplated thereby,
including, without limitation, the Transaction Documents that are required to be
performed or complied with by each such party, and, except as set forth on
Schedule 5.31, there is no default by any such party thereunder. Except as set
forth in Schedule 5.31, the Acquisition
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Documents have not been amended in any respect or any condition to closing
thereunder waived by any party, in any case without the prior written consent of
Waller-Sutton, and the transactions contemplated by each of the Acquisition
Documents have been consummated in accordance with its respective terms. The
disclosures set forth in Schedule 5.31 shall not constitute a waiver by the
Purchasers of any rights or remedies they may have with respect to any breach or
default by any party to any Acquisition Agreement of the terms of such
Acquisition Agreement.
5.32 COMMISSION DOCUMENTS. Each of the Company and its Subsidiaries has
filed all registration statements, proxy statements, reports and other documents
required to be filed by it under the Securities Act or the Exchange Act, and all
amendments thereto (collectively, the "Commission Documents"); and the Company
and each such Subsidiary have furnished the Purchasers copies of all such
Commission Documents, each as filed with the Commission, relating to the
Acquisitions and all such other Commission Documents as the Purchasers shall
have reasonably requested in connection with the transactions contemplated
hereby and by the Acquisition Documents. Each Commission Document when filed
with the Commission was true and accurate in all material respects and in
compliance in all material respects with the requirements of its respective
report form.
5.33 INCORPORATION OF REPRESENTATIONS AND WARRANTIES OF PARTIES TO THE
ACQUISITION DOCUMENTS. Each of the representations and warranties of the parties
to the Acquisition Documents other than the Company are hereby incorporated
herein by this reference as though fully set forth and the Company represents
and warrants to the Purchasers that each such representation and warranty is
true, correct and complete in all material respects.
5.34 SMALL BUSINESS CONCERN. The Company acknowledges that River Cities
is a Federal licensee under the Small Business Investment Act of 1958, as
amended (the "SB Act"). The Company, together with its "affiliates" (as that
term is defined in Title 13, Code of Federal Regulations, ss. 121.103), is a
"small business concern" within the meaning of the SB Act and the regulations
thereunder, including Title 13, Code of Federal Regulations, ss. 121.101 ET.
SEG. The information regarding the Company and its affiliates set forth in the
SB Act Form 1031 delivered at the First Closing shall be accurate and complete.
The Company does not presently engage in, and it shall not hereafter engage in,
any activities, nor shall the Company use directly or indirectly the proceeds
hereunder for any purpose for which a Small Business Investment Company is
prohibited from providing funds by the SB Act and the regulations thereunder
(including Title 13, Code of Federal Regulations, ss. 107.720 ET. SEG.).
5.35 COMPLIANCE WITH LOAN AGREEMENT. The Company is not in default and
no event has occurred which, with notice or lapse of time or both, would
constitute a default, in the due performance or observance of any term, covenant
or condition contained in that Credit Agreement between the Company, certain
Lenders and The Bank of Montreal, dated as of November 14, 1997, as amended by a
First Amendment to Credit Agreement dated as of February 16, 1998 and a Second
Amendment to Credit Agreement dated as of June 15, 1998 (the "Credit
Agreement"). As of the First Closing Date, the Company will have $34,400,000
borrowing availability under the Credit Agreement which, together with the
proceeds of the sale of the Series A Preferred Stock, the Series
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B Preferred Stock, the Series D Preferred Stock and the Series F Preferred Stock
required under Section 3.19 above, will be sufficient to consummate all of the
acquisitions contemplated by the Acquisition Documents and to pay all costs and
expenses associated therewith. In addition, the Company expects to have
sufficient cash on hand or borrowing availability under the Credit Agreement to
satisfy its working capital needs for the foreseeable future.
5.36 YEAR 2000 COMPLIANCE. All hardware and software products used by
the Company or its Subsidiaries in the administration and the business
operations thereof will be able to accurately process date data (including, but
not limited to calculating, comparing and sequencing) from, into and between the
twentieth century (through the year 1999), the year 2000 and the twenty-first
century, including leap year calculations when used in accordance with the
product documentation accompanying such hardware and software products.
5.37 RADIO STATIONS KCBQ (AM) AND WSSP (FM). The Company is party to
one or more agreements or arrangements pursuant to which the Company has been
reimbursed by an unaffiliated third party for all operating losses incurred by
radio station KCBQ (AM) from March 1, 1997 through December 31, 1997 (and
thereafter for such time as the station is held for sale), which unreimbursed
losses as of May 31, 1998 are approximately $90,000 (which the Company
represents will be reimbursed or paid in the ordinary course within 60 days of
the date hereof). The Company is in negotiations for the sale of substantially
all of the assets of radio station KCBQ (AM), which could lead to a consummation
of a sale during the third quarter of 1998. In consideration for the issuance by
the Company of a five-year promissory note for $1.5 million (the "WSSP Note"),
the Company acquired an option to purchase radio station WSSP (FM). Under the
terms of the WSSP Note, the Company is obligated to pay in full satisfaction
thereof the lesser of (i) the stated principal amount of such note or (ii) the
proceeds received by the Company from a sale of WSSP (FM) or of the option to
acquire WSSP (FM). The WSSP Note is collateralized by the Company's interest in
a note receivable from Southwind Broadcasting, Inc. for $1.5 million or by a
first lien on the assets used in the operation of such radio station. Except as
stated above, the Company has not incurred any liability or obligation in
respect of the ownership or operation of radio stations KCBQ (AM) or WSSP (FM).
5.38 FAIRCOM DEBT. The Company shall, upon consummation of the
transactions contemplated herein, pay all indebtedness of Faircom Inc. that is
not "Subordinated Indebtedness" as defined in that certain Subordination
Agreement, dated as of June 30, 1997, as amended by the Amendment and
Reaffirmation of Intercreditor and Subordination Agreement, dated as of January
22, 1998, by and among Faircom Flint Inc., Faircom Mansfield Inc., Faircom Inc.,
Blue Chip Capital Fund II Limited Partnership, Miami Valley Venture Fund L.P.
and AT&T Commercial Financial Corporation.
5.39 CONSOLIDATED FINANCIAL INFORMATION. The Company shall deliver to
the Purchasers no later than June 30, 1998, the pro forma consolidated balance
sheet and financial statements of the Company and its Subsidiaries for each of
the three month period ended March 31, 1998 and the twelve month period ended
March 31, 1998, certified by the chief executive officer of the Company
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that such pro forma balance sheet and financial statements have been prepared in
accordance with generally accepted accounting principals and fairly present the
pro forma adjustments reflecting the consummation of the transactions
contemplated by this Agreement, the Transaction Documents and the Acquisition
Agreements, including, without limitation, all material fees and expenses in
connection therewith. The Total Consolidated Broadcast Cash Flow for the twelve
month period ended March 31, 1998 set forth in such pro forma consolidated
financial statements (prior to adjustments) shall be not more than $50,000 less
than the comparable amount contained in the "pro forma 12 month trailing
financial statements" of the Company delivered by the Company to the lenders
under the Credit Agreement in connection with the loans being made on the First
Closing Date thereunder.
ARTICLE 6
REPRESENTATIONS AND
-------------------
WARRANTIES OF THE PURCHASERS
----------------------------
Each Purchaser, severally but not jointly, hereby represents and
warrants as to itself or himself as follows:
6.1 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by such Purchaser of each Transaction Document to which such
Purchaser is a party: (a) are within such Purchaser's power and authority and
have been duly authorized by all necessary action; (b) do not contravene the
terms of such Purchaser's organizational documents or any amendment thereof; and
(c) will not violate, conflict with or result in any breach or contravention of
any Contractual Obligation or any Requirement of Law applicable to such
Purchaser.
6.2 BINDING EFFECT. This Agreement has been duly executed and delivered
by such Purchaser and each Transaction Document to which such Purchaser is a
party constitutes such Purchaser's legal, valid and binding obligation,
enforceable against such Purchaser in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.3 NO LEGAL BAR. The execution, delivery and performance of each
Transaction Document to which such Purchaser is a party by such Purchaser will
not violate any Requirement of Law applicable to such Purchaser.
6.4 EXPERIENCE. Such Purchaser has carefully reviewed the information
with respect to such Purchaser contained in the registration statement on Form
S-4 filed by the Company in respect of securities of the Company to be issued in
connection with its planned merger with Faircom Inc., as well as the
representations concerning the Company and its Subsidiaries contained in this
Agreement; the officers of the Company have made available to such Purchaser any
and all written information which such Purchaser has requested and have answered
to such Purchaser's satisfaction all inquiries made by such Purchaser; and such
Purchaser has sufficient knowledge and experience
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in investing in companies similar to the Company so as to be able to evaluate
the risks and merits of the investment in the Shares and Investor Warrants and
is able financially to bear the risks thereof.
6.5 PURCHASE FOR OWN ACCOUNT. The Shares and the Investor Warrants to
be acquired by such Purchaser pursuant to this Agreement, or upon conversion
thereof to Common Stock, are being or will be acquired for such Purchaser's own
account for investment and with no intention of distributing or reselling such
securities or any part thereof in any transaction that would be in violation of
the securities laws of the United States of America, or any state, without
prejudice, however, to such Purchaser's right at all times, subject to the
provisions of the Stockholders' Agreement, to sell or otherwise dispose of all
or any part of the Shares or Investor Warrants under an effective registration
statement under the Securities Act, or any applicable state securities laws or
under an exemption from such registration available under the Securities Act, or
any applicable state securities laws and subject, nevertheless, to the
disposition of such Purchaser's property being at all times within such
Purchaser's control. If such Purchaser should in the future decide to dispose of
any of the Shares or Investor Warrants or the Common Stock issuable upon
conversion or exercise thereof, such Purchaser understands and agrees that such
Purchaser may do so only in compliance with the Securities Act and applicable
state securities laws, as then in effect, as well as with the Shareholders'
Agreement. Such Purchaser agrees to the imprinting of one or more legends on
certificates representing all of the Shares and Investor Warrants to the
following effect: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND SUCH LAWS." "THE ISSUER IS SUBJECT TO RESTRICTIONS CONTAINED IN
THE COMMUNICATIONS ACT OF 1934, AS AMENDED. THE SECURITIES EVIDENCED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IF, AS A
RESULT THEREOF, THE ISSUER WOULD BE IN VIOLATION OF THAT ACT." "THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF THAT CERTAIN AMENDED
AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF June 15, 1998 AMONG REGENT
COMMUNICATIONS, INC. AND CERTAIN OF ITS STOCKHOLDERS, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME."
6.6 EXEMPTION. Such Purchaser understands that the Shares and Investor
Warrants have not been registered under the Securities Act or under the
securities laws of any state on the grounds that the sale provided for in this
Agreement and the issuance of the Shares are intended to be exempt from
registration thereunder, and that the Company's reliance on such exemption is
predicated in part on such Purchaser's representations set forth herein.
6.7 ACCREDITED INVESTOR. Such Purchaser is an accredited investor
within the definition set forth in Rule 501(a) promulgated under the Securities
Act. Such Purchaser is not subscribing to the Shares and Investor Warrants as a
result of or pursuant to any advertisement, article, notice or
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other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting, or
any solicitation of a subscription by a person other than a representative of
the Company. Such Purchaser acknowledges that the Shares and Investor Warrants,
including shares of Common Stock issued upon conversion or exercise thereof,
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available. It is aware of
the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.
6.8 NO PUBLIC MARKET. Such Purchaser understands that no public market
now exists for the Shares or Investor Warrants and that there is no assurance
that a public market will ever exist for the Shares or Investor Warrants.
6.9 ERISA. No part of the funds used by such Purchaser to purchase the
Shares or Investor Warrants hereunder constitutes assets of any "employee
benefit plan" (as defined in Section 3(3) of ERISA) or "plan" (as defined in
Section 4975 of the Code) listed on Schedule 5.23(b).
6.10 BROKER'S, FINDER'S OR SIMILAR FEES. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with such Purchaser or any action taken by such Purchaser.
6.11 GOVERNMENTAL AUTHORIZATION: THIRD PARTY CONSENT. No approval,
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by such Purchaser or enforcement against such Purchaser of this
Agreement or the transactions contemplated hereby.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 INDEMNIFICATION. In addition to all other sums due hereunder or
provided for in this Agreement, the Company agrees to indemnify and hold
harmless each Purchaser and its Affiliates and each of their respective
officers, directors, agents, employees, subsidiaries, partners, attorneys,
accountants and controlling persons (each, an "Indemnified Party") to the
fullest extent permitted by law from and against any and all losses, claims,
damages, expenses (including, without limitation,
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reasonable fees, disbursements and other charges of counsel incurred by an
Indemnified Party in any action or proceeding between the Company and such
Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or
Indemnified Parties) and any third party or otherwise) or other liabilities,
losses, or diminution in value of the Shares (collectively, "Liabilities")
resulting from or arising out of (i) any breach of any representation or
warranty, covenant or agreement of the Company in this Agreement, the
Certificate of Incorporation, the Certificate of Amendment, the Registration
Rights Agreement, the Stockholders' Agreement or the other Transaction
Documents, including, without limitation, the failure to make payment when due
of amounts owing pursuant to this Agreement, the Shares or the other Transaction
Documents, on the due date thereof (whether at the scheduled maturity, by
acceleration or otherwise);provided, however, that with respect to a breach of
the covenants of the Company contained in Sections 8.1(other than subsections
(j) and (l) thereof), 8.2, 8.3, 8.4, 8.5 and 8.7 from and after the date hereof,
the indemnification provided herein shall be limited to (1) the indemnification
of the Purchasers for all out-of-pocket costs and expenses incurred by them in
the course of causing the Company to duly perform its obligations under such
Sections, including but not limited to the reimbursement of legal fees and
expenses, and (2) damages incurred with respect to any purchase of Additional
Shares which occurs at a time any such breach existed, (ii) any breach by the
Company, any of its Subsidiaries or any other party to any of the Acquisition
Documents of any covenant or agreement of such contained therein, or (iii) any
legal, administrative or other actions (including actions brought against any of
the Purchasers by any party to any of the Acquisition Documents, or by any of
the other Purchasers, the Company, any Subsidiary, any equity holders of the
Company or any Subsidiary or any other Person, or derivative actions brought
against any of the Purchasers by any Person claiming through or in the Company's
or any Subsidiary's name), proceedings or investigations (whether formal or
informal), or written threats thereof, based upon, relating to or arising out of
the Transaction Documents or the Acquisition Documents, or the transactions
contemplated thereby, or any such actual or threatened action, proceeding or
investigation by any Person against an Indemnified Party arising out of or
relating to or by reason of such Indemnified Party's status as a holder of
securities of the Company, or any Indemnified Party's role therein or in the
transactions contemplated thereby; provided, however, that the Company shall not
be liable under this Section 7.1 to an Indemnified Party: (a) for any amount
paid by the Indemnified Party in settlement of claims by the Indemnified Party
without the Company's written consent (which consent shall not be unreasonably
withheld), (b) to the extent that it is finally judicially determined that such
Liabilities resulted from the willful misconduct or gross negligence of such
Indemnified Party or (c) to the extent that it is finally judicially determined
that such Liabilities resulted from the breach by such Indemnified Party of any
representation, warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement or any other Transaction Document; provided,
further, that if and to the extent that such indemnification is unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of such Liabilities which shall be permissible under applicable
laws. In connection with the obligation of the Company to indemnify for expenses
as set forth above, the Company further agrees, upon presentation of appropriate
invoices containing reasonable detail, to reimburse each Indemnified Party for
all such expenses (including, without limitation, fees, disbursements and other
charges of counsel incurred by an Indemnified Party in any action or proceeding
between the Company and such Indemnified Party (or Indemnified Parties) or
between an Indemnified Party (or
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Indemnified Parties) and any third party or otherwise) as they are incurred by
such Indemnified Party; provided, however, that if an Indemnified Party is
reimbursed hereunder for any expenses, such reimbursement of expenses shall be
refunded to the extent it is finally judicially determined that the Liabilities
in question resulted from (i) the willful misconduct or gross negligence of such
Indemnified Party or (ii) the breach by such Indemnified Party of any
representation, warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement or any other Transaction Document.
7.2 LIMITATIONS ON INDEMNIFICATION.
(a) The Company shall have no indemnification obligation to an
Indemnified Party pursuant to this Article 7 with respect to a breach of any
representation or warranty unless such Indemnified Party delivers to the Company
written notice of such breach within the applicable survival period for such
representation or warranty as set forth in Section 9.1 hereof.
(b) No Indemnified Party shall be entitled to indemnification under
this Article 7 unless the aggregate amount of Liabilities to which the
Indemnified Parties are entitled to recover exceeds $100,000. In the event that
such Liabilities exceed an aggregate of $100,000, the Indemnified Parties shall
be entitled to indemnification under this Article 7 for all such Liabilities.
The limitation set forth in this paragraph (b) shall not apply with respect to
any (i) any breach of any representation or warranty set forth in Section 5.21
hereof, (ii) matter constituting fraud or intentional or willful misconduct, or
(iii) covenant or agreement of the Company to be performed or complied with from
and after the First Closing Date.
7.3 NOTIFICATION. Each Indemnified Party under this Article 7 will,
promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Company under this Article 7,
notify the Company in writing of the commencement thereof. The omission of any
Indemnified Party so to notify the Company of any such action shall not relieve
the Company from any liability which it may have to such Indemnified Party under
this Article 7 unless, and only to the extent that, such omission results in the
Company's forfeiture of material substantive rights or defenses. In case any
such action, claim or other proceeding shall be brought against any Indemnified
Party and it shall notify the Company of the commencement thereof, the Company
shall be entitled to assume and control the defense thereof at its own expense,
with counsel satisfactory to such Indemnified Party in its reasonable judgment;
provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action, claim or proceeding in which the Company, on the one hand, and an
Indemnified Party, on the other hand, is, or is reasonably likely to become, a
party, such Indemnified Party shall have the right to employ separate counsel at
the Company's expense and to control its own defense of such action, claim or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a
conflict or potential conflict exists between the Company, on the one hand, and
such Indemnified Party, on the other hand, that would make such separate
representation advisable. The Company agrees that it will not, without the prior
written consent of the Purchasers, settle,
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compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of the Purchasers and each other Indemnified Party from
all liability arising or that may arise out of such claim, action or proceeding.
The Company shall not be liable for any settlement of any claim, action or
proceeding effected against an Indemnified Party without its written consent,
which consent shall not be unreasonably withheld. The rights accorded to
Indemnified Parties hereunder shall survive the termination of this Agreement
and shall be in addition to any rights that any Indemnified Party may have at
common law, by separate agreement or otherwise.
7.4 REGISTRATION RIGHTS AGREEMENT. Notwithstanding anything to the
contrary in this Article 7, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
ARTICLE 8
AFFIRMATIVE COVENANTS
---------------------
For so long as the Purchasers shall continue to beneficially own any
shares of Series F Preferred Stock and/or Investor Warrants, and until the
payment by the Company of all amounts due to the Purchasers under this Agreement
and the other Transaction Documents, including, without limitation, all fees,
expenses and amounts due at such time in respect of indemnity obligations under
Article 7, the Company hereby covenants and agrees with the Purchasers as
follows:
8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP (it being
understood that monthly and quarterly financial statements are not required to
have footnote disclosures). The Company shall deliver to the Purchasers each of
the financial statements and other reports described below:
(a) MONTHLY AND QUARTERLY FINANCIAL STATEMENTS. As soon as
available and in any event within thirty (30) days after the end of each month
(or forty-five (45) days after the end of any month that is also the end of a
quarter), the Company shall deliver to the Purchasers the consolidated and
consolidating balance sheets of the Company and its Subsidiaries, as at the end
of such month and the related consolidated and consolidating statements of
income, stockholders' and members equity and cash flow for such month and for
the period from the beginning of the then current fiscal year of the Company to
the end of such month (and, with respect to financial statements delivered for
months that are also the last month of any fiscal quarter, accompanied by the
related consolidated and consolidating statements of income, stockholders' and
member's equity and cash flow for such
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fiscal quarter), which, in the case of quarterly financial statements, shall
include a comparison to the corresponding period of the prior fiscal year and a
comparison to the corresponding figures contained in the budgets delivered
pursuant to Section 8.1(f) hereof, in each case with a reasonably detailed
explanation of any material variances.
(b) YEAR-END FINANCIAL STATEMENTS. As soon as available and in any
event within ninety (90) days after the end of the fiscal year of the Company,
the Company shall deliver to the Purchasers (A) the consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the end
of such year and the related consolidated and consolidating statements of
income, stockholders' and members' equity and cash flow for such fiscal year,
(B) a schedule of the outstanding Indebtedness for borrowed money of the Company
and its Subsidiaries describing in reasonable detail each such debt issue or
loan outstanding and the principal amount and amount of accrued and unpaid
interest with respect to each such debt issue or loan, and (C) a report with
respect to the financial statements from Coopers & Lybrand or another nationally
recognized accounting firm of certified public accountants selected by the
Company and reasonably acceptable to the holders of a majority of the shares of
Series F Preferred Stock, which report shall be prepared in accordance with
Statement of Auditing Standards No. 58 (the "Statement") entitled "Reports on
Audited Financial Statements" and such report shall be "Unqualified" (as such
term is defined in such Statement). Together with each delivery of financial
statements of the Company and its Subsidiaries pursuant to this subsection
8.1(b), the Company shall deliver to the Purchasers a copy of a letter from the
Company to such accounting firm, which letter shall have been delivered to such
accounting firm prior to its delivery of such financial statements, stating that
an intent of the Company in engaging the accounting firm's professional services
to prepare the audit report relating to such financial statements was to benefit
and influence the Purchasers and their successors or assigns. Such letter shall
state that the Purchasers intend to rely on the audit report and the accounting
firm's professional services provided to the Company and its Subsidiaries.
(c) COMPANY'S COMPLIANCE CERTIFICATE. Together with each delivery
of quarterly and annual financial statements of the Company and its Subsidiaries
pursuant to subsections 8.1(a) and 8.1(b) above, the Company shall deliver to
the Purchasers a fully and properly completed compliance certificate (in the
form of Exhibit G hereto or in such other form and substance satisfactory to the
Purchasers) signed by the Company's chief executive officer or chief financial
officer.
(d) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, the
Company shall deliver to the Purchasers copies of all significant reports
submitted by the Company's certified public accountants in connection with each
annual, interim or special audit or review of any type of the financial
statements or related internal control systems of the Company and its
Subsidiaries made by such accountants, including any comment letter submitted by
such accountants to management in connection with their services.
(e) MANAGEMENT REPORTS. Together with each delivery of financial
statements of the Company and its Subsidiaries pursuant to subsections 8.1(a)
and 8.1(b) (but with respect to
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subsection 8.1(a), with respect only to financial statements of the Company and
its Subsidiaries delivered for months that are the last month of any fiscal
quarter), the Company shall deliver to the Purchasers a management report (i)
describing the operations and financial condition of the Company and its
Subsidiaries for the quarter or fiscal year then ended and the portion of the
current fiscal year then elapsed (or for the fiscal year then ended in the case
of year-end financials), which description shall include, without limitation,
station ratings by station and corresponding advertising market share (in each
case, if and when available), (ii) setting forth in comparative form on a
quarter-to-quarter basis the corresponding figures from the most recent
projections for the current fiscal year delivered pursuant to subsection 8.1(f)
or otherwise approved by the Board of Directors, and discussing the reasons for
any significant variations, and (iii) setting forth in reasonable detail the
compliance or non-compliance by the Company or any Subsidiary with any financial
or other covenants to which the Company or any such Subsidiary is subject
pursuant to any loan agreement or other agreement relating to Indebtedness of
the Company or such Subsidiary and discussing the reasons for any
non-compliance. The information above shall be presented in reasonable detail
and shall be certified by the chief financial officer of the Company to the
effect that such information fairly presents the results of operations and
financial condition of the Company and its Subsidiaries as at the dates and for
the periods indicated.
(f) BUDGETS. No earlier than sixty (60) days prior nor later than
thirty (30) days after the end of each fiscal year beginning with the current
fiscal year, the Company shall prepare and deliver to the Purchasers budgets of
the Company and its Subsidiaries for the next succeeding fiscal year, on a month
to month basis, which budgets shall be in form and substance reasonably
satisfactory to Waller-Sutton.
(g) SEC FILINGS AND PRESS RELEASES. Promptly upon their becoming
available, the Company shall deliver to the Purchasers copies of (i) all
financial statements, reports, notices and proxy statements sent or made
available by the Company or any of its Subsidiaries to their security holders,
(ii) all regular and periodic reports and all registration statements and
prospectuses, if any, filed by the Company or any of its Subsidiaries with any
securities exchange or with the Commission or any other governmental or private
regulatory authority, and (iii) all press releases and other statements made
available by the Company or any of its Subsidiaries to the public concerning
material developments in the business of the Company or any of its Subsidiaries.
(h) EVENTS OF DEFAULT ETC. Promptly upon any officer of the Company
obtaining knowledge of any of the following events or conditions, the Company
shall deliver to the Purchasers copies of all notices given or received by the
Company or any of its Subsidiaries with respect to any such event or condition
and a certificate of the Company's chief executive officer specifying the nature
and period of existence of such event or condition and what action the Company
has taken, is taking and proposes to take with respect thereto: (i) any
condition or event that constitutes a breach of any provision of this Agreement;
(ii) any notice that any Person has given to the Company or any Subsidiary or
any other action taken with respect to a claimed default in any agreement
evidencing Indebtedness in excess of $50,000, either individually or in the
aggregate, or any other material agreement to which the Company or any
Subsidiary is a party; or (iii) any event or condition that
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could reasonably be expected to result in any material adverse effect on the
Condition of the Company.
(i) LITIGATION. Promptly upon any officer of the Company obtaining
knowledge of (i) the institution of any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Company or any Subsidiary
or any property of the Company or any Subsidiary not previously disclosed by the
Company to the Purchasers or (ii) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting the Company or any Subsidiary or any property of the
Company or any Subsidiary, which, in each and either case, is reasonably likely
to have a material adverse effect on the Condition of the Company, the Company
will promptly give notice thereof to the Purchasers and provide to the
Purchasers such other information as may be reasonably available to the Company
to enable the Purchasers and their respective counsel to evaluate such matter.
(j) SUBSIDIARIES; ACQUISITIONS OF ASSETS. Not less than thirty (30)
days prior to (i) acquiring the stock of a Person, such that such Person will
become a Subsidiary, or (ii) acquiring all or substantially all of the assets of
a business unit of any Person (other than a Subsidiary), the Company shall
notify the Purchasers of the Company's or any Subsidiary's intention to acquire
such stock or assets, and following such notice, such stock or assets will not
be acquired unless, if required by Section 6 of the Stockholders' Agreement, the
Company or a Subsidiary shall have executed and delivered an acquisition or
other agreement with the seller(s) thereof in form and substance satisfactory to
Waller-Sutton, setting forth the terms and conditions of any such acquisition.
(k) NO DEFAULTS. The Company shall deliver to the Purchasers
concurrently with the delivery of the financial statements referred to in
subsection 8.1(b), a certificate of the Company's Chief Financial Officer in the
form of stating that to his or her knowledge no breach of this Agreement or any
Transaction Document shall have occurred during the period covered thereby,
except as specified in such certificate.
(l) NOTICE OF TRIGGERING EVENTS. The Company shall notify the
Purchasers as promptly as practicable of any proposed transaction that is
reasonably likely to cause or result in a Triggering Event, which notice (i)
shall be given in any event not later than 30 days prior to the consummation of
any such transaction or, if earlier, 10 days after the Company shall have
entered into any letter of intent, memorandum of understanding, agreement in
principle (whether or not legally binding) or definitive agreement relating
thereto or received an unsolicited offer or bid relating thereto and (ii) shall
provide a reasonably detailed description of the nature of the proposed
transaction, including without limitation the name or names of the parties
thereto other than the Company, the consideration to be received by the Company
or its securityholders in respect of or as a result of such transaction, the
proposed schedule for closing of such transaction and such other information
(financial or otherwise) relating thereto as the Purchasers shall request. The
Company shall not permit or facilitate the consummation or occurrence of any
transaction which is reasonably likely to cause or result in a Triggering Event
unless the notice required by this Section 8.1(l) has been so given and the
Company complies with its obligations under Section 2.2(c). If the Company
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identifies any information given to a Purchaser pursuant hereto as confidential
at the time such information is provided, Purchaser shall treat such information
as confidential and shall limit the internal distribution of such information
and shall refrain from disclosing such information to any third party, until
such time as such information otherwise becomes publicly available or is
disclosed without breach of this subsection.
(m) OTHER INFORMATION. With reasonable promptness, the Company
shall deliver to the Purchasers such other information and data with respect to
the Company or any of its Subsidiaries as from time to time may be reasonably
required by the Purchasers.
8.2 PRESERVATION OF CORPORATE EXISTENCE. The Company shall, and shall
cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its corporate
existence;
(b) conduct their businesses in accordance with sound business
practices, keep their material items of property in good working order and
condition (normal wear and tear excepted), and from time to time make all needed
repairs to, renewals of or replacements of such properties (except to the extent
that any of such properties are obsolete or are being replaced) so that the
efficiency of their business operations shall be satisfactorily maintained and
preserved; and (c) file or cause to be filed in a timely manner all material
reports, applications, estimates and licenses that shall be required by a
Governmental Authority.
8.3 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each of
its Subsidiaries to, pay and discharge as the same shall become due and payable,
all their respective obligations and liabilities, including without limitation:
(a) all tax liabilities, assessments and governmental charges or
levies upon the Company or any Subsidiary or their properties or assets, unless
the same are being contested in good faith by appropriate proceedings and
adequate reserves in accordance with GAAP are being maintained by the Company or
such Subsidiary;
(b) all lawful claims which the Company or such Subsidiary is
obligated to pay, which are due and which, if unpaid, might by law become a Lien
upon any material property, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary; and
(c) all payments of principal, interest and other amounts when due
on Indebtedness.
8.4 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause its
Subsidiaries to comply, in all material respects with all Requirements of Law
and with the directions of any
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Governmental Authority having jurisdiction over them or their business or
property (including all applicable Environmental Laws).
8.5 INSPECTION; COMPLIANCE WITH SMALL BUSINESS INVESTMENT ACT. (a) The
Company will permit, and will cause each of its Subsidiaries to permit,
representatives of the Purchasers to visit and inspect any of their properties,
to examine their corporate, financial and operating records and make copies
thereof or abstracts therefrom, and to discuss their affairs, finances and
accounts with their respective directors, officers and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably requested, upon reasonable advance notice.
(b) In addition to and not in limitation of the foregoing, the Company
agrees to provide River Cities with sufficient information to permit River
Cities to comply with its obligations under the SB Act and the regulations
thereunder. River Cities and representatives of the SB Act shall be given access
to the Company's records to confirm that the proceeds of the sale of the Shares
are used for the purposes delineated in Section 8.8 hereof. The President of the
Company shall certify to River Cities, within three (3) months of the date of
the First Closing and from time to time thereafter, that the Company has used
the proceeds in accordance with the purposes delineated in Section 8.8 hereof.
If the Company identifies any information given to a River Cities pursuant to
this Section 8.5 as confidential at the time such information is provided, River
Cities shall treat such information as confidential and shall limit the internal
distribution of such information and shall refrain from disclosing such
information to any third party.
8.6 MAINTENANCE OF INSURANCE. The Company and its Subsidiaries will
maintain or cause to be maintained with financially sound and reputable insurers
that have a rating of "A" or better as established by Best's Rating Guide (or an
equivalent rating with such other publication of a similar nature as shall be in
current use), public liability and property damage insurance with respect to
their respective businesses and properties against loss or damage of the kinds
customarily carried or maintained by companies of established reputation engaged
in similar businesses and will deliver evidence thereof to Purchasers. Without
limiting the foregoing, the Company and its Subsidiaries will maintain at all
times business interruption insurance in an amount satisfactory to the Board of
Directors of the Company, and directors' and officers' liability insurance
coverage for each of the members of the Board of Directors of the Company in
amounts satisfactory to the Board of Directors of the Company but in no event
less than $5 million; provided, however, that the Company shall not be obligated
to purchase or maintain such insurance in the event that reasonable terms and
pricing are not commercially available.
8.7 BOOKS AND RECORDS. The Company shall, and shall cause each of its
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
businesses of the Company and each of its Subsidiaries in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
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8.8 USE OF PROCEEDS. The Company shall use the proceeds of the sale of
the Initial Shares at the First Closing hereunder only to fund the Acquisitions,
including payment of capital expenditures related thereto, the fees and expenses
in connection with the transactions contemplated hereunder and under the
Transaction Documents and the Acquisition Documents. The proceeds of the sale of
the Additional Shares will be used by the Company to fund acquisitions of radio
stations pursuant to Future Acquisition Agreements and, in connection therewith,
to the extent approved by the Board of Directors and Waller- Sutton, to pay
capital expenditures, working capital requirements, closing costs and
transaction expenses related thereto, in each case as approved by Waller-Sutton.
In the event of any diversion by the Company of the proceeds of the sale of the
Shares from the uses specified in this Section 8.8 that causes or results in a
breach or violation by River Cities of the SB Act, which shall remain uncured or
unwaived for more than 30 days after notice thereof by River Cities to the
Company, the Company shall use diligent efforts to assist River Cities upon its
request to facilitate the sale by River Cities of its interest in the Company to
a third party.
8.9 BOARD NOMINEES. The Company shall maintain a Board of Directors
consisting of the number of directors specified in Section 2 of the
Stockholders' Agreement and use its best efforts to have the nominees designated
pursuant to Section 2 of the Stockholders' Agreement elected to the Board of
Directors of the Company in accordance with the terms thereof. Without limiting
the generality of the foregoing, each Purchaser other than Waller-Sutton by its
execution and delivery of this Agreement agrees that for so long as
Waller-Sutton shall continue to beneficially own an aggregate number of shares
of Common Stock (either directly or indirectly through its ownership of Series F
Preferred Stock, Series C Preferred Stock and/or Investor Warrants) equal to at
least 10% of the number of shares of Common Stock beneficially owned by it as of
the First Closing Date (either directly or indirectly), such Purchaser shall
nominate and vote its shares of Series F Preferred Stock for the election as
directors designated by the holders of the Series F Preferred Stock of such
Persons as are nominated by Waller-Sutton.
8.10 GRANTING OF OPTIONS. The Company may grant up to an aggregate of
2,000,000 Stock Options, of which up to 1,224,000 Stock Options may be granted
as of the First Closing Date; provided, however, the aggregate amount of shares
of Common Stock issuable upon the exercise of all such Stock Options shall at no
time exceed 15% of the sum of (i) all then outstanding shares of Common Stock of
the Company and (ii) the number of shares of Common Stock then issuable upon the
conversion of then outstanding shares of convertible preferred stock or issuable
upon the exercise of then outstanding warrants or then outstanding stock options
(including, but not limited to, the Stock Options); and provided, further,
however, that the number of shares of Common Stock issuable to Terry S. Jacobs
and William Stakelin upon the exercise of any such Stock Options shall not
exceed the lesser of (x) 733,000 individually (or 1,466,000 in the aggregate) or
(y) 5.5% individually (or 11% in the aggregate) of the sum of (A) all then
outstanding shares of Common Stock of the Company and (B) the number of shares
of Common Stock then issuable upon the conversion of then outstanding shares of
convertible preferred stock or issuable upon the exercise (and conversion) of
then outstanding warrants or then outstanding stock options computed on a fully
diluted basis. If the Stock Options are granted, the Company shall grant the
Stock Options at an exercise price equal to at least the per share fair market
value of the Common Stock (as determined by the Company's Board
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of Directors) at the time of such grant, but in no event less than $5.00 per
share. From and after the First Closing Date, any increase in the number of
Stock Options available for grant under the Stock Option Plan or in the maximum
number of shares of Common Stock issuable upon the exercise of all such Stock
Options (other than pursuant to the operation of customary antidilution
provisions contained in the Stock Option Plan) shall require the approval of the
Company's Board of Directors and Waller- Sutton.
8.11 BUSINESS ACTIVITIES. The Company shall engage in no business or
business activity other than the businesses and business activities in which it
is currently engaged and the performance of its obligations under the
Transaction Documents.
8.12 BOARD CONSENT. The Company shall not, and shall not enter into any
agreement or commitment to, engage in any transaction that is required pursuant
to the terms of the Stockholders' Agreement to be approved by the Company's
Board of Directors and/or Waller-Sutton, including but not limited to any
merger, acquisition, change of control, issuance of equity or debt securities
(including the issuance of Stock Options in excess of the amounts specified in
Section 8.10 hereof), sale of assets or the like, without each required approval
having been obtained.
8.13 RESERVATION OF SHARES. The Company shall at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issuance or delivery upon (a) exercise of the options and warrants set forth on
Schedule 5.19, the Stock Options and the Investor Warrants, and (b) conversion
of the Shares, the maximum number of shares of capital stock that may be
issuable or deliverable upon such exercise or conversion, as the case may be
(the "Exercisable Shares"). The Exercisable Shares shall, when issued or
delivered and paid for in accordance with such options, warrants, the Stock
Options, the Investor Warrants or the Certificate of Amendment with respect to
the Shares, as the case may be, be duly and validly issued and fully paid and
non-assessable. The Company shall issue such capital stock in accordance with
the provisions of such options, warrants, the Stock Options, the Investor
Warrants or the Certificate of Amendment with respect to the Shares, as the case
may be, and shall otherwise comply, in each case, with the terms thereof.
ARTICLE 9
MISCELLANEOUS
-------------
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of either
Purchaser, acceptance of the Shares and payment therefor, or termination of this
Agreement until the date that is 12 months after the final Additional Closing
Date, except for the representations and warranties set forth in the Acquisition
Documents which are incorporated herein pursuant to Section 5.33, which shall
terminate one year from the closing of the acquisition effected pursuant to each
such Acquisition Document and except for representations and warranties set
forth in Sections 5.9, 5.11, 5.13, 5.16, 5.19 and 5.20 and all matters
constituting fraud, or
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intentional or willful misconduct, which shall survive until the expiration of
the applicable statute of limitation periods (including extensions or waivers
thereof). If notification of a breach of any representation or warranty is given
on or before the applicable survival period, any claim with respect to such
breach shall survive until finally resolved by agreement of the parties or
nonappealable court order.
9.2 NOTICES. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to Waller-Sutton:
Waller-Sutton Media Partners, L.P.
c/o Waller-Sutton Management Group, Inc.
1 Rockefeller Plaza, Suite 3300
New York, New York 10020
Telecopier No.: (212)218-4355
Attention: Cathy M. Brienza
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Telecopier No.: (212) 698-7825
Attention: Ronald Greenberg, Esq.
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(b) If to the Company:
Regent Communications, Inc.
50 E. RiverCenter Blvd., Suite 180
Covington, KY 41011
Telecopier: 606-292-0351
Attention: Terry S. Jacobs
with a copy to:
Strauss & Troy
2100 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202-4186
Telecopier: 513-241-8259
Attention: Alan C. Rosser, Esq.
(c) If to any Purchaser other than Waller-Sutton, to such
Purchaser at its address as it appears on the books
and records of the Company or such other address as
to which such Purchaser shall have notified the
Company in accordance with the provisions of this
Section 9.2.
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial overnight courier service; five Business Days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties
hereto. Subject to applicable securities laws and FCC limitations, each
Purchaser may assign any of its rights under any of the Transaction Documents to
any Person, and, also subject to the terms of the Stockholders' Agreement, any
holder of any of the Shares or any of the Common Stock issuable upon conversion
of the Series F Preferred Stock may assign any such securities to any Person.
The Company may not assign any of its rights under this Agreement without the
prior written consent of Waller-Sutton. Except as provided in Article 7, no
Person other than the parties hereto and their successors and permitted assigns
is intended to be a beneficiary of any of the Transaction Documents.
9.4 AMENDMENT AND WAIVER.
(a) No failure or delay on the part of any of the parties hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and
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<PAGE> 55
are not exclusive of any remedies that may be available to the parties hereto at
law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by any party from the terms of any provision of
this Agreement, shall be effective (i) only if it is made or given in writing
and signed by all of the parties hereto, and (ii) only in the specific instance
and for the specific purpose for which made or given; provided, however, that
any amendment, supplement or modification of or to any provision of Article 8
hereof, and any consent to any departure by any party from the terms of any
provision of Article 8 hereof, shall be effective if it is made or given in
writing and signed by the Purchasers holding a majority of the issued and
outstanding shares of Series F Preferred Stock (provided that such majority
shall include Waller-Sutton), and provided further, however, that amendments and
waivers to the provisions of Article 3 effected or given at any time following
the Initial Closing shall be binding on all Purchasers if agreed to in writing
by the Company and Waller-Sutton. Except where notice is specifically required
by this Agreement, no notice to or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances.
9.5 SIGNATURES AND COUNTERPARTS. Telefacsimile transmissions of any
executed original document and/or retransmission of any executed telefacsimile
transmission shall be deemed to be the same as the delivery of an executed
original. At the request of any party hereto, the other parties hereto shall
confirm telefacsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties. This Agreement may
be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
9.6 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
9.8 JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
AGREES THAT THE ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE SHARES OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO
THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND
EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT THE
SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY
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<PAGE> 56
HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS
SET FORTH IN SECTION 9.2, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH
MAILING.
9.9 SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
9.10 RULES OF CONSTRUCTION. Unless the context otherwise requires, "or"
is not exclusive, and references to sections or subsections refer to sections or
subsections of this Agreement.
9.11 ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto and the other Transaction Documents, is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits and
schedules hereto and the other Transaction Documents, supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
9.12 CERTAIN EXPENSES. The Company agrees to pay all reasonable
expenses of Waller-Sutton (including reasonable fees, charges and disbursements
of its counsel) incurred in connection with (i) any amendment, supplement,
modification or waiver of or to any provision of this Agreement (including,
without limitation, a response to a request by the Company for such Purchasers'
consent to any action otherwise prohibited hereunder), the Certificate of
Amendment, or consent to any departure by the Company from, the terms of any
provision of this Agreement or the Certificate of Amendment; and (ii) any
matters on behalf of the Purchasers arising hereunder or under the Transaction
Documents, including without limitation the reasonable out-of-pocket expenses of
the Purchasers incurred to monitor or confirm the Company's performance of or
compliance with all agreements and covenants on its part to be performed or
complied with by the Company hereunder or thereunder.
9.13 PUBLICITY. Except as may be required by applicable law, none of
the parties hereto shall issue a publicity release or announcement or otherwise
make any public disclosure concerning this Agreement or the transactions
contemplated hereby, without prior approval by the other party hereto. If any
announcement is required by law to be made by any party hereto, prior to making
such announcement such party will deliver a draft of such announcement to the
other parties and shall give the other parties an opportunity to comment
thereon.
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<PAGE> 57
9.14 FURTHER ASSURANCES. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
9.15 OBLIGATIONS OF THE PARTIES. Each Purchaser's obligations and the
obligations of the Company hereunder are subject to the execution and delivery
by the other Purchasers of this Agreement. The obligations of each Purchaser
hereunder and under the other Transaction Documents to which such Purchaser is a
party shall be several and not joint, and no Purchaser shall be liable or
otherwise responsible for the acts or omissions of any other Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized as
of the date first above written.
REGENT COMMUNICATIONS, INC.
By:__________________________________________________
Name:
Title:
WALLER-SUTTON MEDIA PARTNERS, L.P.
By: WALLER-SUTTON MEDIA, L.L.C., its General Partner
By:__________________________________________________
Member
WPG CORPORATE DEVELOPMENT ASSOCIATES V, L.P.
By:__________________________________________________
Name:
Title:
WPG CORPORATE DEVELOPMENT ASSOCIATES V
(OVERSEAS), L.P.
By:__________________________________________________
Name:
Title:
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<PAGE> 59
GENERAL ELECTRIC CAPITAL CORPORATION
By:__________________________________________________
Name:
Title:
RIVER CITIES CAPITAL AND LIMITED PARTNERSHIP
By:__________________________________________________
Name:
Title:
--------------------------------------------------
WILLIAM H. INGRAM
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<PAGE> 1
Exhibit 4(e)
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of June
15, 1998, by and among REGENT COMMUNICATIONS, INC. ("Regent"), PNC BANK, N.A., a
national banking association, as Trustee ("PNC"), WALLER-SUTTON MEDIA PARTNERS,
L.P. ("Waller-Sutton"), WILLIAM H. INGRAM ("Ingram"), WPG CORPORATE DEVELOPMENT
ASSOCIATES V, L.P., a Delaware limited partnership, and WPG CORPORATE
DEVELOPMENT ASSOCIATES V (OVERSEAS), L.P., a Delaware limited partnership
(collectively, "WP&G"), BMO FINANCIAL, INC. ("BMO"), WILLIAM L. STAKELIN
("Stakelin"), TERRY S. JACOBS ("Jacobs"), RIVER CITIES CAPITAL FUND LIMITED
PARTNERSHIP ("River Cities"), GENERAL ELECTRIC CAPITAL CORPORATION ("GE
Capital"), MIAMI VALLEY VENTURE FUND L.P. ("Miami Valley"), BLUE CHIP CAPITAL
FUND II LIMITED PARTNERSHIP ("Blue Chip") and THOMAS P. GAMMON ("Gammon") (PNC,
Waller-Sutton, WP&G, BMO, Stakelin, Jacobs, River Cities, GE Capital, Miami
Valley, Blue Chip and Gammon are collectively referred to herein as the
"Stockholders" and each individually as a "Stockholder"). Capitalized terms used
herein and not otherwise defined are defined in Section 9 hereof.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, each of the Stockholders owns shares of preferred stock of
Regent which are convertible into shares of the common stock of Regent (the
"Common Stock") and/or warrants to purchase shares of Common Stock;
WHEREAS, Regent and the Series F Purchasers are parties to that certain
Stock Purchase Agreement dated as of June 15, 1998 (the "Series F Stock Purchase
Agreement"); and
WHEREAS, the Series F Stock Purchase Agreement requires that Regent
enter into this Agreement with the Stockholders to provide for the grant of
certain registration rights to the Stockholders, it being intended that this
Agreement shall supercede and replace the provisions of any agreement entered
into prior to the date hereof between Regent and any Stockholder relating to the
grant or exercise of registration rights.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. SECURITIES SUBJECT TO THIS AGREEMENT. The securities entitled to the
benefits of this Agreement are the Registrable Securities.
<PAGE> 2
2. DEMAND REGISTRATIONS.
(a) At any time, Waller-Sutton and, after July 1, 2000, the holders
of at least 10% of the outstanding Common Stock (computed on an "as-converted"
and fully-diluted basis) shall have the right to request that Regent register
all or part of its Registrable Securities under the Securities Act of 1933, as
amended (the "Securities Act"). Such request (each, a "Request") shall be in
writing and specify the number of Registrable Securities to be registered and
the intended method of distribution thereof. Regent shall only be obligated to
effect two registrations of Registrable Securities pursuant to a Request made by
Waller-Sutton under this Section and only one registration pursuant to a Request
made by any parties other than Waller-Sutton under this Section. Promptly after
receipt of a Request, Regent will give written notice of such requested
registration to all other Stockholders (the "Notice of Request"), and thereupon
Regentwill, as expeditiously as possible, use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities that Regent has been so requested
to register by Waller-Sutton; and
(ii) all other Registrable Securities that Regent has been
requested to register by any other Stockholder by written request given to
Regent within fifteen (15) days after the giving of the Notice of Request;
PROVIDED, that Regent may postpone for not more than 60 calendar days the filing
or effectiveness of a registration statement under this Section 2 if the Board
of Directors of Regent determines that such registration could reasonably be
expected to have a material adverse effect on any proposal or plan by Regent to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer of similar transaction then
under consideration, any public or private sale of equity securities which
Regent reasonably expects to consummate within the next 60 days, or any
registration statement which has been filed by Regent, or which Regent has a
bona fide intention of filing within the next 30 days, with respect to any class
of equity securities of Regent.
(b) Waller-Sutton will be entitled, at any time prior to the
requested registration being declared effective by the SEC, to withdraw a
Request, and if such Request is withdrawn the registration of Registrable
Securities which is to be effected as a result of such Request shall be
terminated and abandoned.
(c) If Regent proposes to effect a registration requested pursuant
to Section 2(a) by the filing of a registration statement on Form S-3 (or any
similar short-form registration statement), Regent will comply with any request
by the Managing Underwriter (as defined below) to effect such registration on
another permitted form if such Managing Underwriter advises Regent that, in its
opinion, the use of another form of registration statement is of material
importance to such proposed offering.
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<PAGE> 3
(d) A registration requested pursuant to Section 2 will not be
deemed to have been effected unless it has been declared effective by the SEC;
PROVIDED, that if after it has become effective, the offering of Registrable
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court, such registration will be deemed not to have been effected.
(e) Regent will pay all Registration Expenses in connection with
each of the registrations of Registrable Securities requested to be effected by
it pursuant to this Section 2.
(f) Waller-Sutton shall have the right, with the approval of Regent
(which approval will not be unreasonably withheld), to select the investment
banker (or investment bankers) that shall manage the offering of Registrable
Securities pursuant to the requested registration (collectively, the "Managing
Underwriter"). Waller-Sutton shall also have the right to request that any
registration effected under this Section 2 constitute a "shelf registration"
pursuant to Rule 415 under the Securities Act which will permit stockholders to
sell their Registrable Securities from time to time while such registration
remains effective.
(g) In addition to the right to request registration pursuant to
Section 2(a), if Regent is eligible to register securities with the SEC on
behalf of selling Stockholders on Form S-3, or a similar "short form"
registration statement, then Waller-Sutton or, after July 1, 2000, the holders
of at least 10% of the outstanding Common Stock (computed on an "as-converted"
and fully-diluted basis), will be entitled to request an unlimited number of
such "short form" registrations for which Regent will pay all Registration
Expenses. All Stockholders shall be entitled to participate in such "short form"
registrations in the same manner as provided in Section 2(a). Registrations made
pursuant to this Section 2 shall be made using "short form" registration
statements whenever Regent is permitted to use such applicable form and Waller-
Sutton requests or consents to the use of such form.
(h) In connection with any offering pursuant to this Section 2, the
only shares that may be included in such offering are Registrable Securities.
(i) If in connection with any registration pursuant to this Section
2, the Managing Underwriter shall advise Regent that, in its judgment, the
number of shares proposed to be included in such offering is such as to
materially and adversely affect the success of the offering, then Regent will
promptly so advise each Stockholder who has requested registration, and the
Registrable Securities requested to be registered by the Stockholders (including
Waller-Sutton) shall be reduced pro rata, based on the respective number of
Registrable Securities as to which registration has been so requested by such
persons, until the number of shares to be included in such offering has been
reduced to a level acceptable to the Managing Underwriter; PROVIDED, that, the
registration of any of the Registrable Securities of Waller-Sutton shall only
count as an effected registration pursuant to Section 2(a) if Waller-Sutton is
able to register and sell all of the Registrable Securities requested by it to
be included in such registration.
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<PAGE> 4
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<PAGE> 5
3. PIGGYBACK REGISTRATIONS.
(a) If Regent at any time proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or
S-8 or any successor forms thereto), whether or not for sale for its own
account, on a form and in a manner that would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give at
least 45 days' advance written notice to all Stockholders of its intention to do
so, describing such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration (including, without
limitation, (x) whether or not such registration will be in connection with an
underwritten offering of Registrable Securities and, if so, the identity of the
Managing Underwriter and whether such offering will be pursuant to a "best
efforts" or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the Registrable
Securities are reasonably expected to be sold). Upon the written request of any
Stockholder delivered to Regent within 20 days after the receipt of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such Stockholder and the intended method of disposition thereof),
Regent will use best efforts to effect the registration under the Securities Act
of all of the Registrable Securities that Regent has been so requested to
register; PROVIDED, HOWEVER, that:
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, Regent shall
determine for any reason not to register such securities, Regent may, at its
election, give written notice of such determination to each Stockholder who made
a request as hereinabove provided and thereupon Regent shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of
Waller-Sutton or other Stockholders to request that such registration be
effected as a registration under Section 2.
(ii) If such registration involves an underwritten offering, all
Stockholders requesting to be included in Regent's registration must sell their
Registrable Securities to the underwriters selected by Regent on the same terms
and conditions as apply to Regent except that if the terms hereof and of the
terms of the agreement with the underwriters conflict, then the terms hereof
shall control.
No registration effected under this Section 3 shall relieve Regent of its
obligation to effect registration upon request under Section 2.
(b) Regent shall not be obligated to effect any registration of
Registrable Securities under this Section 3 incidental to the registration of
any of its securities solely in connection with mergers, acquisitions, exchange
offers, dividend reinvestment plans or stock option or other employee benefit
plans.
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<PAGE> 6
(c) If Regent registers any of its equity securities, it shall use a
form that would permit Stockholders to exercise their rights set forth in this
Section 3 unless (i) the failure to use another form would create a material
disadvantage to Regent or (ii) the transaction contemplated by Regent is a
transaction for which Form S-4, Form S-8 or any such successor form is
specifically applicable.
(d) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 3
(including, without limitation, each registration canceled pursuant to Section
3(a)(i) above), shall be paid by Regent.
(e) If a registration pursuant to this Section 3 involves an
underwritten offering and the Managing Underwriter advises Regent that, in its
opinion, the number of securities proposed to be included in such registration,
when added to the number of securities desired to be offered by Regent, is such
as to materially and adversely affect the success of such offering, then Regent
will include in such registration the number of Registrable Securities requested
by the Stockholders to be included in such registration that, when added to the
number of securities desired to be offered by Regent, in the opinion of such
Managing Underwriter can be sold, such amount to be allocated among all such
Stockholders pro rata on the basis of the respective number of Registrable
Securities each such Stockholder has requested to be included in such
registration; provided, however, that no other securities (other than securities
being sold by Regent and Registrable Securities) shall be included in such
offering unless and until all Registrable Securities have been included.
(f) In connection with any underwritten offering with respect to
which Stockholders shall have requested registration pursuant to this Section 3,
Regent shall have the right to select the Managing Underwriter with respect to
the offering.
4. REGISTRATION PROCEDURES.
(a) If and whenever Regent is required to effect the registration of
any Registrable Securities under the Securities Act as provided in this
Agreement, Regent will, as expeditiously as possible:
(i) Prepare and, in any event within 60 days after the end of
the period within which requests for registration may be given to Regent, file
with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become and remain effective (except as otherwise provided in Sections 5 and 6
below); provided, that before filing a registration statement or prospectus or
any amendments or supplements thereto, Regent will furnish to the counsel
selected by Waller-Sutton or, if Waller-Sutton has not requested that any of its
Registrable Securities be included, the Stockholders owning a majority of the
number of shares of the Registrable Securities to be included in such
registration, copies of all such documents proposed to be filed, which documents
will be subject to the review of such counsel (and Regent shall not file any
document to which such counsel reasonably object).
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<PAGE> 7
(ii) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective during all periods (except as otherwise
provided in Sections 5 and 6 below) and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement until (x) in the event that the
registration statement is filed on Form S-1, or similar long-form registration
statement, for a period of three months from the date of its effectiveness, or
(y) in the event the registration statement is filed on Form S-3 or similar
short-form, or "evergreen" registration statement and constitute a "shelf
registration statement" pursuant to Rule 415 under the Act, for such time until
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement, until all of the Registrable Securities covered
thereby cease to be Registrable Securities, or for such shorter period of time
as to which Waller-Sutton shall consent.
(iii) Furnish to each Stockholder to be included in such
registration, without charge, (A) a copy of the order of the SEC declaring such
registration statement and any post-effective amendment thereto effective, (B)
such reasonable number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including any documents
incorporated therein by reference and all exhibits), (C) such reasonable number
of copies of the prospectus included in such registration statement (including
such preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, and (D) such other documents as such
Stockholder may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Stockholder.
(iv) Use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Waller-Sutton shall
reasonably request, keep each such registration or qualification (or exemption
therefrom) effective for the period required pursuant to Section 4(a)(ii) above,
and do any and all other acts and things that may be reasonably necessary or
advisable to enable such Stockholder to consummate the disposition of the
Registrable Securities owned by such Stockholder, in such jurisdictions within
such time periods, except that Regent shall not for any such purpose be required
(A) to qualify to do business as a foreign corporation in any jurisdiction where
it is not then so qualified, or (B) to take any action that would subject it to
general or unlimited service of process in any such jurisdiction where it is not
then so subject, unless the Managing Underwriter shall otherwise request.
(v) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
Stockholder or Stockholders to consummate the disposition of such Registrable
Securities and keep each such registration or approval effective for the period
required pursuant to Section 4(a)(ii) above.
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<PAGE> 8
(vi) Immediately notify each Stockholder holding Registrable
Securities covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of any
event the happening of which results in the prospectus included in such
registration statement including an untrue statement of a material fact or
omitting to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing, and, at the request of any such Stockholder, prepare and deliver
a reasonable number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing.
(vii) Otherwise comply with all applicable rules and regulations
of the SEC and make generally available to the Stockholders, in each case as
soon as practicable, but not later than 45 calendar days after the close of the
fiscal period covered thereby (90 calendar days in case the fiscal period
covered corresponds to a fiscal year of Regent), an earnings statement of Regent
which will satisfy the provisions of Section 11(a) of the Securities Act.
(viii) Use its best efforts in cooperation with the underwriters
to list such Registrable Securities on each securities exchange on which equity
securities of Regent are listed or as the underwriters may reasonably designate.
(ix) Provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement.
(x) Make available for inspection by any Stockholder, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of Regent and its subsidiaries, and cause Regent's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such Stockholder, underwriter, attorney,
accountant or agent in connection with such registration statement, and cause
Regent's officers, directors, employees and agents to meet with prospective
purchasers of the Registrable Securities offered for sale pursuant to such
registration statement and otherwise generally participate in a "road show"
customary for offerings of the type contemplated by the registration statement.
(xi) Permit any Stockholder which, in its reasonable judgment,
might be deemed to be an underwriter or a controlling person of Regent, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to Regent in writing,
that in the reasonable judgment of such holder and its counsel should be
included.
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(xii) Use its best efforts to prevent the issuance of any stop
order suspending the effectiveness of such registration statement, or of any
order suspending or preventing the use of any related prospectus or suspending
the qualification (or exemption from qualification) of any equity securities
included in such registration statement for sale in any jurisdiction, and, if
such order is issued, use its best efforts to obtain the withdrawal of such
order at the earliest possible moment.
(xiii) In the event the offering is an underwritten offering,
use its best efforts to obtain a "comfort" letter from the independent public
accountants for Regent in customary form and covering such matters of the type
customarily covered by such letters.
(xiv) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten offerings
and is otherwise acceptable to Waller- Sutton) and take all such other actions
in connection therewith (including those reasonably requested by Waller-Sutton,
or in the event Waller-Sutton has not requested that its Registrable Securities
be included, the Stockholders owning a majority of the Registrable Securities
being sold) in order to expedite or facilitate the disposition of such
securities and in such connection, whether or not the registration is an
underwritten registration, (a) make such representations and warranties to the
Stockholders in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm or supplement the same if and
when requested; and (b) deliver such documents and certificates as may be
requested by Waller-Sutton, or in the event Waller-Sutton has not requested that
its Registrable Securities be included, the Stockholders owning a majority of
the Registrable Securities being sold, to evidence the continued validity of the
representations and warranties of Regent and its subsidiaries made pursuant to
clause (a) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by
Regent.
(xv) Furnish to each Stockholder a signed counterpart, addressed
to the Stockholders, of
(A) an opinion of counsel for Regent, in form and substance
customarily given in underwritten public offerings, or as otherwise reasonably
acceptable to Waller-Sutton, dated the effective date of the registration
statement, and
(B) subject to the accountants obtaining the necessary
representations as specified in Statement on Auditing Standards No. 72, a
"comfort" letter signed by the independent public accountants who have certified
Regent's financial statements included in the registration statement, covering
substantially the same matters with respect to the registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to changes subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities.
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(xvi) On or before the effective date of a shelf registration
(A) provide a CUSIP number for each such security and (B) provide the transfer
agent with printed certificates for the Registrable Securities, which are in a
form eligible for deposit with DTC.
If any such registration or comparable statement refers to
any holder by name or otherwise as the Stockholder of any securities of Regent
and if in its sole and exclusive judgment, such Stockholder is or might be
deemed to be a controlling person of Regent, such Stockholder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to such Stockholder and presented to Regent in writing, to the
effect that the holding by such Stockholder of such securities is not to be
construed as a recommendation by such Stockholder of the investment quality of
Regent's securities covered thereby and that such holding does not imply that
such Stockholder will assist in meeting any future financial requirements of
Regent, or (ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force, the deletion of the reference to such Stockholder; provided that
with respect to this clause (ii) such Stockholder shall furnish to Regent an
opinion of counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to Regent.
(xvii) Use its best efforts to cause such Registrable Securities
to be listed on a securities exchange or market or trading system.
(b) Each Stockholder will, upon receipt of any notice from Regent of
the happening of any event of the kind described in Section 4(a)(vi), forthwith
discontinue disposition of the Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
Stockholder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 4(a)(vi).
(c) If a registration pursuant to Sections 2 or 3 involves an
underwritten offering, Regent agrees, if so required by the Managing
Underwriter, not to effect any Public Sale of any of its equity or debt
securities, or securities convertible into or exchangeable or exercisable for
any of such equity or debt securities, during a period commencing 15 days before
and ending 90 calendar days after the effective date of such registration,
except for such underwritten offering or except in connection with a stock
option plan, stock purchase plan, savings or similar plan, or an acquisition,
merger or exchange offer.
(d) If a registration pursuant to Sections 2 or 3 involves an
underwritten offering, any Stockholder requesting to be included in such
registration may elect, in writing, prior to the effective date of the
registration statement filed in connection with such registration, not to
register such securities in connection with such registration, unless such
Stockholder has agreed with Regent or the Managing Underwriter to limit its
rights under this Section 4.
(e) It is understood that in any underwritten offering in addition
to any Stock (the "initial shares") the underwriters have committed to purchase,
the underwriting agreement may grant the underwriters an option to purchase up
to a number of additional shares of authorized but unissued
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<PAGE> 11
shares of Stock (the "Option Shares") equal to 15% of the initial shares (or
such other maximum amount as the NASD may then permit), solely to cover
over-allotments. Shares of Stock proposed to be sold by Regent and the
Stockholders shall be allocated between initial shares and Option Shares as
agreed or, in the absence of agreement, pursuant to Sections 2(i) or 3(e), as
the case may be. The number of initial shares and Option Shares to be sold by
requesting Stockholders shall be allocated pro rata among all such Stockholders
on the basis of the relative number of shares of Registrable Securities included
in such registration for each such Stockholder subject to any reduction in the
number of shares to be sold pursuant to the terms of this Agreement.
(f) In the case of Registrable Securities held by a Stockholder and
included in any registration statement filed hereunder which include shares of
Common Stock issuable upon the conversion of convertible preferred stock or the
exercise of options or warrants, the Stockholder holding such convertible
preferred stock or options or warrants hereby agrees to convert such stock to,
or exercise such options or warrants for, shares of Common Stock concurrently
with and conditional upon the registration statement being declared effective by
the SEC, it being understood that, unless otherwise requested by Waller-Sutton,
such registration statement shall only register the sale of shares of Common
Stock. In addition, the purchase price of Registrable Securities underlying any
warrant to be exercised may be paid by a promissory note that shall be payable
out of the proceeds of the sale of the Registrable Securities so registered.
5. BLACKOUT PERIOD. Regent shall be entitled to elect that any
registration statement filed hereunder not be useable, for a reasonable period
of time, but not in excess of 20 consecutive days, which period may be extended
to 60 consecutive days with the consent of Waller-Sutton (each a "Blackout
Period"), if Regent determines in good faith that the registration and
distribution of Registrable Securities (or the use of such registration
statement or related prospectus) would materially interfere with any pending
financing, acquisition, corporate reorganization or any other significant
corporate development involving Regent (other than a corporate development
described in Section 6) or would require premature disclosure thereof and
promptly gives the holders of record of Registrable Securities written notice of
such determination, containing a general statement of the reasons for such
postponement or restriction on use and an approximation of the length of the
anticipated delay; PROVIDED, HOWEVER, that the aggregate number of days included
in all Blackout Periods during any consecutive 12 month period shall not exceed
an aggregate of (x) 135 days minus (y) the number of days the holders of
Registrable Securities are required to refrain from effective public sales or
distributions of Registrable Securities pursuant to Section 6 during such
period; and PROVIDED, FURTHER, that Regent shall not be entitled to initiate a
Blackout Period unless it shall concurrently forbid purchases or sales of Regent
stock in the open market by all of the directors and senior executives of
Regent. Regent shall give written notice to each Stockholder of record of
Registrable Securities of the commencement and the termination of any Blackout
Period. The Blackout Period shall begin and end when the applicable notice is
given (unless it shall earlier terminate pursuant to the terms hereof).
6. HOLDBACK AGREEMENT. If (i) Regent shall file a registration
statement for its own account (other than in connection with the registration of
securities issuable pursuant to an employee
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<PAGE> 12
stock option, stock purchase or similar plan or pursuant to a merger, exchange
offer or a transaction of the type specified in Rule 145(a) under the Securities
Act) with respect to Common Stock and (ii) with reasonable prior notice, Regent
(in the case of a non-underwritten offering pursuant to such registration
statement) advises the Stockholders in writing that a public sale or
distribution of Registrable Securities would materially adversely affect such
offering or the managing underwriter or underwriters (in the case of an
underwritten offering pursuant to such registration statement) advises Regent in
writing (in which case Regent shall notify the Stockholders in writing) that a
public sale or distribution of Registrable Securities would materially adversely
impact such offering, then each holder of Registrable Securities shall, to the
extent not inconsistent with applicable law, refrain from effecting any public
sale or distribution of Registrable Securities (excluding sales pursuant to Rule
144 under the Securities Act) during the 5-day period prior to, and during the
40- day period beginning on, the effective date of such registration statement;
PROVIDED, HOWEVER, that the aggregate number of days the Stockholders are
required to refrain from offering any public sale or distribution of Registrable
Securities pursuant to Sections 5 and 6 during any consecutive 12 month period
shall not exceed an aggregate of (x) 135 days minus (y) the number of days
included in all Blackout Periods during such period.
7. INDEMNIFICATION.
(a) In the event of any registration of any securities of Regent
under the Securities Act pursuant to Sections 2 or 3, Regent will, and it hereby
agrees to, indemnify and hold harmless, to the extent permitted by law, each
Stockholder owning any Registrable Securities covered by such registration
statement, its directors and officers, employees or agents, each other person
who participates as an underwriter in the offering or sale of such securities
and each other person, if any, who controls such Stockholder or any such
underwriter within the meaning of the Securities Act (each, an "Indemnitee"), as
follows:
(i) against any and all loss, liability, claim, damage or
expense whatsoever including, without limitation, expenses contemplated by
subparagraph (iii) below (collectively, "Losses") arising out of or based upon
an untrue statement or alleged untrue statement of a material fact contained in
any registration statement (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or other document related to
compliance, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus or prospectus (or any
amendment or supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein not
misleading or any violation (or alleged violation) of the Securities Act or
other securities laws in connection with any such registration or compliance;
(ii) against any and all Losses to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or
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<PAGE> 13
omission, or any such alleged untrue statement or omission, if such settlement
is effected with the written consent of Regent; and
(iii) against any and all expenses reasonably incurred by them
in connection with investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraph (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity does not apply to any Loss incurred by an
Indemnitee, to the extent arising out of an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to Regent by or on behalf of any
such Indemnitee expressly for use in the preparation of any registration
statement (or any amendment thereto) or any preliminary prospectus or prospectus
(or any amendment or supplement thereto); and PROVIDED, FURTHER, that Regent
will not be liable to any person who participates as an underwriter in the
offering or sale of Registrable Securities or any other person, if any, who
controls such underwriter within the meaning of the Securities Act, under the
indemnity agreement in this Section 7(a) with respect to any preliminary
prospectus or final prospectus or final prospectus as amended or supplemented,
as the case may be, to the extent that any such Loss of such underwriter or
controlling person results from the fact that such underwriter offered or sold
Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus
or of the final prospectus as then amended or supplemented, whichever is most
recent, if Regent has previously furnished copies thereof to such underwriter.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnitee and shall survive the
transfer of such securities by such Indemnitee.
(b) Regent may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Sections 2 or
3, that Regent shall have received an undertaking reasonably satisfactory to it
from the Stockholder proposing to include such Registrable Securities or any
underwriter, to indemnify and hold harmless against all Losses (in the same
manner and to the same extent as set forth in Section 7(a)), Regent with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Regent by or on behalf of such
Stockholder or underwriter specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of Regent or any
such director, officer or controlling person and shall survive the transfer of
such securities by such Stockholder. In that event, the obligations of Regent
and such Stockholders pursuant to this Section 7 are to be several and not
joint; provided, however, that with respect to each claim pursuant to this
Section, Regent shall be liable for the full amount of such claim, and each such
Stockholder's liability under this Section 7 shall be limited to an amount equal
to the net proceeds (after deducting the
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underwriting discount and expenses) received by such Stockholder from the sale
of Registrable Securities held by such Stockholder pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a claim
referred to in this Section 7, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 7, except to the extent (but only to the extent) that a court of
competent jurisdiction determines (which determination is not subject to appeal)
that the indemnifying party has been materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim (in which case the indemnifying party shall not be liable for the fees and
expenses of more than one firm of counsel in addition to appropriate local
counsel chosen by Waller-Sutton (or, if it is not an indemnified party, by a
majority (by number of shares) of the sellers of Registrable Securities), or
more than one firm of counsel for the underwriters in connection with any one
action or separate but similar or related actions), the indemnifying party will
be entitled by giving written notice of its intention to do so within 20 days of
the date it receives notice of such claim from the indemnified party to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless: (i) the
indemnifying party agrees to pay such fees and expenses; or (ii) the
indemnifying party fails promptly to assume and/or to vigorously maintain the
defense of such proceeding or fails to employ counsel satisfactory to such
indemnified party; or (iii) the named parties to any such proceeding (including
any impleaded parties) include both such indemnified party and the indemnifying
party or an affiliate of the indemnifying party, and there may be one or more
defenses available to such indemnified party that are in addition to, or in
conflict with, those available to the indemnifying party or affiliate or
controlling person (in which case, if such indemnified party, notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such proceeding on behalf of such indemnified
party), it being understood, however, that the indemnifying party shall not, in
connection with any one such proceeding or separate but substantially similar or
related proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party unless, in the reasonable judgment of an
indemnified party, a conflict of interest exists between such indemnified party
and any other indemnified party with respect to such proceeding, in which event
the indemnifying party shall be liable for the fees and expenses of such
additional counsel.
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(d) Regent and each Stockholder including Registrable Securities on
a registration statement shall provide for the foregoing indemnity (with
appropriate modifications) in any underwriting agreement with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of any governmental authority.
8. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
7 is for any reason not available (or not sufficient to hold such indemnified
party harmless), the parties required to indemnify by the terms thereof shall
contribute to the aggregate Losses incurred by the indemnified party. In
determining the amounts which the respective parties shall contribute, there
shall be considered the relative fault of Regent on the one hand, and of the
indemnified or indemnifying party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses, the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. The relative fault of Regent, on the one hand, and of the
indemnified or indemnifying party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact has been taken by, or relates to information
supplied by, Regent or by the indemnified or indemnifying party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent any such action, statement or omission; provided, that no Stockholder
including Registrable Securities on a registration statement shall be required
to contribute any amount in excess of the amount such Stockholder would have
been required to pay to an indemnified party if the indemnity under Section 7
were available. Regent and each such Stockholder agree with each other and the
underwriters of the Registrable Securities, if requested by such underwriters,
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or for the underwriters' portion of such
contribution to exceed the percentage that the underwriting discount bears to
the initial public offering price of the Registrable Securities or any other
method that does not take account of the equitable considerations referred to in
this Section. For purposes of this Section 8, each person, if any, who controls
an underwriter within the meaning of Section 15 of the Securities Act shall have
the same rights to contribution as such underwriter, and each director and each
officer of Regent who signed the registration statement, and each person, if
any, who controls Regent or a seller of Registrable Securities within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as Regent or a Stockholder including Registrable Securities on a
registration statement, as the case may be.
9. RULE 144. Regent covenants that it will file the reports required to
be filed by it under the Securities Act and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations adopted by the
SEC thereunder, and it will take such further action as any Stockholder may
reasonably request, all to the extent required from time to time to enable such
Stockholder to sell shares of Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (i) Rule
144 under the Securities Act, as such
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Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any Stockholder, Regent will
deliver to such holder a written statement as to whether it has complied with
such requirements.
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10. OTHER PROVISIONS REGARDING REGISTRATION RIGHTS.
(a) Except as provided in this Agreement as it may be amended from
time to time in accordance with the express terms hereof, neither Regent nor any
of its subsidiaries will grant to any person the right to request that Regent
register any equity securities of Regent, or any securities convertible or
exchangeable into or exercisable for such securities.
(b) Notwithstanding anything to the contrary in any previous
agreement or security, Regent shall have no obligations to any Stockholder with
respect to the registration of any shares of Stock, except as provided in this
Agreement.
(c) In the event the Registrable Securities of Waller-Sutton
initially sought to be included on a Registration Statement (prior to the
operation or application of any "cut-back" provisions set forth herein) do not
represent more than 20% of Waller-Sutton's Registrable Securities or in the
event the Registrable Securities of Waller-Sutton are not included on a
registration statement filed pursuant to Sections 2 or 3 hereof, the term
"Waller-Sutton," as used in Sections 2(b), 2(f), 4(a)(iv), 4(f) and 7(c) in
respect of such registration statement, shall refer to the holders of a majority
of the Registrable Securities being included on such registration statement.
11. DEFINITIONS.
"APPLICABLE PERCENTAGE" means 2%, prior to the consummation of a
Qualified Public Offering, and 4% at all times thereafter.
"PUBLIC SALE" means any sale of Stock to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 adopted under the
Securities Act.
"QUALIFIED PUBLIC OFFERING" shall have the meaning ascribed to it
in the Series F Stock Purchase Agreement.
"REGISTRABLE SECURITIES" mean the following:
(a) all shares of Common Stock now owned or hereafter acquired
(including through the conversion of convertible preferred stock or the exercise
of warrants or options) or owned of record by the Stockholders, or issuable upon
the conversion of preferred stock or the exercise of warrants or options now
owned or hereafter acquired by any Stockholder; and
(b) any shares of capital stock issued or issuable by Regent in
respect of any shares of Stock referred to in the foregoing clause (a) by way of
a stock dividend or stock split or in connection with a combination or
subdivision of shares, reclassification, recapitalization, merger, consolidation
or other reorganization of Regent.
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As to any particular Registrable Securities that have been issued,
such securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) such securities have been sold in an
open market transaction pursuant to Rule 144, (iii) except in the case of
securities held by Waller-Sutton and except in the case of securities held by
Stockholders beneficially owning more than the Applicable Percentage of the
outstanding Common Stock of Regent (computed on an "as-converted" and
fully-diluted basis), they shall become eligible for sale to the public pursuant
to Rule 144(k), or (iii) they shall have ceased to be outstanding.
"REGISTRATION EXPENSES" means all fees and expenses incident to the
performance of or compliance with all requirements for the registration of
securities under this Agreement, including, without limitation:
(a) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD") and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Securities));
(b) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depositary Trust Company ("DTC") and of printing prospectuses if the
printing of prospectuses is required or reasonably requested by Waller-Sutton
or, if it is not a seller of Registrable Securities pursuant thereto, by the
holders of a majority of the Registrable Securities to be included in any
Registration Statement);
(c) reasonable messenger, telephone, duplication, word processing
and delivery expenses incurred by Regent in the performance of its obligations
hereunder;
(d) fees and disbursements of counsel for Regent;
(e) fees and disbursements of all independent certified public
accountants (including, without limitation, the expenses of any special audit
and "comfort" letters required by or incident to such performance);
(f) fees and expenses of any "qualified independent underwriter" or
other independent appraiser participating in an offering pursuant to Section 3
of Schedule E to the By-laws of the NASD, but only where the need for such a
"qualified independent underwriter" arises due to a relationship with Regent;
(g) Securities Act liability insurance, if Regent or Waller-Sutton
so desires such insurance;
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(h) fees and expenses of all other persons retained by Regent;
internal expenses of Regent (including, without limitation, all salaries and
expenses of officers and employees of Regent performing legal or accounting
duties); and the expenses of any annual or special audit;
(i) rating agency fees and the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange; and
(j) the reasonable fees and disbursements (A) of not more than one
counsel (in addition to appropriate local counsel), chosen by Waller-Sutton (or,
if it is not a seller of Registrable Securities pursuant thereto, by the holders
of a majority of the Registrable Securities to be included in any Registration
Statement) and (B) for other reasonable out-of-pocket expenses of the holders of
Registrable Securities incurred in connection with the registration of the
Registrable Securities, including without limitation under Sections 4(a) (x) and
(xi).
but excluding underwriting fees and commissions incurred by the Stockholders.
"SEC" means the Securities and Exchange Commission of United States
of America.
"SERIES F PURCHASERS" means Waller-Sutton, Ingram, WP&G, GE Capital
and River Cities.
"STOCK" means (i) any Common Stock or preferred stock of Regent
("Preferred Stock") purchased or otherwise acquired by any Stockholder, (ii) any
equity securities issued or issuable directly or indirectly with respect to the
Common Stock or Preferred Stock referred to in clause (i) above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iii) any
other shares of any class or series of capital stock of Regent held by a
Stockholder. Any determination hereunder of the percentage of outstanding Stock
held by one or more holders thereof shall be performed on the basis that all
Preferred Stock then outstanding is converted into Common Stock in accordance
with the terms of the Preferred Stock set forth in the certificate of
incorporation of Regent as in effect on the date of such determination.
12. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the parties to this Agreement unless approved in writing by
Waller-Sutton and Stockholders who, together with Waller Sutton, are the holders
of at least 51 % of the Stock held by the Stockholders. The failure of any party
to enforce any of the provisions of this Agreement shall in no way be construed
as a waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.
13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or
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<PAGE> 20
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. ENTIRE AGREEMENT; CONFLICTING AGREEMENTS. Except as otherwise
expressly set forth herein, this document embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and this agreement supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may constitute or be deemed to constitute the grant of registration rights by
Regent to any other party, including but not limited to the following: Section
12E of the Agreement of Merger, dated as of December 5, 1997, among Faircom,
Regent Merger Corp. and Regent, Section 13 of the Stock Purchase Agreement,
dated as of December 8, 1997, between Regent and BMO, Section 6 of the Stock
Purchase Agreement, dated as of December 1, 1997, between Regent and Stakelin,
Sections 9 and 6 of the Stock Purchase Agreements, dated as of May 20, 1997, and
November 26, 1997, respectively, between Regent and Jacobs, Section 9 of the
Stock Purchase Agreement, dated as of May 20, 1997, between Regent and River
Cities and Section 13 of the Stock Purchase Agreement, dated as of December 8,
1997, between Regent and GE Capital, all of which provisions are deemed null and
void and of no further force or effect.
15. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by Regent
and its successors and assigns and the Stockholders and any permitted subsequent
holders of Registrable Securities and the respective successors and permitted
assigns of each of them, so long as they hold Registrable Securities.
16. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
17. REMEDIES. Regent and any Stockholder shall be entitled to enforce
their rights under this Agreement specifically, to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that Regent and any Stockholder may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief (without posting a bond or other security) in order to
enforce or prevent any violation of the provisions of this Agreement.
18. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to Regent at the address set forth below and to any Stockholder at the
address indicated on the signature pages hereto and to any subsequent holder of
Stock subject to this Agreement at such address as indicated by Regent's
records, or at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the
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<PAGE> 21
sending party. Notices will be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. Regent's address is
set forth below its signature hereto.
19. GOVERNING LAW. The corporate law of the State of Delaware will
govern all questions concerning the relative rights of Regent and its
Stockholders. All other questions concerning this Agreement shall be governed by
and interpreted in accordance with the domestic laws of the State of Delaware,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
20. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
<TABLE>
<S> <C>
THE COMPANY:
REGENT COMMUNICATIONS, INC.
By:
--------------------------------------------
Title: Chairman & CEO
Address: 50 E. River Center Blvd.
Suite #180
Covington, KY 41011
Telecopier No: (606) 292-0352
----------------------------------------------
TERRY S. JACOBS
Address: 6561 Madeira Hills Dr.
Cincinnati, OH 45243
Telecopier No: ( ) -
----------------------------------------------
WILLIAM J. STAKELIN
Address: 1870 Madison Road
Cincinnati, Ohio 45231
Telecopier No: (513) -
PNC BANK, N.A., as Trustee
By:
--------------------------------------------
Address: 201 East Fifth Street, Fifth Floor
Cincinnati, OH 45202
Telecopier No: (513) -
</TABLE>
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<PAGE> 23
<TABLE>
<S> <C>
RIVER CITIES CAPITAL FUND LIMITED
PARTNERSHIP
By: River Cities Management Limited Partnership,
General Partner
By: Mayson, Inc., General Partner
By:
------------------------------------
R. Glen Mayfield, Vice President
Address: 221 East Fourth Street
Suite 2250
Cincinnati, Ohio 45202
Telecopier No: (513) -
BMO FINANCIAL, INC.
By:
--------------------------------------------
Address:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
--------------------------------------------
Senior Vice President
Address: 3379 Peachtree Road, N.E.
Suite 600
Atlanta, GA 30326
Telecopier No: (404) -
</TABLE>
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<PAGE> 24
<TABLE>
<S> <C>
WALLER-SUTTON MEDIA PARTNERS, L.P.
By: Waller-Sutton Media, L.L.C., its General
Partner
By:
---------------------------------------
Address: c/o Waller-Sutton Management
Group, Inc.
1 Rockefeller Plaza, Suite 3300
New York, NY 10020
Attention: Cathy M. Brienza
Telecopier No: (212) 218-4355
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Attention: Ronald Greenberg, Esq.
Telecopier No: (212) 698-7825
----------------------------------------------
WILLIAM H. INGRAM
Address: c/o Waller-Sutton Management
Group, Inc.
1 Rockefeller Plaza, Suite 3300
New York, NY 10020
Telecopier No: (212) 218-4355
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Attention: Ronald Greenberg, Esq.
Telecopier No: (212) 698-7825
</TABLE>
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<PAGE> 25
<TABLE>
<S> <C>
WPG CORPORATE DEVELOPMENT
ASSOCIATES V, L.P.,
By:
--------------------------------------------
By:
--------------------------------------------
Address: One New York Plaza
New York, New York 10004-1950
Telecopier No: (212) -
WPG CORPORATE DEVELOPMENT
ASSOCIATES V (OVERSEAS), L.P.
By:
--------------------------------------------
By:
--------------------------------------------
Address: c/o BankAmerica Trust & Banking
Corp. (Cayman) Ltd.
BankAmerica House
Fort Street
George Town, Grand Cayman
Cayman Islands
Telecopier No: ( ) -
BLUE CHIP CAPITAL FUND II LIMITED
PARTNERSHIP
By: Blue Chip Venture Company, Ltd.,
its general partner
By:
--------------------------------------------
Address: 2000 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Attn: John H. Wyant
Telecopier No: (513) 723-2306
MIAMI VALLEY VENTURE FUND L.P.
</TABLE>
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<PAGE> 26
<TABLE>
<S> <C>
By: Blue Chip Venture Company of Dayton, Ltd.,
its special limited partner
By:
--------------------------------------------
John H. Wyant
Manager
Address: 2000 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Attn: John H. Wyant
Telecopier No: (513) 723-2306
----------------------------------------------
THOMAS P. GAMMON
Address:
Telecopier No.:
</TABLE>
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<PAGE> 1
Exhibit 4(f)
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND ANY SHARES THAT MAY BE ISSUED
UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAW.
NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED EVIDENCE
OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE,
AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).
THIS WARRANT IS SUBJECT TO REPURCHASE AS PROVIDED IN AND PURSUANT TO THE TERMS
OF SECTION 2.3(d) OF THAT CERTAIN STOCK PURCHASE AGREEMENT, DATED AS OF THE DATE
HEREOF, AMONG THE CORPORATION, THE HOLDER AND THE OTHER PARTIES NAMED THEREIN.
REGENT COMMUNICATIONS, INC.
Warrant for the Purchase of 650,000 Shares of Common Stock
----------------------------------------------------------
Dated June 15, 1998
FOR VALUE RECEIVED, REGENT COMMUNICATIONS, INC. (the "Corporation"), a
Delaware corporation, hereby certifies that WALLER-SUTTON MEDIA PARTNERS, L.P.,
a Delaware limited partnership, or its assignee ("Holder") is entitled to
purchase from the Corporation from and after the date hereof and on or before
the tenth anniversary of the date hereof (the "Termination Date"), 650,000 fully
paid and non-assessable shares of the common stock of the Corporation, par value
$.01 per share ("Common Stock"), at a price of $5.00 per share. Hereinafter, (i)
said Common Stock together with any other equity securities which may be issued
by the Corporation in addition thereto or in substitution therefor, is referred
to as "Common Stock," (ii) the shares of Common Stock purchasable hereunder are
referred to as the "Warrant Shares," and (iii) the price payable hereunder for
each of the Warrant Shares is referred to as the "Per Share Warrant Price." The
Per Share Warrant Price and the aggregate number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment as hereinafter provided.
1. EXERCISE OF WARRANT. (a) Subject to the provisions of this Warrant,
this Warrant may be exercised by the Holder in whole or in part (but unless this
Warrant is being exercised in full, only for whole shares of Common Stock) at
any time or from time to time, but not later than 5:00 p.m. Eastern Daylight
Time, on the Termination Date, by presentation and surrender thereof at the
principal office of the Corporation with the subscription form at the end hereof
duly executed and
<PAGE> 2
either (i) accompanied by payment of the Per Share Warrant Price for the number
of shares specified in such form, with payment made in cash, or by certified
check or bank cashier's check payable to the order of the Corporation, or (ii)
in the manner set forth in Section 1(b) below.
(b) If the Current Market Price shall be greater than the Per Share
Warrant Price, then the Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the Corporation
at its address set forth and pursuant to Section 10, a written notice of such
Holder's election to exercise all or a portion of this Warrant on a "cashless"
basis, which notice shall specify the total number of shares of Common Stock as
to which this Warrant is being exercised on a "cashless" basis (the "Aggregate
Net Exercise Number"). Such notice shall also specify as to the Aggregate Net
Exercise Number, the portion thereof which represents the shares of Common Stock
to be delivered to such Holder and the portion thereof which represents the
shares of Common Stock with respect to which the Warrant is being surrendered in
payment of the aggregate exercise price for the shares of Common Stock to be
delivered to the Holder. For purposes of this Section 1(b), each share of Common
Stock as to which this Warrant is surrendered shall be attributed a value equal
to (x) the Current Market Price per share of Common Stock as of the date of the
written notice from the Holder referred to above, minus (y) the then Per Share
Warrant Price.
Notwithstanding anything to the contrary contained in this
Warrant, if as of the Termination Date, the Per Share Warrant Price shall be
less than the then Current Market Price, then this Warrant shall be deemed
exercised pursuant to this Section 1(b) as of the Termination Date without
further action on the part of the Holder, notwithstanding that such Holder did
not deliver notice of exercise, as provided for in this Section 1.
(c) As used herein the term "Current Market Price" per share of
Common Stock, as of any date of determination thereof, shall be deemed to be the
price determined as follows:
(i) If the Common Stock is traded on a national securities
exchange or is traded in the over-the-counter market, the Current Market Price
per share of Common Stock shall be deemed to be the average of the daily market
prices for twenty (20) trading days preceding such date. The market price for
each such trading day shall be, if the Common Stock is traded on a national
securities exchange or on the National Association of Securities Dealers'
National Market System, the closing or final sales price for such trading day,
and if the Common Stock is otherwise traded in the over-the-counter market, the
average of its closing bid and asked prices on the preceding day for such
trading.
(ii) If the Current Market Price per share of Common Stock
cannot be ascertained by the method set forth in paragraph (i) immediately
above, the Current Market Price per share of Common Stock shall be deemed to be
the price equal to the quotient determined by dividing the Appraised Value of
the Common Stock by the number of outstanding shares of Common Stock (on a fully
diluted basis including any fractional shares and assuming the exercise in full
of all then-outstanding options, warrants or other rights to purchase shares of
Common Stock that are then currently exercisable at exercise prices equal to or
less than the Current Market Price). The
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<PAGE> 3
Appraised Value of the Common Stock shall be determined by either (a) the
majority decision of the Corporation's Board of Directors, including the
Holder's representatives to the Board of Directors voting in favor thereof, or
(b) if no such majority decision of the Board of Directors is reached, by an
investment bank or other financial institution with experience in the appraisal
of or investment in radio station properties in the United States (an
"Appraiser") selected by the Board of Directors and reasonably acceptable to the
members of the Board of Directors nominated to serve by holders of the
outstanding shares of the Corporation's 10% Series F Convertible Preferred
Stock, voting separately as a class, pursuant to the provisions of Article
FOURTH, Paragraph I, Section 11, of the Corporation's Amended and Restated
Certificate of Incorporation (the "Series F Directors"). If such Appraiser is
not reasonably acceptable to the Series F Directors, then such Appraiser shall
be selected by the President of the American Arbitration Association, New York
City office, upon the request of any director of the Corporation.
(d) If this Warrant should be exercised in part only, the
Corporation shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder (or its designee
designated in the Assignment Form annexed hereto) to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Corporation of this Warrant,
in proper form for exercise, accompanied by payment of the Per Share Warrant
Price for the number of shares specified in such form (or upon receipt of the
election specified in Section 1(b) above), the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise
(effective as of the close of business on such date), notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
2. RESERVATION OF WARRANT SHARES. The Corporation will at all times
reserve and keep available, solely for issuance or delivery upon the exercise of
this Warrant, the shares of Common Stock and Other Securities (as defined below)
receivable upon the exercise of this Warrant, free and clear of all restrictions
on sale or transfer and free and clear of all preemptive rights.
3. FULLY PAID STOCK; TAXES. The Corporation agrees that the shares of
Common Stock represented by each and every certificate for Warrant Shares or
Other Securities delivered on the exercise of this Warrant and payment of the
Per Share Warrant Price shall, at the time of such delivery, be validly issued
and outstanding, fully paid and non-assessable. The Corporation further
covenants and agrees that it will pay, when due and payable, all federal and
state stamp, original issue or similar taxes, if any, which are payable in
respect of the issue of this Warrant and/or any Warrant Share or certificates
therefor but excluding any federal, state or local taxes based on the income of
the Holder.
4. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise of this Warrant in
full, the Company shall pay to the Holder (or its designee designated in the
Assignment Form annexed hereto) an amount in cash equal to the fair value of
such fractional
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<PAGE> 4
share (determined in such manner as the Board of Directors of the Corporation
shall reasonably determine).
5. ADJUSTMENTS TO THE PER SHARE WARRANT PRICE AND NUMBER OF WARRANT
SHARES. (a) If after the date hereof shares of Common Stock are issued as a
dividend or other distribution on Common Stock, the Per Share Warrant Price in
effect at the opening of business on the business day next succeeding the date
fixed for the determination of the stockholders entitled to receive such
dividend or other distribution shall be decreased to the Per Share Warrant Price
determined by multiplying said Per Share Warrant Price so in effect by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock issued and outstanding and the number of shares of Common Stock
then issuable upon conversion of preferred stock of the Corporation issued and
outstanding (the "Conversion Shares"), all at the close of business on the date
fixed for such determination and the denominator of which shall be the sum of
said number of shares issued and outstanding (including the Conversion Shares)
at the close of business on the date fixed for such determination and the number
of shares constituting such dividend or other distribution, and the aggregate
number of Warrant Shares shall be increased proportionately. Such decrease to
the Per Share Warrant Price and such increase to the aggregate number of Warrant
Shares shall become effective immediately after the opening of business on the
business day next succeeding the date fixed for such determination.
(b) If after the date hereof outstanding shares of Common Stock
shall be subdivided into a greater number of shares or outstanding shares shall
be combined into a smaller number of shares, the Per Share Warrant Price in
effect at the opening of business on the business day next succeeding the day
upon which such subdivision or combination becomes effective shall be decreased
or increased, as the case may be, to the Per Share Warrant Price determined by
multiplying said Per Share Warrant Price so in effect by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
issued and outstanding and the number of Conversion Shares, all immediately
before such subdivision or combination becomes effective and the denominator of
which shall be the number of such shares outstanding (including the Conversion
Shares) at the opening of business on the business day succeeding the day upon
which such subdivision or combination becomes effective. In the event of a
decrease to the Per Share Warrant Price, the aggregate number of Warrant Shares
hereunder shall be increased proportionately, and in the event of an increase to
the Per Share Warrant Price, the aggregate number of Warrant Shares hereunder
shall be decreased proportionately.
(c) If after the date hereof the Corporation shall distribute to all
or substantially all holders of Common Stock either (i) any cash dividends
(excluding ordinary cash dividends paid out of earnings and profits) or (ii) any
evidences of indebtedness, assets or any other securities of the Corporation or
any rights, warrants, options to subscribe for, purchase or otherwise acquire
securities of the Corporation (any of which are referred to herein as "Other
Securities"), then and in any such case the Corporation shall either distribute
such dividends or Other Securities to the Holder of this Warrant or reserve for
the benefit of the Holder of this Warrant, such amount of such dividends or
Other Securities as the Holder of this Warrant would have owned or been entitled
to receive
-4-
<PAGE> 5
immediately following such action had this Warrant been exercised for shares of
Common Stock prior thereto. In addition, the Corporation shall either distribute
to, or reserve for the benefit of, the Holder of this Warrant any principal,
interest, dividends or other property payable with respect to such dividends or
Other Securities as and when such interest, dividends or other property is
distributed to the holders of Common Stock. If such a reserve is made, as and
when this Warrant is exercised, the Holder shall be entitled to receive from the
Corporation such Holder's share of such dividends or Other Securities together
with the principal, interest, dividends or other property payable with respect
thereto.
(d) Upon any adjustment to the Per Share Warrant Price, then, and in
each such case, the Corporation will promptly obtain a certificate from a firm
of independent public accountants of recognized standing selected by its Board
of Directors (who may be the regular auditors of the Corporation) setting forth
the adjusted Per Share Warrant Price, the related adjustment to the aggregate
number of Warrant Shares and a brief statement of the facts accounting for such
adjustment and will cause a brief summary thereof to be mailed to the Holder of
this Warrant.
(e) In case of any reclassification of Common Stock of the
Corporation, other than a subdivision or combination of the outstanding Common
Stock, or of any consolidation or merger to which the Corporation or any
subsidiary of the Corporation is a party and for which approval of shareholders
of the Corporation is required, or of the sale or transfer of all or
substantially all of the assets of the Corporation, or of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall cause to be mailed to the Holder of this Warrant, at least 20
days prior to the applicable date hereinafter specified, a notice stating the
date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares for securities or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(f) If, on or prior to the Termination Date, the Corporation shall
consolidate with or merge into another corporation, or another corporation shall
merge into the Corporation in a merger in which shares of Common Stock are
converted into a right to receive cash, property or other securities, or the
Corporation shall sell or transfer all or substantially all of the assets of the
Corporation, the Corporation shall take such action so that the Holder of this
Warrant will thereafter receive upon the exercise hereof the securities or
property to which a holder of the number of shares of Common Stock then
deliverable upon the exercise of such Warrant would have been entitled to
receive upon such consolidation, merger, sale or transfer if such Warrant had
been exercised in full immediately prior to such transaction.
(g) All calculations under this Section 5 shall be made to the
nearest one-hundredth of a cent or to the nearest one thousandth of a share, as
the case may be. No adjustment shall be required unless such adjustment would
result in an increase or decrease of at least one percent (1%) of the Per Share
Warrant Price, provided, however, that any adjustments which by reason of
-5-
<PAGE> 6
this paragraph (g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(h) If at any time, as a result of an adjustment made pursuant to
paragraph (c) above, the Holder shall become entitled to purchase any Other
Securities, thereafter the number of such Other Securities purchasable upon
exercise of this Warrant and the price of the Other Securities shall be subject
to adjustment from time to time and in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to this Warrant
contained in paragraphs (a) through (g), inclusive above.
(i) Upon the expiration of any rights, options, warrants or
conversion of exchange privileges which caused an adjustment to the Per Share
Warrant Price to be made, if any thereof shall not have been exercised, the Per
Share Warrant Price shall, upon such expiration, be readjusted as if (i) the
only shares of Common Stock so issued were the shares of Common Stock actually
issued or sold upon the exercise of such rights, options, warrants or conversion
or exchange privileges, if any, and (ii) any such shares of Common Stock were
issued or sold for the consideration actually received by the Corporation upon
such exercise plus the aggregate consideration actually received by the
Corporation for the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges, whether or not exercised;
provided, however, that no such readjustment shall have the effect of decreasing
the Per Share Warrant Price by an amount in excess of the amount of any
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrant, or conversion or exchange privileges.
(j) Upon any exercise of this Warrant at a time when there are
dividends or distributions declared but unpaid (whether as to Common Stock or
Other Securities or other property payable with respect hereto) and as to which
the dividend date or other date fixed for payment has passed, then (i) to the
fullest extent permitted by law, such unpaid dividends or distributions shall be
paid by the Corporation contemporaneously with the exercise of this Warrant, and
(ii) to the extent payment of such unpaid dividends or distributions is not
legally permitted, then the Per Share Warrant Price shall be further adjusted by
increasing the number of shares of Common Stock or Other Securities or property
issuable upon conversion to take into account the value of such unpaid dividends
or other distributions in determining the amount of Common Stock or Other
Securities to be issued upon exercise of this Warrant.
6. REPURCHASE RIGHT. Until June 15, 2001, or, if earlier, until such
time as the obligation to purchase Additional Shares set forth in Section 2.1 of
that Stock Purchase Agreement, dated as of the date hereof, among the
Corporation, the Holder and the other parties named therein (the "Purchase
Agreement"), has been satisfied or terminated, this Warrant and the Warrant
Shares will be subject to and may be repurchased as provided in Section 2.3 of
the Purchase Agreement in the event the Holder becomes a Defaulting Purchaser
(as defined in the Purchase Agreement). This Warrant and any Warrant Shares
issued on exercise hereof shall bear an appropriate legend indicating that they
are subject to such repurchase. At the request of the Holder, and after such
time as the obligation to purchase Additional Shares has been satisfied or
terminated, such legend may be
-6-
<PAGE> 7
removed and Section 2.3 of the Purchase Agreement shall no longer be of any
force or effect on this Warrant or Warrant Shares.
7. LIMITED TRANSFERABILITY. (a) This Warrant and the Warrant Shares
have not been registered under the Act and may be transferred only (1) subject
to the provisions of Section 6, (i) pursuant to an exemption from registration
under the Act and in compliance with applicable state securities laws, or (ii)
to either an entity that is a direct or indirect partner of the Holder, or any
entity that is a direct or indirect member of a Holder that is a limited
liability company, or to an entity wholly owned by the Holder, or to an entity
directly or indirectly controlling, controlled by or under common control with
any such entities, (iii) pursuant to applicable laws of descent and distribution
to a spouse, children, parents or siblings (or the respective executors,
administrators, conservators, guardians or custodians during the minority of
such persons) ("Immediate Family") or during the Holder's lifetime to such
Holder's spouse, adult children or to a trust for the benefit of the Holder's
Immediate Family, or (2) pursuant to or in connection with a Qualified Public
Offering (as defined in the Purchase Agreement), or (3) pursuant to the exercise
of registration rights granted by the Corporation, or (4) following a Qualified
Public Offering, pursuant to Rule 144 of the Act. This Warrant may not be
transferred if such transfer would require any registration or qualification
under or cause the loss of exemption from registration or qualification under,
such Act or any applicable state securities law with respect to the Warrants or
the Warrant Shares. This Warrant and any Warrant Shares shall bear an
appropriate legend with respect to such restrictions on transfer indicated in
(1) and (2) above and with respect to the provisions of Section 6. This Warrant
is transferable only upon the books which the Corporation shall cause to be
maintained for such purpose. Any assignment or transfer may be made by
surrendering this Warrant to the Corporation together with the attached
assignment form properly executed by the assignor or transferor. Upon such
surrender the Corporation will execute and deliver, in the case of an assignment
or transfer in whole, a new Warrant in the name of the assignee or transferee
or, in the case of an assignment or transfer in part, a new Warrant in the name
of the assignee or transferee named in such instrument of assignment or transfer
and a new Warrant in the name of the assignor or transferor covering the number
of Warrant Shares in respect of which this Warrant shall not be assigned or
transferred to the assignee or transferee.
(b) The Corporation may treat the registered holder of this Warrant
as it appears on its books any time as the Holder and the owner of this Warrant
for all purposes. The Corporation shall permit the Holder of this Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the Holders of
Warrants. All Warrants will be dated the same date as this Warrant.
8. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Corporation of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity in form and amount reasonably satisfactory to the Corporation, if
lost, stolen or destroyed, and upon surrender and cancellation of this Warrant,
if mutilated, and upon reimbursement of the Corporation's reasonable incidental
expenses, the Corporation shall execute and deliver to the Holder a new Warrant
of like date, tenor and denomination.
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<PAGE> 8
9. WARRANT HOLDER NOT A STOCKHOLDER. This Warrant does not confer upon
the Holder any right to vote or to consent or to receive notice as a stockholder
of the Corporation, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a stockholder, prior to the exercise hereof.
10. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is either sent by Federal Express or similar overnight courier of national
reputation, or is mailed by first-class mail, postage prepaid, addressed to:
(a) the Corporation at 50 East River Center Blvd., Suite 180,
Covington, KY 41011, or such other address as the Corporation has designated in
writing to the Holder, or
(b) the Holder at the address shown on Schedule I hereto.
11. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience, and shall not affect the construction hereof.
12. AMENDMENTS. This Warrant may be amended only by written agreement
of the Corporation and the Holder.
13. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed therein.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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<PAGE> 9
IN WITNESS THEREOF, REGENT COMMUNICATIONS, INC. has executed this
Warrant as of the date set forth on the first page hereof.
REGENT COMMUNICATIONS, INC.
By:
------------------------------------
President
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<PAGE> 10
SUBSCRIPTION
------------
The undersigned, _________________________, pursuant to the provisions
of the foregoing Warrant, hereby agrees to subscribe for and purchase
_________________ shares of Common Stock of REGENT COMMUNICATIONS, INC. covered
by said Warrant and makes payment therefor in full at the price per share
provided by said Warrant.
Dated:
---------------
----------------------------------------
Signature
Address:
--------------------------------
--------------------------
ASSIGNMENT
----------
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto ________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
______________________________, attorney, to transfer said Warrant on the books
of REGENT COMMUNICATIONS, INC., which hereby agrees to be bound by the terms of
the Warrant as defined therein.
Dated:
---------------
----------------------------------------
Signature
Address:
--------------------------------
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<PAGE> 1
EXHIBIT 4(g)
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND ANY SHARES THAT MAY BE ISSUED
UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER THIS SECURITY NOR
ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE
HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE
CORPORATION (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION).
REGENT COMMUNICATIONS, INC.
Warrant for the Purchase of 50,000 Shares of Common Stock
Dated June 15, 1998
FOR VALUE RECEIVED, REGENT COMMUNICATIONS, INC. (the "Corporation"), a
Delaware corporation, hereby certifies that GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, or its assignee ("Holder") is entitled to
purchase from the Corporation from and after the date hereof and on or before
the fifth anniversary of the date hereof (the "Termination Date"), 50,000 fully
paid and non-assessable shares of the Common Stock ("Common Stock") of the
Corporation at a price of $5.00 per share. Hereinafter, (i) said Common Stock,
together with any other equity securities which may be issued by the Corporation
in addition thereto or in substitution therefor, is referred to as "Common
Stock," (ii) the shares of Common Stock purchasable hereunder are referred to as
the "Warrant Shares," and (iii) the price payable hereunder for each of the
Warrant Shares is referred to as the "Per Share Warrant Price." The Per Share
Warrant Price is subject to adjustment as hereinafter provided.
1. Exercise of Warrant. Subject to the provisions of this Warrant, this
Warrant may be exercised by the Holder in whole or in part (but unless this
Warrant is being exercised in full, only for whole shares of Common Stock) at
any time or from time to time, but not later than 5:00 p.m. Eastern Standard
Time, on the Termination Date by presentation and surrender thereof at the
principal office of the Corporation with the subscription form at the end hereof
duly executed and accompanied by payment of the Per Share Warrant Price for the
number of shares specified in such form. Payment shall be in cash, certified
check or bank cashier's check payable to the order of the Corporation. If this
Warrant should be exercised in part only, the Corporation shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant evidencing
the right of the Holder (or its designee designated in the Assignment Form
annexed hereto) to purchase the balance of the shares purchasable hereunder.
Upon receipt by the Corporation of this Warrant, in proper
<PAGE> 2
form for exercise, accompanied by payment of the Per Share Warrant Price for the
number of shares specified in such form, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise
(effective as of the close of business on such date), notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
2. Reservation of Warrant Shares. The Corporation will at all times
reserve and keep available, solely for issuance or delivery upon the exercise of
this Warrant, the shares of Common Stock and Other Securities (as defined below)
receivable upon the exercise of this Warrant, free and clear of all restrictions
on sale or transfer and free and clear of all preemptive rights.
3. Fully Paid Stock; Taxes. The Corporation agrees that the shares of
Common Stock represented by each and every certificate for Warrant Shares or
Other Securities delivered on the exercise of this Warrant and payment of the
Per Share Warrant Price shall, at the time of such delivery, be validly issued
and outstanding, fully paid and non-assessable. The Corporation further
covenants and agrees that it will pay, when due and payable, all federal and
state stamp, original issue or similar taxes, if any, which are payable in
respect of the issue of this Warrant and/or any Warrant Share or certificates
therefor but excluding any federal, state or local taxes based on the income of
the Holder.
4. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise of this Warrant in
full, the Company shall pay to the Holder (or its designee designated in the
Assignment Form annexed hereto) an amount in cash equal to the fair value of
such fractional share (determined in such manner as the Board of Directors of
the Corporation shall reasonably determine).
5. Adjustments of Per Share Warrant Price. (a) If after the date hereof
shares of Common Stock are issued as a dividend or other distribution on Common
Stock, the Per Share Warrant Price in effect at the opening of business on the
business day next succeeding the date fixed for the determination of the
shareholders entitled to receive such dividend or other distribution shall be
decreased to the Per Share Warrant Price determined by multiplying said Per
Share Warrant Price so in effect by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock issued and outstanding and the
number of shares of Common Stock then issuable upon conversion of Preferred
Stock of Regent issued and outstanding (the "Conversion Shares"), all at the
close of business on the date fixed for such determination and the denominator
of which shall be the sum of said number of shares issued and outstanding
(including the Conversion Shares) at the close of business on the date fixed for
such determination and the number of shares constituting such dividend or other
distribution, such decrease becoming effective immediately after the opening of
business on the business day next succeeding the date fixed for such
determination.
(b) If after the date hereof outstanding shares of Common Stock shall
be subdivided into a greater number of shares or outstanding shares shall be
combined into a smaller number of shares, the Per Share Warrant Price in effect
at the opening of business on the business day next succeeding the day upon
which such subdivision or combination becomes effective shall be decreased or
increased, as the case may be, to the Per Share Warrant price determined by
multiplying said Per Share Warrant Price so in effect by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
issued and outstanding and the number of Conversion Shares, all immediately
before such subdivision or combination becomes effective and the denominator of
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<PAGE> 3
which shall be the number of such shares outstanding (including the Conversion
Shares) at the opening of business on the business day succeeding the day upon
which such subdivision or combination becomes effective.
(c) If after the date hereof the Corporation shall distribute to all or
substantially all holders of Common Stock either (i) evidences of indebtedness
or assets (excluding cash dividends or distributions) or (ii) any other
securities of the Corporation or any rights, warrants, options to subscribe for,
purchase or otherwise acquire securities of the Corporation (any of which are
referred to herein as "Other Securities"), then and in any such case the
Corporation shall either distribute such Other Securities to the Holder of this
Warrant or reserve for the benefit of the Holder of this Warrant, such amount of
such Other Securities as the Holder of this Warrant would have owned or been
entitled to receive immediately following such action had this Warrant been
exercised for shares of Common Stock prior thereto. In addition, the Corporation
shall either distribute to, or reserve for the benefit of, the Holder of this
Warrant any principal, interest, dividends or other property payable with
respect to such Other Securities as and when such interest, dividends or other
property is distributed to the holders of Common Stock. If such a reserve is
made, as and when this Warrant is exercised, the Holder shall be entitled to
receive from the Corporation such Holder's share of such Other Securities
together with the principal interest, dividends or other property payable with
respect thereto.
(d) Upon any adjustment of the Per Share Warrant Price, then, and in
each such case, the Corporation will promptly obtain a certificate of a firm of
independent public accountants of recognized standing selected by its Board of
Directors (who may be the regular auditors of the Corporation) setting forth the
adjusted Per Share Warrant Price and a brief statement of the facts accounting
for such adjustment and will cause a brief summary thereof to be mailed to the
Holder of this Warrant.
(e) In case of any reclassification of Common Stock of the Corporation,
other than a subdivision or combination of the outstanding Common Stock, or of
any consolidation or merger to which the Corporation or any subsidiary of the
Corporation is a party and for which approval of shareholders of the Corporation
is required or of the sale or transfer of all or substantially all of the assets
of the Corporation or of the voluntary or involuntary dissolution, liquidation
or winding up of the Corporation, the Corporation shall cause to be mailed to
the Holder of this Warrant, at least 20 days prior to the applicable date
hereinafter specified, a notice stating the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares for
securities or other property deliverable upon such reclassification
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
(f) If, on or prior to the Termination Date, the Corporation shall
consolidate with or merge into another corporation, or another corporation shall
merge into the Corporation in a merger in which shares of Common Stock are
converted into a right to receive cash, property or other securities, or the
Corporation shall sell or transfer all or substantially all of the assets of the
Corporation, the Corporation shall take such action so that the Holder of this
Warrant will thereafter receive upon the exercise hereof the securities or
property to which a holder of the number of shares of Common Stock then
deliverable upon the exercise of such Warrant would have been entitled to
receive upon such consolidation, merger, sale or transfer if such Warrant had
been exercised in full immediately prior to such transaction.
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<PAGE> 4
(g) All calculations under this Section 5 shall be made to the nearest
one-hundredth of a cent or to the nearest one thousandth of a share, as the case
may be. No adjustment shall be required unless such adjustment would result in
an increase or decrease of at least one (1%) percent of the Per Share Warrant
Price; provided, however, that any adjustments which by reason of this paragraph
(g) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment.
(h) If at any time, as a result of an adjustment made pursuant to
paragraph (c) above, the Holder shall become entitled to purchase any Other
Securities, thereafter the number of such Other Securities purchasable upon
exercise of this Warrant and the price of the Other Securities shall be subject
to adjustment from time to time and in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to this Warrant
contained in paragraphs (a) through (g), inclusive above.
(i) Upon the expiration of any rights, options, warrants or conversion
of exchange privileges which caused an adjustment to the Per Share Warrant Price
to be made, if any thereof shall not have been exercised, the Per Share Warrant
Price shall, upon such expiration, be readjusted and shall thereafter be such as
it would have been had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only shares of
Common Stock so issued were the shares of Common Stock, if any, actually issued
or sold upon the exercise of such rights, options, warrants or conversion or
exchange privileges and (ii) such shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Corporation upon such
exercise plus the aggregate consideration, if any, actually received by the
Corporation for the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges, whether or not exercised;
provided further, that no such readjustment shall have the effect of decreasing
the Per Share Warrant Price by an amount in excess of the amount of the
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrant, or conversion or exchange privileges.
(j) Upon any exercise of this Warrant at a time when there are
dividends or distributions declared but unpaid (whether as to Common Stock or
Other Securities or other property payable with respect hereto) and as to which
the dividend date or other date fixed for payment has passed, then, (i) to the
fullest extent permitted by law, such unpaid dividends or distributions shall be
paid by the Corporation contemporaneously with the exercise of this Warrant, and
(ii) to the extent payment of such unpaid dividends or distributions is not
legally permitted, then the Per Share Warrant Price shall be further adjusted by
increasing the number of shares of Common Stock or Other Securities or property
issuable upon conversion to take into account the value of such unpaid dividends
or other distributions in determining the amount of Common Stock or Other
Securities to be issued upon exercise of this Warrant.
6. Limited Transferability. (a) This Warrant and the Warrant Shares have
not been registered under the Securities Act of 1933 and may be transferred only
pursuant to an effective registration thereunder or an exemption from
registration thereunder and in compliance with applicable state securities laws.
This Warrant may not be transferred if such transfer would require any
registration or qualification under, or cause the loss of exemption from
registration or qualification under, such Act or any applicable state securities
law with respect to the Warrants or the Warrant Shares. This Warrant and any
Warrant Shares shall bear an appropriate legend with respect to such
restrictions on transfer. This Warrant is transferable only upon the books which
the
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<PAGE> 5
Corporation shall cause to be maintained for such purpose. Any assignment or
transfer may be made by surrendering this Warrant to the Corporation together
with the attached assignment form properly executed by the assignor or
transferor. Upon such surrender the Corporation will execute and deliver, in the
case of an assignment or transfer in whole, a new Warrant in the name of the
assignee or transferee or, in the case of an assignment or transfer in part, a
new Warrant in the name of the assignee or transferee named in such instrument
of assignment or transfer and a new Warrant in the name of the assignor or
transferor covering the number of Warrant Shares in respect of which this
Warrant shall not be assigned or transferred to the assignee or transferee.
(b) The Corporation may treat the registered holder of this Warrant as
it appears on its books any time as the Holder and the owner of this Warrant for
all purposes. The Corporation shall permit the Holder of this Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the Holders of
Warrants. All Warrants will be dated the same date as this Warrant.
7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Corporation of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity in form and amount reasonably satisfactory to the Corporation, if
lost, stolen or destroyed, and upon surrender and cancellation of this Warrant,
if mutilated, and upon reimbursement of the Corporation's reasonable incidental
expenses, the Corporation shall execute and deliver to the Holder new Warrant of
like date, tenor and denomination.
8. Warrant Holder Not A Shareholder. This Warrant does not confer upon
the Holder any right to vote or to consent or to receive notice as a shareholder
of the Corporation, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a shareholder, prior to the exercise hereof.
9. Communication. No notice or other communication under this Warrant
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is mailed by first-class mail, postage prepaid, addressed to:
(a) the Corporation at 50 East RiverCenter Blvd., Suite 180,
Covington, KY 41011, or such other address as the Corporation has designated in
writing to the Holder, or
(b) the Holder at the address shown on the Corporation's books as
described above.
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience, and shall not affect the construction hereof.
11. Amendments. This Warrant may be amended only by written agreement of
the Corporation and the Holder.
12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed therein.
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<PAGE> 6
IN WITNESS THEREOF, REGENT COMMUNICATIONS, INC. has executed this
Warrant as of the date set forth on the first page hereof.
REGENT COMMUNICATIONS, INC.
By: /s/
--------------------------
President
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<PAGE> 7
SUBSCRIPTION
The undersigned, ___________________________, pursuant to the provisions
of the foregoing Warrant, hereby agrees to subscribe for and purchase
___________ shares of Common Stock of REGENT COMMUNICATIONS, INC. covered by
said Warrant, and makes payment therefor in full at the price per share provided
by said Warrant.
Dated: __________________ Signature: _________________________
Address: _________________________
_________________________
ASSIGNMENT
FOR VALUE RECEIVED ___________________ hereby sells, assigns and transfers
unto _______________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint
________________________________, attorney, to transfer said Warrant on the
books of REGENT COMMUNICATIONS, INC. ___________________ hereby agrees to be
bound by the terms of the Warrant as defined therein.
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<PAGE> 1
EXHIBIT 4(h)
AGREEMENT TO ISSUE WARRANT
Agreement dated as of June 15, 1998 by and between Regent
Communications, Inc., a Delaware corporation ("Regent") and General Electric
Capital Corporation, a New York corporation ("GE Capital").
WITNESSETH:
WHEREAS, GE Capital owns 1,000,000 shares of the 7% Series B Convertible
Preferred Stock of Regent; and
WHEREAS, Regent contemplates the issuance of shares of a Series F
Convertible Preferred Stock of Regent to Waller-Sutton Media Partners, L.P.
("Waller-Sutton") and certain other investors pursuant to the terms of a Stock
Purchase Agreement of even date herewith; and
WHEREAS, in order to induce GE Capital to approve the issuance of
shares of a Series F Convertible Preferred Stock of Regent to Waller-Sutton and
certain other investors as described in the Registration Statement on Form S-4
filed by Regent with the Securities and Exchange Commission, effective May 7,
1998, and as more specifically set forth in said Stock Purchase Agreement,
Regent has agreed to issue to GE Capital, and GE Capital has agreed to accept
upon issuance of such shares, warrants to purchase 50,000 shares of Regent
Common Stock.
NOW, THEREFORE, the parties, desiring to enter into this Agreement to
establish the specific terms and conditions of the warrants, agree as follows:
1. Issuance of Warrant.
Upon and concurrently with the issuance to Waller-Sutton of
shares of Series F Convertible Preferred Stock of Regent pursuant to the terms
of said Stock Purchase Agreement,
<PAGE> 2
Regent shall deliver to GE Capital a warrant in the form of Exhibit A hereto to
purchase 50,000 shares of Common Stock of Regent (the "Warrant").
2. Representations and Warranties of Regent.
Regent hereby represents and warrants to GE Capital as
follows:
(a) All corporate action on the part of Regent, its directors
and stockholders necessary for the authorization, execution, delivery and
performance of this Agreement by Regent; the authorization, sale, issuance and
delivery of (i) the Warrant and (ii) the Warrant Shares (as defined in the
Warrant), and the performance of all of Regent's obligations hereunder and
thereunder has been taken.
(b) This Agreement constitutes the valid and binding
obligation of Regent, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting enforcement of creditors' rights generally and except
as enforcement is subject to general principles of equity regardless of whether
enforcement is considered in a proceeding at law or in equity.
(c) The Warrant, when issued in compliance with the provisions
of this Agreement, will be validly issued, will have the rights, preferences and
privileges described therein and will constitute valid and binding obligations
of Regent, enforceable in accordance with its terms, subject to the matters
described above.
(d) The Warrant Shares have been duly and validly reserved
and, when issued in compliance with the provisions of the Warrant, will be
validly issued, fully paid and nonassessable.
(e) The Warrant and the Warrant Shares will be free of any
liens or encumbrances, other than any liens or encumbrances created by or
imposed upon the holders
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<PAGE> 3
thereof through no action of Regent; provided, however, that the Warrant and the
Warrant Shares will be subject to restrictions on transfer under state and/or
federal securities laws as set forth therein.
3. Representations and Warranties of GE Capital.
GE Capital hereby represents and warrants to Regent, as of the
date hereof, as follows:
(a) Investment Intent. GE Capital is acquiring the Warrant for
its own account, for investment and not with a view to resale, distribution, or
other disposition, and GE Capital has no present plans to enter into any
contract, undertaking, agreement or arrangement for any such resale,
distribution or other disposition. GE Capital will not sell or otherwise
transfer the Warrant without registration under the Securities Act of 1933, as
amended, and applicable state securities laws, or pursuant to an exemption from
the registration requirements thereof which, in the opinion of counsel
acceptable to Regent, is available for the transaction.
(b) Opportunity to Review Books and Records. GE Capital has
had a reasonable opportunity to inspect all documents, books and records
pertaining to Regent and the Warrant and confirms that the Warrant is being
acquired without GE Capital's receipt of any offering literature.
(c) Opportunity for Questions. GE Capital has had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of Regent concerning Regent, its business and proposed
operations, the terms of the Warrant and all other aspects of investment in
Regent, and all such questions have been answered to the full satisfaction of GE
Capital.
(d) No Conflict. The execution, delivery and performance of
this Agreement by GE Capital (i) will not constitute a default under or conflict
with any agreement or instrument to
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<PAGE> 4
which GE Capital is a party or by which it or its assets are bound, (ii) will
not conflict with or violate any order, judgment, decree, statute, ordinance or
regulation applicable to GE Capital (including, without limitation, any
applicable laws relating to permissible legal investments) and (iii) do not
require the consent of any person or entity.
(e) Authority of GE Capital. This Agreement constitutes the
legal, valid and binding obligations of GE Capital, enforceable against GE
Capital in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement is subject
to general principles of equity regardless of whether enforcement is considered
in a proceeding at law or in equity.
4. Miscellaneous.
(a) Notices. Any notice, request or other document to be given
hereunder to any party shall be effective upon receipt (or refusal of receipt)
and shall be in writing and delivered personally or sent by telecopy or
certified or registered mail, postage prepaid:
(i) if to Regent, addressed to:
Regent Communications, Inc.
50 East RiverCenter Boulevard, Suite 180
Covington, Kentucky 41011
Attn: Terry S. Jacobs, Chairman of the Board
Facsimile (606) 292-0352
(ii) if to GE Capital, addressed to:
General Electric Capital Corporation
3379 Peachtree Road, N.E., Suite 600
Atlanta, Georgia 30326
Attn: Regent Account Manager
Facsimile (408)-842-1533
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<PAGE> 5
with a copy to:
General Electric Capital Corporation
201 High Ridge Road
Stanford, Connecticut 06927
Attn: Region Counsel
Facsimile: (203) 316-7889
or to such other address or telecopy number as any party shall have specified by
notice given to the other parties in the manner specified above.
(b) Entire Agreement; Amendment. This Agreement, including the
Exhibit hereto, and the other agreements, if any, expressly contemplated by this
Agreement, contain the entire agreement between the parties with respect to the
subject matter hereof and supersede all prior oral and written agreements,
memoranda, term sheets, understandings and undertakings among the parties hereto
relating to the subject matter hereof. This Agreement may be modified or amended
only by a written instrument executed by or on behalf of the parties hereto.
(c) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware without
regard to the application of its conflicts of laws principles. The parties
hereby waive all right to trial by jury in any action, suit or proceeding
brought to enforce or defend any rights or remedies under this Agreement or the
transactions contemplated hereby.
(d) Severability. If any provision in this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby.
(e) Construction. The section and subsection headings used
herein are for convenience of reference only, are not a party of this Agreement
and are not to affect the construction of, or be taken into consideration in
interpreting, any provision of this Agreement.
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<PAGE> 6
As used in this Agreement, the masculine, feminine and neuter gender each
includes the other, unless the context otherwise dictates. Any and all schedules
and exhibits referred to in this Agreement and attached hereto are and shall be
incorporated in this Agreement as if fully set forth herein.
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instruments.
(g) Specific Performance. The parties hereto acknowledge that
damages may be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder may be
specifically enforced, and no party will take any action to impede the other
from seeking to enforce such right of specific performance after any such
breach.
(h) Successors and Assigns; Assignability. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successor and
permitted assigns. This Agreement shall not confer upon any person other than
the parties hereto and their respective successors and permitted assigns any
rights or remedies hereunder.
(i) Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
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<PAGE> 7
(j) Survival. The representations and warranties of the
parties contained herein shall survive execution and delivery of this Agreement
and issuance and delivery of the Warrant or Warrant Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, as of the day and year first above written.
REGENT COMMUNICATIONS, INC.
By:/s/
------------------------------------
Its:
--------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION
By:/s/
------------------------------------
Its:
--------------------------------
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Exhibit 20(a)
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ..........to..............
Commission file number 0-15392
FAIRCOM INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0394057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Glen Head Road, Old Brookville, N.Y. 11545
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 676-2644
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $.01 Par Value Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
NONE
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 20, 1998, the aggregate market value of the registrant's
voting stock held by non-affiliates was approximately $5,294,000.
The number of outstanding shares of Common Stock as of March 20, 1998
was 7,378,199.
<PAGE> 2
PART I
ITEM 1. BUSINESS
The Company
Faircom Inc., a Delaware corporation ("Faircom" or the
"Company"), owns and operates six radio stations, WFNT(AM) and WCRZ(FM) in
Flint, Michigan; WWBN(FM) in Tuscola, Michigan, a community north of Flint;
WMAN(AM) and WYHT(FM) in Mansfield, Ohio, and WSWR(FM) in Shelby, Ohio
adjoining Mansfield.
Faircom was founded by Joel M. Fairman in April 1984 and
began operations with the objective of acquiring broadcasting properties at
prices considered attractive by Faircom, financing them on terms satisfactory
to Faircom, managing them in accordance with Faircom's operating strategy and
building a broadcasting group. Faircom has sought to acquire radio properties
which have a history of growing revenues and broadcast cash flow, have capable
operating management and are in communities with good growth prospects or
which have attractive competitive environments. Faircom focuses its
acquisition efforts on medium and smaller radio markets, particularly where
there may be an opportunity to achieve a significant cluster of stations in
the market or to add additional stations in surrounding communities. Faircom
has not purchased, and does not foresee purchasing in the near future,
properties with negative cash flows, or so-called "under-performing" or
"turnaround" properties, unless they complement or can be combined with the
operations of positive cash flow properties in a market or regional cluster.
Faircom's strategy is to have at least $1,000,000 in broadcast cash flow and
be among the top three operators in each of its markets.
In June 1997, Faircom, through its wholly-owned subsidiary,
Faircom Mansfield Inc. ("Faircom Mansfield"), purchased substantially all of
the assets of WMAN(AM) and WYHT(FM) for total cash consideration of
$7,650,000. Faircom also negotiated the refinancing of all its existing
indebtedness, increased such indebtedness and obtained additional equity
capital in connection with the acquisition.
In January 1998, Faircom purchased substantially all of the
assets and operations of radio station WSWR(FM) in Shelby, Ohio for $1,125,000
in cash. The acquisition was financed with internal funds and a loan to
Faircom of $1,100,000 from Blue Chip Capital Fund II Limited. This loan is
expected to be refinanced from term loans to Regent Communications Inc.
("Regent") at the closing of the pending merger of Faircom and Regent
discussed below. The loan is in the form of a subordinated note, matures on
the first to occur of April 1, 1999 or the closing of the merger and bears
accrued interest at 14% per annum, payable at maturity.
Faircom continuously reviews radio properties for possible
acquisition, and several acquisitions are currently being actively pursued. No
assurance can be given that Faircom will successfully consummate any of such
acquisitions.
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Faircom's executive offices are located at 333 Glen Head
Road, Suite 220, Old Brookville, New York 11545 and its telephone number is
(516) 676-2644. All of Faircom's properties are owned and operated through
subsidiary corporations and references to the term "Faircom" or the "Company"
herein include such subsidiaries unless the context requires otherwise.
Pending Merger
On December 5, 1997, Faircom signed an agreement to merge
with Regent Communications, Inc. ("Regent"), another group radio broadcaster.
Under the terms of the agreement, Faircom will merge with and into a
subsidiary of Regent. The shareholders of Faircom will receive shares of
Regent Series C Convertible Preferred Stock, par value $.01 per share ("Series
C Preferred Stock").
The Series C Preferred Stock has full voting rights,
provides for annual cumulative dividends of 7%, and is convertible on a
one-for-one basis (subject to adjustment in certain events) into the common
stock, $.01 par value per share, of Regent. The Series C Preferred Stock is
subject to mandatory conversion under certain circumstances. In the event of a
liquidation of Regent, the Series C Preferred Stock has a preference in the
amount of its stated value of $5.00 per share, together with accrued and
unpaid dividends.
In the merger, the outstanding shares of Faircom Common
Stock will be exchanged for fully paid and nonassessable shares of Series C
Preferred Stock, and each outstanding Faircom option will be converted into a
Regent option entitling the holder to acquire, on equivalent terms, the same
number of shares of Series C Preferred Stock as the holder would have been
entitled to receive in the merger if such Faircom option had been exercised in
full prior to the date of the merger. The number of shares of Series C
Preferred Stock to be issued in the merger and issuable pursuant to Regent
options to be received in exchange for Faircom options in the merger will be
based upon an aggregate liquidation preference amount of $33,162,000, adjusted
by the amount of Faircom's net working capital and decreased by its senior
debt and by one-half of the prepayment premium on such senior debt to be paid
at the closing of the merger, all as computed as of the last day of the month
immediately preceding the closing date of the merger.
Faircom anticipates a closing of the merger in the second
quarter of 1998. The closing of the merger is subject to the effectiveness of
a registration statement and delivery of a related proxy statement to
Faircom's stockholders, satisfaction of the conditions of the merger agreement
and the approval of Faircom's stockholders.
Operating Strategy
Faircom's strategy has been to purchase radio properties
that exhibit growing revenues and broadcast cash flow, and have experienced,
in-place operating personnel. After acquiring a radio station, Faircom reviews
the station's operations and
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attempts to realize economies associated with ownership of multiple stations
by centralizing such functions as accounting and other administrative
activities. A minimal staff is maintained at the corporate level reflecting
Faircom's strategy of minimizing corporate expenses while giving considerable
autonomy to its station managers.
Faircom relies on experienced station managers who are given
the authority for decision making at the station level, subject to guidance by
Faircom's management. Faircom's station managers are partially compensated on
the basis of their ability to meet or exceed budgeted operating results.
Consequently, operating personnel can benefit by meeting the revenue and
expense objectives of Faircom.
Each station targets specific demographic groups based upon
advertiser demand, the format of the station and the competition in the
market. Through program selection, promotion, advertising and the use of
selected on-air personnel, each station attempts to attract a target audience
that it believes is attractive to advertisers. Faircom retains consultants to
assist its programming personnel by evaluating and suggesting improvements for
programming. Faircom also conducts research through outside consultants to
evaluate and improve its programming and also uses its own personnel for such
research.
The Radio Broadcasting Industry
At December 31, 1997, there were 4,762 commercial AM and
5,542 commercial FM stations authorized and operating in the United States. An
increasing number of persons listen to FM radio because of clearer sound
characteristics and stereo transmission. In the spring of 1997, FM
listenership was about 78% of total radio audience.
Operations
Radio station revenue is derived predominantly from local
and regional advertising and to a lesser extent from national advertising.
Network compensation also provides some revenue. For example, in 1997,
approximately 77% of Faircom's consolidated station advertising revenues were
from local and regional sales, 22% from national sales and about 1% from
network or syndication compensation. Local and regional sales generally are
made by a station's sales staff. National sales generally are made by
"national rep" firms, specializing in radio advertising sales on the national
level. These firms are compensated on a commission-only basis. Local and
regional sales are made primarily to businesses in the market covered by a
station's broadcast signal and to some extent to businesses in contiguous or
nearby markets. Such businesses include auto dealers, soft drink, beer and
wine distributors, fast food outlets and financial institutions. National
sales are made to larger, nationwide advertisers, such as soft drink
producers, automobile manufacturers and airlines. Most advertising contracts
are short-term, generally running only for a few weeks. Advertising rates
charged by a radio station are based primarily on the station's ability to
attract
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audiences in the demographic groups which advertisers wish to reach and on the
number of stations competing in the market area. Rating service surveys
quantify the number of listeners tuned to the station at various times. Rates
are generally highest during morning and evening drive-time hours. Faircom's
stations' advertising sales are made by their sales staffs under the direction
of a general manager or sales managers. Television, billboard, newspaper and
direct mail advertising, as well as special events and promotions, can be used
to supplement direct contact by the sales staff in developing advertising
clients.
The primary costs incurred in operating a radio station are
salaries, programming, promotion and advertising expenditures, occupancy costs
of premises for studios and offices, transmitting and other equipment expenses
and music license royalty fees.
Radio broadcasting revenues are spread over the calendar
year. The first quarter generally reflects the lowest and the third and fourth
quarters the highest revenues for the year, due in part to increases in retail
advertising in the summer and in the fall in preparation for the holiday
season and, in election years, to political advertising.
The radio industry is continually faced with technological
changes and innovations, the possible rise in popularity of competing
entertainment and communications media, changes in labor conditions,
governmental restrictions and actions of federal regulatory bodies, including
the FCC, any of which could have a material effect on Faircom's business.
However, broadcasting stations have generally enjoyed growth in listeners and
value within the past several decades. Population increases and greater
availability of radios, particularly car and portable radios, have contributed
to this growth.
Competition
The radio broadcasting industry is a highly competitive
business. Faircom's radio broadcasting stations compete for audience share and
revenue directly with the other AM and FM radio stations in their respective
market areas, as well as with other advertising media such as newspapers,
television, magazines, outdoor advertising, transit advertising and mail
marketing. Competition within the radio broadcasting industry occurs primarily
in the individual market areas so that a station in one market does not
generally compete with stations in other market areas. In addition to
management experience, factors which are material to competitive position
include the station's ratings in its market, rates charged for advertising
time, broadcast signal coverage, assigned frequency, audience characteristics,
the ability to create and execute promotional campaigns for clients and for
the station, local program acceptance and the number and characteristics of
other stations in the market area. Faircom attempts to improve its competitive
position by reviewing programming and the programming of competitors,
upgrading technical facilities where appropriate, attempting to expand sales
to existing advertising clients and developing new client
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relationships, and by promotional campaigns aimed at the demographic groups
targeted by its stations.
In order to provide additional opportunity for persons
interested in obtaining radio broadcasting licenses, including minorities, the
FCC in 1984 proposed new licenses for new full service FM broadcast stations
in 684 communities. This FCC program is referred to as the "Docket 80-90"
proceeding. Where these stations have commenced commercial broadcasting, they
have increased competition in these markets. Also, it has been customary in
the industry for experienced operators to buy stations in markets they
consider attractive and attempt to improve the performance of these stations
by additional investment and better management, thus increasing competition in
these markets.
The FCC recently has allocated spectrum to a new technology,
digital audio broadcasting ("DAB"), to deliver satellite-based audio
programming to a national or regional audience and has adopted regulations for
a DAB service. DAB may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats with compact disc
quality sound to local and national audiences. Another form of DAB, known as
In-Band On Channel ("IBOC"), could provide DAB in the present FM radio band.
It is not known at this time whether this technology also may be used in the
future by existing radio broadcast stations either on existing or alternate
broadcasting frequencies. In addition, three applications have been granted by
the FCC for authority to offer multiple channels of digital,
satellite-delivered S-Band aural services that could compete with conventional
terrestrial radio broadcasting. These satellite radio services use technology
that may permit higher sound quality than is possible with conventional AM and
FM terrestrial radio broadcasting. Implementation of DAB or IBOC would provide
an additional audio programming service that could compete with Faircom's
radio stations for listeners, but the effect upon Faircom cannot be predicted.
Implementation of DAB or IBOC would provide an additional audio programming
service that could compete with the Company's radio stations for listeners,
but the effect upon the Company cannot be predicted.
FCC Regulation
The FCC regulates radio stations under the Communications
Act of 1934, as amended (the "Communications Act") which, together with FCC
rules and policies promulgated thereunder, governs the issuance, renewal and
assignment of licenses, technical operations, employment practices and, to a
limited extent, business and program practices of radio stations and other
communications entities.
The rules also generally prohibit the acquisition of
ownership in, or control of, a television station and either an AM or a FM
radio station serving the same market. Such so-called "cross-ownership"
prohibition is subject to waiver for stations in the 25 largest television
markets under certain conditions. There are also prohibitions relating to
ownership in or control of a daily newspaper and a broadcast
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station in the same market and limitations on the extent to which aliens may
own an interest in broadcast stations.
Over the past five years, broadcasters such as Faircom have
entered into what have commonly been referred to as "Local Market Agreements,"
or "LMAs." While these agreements may take varying forms, under a typical LMA,
separately owned and licensed radio stations agree to enter into cooperative
arrangements of varying sorts, subject to compliance with the requirements of
antitrust laws and with the FCC's rules and policies. Under these types of
arrangements, separately owned stations could agree to function cooperatively
in terms of programming, advertising sales, etc., subject to the licensee of
each station maintaining independent control over the programming and station
operations of its own station. One typical type of LMA is a programming
agreement among two separately owned radio stations serving a common service
area, whereby the licensee of one station programs substantial portions of the
broadcast day on the other licensee's station, subject to ultimate editorial
and other controls being exercised by the latter licensee, and sells
advertising time during such program segments. Such arrangements are an
extension of the concept of "time brokerage" agreements, under which a
licensee of a station sells blocks of time on its station to an entity or
entities which program the blocks of time and which sell their own commercial
advertising announcements during the time periods in question.
In the past, the FCC has determined that issues of joint
advertising sales should be left to antitrust enforcement and has specifically
revised its so-called "cross- interest" policy to make that policy
inapplicable to time brokerage arrangements. Under the cross-interest policy,
the FCC may prohibit one party from acquiring certain economic interests in
two broadcast stations in the same market. Furthermore, the staff of the FCC's
Mass Media Bureau has, over the past five years, held that LMAs are not
contrary to the Communications Act provided that the licensee of the station
which is being substantially programmed by another entity maintains complete
responsibility for and control over operations of its broadcast station and
assures compliance with applicable FCC rules and policies. However, LMAs in
which one station programs more than 15% of the weekly broadcast time of
another local radio station are prohibited under FCC rules if the programming
station could not own the programmed station under the FCC's so-called
"multiple ownership" rules.
On February 8, 1996, the President signed into law the
Telecommunications Act of 1996. This legislation (a) permits foreign nationals
to serve as officers and directors of broadcast licensees and their parent
companies, (b) directs the FCC to eliminate its national ownership limits on
radio station ownership, (c) requires the FCC to relax its numerical
restrictions on local radio ownership, (d) extends the FCC's radio and
television cross ownership waiver policy to the top 50 markets, (e) extends
the license renewal period for radio and television stations to eight years
and (f) affords renewal applicants significant new projections from competing
applications for their broadcast licenses.
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The Telecommunications Act's provisions regarding local
radio ownership limits create a sliding scale of permissible ownership,
depending on market size. In radio markets with 45 or more commercial radio
stations, a license may own up to eight stations, no more than five of which
can be in a single radio service (i.e. no more than five AM or five FM). In
radio markets with 30 to 44 commercial radio stations, a license may own up to
seven stations, no more than four of which are in a single radio service. In
radio markets having 15 to 29 commercial radio stations, a licensee may own up
to six radio stations, no more than four of which are in a single radio
service. Finally, with respect to radio markets having 14 or fewer commercial
radio stations, a licensee may own up to five radio stations, no more than
three of which are in the same service; provided that the licensee may not own
more than one half of the radio stations in the market.
The Telecommunications Act affords renewal applicants
additional protection from renewal challenges by (a) changing the standard for
grant of license renewal and (b) precluding the FCC from considering the
relative merits of a competing applicant in connection with making its
determination on a licensee's renewal application. The new standard for
license renewal is that a station's license will be renewed if (x) the station
has served the public interest, convenience and necessity, (y) there have been
no serious violations of the Communications Act or FCC rules by the licensee
and (z) there have been no other violations of the Communications Act or FCC
rules which, taken together, would establish a pattern of abuse by the
licensee.
The Communications Act limits the ownership of broadcast
licenses by "aliens." Faircom's voting securities contain a legend which
states that the securities are subject to certain restrictions on transfer to
"aliens" (as defined in the Communications Act) as set forth in the By-laws of
Faircom. Faircom's By-laws provide that shares of voting securities held by
aliens which cause Faircom to be in violation of any provisions of the
Communications Act shall not be entitled to vote, to receive dividends or have
any other rights, and the holders of such securities will be required to
transfer them to Faircom or another person whose ownership of such shares
would not be in violation of the Communications Act.
The foregoing does not purport to be a complete summary of
all of the provisions of the Communications Act, the Telecommunications Act or
the regulations or policies of the FCC thereunder. Reference is made to such
Acts, regulations, and policies for further information.
Licenses
Faircom's license for its Tuscola station, WWBN(FM), was to
expire October 1, 1996, and was renewed for a term through October 1, 2003.
Pursuant to regulations adopted by the FCC in January 1997, as provided by the
Telecom Act, the license renewal term was extended to October 1, 2004, a
period of eight years. Faircom's licenses for its Flint stations, WCRZ(FM) and
WFNT(AM), also were to expire on October 1, 1996. Timely license renewal
applications for the stations were
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filed, and, as part of the FCC's review process, the Equal Employment
Opportunity ("EEO") Branch of the FCC's Mass Media Bureau requested additional
written information regarding Faircom's EEO recruitment efforts at these
stations. Such additional information was furnished, and on September 30,
1997, the FCC released a Memorandum Opinion and Order and Notice of Apparent
Liability. The Opinion found that there was no evidence that the licensee
engaged in employment discrimination, but that the overall EEO recruitment
effort was deficient because the licensee failed to recruit actively for some
of its vacancies and to engage in meaningful self-assessment of its EEO
program. The Order granted renewal of the stations' licenses for a term
expiring October 1, 2004, subject to an admonishment and reporting
requirements with respect to EEO recruitment performance for the 12 month
periods ending June 1, 1998, 1999 and 2000. A Notice of Apparent Liability was
issued in the amount of $11,000. The management of Faircom and its FCC counsel
believe that the factual assumptions on which the FCC Opinion, Order and
Notice are based are incorrect, and incomplete. On October 30, 1997, Faircom
filed with the FCC a Petition for Reconsideration in this matter, Faircom and
its FCC counsel are unable to predict the ultimate outcome of this matter,
but, in the opinion of both, a rejection a Faircom's Petition would not have a
material adverse effect on Faircom. The licenses of WMAN(AM) and WYHT(FM) in
Mansfield, Ohio, and WSWR(FM), in Shelby, Ohio, were renewed October 1, 1996
and expire October 1, 2004.
Employees
At the corporate level, Faircom employs its President and
Treasurer, Joel M. Fairman, and John E. Risher, its Senior Vice President, who
also utilize the services of consultants, a bookkeeping service and Faircom's
attorneys. Faircom's President and Senior Vice President assist the general
managers of Faircom's stations in developing strategies to increase the
profitability of Faircom's broadcasting properties and in the operation of the
stations. Faircom plans to continue its present policy of utilizing only a
small number of persons at the corporate level. Each market in which Faircom
owns and operates radio stations has its own complement of employees,
including a general manager, a sales manager, a business manager, advertising
sales staff, on-air personalities and engineering and operating personnel. In
the aggregate, Faircom's subsidiaries employ 64 people on a full-time basis
and 32 people on a part-time basis.
Faircom has never experienced a strike or work stoppage and
believes that its relations with its employees are good.
ITEM 2. PROPERTIES
Faircom leases approximately 780 square feet of office space
for its corporate offices in Old Brookville, New York. The lease expires
February 28, 2001. Annual rent is currently $22,200.
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The Flint stations occupy studio and office space in a
building of approximately 6,000 square feet located on 10 acres in
southeastern Flint, Michigan. The AM towers and antennas are also located on
this land. An FM tower, antenna and transmitter building and equipment are
located on 19 acres of land located nearby. The land, buildings, towers,
antennas and equipment are owned by a subsidiary of Faircom.
The Tuscola station occupies studio and office space in
leased premises in Frankenmuth, Michigan, at an annual rental of $1,800 under
a lease that expires in September 1998. The station's tower, antenna and
transmitter building and equipment are owned by a subsidiary of Faircom. Those
facilities are located on leased land in Millington, Michigan. The lease
expires in June 2002 and has renewal options through June 2042. Current rental
is $2,112 annually.
The Mansfield stations occupy studio and office space in a
building of approximately 6,600 square feet located on six acres in Mansfield,
Ohio. An auxiliary AM tower is located at this site. An adjoining property of
approximately 10 acres is the site of a building of approximately 6,000 square
feet that contains AM and FM transmitters and equipment and storage space. The
AM and FM towers and antenna are located on this property. The land,
buildings, towers, antennas and equipment are owned by a subsidiary of
Faircom.
All operations of WSWR(FM) in Shelby have been moved to the
Mansfield studio and office space. The tower, antenna and transmitter building
and equipment of WSWR(FM) are located on approximately one-half acre in
Plymouth Township, Ohio, northeast of Shelby. The tower site is leased through
September 2002 at a current rental of $1,200 annually, with four five-year
term renewal options, each at a 10% increase in annual rent over the prior
term. WSWR(FM) also leases approximately 1,000 square feet for office, sales,
and broadcast use in Willard, Ohio. The lease is at a current annual rental of
$3,600 and expires in August 2002. The lease contains an option to renew for
an additional five-year term at an annual rental of $4,200.
Faircom owns substantially all of its studio and general
office equipment. Faircom believes that its properties are in good condition
and are adequate for its operations, although opportunities to upgrade
facilities are constantly reviewed.
All the tangible and intangible property of the Company's
subsidiaries is pledged as security for senior debt of the subsidiaries. See
Notes 3 and 5 to the Company's 1997 Consolidated Financial Statements for a
description of encumbrances against the Company's properties and the Company's
rental obligations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any lawsuit or legal
proceeding that, in the opinion of the Company, is likely to have a material
adverse effect on the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market For Common Stock
The Company's common stock is quoted on the OTC Bulletin
Board under the symbol "FXCM" and is traded on the over-the-counter market.
The following table reflects the reported high and low bid
quotations for Faircom Common Stock on the OTC Bulletin Board for each quarter
during 1996 and 1997. Such quotations reflect interdealer prices, without
retail mark-up, markdown or commission and may not necessarily represent
actual transactions.
Fiscal Year High Low
1996
First Quarter....................... $.25 $.13
Second Quarter...................... $.25 $.13
Third Quarter....................... $.25 $.13
Fourth Quarter...................... $.19 $.13
1997
First Quarter....................... $.22 $.13
Second Quarter...................... $.28 $.22
Third Quarter....................... $.63 $.28
Fourth Quarter...................... $.94 $.56
On March 20, 1998, the bid and asked prices of the Company's
Common Stock on the OTC Bulletin Board were $.81 and $.94, respectively. There
were 329 holders of record of the Company's Common Stock on March 20, 1998.
Dividend Policy
The Company has never paid dividends on its Common Stock. It
is the Company's current policy to retain future earnings for the capital
requirements of its business. The Company and its subsidiaries are subject to
certain restrictions under existing agreements with their lenders which limit
dividends on their Common Stock. See Note 3 to the Company's 1997 Consolidated
Financial Statements.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net Broadcasting Revenues $ 5,993,291 $ 4,873,954 $ 5,113,582 $ 4,983,513 $ 5,015,265
Income from Operations 1,015,144 1,222,829 1,511,481 1,470,355 854,514
Income (Loss)
Before Extraordinary
Items (362,537) 278,840 244,816 992,079 (796,843)
Extraordinary Items (4,333,310) 787,201 3,216,605
Net Income (Loss) (4,695,847) 278,840 244,816 1,779,280 2,419,762
Basic Income (Loss)
Per Common Share:
Income (Loss)
Before Extraordinary
Items (.05) .04 .03 .13 (.11)
Extraordinary Items (.59) .11 .44
Basic Net Income (Loss)
Per Common Share (.64) .04 .03 .24 .33
Diluted Income (Loss)
Per Common Share:
Income (Loss)
Before Extraordinary
Items (.05) .02 .02 .06 (.11)
Extraordinary Items (.59) .05 .44
Diluted Net Income (Loss)
Per Common share (.64) .02 .02 .11 .33
BALANCE SHEET DATA
AT YEAR END:
Total Current Assets 1,919,232 1,305,585 1,311,916 1,246,104 1,771,069
Total Current Liabilities 859,631 1,068,021 1,037,239 1,150,537 2,771,126
Total Assets 13,010,554 4,326,453 4,546,508 4,488,913 4,515,236
Long-Term Debt and
Obligations Under
Capital Leases 21,911,661 7,276,884 7,828,883 8,367,345 6,010,018
Redeemable Preferred Stock
of Subsidiaries at
Liquidation Value 1,968,544
Total Capital Deficit (10,181,788) (5,485,941) (5,764,781) (6,009,597) (11,624,571)
</TABLE>
The Company has not declared or paid Common Stock cash dividends since
inception.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Year ended December 31, 1997 compared to year ended December
31, 1996
The results of the Company's operations for the year ended
December 31, 1997 compared to the year ended December 31, 1996 are not
comparable or necessarily indicative of results in the future due to the
significance of acquisitions.
As of June 30, 1997, the Company, through a wholly-owned
subsidiary, Faircom Mansfield Inc. ("Faircom Mansfield"), acquired the assets
and operations of two radio stations, WMAN-AM and WYHT-FM, both located in
Mansfield, Ohio (the "Mansfield Stations") for aggregate cash consideration of
$7,650,000. The acquisition has been accounted for as a purchase, and
accordingly the operating results of the Mansfield Stations have been included
in the Consolidated Statements of Operations from the acquisition date.
The increase in the Company's net broadcasting revenues in
1997 as compared with 1996 resulted principally from the ownership and
operation of the Mansfield Stations during 1997. Net broadcasting revenues
increased to $5,993,000 from $4,874,000, or 23.0%, in 1997 as compared with
1996.
Programming and technical expenses and selling, general and
administrative expenses increased in 1997 as compared with 1996, principally
as a result of the acquisition of the Mansfield Stations. Such increases were
to $1,591,000 from $1,218,000, or 30.6%, and to $2,270,000 from $1,775,000, or
27.9%, respectively.
Operating expenses before depreciation, amortization and
corporate expenses also increased in 1997 as compared with 1996, primarily as
a result of the acquisition of the Mansfield Stations. Such increase was to
$3,860,000 from $2,993,000, or 29.0%, in 1997 as compared with 1996.
Net broadcasting revenues in excess of operating expenses
before depreciation, amortization and corporate expenses ("broadcast cash
flow") increased 13.4% to $2,133,000 in 1997 from $1,881,000 in 1996. This
increase resulted from the acquisition of the Mansfield Stations as described
above, offset in part by lower broadcast cash flow from the Company's radio
stations in Flint, Michigan.
Depreciation and amortization and interest expense increased
in 1997 as compared with 1996 as a result of the addition of assets and debt
incurred in connection with the acquisition of the Mansfield Stations.
Taxes on income for both 1997 and 1996 related principally
to state income taxes. There were no current federal income taxes in 1997, as
a result of a taxable loss. Current federal income taxes in 1996 were offset
in full by the utilization
13
<PAGE> 15
of net operating loss carryforwards. The Company has provided valuation
allowances equal to its deferred tax assets because of uncertainty as to their
future utilization. The deferred tax assets relate principally to net
operating loss carryforwards. Although the Company was marginally profitable
in 1994 through 1996, the loss in 1997 along with substantial historical
losses caused management to conclude that it was still premature to reduce the
valuation allowance.
As a result principally of an extraordinary loss from debt
extinguishment of $4,703,000, offset in part by an extraordinary gain from
debt extinguishment of $370,000, net loss was $4,696,000 for 1997 compared to
net income of $279,000 in 1996.
Year ended December 31, 1996 compared to year ended December
31, 1995
The Company's net broadcasting revenues decreased 4.7% in
1996 compared to 1995 (to $4,874,000 from $5,114,000), primarily due to lower
regional and national advertising activity in the Flint, Michigan radio market
and resulting lower regional and national advertising revenues in the
Company's Flint radio stations.
Programming and technical expenses decreased by 0.9% in 1996
compared to 1995 (to $1,218,000 from $1,229,000) and selling, general and
administrative expenses increased by 3.4% (to $1,775,000 from $1,717,000).
Operating expenses before depreciation, amortization and
corporate expenses increased by 1.6% in 1996 compared to 1995 (to $2,993,000
from $2,946,000).
Net broadcasting revenues in excess of operating expenses
before depreciation, amortization and corporate expenses ("broadcast cash
flow") decreased 13.2% (to $1,881,000 from $2,167,000) in 1996 compared to
1995, principally as a result of the lower net broadcasting revenues in Flint.
Corporate expenses increased by 10.5% in 1996 from 1995 (to
$337,000 from $305,000) primarily as a result of higher employee compensation,
professional fees and related expense. Such employee compensation in 1996
included incentive payments indexed to 1995 operating results.
Interest expense decreased by 26.9% in 1996 from 1995 (to
$914,000 from $1,249,000) due to lower principal amounts of interest bearing
debt outstanding, lower interest rates during 1996 and a lower provision for
appraisal rights.
Taxes on income for both 1996 and 1995 related principally
to state income taxes. Current federal income taxes in 1996 and 1995 and a
portion of state income taxes in 1995 were offset by the utilization of net
operating loss carryforwards. The Company has provided valuation allowances
equal to its deferred tax assets because of uncertainty as to their future
utilization. The deferred tax assets relate principally to net operating loss
carryforwards. Although the Company was marginally
14
<PAGE> 16
profitable in 1994 through 1996, substantial historical losses caused
management to conclude that it was still premature to reduce the valuation
allowance.
As a result principally of lower provision for appraisal
rights and interest expense in 1996 compared with 1995, offset by lower income
from operations, net income increased to $279,000 in 1996 from $245,000.
Liquidity and Capital Resources
In 1997, net cash provided by operating activities was
$418,000 compared with $379,000 provided by operating activities in 1996. Net
increase in cash and cash equivalents was $412,000 in 1997 compared with a net
decrease of $240,000 in 1996.
In January 1998, Faircom Mansfield purchased substantially
all of the assets and operations of radio station WSWR-FM in Shelby, Ohio for
$1,125,000 in cash. The acquisition was financed with internal funds and a
loan to the Company of $1,100,000. The loan is in the form of a subordinated
note, matures on the first to occur of April 1, 1999 or the closing of the
merger with Regent Communications, Inc. ("Regent"), discussed below, and bears
accrued interest at 14% per annum, payable at maturity.
Based upon current interest rates, and assuming the merger
with Regent is not consummated, the Company believes its interest payments for
1998 will be approximately $1,213,000. Scheduled debt principal payments are
$430,000. Corporate expenses and capital expenditures for 1997 are estimated
to be approximately $410,000 and $200,000, respectively. The Company expects
to be able to meet such interest expense, debt repayment, corporate expenses
and capital expenditures, aggregating $2,253,000, from net cash provided by
operations and current cash balances. For the years 1999 through 2001,
currently scheduled debt principal payments average $685,000 yearly. Interest
payments, corporate expenses and capital expenditures are expected to be
approximately the same as projected for 1998, adjusted for inflation. The
Company expects to be able to meet such cash requirements from net cash
provided by operations and cash balances. The Company believes its $1,100,000
loan maturing April 1, 1999, and the balance of its long-term debt in the
amount of $19,858,000, maturing July 1, 2002, will be refinanced at their
respective maturity dates either from its current lenders or from other
sources, if still outstanding.
The terms of the Securities Purchase Agreement applicable to
the Company's Convertible Subordinated Promissory Class A and Class B Notes
(the "Notes"), as amended, provide that if the Company does not, on or before
April 1, 1999, consummate a merger of the Company with another corporation on
terms acceptable to the holders of the Notes, then upon notice from such
holders, the Company shall take all action necessary to liquidate the Company
and each of its subsidiaries on terms and conditions acceptable to such
holders, such approval not to be unreasonably withheld. As indicated below,
the Company expects to complete a merger with Regent in the second quarter of
1998. If, however, such merger should not occur, the Company
15
<PAGE> 17
believes there are a number of alternatives available to it which would be
acceptable to the holders of the Notes.
On December 5, 1997, the Company announced that it had
signed an agreement to merge with Regent, another group radio broadcaster. The
Company anticipates a closing of the merger in the second quarter of 1998. The
closing of the merger is subject to the effectiveness of a registration
statement and delivery of a related proxy statement to the Company's
stockholders, satisfaction of the conditions of the merger agreement and the
approval of the Company's stockholders. The Company estimates the fees and
expenses of this transaction, for which the Company is responsible, to be
approximately $543,000. Of this amount, approximately $233,000 is payable only
if the merger is consummated. Of the balance of $310,000, the Company expects
to pay such fees and expenses from net cash provided by operations and current
cash balances, and, with respect to the amount payable on consummation of the
merger, from such balances at the time of the closing of the merger.
Inflation
The Company does not believe the effects of inflation have
had a significant impact on its consolidated financial statements.
Compliance with Year 2000
Management has initiated a Company-wide program to prepare
the Company's computer systems and applications for year 2000 compliance. The
Company expects to incur internal staff costs as well as other expenses
necessary to prepare its systems for the year 2000. The Company expects to
both replace some systems and upgrade others. Maintenance or modification
costs will be expensed as incurred. The total cost of this effort is still
being evaluated, but is not expected to be material to the Company.
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-K, including this Management's Discussion and
Analysis, includes or may include certain forward-looking statements with
respect to Faircom that involve risks and uncertainties. This Form 10-K
contains certain forward-looking statements concerning financial position,
business strategy, budgets, projected costs, and plans and objectives of
management for future operations, as well as other statements including words
such as "anticipate," "believe," "plan," "estimate," "expect," "intend,"
"project" and other similar expressions. Although Faircom believes its
expectations reflected in such forward-looking statements are based on
reasonable assumptions, readers are cautioned that no assurance can be given
that such expectations will prove correct and that actual results and
developments may differ materially from those conveyed in such forward-looking
statements. For these statements, Faircom claims the protections of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
16
<PAGE> 18
Important factors that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
herein include changes in general economic, business and market conditions, as
well as changes in such conditions that may affect the radio broadcast
industry or the markets in which Faircom operate, in particular, increased
competition for attractive radio properties and advertising dollars,
fluctuations in the costs of operating radio properties, and changes in the
regulatory climate affecting radio broadcast companies. Such forward-looking
statements speak only as of the date on which they are made, and Faircom
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date of this Form 10-K. If Faircom does
update or correct one or more forward-looking statements, readers should not
conclude that Faircom will make additional updates or corrections with respect
thereto or with respect to other forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data required
pursuant to this Item begin on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
17
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the directors and executive officers of Faircom
Inc. (the "Company") and certain information about them are set forth below:
<TABLE>
<CAPTION>
Principal Occupation
Name Age for Past Five Years
- - ---- --- --------------------
<S> <C> <C>
Joel M. Fairman 69 Founder, President, Treasurer and
Chairman of the Board of the Company
since its inception in April 1984. From
September 1965 until June 1984, Mr.
Fairman was employed in an executive
capacity by investment banking firms.
Anthony Pantaleoni 58 Secretary and director of the Company
since its inception in April 1984. Mr.
Pantaleoni has been a partner in the
law firm of Fulbright & Jaworski L.L.P.
for more than five years. Mr.
Pantaleoni also currently serves as a
director of Universal Health Services,
Inc., AAON Inc. and Westwood
Corporation.
Stephen C. Eyre 75 Director of the Company since May
1984. From July 1985 to December
1997, Dr. Eyre was Executive Director
of The John A. Hartford Foundation.
From March 1983 through June 1985 he
was Distinguished Professor, Citicorp
Chair of Finance at Pace University,
New York City. Prior to March 1983,
Dr. Eyre was a director of Citibank,
N.A. (December 1981 - March 1983),
Senior Vice-President and Secretary
(1980 - 1983) and Comptroller (1973 -
1980) of Citibank and Citicorp. Dr.
Eyre currently serves as a director or
trustee of various Prudential Global
Equity and Money Market Funds.
John C. Jansing 72 Director of the Company since May
1984. From January 1975 to February
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C> <C>
1992, Mr. Jansing was Chairman of the
Board of Directors of The Independent
Election Corporation of America, a
proxy solicitation, tabulation and
services firm. Mr. Jansing also serves
as a director of Vestaur Securities,
Inc. and Alpine Group Corporation. In
addition, Mr. Jansing currently serves
as a director of the following
investment funds: Affiliated Fund,
Inc.; Lord Abbett Value Appreciation
Fund, Inc.; Lord Abbett Bond-Debenture
Fund, Inc.; Lord Abbett Cash Reserve
Fund, Inc.; Lord Abbett Development
Growth Fund, Inc.; Lord Abbett Income
Fund, Inc.; and the Lord Abbett Tax
Free Income Fund, Inc.
John H. Wyant 52 Director of the Company since
September 1997. Mr. Wyant has served
since its formation in 1992 as President
of Blue Chip Venture Company, a
venture capital investment firm which,
together with its affiliates, manages an
aggregate of approximately $180 million
of committed capital for investment in
privately held high growth companies.
From 1991 to 1992, Mr. Wyant served
as Executive Vice President, Corporate
Finance, of Gradison & Co., a financial
services firm, where his primary activity
was the development and formation of
Blue Chip Venture Company. Mr.
Wyant was initially trained in
marketing with The Proctor & Gamble
Company and served in marketing and
general management positions with Taft
Broadcasting Company. Subsequently,
he was Chief Executive Officer of Home
Entertainment Network and Nutrition
Technology Corporation, both venture
capital-backed companies. Mr. Wyant is
also a director of Zaring National
Corporation, Ciao Cucina Corporation
and a number of privately held
companies.
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C> <C>
John E. Risher 58 Senior Vice President of the Company
since January 1996 and Vice President
of the Company from July 1991 to
January 1996. Mr. Risher is also
President and General Manager, since
January 1996, of the Company's
subsidiary, Faircom Flint Inc. Prior to
January 1996, Mr. Risher was Vice
President and General Manager of the
subsidiary since its acquisition of the
Company's radio stations in Flint,
Michigan in December 1986. For 20
years prior to 1986, Mr. Risher was
employed in sales, sales management
and as a general manager for radio
stations.
</TABLE>
Directors of the Company are elected annually and hold
office until the Annual Meeting of stockholders or until their successors have
been elected and have duly qualified.
Executive officers of the Company are elected annually and
hold office until the first meeting of the Board of Directors following the
Annual Meeting of stockholders or until their successors have been elected and
have duly qualified.
Compensation Pursuant to Stock Option Plan
On September 18, 1984 the Board of Directors of the Company
adopted a stock option plan (the "Plan"), which was subsequently approved by
the stockholders of the Company on September 12, 1985. The Plan provides for
the granting of incentive stock options as well as options not qualifying as
incentive stock options (non-statutory stock options). Under the terms of the
Plan, the Company's right to grant additional incentive stock options
terminated September 18, 1994, ten years from the date the Plan was adopted by
the Company's Board of Directors.
The Plan was adopted for the purpose of advancing the
interests of the Company and furthering its growth and development by
encouraging and enabling directors, officers and key employees of the Company
and its subsidiaries and other persons, who are presently making and are
expected to continue to make substantial contributions to the successful
growth of the Company, to acquire an increased and proprietary interest in its
continued success and progress. Incentive stock options granted pursuant to
the Plan provide certain restrictions concerning to whom and upon what basis
the grant and exercise of options may be made and on the disposition of stock
issued upon exercise of options as required by the tax laws.
20
<PAGE> 22
An aggregate of 900,000 shares of the Common Stock, par
value $.01 per share, is available and reserved for issuance under the Plan.
Eligibility
Employees (either full or part-time), directors and
consultants to the Company and its subsidiaries, who are deemed to have the
potential to contribute to the future success of the Company, are eligible to
receive non-statutory stock options under the Plan. Until September 1994,
full-time and part-time employees (including employees who are also directors
of the Company or a subsidiary) and salaried directors, were eligible to
receive incentive stock options. Approximately 97 employees of the Company and
its subsidiaries are entitled to participate in the Plan.
Administration of the Plan
The Plan may be administered by the Board of Directors or by
a committee appointed by the Board of Directors of the Company (the
"Committee"). Currently, the Board of Directors is administering the Plan.
Subject to the provisions of the Plan, either the Board of Directors or the
Committee, whichever is then acting with respect to the Plan, possesses the
authority in its discretion (i) to determine, upon review of relevant
information, the fair market value of the Common Stock; (ii) to determine the
exercise price per share of stock options to be granted; (iii) to determine
the Eligible Participants to whom, and time or times at which, awards shall be
granted and the number of shares to be represented by each stock option; (iv)
to construe and interpret the Plan; (v) to prescribe, amend and rescind rules
and regulations relating to the Plan; (vi) to determine the terms and
provisions of each award (which need not be identical) and (vii) to make all
other determinations necessary to or advisable for the administration of the
Plan.
The Plan provides for the issuance of shares of Common Stock
for any nature of consideration, including a promissory note, as determined by
the Board of Directors or the Committee. The Board of Directors or the
Committee may also determine the conditions which it deems appropriate to
assure that such consideration will be received by, or accrued to, the
Company. The consideration may be different for different options.
Grants and Exercises under the Plan and Other Stock Options
During the fiscal year ended December 31, 1997, options to
purchase an aggregate of 69,000 shares of Common Stock at a weighted average
exercise price of $.53 per share were granted pursuant to the Plan. As of
March 20, 1998, no options granted pursuant to the Plan had been exercised. On
that date the bid and asked prices for the Common Stock as quoted on the OTC
Bulletin Board were $.81 and $.94, respectively.
At June 30, 1997, in connection with the issuance of its
Class A and Class B Convertible Subordinated Promissory Notes ("Notes"), the
Company issued options
21
<PAGE> 23
to purchase 958,886 and 159,814 shares of its common stock at an exercise
price of $.53 per share to its President and Senior Vice President,
respectively. These options are exercisable through July 1, 2002 to the extent
the Notes are converted to common stock. If less than all of the Notes are
ultimately converted, the number of options will be reduced proportionately.
22
<PAGE> 24
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information
concerning compensation paid or accrued by the Company and its subsidiaries
to, or on behalf of, the Company's Chief Executive Officer for the fiscal
years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------- ------------------------------- -----------
Other Number of Long Term
Annual Restricted Securities Incentive
Name and Compen- Stock Underlying Plan
Principal Position Year Salary($) Bonus ($) sation ($) Award(s) ($) Options Payouts ($)
- - ------------------ ---- --------- --------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Joel M. Fairman, 1997 $125,438 $28,000 $2,459(1) --- 958,886 ---
Chairman of the
Board, President and 1996 $102,672 $28,000 $2,024(1) --- 118,182 ---
Treasurer
1995 $90,000 $15,000 $1,040(1) --- 181,818 ---
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
All Other
Name and Compensa-
Principal Position tion ($)
- - ------------------ --------
<S> <C>
Joel M. Fairman, 29,574(2)
Chairman of the
Board, President and 26,639(2)
Treasurer
28,960(2)
</TABLE>
(1) Represents tax "gross up" for use of motor vehicle.
(2) Represents tax "gross up" for premiums paid by the Company for a "key
man" life insurance policy owned by Mr. Fairman.
23
<PAGE> 25
The following table sets forth certain information
concerning stock options granted to Joel M. Fairman and John E. Risher in the
fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options Granted Exercise or Potential Realizable Value at
Name and Options to Employees in Base Expiration Assumed Annual Rates of Stock Price
Principal Position Granted Fiscal Year Price ($/Sh)(1) Date Appreciation for Option Term(2)
- - ------------------ ---------- ---------------- --------------- ---------- -----------------------------------
5% ($) 10% ($)
------ -------
<S> <C> <C> <C> <C> <C> <C>
Joel M. Fairman, 958,886 83.5% .53 7/1/2002 $139,326 $307,994
Chairman of the
Board, President
and Treasurer
John E. Risher, 30,000 2.6% .53 7/1/2002 $4,359 $23,221
Senior Vice
President 159,214 17.9% .53 7/1/2002 $9,636 $51,332
</TABLE>
(1) The exercise price per share under each option was at least equal to
the fair market value of the Common Stock on the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options were granted
to their expiration date and are not presented to forecast possible
future appreciation, if any, in the price of the Common Stock. The
gains shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise of
the options or the sale of the underlying shares. The actual gains, if
any, on the stock option exercises will depend on the future
performance of the Common Stock, the optionee's continued employment
through applicable vesting periods and the date on which the options
are exercised.
24
<PAGE> 26
The following table sets forth certain information concerning
unexercised stock options granted to Joel M. Fairman and John E. Risher:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Unexercised the-Money Options
Options FY-End at FY-End(1)
--------------------- ------------------------
Value Realized
Shares (Market Price at
Acquired on Exercise Less
Name Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
- - ---- --------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel M. Fairman None --- 300,000 958,886 $204,670 $304,686
John E. Risher None --- 131,000 253,814 $78,645 $113,742
</TABLE>
(1) The "Value" set forth in this column is based on the difference between
the fair market value at December 31, 1997 ($.84 per share as quoted on
the OTC Bulletin Board), and the option exercise price, multiplied by
the number of shares underlying the option.
25
<PAGE> 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 20, 1998, certain
information with respect to all stockholders known to Faircom to beneficially
own more than 5% of the Faircom Common Stock, and information with respect to
Faircom Common Stock beneficially owned by each director of Faircom, the
President of Faircom and all directors and executive officers of Faircom as a
group. Except as otherwise specified, the stockholders listed in the table
have sole voting and investment power with respect to Faircom Common Stock
owned by them.
<TABLE>
<CAPTION>
Name and Address of Number of Shares
Beneficial Owners Beneficially Owned(a) Percent of Class
------------------- --------------------- ----------------
<S> <C> <C>
Blue Chip Capital Fund II Limited.......................... 14,492,085(b) 66.3%
Partnership
2000 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Miami Valley Venture Fund L.P.............................. 2,557,427(c) 25.7%
2000 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
John H. Wyant.............................................. 17,049,512(d) 69.8%
c/o Blue Chip Venture Company, Ltd.
2000 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
PNC Bank, National Association, Trustee.................... 1,962,488(e) 21.0%
201 East Fifth Street
Cincinnati, Ohio 45202
Joel M. Fairman............................................ 2,458,886(f) 28.5%
333 Glen Head Road
Old Brookville, New York 11545
Don G. Hoff and Sandra Hoff................................ 430,000 5.8%
1 Via Capistrano
Tiburon, California 94920
Ido Klear.................................................. 380,000 5.2%
111 Great Neck Road
Great Neck, New York 11021
Anthony Pantaleoni......................................... 110,000(g) 1.5%
666 Fifth Avenue
New York, New York 10103
Stephen C. Eyre............................................ 139,000(g) 1.9%
69 Dogwood Lane
Locust Valley, New York 11560
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
Name and Address of Number of Shares
Beneficial Owners Beneficially Owned(a) Percent of Class
------------------- --------------------- ----------------
<S> <C> <C>
John C. Jansing............................................ 153,500(g) 2.1%
162 South Beach Road
Hobe Sound, Florida 33455
All officers and directors as a group (6 persons).......... 20,227,212(h) 77.0%
</TABLE>
- - ------------------------
(a) The Securities and Exchange Commission has defined "beneficial
ownership" to include sole or shared voting or investment power with
respect to a security or the right to acquire beneficial ownership
within 60 days. The number of shares indicated are owned with sole
voting and investment power unless otherwise noted and includes certain
shares held in the name of affiliated companies as to which beneficial
ownership may be disclaimed.
(b) Represents: (A) 8,431,875 shares issuable upon conversion of Faircom's
Class A Convertible Subordinated Promissory Note held by Blue Chip
Capital Fund II Limited Partnership in the principal amount of
$3,750,000; and (b) 6,060,210 shares issuable upon conversion of
Faircom's Class B Convertible Subordinated Promissory Note held by Blue
Chip Capital Fund II Limited Partnership in the aggregate principal
amount of $3,900,000. See note (d) below.
(c) Represents: (A) 1,487,979 shares issuable upon conversion of Faircom's
Class A Convertible Subordinated Promissory Note held by Miami Valley
Venture Fund L.P., in the principal amount of $661,765; and (b)
1,069,448 shares issuable upon conversion of Faircom's Class B
Convertible Subordinated Promissory Note held by Miami Valley Venture
Fund L.P. in the principal amount of $688,235. See note (d) below.
(d) John H. Wyant, a director of Fairman, is a beneficial owner and manager
of Blue Chip Venture Company Ltd., which is the general partner of Blue
Chip Capital Fund II Limited Partnership, and Blue Chip Venture Company
of Dayton, Ltd., an investment manager for Miami Valley Venture Fund
L.P. Mr. Wyant disclaims beneficial ownership of the securities held by
Blue Chip Capital Fund II Limited Partnership and Miami Valley Venture
Fund L.P. See notes (b) and (c) above.
(e) Represents 1,322,646 shares issuable upon conversion of Faircom's Class
A Convertible Subordinated Promissory Notes held by PNC Bank, National
Association, Trustee in the principal amount of $588,235 and 639,842
shares issuable upon conversion of Faircom's Class B Convertible
Subordinated Promissory Notes held by PNC Bank, National Association,
Trustee in the principal amount of $411,765.
(f) Includes 1,258,886 shares issuable pursuant to stock options held by Mr.
Fairman, including options granted under Faircom's Stock Option Plan
(the "Plan") and outside the Plan.
27
<PAGE> 29
(g) Includes 100,000 shares issuable pursuant to stock options held by each
of Messrs. Pantaleoni, Eyre and Jansing under the Plan.
(h) Includes 1,849,700 shares issuable pursuant to stock options held by
officers and directors of Faircom, including options granted under the
Plan and outside the Plan, and 17,049,512 shares issuable upon
conversion of Faircom's Class A and Class B Convertible Subordinated
Promissory Notes held by Blue Chip Capital Fund II Limited Partnership
and Miami Valley Fund L.P. See note (d) above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended December 31, 1997, Anthony
Pantaleoni, Secretary and a Director of the Company, was a partner in the law
firm of Fulbright & Jaworski L.L.P., which firm was retained by the Company
during such fiscal year.
As of June 30, 1997, the Company sold $10,000,000 aggregate
principal amount of its convertible subordinated notes to Blue Chip Capital
Fund II Limited Partnership ("Blue Chip") and Miami Valley Fund L.P. ("Miami
Valley"). John H. Wyant, who was elected a director of Faircom on September
16, 1997, is a beneficial owner and manager of Blue Chip Venture Company Ltd.,
which is the general partner of Blue Chip, and Blue Chip Venture Company of
Dayton, Ltd., an investment manager for Miami Valley.
28
<PAGE> 30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) 1 and 2. Index to financial statements and related schedules.
See the Index to Consolidated Financial Statements and
Consolidated Financial Statement Schedules beginning on page F-1 of this
report.
(a) 3. Exhibits.
* 3.1 Certificate of Incorporation, as amended.
* 3.2 By-Laws of the Company.
* 21 Subsidiaries of the registrant.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the period October 1, 1997
through December 31, 1997.
- - --------
* Previously filed as an exhibit to the Company's registration of
securities on Form 10, dated February 12, 1987, pursuant to Section
12(g) of the Securities Exchange Act of 1934.
29
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FAIRCOM INC.
By /s/ Joel M. Fairman
-------------------
Joel M. Fairman
President
March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
By /s/ Joel M. Fairman President, Treasurer March 30, 1998
----------------------- and Chairman of the Board
Joel M. Fairman (Chief Executive, Financial
and Accounting Officer)
By /s/ Anthony Pantaleoni Secretary and Director March 30, 1998
-----------------------
Anthony Pantaleoni
By /s/ Stephen C. Eyre Director March 30, 1998
----------------------
Stephen C. Eyre
By ---------------------- Director March , 1998
John C. Jansing
By /s/ John H. Wyant Director March 30, 1998
----------------------
John H. Wyant
30
<PAGE> 32
FAIRCOM INC.
CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-K - ITEM 8 AND ITEMS 14 (A) (1) AND (2)
YEAR ENDED DECEMBER 31, 1997
F-1
<PAGE> 33
FAIRCOM INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED BALANCE SHEETS:
December 31, 1997 and 1996 F-4
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
YEARS ENDED DECEMBER 31, 1997:
Statements of operations F-5
Statements of capital deficit F-6
Statements of cash flows F-7
SUMMARY OF ACCOUNTING POLICIES F-8 - F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-12 - F-27
F-2
<PAGE> 34
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Faircom Inc.
We have audited the consolidated balance sheets of Faircom Inc. as of December
31, 1997 and 1996 and the related consolidated statements of operations,
capital deficit, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Faircom Inc. at
December 31, 1997 and 1996 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
Mitchel Field, New York /s/ BDO Seidman, LLP
January 21, 1998 ---------------------
BDO Seidman, LLP
F-3
<PAGE> 35
FAIRCOM INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1997 1996
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (NOTE 3)
CURRENT ASSETS:
Cash and cash equivalents $ 535,312 $ 123,221
Accounts receivable, less allowance of $32,000 and $20,000
for possible losses 1,358,002 1,169,772
Prepaid expenses 25,918 12,592
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,919,232 1,305,585
- - ---------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, less accumulated depreciation and
amortization (Note 1) 2,156,244 1,184,554
- - ---------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS, net of accumulated amortization of $784,791
and $515,670 (Note 2) 7,701,341 1,627,767
OTHER ASSETS:
Deferred financing costs 837,411 167,222
Escrow deposit for purchase of radio station (Note 13) 100,000 -
Other 296,326 41,325
- - ---------------------------------------------------------------------------------------------------------------------
8,935,078 1,836,314
- - ---------------------------------------------------------------------------------------------------------------------
$13,010,554 $4,326,453
=====================================================================================================================
LIABILITIES AND CAPITAL DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 87,280 $ 76,853
Accrued expenses and liabilities 163,805 199,054
Taxes payable 70,150 10,150
Current portion of interest payable (Note 3 (a)) 108,391 226,417
Current portion of long-term debt (Note 3) 430,005 552,000
Current portion of obligations under capital leases - 3,547
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 859,631 1,068,021
LONG-TERM DEBT, less current portion (including $10,000,000 to
a related party in 1997) (Note 3) 21,911,661 7,276,884
INTEREST PAYABLE, less current portion (Note 3 (a)) 353,063 350,494
DEFERRED RENTAL INCOME (Note 4) 67,987 101,995
APPRAISAL RIGHT LIABILITY (Note 3 (b)) - 1,015,000
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 23,192,342 9,812,394
- - ---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 3 (b) and 5)
</TABLE>
F-4
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C>
CAPITAL DEFICIT (Notes 3 (b), 7 and 8):
Common stock - $.01 par value, 35,000,000 shares
authorized; 7,378,199 shares issued and outstanding 73,782 73,782
Additional paid-in capital 2,605,813 2,605,813
Deficit (12,861,383) (8,165,536)
- - ----------------------------------------------------------------------------------------------------------
TOTAL CAPITAL DEFICIT (10,181,788) (5,485,941)
- - ----------------------------------------------------------------------------------------------------------
$ 13,010,554 $ 4,326,453
==========================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-5
<PAGE> 37
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BROADCASTING REVENUES:
Gross broadcasting revenues $ 6,696,564 $5,517,586 $5,785,963
Less: agency commissions (703,273) (643,632) (672,381)
- - ---------------------------------------------------------------------------------------------------------------------------------
NET BROADCASTING REVENUES 5,993,291 4,873,954 5,113,582
- - ---------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Programming and technical expenses 1,590,531 1,218,160 1,229,333
Selling, general and administrative expenses 2,269,800 1,775,059 1,716,858
Depreciation and amortization 726,564 321,263 351,257
Corporate expenses 391,252 336,643 304,653
- - ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 4,978,147 3,651,125 3,602,101
- - ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 1,015,144 1,222,829 1,511,481
Interest expense (including provision for appraisal rights of
$215,000 in 1996 and $438,000 in 1995 (Note 3(b)) (1,330,676) (913,643) (1,249,298)
Other income 24,537 7,346 10,633
- - ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES ON INCOME AND EXTRAORDINARY ITEMS (290,995) 316,532 272,816
TAXES ON INCOME (Note 9) 71,542 37,692 28,000
- - ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (362,537) 278,840 244,816
- - ---------------------------------------------------------------------------------------------------------------------------------
EXTRAORDINARY ITEMS:
Gain from debt extinguishment (Note 3(a)) 370,060 - -
Loss from debt extinguishment (Note 3(b)) (4,703,370) - -
- - ---------------------------------------------------------------------------------------------------------------------------------
Extraordinary items - net (4,333,310) - -
- - ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(4,695,847) $ 278,840 $ 244,816
===================================================================================================================================
BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK - ASSUMING NO
DILUTION (Note 10):
Income (loss) before extraordinary items $(.05) $.04 $.03
Extraordinary items (.59) - -
- - ---------------------------------------------------------------------------------------------------------------------------------
BASIC NET INCOME (LOSS) PER COMMON SHARE $(.64) $.04 $.03
===================================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 7,378,199 7,378,199 7,378,199
===================================================================================================================================
DILUTED INCOME (LOSS) PER COMMON SHARE - ASSUMING ISSUANCE OF ALL DILUTIVE
CONTINGENT SHARES (Note 10):
Income (loss) before extraordinary items $(.05) $.02 $.02
Extraordinary items (.59) - -
- - ---------------------------------------------------------------------------------------------------------------------------------
DILUTED NET INCOME (LOSS) PER COMMON SHARE $(.64) $.02 $.02
===================================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 7,378,199 16,459,701 16,459,701
===================================================================================================================================
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-6
<PAGE> 38
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CAPITAL DEFICIT
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Common Stock
---------------------------------
Additional
Shares Amount paid-in capital Deficit Total
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1994 7,378,199 $73,782 $2,605,813 $(8,689,192) $(6,009,597)
Net income for the year
ended December 31,
1995 - - - 244,816 244,816
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
1995 7,378,199 73,782 2,605,813 (8,444,376) (5,764,781)
Net income for the year
ended December 31,
1996 - - - 278,840 278,840
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
1996 7,378,199 73,782 2,605,813 (8,165,536) (5,485,941)
NET LOSS FOR THE
YEAR ENDED
DECEMBER 31,1997 - - - (4,695,847) (4,695,847)
- - ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1997 7,378,199 $73,782 $2,605,813 $(12,861,383) $(10,181,788)
===================================================================================================================================
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-7
<PAGE> 39
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 12)
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (4,695,847) $278,840 $244,816
- - -------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization 726,564 323,474 351,257
Amortization of deferred rental income (34,008) (34,005) (34,000)
Provision for doubtful accounts 46,308 23,449 16,428
Provision for appraisal rights - 215,000 438,000
Net loss from debt extinguishments 4,333,310 - -
Increase (decrease) in cash flows from changes in
operating assets and liabilities, net of effects of
purchase of radio stations:
Accounts receivable (234,538) (250,620) (2,708)
Prepaid expenses (13,326) (6,809) 31,724
Other assets - (1,325) -
Accounts payable 10,427 17,907 13,907
Accrued expenses and liabilities (35,249) (9,581) (77,016)
Taxes payable 60,000 (10,000) (100,918)
Interest payable 254,603 (167,714) (61,978)
- - -------------------------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 5,114,091 99,776 574,696
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 418,244 378,616 819,512
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Assets related to purchase of radio stations (7,650,000) - -
Capital expenditures (131,701) (63,440) (172,805)
Acquisition of intangible assets (81,180) - -
Escrow deposit for purchase of radio station (100,000) - -
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (7,962,881) (63,440) (172,805)
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for deferred financing costs (834,137) (44,985) (235)
Proceeds from long-term debt 23,000,000 - -
Principal payments on long-term debt (7,805,588) (493,249) (515,556)
Purchase of convertible and exchangeable debt (5,385,000) - -
Payment of appraisal right liability (1,015,000) - -
Principal payments under capital lease obligations (3,547) (17,253) (19,660)
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 7,956,728 (555,487) (535,451)
- - -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 412,091 (240,311) 111,256
CASH AND CASH EQUIVALENTS, beginning of year 123,221 363,532 252,276
</TABLE>
F-8
<PAGE> 40
<TABLE>
Year ended December 31, 1997 1996 1995
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS, end of year $ 535,312 $123,221 $363,532
===============================================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-9
<PAGE> 41
FAIRCOM INC.
SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION AND Faircom Inc. (the "Company") owns and operates
BUSINESS radio stations through its wholly-owned
subsidiaries in Flint, Michigan and, effective
June 30, 1997, in Mansfield, Ohio.
PRINCIPLES OF The consolidated financial statements of the
CONSOLIDATION Company include the accounts of Faircom Inc.
and its subsidiaries, Faircom Flint Inc.
("Flint"), and Faircom Mansfield Inc.
("Mansfield"), all of whose common stock is
owned by the Company. All intercompany
accounts and transactions are eliminated.
Prior to January 1997, Mansfield was named
Faircom Evansville Inc. and was inactive.
USE OF ESTIMATES In preparing financial statements in conformity
with generally accepted accounting principles,
management is required to make estimates and
assumptions that may affect the reported
amounts of assets and liabilities and
the disclosure of contingent assets and
liabilities at the date of the financial
statements and revenues and expenses during
the reporting period. Actual results could
differ from those estimates.
CASH AND CASH For purposes of the statement of cash flows,
EQUIVALENTS the Company considers all highly liquid
financial instruments purchased with an
original maturity of three months or less to
be cash equivalents. The carrying amount
reported in the consolidated balance sheets
for cash and cash equivalents approximates its
fair value.
PROPERTY AND Property and equipment are stated at cost.
EQUIPMENT For financial reporting purposes, depreciation
is determined using the straight-line method
based upon the estimated useful lives of the
various classes of assets, ranging from three
to fifteen years. Leasehold improvements are
amortized over the shorter of their useful
lives or the terms of the related leases. Both
straight-line and accelerated methods are used
for federal and state income tax purposes.
F-10
<PAGE> 42
FAIRCOM INC.
SUMMARY OF ACCOUNTING POLICIES
INTANGIBLE ASSETS Intangible assets consist principally of the
excess of the purchase price (including
related acquisition costs) over the fair value
of tangible assets of acquired radio stations,
a substantial portion of which represents the
value of Federal Communications Commission
licenses. These assets are amortized on a
straight-line basis over lives ranging from
15 to 40 years. Management evaluates the
continuing realizability of the intangible
assets by assessing projected future
undiscounted cash flows of its radio stations.
LONG-LIVED ASSETS The Company follows Statement of Financial
Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS
No. 121"). SFAS No. 121 requires, among other
things, that losses resulting from impairment
of assets expected to be held, and gains or
losses from assets expected to be disposed of,
be included as a component of income from
continuing operations before taxes on income.
DEFERRED FINANCING Deferred financing costs are amortized on a
COSTS AND OTHER straight-line basis over the term of the
ASSETS related debt. Non-compete agreements,
comprising substantially all of the category
"other assets", are amortized over the terms
of the related agreements.
APPRAISAL RIGHT The value of the appraisal right given to
Citicorp Venture Capital, Ltd. ("CVC") in
connection with its subordinated exchangeable
note (see Note 3 (b)) was accrued at a
discounted amount, based on the interest rate
of the related note and the date on which the
appraisal right was to become exercisable.
Adjustments were made to this accrual based on
the passage of time and changes in appraisal
values. The appraisal right liability was
extinguished as of June 30, 1997, the time
that the related underlying debt was purchased
(see Note 3(b)).
TAXES ON INCOME Income taxes are calculated using the
liability method specified by Statement
of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes".
F-11
<PAGE> 43
FAIRCOM INC.
SUMMARY OF ACCOUNTING POLICIES
REVENUE Revenue from radio advertisements, including
RECOGNITION barter transactions (advertising provided in
exchange for goods and services), is recognized
as income when the advertisements are
broadcast. Revenue from barter transactions is
recorded based on the estimated fair value of
the goods and services received. The
merchandise or services received as barter for
advertising are charged to expense when used
or provided. Any merchandise or services
received prior to the broadcast of the related
advertisements are recorded as a liability; if
the advertisement is broadcast first, a
receivable is recorded. Barter liabilities and
receivables were not material at December 31,
1997 and 1996.
STOCK-BASED In 1996, the Company adopted the disclosure
COMPENSATION provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123").
SFAS No. 123 establishes a fair value method
of accounting for stock-based compensation,
through either recognition or disclosure.
The disclosure provisions require the Company
to disclose pro forma information regarding
net income (loss) and net income (loss) per
share as if compensation cost for stock
options granted by the Company had been
determined in accordance with the fair value
method prescribed by SFAS No. 123.
ADVERTISING COSTS Advertising costs are charged to expense
as incurred and amounted to $75,858, $68,345
and $149,469 for the years ended December 31,
1997, 1996 and 1995, respectively.
NET INCOME (LOSS) In February 1997, the Financial Accounting
PER COMMON SHARE Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share." SFAS No. 128
establishes a different method of computing
earnings per share than was previously
required under the provisions of Accounting
Principles Board Opinion No. 15 ("APB 15").
Under SFAS No. 128, the Company is required to
report both basic net income (loss) per common
share and diluted net income (loss) per common
share for all periods presented. The adoption
of SFAS No. 128 had no effect on the per share
amounts previously reported by the Company
under APB 15.
F-12
<PAGE> 44
FAIRCOM INC.
SUMMARY OF ACCOUNTING POLICIES
Net income (loss) per common share is based on
the weighted average number of shares of
common stock outstanding during each period.
The effects of the assumed conversion of
convertible debt on per share data have been
reflected in the diluted calculation only for
1996 and 1995; such effects were not dilutive
for 1997 (see Note 3 (b)). The effects of the
assumed exercise of outstanding options were
not dilutive and, accordingly, have been
excluded from the diluted per share
calculations (see Notes 7 and 8).
RECENT ACCOUNTING In June 1997, the FASB issued SFAS No. 130,
PRONOUNCEMENTS "Reporting Comprehensive Income." This
Statement establishes standards for reporting
and displaying comprehensive income and its
components in the financial statements. It
does not, however, require a specific format
for the statement, but requires the Company to
display an amount representing total
comprehensive income for the period of the
financial statement. The Company is in the
process of determining its preferred format.
This Statement is effective for fiscal years
beginning after December 15, 1997.
Also in June 1997, the FASB issued SFAS No.
131, "Disclosures about Segments of an
Enterprise and Related Information." The
Statement establishes standards for the manner
in which public business enterprises report
information about operating segments in annual
financial statements and requires those
enterprises to report selected information
about operating segments in interim financial
reports issued to stockholders. This Statement
is effective for financial statements for
periods beginning after December 15, 1997, and
the Company has not yet determined the impact,
if any, of the Statement on its financial
reporting.
<TABLE>
<CAPTION>
1. PROPERTY AND Property and equipment consist of the following:
EQUIPMENT
1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 285,000 $ 116,000
Buildings and improvements 958,583 636,581
Towers and antenna systems 1,457,564 1,182,526
Studio, technical and transmitting
equipment 3,819,910 3,467,747
Office equipment, furniture and fixtures 1,043,648 941,665
</TABLE>
F-13
<PAGE> 45
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
7,564,705 6,344,519
Less: accumulated depreciation and
amortization (5,408,461) (5,159,965)
- - -----------------------------------------------------------------------------------------
Net property and equipment $2,156,244 $1,184,554
=========================================================================================
</TABLE>
2. INTANGIBLE ASSETS Intangible assets consist of the
following:
<TABLE>
<CAPTION>
1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Excess of purchase price over fair value of
tangible assets of acquired radio stations
(substantially related to the value of
Federal Communications Commission
licenses) $8,255,940 $1,994,425
Related acquisition costs 216,209 135,029
Other 13,983 13,983
- - -----------------------------------------------------------------------------------------
8,486,132 2,143,437
Less: accumulated amortization (784,791) (515,670)
- - -----------------------------------------------------------------------------------------
$7,701,341 $1,627,767
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
3. LONG-TERM DEBT Long-term debt consists of the following:
AND FAIR VALUE
DISCLOSURES
1997 1996
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
Senior secured term and time notes
(see (a) below) $12,341,666 $7,147,254
Convertible and exchangeable
subordinated promissory notes (see
(b) below) 10,000,000 681,630
- - ---------------------------------------------------------------------------------------
22,341,666 7,828,884
Less: Current portion of long-term
debt (430,005) (552,000)
</TABLE>
F-14
<PAGE> 46
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
$21,911,661 $7,276,884
=======================================================================================
</TABLE>
(a) Senior secured term and time notes
In connection with the June 1997 Mansfield
acquisition described in Note 12, the Company
repaid its outstanding senior secured term
and time notes, which had an aggregate
principal balance of $7,371,000 at that time,
and borrowed $12,500,000 from the same lender
under an amended and restated loan agreement
(the "1997 loan agreement"). The term notes
under the 1997 loan agreement mature July 1,
2002 with optional renewal by the Company
under certain circumstances for an additional
five years. The principal balance is payable
in varying monthly installments, ranging from
$31,667 to $72,500, from August 1, 1997
through June 1, 2002, with the balance due on
the maturity date. Interest on the term notes
initially is at the rate of 4.50% over 30 day
commercial paper rates.
The borrowings are secured by all tangible
and intangible property of Flint and
Mansfield and all outstanding Flint and
Mansfield common stock held by the Company,
and are guaranteed by the Company.
F-15
<PAGE> 47
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 1997 loan agreement contains certain
financial and restrictive covenants,
including maintenance of minimum operating
income levels and debt coverage ratios, and
limitations on capital expenditures,
corporate expenses, additional indebtedness,
mergers and dividend payments.
As of the date that the Company entered into
the 1997 loan agreement, certain accrued
interest was extinguished, resulting in an
extraordinary gain of $370,060.
(b) Convertible and exchangeable subordinated
promissory notes
As of June 30, 1997, the Company completed
the sale of $10,000,000 aggregate principal
amount of its convertible subordinated
promissory notes due July 1, 2002 (the
"Notes"). The Notes consist of Class A and
Class B convertible subordinated promissory
notes, each in the aggregate principal amount
of $5,000,000.
The Class A Notes are convertible into
11,242,500 shares of the Company's common
stock, and the Class B Notes into
7,769,500 shares of common stock. The
aggregate 19,012,000 of such shares on full
conversion of the Notes would represent 67.1%
of the Company's outstanding common stock on
a fully diluted and adjusted basis. The Notes
bear interest at 7% per annum, compounded
quarterly, payable at the maturity of the
Notes. The terms of the Securities Purchase
Agreement applicable to the Class A and Class
B Notes, as amended, provide that if the
Company does not, on or before April 1, 1999,
consummate a merger of the Company with
another corporation on terms acceptable to
the holders of the Notes, then upon notice
from such holders, the Company shall take all
action necessary to liquidate the Company and
each of its subsidiaries on terms and
conditions acceptable to such holders, such
approval not to be unreasonably withheld.
Subsequent to the sale of the Notes, an
individual who is a beneficial owner and
manager of the general partner of one of the
holders of the Notes and of the investment
manager of the other holder of the Notes
became a director of the Company.
F-16
<PAGE> 48
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The proceeds from the sale of the Notes were
used (i) to purchase for $6,400,000 from
Citicorp Venture Capital, Ltd. ("Citicorp")
the Company's 8.65% Senior Convertible Note
("Convertible Note") in the principal amount
of $181,630 due December 1, 2004 and the
Company's 10% Senior Exchangeable Note
("Exchangeable Note") in the principal amount
of $500,000 due December 1, 2004,
representing all of Citicorp's interests in
the Company, and (ii) to pay a portion of the
purchase price for the Mansfield acquisition,
described in Note 12, and the legal and other
fees and expenses of such acquisition. The
Convertible Note was convertible into
9,081,502 shares of Common Stock, which would
have represented 52.5% of the Company's fully
diluted outstanding Common Stock prior to the
acquisition and the financing activities
described herein. The Exchangeable Note gave
Citicorp the right to request, at any time
after December 1, 1999, that $350,000
principal amount of such Note be exchanged
for a payment equal to 19.99% of the
appraised value, as defined, of the Company's
subsidiary which owns and operates radio
stations in Flint, Michigan.
In connection with the purchase for
$6,400,000 of the Citicorp notes, which had a
principal amount aggregating $681,630, the
Company's appraisal right liability of
$1,015,000 was also extinguished. This debt
extinguishment resulted in an extraordinary
loss of $4,703,370.
Minimum annual maturities of the Company's
long-term debt for the next five years are
approximately as follows: 1998 - $430,000;
1999 - $554,000; 2000 - $688,000; 2001 -
$812,000; and 2002 - $19,858,000.
F-17
<PAGE> 49
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company estimates that the carrying
amounts of its senior secured term and time
notes, $12,341,666 and $7,147,254 at December
31, 1997 and 1996, respectively, approximated
their fair values at those dates, based on
rates available to the Company for debt with
similar terms and remaining maturities. The
fair values of the convertible and
exchangeable subordinated promissory notes
are not readily determinable. Such debt was
carried at $10,000,000 at December 31, 1997
and $1,696,630 (including a related appraisal
right liability of $1,015,000) at December
31, 1996. The 1997 debt is convertible into
common stock with a market value of
approximately $16,000,000 at December 31,
1997. The 1996 debt was convertible into
common stock with a market value of
approximately $1,540,000 at December 31,
1996, and $350,000 of the debt was
exchangeable into the aforementioned
appraisal right. The Company believes that an
undetermined discount for lack of liquidity
would be appropriate due to the large amounts
of stock that would be issuable upon
conversion.
4. DEFERRED RENTAL Effective January 1995, Flint, as lessor,
INCOME entered into an operating lease agreement
with a telecommunications company. The
lessee agreed to arrange for the construction
of a new radio tower and antenna at one
of Flint's tower sites, at lessee's expense,
and transfer title to those assets to
Flint, in exchange for the right to use a
portion of the new tower and related building
facilities in its operations on a rent-free
basis for five years. The lessee has three
successive five-year renewal options,
providing for no rent in the sixth year, a
total of $18,000 rent in the seventh year,
and annual increases of 4% beginning with the
eighth year.
Flint has recorded as an advance minimum
lease payment an amount equal to the fair
value of the tower and antenna constructed
for its benefit, based on the lessee's
construction costs, aggregating approximately
$170,000. The assets received were
capitalized, the advance lease payment is
being amortized as rental income on a
straight-line basis over the five year
initial lease term, and the unamortized
portion of the lease payment is recorded as
deferred rental income.
F-18
<PAGE> 50
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COMMITMENTS The Company has entered into an operating
lease agreement for office space.
The following is a schedule of approximate
future minimum lease payments required under
this lease:
1998 $22,200
1999 22,200
2000 22,200
2001 3,700
-------------------------------------------
$70,300
===========================================
Rent expense was approximately $56,000,
$46,000 and $32,000 for the years ended
December 31, 1997, 1996 and 1995,
respectively.
6. RETIREMENT PLANS Effective January 1, 1995, the Company
established a qualified salary reduction plan
under Section 401(k) of the Internal Revenue
Code for eligible employees. Under the plan,
the Company may, but is not required to, make
matching and discretionary contributions to
participants' accounts. Matching
contributions charged against operations
amounted to $6,800 and $4,600 for the years
ended December 31, 1996 and 1995,
respectively. No matching contributions were
made for the year ended December 31, 1997.
F-19
<PAGE> 51
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCK OPTION PLAN The Company has a stock option plan (the
AND OTHER STOCK "Plan") under which 900,000 shares of common
OPTIONS stock have been reserved for issuance. Under
this Plan, the Company may grant options to
purchase up to 900,000 shares of common stock
in the form of either nonqualified stock
options or incentive stock options ("ISOs").
The Plan provides that the option price for
the nonqualified options be determined by the
Board of Directors at or prior to the time
the option is granted (but in no event at a
price below par value of the common stock)
and for ISOs, at a price not less than 100%
of the fair market value of the common stock
at the date the option is granted, except for
those individuals possessing more than 10% of
the total combined voting power of all
classes of stock of the Company or its
subsidiaries, for whom the price is not less
than 110% of the fair market value of the
common stock.
The term of each option granted shall be
determined by the Board of Directors,
provided that the term for each ISO granted
under the Plan not be more than 10 years from
the date of the grant and the term for each
option granted to an individual owning more
than 10% of the combined voting power, as
described above, not be more than five years.
Under the terms of the Plan, the Company's
right to grant additional ISOs terminated
September 18, 1994, 10 years from the date
the Plan was adopted by the Company's Board
of Directors.
The Company applies APB Opinion 25,
"Accounting for Stock Issued to Employees",
and related Interpretations in accounting for
the Plan. Under APB 25, for options granted
to employees at exercise prices equal to the
fair market value of the underlying common
stock at the date of grant, no compensation
cost is recognized.
F-20
<PAGE> 52
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1997, in connection with the
issuance of its Class A and Class B
Convertible Subordinated Notes ("Notes"), the
Company issued options to purchase 958,886
and 159,814 shares of its common stock at an
exercise price of $.53 per share to its
President and Senior Vice President,
respectively. These options are exercisable
through July 1, 2002 to the extent the Notes
are converted to common stock. If less than
all of the Notes are ultimately converted,
the number of options will be reduced
proportionately. At the time when any portion
of the Notes is converted and the
proportionate number of options become
exercisable, the Company will record a
nonrecurring charge to operations based on
the difference between the exercise price and
the market value of the Company's common
stock at that time. If all of the Notes had
been converted and all of the options had
been exercised at December 31, 1997, the
charge to operations would have been
approximately $355,000.
Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") requires the
Company to provide, beginning with 1995
grants, pro forma information regarding net
income and net income per common share as if
compensation costs for the Company's stock
option plans had been determined in
accordance with the fair value based method
prescribed in SFAS No. 123. Such pro forma
information is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income
(loss) $(4,865,688) $257,255 $220,071
Pro forma basic net
income (loss) per
common share $(.66) $.03 $.03
- - -----------------------------------------------------------------------------------------
</TABLE>
F-21
<PAGE> 53
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average fair value per share for
options granted was $.08, $.09 and $.08 in
1997, 1996 and 1995, respectively. The fair
value of each option grant is estimated on
the date of grant using the Black-Scholes
option-pricing model with the following
assumptions for 1997, 1996 and 1995 grants:
Dividends: None
Volatility: 46.5%
Risk-free interest rate: Ranging from
6.28% to 6.38%
Expected term: 5 years
Transactions involving options are summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------------------
WEIGHTED- Weighted- Weighted-
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICE Shares Price Shares Price
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1 825,000 $.16 800,000 $.14 533,882 $.11
Granted 1,187,700 .53 234,182 .19 309,318 .16
Cancelled 69,000 .13 209,182 .13 43,200 .31
</TABLE>
F-22
<PAGE> 54
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, December 31 1,943,700 $.37 825,000 $.16 800,000 $.14
===============================================================================================================
Exercisable, December 31 721,000 $.20 676,000 $.16 661,000 $.14
===============================================================================================================
</TABLE>
F-23
<PAGE> 55
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about
stock options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ----------------------
Weighted-
Number Average Weighted- Weighted-
Outstanding Remaining Average Number Average
Exercise at Contractual Exercise Exercisable Exercise
Price 12/31/97 Life (years) Price at 12/31/97 Price
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
.13 112,500 .5 $.13 105,000 $.13
.16 409,318 2.1 .16 352,818 .16
.17 139,182 3.9 .17 139,182 .17
.22 95,000 3.2 .22 55,000 .22
.53 1,187,700 4.5 .53 69,000 .53
- - ------------------------------------------------------------------------------------------------
1,943,700 2.8 $.37 721,000 $.20
=================================================================================================
</TABLE>
Of the 1,943,700 options outstanding at December 31, 1997,
1,866,200 are nonqualified options and 77,500 are ISOs.
8. COMMON STOCK At December 31, 1997, shares of the Company's
SHARES RESERVED authorized and unissued common stock were
reserved for issuance upon conversion of
convertible subordinated promissory notes and
exercise of options, as follows:
Convertible subordinated promissory notes (Note 3 (b)) 19,012,000
Stock options (Note 7) 1,943,700
- - -----------------------------------------------------------------------------
20,955,700
=============================================================================
F-24
<PAGE> 56
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
9. TAXES ON INCOME The provision for federal and state income
taxes consists of the following:
1997 1996 1995
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ - $152,000 $157,000
State 71,542 37,692 70,000
- - --------------------------------------------------------------------------------------
71,542 189,692 227,000
Benefits of net operating loss
carryforwards - 152,000 199,000
- - --------------------------------------------------------------------------------------
$71,542 $ 37,692 $ 28,000
======================================================================================
</TABLE>
The net deferred tax asset consists of the
following:
<TABLE>
<CAPTION>
1997 1996
- - ----------------------------------------------------------------------------------------
<S> <C> <C>
Gross deferred asset for:
Net operating loss carryforwards $2,448,000 $2,311,000
Excess gain on debt restructuring for tax
reporting purposes - 186,000
Alternative minimum tax credit
carryforwards 35,000 35,000
- - ----------------------------------------------------------------------------------------
Subtotal 2,483,000 2,532,000
Less: valuation allowance (2,483,000) (2,532,000)
- - ----------------------------------------------------------------------------------------
Net $ - $ -
- - ----------------------------------------------------------------------------------------
</TABLE>
The Company has provided valuation allowances
equal to its deferred tax assets because of
the uncertainty as to future utilization.
The Company and its subsidiaries file
consolidated federal and separate state
income tax returns. At December 31, 1997,
consolidated net operating loss carryforwards
("NOLs") for income tax purposes were
approximately $6,800,000. Such NOLs may be
limited as to use upon a significant change
in the Company's ownership. The tax NOLs
expire during the years 2002 to 2012.
F-25
<PAGE> 57
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The difference between the Company's effective tax rate on income before taxes
on income and the federal statutory tax rate arises from the following:
<TABLE>
<CAPTION>
1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax expense at
statutory rate 34.0% 34.0% 34.0%
Federal taxes, based on
alternative minimum
calculation - - 1.8
Loss from debt
extinguishment - non-deductible (34.6) - -
Amortization of
intangibles and other
non-deductible
expenses (1.0) 31.9 47.6
Benefit of net operating
losses - (48.0) (72.8)
Changes in valuation
allowance 1.1 (13.9) -
State taxes, net of
federal benefit (1.0) 7.9 16.9
Prior year's federal tax
overaccrual - - (17.2)
- - -----------------------------------------------------------------------------------------
Effective tax rate (1.5)% 11.9% 10.3%
=========================================================================================
</TABLE>
There was no material income tax effect related to the extraordinary items
described in Note 3.
F-26
<PAGE> 58
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. NET INCOME (LOSS) PER
COMMON SHARE The following table sets forth the
computation of basic and diluted net income (loss) per common
share:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NUMERATOR:
Income (loss) before extraordinary items -
basic $(362,537) $278,840 $244,816
Addback:
Interest from subordinated senior
convertible note (net of tax effect) - 13,840 14,093
- - --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS -
DILUTED $(362,537) $292,680 $258,909
==========================================================================================================================
EXTRAORDINARY ITEMS - BASIC AND DILUTED $(4,333,310) $ - $ -
==========================================================================================================================
DENOMINATOR:
Weighted average shares outstanding
Common stock - basic 7,378,199 7,378,199 7,378,199
Shares issuable upon assumed conversion of
subordinated senior convertible note - 9,081,502 9,081,502
- - --------------------------------------------------------------------------------------------------------------------------
Common shares - diluted 7,378,199 16,459,701 16,459,701
==========================================================================================================================
BASIC INCOME (LOSS) PER SHARE OF COMMON
STOCK - ASSUMING NO DILUTION:
Income (loss) before extraordinary items $(.05) $.04 $.03
Extraordinary items (.59) - -
- - --------------------------------------------------------------------------------------------------------------------------
BASIC NET INCOME (LOSS) PER COMMON
SHARE $(.64) $.04 $.03
==========================================================================================================================
DILUTED INCOME (LOSS) PER COMMON SHARE ASSUMING ISSUANCE OF ALL DILUTIVE
CONTINGENT SHARES:
Income (loss) before extraordinary items $(.05) $.02 $.02
Extraordinary items (.59) - -
- - --------------------------------------------------------------------------------------------------------------------------
DILUTED NET INCOME (LOSS) PER COMMON
SHARE $(.64) $.02 $.02
==========================================================================================================================
</TABLE>
Note: The effects of the assumed exercise of outstanding options were not
dilutive and, accordingly, have been
F-27
<PAGE> 59
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
excluded from the diluted per share calculations. The effects of the
assumed conversion of convertible debt were not dilutive for 1997.
F-28
<PAGE> 60
<TABLE>
<CAPTION>
11. SUPPLEMENTAL CASH (a) Supplemental disclosure of cash flow information:
FLOW INFORMATION
Year ended December 31, 1997 1996 1995
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid during the year $1,076,073 $ 866,357 $ 873,276
=========================================================================================
Income taxes paid during
the year $ 71,542 $ 43,592 $ 133,257
=========================================================================================
</TABLE>
(b) Supplemental disclosures of
non-cash investing and financing
activities:
In January 1995, Flint received a
tower and antenna, valued at
$170,000, as an advance lease
payment under the terms of an
operating lease agreement (see
Note 4).
In June 1997, certain accrued
interest was extinguished,
resulting in an extraordinary
gain of $370,060 (see Note 3
(a)).
12. ACQUISITION OF RADIO As of June 30, 1997, Mansfield
STATIONS acquired the assets and operations
of two commercial radio stations
located in Mansfield, Ohio (the
"Stations"), from an unrelated
company and its principals, pursuant
to the terms of an Asset Purchase
Agreement, made as of May 20, 1997
(the "Agreement"). Under the terms
of the Agreement, the selling
company received aggregate
consideration of $7,350,000 in cash,
which included $1 in consideration
of a five-year non-compete
agreement. In addition, the Company
paid $300,000 in cash to one of the
selling company's principals in
consideration of a five year
non-compete agreement. A substantial
portion of the purchase price for
the Stations was allocated to
intangible assets, representing
principally the value of the Federal
Communications Commission licenses
acquired. The acquisition of the
Stations has been accounted for by
the purchase method of accounting
and, accordingly, the operating
results of the Stations are included
in the Company's consolidated
results of operations from June 30,
1997, the date of acquisition.
F-29
<PAGE> 61
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following are the Company's estimates of selected pro forma unaudited
consolidated results as if the Stations had been acquired as of the beginning
of 1996:
<TABLE>
<CAPTION>
1997 1996
- - -------------------------------------------------------------------------------------
<S> <C> <C>
($000s except per share
amounts)
Net broadcasting revenues $7,154 $7,152
=====================================================================================
Loss before extraordinary
items $ (570) $ (168)
=====================================================================================
Basic loss before
extraordinary items, per
common share $ (.08) $ (.02)
=====================================================================================
</TABLE>
13. SUBSEQUENT (a) On September 25, 1997, Mansfield filed an
ACQUISITION AND application with the Federal Communications
PENDING MERGER Commission ("FCC") to acquire the assets
and operations of radio station WSWR-FM,
Shelby, Ohio, for $1,125,000. The net
broadcasting revenues and results of
operations of the Shelby station for 1997
were not material in relation to the
Company's comparable amounts. Mansfield
deposited $100,000 in escrow pursuant to
the contract to acquire the Shelby station.
The closing of this acquisition occurred in
January 1998. In connection with the
closing, the Company borrowed $1,100,000
from a holder of the Class A and Class B
convertible subordinated promissory notes
described in Note 3(b). To evidence this
loan, the Company issued its Class C
Subordinated Promissory Note, which bears
interest at a rate of 14% per annum payable
at maturity, and is payable on the earlier
of April 1, 1999 or the closing of the
merger described in the following
paragraph.
F-30
<PAGE> 62
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(b) On December 5,1997, the Company signed an
agreement to merge with Regent
Communications, Inc., another group radio
broadcaster. Under the terms of the
agreement, Faircom will merge with and into
a subsidiary of Regent. The shareholders of
Faircom will receive shares of Regent
Series C Convertible Preferred Stock, par
value $.01 per share ("Series C Preferred
Stock"). The Series C Preferred Stock has
full voting rights, provides for annual
cumulative dividends of 7%, and is
convertible on a one-for-one basis (subject
to adjustment in certain events) into the
common stock, $.01 par value per share, of
Regent. The Series C Preferred Stock is
subject to mandatory conversion under
certain circumstances. In the event of a
liquidation of Regent, the Series C
Preferred Stock has a preference in the
amount of its stated value of $5.00 per
share, together with accrued and unpaid
dividends. In the merger, the outstanding
shares of Faircom Common Stock will be
exchanged for fully paid and nonassessable
shares of Series C Preferred Stock, and
each outstanding Faircom option will be
converted into a Regent option entitling
the holder to acquire, on equivalent terms,
the same number of shares of Series C
Preferred Stock as the holder would have
been entitled to receive in the merger if
such Faircom option had been exercised in
full prior to the date of the merger. The
number of shares of Series C Preferred
Stock to be issued in the merger and
issuable pursuant to Regent options to be
received in exchange for Faircom options in
the merger will be based upon an aggregate
liquidation preference amount of
$33,162,000, adjusted by the amount of
Faircom's net working capital and decreased
by its senior debt and by one-half of the
prepayment premium on such senior debt to
be paid at the closing of the merger, all
as computed as of the last day of the month
immediately preceding the closing date of
the merger.
As of the date of issuance of this report,
the closing of the merger is still pending,
subject to shareholder approval and
satisfaction of certain other conditions.
F-31
<PAGE> 63
FAIRCOM INC.
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
FORM 10-K - ITEM 14 (D)
DECEMBER 31, 1997
S-1
<PAGE> 64
FAIRCOM INC.
INDEX TO CONSOLIDATED FINANCIAL
STATEMENT SCHEDULES
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS S-3
Consolidated financial statement schedules:
Schedule I - Condensed financial information of registrant S-4 - S-7
Schedule II - Valuation and qualifying accounts S-8
S-2
<PAGE> 65
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Stockholders
Faircom Inc.
The audits referred to in our report dated January 21, 1998, relating to the
consolidated financial statements of Faircom Inc., which is contained in Item 8
of this Form 10-K, included the audit of the financial statement schedules
listed in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based upon our audits.
In our opinion such financial statement schedules present fairly, in all
material respects, the information set forth therein.
/s/BDO Seidman, LLP
--------------------
BDO Seidman, LLP
Mitchel Field, New York
January 21, 1998
S-3
<PAGE> 66
FAIRCOM INC.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS (COMPANY ONLY)
<TABLE>
<CAPTION>
December 31, 1997 1996
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,478 $ 7,014
Other current assets - 4,155
Interest receivable from subsidiary 92,944 29,004
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 104,422 40,173
OFFICE EQUIPMENT, FURNITURE AND FIXTURES - NET 630 630
NOTES RECEIVABLE FROM SUBSIDIARIES (NOTE 2) 3,673,000 1,243,000
OTHER ASSETS, INCLUDING DEFERRED FINANCING COSTS OF
$629,403 AND $6,016 630,728 7,341
- - ---------------------------------------------------------------------------------------------------------------------------
$ 4,408,780 $ 1,291,144
===========================================================================================================================
LIABILITIES AND CAPITAL DEFICIT
CURRENT LIABILITIES:
Accrued expenses and liabilities $ 30,033 $ 132,747
Taxes payable 150 150
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 30,183 132,897
LONG-TERM DEBT 10,000,000 681,630
INTEREST PAYABLE 353,063 -
APPRAISAL RIGHT LIABILITY - 1,015,000
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 10,383,246 1,829,527
- - ---------------------------------------------------------------------------------------------------------------------------
EXCESS OF LOSSES AND PREFERRED STOCK DIVIDENDS OF
SUBSIDIARIES OVER COST (NOTE 1) 4,207,322 4,947,558
- - ---------------------------------------------------------------------------------------------------------------------------
CAPITAL DEFICIT:
Common stock 73,782 73,782
Additional paid-in capital 2,605,813 2,605,813
Deficit (12,861,383) (8,165,536)
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL DEFICIT (10,181,788) (5,485,941)
- - ---------------------------------------------------------------------------------------------------------------------------
$ 4,408,780 $ 1,291,144
===========================================================================================================================
</TABLE>
S-4
<PAGE> 67
FAIRCOM INC.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS (COMPANY ONLY)
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME:
Corporate overhead from subsidiaries
(Note 3) $ 172,000 $ 226,498 $ 354,328
Interest 245,653 174,024 174,024
Other 319 - 367
- - ---------------------------------------------------------------------------------------------------------------------------
417,972 400,522 528,719
- - ---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Depreciation and amortization 72,514 3,035 3,035
General and administrative 391,252 336,643 304,653
Interest (including provision for appraisal
rights of $215,000 in 1996 and $438,000
in 1995) 385,919 280,711 503,873
- - ---------------------------------------------------------------------------------------------------------------------------
849,685 620,389 811,561
- - ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EQUITY IN INCOME AND
EXTRAORDINARY GAIN OF SUBSIDIARIES; TAXES ON
INCOME; AND EXTRAORDINARY LOSS (431,713) (219,867) (282,842)
EQUITY IN INCOME AND EXTRAORDINARY GAIN OF
SUBSIDIARIES (NOTE 1) 439,236 500,399 527,658
- - ---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES ON INCOME AND
EXTRAORDINARY LOSS 7,523 280,532 244,816
TAXES ON INCOME - 1,692 -
- - ---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS 7,523 278,840 244,816
EXTRAORDINARY LOSS FROM DEBT EXTINGUISHMENT (4,703,370) - -
- - ---------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(4,695,847) $ 278,840 $ 244,816
===========================================================================================================================
</TABLE>
S-5
<PAGE> 68
FAIRCOM INC.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS (COMPANY ONLY)
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(4,695,847) $ 278,840 $ 244,816
- - ---------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 72,514 3,035 3,035
Provision for appraisal right - 215,000 438,000
Equity in income and extraordinary gain
of subsidiaries (439,236) (500,399) (527,658)
Extraordinary loss from debt
extinguishment 4,703,370 - -
Increase (decrease) in cash flows from
changes in operating assets and
liabilities:
Other current assets 4,155 (1,745) (2,410)
Other assets - (1,325) -
Interest receivable from subsidiary (63,940) (14,502) (14,502)
Accrued expenses and liabilities and
taxes payable (102,714) - (79,519)
Interest payable 353,063 - (1,663)
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 4,527,212 (299,936) (184,717)
- - ---------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (168,635) (21,096) 60,099
- - ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in subsidiary (301,000) - -
Decrease (increase) in advances and loans to
subsidiaries (2,430,000) 8,000 (8,000)
- - ---------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (2,731,000) 8,000 (8,000)
- - ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for deferred financing costs (695,901) - -
Proceeds from long-term debt 10,000,000 - -
Purchase of convertible and exchangeable
debt (5,385,000) - -
Payment of appraisal right liability (1,015,000) - -
Payment of loan from subsidiary - - (85,850)
- - ---------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,904,099 - (85,850)
- - ---------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 4,464 (13,096) (33,751)
CASH AND CASH EQUIVALENTS, beginning of year 7,014 20,110 53,861
- - ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 11,478 $ 7,014 $ 20,110
=====================================================================================================================
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
<TABLE>
<CAPTION>
1997 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid during the year $ 32,856 $ 65,711 $ 67,537
=====================================================================================================================
</TABLE>
S-6
<PAGE> 69
FAIRCOM INC.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1. INVESTMENTS IN The financial statements account for
SUBSIDIARIES the Company's investment in its
subsidiaries by the equity method of
accounting and have been prepared for
the purpose of presenting the
financial position and operating
results of the Company as a separate
entity. The Company has also prepared
consolidated financial statements of
the Company and its subsidiaries which
represent the primary financial
statements.
2. NOTES RECEIVABLE Notes receivable from subsidiaries
FROM SUBSIDIARIES consist of the following:
<TABLE>
<CAPTION>
December 31, 1997 1996
--------------------------------------------------------------------------------------
<S> <C> <C>
Faircom Flint Inc. $1,523,000 $1,243,000
Faircom Mansfield Inc. 2,150,000 -
--------------------------------------------------------------------------------------
$3,673,000 $1,243,000
======================================================================================
</TABLE>
Interest on the Flint notes was at
the rate of 14% per annum through
June 30, 1997 and prime thereafter.
Interest on the Mansfield notes is at
prime. The prime rate was 8.5% at
December 31, 1997. All of the notes
mature on July 1, 2002.
3. CORPORATE The Company received $172,000,
OVERHEAD $226,498 and $354,328 from its
subsidiaries for corporate overhead,
representing fees and expenses in
connection with management and
administrative services for the years
ended December 31, 1997, 1996 and
1995, respectively.
S-7
<PAGE> 70
FAIRCOM INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Additions Balance at
beginning charged to end of
of year expense Deductions * year
- - ---------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful receivables:
Years ended December 31,
<S> <C> <C> <C> <C>
1997 $20,000 $46,308 $34,308 $32,000
===================================================================================================================================
1996 $20,000 $42,449 $42,449 $20,000
===================================================================================================================================
1995 $20,000 $16,428 $16,428 $20,000
===================================================================================================================================
</TABLE>
(*) Represents accounts written off against the reserve.
S-8
<PAGE> 71
[ARTICLE] 5
[MULTIPLIER] 1000
[S] [C]
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[CASH] 535
[SECURITIES] 0
[RECEIVABLES] 1,390
[ALLOWANCES] 32
[INVENTORY] 0
[CURRENT-ASSETS] 1,919
[PP&E] 7,565
[DEPRECIATION] 5,408
[TOTAL-ASSETS] 13,011
[CURRENT-LIABILITIES] 860
[BONDS] 21,912
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 74
[OTHER-SE] (10,256)
[TOTAL-LIABILITY-AND-EQUITY] 13,011
[SALES] 0
[TOTAL-REVENUES] 6,697
[CGS] 0
[TOTAL-COSTS] 2,294
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 34
[INTEREST-EXPENSE] 1,331
[INCOME-PRETAX] (291)
[INCOME-TAX] 72
[INCOME-CONTINUING] (363)
[DISCONTINUED] 0
[EXTRAORDINARY] (4,333)
[CHANGES] 0
[NET-INCOME] (4,696)
[EPS-PRIMARY] (.64)
[EPS-DILUTED] (.64)
<PAGE> 1
Exhibit 20(b)
-------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................. to ................
Commission file number 0-15392
Faircom Inc.
(Exact name of registrant as specified in its charter)
Delaware 87-0394057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Glen Head Road, Old Brookville, New York 11545
(Address of principal executive offices)
(516) 676-2644
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 6, 1998:
Common Stock, par value $.01 7,378,199
- ---------------------------- -----------------
(Title of each class) (Number of Shares)
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1998 March 31, 1997
------------------ ------------------
<S> <C> <C>
Gross broadcasting
revenues $1,613,205 $1,030,277
Less: agency
commissions (148,128) (126,097)
--------- -------
Net broadcasting
revenues 1,465,077 904,180
--------- -------
Operating expenses
Programming and
technical expenses 448,278 293,856
Selling, general and
administrative
expenses 650,633 436,459
Depreciation and
amortization 290,548 78,624
Corporate expenses 113,528 115,534
------- -------
Total operating expenses 1,503,087 924,473
--------- -------
Loss from operations (38,010) (20,293)
Interest expense (503,770) (173,042)
Other income 12,152 1,584
-------- --------
Loss before taxes on income (529,628) (191,751)
Taxes on income (12,000) (16,000)
-------- --------
Net Loss $ (541,628) $ (207,751)
Basic and diluted net loss
per common share $ (.07) $ (.03)
========== ==========
Weighted average share
outstanding 7,378,199 7,378,199
=========== ===========
</TABLE>
-2-
<PAGE> 3
FAIRCOM INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(UNAUDITED) 1997
----------- -----------
<S> <C> <C>
ASSETS $ 524,181 $ 535,312
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance
of $32,000 for possible losses in
1998 and 1997 1,086,206 1,358,002
Prepaid expenses 59,048 25,918
----------- -----------
Total current assets 1,669,435 1,919,232
----------- -----------
Property and equipment, at cost 7,786,383 7,564,705
Less accumulated depreciation and
amortization (5,487,232) (5,408,461)
----------- -----------
Property and equipment, net 2,299,151 2,156,244
----------- -----------
Intangible assets, net of accumulated
amortization of $891,472 in 1998 and
$784,790 in 1997 8,605,826 7,701,341
Other assets:
Deferred financing costs 841,563 837,411
Escow deposit for purchase of radio stations 0 100,000
Other 469,584 296,326
----------- -----------
9,916,973 8,935,078
----------- -----------
$13,885,559 $13,010,554
=========== ===========
LIABILITIES AND CAPITAL DEFICIT
- -------------------------------
Current liabilities:
Accounts payable $ 102,386 $ 87,280
Accrued expenses and liabilities 354,950 163,805
Taxes payable 88,623 70,150
Current portion of interest payable 104,433 108,391
Current portion of long-term debt 460,012 430,005
----------- -----------
Total current liabilities 1,110,404 859,631
Long-term debt, less current portion 22,886,652 21,911,661
Interest payable, less current portion 552,434 353,063
Deferred rental income 59,485 67,987
----------- -----------
Total liabilities 24,608,975 23,102,342
----------- -----------
Capital deficit:
Common stock-$.01 par value, 35,000,000
shares authorized; 7,378,199 shares
issued and outstanding 73,782 73,782
Additional paid-in capital 2,605,813 2,605,813
Deficit (13,403,011) (12,861,383)
----------- -----------
Total capital deficit (10,723,416) (10,181,788)
----------- -----------
$13,885,559 $13,010,554
=========== ===========
</TABLE>
-3-
<PAGE> 4
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (541,628) $ (207,751)
----------- ----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 290,548 78,625
Amortization of deferred
rental income (8,502) (8,502)
Increase (decrease) in caah flows
from changes in operating
assets and liabilities, net of effects
of purchase of radio station:
Account receivable 271,796 383,039
Prepaid expenses (33,130) (47,869)
Other assets 1,325 0
Account payable 15,106 (8,695)
Accrued expenses and
liabilities 191,145 (6,124)
Taxes payable 18,473 11,318
Interest payable 195,413 (16,972)
----------- ----------
Total adjustments 942,174 384,820
----------- ----------
Net cash provided by
operating activities $ 400,546 $ 177,069
----------- ----------
</TABLE>
-4-
<PAGE> 5
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from investing activities:
Assets related to purchase of radio station $ (1,205,000) $ 0
Capital expenditures (46,898) (10,256)
Acquisition of intangible assets (180,946) 0
Escrow deposits for purchase of radio stations 100,000 (400,000)
------------- ------------
Net cash used in
investing activities (1,332,844) (410,256)
------------- ------------
Cash flows from financing activities:
Payments for deferred financing costs (83,831) (52,618)
Principal payments on long-term
debt (95,002) (138,000)
Principal payments under capital
lease obligations 0 (3,547)
Proceeds from aecured note payable 0 400,000
Proceeds from subordinated note payable 1,100,000 0
------------- ------------
Net cash provided by
financing activities 921,167 205,835
------------- ------------
Net decrease in cash and cash
equivalents (11,131) (27,352)
Cash and cash equivalents,
beginning of period 535,312 123,221
------------- ------------
Cash and cash equivalents,
end of period $ 524,181 $ 95,869
============= ============
</TABLE>
-5-
<PAGE> 6
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for completed financial statements. In the opinion of management, the
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. The results of operations for any interim period are not necessarily
indicative of the results for a full year.
It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, as filed with the Commission.
2. Net Loss Per Common Share
The effects of the assumed conversion of the Company's
Convertible Subordinated Promissory Notes and the Company's Subordinated Senior
Convertible Note and the assumed exercise of outstanding options were not
dilutive and, accordingly, have been excluded from the diluted per share
calculations for the three months ended March 31, 1998 and March 31, 1997.
-6-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The results of the Company's operations for the three months
ended March 31, 1998 compared to the three months ended March 31, 1997 are not
comparable or necessarily indicative of results in the future due to the
significance of acquisitions.
As of June 30, 1997, the Company, through a wholly-owned
subsidiary, Faircom Mansfield Inc. ("Faircom Mansfield"), acquired the assets
and operations of two radio stations, WMAN-AM and WYHT-FM, both located in
Mansfield, Ohio (the "Mansfield Stations") for aggregate cash consideration of
$7,650,000. As of January 21, 1998, Faircom Mansfield purchased substantially
all of the assets and operations of radio station WSWR-FM in Shelby, Ohio (the
"Shelby Station") for $1,125,000 in cash. The acquisitions have been accounted
for as purchases, and accordingly the operating results of the Mansfield
Stations and the Shelby Station have been included in the Consolidated
Statements of Operations from their respective acquisition dates. The operating
results of the Shelby Station, as so included in such Consolidated Statements of
Operations for the three months ended March 31, 1998, were not material.
The increase in the Company's net broadcasting revenues in the
three months ended March 31, 1998 as compared with the same period in 1997
resulted principally from the ownership and operation of the Mansfield Stations
during the 1998 period. Net broadcasting revenues increased to $1,465,000 from
$904,000, or 62.0%, in the 1998 period as compared with the 1997 period.
Programming and technical expenses and selling, general and
administrative expenses increased in the three months ended March 31, 1998 as
compared with the same 1997 period, principally as a result of the acquisition
of the Mansfield Stations. Such increases were to $448,000 from $294,000, or
52.6%, and to $651,000 from $436,000, or 49.1%, respectively.
Operating expenses before depreciation, amortization and
corporate expenses consequently increased in the three months ended March 31,
1998 as compared with the comparable period in 1997, primarily as a result of
the acquisition of the Mansfield Stations. Such increase was to $1,099,000 from
$730,000, or 50.5%, in the 1998 period as compared with the same period in 1997.
Net broadcasting revenues in excess of operating expenses
before depreciation, amortization and corporate expenses ("broadcast cash flow")
increased 110.5% to $366,000 in the three months ended March 31, 1998 from
$174,000 in the same period in 1997. This increase resulted from the acquisition
of the Mansfield Stations as described above, offset somewhat by slightly lower
broadcast cash flow from the Company's radio stations in Flint, Michigan.
-7-
<PAGE> 8
Depreciation and amortization and interest expense increased
in the three months ended March 31, 1998, as compared with the same period in
1997, as a result of the addition of assets and debt incurred in connection with
the acquisition of the Mansfield Stations and the Shelby Station.
As a result principally of higher depreciation and
amortization and interest expense in the three months ended March 31, 1998,
offset in part by higher broadcast cash flow, net loss was $542,000 for the
period in 1998 compared to net loss of $208,000 in the comparable 1997 period.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 1998, net cash provided by
operating activities was $401,000 compared with $177,000 provided by operating
activities in the three months ended March 31, 1997. Net decrease in cash and
cash equivalents was $11,000 in the 1998 period compared with a net decrease of
$27,000 in the comparable 1997 period.
Historically, the Company's net cash provided by operating
activities is lower in its first and second quarters, and the Company expects
such net cash to increase for the balance of 1998.
In January 1998, Faircom Mansfield purchased substantially all
of the assets and operations of radio station WSWR-FM in Shelby, Ohio for
$1,125,000 in cash. The acquisition was financed with internal funds and a loan
to the Company of $1,100,000. The loan is in the form of a subordinated note,
matures on the first to occur of April 1, 1999 or the closing of the merger with
Regent Communications, Inc. ("Regent"), discussed below, and bears accrued
interest at 14% per annum, payable at maturity.
Based upon current interest rates, and assuming the merger
with Regent is not consummated, the Company believes its interest payments for
the balance of 1998 will be approximately $909,000. Scheduled debt principal
payments are $335,000. Corporate expenses and capital expenditures for the
remainder of 1998 are estimated to be approximately $296,000 and $153,000,
respectively. The Company expects to be able to meet such interest expense, debt
repayment, corporate expenses and capital expenditures, aggregating $1,693,000,
from net cash provided by operations and current cash balances. For the years
1999 through 2001, currently scheduled debt principal payments average $685,000
yearly. Interest payments, corporate expenses and capital expenditures are
expected to be approximately the same as projected for 1998, adjusted for
inflation. The Company expects to be able to meet such cash requirements from
net cash provided by operations and cash balances. The Company believes its
$1,100,000 loan maturing April 1, 1999, and the balance of its long-term debt in
the amount of $19,858,000, maturing July 1, 2002, will be refinanced at their
respective maturity dates either from its current lenders or from other sources,
if still outstanding.
-8-
<PAGE> 9
The terms of the Securities Purchase Agreement applicable to
the Company's Convertible Subordinated Promissory Class A and Class B Notes (the
"Notes"), as amended, provide that if the Company does not, on or before April
1, 1999, consummate a merger of the Company with another corporation on terms
acceptable to the holders of the Notes, then upon notice from such holders, the
Company shall take all action necessary to liquidate the Company and each of its
subsidiaries on terms and conditions acceptable to such holders, such approval
not to be unreasonably withheld. As indicated below, the Company expects to
complete a merger with Regent in the second quarter of 1998. If, however, such
merger should not occur, the Company believes there are a number of alternatives
available to it which would be acceptable to the holders of the Notes.
On December 5, 1997, the Company announced that it had signed
an agreement to merge with Regent, another group radio broadcaster. The Company
anticipates a closing of the merger in the second quarter of 1998. The closing
of the merger is subject to satisfaction of the conditions of the merger
agreement and the approval of the Company's stockholders. The Company estimates
the fees and expenses of this transaction, for which the Company is responsible,
to be approximately $543,000. Of this amount, approximately $233,000 is payable
only if the merger is consummated. Of the balance of $310,000, the Company
expects to pay such fees and expenses from net cash provided by operations and
current cash balances, and, with respect to the amount payable on consummation
of the merger, from current cash balances at the time of the closing of the
merger.
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-Q includes or may include certain forward-looking
statements with respect to the Company that involve risks and uncertainties.
This Form 10-Q contains certain forward-looking statements concerning financial
position, business strategy, budgets, projected costs, and plans and objectives
of management for future operations, as well as other statements including words
such as "anticipate," "believe," "plan," "estimate," "expect," "intend,"
"project" and other similar expressions. Although the Company believes its
expectations reflected in such forward-looking statements are based on
reasonable assumptions, readers are cautioned that no assurance can be given
that such expectations will prove correct and that actual results and
developments may differ materially from those conveyed in such forward-looking
statements. For these statements, the Company claims the protections of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
Important factors that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
herein include changes in general economic, business and market conditions, as
well as changes in such conditions that may affect the radio broadcast industry
or the markets in which the Company operates, including, in particular,
increased competition for attractive radio properties and advertising dollars,
fluctuations in the costs of operating radio properties, and changes
-9-
<PAGE> 10
in the regulatory climate affecting radio broadcast companies. Such
forward-looking statements speak only as of the date on which they are made, and
the Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date of this Form 10-Q. If the Company
does update or correct one or more forward-looking statements, readers should
not conclude that the Company will make additional updates or corrections with
respect thereto or with respect to other forward-looking statements.
-10-
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
All other items of this Part are inapplicable.
-11-
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FAIRCOM INC.
(Registrant)
/s/ Joel M. Fairman
-----------------------
Joel M. Fairman
Chairman of the Board
President and Treasurer
(Principal Executive Officer
and Chief Financial Officer)
Date: May 14, 1998
-12-
<PAGE> 13
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] MAR-31-1998
[CASH] 524,181
[SECURITIES] 0
[RECEIVABLES] 1,118,206
[ALLOWANCES] 32,000
[INVENTORY] 0
[CURRENT-ASSETS] 1,669,435
[PP&E] 7,786,383
[DEPRECIATION] 5,487,232
[TOTAL-ASSETS] 13,885,559
[CURRENT-LIABILITIES] 1,110,404
[BONDS] 22,886,652
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 73,782
[OTHER-SE] (10,797,198)
[TOTAL-LIABILITY-AND-EQUITY] 13,885,559
[SALES] 0
[TOTAL-REVENUES] 1,613,205
[CGS] 0
[TOTAL-COSTS] 596,406
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 503,770
[INCOME-PRETAX] (529,628)
[INCOME-TAX] 12,000
[INCOME-CONTINUING] (541,628)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (541,628)
[EPS-PRIMARY] (.07)
[EPS-DILUTED] (.07)
</TABLE>
<PAGE> 1
Exhibit 20(c)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), effective as of
June 15, 1998 by and between REGENT COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), and JOEL M. FAIRMAN ("Employee").
RECITALS
WHEREAS, the Company is engaged in the business, either directly or
through affiliates, of owning and operating radio broadcasting stations (the
"Business"), with principal offices in Covington, Kentucky. For purposes of this
Agreement, the term "Company" shall include the Company, its subsidiaries,
affiliates, and assignees and any successors in interest of the Company and its
subsidiaries and/or affiliates.
WHEREAS, Employee has been actively engaged in the radio broadcasting
business since 1985 and has extensive knowledge and a unique understanding of
the operation of the Business.
WHEREAS, the Company desires to employ Employee, and Employee desires to
be employed by the Company, as Vice Chairman of the Board of Directors of the
Company.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. EMPLOYMENT.
1.1 ENGAGEMENT OF EMPLOYEE. The Company agrees to employ Employee
and Employee agrees to accept employment as the Vice Chairman of the Board of
Directors of the Company, all in accordance with the terms and conditions of
this Agreement.
1.2 DUTIES AND POWERS.
(a) During the Employment Period, Employee will serve as the
Company's Vice Chairman of the Board of Directors and will render services of an
executive and administrative character, and act in such other executive capacity
for the Company, as the Company's board of directors (the "Board") shall from
time to time direct. The foregoing duties and responsibilities shall include
those set forth on Exhibit A attached hereto. Employee shall devote his best
efforts, energies and abilities to the business and affairs of the Company.
Employee shall perform the duties and carry out the responsibilities assigned to
him, to the best of his ability, in a diligent, trustworthy and businesslike
manner for the purpose of advancing the business of the Company and in a manner
he reasonably believes to be in and not opposed to the best interests of the
Company.
<PAGE> 2
(b) Employee acknowledges that his duties and responsibilities
will require his concentrated business efforts and agrees that during the
Employment Period he will not engage directly or indirectly in any other
business activity or have any business pursuits or interests which materially
interfere or conflict with the performance of Employee's duties hereunder or
which compete directly with the Company; provided, however, nothing in this
Section 1.2 shall be deemed to prohibit Employee from investing in the stock of
any competing corporation listed on a national securities exchange or traded in
the over-the-counter market, but only if his associates (as such term is defined
in Regulation 14(A) promulgated under the Securities Exchange Act of 1934, as in
effect on the date hereof), collectively, do not own more than an aggregate of
three percent of the stock of such corporation. Notwithstanding the foregoing or
anything else in this Agreement to the contrary, Employee may serve on
additional boards of directors during the Employment Period and volunteer his
service to charitable, business and other public service agencies, clubs or
organizations so long as such board or other service does not materially
interfere or conflict with the performance of Employee's duties hereunder and so
long as such activities are not rendered for a competitor of the Company. Any
and all fees or remuneration paid to Employee in consideration of work and
services performed outside the scope of Employee' employment hereunder shall
inure to the benefit of Employee.
(c) The parties hereto agree that none of Employee's duties
hereunder shall require him to, and Employee agrees that he will not without the
consent of the Board, which consent shall not be unreasonably withheld, change
his personal residence from the Old Brookville, New York SMSA Area.
1.3 EMPLOYMENT PERIOD. Employee's employment under this Agreement
shall begin on the date hereof and shall continue through and until the second
anniversary of the date hereof (the "Initial Period"). Employee shall be
employed as a consultant to the Company, in accordance with a standard Company
consulting agreement to be executed, for a one year period (the "Consulting
Period") following the end of the Initial Period. The Initial Period and the
Consulting Period are hereinafter collectively referred to as the "Employment
Period." Notwithstanding anything to the contrary contained herein, the
Employment Period is subject to termination pursuant to Section 1.4 and Section
1.5 below.
1.4 TERMINATION BY THE COMPANY. The Company has the right to
terminate Employee's employment under this Agreement, by notice to Employee in
writing at any time, (i) for "Cause", (ii) without Cause for any or no reason,
and (iii) due to the Disability of Employee. Any such termination shall be
effective upon the date of service of such notice pursuant to Section 15. This
Agreement shall terminate automatically upon Employee's death.
"Cause" as used herein means the occurrence of any of the following
events:
(a) the determination by the Board in the exercise of its
reasonable judgment that Employee has committed an act or acts constituting (i)
a crime involving moral turpitude, dishonesty or theft, (ii) dishonesty or
disloyalty with respect to the Company, or (iii) fraud;
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<PAGE> 3
(b) the determination by the Board in the exercise of its
reasonable judgment that Employee has committed an act that indicates alcohol or
drug abuse by Employee that adversely affects his performance hereunder;
(c) a material breach by Employee of any of the terms and
conditions of Sections 3 or 4 of this Agreement; or
(d) Employee's gross negligence, habitual neglect, or
intentional misconduct in the performance of his duties hereunder.
Employee shall be deemed to have a "Disability" for purposes of this
Agreement if Employee shall be unable, by reason of illness or physical or
mental incapacity or disability (from any cause or causes whatsoever), to
perform Employee's essential job functions hereunder, whether with or without
reasonable accommodation by the Company, in substantially the manner and to the
extent required hereunder prior to the commencement of such Disability, for a
total period of 90 days in any 180-day period. In the event Employee shall be
under a Disability, the Company shall have the right to terminate Employee's
employment hereunder during the continuance of such Disability upon at least
thirty (30) days prior written notice to Employee. Such determination shall not
be arbitrary or unreasonable, and the Board shall take into consideration the
opinion of Employee's personal physician, if reasonably available, as well as
applicable provisions of the Americans with Disabilities Act, but such
determination by the Board, if not arbitrary or unreasonable, shall be final and
binding on the parties hereto.
1.5 TERMINATION BY EMPLOYEE. Employee has the right to terminate
his employment under this Agreement for any or no reason, upon ninety (90) days
prior written notice to the Company.
1.6 BOARD OF DIRECTORS AND RESIGNATION. Throughout the Employment
Period and for two years thereafter unless Employee's employment has been
terminated for cause, the Company agrees to seek to cause Employee to be elected
to the Board. Compensation for serving as a director after expiration of the
Employment Period will be the same as for all other outside directors. Unless by
virtue of his beneficial ownership of voting stock of the Company he has voting
control over a number of shares sufficient to assure his election to the Board,
upon the termination of Employee's employment with the Company for Cause,
Employee shall be deemed to have automatically resigned from any position he may
then hold on the Board. Such resignation shall be deemed effective immediately
without the requirement that a written resignation be delivered.
1.7 INDEMNITY. The Company shall indemnify Employee and hold him
harmless to the fullest extent permissible under applicable law for all acts or
decisions made by him in good faith while performing services for the Company.
The Company shall also use its best efforts to obtain coverage for him under any
insurance policy obtained during the term of this Agreement covering the other
officers and directors of the Company against lawsuits.
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<PAGE> 4
2. COMPENSATION AND BENEFITS.
2.1 BASE COMPENSATION. During the Employment Period, the Company
will pay Employee an annual base salary of $190,000.00 per annum (the "Base
Salary") ( contingent upon Faircom Inc. corporate expenses for the fiscal year
ended December 31, 1997 having been reduced by at least $27,000 annually during
the Employment Period), payable in accordance with the Company's regular payroll
policy for senior executive salaried employees. Employee represents and warrants
that Faircom Inc. has reduced such corporate expenses by at least $27,000
annually over each of the three years by eliminating those expenses listed on
Exhibit B, and the Company agrees that the elimination of such expenses
satisfies such contingency. Upon termination of the Employment Period, the Base
Salary for any partial year will be prorated based on the number of days elapsed
in such year during which the Employment Period had continued.
2.2 DISCRETIONARY BONUS. Within seventy five (75) days following
the end of each fiscal year, the Board, as part of its annual review of
Employee's performance, shall consider in its sole discretion the merits of a
bonus to Employee, and in the event a bonus is warranted, shall cause the
Company to award to Employee a bonus (the "Discretionary Bonus") for such year
in an amount to be determined by the Board in its reasonable judgment based upon
the Employee's and the Company's performance and the achievement of reasonably
attainable goals and objectives established by the Board in consultation with
Employee for such year.
2.3 STOCK OPTIONS. In addition to and not in lieu of Discretionary
Bonuses, the Company may, from time to time and on such terms and conditions as
the Board shall deem appropriate, in its sole discretion, grant to Employee
qualified and/or non-qualified options to acquire capital stock of the Company
pursuant to the Company's 1998 Management Stock Option Plan.
2.4 BENEFITS. In addition to the Base Salary, any Discretionary
Bonus and any stock options payable or granted to Employee hereunder, Employee
will be entitled to the following benefits during the Employment Period:
(a) payments of premiums for hospitalization, disability, life
and health insurance, to the extent offered by the Company, and in amounts
consistent with Company policy, for all key management employees, as reasonably
determined by the Board;
(b) up to four (4) weeks paid vacation each year with salary,
provided that unused vacation time shall not be carried over to subsequent
years;
(c) reimbursement for reasonable, ordinary and necessary
out-of-pocket business expenses incurred by Employee in the performance of his
duties, subject to the Company's policies in effect from time to time with
respect to travel, entertainment and other expenses, including without
limitation, requirements with respect to reporting and documentation of such
expenses;
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<PAGE> 5
(d) use of an automobile at the Company's expense which shall
include expenses for comprehensive insurance coverage for the automobile;
(e) lease of Suite 220, Old Brookville offices, pursuant to
existing lease terms, which lease will be renewed for a three (3) year term
commencing March 1, 1998 and ending February 28, 2001; and
(f) other benefit arrangements and perquisites, including a
401(k) or similar tax deferral plan, to the extent made generally available by
the Company to its executives and key management employees.
2.5 TAXES, ETC. All compensation payable to Employee hereunder is
stated in gross amount and shall be subject to all applicable withholding taxes,
other normal payroll and any other amounts required by law to be withheld.
2.6 COMPENSATION AFTER TERMINATION.
(a) If the Employment Period is terminated (i) by the Company
without Cause; (ii) by reason of Employee's Disability; or (iii) through
expiration of the Employment Period or death of Employee, then except as
otherwise provided in the specific terms of the option agreement or grant, all
unvested options to purchase stock of the Company held by Employee shall cease
and terminate as of the date of termination; whereupon, the Company shall have
no further obligations hereunder or otherwise with respect to Employee's
employment from and after the termination or expiration date (except payment of
Employee's current Base Salary accrued through the date of termination or
expiration and any deferred payments provided for herein) and the Company shall
continue to have all other rights available hereunder (including without
limitation, all rights under Sections 3 and 4 at law or in equity).
(b) If the Employment Period is terminated by the Company
because of Employee's Disability, the Company agrees to continue to pay Employee
his current Base Salary during such period of Disability, said payments to
continue for a maximum of six months. Thereafter, Employee shall be paid by the
Company's insurer, if any, such disability benefits as may be paid to any
employee of the Company under any disability plan then in effect, if any.
(c) If the Employment Period is terminated by the Company
without Cause, Employee shall be entitled to receive as severance pay (in
addition to the payment of the Base Salary through the date of termination as
well as a prorated Discretionary Bonus) an amount equal to the greater of (i)
his Base Salary for a period equal to twelve (12) months and (ii) Employee's
Base Salary for the remainder of the Employment Period, such amount to be
payable in regular installments in accordance with the Company's general payroll
practices for salaried employees. Employee shall have no obligation to mitigate
these post-employment payments by seeking other employment. Except pursuant to
Section 2.6(a), the Company shall have no other obligations hereunder or
otherwise with respect to Employee's employment from and after the termination
or expiration date, and the Company shall continue to have all other rights
available hereunder (including, without limitation, all rights under Sections 3,
4, and 6 at law or in equity).
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<PAGE> 6
(d) If the Employment Period is terminated pursuant to Section
2.6(a)(iii), 2.6(b), or 2.6(c) above, Employee shall be entitled to receive, at
such time it would otherwise be payable, any Discretionary Bonus which would
have been payable, based upon the Company's performance over the full fiscal
year, prorated for that portion of the fiscal year during which the Employee was
employed by the Company.
2.7 PROFIT SHARING, PENSION AND SALARY DEFERRAL BENEFITS. It is
understood by the parties to this Agreement that, during the Employment Period,
Employee shall be entitled to participate in or accrue benefits under any
pension, salary deferral or profit sharing plan now existing or hereafter
created for employees of the Company upon terms and conditions equivalent to
those which the Company may provide for other senior executive employees.
3. COVENANT NOT TO COMPETE.
3.1 NON-COMPETITION. Employee agrees that during the Employment
Period and for the 18-month period immediately thereafter, he shall not, within
a seventy (75) mile radius of any radio station transmission tower or studio
then owned or operated, directly or indirectly, by the Company (the
"Territory"), engage in any of the following activities:
(a) Directly or indirectly enter into the employ or render any
service to or act in concert with any person, partnership, corporation or other
entity engaged in the ownership or operation of radio stations (the "Radio
Business") with a radio station transmission tower or studio located within the
Territory; or
(b) Directly or indirectly engage in the Radio Business with a
radio station transmission tower or studio located within the Territory on his
own account; or
(c) Become interested in any such Radio Business with a radio
station transmission tower or studio located within the Territory directly or
indirectly as an individual, partner, shareholder, director, officer, principal,
agent, employee, consultant, creditor or in any other relationship or capacity;
provided, that the purchase of a publicly traded security of a corporation
engaged in the Radio Business shall not in itself be deemed violative of this
Agreement so long as Employee does not own, directly or indirectly, more than 3%
of the securities of such corporation.
3.2 NON-SOLICITATION. Employee agrees that during the Employment
Period and for the 18-month period immediately thereafter, he shall not (other
than in the regular course of the Company's business) within the Territory
solicit, directly or indirectly, business of the type then being performed by
the Company from any person, partnership, corporation or other entity which is a
customer of the Company at the time Employee's employment with the Company
terminates, or was such a customer within the one-year period immediately prior
thereto, or to the knowledge of Employee at the date of termination of
employment, is a person, partnership, corporation or other entity with which the
Company plans to do a substantial amount of business within the one-year period
after such termination of employment.
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<PAGE> 7
4. NON-INDUCEMENT AND NON-DISCLOSURE.
4.1 NON-INDUCEMENT. Employee agrees that during the Employment
Period and for a one-year period immediately thereafter, he shall not directly
or indirectly, individually or on behalf of persons not parties to this
Agreement, aid or endeavor to solicit or induce any of the Company's employees
to leave their employment with the Company in order to accept employment with
Employee or another person, partnership, corporation or other entity.
4.2 NON-DISCLOSURE. At no time shall Employee divulge, furnish or
make accessible to anyone (other than in the regular course of the Company's
business) any knowledge or information with respect to confidential information
or data of the Company, or with respect to any confidential information or data
of any of the customers of the Company, or with respect to any other
confidential aspect of the business or products or services of the Company or
its customers. Upon termination of his employment with the Company, Employee
shall return to the Company all records, documents and material containing
confidential information of the Company prepared by Employee or coming into his
possession by virtue of his employment with the Company, including all copies
thereof.
5. EFFECT OF TERMINATION WITHOUT CAUSE. Notwithstanding the provisions
of Sections 3 and 4 above, the restrictions imposed upon Employee in Sections
3.1, 3.2, and 4.1 of this Agreement during the period following the termination
of his employment hereunder shall not apply in the event Employee's employment
hereunder is terminated by the Company without cause pursuant to Section
1.4(ii).
6. REMEDIES. Employee acknowledges and agrees that the covenants set
forth in Sections 3 and 4 of this Agreement (collectively, the "Restrictive
Covenants") are reasonable and necessary for the protection of the Company's
business interests and compliance therewith will not deprive Employee of the
ability to earn a suitable living, that irreparable injury will result to the
Company if Employee breaches any of the terms of the Restrictive Covenants, and
that in the event of Employee's actual or threatened breach of any such
Restrictive Covenants, the Company will have no adequate remedy at law. Employee
accordingly agrees that in the event of any actual or threatened breach by him
of any of the Restrictive Covenants, the Company shall be entitled to immediate
temporary injunctive and other equitable relief, without the necessity of
showing actual monetary damages, subject to hearing as soon thereafter as
possible. In such event, the periods of time referred to in Sections 3 and 4
shall be deemed extended for a period equal to the respective period during
which Employee is in breach thereof, in order to provide for injunctive relief
and specific performance for a period equal to the full term thereof. Nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including
the recovery of any damages which it is able to prove. The covenants contained
in Section 4 and 5 shall be construed as separate covenants, and if any court
shall finally determine that the restraints provided for in any such covenants
are too broad as to the geographic area, activity or time covered, said area,
activity or time covered may be reduced to whatever extent the court deems
reasonable and such covenants shall be enforced as to such reduced area,
activity or time. Employee shall indemnify and hold Company harmless from any
liability, loss, damage, judgment, cost or expense
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<PAGE> 8
(including reasonable attorneys' fees and expenses) arising out of any claim or
suit resulting from Employee's breach of these covenants or his failure to
perform a duty hereunder.
7. NO OTHER NON-COMPETE AGREEMENTS. Notwithstanding anything to the
contrary contained herein, Employee hereby represents, warrants and covenants to
Company that Employee (i) is not a party to nor bound by any non-competition,
non-solicitation, confidentiality or other agreement of any kind which would
conflict with or prevent his employment hereunder or the full performance of all
of his duties hereunder, and (ii) has not, and will not, wrongfully use any
confidential information or know-how taken from another employer. Employee
hereby agrees to indemnify and hold the Company harmless from any claim, loss,
damage and expense hereafter incurred by the Company as a result of any breach
of the foregoing representations, warranties or covenants made by Employee in
this Section.
8. LIFE INSURANCE. The Company may at its discretion and at any time
apply for and procure as owner and for its own benefit and at its own expense,
insurance on the life of Employee in such amounts and in such form or forms as
the Company may choose. Employee shall cooperate with the Company in procuring
such insurance and shall, at the request of the Company, submit to such medical
examinations, supply such information and execute such documents as may be
required by the insurance company or companies to whom the Company has applied
for such insurance. Employee shall have no interest whatsoever in any such
policy or policies, except that, upon the termination of Employee's employment
hereunder, Employee shall have the privilege of purchasing any such insurance
from the Company for an amount equal to the actual premiums thereon previously
paid by the Company. Notwithstanding the foregoing, as of the date of this
Agreement the ownership of Term Life Policy No. 0000263362, underwritten by
William Penn Co. on the life of Employee, shall be conveyed to Employee, and the
Company shall pay the premiums on such policy during the Employment Period. The
Company shall have no obligation to pay insurance premiums or any other
liability whatsoever with respect to Universal Life Policy No. 0700000882,
underwritten by William Penn Co. on the life of Employee, and owned by Employee.
9. INCOME TAX TREATMENT. Employee and the Company acknowledge that it is
the intention of the Company to deduct all amounts paid under Section 2 hereof
as ordinary and necessary business expenses for income tax purposes. Employee
agrees and represents that he will treat all amounts paid hereunder as ordinary
income for income tax purposes, and should he report such amounts as other than
ordinary income for income tax purposes, he will indemnify and hold the Company
harmless from and against any and all taxes, penalties, interest, costs and
expenses, including reasonable attorneys' and accounting fees and costs, which
are incurred by the Company directly or indirectly as a result thereof.
10. ASSIGNMENT. No party hereto may assign or delegate any of its rights
or obligations hereunder without the prior written consent of the other party
hereto, provided, however, the Company shall have the right to assign all or any
part of its rights and obligations under this Agreement to (i) any affiliate of
the Company to which the Business is assigned at any time or (ii) the purchaser
of all or substantially all of the assets of the Company. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement
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<PAGE> 9
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and permitted assigns of the parties hereto whether
so expressed or not.
11. SEVERABILITY. Whenever possible, each provision of this agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same Agreement.
13. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings
in this Agreement are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. The use of the word "including" in this Agreement shall be by way
of example rather than by limitation.
14. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered personally
to the recipient, (ii) sent to the recipient by reputable express courier
service (charges prepaid) or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid, or (iii) transmitted by
telecopy to the recipient with a confirmation copy to follow the next day to be
delivered by overnight carrier. Such notices, demands and other communications
shall be sent to the addresses indicated below:
(a) If to Employee:
Joel M. Fairman
333 Glen Head Road
Suite 220
Old Brookville, New York 11545
Facsimile No.: 516/676-2631
(b) If to the Company:
Regent Communications, Inc.
50 East RiverCenter Boulevard
Suite 180
Covington, Kentucky 41011
Facsimile No.: 606/292-0352
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party. Date
of service of such notice shall be (w) the date such notice is personally
delivered, (x) three days after the date of mailing if sent by certified or
registered mail, (y) one day after the date of delivery to the overnight courier
if sent by overnight courier or (z) the next business day after the date of
transmittal by telecopy.
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<PAGE> 10
15. PREAMBLE; PRELIMINARY RECITALS. The Preliminary Recitals set forth in
the Preamble hereto are hereby incorporated and made part of this Agreement.
16. WAIVER. No modification, termination or attempted waiver of this
Agreement shall be valid unless in writing and signed by the party against whom
the same is sought to be entered. Either party's failure to enforce any
provision or provisions of this Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations thereof,
nor prevent that party thereafter from enforcing each and every other provision
of this Agreement. The rights granted the parties herein are cumulative and the
waiver by a party of any single remedy shall not constitute a waiver of such
party's right to assert all other legal remedies available to him or it under
the circumstances.
17. ADDITIONAL OBLIGATIONS. Both during and after the Employment Period,
Employee shall, upon reasonable notice, furnish the Company with such
information as may be in Employee's possession, and cooperate with the Company,
as may reasonably be requested by the Company (and, after the Employment Period,
with due consideration for Employee's obligations with respect to any new
employment or business activity) in connection with any litigation in which the
Company or any affiliate is or may become a party. The Company shall reimburse
Employee for all reasonable expenses incurred by Employee in fulfilling
Employee's obligations under this Section 17.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the Commonwealth of Kentucky without giving effect to provisions thereof
regarding conflict of laws.
19. ENTIRE AGREEMENT. This Agreement, together with the Exhibits hereto,
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
REGENT COMMUNICATIONS, INC.
By: /s/ Terri S. Jacobs
-------------------
Title: Chairman and CEO
----------------
EMPLOYEE:
/s/ Joel M. Fairman
-----------------------
Joel M. Fairman
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<PAGE> 11
EXHIBIT A
TO
EXECUTIVE EMPLOYMENT AGREEMENT
1. Assist in the coordination and transition of the Regent and Faircom
operations to ensure a smooth merger.
2. Serve as part of acquisition committee to assist Regent's future
development and growth, utilizing knowledge, resources and contacts.
3. Shareholder relations.
4. Coordination of relationships with market makers, brokerage research firms
and the like relating to public shares outstanding.
5. Coordinate acquisition agreements and other related matters.
6. Assist the Chairman and CEO with investment banking, commercial banking
and other financial and capital matters.
7. Other duties determined by Chairman and Board.
<PAGE> 12
EXHIBIT B
TO
EXECUTIVE EMPLOYMENT AGREEMENT
1. The lease for Suite 280 in 333 Glen Head Road, Old Brookville, New
York, was terminated as of February 28, 1998. The rental expense for Suite 280
contained in Faircom Inc.'s corporate expenses for the fiscal year ended
December 31, 1997 was $16,322.28.
2. As of the effective date of the Merger, Regent will no longer be
responsible for payment of insurance premiums on Universal Life Policy No.
0700000882, underwritten by William Penn Co. on the life of Employee, for which
the premiums paid in 1997 were $17,000. In the fiscal year ended December 31,
1997 these premiums were "grossed up" to $29,573.59 and this amount was included
in Faircom's corporate expenses. Regent will be responsible for Term Life Policy
No. 0000263362, underwritten by William Penn Co. on the life of Employee, for
which the premiums paid in 1997 were $10,810.80 and that amount was included in
Faircom's 1997 corporate expenses. Since this Term Life Policy will become a
so-called "key-man" life policy, the premium will be "grossed up" to $18,639.32.
This would result in an addition to Faircom Inc. corporate expense of $7,828.52
($18,639.32 minus $10,810.80) offset by the elimination of $29,573.59 corporate
expense, a net saving of $21,745.07 in Faircom corporate expense.
3. The sum of $16,322.28 and $21,745.07 is $38,067.35.
4. Employee represents and warrants that since December 31, 1997, Faircom
Inc. has not entered into any agreements, obligations or commitments, other than
in connection with activities relating to (i) the Agreement of Merger of Faircom
Inc., Regent Merger Corp., Regent Communications, Inc., Blue Chip Capital Fund
II Limited Partnership and Miami Valley Venture Fund, L.P., dated as of December
5, 1997, as amended, and (ii) the Shelby acquisition, which will increase the
continuing corporate expense obligations of the Faircom operations not referred
to above to an aggregate amount in excess of the aggregate amount of such other
expenses incurred for the year ended December 1997. The foregoing representation
shall not in any manner modify the terms of this Agreement and shall in no way
be deemed to restrict the level of corporate expenses of the former Faircom
operations from and after the date hereof which have been approved by the
appropriate officers or by the directors of the Company.
<PAGE> 1
Exhibit 20(d)
CONSULTING AND NON-COMPETITION AGREEMENT
THIS CONSULTING AND NON-COMPETITION AGREEMENT ("Agreement") is made this
15th day of June, 1998, between REGENT COMMUNICATIONS, INC., a Delaware
corporation (the "Corporation") with its principal offices in Covington,
Kentucky, and JAMES H. LEVY, who resides at 245 Park Lane, Atherton, California
94025 (the "Consultant").
WHEREAS, pursuant to a certain Stock Purchase Agreement dated June 16,
1997, as amended, the Corporation has purchased all of the issued and
outstanding shares of capital stock of The Park Lane Group ("Park Lane"), a
California corporation engaged, through its subsidiaries, in the business of
owning and operating radio stations; and
WHEREAS, the Consultant has served as the chief executive officer of Park
Lane for over seven years, and as such, has been responsible for the day-to-day
operations of Park Lane and its subsidiaries, utilizing his many years of
experience in the radio industry; and
WHEREAS, the Corporation wishes to have the benefits of the Consultant's
services and experience in the Corporation's ongoing business activities and has
requested the Consultant to serve the Corporation as a consultant on the terms
and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Consulting Services.
(a) The Corporation shall retain the Consultant and the
Consultant will provide consulting services to the Corporation for an initial
term of one (1) year, commencing June 15, 1998. The term of this Agreement shall
terminate on June 14, 1999 unless extended by the written agreement of the
Corporation and the Consultant.
(b) The Consultant shall perform such consulting services as
are reasonably requested by the Corporation and within the scope of Consultant's
experience and expertise subject to the conditions set forth herein. The
Consultant shall report to the Chairman and President of the Corporation or to
any other person designated from time to time by the Chairman.
(c) The Corporation and the Consultant agree that the
Consultant will provide consulting services to the Corporation on a full time
basis, provided Consultant will not be required to devote more than forty (40)
hours per week on average for such consulting services.
(d) All of the Consultant's obligations under this Agreement
shall be fulfilled within close proximity to Consultant's residence in
California or at such other locations as may be deemed necessary by the
Corporation in its sole discretion; provided, however, Consultant shall not be
required to relocate his current residence nor shall he be required to spend
<PAGE> 2
more than eight (8) nights away from home per month. Consultant shall be
entitled to five (5) weeks' vacation, to be taken at such times as Consultant
selects, subject to reasonable advance notice to the Corporation and consent of
the Corporation, not to be unreasonably withheld.
(e) Consultant's services shall be considered, for federal
income tax reporting purposes, to be personal services income, and the total of
all consulting fees paid hereunder during each calendar year of the term of this
Agreement shall be reported by Corporation to Consultant by use of Internal
Revenue Service Information Report Form 1099. Consultant acknowledges the
character of consulting fee income so reported is income from personal services,
and Corporation shall treat such payments as ordinary and necessary business
expenses for federal income tax purposes.
2. Consulting Fees, Expenses.
(a) For the consulting services furnished by the Consultant
pursuant to this Agreement and for his agreement not to compete, the Corporation
shall pay the Consultant $200,000.00, payable in twelve equal monthly
installments during the term of this Agreement due in advance on the first day
of each monthly period during said term.
(b) The Consultant shall be reimbursed for all authorized
reasonable expenses incurred by him in connection with the performance of his
responsibilities hereunder upon presentation of expense statements, vouchers or
other appropriate evidence of expense. An expense shall be deemed reasonable if
it is an expense for which Consultant would have been reimbursed in connection
with the performance of his responsibilities as chief executive officer of Park
Lane.
3. Proprietary Information.
Consultant acknowledges that in the course of his engagement
by the Corporation, he has, is or may be making use of, acquiring or adding to
confidential information of a special and unique nature and value relating to
such matters as the Corporation's trade secrets, contracts, prices, know how,
systems, programs and programming strategies, developments, designs, procedures,
manuals, confidential reports and communications and lists of customers and
clients. Further, any information and materials received by the Corporation or
Consultant at any time from third parties in confidence (or subject to
nondisclosure or similar covenants) shall also be deemed to be and shall be
confidential information. Consultant hereby confirms that he has not and shall
not, except with the prior written consent of the Corporation, or except when he
is acting as a consultant of the Corporation solely for the benefit of the
Corporation in connection with the Corporation's business and in accordance
with, and as authorized by, the Corporation's business practices and employee
practices, including without limitation those relating to the protection of
confidential information, at any time during or following the termination of
this Agreement, directly or indirectly, disclose, divulge, reveal, report,
publish, transfer or use, for any purposes whatsoever, any of such confidential
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<PAGE> 3
information which has been obtained or created by or disclosed to him as a
result of his previous employment by Park Lane or engagement hereunder by the
Corporation. Upon the termination of this Agreement, Consultant shall deliver to
the Corporation all contracts, documents, books and records, memoranda, notes,
work papers, manuals, computer software programs, and all other similar and
dissimilar repositories containing information relating to the Corporation,
including without limitation, confidential information and all copies thereof,
in his possession or under his control.
4. Covenant Not To Compete.
During the term of this Agreement, and for a period of one (1)
year thereafter, the Consultant shall not, directly or indirectly, (a) engage as
an employee, agent, partner, owner, officer, director, consultant, service
provider or principal of or for any entity or enterprise which owns or operates
a radio station whose transmitter site is located within a seventy-five (75)
mile radius of any transmitter site of any radio station owned by the
Corporation during the term of this Agreement and at the time of termination of
this Agreement, or (b) individually or on behalf of any other person or entity
aid or endeavor to solicit or induce any of the Corporation's employees to leave
their employment with the Corporation in order to accept employment with
Consultant or another person, partnership, corporation or other entity.
5. General.
(a) This Agreement shall be governed by and construed and
enforced in accordance with the internal substantive laws of the State of
California.
(b) This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof.
(c) This Agreement, and the Consultant's obligations
hereunder, may not be assigned by the Consultant. The Corporation may assign its
rights in connection with any sale, transfer or other disposition of all or
substantially all of its business or assets. In any event, the obligations of
the Corporation hereunder shall be binding on its successors or assigns, whether
by merger, consolidation or acquisition of all or substantially all of its
business or assets.
(d) This Agreement may be amended, modified, superseded,
renewed or extended and the terms or covenants hereof may be waived, only by a
written instrument executed by both of the parties hereto, or in the case of a
waiver, by the party waiving compliance.
(e) Consultant, in performing his services hereunder, is doing
so in an advisory capacity and Consultant will be held harmless from any actions
taken by Corporation as a result of the consulting services rendered hereunder.
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<PAGE> 4
(f) The failure of either party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver by either party of the breach of
any term or covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such breach, or a waiver of the breach of
any other term or covenant contained in this Agreement. The Consultant
acknowledges that in the event he breaches this Agreement, the Corporation may
terminate this Agreement without further notice or liability and recover from
Consultant all damages, including attorneys' fees, resulting from his breach. In
addition to any other rights or remedies the Corporation may have, the
Corporation may obtain a restraining order or injunction against any threatened
or actual breach of Sections 3 and 4 of this Agreement by Consultant or a court
order requiring specific performance of this Agreement.
(g) Consultant has carefully considered the nature and extent
of the restrictions upon him and the rights and remedies conferred upon the
Corporation under this Agreement, and hereby acknowledges and agrees that such
covenants are reasonable, are designed to prevent irreparable damage to the
Corporation, are required to protect the Corporation's legitimate interests, and
do not confer a benefit upon the Corporation disproportionate to the detriment
to Consultant. Consultant represents to the Corporation that, based on
Consultant's experience and abilities, Consultant's observance of the covenants
set forth in Section 4 above, including without limitation the geographic area
and time period covered, will not cause undue hardship to Consultant or
unreasonably interfere with Consultant's ability to earn a livelihood.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
REGENT COMMUNICATIONS, INC.
By: William L. Stakelin
---------------------
Name: William L. Stakelin
-------------------
Title: President
-------------------
James H. Levy
--------------------------
JAMES H. LEVY
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