SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
TRIATHLON BROADCASTING COMPANY
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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(1) Set for the amount on which the filing fee is calculated and state how it
was determined.
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September __, 1996
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Triathlon Broadcasting Company (the "Company") on
____________, 1996 at the _____________________
_______________________________ at ________. A Notice of Annual Meeting of
Stockholders, a Proxy and a Proxy Statement containing information about the
matters to be acted upon at the Annual Meeting are enclosed.
All holders of Class A Common Stock, Class B Common Stock
and Depositary Shares representing a one-tenth interest in a share of 9%
Mandatory Convertible Preferred Stock as of the close of business on
_______________, 1996 are entitled to vote at the Annual Meeting.
A record of the Company's activities for the fiscal year
ending March 31, 1996 is included in the Annual Report on Form 10-KSB enclosed
herewith. We look forward to greeting in person as many of our stockholders as
possible. Whether or not you plan to attend the Annual Meeting, the Company
requests that you please exercise your voting rights by completing and
returning your Proxy promptly in the enclosed self-addressed, stamped
envelope. If you attend the meeting and desire to vote in person, your Proxy
will not be used.
Thank you for your continued support of our Company.
Sincerely,
Norman Feuer
Chief Executive Officer
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[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD _____________, 1996
September __, 1996
To The Holders of Common Stock:
The Annual Meeting of Stockholders of Triathlon Broadcasting Company
(the "Company"), a Delaware corporation, will be held on
_______________________, 1996 at the ___________
_____________________________at 9:00 a.m. to act upon the following matters:
1. To elect five directors to serve for the ensuing year.
2. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to remove the designation of 600,000 shares of
Series A Convertible Preferred Stock, so that such shares may be redesignated
with such rights, limitations, powers and preferences as the Board of
Directors may properly designate from time to time.
3. To approve the Company's 1996 Stock Option Plan providing for the
issuance of options in respect of up to 200,000 shares of Class A Common Stock
and the performance goal included therein.
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 1997.
5. To consider and act upon such other matters as may
properly come before the meeting or any adjournment thereof.
Information regarding the matters to be acted upon at the Annual
Meeting is more fully described in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on
_____________, 1996 as the record date for the determination of stockholders
entitled to notice of, and to vote at, the meeting and any postponement or
adjournment thereof. Accordingly, only holders of record of the Company's
voting common stock and depositary shares (representing Preferred Stock) at
the close of business on _____________ will be entitled to vote at the meeting
and any adjournment or postponement thereof.
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Management sincerely desires the attendance of every stockholder at
the meeting. It is recognized however, that some will be unable to attend. IN
ORDER TO ACHIEVE A QUORUM REQUIRED TO CONDUCT BUSINESS AT THE MEETING, WE ASK
THAT YOU VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE SELF-ADDRESSED,
STAMPED ENVELOPE. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU ARE
LATER ABLE TO ATTEND IN PERSON.
By Order of the Board of Directors
Kraig G. Fox
Secretary
New York, New York
September __, 1996
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[GRAPHIC OMITTED]
PROXY STATEMENT FOR 1996 ANNUAL MEETING OF STOCKHOLDERS
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This Proxy Statement is being furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Triathlon
Broadcasting Company, a Delaware corporation (the "Company"), for use at the
Company's Annual Meeting of Stockholders (the "Annual Meeting") to be held on
______________________, 1996 at the _____________________________________
______________ at 9:30 a.m., and any adjournment thereof.
The Company's principal executive offices are located at Symphony
Towers, 750 B Street, Suite 1920, San Diego, California 92101.
This Proxy Statement and the enclosed Proxy are being mailed
beginning on or about _____________, 1996 to all stockholders entitled to vote
at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
Stockholders of record of the Company's voting stock at the close of
business on _____________, 1996 are entitled to notice of, and to vote at, the
Annual Meeting. A quorum is necessary to transact business at the Annual
Meeting. The presence in person or by proxy of the holders of record of a
majority of the combined voting power of the outstanding shares entitled to
vote at the Annual Meeting shall constitute a quorum. Abstentions and broker
non-votes (i.e., shares held by a broker for its customers that are not voted
because the broker does not receive instructions from the customer or because
the broker does not have discretionary voting power with respect to the item
under consideration) will be counted as present for purposes of determining
the presence or absence of a quorum for the transaction of business.
At the record date there were 3,102,344 shares of Class A Common
Stock, par value $.01 per share ("Class A Common Stock"), 244,890 shares of
Class B Common Stock, par value $.01 per share ("Class B Common Stock"), and
5,834,000 Depositary Shares, each representing a one-tenth interest in a share
of 9% Mandatory Convertible Preferred Stock, par value $.01 per share
("Depositary Shares"), issued, outstanding and entitled to vote at the Annual
Meeting. In addition, at the record date there were 50,000 shares of Class C
Common Stock, par value $.01 per share, 1,444,366 shares of Class D Common
Stock, par value $.01 per share, and 565,000 shares of Series B Convertible
Preferred Stock, par value $.01 per share, issued and outstanding but not
entitled to vote at the Annual Meeting.
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Under the Company's Amended and Restated Certificate of
Incorporation, the holders of Depositary Shares and Class A Common Stock
voting together as a class are entitled to elect two of the Company's
directors, with each Depositary Share being entitled to 4/5 of a vote and each
share of Class A Common Stock being entitled to one vote. With respect to the
election of the other three directors and other matters submitted for a vote,
the holders of Depositary Shares, Class A Common Stock and Class B Common
Stock shall vote as a single class, with each Depositary Share being entitled
to 4/5 of a vote and each share of Class A Common Stock and Class B Common
Stock being entitled to one vote per share and ten votes per share,
respectively.
In accordance with the By-Laws of the Company and the General
Corporation Law of the State of Delaware (i) a plurality of the votes duly
cast is required for the election of directors, (ii) the affirmative vote of a
majority of the combined voting power of the outstanding shares present in
person or by proxy and entitled to vote is required for approval of Proposals
3 and 4, and (iii) with respect to Proposal 2, the affirmative vote of the
majority of the voting power of the Company entitled to vote is required to
amend the Company's Amended and Restated Certificate of Incorporation.
Under the General Corporation Law of the State of Delaware, although
abstaining votes and broker non-votes are deemed to be present for purposes of
determining whether a quorum is present at a meeting, abstaining votes and
broker non-votes are not deemed to be a vote duly cast. As a result,
abstentions and broker non-votes will not be included in the tabulation of the
voting results with respect to Proposals 1, 3 and 4 and therefore with respect
to such matters, abstentions and broker non-votes do not have the effect of
votes in opposition. Abstentions and broker non-votes will, however, be
treated as votes against Proposal 2.
Proxies in the accompanying form which are properly executed and
returned will be voted at the meeting and any adjournment thereof and will be
voted in accordance with the instructions thereon. Any proxy upon which no
instructions have been indicated with respect to a specified matter will b
voted as follows with respect to such matters: FOR (i) the election of five
directors, (ii) the approval of an amendment to the Company's Amended and
Restated Certificate of Incorporation to remove the designation of 600,000
shares of Series A Convertible Preferred Stock, (iii) the approval of the
Company's 1996 Stock Option Plan for the issuance of options in respect of up
to 200,000 shares of Class A Common Stock and the performance goal included
therein and (iv) the ratification of the appointment of Ernst & Young LLP as
independent auditors.
Each of the nominees for election as directors has agreed to serve if
elected. The Company knows of no reason why any of the nominees for election
as directors would be unable to serve. Should any or all of the nominees be
unable to serve, all proxies returned to the Company will be voted in
accordance with the best judgment of the persons named as proxies except where
a contrary instruction is given.
The Company knows of no other matters, other than those stated above,
to be presented for consideration at the meeting. If, however, other matters
properly come before the meeting or any adjournments thereof, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their judgment on any such matters. The persons named in the
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accompanying proxy may also, if it is deemed advisable, vote such proxy to
adjourn the meeting from time to time.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time prior to the voting of the proxy by (i) filing a
written notice of revocation with the Secretary of the Company bearing a later
date than the proxy; (ii) duly executing and submitting a later-dated proxy
relating to the Annual Meeting; or (iii) voting in person at the Annual
Meeting (although attendance at the Annual Meeting will not, in and of itself,
constitute a revocation of proxy).
The cost of this solicitation of proxies will be borne by the
Company. Solicitation of Proxies may be in person or by mail, telephone or
telegraph by directors, officers and regular employees of the Company.
Arrangements will be made with brokerage houses, custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of
Class A Common Stock, Class B Common Stock and Depositary Shares and, upon
request, the Company will reimburse the expense of forwarding the materials.
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1997 Annual Meeting must be
received by the Corporate Secretary of the Company no later than _____________
in order to be included in the proxy soliciting material relating to that
meeting. Only those proposals that are proper for stockholder action and
otherwise proper may be included in the proxy soliciting material.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation of the Company
authorizes the Board of Directors (the "Board") to fix the number of directors
from time to time, but at no less than two directors. The Board has fixed the
number of directors to be elected at this Annual Meeting at five. All
directors hold office until the next annual meeting of stockholders following
their election or until their successors are elected and qualified. Officers
are elected annually by the Board and serve at the Board's discretion.
The holders of Depositary Shares and Class A Common Stock voting
together as a class are entitled to elect two of the Company's directors (the
"Class A Directors" or the "Independent Directors"), with the holders of
Depositary Shares and Class A Common Stock being entitled to 4/5 of a vote per
share and one vote per share, respectively. The remaining directors are
elected by the holders of Depositary Shares, Class A Common Stock and Class B
Common Stock, with the holders of Depositary Shares, Class A Common Stock and
Class B Common Stock being entitled to 4/5 of a vote per share, one vote per
share and ten votes per share, respectively.
NOMINEES
Each person named below as a nominee for director is currently
serving in such capacity. In addition, Mr. Feuer is an executive officer of
the Company. Each nominee has advised the Company of his willingness to serve
if elected. There are no family relationships among any directors and
executive officers of the Company.
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Nominees to be elected by holders of Depositary Shares,
Class A Common Stock and Class B Common Stock
First Became a Director
Name Age of the Company
---- --- --------------
John D. Miller ............... 51 1995
Norman Feuer ................. 58 1995
Dennis R. Ciapura ............ 50 1995
Nominees to be elected by holders of Depositary Shares and
Class A Common Stock
First Became a Director
Name Age of the Company
---- --- --------------
Frank E. Barnes III .......... 46 1995
Jeffrey W. Leiderman ......... 49 1995
BUSINESS EXPERIENCE OF NOMINEES
JOHN D. MILLER has served as Chairman of the Board of Directors of the
Company since June 30, 1995. Mr. Miller has been the President of Rothschild
Ventures, Inc., a private investment group, since July 1995. In addition, Mr.
Miller was the President of Starplough, Inc. from February 1994 to June 1995.
Mr. Miller formed Starplough, Inc. as a private investment company focusing on
investing in medium-sized companies. He was the Managing Director of Clipper
Group, a private equity investment group, from March 1993 to March 1994. From
1969 to 1994, Mr. Miller served in various capacities with The Equitable, a
full service insurance and investment company. Immediately prior to his
retirement from The Equitable in 1994, Mr. Miller served as the President and
Chief Executive Officer of Equitable Capital Management Corp., an investment
and advisory subsidiary of The Equitable.
NORMAN FEUER has served as President, Chief Executive Officer and a
Director of the Company since June 30, 1995. In addition, Mr. Feuer has served
as acting Chief Financial Officer, Secretary and Treasurer since June 24,
1996. Since September 13, 1995 Mr. Feuer has also provided consulting services
to two stations owned by Pourtales Radio Partnership ("Pourtales") in the
Tri-Cities, Washington market and the two stations subject to a local
marketing agreement ("LMA") in Tri-Cities (the "Tri-Cities LMA") and will
continue to do so until such radio stations are sold to a third party or
acquired by the Company. See "Certain Relationships and Related
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Transactions--The Pourtales Stations." Prior to September 13, 1995, Mr. Feuer
was acting as the Chief Operating Officer responsible for the day-to-day
operations of all of the radio stations owned by Pourtales. From 1990 to 1992,
Mr. Feuer served as a consultant to numerous radio broadcasting companies.
From 1985 to 1990, Mr. Feuer served as the Executive Vice President and Chief
Operating Officer of Noble Broadcasting Group, one of the largest
independently owned radio companies in the U.S. From 1983 to 1985, Mr. Feuer
served as the President of the Radio Division of Viacom, Inc. From 1970 to
1983, Mr. Feuer served as vice president and general manager of several radio
station properties. From 1967 to 1970, Mr. Feuer served in various capacities
for CBS Radio.
FRANK E. BARNES III has served as a Director of the Company since
October 30, 1995. He has been the Executive Director of Carolina Barnes
Corporation, an investment and merchant banking firm since August 1989.
Carolina Barnes Corporation through its affiliate, Carolina Barnes Capital,
Inc., which is owned by Mr. Barnes, has provided corporate financial services
for companies in media, entertainment, communications, maritime transportation
and real estate since 1989. His previous experience includes senior corporate
finance positions at major Wall Street firms and he currently serves on the
boards of B&H Bulk Carriers Ltd. and Carolina Barnes Capital Inc.
DENNIS R. CIAPURA has served as a Director of the Company since October
30, 1995. He has been a consultant to SFX Broadcasting, Inc. ("SFX") since
January 1995. From August 1986 to December 1995, he was an Executive Vice
President for Noble Broadcasting Group.
JEFFREY W. LEIDERMAN has served as a Director of the Company since
October 30, 1995. He has been the President of Leiderman Associates,
Executive, Corporate and Group Benefit Consultants since 1970. Between 1982
and 1987, he served as the Chairman of the Board of two public companies,
American Medical Technology, Inc. and American Pipeline & Exploration Co. He
was a board member of Minami International Corp., a Japanese trading and
manufacturing company from 1987 to 1991.
BUSINESS EXPERIENCE OF OFFICERS WHO ARE NOT DIRECTORS
KRAIG G. FOX has served as the Secretary of the Company since June 24,
1996. Since December 1993, Mr. Fox has been Manager-Business and Legal Affairs
for The Sillerman Companies, Inc. Since April 1995, Mr. Fox has been the
Secretary of Multi-Market Radio, Inc., a publicly-traded company engaged in
the ownership and operation of radio stations.
PRINCIPAL EXECUTIVE OFFICERS OF SILLERMAN COMMUNICATIONS MANAGEMENT CORPORATION
Information is set forth below with respect to Messrs. Sillerman and
Tytel, who make significant contributions to the business of the Company
through their positions with Sillerman Communications Management Corporation
("SCMC"), which provides consulting and advisory services to the Company.
Messrs. Sillerman and Tytel, under the direction of the Chief Executive
Officer and the Board of Directors of the Company, have assisted, and will
continue to assist, the Company in planning and negotiating acquisitions of
radio stations as well as obtaining financing
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and maintaining the Company's ongoing relationships with financial
institutions. See "Certain Relationships and Related Transactions."
Robert F. X. Sillerman is the Executive Chairman of the Board and
chief executive officer of SFX. He has been Chairman of the Board from 1992.
He has been Chairman of the Board and Chief Executive Officer of SCMC since
1985 and Radio Investors since February 1995 and, through privately held
entities, controls the general partner of Sillerman Communication Partners,
L.P. From 1985 to 1989, Mr. Sillerman was co-Chairman of Legacy Broadcasting,
Inc. ("Legacy I"), which owned radio stations and which has subsequently been
liquidated. In addition, Mr. Sillerman was co-Chairman of Metropolitan
Broadcasting Corporation ("Metropolitan"), which was merged with Legacy I and
Group W Radio Holdings, Inc., an affiliate of Westinghouse Broadcasting
Corporation, in 1989. Mr. Sillerman also served from 1990 to 1993 as
co-Chairman of Legacy Broadcasting, Inc. ("Legacy II"), which, through a
related partnership, owned and operated a radio business. In 1993 Mr.
Sillerman became the Chancellor of the Southampton campus of Long Island
University.
Howard J. Tytel has been a Director and the Executive Vice President
and Secretary of SFX since 1992 and Executive Vice President and General
Counsel of SCMC since 1985 and Radio Investors since February 1995, a director
and officer of SCMC since 1989, and from 1991 to 1993, Mr. Tytel was an
officer and director of Legacy II. Mr. Tytel was a director of Country Music
Television from 1988 to 1991, Legacy I from 1986 to 1989 and Metropolitan from
1988 to 1989. Since March 1995, Mr. Tytel has been director of Interactive
Flight Technologies, Inc., a public company engaged in providing
computer-based in-flight entertainment systems to the commercial airline
industry. Mr. Tytel is currently of counsel to the law firm of Baker &
McKenzie, which represents the Company, SFX, SCMC, Multi-Market Radio, Inc.
("MMR") and Radio Investors, and was formerly of counsel to the law firm of
Winston & Strawn.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF
THE NOMINEES NAMED ABOVE.
PROPOSAL 2 - AMENDMENT TO THE COMPANY'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
Prior to the Company's Initial Public Offering, the Board approved a
compensation plan which provided that the Company may issue up to 600,000
shares of Series A Convertible Preferred Stock (the "Series A Preferred
Stock") out of 4,000,000 authorized shares of Preferred Stock to certain of
its officers, directors and advisors. The designation of the Series A
Preferred Stock is part of Article 4.5 of the Company's Amended and Restated
Certificate of Incorporation ("Article 4.5") which provides that such Series A
Preferred Stock has a par value of $.01 per share, is non-voting, bears no
dividends and is convertible into shares of the Company's Class A Common Stock
upon the Company's achievement of certain performance goals. The Board has
altered certain provisions of the Series A Preferred Stock and has designated
an aggregate of 600,000 shares of Series B Convertible Preferred Stock
pursuant to its compensation plan and issued 565,000 of those shares to
certain officers, directors and advisors. See "Executive
Compensation--Issuances of Securities." The Company has not issued, and does
not intend to issue, any of the Series A Preferred Stock.
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Subject to stockholder approval, the Board has approved the repeal of
Article 4.5. A copy of the entire Article 4 of the Company's Amended and
Restated Certificate of Incorporation is attached hereto as Annex A.
If the repeal of Article 4.5 is approved by the stockholders, the
600,000 shares of Preferred Stock currently designated as Series A Preferred
Stock would revert to blank check Preferred Stock (the "Blank Check
Preferred") and, pursuant to Article 4.4 of the Company's Amended and Restated
Certificate of Incorporation, the Board would determine when, and on what
terms, each share of Blank Check Preferred would be issued. Specifically, the
Board would be permitted to designate each share of Blank Check Preferred as a
member of a class or series and accordingly, would be empowered to determine,
among other things, the following: (i) the dividend rights of each share of
Blank Check Preferred; (ii) the voting rights, if any (in addition to any
prescribed by statute), of each share of Blank Check Preferred; (iii) the
rights if any, to convert or exchange each share of Blank Check Preferred into
or for other securities; (iv) the conditions or restrictions, if any, on
specified actions of the Company affecting the rights of each share of Blank
Check Preferred; (v) the redemption provisions, if any, of each share of Blank
Check Preferred; (vi) the preference, if any, to which each share of Blank
Check Preferred would be entitled in the event of liquidation of, or
distribution of, the assets of the Company; and (vii) the provisions of the
sinking fund, if any, provided for the redemption of each share of Blank Check
Preferred. Accordingly, the Board may, in its discretion, upon issuance of the
shares of Blank Check Preferred, or any portion thereof, designate rights,
limitations, powers and preferences similar to those currently attached to the
Series A Preferred Stock. In addition, shares of Blank Check Preferred may be
voting or non-voting as determined in the Board's sole discretion with no
further authorization by security holders required for the creation and
issuance thereof.
The Board is required to make any determination to issue shares of
capital stock of the Company based on its judgment as to the best interests of
the stockholders and the Company. Although the Board has no present intention
of doing so, it could issue shares of Blank Check Preferred that could,
depending on the terms of such series, make more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or other means. Such shares of Blank Check Preferred could be
used to create voting or other impediments or to discourage persons seeking to
gain control of the Company. Such shares of Blank Check Preferred could also
be privately placed with purchasers favorable to the Board in opposing such
action. In addition, the Board could authorize holders of a series of shares
of Blank Check Preferred to vote either separately as a class or with the
holders of the Company's currently outstanding Class A Common Stock or
Depositary, on any merger, sale or exchange of assets by the Company or any
other extraordinary corporate transaction. The issuance of new shares of Blank
Check Preferred also could be used to dilute the stock ownership of a person
or entity seeking to obtain control of the Company should the Board consider
the action of such entity or person not to be in the best interest of the
stockholders and the Company.
The Board believes that the proposed amendment would provide the
Company with additional flexibility for possible future financing
transactions, acquisitions, employee benefit plans and other corporate
purposes. The reversion of the shares of Series A Preferred Stock to blank
check Preferred Stock would be particularly useful, as it will provide the
Board with the authority to
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determine the exact terms of the shares of Blank Check Preferred, or any
portion thereof, at the time of issuance, in order to reflect the nature of
the specific transaction.
THE BOARD OF DIRECTORS BELIEVES THAT THIS AMENDMENT WOULD BE IN THE
COMPANY'S BEST INTERESTS AND RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT.
ADOPTION OF THE PROPOSED AMENDMENT REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF ALL OUTSTANDING STOCK OF THE COMPANY ENTITLED TO VOTE
THEREON.
PROPOSAL 3 - APPROVAL OF THE COMPANY'S 1996 STOCK OPTION
PLAN AND THE PERFORMANCE GOAL INCLUDED THEREIN
The Board has unanimously approved, subject to the approval of the
Company's stockholders, the adoption of the Company's 1996 Stock Option Plan
(the "1996 Plan"). The 1996 Plan, which provides for a grant of a limited
number of non-qualified and incentive stock options in respect of up to
200,000 shares of Class A Common Stock to eligible employees and advisors, is
designed to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to key employees,
officers and advisors to the Company and its subsidiaries and to promote the
success of the Company's business.
As of March 31, 1996, there were 120,000 shares of Class A Common
Stock issuable under stock option plans currently in effect. An additional
reserve of 200,000 shares of Class A Common Stock will be established pursuant
to the 1996 Plan.
Each option granted pursuant to the 1996 Plan is designated at the
time of grant as either an "incentive stock option" or as a "non-qualified
stock option." A copy of the 1996 Plan is attached hereto as Annex B. A
summary of the 1996 Plan is set forth below.
ADMINISTRATION OF THE PLAN.
The 1996 Plan is administered by the Stock Option Committee (the
"Committee"), which is appointed by the Board. Only the Independent Directors
may serve on the Committee. The Committee is currently comprised of Messrs.
Barnes and Leiderman. The Committee determines who among those eligible will
be granted options, the time or times at which options will be granted, the
number of shares to be subject to each option, the duration of options, any
conditions to the exercise of options and the date or dates on, and the price
at which, options may be exercised.
The 1996 Plan may be amended by the Board without stockholder
approval, except that stockholder approval is required to (i) extend the term
of the 1996 Plan beyond ten years; (ii) extend the maximum term of the options
granted under the 1996 Plan beyond ten years; (iii) withdraw the
administration of the 1996 Plan from the Committee; (iv) expand the class of
eligible participants; (v) increase the aggregate number of shares of Class A
Common Stock which may be issued pursuant to the provisions of the 1996 Plan;
or (vi) change the material terms of the performance goal within the meaning
of Internal Revenue Code Section 162(m).
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Unless the 1996 Plan is terminated earlier by the Board, it will
terminate when all shares of the Class A Common Stock reserved for issuance
under the 1996 Plan have been acquired through the exercise of options granted
thereunder, or upon the tenth anniversary of the earlier of the adoption of
the 1996 Plan by the Company's Board or its approval by the stockholders.
SHARES SUBJECT TO THE PLAN.
The 1996 Plan provides that options may be granted with respect to a
total of 200,000 shares of Class A Common Stock. Under certain circumstances
involving a change in the number of shares of Class A Common Stock without
receipt by the Company of any consideration therefor, such as a stock split,
stock consolidation or payment of a stock dividend, the class and aggregate
number of shares subject to options under the 1996 Plan will be adjusted. In
addition, if the Company is involved in a merger, consolidation, dissolution
or liquidation, the options granted under the 1996 Plan will be adjusted. If
any option expires or terminates for any reason, without having been exercised
in full, the unpurchased shares subject to such option will be available again
for the purposes of the 1996 Plan.
Participation. Options under the 1996 Plan may be granted to key employees of
the Company and its subsidiaries and any other individual who, in the judgment
of the Committee, provides substantial and important services to the Company.
Non-employee directors are not eligible to participate in the 1996 Plan.
Option Price. The exercise price of each option will be determined by the
Committee. With respect to incentive stock options, the exercise price may not
be less than 100% of the fair market value of the shares of Class A Common
Stock covered by the option on the date the option is granted. If an incentive
stock option is granted to a person who owns over 10% of the total combined
voting power of all classes of the Company's stock, then the exercise price
may not be less than 110% of the fair market value of the Class A Common Stock
underlying the option on the date the option is granted. The exercise price of
non-qualified stock options may be any price set by the Committee.
Term of Options. The Committee shall fix the term of each option, provided
that the maximum term of each option shall be ten years. Incentive stock
options granted to a person who owns over 10% of the total combined voting
power of all classes of the Company's stock shall expire not more than five
years after the date of grant. The 1996 Plan provides for the earlier
expiration of options held by a participant under certain terminations of
employment with the Company. Shares purchased pursuant to the exercise of
options granted under the 1996 Plan must be paid for in United States
currency, or, at the Committee's discretion, in shares of the Company's Class
A Common Stock already owned by the participant exercising the options.
Restrictions on Grant and Exercise. Options granted under the 1996 Plan may
not be transferred other than to members of the holder's family, trusts and
charities. Any other transfers are permissible upon prior written approval of
the Committee. The aggregate fair market value (determined at the time the
option is granted) of the shares as to which a Grantee may first exercise
incentive stock options in any one calendar year may not exceed $100,000. The
Committee may impose any other conditions on the exercise of options it deems
appropriate.
9
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND THE PARTICIPANT.
Incentive Stock Options
Incentive Stock Options ("ISOs): Options granted under the 1996 Plan
which constitute ISOs will, in general, be subject to the following Federal
income tax treatment:
(i) The grant of an ISO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) A participant's exercise of an ISO will result in no Federal income
tax consequences to the Company.
(iii) A participant's exercise of an ISO will not result in ordinary
Federal taxable income to the participant, but may result in the imposition of
an increase in the alternative minimum tax. If shares acquired upon exercise
of an ISO are not disposed of within the same taxable year the ISO is
exercised, the excess of the fair market value of the shares at the time the
ISO is exercised over the option price is included in the participant's
computation of alternative minimum taxable income.
(iv) If shares acquired upon the exercise of an ISO are disposed of
within two years of the date of the option grant, or within one year of the
date of the option exercise, the participant will realize ordinary Federal
taxable income at the time of the disposition to the extent that the fair
market value of the shares at the time of exercise exceeds the option price,
but not in an amount greater than the excess, if any, of the amount realized
on the disposition over the option price.
(v) Short-term or long-term capital gain will be realized by the
participant at the time of such a disposition to the extent that the amount of
proceeds from the sale exceeds the fair market value at the time of the
exercise of the ISO.
(vi) Short-term or long-term capital loss will be realized by the
participant at the time of such a disposition to the extent that the option
price exceeds the amount of proceeds from the sale.
(vii) If a disposition is made as described in this section, the Company
will be entitled to a Federal income tax deduction in the taxable year in
which the disposition is made in an amount equal to the amount of ordinary
Federal taxable income realized by the participant.
(viii) If shares acquired upon the exercise of an ISO are disposed of
after the later of two years from the date of the option grant or one year
from the date of the option exercise, the participant will realize long-term
capital gain or loss in an amount equal to the difference between the amount
realized by the participant on the disposition and the participant's Federal
income tax basis in the shares, usually the option price. In such event, the
Company will not be entitled to any Federal income tax deduction with respect
to the ISO.
10
<PAGE>
Non-Qualified Stock Options
Non-Qualified Stock Options ("NQSOs"): Options granted under the 1996
Plan which constitute NQSOs will, in general, be subject to the following
Federal income tax treatment:
(i) The grant of an NQSO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) The exercise of an NQSO will generally result in ordinary Federal
taxable income to the participant in an amount equal to the excess of the fair
market value of the shares at the time of exercise over the option price.
(iii) A deduction from Federal taxable income will be allowed to the
Company in an amount equal to the amount of ordinary income recognized by the
participant.
(iv) Upon a subsequent disposition of shares, a participant will
recognize a short-term or long-term capital gain or loss equal to the
difference between the amount received and the tax basis of the shares,
usually fair market value at the time of exercise.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO ADOPT THE 1996
PLAN AND THE PERFORMANCE GOAL INCLUDED THEREIN IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR APPROVAL OF THE 1996
PLAN AND PERFORMANCE GOAL INCLUDED THEREIN.
PROPOSAL 4 - APPOINTMENT OF INDEPENDENT AUDITORS
Audited consolidated financial statements of the Company and its
subsidiaries are included in the Company's annual report, a copy of which has
been furnished to all stockholders of record. Upon recommendation of the Audit
Committee, the Board has appointed Ernst & Young LLP to examine its
consolidated financial statements for the fiscal year ending March 31, 1997,
and has deemed it desirable to request that the stockholders approve such
appointment. Representatives of Ernst & Young LLP will be present at the
Annual Meeting and will have the opportunity to make a statement, if they
desire to do so, and are also expected to be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE FISCAL YEAR ENDING MARCH 31, 1997.
INCORPORATION BY REFERENCE
The audited financial statements for the fiscal year ending March 31,
1996 are included in the Annual Report on Form 10-KSB, a copy of which is
enclosed herewith, and are incorporated by reference herein.
11
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth all reportable compensation awarded to,
earned by or paid to the Chief Executive Officer (the "Named Executive
Officer") for services rendered in all capacities to the Company and its
subsidiaries. No individual officer received annual compensation in excess of
$100,000 for the fiscal year ended March 31, 1996 ("Fiscal 1995"). Prior to
June 24, 1996, when Mr. Feuer assumed the responsibilities of Chief Financial
Officer and Treasurer, the Company reimbursed SCMC for providing these
services and functions.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- ------------------------------------------------------------
AWARDS PAYOUTS
------------------------------- ------------
RESTRICTED
NAME AND PRINCIPAL OTHER ANNUAL STOCK SECURITIES UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S)($) OPTIONS/SARS(#) PAYOUTS($) COMPENSATION($)
(a) (b) (c) (d) (e) (3) (f) (g) (h) (i)
- - - ------------------- ---- ---------- --------- --------------- ----------- ------------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Norman Feuer Fiscal 81,250(1) 70,000(2) 60,000(4) 15,000(5) 0 0
Chief Executive 1995
Officer
</TABLE>
(1) Mr. Feuer began receiving a salary when the Company completed its Initial
Public Offering on September 13, 1995. Accordingly, the amount reflects
only six and one half months of salary for Fiscal 1995. Mr. Feuer's
salary includes compensation for consulting services rendered to
Pourtales and the Company is reimbursed by Pourtales pursuant to the
Shared Expense Agreement (as defined herein). See "Certain Relationships
and Related Transactions."
(2) On April 30, 1996, the Board of Directors approved a bonus for Mr. Feuer
in the amount of $70,000 in recognition of the Company's performance in
Fiscal 1995 and pursuant to the bonus clauses in Mr. Feuer's employment
agreement. See "--Employment Agreement."
(3) In Fiscal 1995 the aggregate amount of perquisites and other personal
benefits did not exceed the lesser of $50,000 or 10% of the salary and
bonus for the Named Executive Officer.
(4) On February 8, 1996, Mr. Feuer received 60,000 shares of Series B
Convertible Preferred Stock pursuant to a compensation plan. If the
market price of Class A Common Stock is greater than or equal to $14.00
per share for 20 consecutive trading days, 30,000 shares of Mr. Feuer's
Series B Convertible Preferred Stock will be convertible into an equal
number of shares of Class A Common Stock. If the market price of Class
Common Stock is greater than or equal to $15.00 per share for 20
consecutive trading days, the remaining 30,000 shares of Mr. Feuer's
Series B Convertible Preferred Stock will be convertible into an equal
number of shares of Class A Common Stock. The Series B Convertible
Preferred Stock is non-voting and vests in equal installments over five
years beginning one year from date of issuance.
(5) The options were granted on October 30, 1995 and vest in two equal annual
installments on October 30, 1996 and October 30, 1997. In addition to the
options, On October 30, 1995 Mr. Feuer received the right to a cash bonus
in the amount of $90,000, representing the difference between $5.50, the
price of the Class A Common Stock at the Initial Public Offering, and
$11.50, the closing price of the Class A Common Stock on October 30,
1995, multiplied by 15,000. The bonus vests in two equal installments on
October 30, 1996 and October 30, 1997 and will be paid upon exercise of
Mr. Feuer's options.
12
<PAGE>
The following table provides information with respect to stock options
granted during Fiscal 1995 to the Named Executive Officer.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
- - - ------------------ --------------------- --------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Norman Feuer 15,000(1) 42.3% $11.50(2) 10/30/2005
- - - ------------------------
(1) The options were granted pursuant to the 1995 Stock Option Plan on
October 30, 1995 and vest in two equal annual installments on October
30, 1996 and October 30, 1997. In addition to the options, on October
30, 1995 Mr. Feuer received the right to a cash bonus in the amount
of $90,000, representing the difference between $5.50, the price of
the Class A Common Stock at the Initial Public Offering, and $11.50,
the closing price of the Class A Common Stock on October 30, 1995,
multiplied by 15,000. The bonus vests in two equal installments on
October 30, 1996 and October 30, 1997 and will be paid upon exercise
of Mr. Feuer's options.
(2) The exercise price of the options represents the fair market value of
the underlying stock on the date of grant.
The following table provides information with respect to the stock
options exercised during Fiscal 1995 and the value as of March 31, 1996 of
unexercised in-the-money options held by the Named Executive Officer. The
value of unexercised in-the-money options at fiscal year end is the difference
between the option exercise price and the fair market value of the Company's
stock on March 31, 1996, multiplied by the number of options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END ($)(1)
------------------- -------------------
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- - - --------------- -------------------- ---------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Norman Feuer -- -- 0/15,000 0/0
</TABLE>
(1) The options were not in-the-money since the exercise price exceeded the
closing market price of the underlying stock on March 31, 1996.
THE 1995 STOCK OPTION PLAN
The 1995 Stock Option Plan (the "1995 Plan") was approved by the
Board and the stockholders of the Company prior to the Initial Public
Offering. The purposes of the 1995 Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to key employees, officers, and advisors of the Company
and its subsidiaries
13
<PAGE>
and to promote the success of the Company's business. Each option granted
pursuant to the 1995 Plan is designated at the time of grant as either an
"incentive stock option" or as a "non-qualified stock option." A copy of the
1995 Plan is attached hereto as Annex C. A summary of the 1995 Plan is set
forth below.
Administration of the Plan. The 1995 Plan is administered by the Stock Option
Committee (the "Committee"), which is appointed by the Board. Only the
Independent Directors may serve on the Committee. The Committee is currently
comprised of Messrs. Barnes and Leiderman. The Committee determines who among
those eligible will be granted options, the time or times at which options
will be granted, the number of shares to be subject to each option, the
duration of options, any conditions to the exercise of options and the date or
dates on, and the price at which, options may be exercised.
The 1995 Plan may be amended by the Board without stockholder
approval, except that stockholder approval is required to (i) extend the term
of the 1995 Plan beyond ten years; (ii) extend the maximum term of the options
granted under the 1995 Plan beyond ten years; (iii) withdraw the
administration of the 1995 Plan from the Committee; (iv) expand the class of
eligible participants; (v) increase the aggregate number of shares of Class A
Common Stock which may be issued pursuant to the provisions of the 1995 Plan;
(vi) otherwise materially increase the benefits accruing to participants under
the 1995 Plan.
Unless the 1995 Plan is terminated earlier by the Board, it will
terminate when all shares of the Class A Common Stock reserved for issuance
under the 1995 Plan have been acquired through the exercise of options granted
thereunder, or upon the tenth anniversary of the earlier of the adoption of
the 1995 Plan by the Company's Board or its approval by the stockholders.
Shares Subject to the Plan. The 1995 Plan provides that options may be granted
with respect to a total of 400,000 shares of Class A Common Stock. Under
certain circumstances involving a change in the number of shares of Class A
Common Stock without receipt by the Company of any consideration therefor,
such as a stock split, stock consolidation or payment of a stock dividend, the
class and aggregate number of shares subject to options under the 1995 Plan
will be adjusted. In addition, if the Company is involved in a merger,
consolidation, dissolution or liquidation, the options granted under the 1995
Plan will be adjusted. If any option expires or terminates for any reason,
without having been exercised in full, the unpurchased shares subject to such
option will be available again for the purposes of the 1995 Plan.
Participation. Options under the 1995 Plan may be granted to key employees of
the Company and its subsidiaries and any other individual who, in the judgment
of the Committee, provides substantial and important services to the Company.
Non-employee directors are not eligible to participate in the 1995 Plan.
Option Price. The exercise price of each option will be determined by the
Committee. With respect to incentive stock options, the exercise price may not
be less than 100% of the fair market value of the shares of Class A Common
Stock covered by the option on the date the option is granted. If an incentive
stock option is granted to a person who owns over 10% of the total combined
voting power
14
<PAGE>
of all classes of the Company's stock, then the exercise price may not be less
than 110% of the fair market value of the Class A Common Stock underlying the
option on the date the option is granted. The exercise price of non-qualified
stock options may be any price set by the Committee.
Term of Options. The Committee shall fix the term of each option, provided
that the maximum term of each option shall be ten years. Incentive stock
options granted to a person who owns over 10% of the total combined voting
power of all classes of the Company's stock shall expire not more than five
years after the date of grant. The 1995 Plan provides for the earlier
expiration of options held by a participant under certain terminations of
employment with the Company. Shares purchased pursuant to the exercise of
options granted under the 1995 Plan must be paid for in United States
currency, or, at the Committee's discretion, in shares of the Company's Class
A Common Stock already owned by the participant exercising the options.
Restrictions on Grant and Exercise. Options granted under the 1995 Plan may
not be transferred other than by will or the laws of descent and distribution
and, during the Grantee's lifetime, may be exercised solely by the Grantee.
The aggregate fair market value (determined at the time the option is granted)
of the shares as to which a Grantee may first exercise incentive stock options
in any one calendar year may not exceed $100,000. The Committee may impose any
other conditions on the exercise of options it deems appropriate.
Federal Income Tax Consequences to the Company and the Participant.
Incentive Stock Options
Incentive Stock Options ("ISOs): Options granted under the 1995 Plan
which constitute ISOs will, in general, be subject to the following Federal
income tax treatment:
(i) The grant of an ISO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) A participant's exercise of an ISO will result in non Federal
income tax consequences to the Company.
(iii) A participant's exercise of an ISO will not result in ordinary
Federal taxable income to the participant, but may result in the imposition of
an increase in the alternative minimum tax. If shares acquired upon exercise
of an ISO are not disposed of within the same taxable year the ISO is
exercised, the excess of the fair market value of the shares at the time the
ISO is exercised over the option price is included in the participant's
computation of alternative minimum taxable income.
(iv) If shares acquired upon the exercise of an ISO are disposed of
within two years of the date of the option grant, or within one year of the
date of the option exercise, the participant will realize ordinary Federal
taxable income at the time of the disposition to the extent that the fair
market value of the shares at the time of exercise exceeds the option price,
but not in an amount greater than the excess, if any, of the amount realized
on the disposition over the option price.
15
<PAGE>
(v) Short-term or long-term capital gain will be realized by the
participant at the time of such a disposition to the extent that the amount of
proceeds from the sale exceeds the fair market value at the time of the
exercise of the ISO.
(vi) Short-term or long-term capital loss will be realized by the
participant at the time of such a disposition to the extent that the option
price exceeds the amount of proceeds from the sale.
(vii) If a disposition is made as described in this section, the Company
will be entitled to a Federal income tax deduction in the taxable year in
which the disposition is made in an amount equal to the amount of ordinary
Federal taxable income realized by the participant.
(viii) If shares acquired upon the exercise of an ISO are disposed of
after the later of two years from the date of the option grant or one year
from the date of the option exercise, the participant will realize long-term
capital gain or loss in an amount equal to the difference between the amount
realized by the participant on the disposition and the participant's Federal
income tax basis in the shares, usually the option price. In such event, the
Company will not be entitled to any Federal income tax deduction with respect
to the ISO.
Non-Qualified Stock Options
Non-Qualified Stock Options ("NQSOs"): Options granted under the 1995
Plan which constitute NQSOs will, in general, be subject to the following
Federal income tax treatment:
(i) The grant of an NQSO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) The exercise of an NQSO will generally result in ordinary Federal
taxable income to the participant in an amount equal to the excess of the fair
market value of the shares at the time of exercise over the option price.
(iii) A deduction from Federal taxable income will be allowed to the
Company in an amount equal to the amount of ordinary income recognized by the
participant, provided the Company deducts and withholds all appropriate
Federal withholding tax.
(iv) Upon a subsequent disposition of shares, a participant will
recognize a short-term or long-term capital gain or loss equal to the
difference between the amount received and the tax basis of the shares,
usually fair market value at the time of exercise.
Options granted under the 1995 Plan are set forth and described in the
table entitled "Option/SAR Grants in the last fiscal year."
As the 1995 Plan has already been approved by stockholders, this
information is being provided for informational purposes only. No stockholder
action is being taken at this time with respect to the 1995 Plan.
16
<PAGE>
EMPLOYMENT AGREEMENT
Mr. Feuer has entered into an employment agreement with the Company
(the "Employment Agreement"), pursuant to which he has agreed to serve as the
Company's President and Chief Executive Officer for an initial term of five
years, which commenced on September 13, 1995. Mr. Feuer is required to devote
at least two-thirds of his business time to matters related to the Company,
provided, however, that in the Board of Director's discretion, he may devote
up to one-third of his business time to serving as a radio programming
consultant to Pourtales for the stations it owns in the Tri-Cities, Washington
market as well as the stations subject to the Tri-Cities LMA, until the
consummation of the acquisition of 11 radio stations and the assumption of
LMA's on two radio stations (the "Pourtales Acquisition"). Mr. Feuer receives
an annual base salary of $150,000, with annual increases based on increases in
the consumer price index and pursuant to the Board of Director's
recommendation. Mr. Feuer also receives an annual bonus of $25,000 if there
are no defaults during the year under any of the Company's financing
agreements with its lenders, and if there are any defaults thereunder which
are waived or cured with no material cost to the Company, Mr. Feuer will
receive one-half of such bonus and shall receive the remaining one-half at the
sole discretion of the Company's Board. Mr. Feuer will also receive an annual
bonus of $25,000 upon the Company's achievement of performance goals to be
mutually agreed upon, and an additional bonus at the discretion of the Board
(the "Discretionary Bonus"). If such Discretionary Bonus is less than $50,000
in any year, the Company will loan Mr. Feuer an amount equal to $50,000 less
such Discretionary Bonus. If Mr. Feuer remains employed by the Company for the
full term of his five year employment agreement, such loan amounts will be
forgiven. The Company loaned Mr. Feuer $25,000 on October 12, 1995, and an
additional $25,000 on January 10, 1996. These two loans were offset against
the bonus in the amount of $70,000 which was approved by the Board on April
30, 1996 in recognition of the Company's performance in Fiscal 1995 and
pursuant to the bonus clauses described above. In addition, the Company loaned
Mr. Feuer $25,000 evidenced by a promissory note which bears interest at an
annual rate of 8%.
The Employment Agreement provides that if Mr. Feuer's employment is
terminated without "Cause" or in the event of a "Constructive Termination
Without Cause," Mr. Feuer will be entitled to a payment equal to 12 months of
his base salary and bonuses (excluding the Discretionary Bonus) for the year,
prorated through the date of termination. In the event that Mr. Feuer becomes
disabled, the Company is obligated to pay his full base salary and bonuses
(excluding the Discretionary Bonus) for the first six months of such
disability and 75% of his base salary for the remainder of the term of the
employment agreement. The Employment Agreement defines "Cause" as conviction
of a felony involving moral turpitude which would render Mr. Feuer unable to
perform his duties under the Employment Agreement or conduct that constitutes
willful gross neglect or willful gross misconduct. "Constructive Termination
Without Cause" is defined in the Employment Agreement as a reduction of Mr.
Feuer's base salary or the failure of the Company to pay Mr. Feuer's bonuses,
the failure to reelect Mr. Feuer to, or the removal of Mr. Feuer from, his
position as an officer and director, a diminution of his duties and
responsibilities, or the failure of the Company to obtain a written assumption
of its obligations under the Employment Agreement by any successor to all or
substantially all of the Company's assets within 15 days after a merger or
similar transaction.
17
<PAGE>
In the event Mr. Feuer voluntarily terminates his employment for
reasons other than death or disability or a "Constructive Termination Without
Cause," Mr. Feuer will be required to surrender to the Company certain of his
shares of Class B Common Stock. If the voluntary termination occurs prior to
two and one-half years from the date of employment, Mr. Feuer must surrender
all of his shares of Class B Common Stock. If the termination occurs after two
and one-half years but prior to three and one-half years, after three and
one-half years but prior to four and one-half years, or after four and
one-half years but prior to five years, he must surrender 50%, 25% and 20%,
respectively, of his shares of Class B Common Stock.
BOARD MEETINGS AND COMMITTEES
The Company commenced operations in September 1995 with the purchase
of its first radio stations. The Board of Directors held four meetings during
the fiscal year ended March 31, 1996. The Committees of the Board of Directors
consist of an Audit Committee, a Stock Option Committee and a Compensation
Committee. The Company does not have a Nominating Committee and nominations
for directors are made by the Board of Directors. No director attended fewer
than 75 percent of all meetings of the Board of Directors or 75 percent of the
meetings of all committees on which he served.
The Audit Committee currently consists of Messrs. Miller and Barnes.
The Audit Committee met two times during the fiscal year ended March 31, 1996.
The principal functions of the Audit Committee are to recommend engagement of
the Company's independent public accountants and to maintain communications
among such independent accountants, the Board of Directors and the Company's
internal accounting staff with respect to accounting and audit procedures, the
implementation of recommendations by such independent public accountants, the
adequacy of the Company's internal controls and related matters.
The Stock Option Committee currently consists of Messrs. Barnes and
Leiderman. The Stock Option Committee met two times during the fiscal year
ended March 31, 1996. The principal functions of the Stock Option Committee
are to grant options, determine which employees and other individuals
performing substantial services to the Company may be granted options and
determine the rights and limitations attendant to options granted pursuant to
the Company's 1995 Stock Option Plan.
The Compensation Committee currently consists of Messrs. Miller and
Leiderman. The Compensation Committee met two times during the fiscal year
ended March 31, 1996. The principal functions of the Compensation Committee
are to review management organization and development, review significant
employee benefit programs and establish and administer executive compensation
programs, including bonus plans, stock option and other equity-based programs,
deferred compensation plans and any other cash or stock incentive programs.
18
<PAGE>
DIRECTORS' COMPENSATION
Each Independent Director receives $1,000 for each meeting of the
Board of Directors he attends. In addition, each Independent Director receives
$500 for any committee meeting he attends not held in conjunction with a
meeting of the Board of Directors. In connection with their service on a board
committee constituted solely for the purpose of evaluating the terms of a
possible acquisition offer by a third party, Messrs. Miller, Leiderman and
Barnes each received a one-time payment of $15,000. No other compensation is
paid to Directors for attending Board of Directors' meetings or committee
meetings.
STOCK BASED COMPENSATION OF DIRECTORS AND OTHERS
On January 31, 1996, the Company granted cash-only stock appreciation
rights with respect to 2,000 shares of Class A Common Stock to each of Messrs.
Leiderman and Barnes. The value of these cash-only stock appreciation rights
will be calculated by adding the sum of (i) one-half of the number of shares
times the difference between $.01 and the price of the Class A Common Stock on
January 31, 2001, if prior to such date the price of the Class A Common Stock
was equal to or greater than $14.00 for 20 consecutive trading days and (ii)
one-half of the number of shares times the difference between $.01 and the
price of the Class A Common Stock on January 31, 2001 if prior to such date
the price of the Class A Common Stock was equal to or greater than $15.00 for
20 consecutive trading days. The cash-only stock appreciation rights will be
paid on January 31, 2001.
On October 30, 1995, options with respect to 120,000 shares of Class
A Common Stock were granted pursuant to the Triathlon Broadcasting Company
1995 Stock Option Plan. Options to purchase 15,000 and 5,000 shares of Class A
Common Stock granted to Mr. Feuer and Mr. Ciapura, respectively, are
exercisable at $11.50 per share, have a ten year term and vest in equal
installments on October 30, 1996 and October 30, 1997. Options to purchase
20,000 shares of Class A Common Stock granted to each of Radio Investors,
Radio Analysis, The Sillerman Companies and SCMC are exercisable at $5.50 per
share, have a ten year term and vest in equal installments on October 30, 1996
and October 30, 1997. Options to purchase an aggregate of 20,000 shares of
Class A Common Stock with varying terms have been issued to several station
level employees as well as the Company's comptroller.
On October 30, 1995 Mr. Feuer and Mr. Ciapura received the right to a
cash bonus in the amount of $90,000 and $30,000, respectively, representing
the difference between $5.50, the price of the Class A Common Stock at the
initial public offering of the Company's Class A Common Stock (the "Initial
Public Offering"), and $11.50, the closing price of the Class A Common Stock
on October 30, 1995, multiplied by 15,000 and 5,000 respectively. The bonuses
vest in two equal installments on October 30, 1996 and October 30, 1997, and
will be paid upon Mr. Feuer's and Mr. Ciapura's exercise of their respective
options. Grants to officers under the Company's 1995 Stock Option Plan are set
forth in the table entitled "Options/SAR Grants in the Last Fiscal Year." In
addition to the option grants under the 1995 Stock Option Plan, on October 30,
1995, the Company's Board of Directors granted "cash-only stock appreciation
rights" with respect to 5,000, 1,000 and 1,000 shares of Class A Common Stock
to Messrs. Miller, Leiderman and Barnes, respectively. The value of these
cash-only stock appreciation rights will be calculated by multiplying the
number of
19
<PAGE>
shares by the difference between $5.50 and the price of the Class A Common
Stock on October 30, 2000, vesting in two equal installments on October 30,
1996 and October 30, 1997 and will be paid on October 30, 2000.
The Company has approved a compensation plan which provides that the
Company may issue up to 600,000 shares of Series B Convertible Preferred Stock
to certain of its officers, directors and advisors. Subject to required FCC
consents, if the market price of Class A Common Stock is greater than or equal
to $14.00 for 20 consecutive trading days, 300,000 shares of the Series B
Convertible Preferred Stock will be convertible into an equal number of shares
of Class A Common Stock. If the market price of Class A Common Stock is
greater than or equal to $15.00 per share for 20 consecutive trading days, the
remaining shares of the Series B Convertible Preferred Stock will be
convertible into an equal number of shares of Class A Common Stock. On
February 8, 1996, the Company issued (i) 220,000, 30,000, 30,000, 1,500 and
1,000 shares of Series B Convertible Preferred Stock convertible into Class A
Common Stock in the event the market price of the Class A Common Stock is
greater than or equal to $14.00 per share for 20 consecutive days to Radio
Investors, Radio Analysis and Messrs. Feuer, Miller and Ciapura, respectively,
and (ii) 220,000, 30,000, 30,000, 1,500, and 1,000 shares of Series B
Convertible Preferred Stock convertible into Class A Common Stock in the event
the market price of the Class A Common Stock is greater than or equal to
$15.00 per share for 20 consecutive trading days to Radio Investors, Radio
Analysis and Messrs. Feuer, Miller and Ciapura, respectively. The Series B
Convertible Preferred Stock is non-voting and vests in equal installments over
a five year period beginning one year from the date of issuance. Restricted
Stock Awards made to officers pursuant to a compensation plan are set forth
below in the Summary Compensation Table.
During the period in which the Series B Convertible Preferred Stock
becomes convertible, the Company will incur a substantial non-cash charge to
operations, which would equal the fair market value of such Class A Common
Stock at such time allocated over the five year vesting period. Such charge
could substantially reduce the Company's net income, if any, or increase the
Company's net loss for financial reporting purposes during that period. The
conversion of the Series B Convertible Preferred Stock will also result in
dilution to holders of the Company's Class A Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table gives information concerning the beneficial
ownership of the Company's capital stock as of September 9, 1996 by (i) each
person known to the Company to own beneficially more than 5% of any class of
Common Stock or Depositary Shares of the Company, (ii) each named executive
officer and director and (iii) all directors and executive officers of the
Company as a group.
20
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C
Common Stoc(2) Common Stock (2) Common Stock (2)
--------------- ------------------- ---------------------
Name and Address of Number Percent Number of Percent Number of Percent of
Beneficial Owner (1) of Shares of Class Shares of Class Shares Class
-------------------- --------- -------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John D. Miller 25,000 * -- -- -- --
Norman Feuer 7,500(4) * 244,890(6) 100% -- --
Frank E. Barnes III -- -- -- -- -- --
Dennis R. Ciapura 2,500(5) * -- -- -- --
Jeffrey W. Leiderman 1,000 * -- -- -- --
Radio Investors -- -- --(6) -- -- --
Radio Analysis Associates -- -- -- -- -- --
Robert F.X. Sillerman -- -- -- -- -- --
C. Terry Robinson -- -- -- -- -- --
Henilia Financial Limited(13) 267,344 8.6% -- -- -- --
Ellis French(14) -- -- -- -- 18,750 37.5%
Jeffrey Zimmerman(15) -- -- -- 18,750 37.5%
Henry A. Leonard & Co.
Employees Pension Trust(16) -- -- -- -- 6,250 12.5%
Richard Tauber(17) -- -- -- -- 6,250 12.5%
All Directors and Executive
Officers as a Group
(6 persons) 36,000(18) * 244,890 100% -- --
</TABLE>
(TABLE RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
Class D Depositary
Common Stock (2) Shares (3)
- - - ----------------------- --------------
Percentage
of Total
Number of Percent Number Percent Voting
Shares of Class of Shares of Class Shares
------ -------- --------- -------- -----------
<S> <C> <C> <C> <C>
-- -- -- -- *
-- -- -- -- 24.0%
-- -- -- -- --
-- -- -- -- *
-- -- -- -- *
1,321,921(7) 91.5% -- -- --(8)
244,890 17.0% -- -- --(8)
1,321,921(9) 91.5% -- -- --(10)
122,445(11) 8.5% -- -- --(12)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- 24.3%(19)
</TABLE>
- - - -----------
* Less than 1%
(1) Except as otherwise noted, the address of each of the persons named is c/o
the Company, Symphony Towers, 750 B Street, Suite 1920, San Diego,
California 92101. The information as to beneficial ownership is based on
statements furnished to the Company by the beneficial owners. As used in
this table, "beneficial ownership" means the sole or shared power to vote,
or to direct the disposition of, a security. For purposes of this table, a
person is deemed to have "beneficial ownership" of any security that such
person has the right to acquire within 60 days. Unless noted otherwise,
stockholders possess sole voting and dispositive power with respect to
shares listed on this table.
(2) Each share of Class B Common Stock, Class C Common Stock (non-voting) and
Class D Common Stock (non-voting) automatically converts into one share
of Class A Common Stock upon the sale of such stock to a non-affiliate of
the Company. In addition, each share of Class D Common Stock is
convertible into one share of Class B Common Stock or Class A Common
Stock at the option of the holder and subject to certain conditions,
including FCC approval. An aggregate of 565,000 shares of Series B
Convertible Preferred Stock was issued on February 8, 1996 and will vest
over a five year period beginning one year from the date of issuance. The
Series B Convertible Preferred Stock is non-voting and convertible into
an equal number of shares of Class A Common Stock in the event the market
price of the Class A Common Stock exceeds certain levels.
(3) Each Depositary Share has 4/5 of a vote. Assuming the conversion or
redemption of all Depositary Shares into shares of Class A Common Stock
(at the rate of .833 shares of Class A Common Stock per Depositary Share)
and the conversion of the shares of Class D Common Stock into Class B
Common Stock, Messrs. Feuer and Sillerman would beneficially own 68% of
the voting power of the Company.
(4) Consists of options to purchase 7,500 shares of Class A Common Stock
granted pursuant to the Company's 1995 Stock Option Plan which are
exercisable within 60 days.
(5) Consists of options to purchase 2,500 shares of Class A Common Stock
granted pursuant to the Company's 1995 Stock Option Plan which are
exercisable within 60 days.
(6) Mr. Feuer and Radio Investors, Inc. ("Radio Investors"), which is
substantially owned and controlled by Mr. Sillerman and his affiliates,
have entered into an agreement pursuant to which Mr. Feuer has assigned
his economic interest in 100,000 shares and has pledged such shares to
Radio Investors to secure certain payment obligations. In the event Radio
Investors exercises its right of first refusal to purchase all 244,890
shares (which may require prior FCC approval), it will hold approximately
24% of the voting power without giving effect to the conversion of the
Class D Common Stock. In
21
<PAGE>
addition, varying percentages of Mr. Feuer's shares are subject to
surrender to the Company in the event he voluntarily terminates his
employment prior to the expiration of the term of his employment
agreement. See "Remuneration of Management" and "Certain Relationships
and Related Transactions--Agreement between Mr. Feuer and Radio
Investors."
(7) Includes 122,445 shares beneficially owned by Radio Investors by virtue
of its 50% ownership of Radio Analysis Associates ("Radio Analysis").
(8) In the event that all of the shares of Class D Common Stock are converted
into Class B Common Stock, Radio Investors would hold of record
approximately 48.6% and Radio Analysis would hold of record approximately
9.9% of the total voting power of the Company. In the event that all of
the shares of Class D Common Stock are converted into Class A Common
Stock, the shares of Class D Common Stock held of record by Radio
Investors and Radio Analysis would represent approximately 10.3% and
2.1%, respectively, of the total voting power of the Company.
(9) Consists of 1,199,476 shares owned by Radio Investors, which is
controlled by Mr. Sillerman, and 50% of the 244,890 shares owned by Radio
Analysis, of which 50% is owned by Radio Investors.
(10) If the shares of Class D Common Stock are converted into shares of Class
B Common Stock, Mr. Sillerman would beneficially hold 53.6% of the total
voting power of the Company.
(11) Represents shares owned by Mr. Robinson by virtue of his ownership of 50%
of Radio Analysis.
(12) If the shares of Class D Common Stock are converted into shares of Class
B Common Stock, Mr. Robinson would beneficially hold 5% of the total
voting power of the Company.
(13) The address of Henilia Financial Limited is P.O. Box 129 FL-9490, Bavaduz,
Furstentum Liechtenstein. The Class A Common Stock held by it was issued
upon conversion pursuant to its terms of 267,344 shares of Class C Common
Stock from Macrocom Investors LLC, the sole shareholder of which is Michael
Millon. See "Certain Relationships and Related Transactions--Issuances of
Securities" for a description of the issuance of Class C Common Stock.
(14) Mr. French's address is 24 Egypt Close, East Hampton, New York 11937.
(15) Mr. Zimmerman's address is 86 Susan Drive, New City, New York 10956.
(16) The address of Henry A. Leonard & Co. Employees Pension Trust is c/o
Henry Leonard, 140 Grant Street, White Plains, New York 10601.
(17) Mr. Tauber's address is 250 West 90th Street, PH A, New York, New York
10024.
(18) Includes options to purchase 10,000 shares of Class A Common Stock
granted pursuant to the Company's 1995 Stock Option Plan which are
exercisable within 60 days.
(19) In the event that all of the shares of Class D Common Stock are converted
into Class B Common Stock, all Directors and Executive Officers as a
group would hold of record approximately 10% of the total voting power of
the Company.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officer, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in ownership of
Class A Common Stock and other equity securities of the Company. Directors and
the executive officer and greater than ten-percent stockholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a)
forms they file.
22
<PAGE>
Based solely upon its review of the copies of such forms and written
representations from certain reporting persons, the Company believes that all
filing requirements applicable to its directors, executive officer and persons
who own more than ten-percent of the Company's equity securities have been
complied with during fiscal year 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE RELATIONSHIP WITH POURTALES
Simultaneously with the Initial Public Offering, the Company acquired
from Pourtales, radio stations KXLK-FM, KLFH-AM and KQAM-AM, each operating in
the Wichita, Kansas Market. The purchase price for these three stations was
approximately $2.5 million. On January 24, 1996 the Company also acquired from
Pourtales, radio stations KZKX-FM and KTGL-FM, each operating in the Lincoln,
Nebraska market, for an aggregate purchase price of $9.7 million. C. Terry
Robinson, the beneficial owner of 122, 445 shares of Class D Common Stock by
virtue of his 50% interest in Radio Analysis, is the principal owner of
Pourtales. Mr. Robinson also provides marketing and consulting services to the
Company through Radio Analysis. See "Relationship With Radio Analysis." In
addition, prior to the Initial Public Offering, Mr. Feuer, the owner of 100%
of the shares of Class B Common Stock and, as a result thereof, the holder of
26% of the combined voting power of the Company upon completion of the
Preferred Stock Offering, acted as the Chief Operating Officer of Pourtales
and was responsible for the day-to-day operations of all the radio stations
currently owned by Pourtales. Currently, Mr. Feuer, in addition to serving as
President, Chief Executive Officer and a director of the Company, provides
radio programming consulting services to Pourtales for its stations in the
Tri-Cities, Washington market, including the two stations subject to the
Tri-Cities LMA, until the sale of such stations or the consummation of the
Pourtales Acquisition. From September 13, 1995 until Pourtales sold certain
stations in the Mobile, Alabama market to a third party and until the Company
entered into the Pourtales LMA, Mr. Feuer also provided radio programming
consulting services to Pourtales and the radio stations it owned in the
Mobile, Alabama market and the stations subject to the Pourtales LMA.
The Company has entered into an agreement to acquire from Pourtales
the eight additional radio stations subject to the Pourtales LMA, the radio
stations on which it currently sells advertising pursuant to a JSA and two
additional radio stations, and to assume the Tri-Cities LMA for an aggregate
purchase price of $22.5 million.
On September 13, 1995, the Company entered into an agreement with
Pourtales (the "Shared Expense Agreement") to share certain expenses with
Pourtales until the consummation of the Pourtales Acquisition (the "Shared
Expense Period"). Pursuant to the Shared Expense Agreement, during the Shared
Expense Period, Pourtales pays the Company $11,000 per month as consideration
for Pourtales' use of the Company's corporate headquarters and the services
and facilities related thereto, and for Mr. Feuer's radio programming
consulting services provided to Pourtales. The Company pays Pourtales $3,000
per month, during the Shared Expense Period, as consideration for the use of
certain
23
<PAGE>
services of Pourtales' chief financial officer. The Company obtained
the lease to its corporate headquarters on September 13, 1995 by assignment
from Force II Communications, a corporation wholly-owned by Mr.
Feuer.
THE MMR ACQUISITION
Subject to adjustment, the Company has agreed to acquire radio
station KOLL-FM from MMR for an aggregate purchase price of $4.1 million (the
"MMR Acquisition") and has obtained an independent valuation regarding the
acquisition. SCMC provides advisory services to both MMR and the Company with
respect to the MMR Acquisition.
RELATIONSHIP WITH RADIO ANALYSIS
Radio Analysis, a limited liability company owned 50% by Mr. Robinson
and 50% by Radio Investors, was formed to provide marketing and consulting
services to radio broadcasting companies and provides such services to the
Company. The Company has been advised by Radio Analysis that any services
provided to the Company will be provided at its actual cost. In connection
with the formation of Radio Analysis, Radio Investors contributed 244,890
shares of Class D Common Stock to Radio Analysis as a capital contribution.
Upon the fulfillment of certain conditions, including FCC approval, if
necessary, the Class D Common Stock is convertible into shares of Class B
Common Stock. If the shares of Class D Common Stock are converted into shares
of Class B Common Stock, Radio Analysis will hold 10% of the combined voting
power of the Company. It is anticipated that Radio Analysis will be paid fees
in connection with services provided to Pourtales with respect to the proposed
sale of certain stations in Mobile, Alabama owned by Pourtales. The Company
had an option to purchase such stations from Pourtales which it did not
exercise. See "Security Ownership of Certain Beneficial Owners and
Management."
AMENDED AND RESTATED FINANCIAL CONSULTING AGREEMENT WITH SCMC
The Company has entered into the Amended and Restated Financial
Consulting Agreement (the "Amended and Restated SCMC Agreement") with SCMC
dated February 1, 1996, pursuant to which SCMC has agreed to serve until June
1, 2005 as the Company's financial consultant and to provide customary
financial and advisory services. SCMC also acts as financial adviser to a
number of broadcast entities other than the Company, including SFX and MMR,
some of which participate in business opportunities that might be suitable for
the Company. Mr. Sillerman is principal stockholder, Executive Chairman of the
Board and chief executive officer of SFX, and is required to devote
substantially all of his business time to matters relating to SFX. Mr. Tytel
is a Director and Executive Officer of SFX. Each of SCMC and Messrs. Sillerman
and Tytel are required to offer SFX opportunities involving radio stations
located in the top 70 markets and are required to offer MMR opportunities
involving stations located outside the top 70 markets and which are located in
certain states in the Eastern United States.
24
<PAGE>
In consideration for securities of SFX and the forgiveness of an
outstanding loan, on April 15, 1996, SCMC entered into an agreement with SFX
(the "SCMC Termination Agreement") pursuant to which SCMC assigned its right
to receive fees payable pursuant to the Amended and Restated SCMC Agreement
(and a similar agreement with MMR) to SFX, except for fees related to certain
transactions pending on April 15, 1996. In addition, the Company has agreed to
advance $500,000 to SCMC per year in connection with services to be provided
by SCMC, provided, however, that if the agreement between SCMC and Triathlon
is terminated or an unaffiliated person acquires a majority of the capital
stock of the Company, the advanced fees must be repaid at such time. Pursuant
to the SCMC Termination Agreement, SCMC has agreed to continue to provide the
services described herein until the expiration of the Amended and Restated
SCMC Agreement and not to perform any consulting or investment banking
services for any person or entity, other than the Company and MMR, in the
radio broadcasting industry or in any business which uses technology for the
audio transmission of information or entertainment.
SCMC is controlled by Mr. Sillerman, and Messrs. Sillerman and Tytel
are officers and directors of SCMC. Under the Amended and Restated SCMC
Agreement, SCMC has agreed to perform, or assist the Company in performing,
among other things: (i) the placement of financing; (ii) the generation of
financial reports and other data for the Company that are required for
presentation to the lenders of the Company under the Company's senior credit
agreements and the Company's investors as required under the securities laws;
(iii) assistance with the preparation of the Company's regular books and
records for audit by the Company's independent public accountants; (iv) the
maintenance of relationships and connections with financial institutions
participating in the financing of the Company; (v) preparation and delivery to
the Company of quarterly reports and analyses of regional and national
advertising activity in small and medium-sized radio markets; (vi) the design
and implementation of accounting systems appropriate and necessary for the
operation of the Company; (vii) the purchase, installation, and implementation
of hardware and software appropriate to the accounting system to be utilized
by the Company; (viii) the implementation of cash management systems to
facilitate the collection of revenues for the Company and to maximize the
investment income available from cash balances; (ix) the establishment of
regularized procedures for the payment of trade payables and the accumulation
of cash balances available for interest and other debt service payments as
they come due; and (x) the engagement of bookkeeping, accounting and other
personnel necessary for the implementation of the Company's accounting
systems.
Pursuant to the terms of the Amended and Restated SCMC Agreement: (i)
any radio broadcast opportunities outside of the top 70 markets in the United
States and located west of the Mississippi River, other than Arkansas (the
"Applicable Markets"), that come to the attention of SCMC, Mr. Sillerman or
Mr. Tytel, will be brought first to the Company for its consideration prior to
being presented to any other clients of SCMC and (ii) in cases in which SCMC,
Mr. Sillerman or Mr. Tytel is rendering advice in a restructuring or similar
circumstance to a radio company owning and operating stations outside of the
top 70 markets and within the Applicable Markets, SCMC will present to the
Company, subject to any fiduciary or confidentiality obligations to any of
their clients, any opportunity for such a
25
<PAGE>
radio station acquisition by the Company, on terms at least as favorable
to the Company as to any other potential buyer. To the extent Mr.
Sillerman determines in good faith, with the concurrence of the Class A
Directors, that the Company does not have the capacity to acquire a
specific station outside the top 70 markets and within the Applicable
Markets, then SCMC or any affiliate may acquire or invest in such
station.
During the term of the Amended and Restated SCMC Agreement, the
Company will be required to pay to SFX, pursuant to the SCMC Termination
Agreement as compensation for its services under the Amended and Restated SCMC
Agreement, the following annual advisory fees: (i) from February 1, 1996 until
March 10, 1996, $240,000 per year; (ii) from March 10, 1996 until the date the
Company has used the net proceeds of the offering of depositary shares
representing a one-tenth interest in its 9% Mandatory Convertible Preferred
Stock (the "Preferred Stock Offering") as contemplated in the prospectus
relating thereto as well as paid the expenses in connection with the
acquisitions, $300,000 per year; and (iii) from the date the Company has used
the net proceeds of the Preferred Stock Offering until June 1, 2005, $400,000
per year. SCMC and the Company have agreed in the Amended and Restated SCMC
Agreement that the compensation for SCMC shall be increased by an amount to be
mutually agreed upon by SCMC and the Company if (i) the time and effort spent
by SCMC exceeds the level that was originally contemplated by the parties when
they entered into the Amended and Restated SCMC Agreement or (ii) the Company
acquires additional broadcast properties.
The Company is also required under the Amended and Restated SCMC
Agreement to reimburse SCMC for all reasonable out-of-pocket disbursements
incurred by SCMC in connection with the performance of services under the
agreement. The Company has agreed to indemnify SCMC and its directors,
officers, employees, affiliates and agents, and any person controlling such
persons, with respect to any and all losses, claims, damages or liabilities,
joint or several, to which any such indemnified party may be subject, and any
and all expenses incurred in connection with any such claim, action or
proceedings, insofar as such losses, claims, damages, liabilities, actions,
proceedings or expenses arise out of or are based upon any matters that are
the subject of the Amended and Restated SCMC Agreement, except with respect to
such indemnified amounts that arise out of reckless or willful misconduct of
such indemnified person.
Under the Amended and Restated SCMC Agreement, SCMC will defer
two-thirds of its advisory fees during any period for which the Company is in
arrears with respect to payment of dividends on the Preferred Stock.
Pursuant to the SCMC Agreement, which governed the Company's
relationship with SCMC prior to entering into the Amended and Restated SCMC
Agreement, the Company paid to SCMC an aggregate of $70,000 in advisory fees,
$163,034 in connection with the acquisition of the radio stations KRBB-FM,
KXLK-FM, KFH-AM, and KQAM-AM, each operating in the Wichita, Kansas market
(the "Initial Wichita Stations"), $265,375 in connection with the acquisition
of radio stations KTGL-FM and KZKX-FM, each operating in the Lincoln, Nebraska
market (the "Initial Lincoln Stations"), $135,000 in connection with
26
<PAGE>
entering into a $9.0 million credit agreement (the "Credit Agreement")
and $918,855 in connection with the Preferred Stock Offering.
ADDITIONAL ARRANGEMENTS WITH SCMC AND MR. SILLERMAN
SCMC provides investor relation services to the Company and is paid
$2,500 per month as compensation for these services.
SCMC, on behalf of the Company, funded a letter of credit in the
amount of $200,000 in connection with the deposit required for the acquisition
of radio stations KIBZ-FM and KKNB-FM, both operating in the Lincoln, Nebraska
market from Rock Steady, Inc. The Company subsequently repaid SCMC $200,000
and SCMC assigned its right under the letter of credit to the Company.
SCMC, on behalf of Radio Investors, funded on behalf of the Company,
the letters of credit in connection with the deposits required for the Initial
Wichita Stations and Initial Lincoln Stations in an aggregate amount of
$765,000. Of this amount, $2,449 was contributed to the capital of the Company
in payment of Mr. Feuer's subscription of 244,890 shares of Class B Common
Stock. The balance was treated as an advance to the Company. In June 1995,
Radio Investors received a promissory note in the principal amount of $515,000
from the Company, which accrued interest at the rate of 6% per annum from
March 31, 1996, and $247,551 was contributed to the capital of the Company in
payment of 1,444,366 shares of Class D Common Stock issued to Radio Investors
and 25,000 shares of Class A Common Stock issued to Mr. Miller. In addition,
SCMC advanced to, or paid on behalf of, the Company certain expenses in an
aggregate amount of approximately $200,000, including $50,000 to fund initial
payments in respect of the non-accountable expense allowance of the
underwriters of the Initial Public Offering, and $55,000 to AT&T Commercial
Finance Corporation as commitment fees for the Credit Agreement, and other
expenses related to the Initial Public Offering. The promissory note with
accrued interest and the $200,000 advanced on behalf of the Company were
repaid out of the proceeds of the Company's Initial Public Offering. During
May 1995, SCMC funded on behalf of the Company a promotional campaign
conducted by KRBB-FM in the aggregate amount of $30,000, which was repaid out
of the proceeds of the Company's Initial Public Offering. Furthermore, in
August 1995, SCMC funded on behalf of the Company $98,500 in additional
purchase price and an additional deposit of $55,500 in connection with
extensions of the closing date of the acquisition of KRBB-FM, which was repaid
to SCMC out of the proceeds of the Company's Initial Public Offering.
ISSUANCES OF SECURITIES
In February 1995 Mr. Feuer acquired 400 shares of common stock of
Triathlon New York for a cash purchase price of $2,449 in connection with the
formation of Triathlon New York, and Radio Investors and Mr. Miller subscribed
for, and in June 1995 received, 500 and 10 shares of common stock,
respectively, of Triathlon New York for a purchase price of $247,301 and $250,
respectively.
27
<PAGE>
In June 1995, Mr. Feuer, Radio Investors and Mr. Miller, the
stockholders of Triathlon New York, contributed their shares of Triathlon New
York to the Company and, following a recapitalization of the Company's Common
Stock, in return, Mr. Feuer received 244,890 shares of Class B Common Stock,
Radio Investors received 1,444,366 shares of Class D Common Stock and Mr.
Miller received 25,000 shares of Class A Common Stock. In connection with the
formation of Radio Analysis, Radio Investors contributed 244,890 of its shares
of Class D Common Stock to Radio Analysis as its capital contribution. Mr.
Feuer is required to surrender varying percentages of his shares of Class B
Common Stock to the Company in the event he voluntarily terminates his
employment with the Company during the term of his employment agreement. See
"Remuneration of Management--Employment Agreement."
In connection with the Company's discussions relating to obtaining a
bridge loan of up to $2.0 million (the "Proposed Bridge Loan") in July 1995,
pursuant to subscription agreements effective as of May 1, 1995, the Company
sold an aggregate of 367,344 shares of Class C Common Stock to six accredited
investors (the "Class C Stockholders") for an aggregate purchase price of
$3,673 (or $.01 per share). The Class C Stockholders were introduced to the
Company by Americorp Securities, Inc., one of the underwriters of the
Company's Initial Public Offering. The Company sold the Class C Common Stock,
for no additional consideration, in lieu of paying a commitment fee for the
Proposed Bridge Loan, which the Company later determined not to utilize.
On October 30, 1995 the Company granted to Mr. Feuer, options to
purchase 15,000 shares of Class A Common Stock which are exercisable at $11.50
per share. In addition, the Company granted to each of Radio Investors, Radio
Analysis, The Sillerman Companies and SCMC, options to purchase 20,000 shares
of Class A Common Stock which are exercisable at $5.50 per share.
On October 30, 1995, the Company granted cash-only stock appreciation
rights with respect to 1,000 shares of Class A Common Stock to each of Messrs.
Leiderman and Barnes and 5,000 shares of Class A Common Stock to Mr. Miller.
The cash-only stock appreciation rights with respect to each share of Class A
Common Stock entitle the holder thereof to receive the difference between
$5.50 and the closing price of the Class A Common Stock on October 30, 2000,
and will be paid on October 30, 2000.
On January 31, 1996, the Company granted cash-only stock appreciation
rights with respect to 2,000 shares of Class A Common Stock to each of Messrs.
Leiderman and Barnes. The cash-only stock appreciation rights with respect to
each share of Class A Common Stock entitle the holder thereof to receive an
amount equal to the sum of (i) one-half of the difference between $.01 and the
price of the Class A Common Stock on January 31, 2001 if prior to such date
the price of the Class A Common Stock was equal to or greater than $14.00 for
20 consecutive trading days and (ii) one-half of the difference between $.01
and the price of the Class A Common Stock on January 31, 2001 if prior to such
date the price of the Class A Common Stock was equal to or greater than $15.00
for 20 consecutive trading days. These cash-only stock appreciation rights
will be paid on January 31, 2001.
28
<PAGE>
On February 8, 1996, the Company issued an aggregate of 565,000
shares of Series B Convertible Preferred Stock to Radio Investors, Radio
Analysis and Messrs. Feuer, Miller and Ciapura in the amount of 440,000,
60,000, 60,000, 3,000 and 2,000 shares, respectively. The Series B Convertible
Preferred Stock is non-voting and vests over a five year period beginning one
year from the date of issuance. See "Stock Based Compensation of Directors and
Others."
AGREEMENT BETWEEN MR. FEUER AND RADIO INVESTORS
Mr. Feuer and Radio Investors, which is controlled by Mr. Sillerman,
have entered into an agreement pursuant to which Mr. Feuer has assigned to
Radio Investors, 40.835% (the "Agreed Percentage") of all proceeds paid or
payable to Mr. Feuer in connection with any sale or other disposition of, or
dividend or other distribution payable on or with respect to, such shares of
Class B Common Stock. In addition, Mr. Feuer has also granted to Radio
Investors, a right of first refusal with respect to any sale or other
disposition to a third party of all 244,890 shares of Class B Common Stock
held by Mr. Feuer. This right enables Radio Investors to acquire shares of
Class B Common Stock at the proposed sale price. In the event that Radio
Investors does not exercise the right of first refusal and Mr. Feuer
consummates the sale to a third party (in which case such third party will
receive shares of Class A Common Stock), Mr. Feuer is required to pay to Radio
Investors an amount equal to the greater of the sales price and the fair
market value multiplied by the Agreed Percentage. To secure his payment
obligations, Mr. Feuer has also entered into a pledge agreement with Radio
Investors pursuant to which he has pledged 100,000 shares of his 244,890
shares of Class B Common Stock to Radio Investors. The conveyance of shares of
Class B Common Stock to Radio Investors may require the prior approval of the
FCC. See "Security Ownership of Certain Beneficial Owners and Management."
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General
The Company believes that transactions between the Company and its
officers, directors and principal stockholders or affiliates thereof have been
on terms no less favorable to the Company than could be obtained from
independent third parties. However, except for the Company's intention to
obtain a fairness opinion with respect to the MMR Acquisition, the Company has
not sought outside advice with respect to such transactions and, in certain
instances, has not considered retaining any other provider of similar
services. Since the Initial Public Offering, all transactions between the
Company and its officers, directors and principal stockholders or affiliates
thereof have been approved by the Company's independent directors.
30
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ANNEX A
ARTICLE FOUR
4.1 Authorized Shares. The total number of shares of stock which the
Corporation shall have the authority to issue is thirty-seven million five
hundred thousand nine hundred and sixty-six (37,500,966) shares, consisting of
five classes of capital stock:
(i) 30,000,000 shares of Class A Common Stock, par value $.01
per share (the "Class A Common Stock");
(ii) 1,689,256 shares of Class B Common Stock, par value $.01
per share (the "Class B Common Stock");
(iii) 367,344 shares of Class C Common Stock, par value $.01
per share (the "Class C Common Stock");
(iv) 1,444,366 shares of Class D Common Stock, par value $.01
per share (the "Class D Common Stock," and together with the Class A Common
Stock, Class B Common Stock and Class C Common Stock, the "Common Stock"); and
(v) 4,000,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock").
4.2 Designations, Preferences, etc. of Common Stock. The designations,
relative rights, preferences and limitations of the Common Stock of the
Corporation shall be as follows:
(a) Identical Rights. Except as otherwise expressly provided in
this ARTICLE FOUR, all shares of Common Stock shall be identical and shall
entitle the holders thereof to the same rights and privileges.
(b) Dividends on Common Stock. (i) Subject to the prior rights
and preferences, if any, applicable to shares of the Preferred Stock or any
series thereof, the holders of shares of Common Stock shall be entitled to
receive such dividends (payable in cash, stock, or otherwise) as may be
declared thereon by the Board at any time and from time to time out of any
funds of the Corporation legally available therefor, except that if dividends
are declared that are payable in shares of Common Stock, such stock dividends
shall be payable at the same rate on each class of Common Stock and shall be
payable only in shares of Class A Common Stock to holders of Class A Common
Stock, in shares of Class B Common Stock to holders of Class B Common Stock,
in shares of Class C Common Stock to holders of Class C Common Stock and in
shares of Class D Common Stock to holders of Class D Common Stock; provided
that in the event that there does not exist a sufficient number of authorized
but unissued shares of Class B Common Stock, Class C Common Stock or Class D
Common Stock to issue to such holders, then, to the extent that there does not
exist a sufficient number of shares of such class of common stock, such stock
dividend may be payable in shares of Class A Common Stock.
(ii) Dividends payable under this subparagraph (b) shall be
paid to the holders of record of the outstanding shares of Common Stock as
their names shall appear on the stock register of the Corporation on the
record date fixed by the Board in advance of declaration and payment of each
dividend. Any shares of Common Stock issued as a dividend pursuant to this
subparagraph (b) shall, when so issued, be duly authorized, validly issued,
fully paid, non-assessable, and free of all liens and charges.
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(c) Stock Splits Relating to Common Stock. The Corporation shall not
in any manner subdivide (by any stock split, reclassification, stock dividend,
recapitalization, or otherwise) or combine the outstanding shares of one class
of Common Stock unless the outstanding shares of all classes of Common Stock
shall be proportionately subdivided or combined.
(d) Liquidation Rights of Common Stock. Upon any voluntary or
involuntary liquidation, dissolution, or winding-up of the affairs of the
Corporation, after payment shall have been made to holders of outstanding
shares of Preferred Stock, if any, of the full amount to which they are
entitled pursuant to this Amended and Restated Certificate of Incorporation,
the holders of Common Stock shall be entitled, to the exclusion of the holders
of Preferred Stock, if any, to share ratably, in accordance with the number of
shares of Common Stock held by each such holder, in all remaining assets of
the Corporation available for distribution among the holders of Common Stock,
whether such assets are capital, surplus, or earnings. For the purposes of
this subparagraph (d), neither the consolidation or merger of the Corporation
with or into any other corporation or corporations in which the stockholders
of the Corporation receive capital stock or securities (including debt
securities) of the acquiring corporation (or of the direct or indirect parent
corporation of the acquiring corporation), nor the sale, lease, or transfer of
all or substantially all of the property or assets of the Corporation by the
Corporation, shall be deemed to be a voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation as those terms are used in this
subparagraph (d).
(e) Voting Rights of Common Stock. (i) The holders of shares of
Class A Common Stock and Class B Common Stock shall vote as a single class on
all matters submitted to a vote of the stockholders, with each share of Class
A Common Stock being entitled to one vote and each share of Class B Common
Stock being entitled to ten votes, except (A) for the election of directors,
which shall be governed by subparagraphs (iii) and (iv) below, (B) with
respect to any Going Private Transaction (as defined below) between the
Corporation and any of Norman Feuer, Robert F.X. Sillerman, Howard J. Tytel or
Radio Investors, Inc. (each a "Principal Stockholder," and collectively, the
"Principal Stockholders") or any Affiliate (as defined below) of a Principal
Stockholder, which shall be governed by subparagraph (v) below, and (C) as
otherwise provided by law.
(ii) The holders of Class C Common Stock and Class D Common
Stock shall have no voting rights, except as otherwise provided by law.
(iii) The holders of Class A Common Stock, voting as a single
class, shall have the right to vote on the election or removal of two of the
Corporation's directors, with each share of Class A Common Stock entitled to
one vote.
(iv) Except as otherwise provided in and subject to (A)
subparagraph (iii) above and (B) the terms of any Preferred Stock which the
Corporation may issue from time to time, the holders of Class A Common Stock
and Class B Common Stock, voting as a single class, each share of Class A
Common Stock entitled to one vote and each share of Class B Common Stock
entitled to ten votes.
(v) With respect to any Going Private Transaction between the
Corporation and one or more Principal Stockholders or Affiliates of a
Principal Stockholder, the holders of Class A Common Stock and Class B Common
Stock shall vote as a single class, with each share of Class A Common Stock
entitled to one vote and each share of Class B Common Stock entitled to ten
votes; provided that each share of Class B Common Stock held by a Principal
Stockholder or an Affiliate of a Principal Stockholder engaging in or agreeing
to participate in such Going Private Transaction shall be entitled to one
vote. For purposes of this subparagraph (e), the term "Going Private
Transaction" shall mean any transaction that is a "Rule 13e-3 Transaction," as
such term is defined in Rule 13e-3(a)(3), 17 C.F.R. ss.240.13e-3, as amended
from time to time, promulgated under the Securities Exchange Act of 1934, as
amended. An "Affiliate" of a specified person is a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified. For purposes of this
definition, "control" when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
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securities, by contract or otherwise. Without limitation, an Affiliate also
includes any director or executive office of such person and, in the case of
an individual, the estate of such person. Solely for purposes of this
subparagraph (v), under no circumstances shall Norman Feuer, on the one hand,
and Robert F.X. Sillerman, Howard J. Tytel or Radio Investors, Inc., on the
other hand, be deemed to be Affiliates.
(f) Conversion Rights of Common Stock.
(i) Automatic Conversion. Each share of Class B Common Stock,
Class C Common Stock and Class D Common Stock shall (subject to receipt of all
necessary approvals from the Federal Communications Commission, if any
(hereinafter referred to collectively as "FCC Approval")) convert
automatically into one fully paid and non-assessable share of Class A Common
Stock (i) upon its sale, gift, or other transfer of such holder's entire
interest in such stock to a party other than a Principal Stockholder or an
Affiliate of a Principal Stockholder; or (ii) in the event of a sale or gift
of, or other transfer of such holder's entire interest in, a share of Class B
Common Stock, Class C Common Stock or Class D Common Stock to an Affiliate of
a Preferred Stockholder, upon the death of the transferor; provided, however,
that each share of Class B Common Stock, Class C Common Stock and Class D
Common Stock may be conveyed by sale or gift or other transfer of such
holder's entire interest in such stock to (x) a Principal Stockholder; or (y)
to an Affiliate of the Principal Stockholder holding such stock, in which case
upon the death of the transferor each of such shares shall automatically
convert into one share of Class A Common Stock (subject to FCC Approval). Each
of the foregoing automatic conversion events shall be referred to hereinafter
as an "Event of Automatic Conversion."
(ii) Automatic Conversion Procedure. Promptly upon the
occurrence of an Event of Automatic Conversion, the holder of such shares
shall surrender the certificate or certificates therefor, duly endorsed in
blank or accompanied by proper instruments of transfer, at the office of the
Corporation or of any transfer agent for the Class A Common Stock, and shall
give written notice to the Corporation at such office (A) stating that the
shares are being converted pursuant to an Event of Automatic Conversion into
shares of Class A Common Stock as provided in subparagraph (f)(i) above and
that FCC Approval has been obtained, if required, (B) specifying the Event of
Automatic Conversion (and, if the occurrence of such event is within the
control of the transferor, stating the transferor's intent to effect an Event
of Automatic Conversion), (C) identifying the number of shares of Class B
Common Stock, Class C Common Stock or Class D Common Stock, as the case may
be, being converted, and (D) setting out the name or names (with addresses)
and denominations in which the certificate or certificates for the shares of
Class A Common Stock shall be issued and including instructions for delivery
thereof. Delivery of such notice together with the certificates representing
the shares of Class B Common Stock, Class C Common Stock or Class D Common
Stock shall obligate the Corporation to issue such shares of Class A Common
Stock and the Corporation shall be justified in relying upon the information
and the certification contained in such notice and shall not be liable for the
result of any inaccuracy with respect thereto. Thereupon, the Corporation or
its transfer agent shall promptly issue and deliver at such stated address to
such holder or to the transferee of shares of Class B Common Stock, Class C
Common Stock or Class D Common Stock a certificate or certificates for the
number of shares of Class A Common Stock to which such holder or transferee is
entitled registered in the name of such holder, the designee of such holder or
transferee as specified in such notice. To the extent permitted by law,
conversion pursuant to an Event of Automatic Conversion shall be deemed to
have been effected as of the date on which the Event of Automatic Conversion
occurred (such date being the "Conversion Date"). The person entitled to
receive the shares of Class A Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such Class A Common Stock
at and as of the conversion Date, and the right of such person as the holder
of shares of Class B Common Stock, Class C Common Stock or Class D Common
Stock, as the case may be, shall cease and terminate at and as of the
Conversion Date, in each case without regard to any failure by the holder to
deliver the certificates or the notice required by this subparagraph (ii).
(iii) Voluntary Conversion. (A) Each share of Class D Common
Stock may at any time, subject to FCC Approval, at the option of its holder,
be converted into one fully paid and non-assessable share of Class A Common
Stock.
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(B) Each share of Class D Common Stock may at any time, subject
to FCC Approval, at the option of its holder, be converted into one fully paid
and non-assessable share of Class B Common Stock in the event that (1) the
Corporation generates less than $2,000,000 of Broadcast Cash Flow (as defined
herein) for the twelve month period ending December 31,1996, or in any fiscal
year ending after December 31,1996, or (2) the Corporation is in default for
borrowed money from institutional lender and such default has not been cured
or waived by such lender. "Broadcast Cash Flow" means operating income (loss),
exclusive of trade (non-cash) revenue and expenses, before deductions for
interest, taxes, depreciation, amortization and corporate expenses, as
determined by the Corporation's Chief Financial Officer on the basis of the
Corporation's audited consolidated statement of operations for the relevant
period.
(iv) Voluntary Conversion Procedure. At the time of a voluntary
conversion, the holder of shares of Class D Common Stock shall deliver to the
office of the Corporation or of any proper transfer agent (A) the certificate
or certificates representing the shares of Class D Common Stock to be
converted, duly endorsed in blank or accompanied by proper instruments of
transfer and (B) written notice to the Corporation (1) stating that such
holder elects to convert such share or shares and FCC Approval has been
obtained, if required, (2) setting forth the name and address in which each
certificate for shares of Class A Common Stock or shares of Class B Common
Stock issued upon such conversion is to be issued, and (3) as to a conversion
to shares of Class B Common Stock, that the conditions set forth in
subparagraph (iii)(B) above have been satisfied. Conversion shall be deemed to
have been effected at the close of business on the date when such delivery is
made to the Corporation of the shares to be converted, and the person
exercising such voluntary conversion shall be deemed to be the holder of
record of the number of shares of Class A Common Stock or Class B Common Stock
issuable upon such conversion at such time. The Corporation shall be justified
in relying upon the information and the certification contained in such notice
and shall not be liable for the result of any inaccuracy with respect thereto.
The Corporation or its transfer agent shall thereupon promptly deliver
certificates evidencing the appropriate number of shares of Class A Common
Stock or Class B Common Stock to such person.
(v) Unconverted Common Stock. In the event of the conversion of
less than all of the shares of Class B Common Stock, Class C Common Stock or
Class D Common Stock, as the case may be, evidenced by a certificate
surrendered to the Corporation in accordance with the procedures of this
subparagraph (f), the Corporation shall execute and deliver to or upon the
written order of the holder of such certificate, without charge to such
holder, a new certificate evidencing the number of shares of Class B Common
Stock, Class C Common Stock or Class D Common Stock not converted.
(vi) Reissue of Common Stock. Shares of Class B Common Stock,
Class C Common Stock and Class D Common Stock that are converted into shares
of Class A Common Stock or Class B Common Stock as provided herein shall be
retired and canceled and shall not be reissued.
(vii) Reservation. (A) The Corporation hereby reserves and
shall at all times reserve and keep available, out of its authorized and
unissued shares of Class A Common Stock, for the purpose of effecting
conversions, such number of duly authorized shares of Class A Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Class B Common Stock, Class C Common Stock and Class D
Common Stock. The Corporation covenants that all the shares of Class A Common
Stock so issuable shall, when so issued, be duly and validly issued, fully
paid and non-assessable, and free from liens and charges with respect to the
issuance thereof. The Corporation shall take all such action as may be
necessary to assure that all shares of Class A Common Stock may be so issued
without violation of any applicable law or regulation or of any requirements
of any national securities exchange upon which the shares of Class A Common
Stock may be traded.
(B) The Corporation hereby reserves and shall at all times
reserve and keep available, out of its authorized and unissued shares of Class
B Common Stock, for the purposes of effecting conversions, such number of duly
authorized of shares Class B Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class D
Common Stock. The Corporation covenants that all the shares of Class B Common
Stock so issuable shall, when so issued, be duly
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and validly issued, fully paid and non-assessable, and free from liens and
charges with respect to the issuance thereof. The Corporation will take all
such action as may be necessary to assure that all such shares of Class B
Common Stock may be so issued without violation of any applicable law or
regulation.
4.3 Consideration on Merger, Consolidation, etc. In any merger,
consolidation, or business combination, the consideration received per share
by the holders of Class A Common Stock, Class B Common Stock, Class C Common
Stock and Class D Common Stock must be identical for each class of stock,
except that in any such transaction in which shares of common stock are to be
distributed, such shares may differ as to voting rights to the extent that
voting rights now differ among the Class A Common Stock, Class B Common Stock,
Class C Common Stock and Class D Common Stock.
4.4 Designations, Preferences, etc. of Preferred Stock. The
designations, relative rights, preferences and limitations of the Preferred
Stock of the Corporation shall be as follows:
(a) The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class or series to have such
designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the Board of the Corporation as hereafter prescribed.
(b) Authority is hereby expressly granted to and vested in the
Board of the Corporation to authorize the issuance of the Preferred Stock from
time to time in one or more classes or series, and with respect to each class
or series of the Preferred Stock, to fix and state by the resolution or
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes
or series of stock;
(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the qualifications,
limitations, or restrictions thereof, if any, with respect to any class or
series;
(iv) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
(v) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking funds to be applied to
the purchase or redemption of such shares for retirement, and, if such
retirement or sinking fund or funds are to be established, the annual amount
thereof, and the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon which
and the times when such dividends are payable, the preference to or the
relation to the payment of dividends payable on any other class or classes or
series of stock, whether or not such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates from which such dividends
shall accumulate;
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(vii) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any class or series,
at the option of the Corporation or the holder thereof or upon the happening
of any specified event, shall be convertible into or exchangeable for, the
shares of any other class or classes or of any other series of the same or any
other class or classes of stock, securities, or other property of the
Corporation and the conversion price or prices or ratio or ratios or the rate
or rates at which such exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective provisions
with respect to any class or series as may to the Board of the Corporation
seem advisable.
(c) The shares of each class or series of the Preferred
Stock may vary form the shares of any other class or series thereof in any or
all of the foregoing respects. The Board of the Corporation may increase the
number of shares of the Preferred Stock designated for any existing class or
series by a resolution adding to such class or series authorized and unissued
shares of the Preferred Stock not designated for any other class or series.
The Board of the Corporation may decrease the number of shares of the
Preferred Stock designated for any existing class or series by a resolution
subtracting from such class or series authorized and unissued shares or the
Preferred Stock designated for such existing class or series, and the shares
so subtracted shall become authorized, unissued, and undesignated shares of
the Preferred Stock.
4.5 Series A Convertible Preferred Stock.
(a) Designation and Amount. An aggregate of 600,000 shares of
Preferred Stock shall be designated as Series A Convertible Preferred Stock
(the "Series A Preferred Stock") with a par value of $.01 per share.
(b) Dividends. The holders of Series A Convertible Preferred Stock
shall not be entitled to receive any dividends.
(c) Voting Rights. The holders of Series A Convertible Preferred
Stock shall have no voting rights, except as otherwise provided by law.
(d) No Sinking Fund. No sinking fund shall be created for the
benefit of holders of Series A Preferred Stock.
(e) Liquidation. (i) In the event of any liquidation, dissolution,
or winding up of the affairs of the Corporation, whether voluntary or
otherwise, after payment or provision for payment of the debts and other
liabilities of the Corporation and after satisfaction of all rights and
preferences of the holders of any class or series of Preferred Stock which by
its terms ranks senior to the Series A Preferred Stock, the holders of Series
A Preferred Stock shall be entitled to receive, out of the remaining assets of
the Corporation, the amount of $.01 in cash for each share of Series A
Preferred Stock, before any distribution shall be made to the holders of
Common Stock or any other capital stock of the Corporation expressly made
junior in liquidation to the Series A Preferred Stock. If upon any
liquidation, dissolution or winding up of the Corporation such remaining
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the holders of Series A Preferred Stock the full
amounts to which they respectively shall be entitled, the holders of Series A
Preferred Stock shall share ratably in any distribution of assets according to
the respective amounts which would be payable in respect of the shares held by
them upon such distribution. In the event of any liquidation, dissolution or
winding up of the Corporation after payment shall have been made to the
holders of Series A Preferred Stock of the full amount to which they shall be
entitled as aforesaid, holders of any class or classes of stock ranking in
liquidation junior to the Series A Preferred Stock shall be entitled, to the
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exclusion of the holders of Series A Preferred Stock, to share according to
their respective rights and preferences in all remaining assets of the
Corporation available for distribution to its stockholders.
(ii) For purposes hereof, a distribution of assets in any
dissolution winding up or liquidation shall not include (A) any consolidation
or merger of the Corporation with or into any other corporation, (B) any
dissolution, liquidation, winding up, or reorganization of the Corporation
immediately followed by reincorporation of another corporation, or (C) a sale
or other disposition of all or substantially all of the Corporation's assets
to another corporation; provided, however, that in each case, effective
provision is made in the certificate of incorporation of the resulting and
surviving corporation or otherwise for the protection of the rights and
priority of the holders of Series A Preferred Stock such that their rights and
priority are not adversely affected thereby.
(f) Ranking of Series A Preferred Stock. Series A Preferred Stock
shall rank senior to all shares of Common Stock and either senior to or on
parity with all other Preferred Stock of the Corporation authorized and issued
hereafter; provided, that the Series A Preferred Stock shall rank junior to
any class or series of Preferred Stock which by its terms ranks senior to the
Series A Preferred Stock.
(g) Convertibility. Each share of Series A Preferred Stock may, for
no additional consideration and subject to FCC Approval, if required, be
converted into one fully paid and non-assessable share of Class A Common stock
as follows (A) if the Broadcast Cash Flow of the Corporation is at least
$3,000,000 for the twelve month period ending December 31, 1997, up to 300,000
shares of the Series A Preferred Stock may be converted into shares of Class A
Common Stock, provided that if such condition is satisfied and more than
300,000 shares of Series A Preferred Stock are outstanding on December 31,
1997, each holder of Series A Preferred Stock may elect to convert such number
of shares of Series A Preferred as are equal to the number of shares of Shares
A Preferred Stock held by such holder multiplied by a fraction, the numerator
of which is equal to 300,000 and the denominator of which is equal to the
total number of shares of Series A Preferred Stock outstanding on December 31,
1997, and (B) if the Broadcast Cash Flow of the Corporation is at least
$5,000,000 for the twelve month period ending December 31, 1999, and
regardless of whether the Broadcast Cash Flow of the Corporation was at least
$3,000,000 for the twelve month period ending December 31, 1997, all shares of
Series A Preferred Stock outstanding on December 31, 1999, may be converted
into shares of Class A Common Stock.
1. A holder of Series A Preferred Stock may elect to convert
his shares by delivering to the office of the Corporation
(A) the certificate or certificates representing the
shares of Series A Preferred Stock to be converted, duly
endorsed in blank or accompanied by proper instruments or
transfer and (B) written notice to the Corporation (1)
stating that such holder elects to convert such share of
shares and FCC Approval has been obtained, if required,
(2) setting forth the name and address in which each
certificate for the shares of Class A Common Stock
issuable upon such conversion is to be issued, and (3)
that the conditions set forth in subparagraph (i) above
have been satisfied. Conversion of the shares to be
converted shall be deemed to have been effected at the
close of business on the date when such delivery is made
to the Corporation, and the person exercising such
voluntary conversion shall be deemed to be the holder of
record of the number of shares of Class A Common Stock
issuable upon such conversion at such time. The
Corporation shall be justified in relying upon the
information and the certification contained in such notice
and shall not be liable for the result of any inaccuracy
with respect thereto. The Corporation or its transfer
agent shall thereupon promptly deliver certificates
evidencing the appropriate number of shares of Class A
Common Stock to such person.
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2. Series A Preferred Stock that are converted into Class A
Common Stock as provided herein shall be retired and
canceled and shall not be reissued.
i. Mandatory Redemption. In the event that the
Corporation does not achieve Broadcast Cash Flow of at
least $3,000,000 for the twelve month period ending
December 31, 1997, the lesser of (A) 300,000 or (B) all of
the outstanding shares of Series A Preferred Stock shall
be redeemed by the Corporation on April 30, 1998, at the
redemption price of $.01 per share. In the event that more
than 300,000 shares of Series A Preferred Stock are
outstanding on December 31, 1997, the Corporation shall
redeem from each holder of Series A Preferred Stock such
number of shares of Series A Preferred as are equal to the
number of shares of Series A Preferred Stock held by such
holder multiplied by a fraction, the numerator of which is
equal to 300,000 and the denominator of which is equal to
the total number of shares of Series A Preferred Stock
outstanding on December 31, 1997.
(1) In the event that the Corporation does not
achieve Broadcast Cash Flow of at least
$5,000,000 for the twelve month period
ending December 31, 1999, the greater of (A)
300,000 or (B) all of the then outstanding
shares of Series A Preferred Stock shall be
redeemed by the Corporation on April 30,
2000, at the redemption price of $.01 per
share.
ii. Redemption Procedures. At least 10 days but
not more than 20 days prior to the date fixed for
redemption of the Series A Preferred Stock (the
"Redemption Date"), the Corporation shall mail to each
holder of Series A Preferred Stock, in a postage prepaid
envelope bearing the name and post office address of such
holder as shown on the records of the Corporation, a
written notice of redemption of the Series A Preferred
Stock stating the Redemption Date and the redemption price
to be paid for such shares and calling upon such holder to
surrender its certificate or certificates for such shares
to the Corporation on the Redemption Date at the place
designated in such notice of redemption. On or after the
Redemption Date, each holder of Series A Preferred Stock
shall present and surrender its certificate or
certificates for such shares to the Corporation at the
place designated in such notice and thereupon the
redemption price of such shares shall be paid to or on the
order of the person whose name appears on such certificate
or certificates as the owner thereof and each surrendered
certificate shall be canceled. From and after the
Redemption Date (unless default shall be made by the
Corporation in payment of the redemption price), all
rights of the holders of Series A Preferred Stock as
stockholders of the Corporation, except the right to
receive the redemption price thereof upon the surrender of
certificates representing the same, shall cease and
terminate, and thereafter shares of Series A Preferred
Stock shall not be transferred on the books of the
Corporation and shall not be deemed to be outstanding for
any purpose whatsoever.
1. Shares of Series A Preferred Stock redeemed
pursuant hereto shall not be reissued.
iii. Reservation. The Corporation hereby reserves
and shall at all times reserve and keep available, out of
its authorized and unissued Class A Common Stock, for the
purposes of effecting conversions, such number of shares
of duly authorized Class A Common Stock as shall from time
to time be sufficient to effect the conversion of all
outstanding Series A Preferred Stock. The Corporation
covenants that all the shares of Class A Common Stock so
issuable shall, when so issued, be duly and validly
issued, fully paid and non-assessable, and free from liens
and charges with respect to the issue. The Corporation
will take all such action as may be necessary to assure
that all such shares Class A Common Stock may be so issued
without violation of any applicable law or regulation.
A-8
<PAGE>
ANNEX B
TRIATHLON BROADCASTING COMPANY
1996 STOCK OPTION PLAN
1. Purpose. The purposes of the Triathlon Broadcasting Company (the
"Company") 1996 Stock Option Plan (the "Plan") are to attract and retain the
best available personnel for positions of substantial responsibility, to
provide additional incentive to key employees, officers, and advisors of the
Company and its subsidiaries and to promote the success of the Company's
business.
2. The Plan. Two types of stock options may be granted under the
Plan: incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder ("ISOs"), and options that do not qualify as incentive stock
options ("NQSOs"). All options shall be exercisable to purchase shares of
Class A Common Stock, $.01 par value (the "Class A Common Stock"), of the
Company. Collectively, ISOs and NQSOs are referred to herein as "Options."
Subject to Section 6(a), ISOs may be awarded only to employees of the
Company and its subsidiaries, within the meaning of Code Section 424(f),
including employees who may serve as officers and directors.
NQSOs may be awarded only to employees who may serve as officers and
directors, and anyone other than non-employee Directors whom the Committee
administering the Plan pursuant to Section 3 determines provides substantial
service to the Company.
To the extent that any Option is not designated as an ISO, or even if
so designated it does not qualify as an ISO, it shall be treated as a NQSO.
3. Administration. The Plan shall be administered by a committee (the
"Committee") selected by the Board (the "Board") of not fewer than two Outside
Directors. An Outside Director shall mean a director within the meaning of
Code Section 1.162-27, voting as a separate class. The Committee shall act by
a majority of its members at the time in office and eligible to vote on any
particular matter, and such action may be taken either by a vote at a meeting
or in writing without a meeting. Subject to the provisions of the Plan, the
Committee shall from time to time and at its discretion (i) grant Options,
(ii) determine which employees and other individuals performing substantial
services ("Grantees") may be granted Options under the Plan; (iii) determine
whether any Option shall be an ISO or NQSO; (iv) determine the number of
shares subject to each Option; (v) determine the term of each Option granted
under the Plan; (vi) determine the date or dates on which the Option shall be
exercisable; (vii) determine the exercise price of any Option; (viii)
determine the fair market value of the Class A Common Stock subject to the
Options; (ix) determine the terms of any agreement pursuant to which Options
are granted; (x) amend any such agreement with the consent of the Grantee;
(xi) establish such procedures as it deems appropriate for a recipient of an
award hereunder to designate a beneficiary to whom any benefits payable in the
event of his or here death are to be made; and (xii) determine any other
matters specifically delegated to it under the Plan or necessary for the
proper administration of the Plan.
The Committee shall also have the final authority to interpret and
construe the terms of the Plan and of any Option and such interpretation and
construction by the Committee shall be final, binding and conclusive upon all
persons including, without limitation, the Company, shareholders of the
Company, the Plan, and all persons claiming an interest in the Plan.
No member of the Committee or Director shall be liable for any
action, interpretation or construction made in good faith with respect to the
Plan or any Option granted hereunder.
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4. Effectiveness and Termination of Plan. This Plan shall become
effective as of the date of adoption thereof by the Board of the Company, or
the date this Plan is approved by the stockholders, whichever is earlier. This
Plan shall terminate on the earliest of:
a. The tenth anniversary of the effective date as determined
under this Section 4;
b. The date when all shares of the Class A Common Stock
reserved for issuance under the Plan, shall have been acquired
through exercise of Options granted under the Plan; or
c. Such earlier date as the Board may determine. Any Option
outstanding under the Plan at the time of its termination shall
remain in effect in accordance with its terms and conditions and
those of the Plan.
5. The Stock. The aggregate number of shares of Class A Common Stock
which may be issued under the Plan shall be 200,000 shares. Such number of
shares may be set aside out of the authorized but unissued shares of Class A
Common Stock not reserved for any other purpose or out of shares of Class A
Common Stock held in or acquired for the treasury of the Company. All or any
shares of Class A Common Stock subject under this Plan to an Option which, for
any reason, terminates unexercised as to such shares, may again be subjected
to an Option under the Plan. No Grantee may receive grants in respect of more
than 50,000 shares of Class A Common Stock.
6. Grant, Terms and Conditions of Options. Options may be granted by
the Committee at any time and from time to time prior to the termination of
the Plan. Each Option granted under the Plan shall be evidenced by an
agreement in a form approved by the Committee. The terms and conditions of
such Option agreement need not be identical with respect to each Grantee, but
each Option agreement will evidence on its face whether it is an ISO or a
NQSO. For purposes of this Section, an Option shall be deemed granted on the
date the Committee selects an individual to be a Grantee, determines the
number of shares to be issued pursuant to such Option and specifies the terms
and conditions of the Option. Except as hereinafter provided, Options granted
pursuant to the Plan shall be subject to the following terms and conditions:
a. Grantee. Subject to Section 2 hereof, the Grantees of any
Options hereunder shall be such key employees of the Company and its
subsidiaries, within the meaning of Code Section 424(f), as
determined by the Committee, who have substantial responsibility in
the direction of the Company and its subsidiaries, and anyone else
whom the Committee determines provides substantial and important
services to the Company except that in no event shall a non-employee
Director of the Company be a Grantee under this Plan.
b. Price and Exercise. The purchase price of the shares of
Class A Common Stock upon exercise of an ISO shall be no less than
the fair market value of the shares at the time of grant of an ISO;
provided, however, if an ISO is granted to a person owning stock of
the Company possessing more than 10% of the total combined voting
power of all classes of stock of the Company as defined in Code
Section 422 ("10% Shareholder"), the purchase price shall be no less
than 110% of the fair market value of the shares. The fair market
value of the Class A Common Stock shall be the closing price of
publicly traded Class A Common Stock on the national securities
exchange on which the Class A Common Stock is listed (if the Class A
Common Stock is so listed) or on the Nasdaq National Market System
(if the Class A Common Stock is regularly quoted on the Nasdaq
National Market System), or, if not so listed or regularly quoted,
the mean between the closing bid and asked prices of publicly traded
Class A Common Stock in the over-the-counter market, or, if such bid
and asked prices shall not be available, as reported by any
nationally recognized quotation service selected by the Company, or
as determined by the Committee in a manner consistent with the
provisions of the Code.
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<PAGE>
The purchase price of the shares of Class A Common Stock upon
exercise of a NQSO may be any price set by the Committee; provided
that the exercise price of any grant to an employee required to be
named on the Summary Compensation Table of the Company's annual
proxy statement under the rules and regulations promulgated under
the Securities Exchange Act of 1934, as amended, shall not be lower
than the fair market value of the underlying Class A Common Stock on
the date of grant which constitutes a performance goal under Section
162(m) of the Internal Revenue Code of 1986, as amended.
The notice of the exercise of any Option shall be accompanied by
payment in full of the Option price. The purchase price shall be
paid in United States dollars in cash or by certified or cashier's
check payable to the order of the Company at the time to purchase.
At the discretion of the Committee, the purchase price may be paid
with: (i) stock of the Company (Class A Common Stock already owned
by, and in the possession of, the Grantee); or (ii) any combination
of United States dollars or stock of the Company. Anything contained
herein to the contrary notwithstanding, any required withholding tax
shall be paid by the Grantee in full in United States dollars in
cash or by certified or cashier's check at the time of exercise of
the Option. Shares of stock of the Company used to satisfy the
exercise price of an Option shall be valued at their fair market
value as determined by the Committee, as of the close of business on
the day immediately preceding the date of exercise.
In lieu of the notice of exercise procedures set forth above, the
Committee may prescribe cashless exercise or other exercise methods
pursuant to which a broker or financial intermediary assists in the
exercise by an amount of shares sufficient to provide the exercise
plus any required with holdings.
If required by the Company, such notice of exercise of an Option
shall be accompanied by the Grantee's written representation that
the shares being acquired are purchased for investment and not for
distribution; acknowledging that such shares have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"); and agreeing that such shares may not be sold or transferred
unless there is an effective Registration Statement for them under
the 1933 Act, or, in the opinion of counsel, such sale or transfer
is not in violation of the 1933 Act.
The purchase price shall be subject to adjustment, but only as
provided in Section 7 hereof.
c. Vesting. Options shall vest in accordance with the schedule
established for each Grantee; provided, however, an Option may be
immediately exercisable in accordance with Section 6(g) below.
d. Forfeiture. Notwithstanding anything contained herein to
the contrary, the right (whether or not vested) of a Grantee to
exercise his or her outstanding Options, if any, shall be forfeited
if (i) the Grantee shall enter into a business or employment which
the Committee determines to be detrimentally competitive with the
Company or substantially injurious to the Company's financial
interests; or (ii) the Grantee is discharged from employment with the
Company for cause; or (iii) the Grantee performs acts of willful
malfeasance or gross negligence in a matter of material importance to
the Company.
e. Additional Restrictions on Exercise of an ISO. The
aggregate fair market value of Class A Common Stock (determined at
the time an ISO is granted) for which an ISO is exercisable for the
first time by a Grantee during any calendar year (under all plans of
the Company and its subsidiaries or parent) shall not exceed
$100,000.
f. Duration of Options. Options may be granted for terms of up
to but not exceeding ten (10) years from the effective date the
particular Option is granted; provided, however, that ISOs
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<PAGE>
granted to a 10% Shareholder may be for a term of up to but not
exceeding five (5) years from the effective date the particular
ISO is granted.
g. Termination of Employment. Upon the termination of a
Grantee's employment with the Company, his or her rights to exercise
an Option then held by such Grantee shall be only as follows:
i. Retirement. If the Grantee's employment is terminated
because he or she has attained the age which the Company may
from time to time establish as the retirement age for any class
of its employees, or in accordance with the age specified in an
employment agreement with a Grantee he or she may, with the
consent of the Company within three months following such
termination, exercise the Option with respect to all or any
part of the shares subject thereto, regardless of whether the
Grantee had the right to purchase such shares at the time of
termination of employment. However, in the event of his or her
death prior to the end of the three-month period after the
aforesaid termination of his or here employment, his or her
estate shall have the right to exercise the Option within one
(1) year following such termination with respect to all or any
part of the shares subject thereto, regardless of whether the
Grantee had the right to purchase such shares at the time of
termination of employment.
ii. Death. In the case of a Grantee who dies while employed
by the Company, his or her estate shall have the right for a
period of one (1) year following the date of such death to
exercise the Option to the extent the Grantee had the right to
purchase such shares on the day immediately prior to his or her
death.
iii. Disability. In the case of a Grantee whose employment
with the Company is terminated by disability, as defined in
Code Section 22(e)(3), he or she shall have the right for a
period of one (1) year of the disability to exercise the Option
to the extent the right had occurred prior to the date of his
or her disability.
iv. Other Reasons. In the case of a Grantee whose
employment is terminated for any reason other than those
provided above under "Retirement," Death," or "Disability," the
Grantee or his or her estate (in the event of his or her death
after such termination) may, within the 30-day period following
such termination, exercise the Option to the extent the right
to exercise had occurred prior to such termination.
For purposes of this Section 6(g), "termination of employment" shall
mean the termination of a Grantee's employment with the Company or a
subsidiary or a parent. A Grantee employed by a subsidiary shall also
be deemed to have a termination of employment if the subsidiary
ceases to be a subsidiary of the Company, and the Grantee does not
immediately thereafter become an employee of the Company or of a
subsidiary or the parent. Any other Grantee who is not otherwise an
employee of the Company shall be considered to have terminated
employment when substantial services, as determined by the Committee,
are no longer provided to the Company by the Grantee.
Also for purposes of this Section 6(g), a Grantee's "estate" shall
mean his or her legal representatives upon his or her death or any
person who acquires the right to exercise an Option by reason of the
Grantee's death. The Committee may in its discretion require the
transferee of a Grantee to supply it with written notice of the
Grantee's death or disability and to supply it with a copy of the
will (in the case of the Grantee's death) or such other evidence as
the Committee deems necessary to establish the validity of the
transfer of an Option.
h. Transferability of Option and Shares Acquired Upon
Exercise of Option. Options shall not be transferred other than
to members of the holder's family, trusts and charities. Any
other transfers are permissible upon prior written approval of
the Committee. Except as limited by
B-4
<PAGE>
applicable securities laws and the provisions of Sections
6(b), 6(j), 8 and 14 hereof, shares of Class A Common Stock
acquired upon exercise of Options hereunder shall be freely
tradeable.
i. Modifications, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations
of the Plan, the Committee may modify, extend or renew
outstanding Options granted under the Plan, or accept the
surrender or outstanding Options (up to the extent not
theretofore exercised) and authorize the granting of new
Options in substitution therefor (to the extent not theretofore
exercised). The Committee shall not, however, with respect to
ISOs, modify any outstanding Options so as to specify a lower
Option price or accept the surrender of outstanding Options and
authorize the granting of new Options in substitution therefor
specifying a lower price. Notwithstanding the foregoing, no
modification of an Option shall, without the consent of the
Grantee, alter or impair any rights or obligations under any
Option theretofore granted under the Plan.
j. Shares Held for Investment. Each Option agreement may
contain an undertaking that, upon demand by the Committee for
such a representation, the Grantee, or any person acting under
Section 6(g), shall deliver to the Committee at the time of any
exercise of an Option a written representation that the shares
to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon
exercise of an option shall be a condition precedent to the
right of the Grantee or such other person to purchase any
shares of Class A Common Stock.
k. Other Terms and Conditions. Options may contain such
other provisions, which shall not be inconsistent with any of
the foregoing terms, as the Committee shall deem appropriate
including those conditions that may be necessary to comply with
applicable FCC requirements.
7. Adjustment of the Changes in the Stock.
a. In the event the shares of Class A Common Stock, as
presently constituted, shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of
the Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split, reverse
split, combination of shares, or otherwise) or if the number of such
shares of Class A Common Stock shall be increased through the payment
of a stock dividend, then there shall be substituted for or added to
each share of Class A Common Stock theretofore appropriated or
thereafter subject or which may become subject to an Option under
this Plan, the number and kind of shares of stock or other securities
into which each outstanding share of Class A Common Stock shall be so
changed, or for which each such share shall be exchanged, or to which
each such share shall be entitled, as the case may be. Outstanding
Options shall also be appropriately amended as to price and other
terms as may be necessary to reflect the foregoing events. In the
event there shall be any other change in the number or kind of the
outstanding shares of the Class A Common Stock, or of any stock or
other securities into which such Class A Common Stock shall have been
changed, or for which it shall have been exchanged, then, if the
Board shall, in its sole discretion, determine that such change
equitably requires as adjustment in any Option theretofore granted or
which may be granted under the Plan, such adjustments shall be made
in accordance with such determination.
b. Fractional shares resulting from any adjustment in
Options pursuant to Section 7 may be settled in cash or otherwise as
the Committee shall determine. Notice of any adjustment shall be
given by the Company to each holder of an Option which shall have
been so adjusted and such adjustment (whether or not such notice is
given) shall be effective and binding for all purposes of the Plan.
B-5
<PAGE>
8. Securities Law Requirements. No Option granted pursuant to this
Plan shall be exercisable in whole or in part, nor shall the Company be
obligated to sell any shares of Class A Common Stock subject to any such
Option, if such exercise and sale would, in the opinion of counsel for the
Company, violate the 1933 Act (or other Federal or State statutes having
similar requirements), as it may be in effect at that time. In this regard,
the Committee may demand the representations described in Section 6(b) and
Section 6(j).
Each Option shall be subject to the further requirement that, if at
any time the Committee shall determine in its discretion that the listing or
qualification of the shares of Class A Common Stock subject to such Option
under any securities exchange requirements or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the granting of such Option or the issue
of shares thereunder, such Option may not be exercised in whole or in part,
unless such listing, qualification, consent or approval shall have been
affected or obtained free of any conditions not acceptable to the Board.
No person who acquires shares of Class A Common Stock under the Plan
may, during any period of time that such person is an affiliate of the Company
within the meaning of the rules and regulations of the Securities and Exchange
Commission under the 1933 Act, sell such shares of Class A Common Stock,
unless such offer and sale is made (i) pursuant to an effective registration
statement under the 1933 Act, which is current and includes the shares to be
sold, or (ii) pursuant to an appropriate exemption from the registration
requirement of the 1933 Act, such as that set forth in Rule 144 promulgated
under the 1933 Act.
9. Amendment of the Plan.
The Board may amend the Plan at any time, except that approval of the
holders of a majority of the outstanding voting stock of the Company is
required for amendments which:
a. extend the term of the Plan beyond ten years;
b. extend the maximum terms of the Options granted
hereunder beyond ten years;
c. withdraw the administration of the Plan from the
Committee appointed pursuant to Section 3;
d. expand the class of eligible employees, and other
Grantees;
e. increase the aggregate number of shares of Class A
Common Stock which may be issued pursuant to the provisions of
the Plan; or
f. change the material terms of the performance goal
within the meaning of Code Section 162(m).
Notwithstanding the foregoing, the Board may, without the need for
stockholders' approval, amend the Plan in any respect to qualify ISOs as
incentive stock options under Code Section 422.
10. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Grantee (or upon a transferee of a Grantee) to
exercise such Option.
11. No Limitation on Rights of the Company. The grant of any Option
shall not in any way affect the right or power of the Company to make
adjustments, reclassification, or changes in its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
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<PAGE>
12. Plan Not a Contract of Employment. The Plan is not a contract of
employment, and the terms of employment of any recipient of any award
hereunder shall not be affected in any way by the Plan or related instruments
except as specifically provided therein. The establishment of the Plan shall
not be construed as conferring any legal rights upon any recipient of any
award thereunder for a continuation of employment, nor shall it interfere with
the right of the Company or any subsidiary to discharge any recipient of any
award hereunder and to treat him or her without regard to the effect which
such treatment might have upon him or her as the recipient of any award
hereunder.
13. Expenses of the Plan. All of the expenses of the Plan shall be
paid by the Company.
14. Compliance with Applicable Law. Notwithstanding anything herein
to the contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates for shares of Class A Common Stock pursuant to the
exercise of an Option, unless and until the Company is advised by its counsel
that the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the requirements of
any exchange upon which shares of Class A Common Stock are traded. The Company
shall in no event be obligated to register any securities pursuant to the 1933
Act (as now in effect or as hereinafter amended) or to take any other action
in order to cause the issuance and delivery of such certificates to comply
with any such law, regulation or requirement. The Committee may require, as a
condition of the issuance and delivery of such certificates and in order to
ensure compliance with such law, regulations and requirements, that the
recipient of any award hereunder make such covenants, agreements and
representations as the Committee, in its sole discretion, deems necessary or
desirable, including, without limitation, a written representation from a
stockholder that the shares are being purchased for investment and not for
distribution, acknowledging that such shares have not been registered under
the 1933 Act, as amended and agreeing that such shares may not be sold or
transferred unless there is an effective Registration Statement for them under
the 1933 Act, or, in the opinion of counsel to the Company, that such sale or
transfer is not in violation of the 1933 Act.
15. Effect Upon Other Compensation. Nothing contained herein shall
prevent the Company or any subsidiary from adopting other or additional
compensation arrangements for its employees or directors.
16. Grantee to Have No Rights as a Stockholder. No Grantee of any
Option shall have any rights as a stockholder with respect to any shares
subject to his or her Option prior to the date on which he or she is recorded
as the holder of such shares on the records of the Company. No Grantee of any
Option shall have the rights of a stockholder until he or she has paid in full
the Option price.
17. Notice. Notice to the Committee shall be deemed given if in
writing and mailed to the Secretary of the Company at its principal executive
offices by first class, certified mail at the then principal office of the
Company.
18. Governing Law. Except to the extent preempted by Federal law,
this Plan and all Option agreements entered into pursuant thereto shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware, determined without regard to its conflict of law rules.
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<PAGE>
ANNEX C
TRIATHLON BROADCASTING COMPANY
1995 STOCK OPTION PLAN
19. Purpose. The purposes of the Triathlon Broadcasting Company (the
"Company") 1995 Stock Option Plan (the "Plan") are to attract and retain the
best available personnel for positions of substantial responsibility, to
provide additional incentive to key employees, officers, and advisors of the
Company and its subsidiaries and to promote the success of the Company's
business.
20. The Plan. Two types of stock options may be granted under the
Plan: incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder ("ISOs"), and options that do not qualify as incentive stock
options ("NQSOs"). All options shall be exercisable to purchase shares of
Class A Common Stock, $.01 par value (the "Class A Common Stock"), of the
Company. Collectively, ISOs and NQSOs are referred to herein as "Options."
Subject to Section 6(a), ISOs may be awarded only to employees of the
Company and its subsidiaries, within the meaning of Code Section 424(f),
including employees who may serve as officers and directors.
NQSOs may be awarded only to employees who may serve as officers and
directors, and anyone other than non-employee Directors whom the Committee
administering the Plan pursuant to Section 3 determines provides substantial
service to the Company.
To the extent that any Option is not designated as an ISO, or even if
so designated it does not qualify as an ISO, it shall be treated as a NQSO.
21. Administration. The Plan shall be administered by a committee
(the "Committee") selected by the Board (the "Board") of not fewer than two
Independent Directors. An Independent Director shall mean a director elected
by the holders of the Company's Class A Common Stock, voting as a separate
class. The Committee shall act by a majority of its members at the time in
office and eligible to vote on any particular matter, and such action may be
taken either by a vote at a meeting or in writing without a meeting. Subject
to the provisions of the Plan, the Committee shall from time to time and at
its discretion (i) grant Options, (ii) determine which employees and other
individuals performing substantial services ("Grantees") may be granted
Options under the Plan; (iii) determine whether any Option shall be an ISO or
NQSO; (iv) determine the number of shares subject to each Option; (v)
determine the term of each Option granted under the Plan; (vi) determine the
date or dates on which the Option shall be exercisable; (vii) determine the
exercise price of any Option; (viii) determine the fair market value of the
Class A Common Stock subject to the Options; (ix) determine the terms of any
agreement pursuant to which Options are granted; (x) amend any such agreement
with the consent of the Grantee; (xi) establish such procedures as it deems
appropriate for a recipient of an award hereunder to designate a beneficiary
to whom any benefits payable in the event of his or here death are to be made;
and (xii) determine any other matters specifically delegated to it under the
Plan or necessary for the proper administration of the Plan.
The Committee shall also have the final authority to interpret and
construe the terms of the Plan and of any Option and such interpretation and
construction by the Committee shall be final, binding and conclusive upon all
persons including, without limitation, the Company, shareholders of the
Company, the Plan, and all persons claiming an interest in the Plan.
Notwithstanding anything contained in this Section to the contrary, no term of
the Plan relating to ISOs shall be interpreted, nor shall any discretion to
authority of the Committee be exercised, so as to disqualify the Plan under
Code Section 422 or, without the consent of the Grantee, to disqualify any ISO
under Code Section 422.
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No member of the Committee or Director shall be liable for any
action, interpretation or construction made in good faith with respect to the
Plan or any Option granted hereunder.
22. Effectiveness and Termination of Plan. This Plan shall become
effective as of the date of adoption thereof by the Board of the Company, or
the date this Plan is approved by the stockholders, whichever is earlier. This
Plan shall terminate on the earliest of:
a. The tenth anniversary of the effective date as
determined under this Section 4;
b. The date when all shares of the Class A Common
Stock reserved for issuance under the Plan, shall have
been acquired through exercise of Options granted under
the Plan; or
c. Such earlier date as the Board may determine. Any
Option outstanding under the Plan at the time of its
termination shall remain in effect in accordance with its
terms and conditions and those of the Plan.
23. The Stock. The aggregate number of shares of Class A Common Stock
which may be issued under the Plan shall be 400,000 shares. Such number of
shares may be set aside out of the authorized but unissued shares of Class A
Common Stock not reserved for any other purpose or out of shares of Class A
Common Stock held in or acquired for the treasury of the Company. All or any
shares of Class A Common Stock subject under this Plan to an Option which, for
any reason, terminates unexercised as to such shares, may again be subjected
to an Option under the Plan. No Grantee may receive grants in respect of more
than 50,000 shares of Class A Common Stock.
24. Grant, Terms and Conditions of Options. Options may be granted by
the Committee at any time and from time to time prior to the termination of
the Plan. Each Option granted under the Plan shall be evidenced by an
agreement in a form approved by the Committee. The terms and conditions of
such Option agreement need not be identical with respect to each Grantee, but
each Option agreement will evidence on its face whether it is an ISO or a
NQSO. For purposes of this Section, an Option shall be deemed granted on the
date the Committee selects an individual to be a Grantee, determines the
number of shares to be issued pursuant to such Option and specifies the terms
and conditions of the Option. Except as hereinafter provided, Options granted
pursuant to the Plan shall be subject to the following terms and conditions:
a. Grantee. Subject to Section 2 hereof, the Grantees
of any Options hereunder shall be such key employees of
the Company and its subsidiaries, within the meaning of
Code Section 424(f), as determined by the Committee, who
have substantial responsibility in the direction of the
Company and its subsidiaries, and anyone else whom the
Committee determines provides substantial and important
services to the Company except that in no event shall a
non-employee Director of the Company be a Grantee under
this Plan.
b. Price and Exercise. The purchase price of the
shares of Class A Common Stock upon exercise of an ISO
shall be no less than the fair market value of the shares
at the time of grant of an ISO; provided, however, if an
ISO is granted to a person owning stock of the Company
possessing more than 10% of the total combined voting
power of all classes of stock of the Company as defined in
Code Section 422 ("10% Shareholder"), the purchase price
shall be no less than 110% of the fair market value of the
shares. The fair market value of the Class A Common Stock
shall be the closing price of publicly traded Class A
Common Stock on the national securities exchange on which
the Class A Common Stock is listed (if the Class A Common
Stock is so listed) or on the Nasdaq National Market
System (if the Class A Common Stock is regularly quoted on
the Nasdaq National Market System), or, if not so listed
or regularly quoted, the mean between the closing bid and
asked prices of publicly traded Class A Common Stock in
the over-the-counter market, or, if such bid and asked
prices shall not be available, as reported by any
nationally
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recognized quotation service selected by the Company, or
as determined by the Committee in a manner consistent with
the provisions of the Code.
The purchase price of the shares of Class A Common Stock
upon exercise of a NQSO may be any price set by the
Committee; provided that the exercise price of any grant
to an employee required to be named on the Summary
Compensation Table of the Company's annual proxy statement
under the rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended, shall not be
lower than the fair market value of the underlying Class A
Common Stock on the date of grant which constitutes a
performance goal under Section 162(m) of the Internal
Revenue Code of 1986, as amended.
The notice of the exercise of any Option shall be
accompanied by payment in full of the Option price. The
purchase price shall be paid in United States dollars in
cash or by certified or cashier's check payable to the
order of the Company at the time to purchase. At the
discretion of the Committee, the purchase price may be
paid with: (i) stock of the Company (Class A Common Stock
already owned by, and in the possession of, the Grantee);
or (ii) any combination of United States dollars or stock
of the Company. Anything contained herein to the contrary
notwithstanding, any required withholding tax shall be
paid by the Grantee in full in United States dollars in
cash or by certified or cashier's check at the time of
exercise of the Option. Shares of stock of the Company
used to satisfy the exercise price of an Option shall be
valued at their fair market value as determined by the
Committee, as of the close of business on the day
immediately preceding the date of exercise.
If required by the Company, such notice of exercise of an
Option shall be accompanied by the Grantee's written
representation that the shares being acquired are
purchased for investment and not for distribution;
acknowledging that such shares have not been registered
under the Securities Act of 1933, as amended (the "1933
Act"); and agreeing that such shares may not be sold or
transferred unless there is an effective Registration
Statement for them under the 1933 Act, or, in the opinion
of counsel, such sale or transfer is not in violation of
the 1933 Act.
The purchase price shall be subject to adjustment, but
only as provided in Section 7 hereof.
c. Vesting. Options shall vest in accordance with the
schedule established for each Grantee; provided, however,
an Option may be immediately exercisable in accordance
with Section 6(g) below.
d. Forfeiture. Notwithstanding anything contained
herein to the contrary, the right (whether or not vested)
of a Grantee to exercise his or her outstanding Options,
if any, shall be forfeited if (i) the Grantee shall enter
into a business or employment which the Committee
determines to be detrimentally competitive with the
Company or substantially injurious to the Company's
financial interests; or (ii) the Grantee is discharged
from employment with the Company for cause; or (iii) the
Grantee performs acts of willful malfeasance or gross
negligence in a matter of material importance to the
Company.
e. Additional Restrictions on Exercise of an ISO. The
aggregate fair market value of Class A Common Stock
(determined at the time an ISO is granted) for which an
ISO is exercisable for the first time by a Grantee during
any calendar year (under all plans of the Company and its
subsidiaries or parent) shall not exceed $100,000.
f. Duration of Options. Options may be granted for
terms of up to but not exceeding ten (10) years from the
effective date the particular Option is granted; provided,
however, that ISOs granted to a 10% Shareholder may be for
a term of up to but not exceeding five (5) years from the
effective date the particular ISO is granted.
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<PAGE>
g. Termination of Employment. Upon the termination of a
Grantee's employment with the Company, his or her rights to exercise
an Option then held by such Grantee shall be only as follows:
i. Retirement. If the Grantee's employment is
terminated because he or she has attained the age which
the Company may from time to time establish as the
retirement age for any class of its employees, or in
accordance with the age specified in an employment
agreement with a Grantee he or she may, with the consent
of the Company within three months following such
termination, exercise the Option with respect to all or
any part of the shares subject thereto, regardless of
whether the Grantee had the right to purchase such shares
at the time of termination of employment. However, in the
event of his or her death prior to the end of the
three-month period after the aforesaid termination of his
or here employment, his or her estate shall have the right
to exercise the Option within one (1) year following such
termination with respect to all or any part of the shares
subject thereto, regardless of whether the Grantee had the
right to purchase such shares at the time of termination
of employment.
ii. Death. In the case of a Grantee who dies while
employed by the Company, his or her estate shall have the
right for a period of one (1) year following the date of
such death to exercise the Option to the extent the Grantee
had the right to purchase such shares on the day immediately
prior to his or her death.
iii. Disability. In the case of a Grantee whose
employment with the Company is terminated by disability,
as defined in Code Section 22(e)(3), he or she shall have
the right for a period of one (1) year of the disability
to exercise the Option to the extent the right had
occurred prior to the date of his or her disability.
iv. Other Reasons. In the case of a Grantee whose
employment is terminated for any reason other than those
provided above under "Retirement," Death," or "Disability,"
the Grantee or his or her estate (in the event of his or her
death after such termination) may, within the 30-day period
following such termination, exercise the Option to the
extent the right to exercise had occurred prior to such
termination.
For purposes of this Section 6(g), "termination of employment" shall
mean the termination of a Grantee's employment with the Company or a
subsidiary or a parent. A Grantee employed by a subsidiary shall
also be deemed to have a termination of employment if the subsidiary
ceases to be a subsidiary of the Company, and the Grantee does not
immediately thereafter become an employee of the Company or of a
subsidiary or the parent. Any other Grantee who is not otherwise an
employee of the Company shall be considered to have terminated
employment when substantial services, as determined by the
Committee, are no longer provided to the Company by the Grantee.
Also for purposes of this Section 6(g), a Grantee's "estate" shall
mean his or her legal representatives upon his or her death or any
person who acquires the right to exercise an Option by reason of the
Grantee's death. The Committee may in its discretion require the
transferee of a Grantee to supply it with written notice of the
Grantee's death or disability and to supply it with a copy of the
will (in the case of the Grantee's death) or such other evidence as
the Committee deems necessary to establish the validity of the
transfer of an Option.
h. Transferability of Option and Shares Acquired Upon Exercise
of Option. Options shall be transferable only by will or the laws of
descent and distribution and shall be exercisable during the
Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee. Except as limited by applicable
securities laws and the provisions of Sections 6(b), 6(j), 8 and 14
hereof, shares of Class A Common Stock acquired upon exercise of
Options hereunder shall be freely tradeable.
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i. Modifications, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender or outstanding Options (up
to the extent not theretofore exercised) and authorize the granting
of new Options in substitution therefor (to the extent not
theretofore exercised). The Committee shall not, however, with
respect to ISOs, modify any outstanding Options so as to specify a
lower Option price or accept the surrender of outstanding Options
and authorize the granting of new Options in substitution therefor
specifying a lower price. Notwithstanding the foregoing, no
modification of an Option shall, without the consent of the Grantee,
alter or impair any rights or obligations under any Option
theretofore granted under the Plan nor shall any modification be
made which shall adversely affect the status of an Option as an ISO
under Code Section 422.
j. Shares Held for Investment. Each Option agreement may
contain an undertaking that, upon demand by the Committee for such a
representation, the Grantee, or any person acting under Section
6(g), shall deliver to the Committee at the time of any exercise of
an Option a written representation that the shares to be acquired
upon such exercise are to be acquired for investment and not for
resale or with a view to the distribution thereof. Upon such demand,
delivery of such representation prior to the delivery of any shares
issued upon exercise of an option shall be a condition precedent to
the right of the Grantee or such other person to purchase any shares
of Class A Common Stock.
k. Other Terms and Conditions. Options may contain such
other provisions, which shall not be inconsistent with any of the
foregoing terms, as the Committee shall deem appropriate including
those conditions that may be necessary to comply with applicable FCC
requirements.
25. Adjustment of the Changes in the Stock.
a. In the event the shares of Class A Common Stock, as
presently constituted, shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of
the Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split, reverse
split, combination of shares, or otherwise) or if the number of such
shares of Class A Common Stock shall be increased through the payment
of a stock dividend, then there shall be substituted for or added to
each share of Class A Common Stock theretofore appropriated or
thereafter subject or which may become subject to an Option under
this Plan, the number and kind of shares of stock or other securities
into which each outstanding share of Class A Common Stock shall be so
changed, or for which each such share shall be exchanged, or to which
each such share shall be entitled, as the case may be. Outstanding
Options shall also be appropriately amended as to price and other
terms as may be necessary to reflect the foregoing events. In the
event there shall be any other change in the number or kind of the
outstanding shares of the Class A Common Stock, or of any stock or
other securities into which such Class A Common Stock shall have been
changed, or for which it shall have been exchanged, then, if the
Board shall, in its sole discretion, determine that such change
equitably requires as adjustment in any Option theretofore granted or
which may be granted under the Plan, such adjustments shall be made
in accordance with such determination.
b. Fractional shares resulting from any adjustment in Options
pursuant to Section 7 may be settled in cash or otherwise as the
Committee shall determine. Notice of any adjustment shall be given
by the Company to each holder of an Option which shall have been so
adjusted and such adjustment (whether or not such notice is given)
shall be effective and binding for all purposes of the Plan.
26. Securities Law Requirements. No Option granted pursuant to this
Plan shall be exercisable in whole or in part, nor shall the Company be
obligated to sell any shares of Class A Common Stock subject
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<PAGE>
to any such Option, if such exercise and sale would, in the opinion of counsel
for the Company, violate the 1933 Act (or other Federal or State statutes
having similar requirements), as it may be in effect at that time. In this
regard, the Committee may demand the representations described in Section 6(b)
and Section 6(j).
Each Option shall be subject to the further requirement that, if at
any time the Committee shall determine in its discretion that the listing or
qualification of the shares of Class A Common Stock subject to such Option
under any securities exchange requirements or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the granting of such Option or the issue
of shares thereunder, such Option may not be exercised in whole or in part,
unless such listing, qualification, consent or approval shall have been
affected or obtained free of any conditions not acceptable to the Board.
No person who acquires shares of Class A Common Stock under the Plan
may, during any period of time that such person is an affiliate of the Company
within the meaning of the rules and regulations of the Securities and Exchange
Commission under the 1933 Act, sell such shares of Class A Common Stock,
unless such offer and sale is made (i) pursuant to an effective registration
statement under the 1933 Act, which is current and includes the shares to be
sold, or (ii) pursuant to an appropriate exemption from the registration
requirement of the 1933 Act, such as that set forth in Rule 144 promulgated
under the 1933 Act.
27. Amendment of the Plan.
The Board may amend the Plan at any time, except that approval of the
holders of a majority of the outstanding voting stock of the Company is
required for amendments which:
a. extend the term of the Plan beyond ten years;
b. extend the maximum terms of the Options granted hereunder
beyond ten years;
c. withdraw the administration of the Plan form the Committee
appointed pursuant to Section 3;
d. expand the class of eligible employees, and other Grantees;
e. increase the aggregate number of shares of Class A Common
Stock which may be issued pursuant to the provisions of the Plan; or
f. otherwise materially increase the benefits accruing to
participants under the Plan.
Notwithstanding the foregoing, the Board may, without the need for
stockholders' approval, amend the Plan in any respect to qualify ISOs as
incentive stock options under Code Section 422.
It is intended that the Plan qualify as an employee benefit plan
under Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act
of 1934, as amended. To the extent necessary and desirable to comply with Rule
16b-3, the Company shall obtain shareholder approval of any Plan amendment in
such manner and to such a degree as required.
28. No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon the Grantee (or upon a transferee of a
Grantee) to exercise such Option.
29. No Limitation on Rights of the Company. The grant of any Option
shall not in any way affect the right or power of the Company to make
adjustments, reclassification, or changes in its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
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30. Plan Not a Contract of Employment. The Plan is not a contract of
employment, and the terms of employment of any recipient of any award
hereunder shall not be affected in any way by the Plan or related instruments
except as specifically provided therein. The establishment of the Plan shall
not be construed as conferring any legal rights upon any recipient of any
award thereunder for a continuation of employment, nor shall it interfere with
the right of the Company or any subsidiary to discharge any recipient of any
award hereunder and to treat him or her without regard to the effect which
such treatment might have upon him or her as the recipient of any award
hereunder.
31. Expenses of the Plan. All of the expenses of the Plan shall be
paid by the Company.
32. Compliance with Applicable Law. Notwithstanding anything herein
to the contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates for shares of Class A Common Stock pursuant to the
exercise of an Option, unless and until the Company is advised by its counsel
that the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the requirements of
any exchange upon which shares of Class A Common Stock are traded. The Company
shall in no event be obligated to register any securities pursuant to the 1933
Act (as now in effect or as hereinafter amended) or to take any other action
in order to cause the issuance and delivery of such certificates to comply
with any such law, regulation or requirement. The Committee may require, as a
condition of the issuance and delivery of such certificates and in order to
ensure compliance with such law, regulations and requirements, that the
recipient of any award hereunder make such covenants, agreements and
representations as the Committee, in its sole discretion, deems necessary or
desirable, including, without limitation, a written representation from a
stockholder that the shares are being purchased for investment and not for
distribution, acknowledging that such shares have not been registered under
the 1933 Act, as amended and agreeing that such shares may not be sold or
transferred unless there is an effective Registration Statement for them under
the 1933 Act, or, in the opinion of counsel to the Company, that such sale or
transfer is not in violation of the 1933 Act.
33. Effect Upon Other Compensation. Nothing contained herein shall
prevent the Company or any subsidiary from adopting other or additional
compensation arrangements for its employees or directors.
34. Grantee to Have No Rights as a Stockholder. No Grantee of any
Option shall have any rights as a stockholder with respect to any shares
subject to his or her Option prior to the date on which he or she is recorded
as the holder of such shares on the records of the Company. No Grantee of any
Option shall have the rights of a stockholder until he or she has paid in full
the Option price.
35. Notice. Notice to the Committee shall be deemed given if in
writing and mailed to the Secretary of the Company at its principal executive
offices by first class, certified mail at the then principal office of the
Company.
36. Governing Law. Except to the extent preempted by Federal law,
this Plan and all Option agreements entered into pursuant thereto shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware, determined without regard to its conflict of law rules.
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PROXY CARD
TRIATHLON BROADCASTING COMPANY PROXY FORM
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ______________, 1996
The undersigned hereby appoint(s) _____________________ and _______________,
or either of them, each with full power of substitution, as proxies to vote
all stock in Triathlon Broadcasting, Inc. that the undersigned would be
entitled to vote on all matters that may come before the 1996 Annual Meeting
of Stockholders and any adjournments thereof.
Returned proxy forms will be voted: (1) as specified on the matters listed on
the reverse side of this form; (2) in accordance with the Directors'
recommendations where a choice is not specified; and (3) in accordance with
the judgment of the proxies on any other matters that properly come before the
meeting.
Your shares will not be voted unless your signed Proxy Form is returned to
Triathlon Broadcasting Company or you otherwise vote at the meeting.
SIGNATURE(S)_______________________________________________________
Dated:_______________, 1996 Please sign as registered and return promptly in
the enclosed envelope.
Executors, trustees and others signing in a representative capacity should
include their names and the capacity in which they sign.
INSTRUCTIONS Mark votes by placing an "x" in the appropriate [ ].
The Board of Directors recommends a vote FOR the proposals
relating to:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VOTE
FOR AGAINST WITHHELD
1. Election of Directors (to withhold vote for any [ ] [ ] [ ]
nominee, write his name on the line provided)
Nominees for election by holders of Class A Common
Stock, Class B Common Stock and Depositary Shares
(John D. Miller, Norman Feuer and Dennis R. Ciapura)
Nominees for election by holders of Class A Common [ ] [ ] [ ]
Stock and Depositary Shares only
(Frank E. Barnes and Jeffrey W. Leiderman)
2. To approve an amendment to the Company's Amended and [ ] [ ] [ ]
Restated Certificate of Incorporation to reverse the
designation of Series A Convertible Preferred Stock
3. To approve the Company's 1996 Stock Option Plan and [ ] [ ] [ ]
the Performance Goal Included Therein
4. To ratify the appointment of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors of the Company for the fiscal
year ending March 31, 1997
</TABLE>
