<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-21267
PROSPECTUS
389,808 Shares
TRIATHLON BROADCASTING COMPANY
[LOGO]
Class A Common Stock
The 389,808 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), offered hereby are being offered for the account
of certain stockholders of Triathlon Broadcasting Company, a Delaware
corporation (the "Company"), named under the heading "Selling Stockholders."
The shares offered hereby include 50,000 shares of Class A Common Stock which
will be issued upon the automatic conversion of an equal number of shares of
Class C Common Stock, par value $.01 per share (the "Class C Common Stock").
The Class C Common Stock automatically converts into Class A Common Stock upon
transfer. The Company will not receive any proceeds from the sale of the Class
A Common Stock offered hereby, but has agreed to bear certain costs relating
to the registration of the Class A Common Stock under the federal and state
securities laws (currently estimated to be $50,000), and of any offering and
sale hereunder, not including certain expenses such as commissions and
discounts of underwriters, dealers and agents. See "Selling Stockholders,"
"Use of Proceeds" and "Plan of Distribution."
The shares of Class A Common Stock may be offered and sold from time to
time by the Selling Stockholders directly or through broker-dealers or
underwriters who may act solely as agents, or who may acquire shares as
principals. The distribution of the shares of Class A Common Stock may be
effected in one or more transactions that may take place through the Nasdaq
SmallCap Market or any national securities exchange on which the Class A
Common Stock is approved for listing in the future, including block trades or
ordinary broker's transactions, or through privately negotiated transactions,
or through an underwritten public offering, or through a combination of any
such methods of sale, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specially negotiated brokerage fees or commissions may be
paid by the Selling Stockholders in connection with such sales. See "Plan of
Distribution."
To the extent required, the specific shares of the Class A Common Stock
to be sold, the names of the Selling Stockholders, purchase price, public
offering price, the names of any such agent, dealer or underwriter, and any
applicable commission or discount with respect to a particular offering will
be set forth in an accompanying Prospectus Supplement. The aggregate proceeds
to the Selling Stockholders will be the purchase price thereof less
commissions and discounts, if any, and other expenses of distribution not
borne by the Company.
The Company's outstanding voting securities are comprised of Class A
Common Stock, which entitles its holders to one vote per share and, voting
together as a class with the holders of the Depositary Shares (as defined
herein), to elect two members of the Company's Board of Directors, Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"), which
entitles its holders generally to ten votes per share, Class C Common Stock
which is non-voting, Class D Common Stock, par value $.01 per share (the
"Class D Common Stock"), which is non-voting and convertible on certain terms
and conditions into shares of Class B Common Stock, and Depositary Shares,
each representing a one-tenth interest in the Company's 9% Mandatory
Convertible Preferred Stock (the "Preferred Stock"), which entitles its
holders to 4/5 of one vote (the "Depositary Shares"). Norman Feuer, the
President, Chief Executive Officer and a Director of the Company, holds all of
the outstanding shares of Class B Common Stock and, as a result thereof holds
approximately 23.85% of the combined voting power assuming the conversion of
the remaining 50,000 shares of Class C Common Stock into an equal number of
shares of Class A Common Stock. The non-voting Class D Common Stock is held by
affiliates of Robert F.X. Sillerman, one of the founders of the Company. If
all of such shares of Class D Common Stock were converted into shares of Class
B Common Stock, affiliates of Mr. Sillerman would own approximately 58.4% of
the combined voting power of the Company. See "Description of Capital Stock."
The Class A Common Stock and the Depositary Shares are traded on the
Nasdaq SmallCap Market under the symbols "TBCOA" and "TBCOL," respectively. On
February 12, 1997, the closing sales price of the Class A Common Stock was
$77/8 per share.
---------
An investment in the securities offered hereby involves a high degree of risk.
See "Risk Factors" beginning on page 4 of this Prospectus.
---------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 13, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements
and other information with the Securities and Exchange Commission (the
"Commission"). The reports, proxy statements and other information filed by
the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Seven World Trade Center, 13th Floor, New
York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington D.C. 20549 at prescribed rates. The Company is an
electronic filer under the EDGAR (Electronic Data Gathering, Analysis and
Retrieval) system maintained by the Commission. The Commission maintains a Web
site (http://www.sec.gov) on the Internet that contains reports, proxy
statements, information statements and other information regarding companies
that file electronically with the Commission. In addition, material filed by
the Company can be inspected at the offices of The Nasdaq Stock Market, Inc.,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with any amendments or supplements thereto, the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Class A Common Stock. This Prospectus does not contain all the
information set forth in the Registration Statement. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other documents filed as an exhibit to the Registration Statement, each
such statement being qualified by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with
the Commission, are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-KSB, as amended, for the year
ended March 31, 1996;
(ii) the Company's Quarterly Reports on Form 10-QSB for the quarterly
periods ended June 30, 1996 and September 30, 1996;
(iii) the Company's Current Reports on Form 8-K dated June 20, 1996 (as
amended by Form 8-K/A Amendment No. 1 dated August 27, 1996),
December 9, 1996 (as amended by Form 8-K/A Amendment No. 1 dated
February 4, 1997) and January 24, 1997 (as amended by Form 8-K/A
Amendment No. 1 dated February 4, 1997); and
(iv) the description of the Company's Class A Common Stock contained in
the Company's Registration Statement on Form 8-A (File No. 0-026530)
filed with the Commission on July 27, 1995.
All documents and reports filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Class A Common
Stock shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents or reports.
Any statement contained in a document which is, or is deemed to be,
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also is, or is
deemed to be, incorporated by reference herein) modifies or supersedes the
previous statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any document incorporated by reference in this Prospectus, other than
exhibits to any such document unless such exhibits are specifically
incorporated by reference herein. Requests for such documents should be
directed to Triathlon Broadcasting Company, 150 East 58th Street, 19th Floor,
New York, New York 10155, Attention: Timothy J. Klahs, Director of Investor
Relations, telephone number (212) 407-9191.
2
<PAGE>
TABLE OF CONTENTS
Page
Available Information..............................................2
Incorporation of Certain Documents by Reference....................2
Risk Factors.......................................................4
The Company.......................................................10
Use of Proceeds...................................................10
Description of Capital Stock......................................10
Plan of Distribution..............................................16
Selling Stockholders..............................................17
Legal Matters.....................................................17
Experts...........................................................18
-----------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH
OFFER WOULD BE UNLAWFUL OR AN OFFERING OF ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER AT ANY TIME SHALL IMPLY THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION PROVIDED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
3
<PAGE>
RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus, the following factors should be considered
carefully by prospective investors in evaluating the Company before purchasing
any of the securities offered hereby. The information contained or
incorporated by reference in this Prospectus includes forward-looking
statements that involve risks and uncertainties, a number of which are
identified in this "Risk Factors" section. These risks and uncertainties
include limitations on the consummation of acquisitions, integration of
acquired stations, leverage, regulation of radio broadcasting and other
factors. The Company's actual results may differ materially from the results
discussed in the forward-looking statements due to such risks and
uncertainties.
RISKS RELATED TO PENDING ACQUISITIONS
Consummation of the Company's pending acquisitions of radio stations
is subject to a number of factors, certain of which are beyond the Company's
control. In particular, consummation of the acquisitions is subject to the
prior approval by the Federal Communications Commission (the "FCC") of the
assignments or transfers of control of operating licenses issued by the FCC
and the continued operating performance of the stations to be acquired such
that there is no material adverse change in such stations that would prevent
consummation of any such transactions. As a result of the elimination of the
national ownership limits and the liberalization of the local ownership limits
effected by the Telecommunications Act of 1996 (the "Recent Legislation"),
acquisitions and dispositions of radio stations will be subject to antitrust
review by the Federal Trade Commission and the Department of Justice,
Antitrust Division (the "Antitrust Agencies"). The Antitrust Agencies have
indicated their intention to review matters related to the concentration of
ownership within markets even when the ownership in question is in compliance
with the provisions of the Recent Legislation. See "--Extensive Regulation of
Radio Broadcasting."
In order to consummate its pending acquisitions, the Company must
also seek additional financing. The amounts available under the $40.0 million
credit facility of the Company (the "Credit Agreement") and cash on hand and
from operations is not sufficient to fund the purchase price of all of the
pending acquisitions. The ability of the Company to issue certain securities
or borrow under the Credit Agreement will be subject to meeting certain
financial tests. In addition, consummation of certain acquisitions is subject
to the prior approval of AT&T Commercial Finance Corporation ("AT&T"), the
lender under the Credit Agreement. There can be no assurance that the
Company's existing stations, and the stations which the Company will acquire,
will achieve the cash flow levels required to issue certain securities or
borrow under the Credit Agreement. Without additional financing it is unlikely
that the Company will be able to implement its acquisition strategy and will
lose all or part of the deposits made in connection with the pending
acquisitions.
HISTORICAL LOSSES AND FUTURE CHARGES TO OPERATIONS
Although the Company had net income of $213,000 for the six months
ended September 30, 1996, since inception the Company has accumulated net
losses and many of the stations it has acquired have accumulated net losses,
primarily due to depreciation and amortization, interest expense and corporate
overhead. There can be no assurance that the Company will be able to continue
to achieve net income.
The Company has recorded and will continue to record substantial
non-cash compensation expense in connection with the issuance prior to the
date hereof of securities and stock options to certain officers, directors and
advisors. In connection with the issuance of Class B Common Stock to Mr. Feuer
prior to the date hereof, the Company will record compensation expense of
$136,000 per year through 2001. The Company will also record a charge of
$220,000 in 1997 with respect to the stock options to purchase 80,000 shares
of Class A Common Stock issued to Sillerman Communications Management
Corporation ("SCMC") and its affiliates prior to the date hereof. In addition,
the Company may incur additional substantial charges in connection with
certain cash-only stock appreciation rights and the issuance of Series B
Convertible Preferred Stock to officers, directors and advisors of the Company
in the event that such shares become convertible into shares of Class A Common
Stock in the event certain Class A Common Stock
4
<PAGE>
price targets are met. The recording of substantial non-cash compensation
expense could adversely affect the price of the Class A Common Stock and the
Depositary Shares.
SUBSTANTIAL LEVERAGE; INABILITY TO SERVICE OBLIGATIONS
In connection with acquisitions, the Company has incurred and will
incur significant amounts of indebtedness. Subject to certain restrictions
contained in the Credit Agreement and the Preferred Stock, the Company may
incur additional indebtedness from time to time to finance acquisitions, for
capital expenditures or for other purposes. See "--Limitations on Expansion
Strategy; Need for Additional Funds."
The degree to which the Company is and may become leveraged could
have material consequences to the Company and the holders of the Company's
securities, including, but not limited to, the following: (i) the Company's
ability to obtain additional financing in the future for acquisitions, working
capital, capital expenditures, general corporate or other purposes may be
impaired, (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of the principal and interest on
its debt and dividends on Preferred Stock and will not be available for other
purposes, (iii) the agreements governing the Company's debt contain or are
expected to contain restrictive financial and operating covenants, and the
failure by the Company to comply with such covenants could result in an event
of default under the applicable instruments, which could permit acceleration
of the debt under such instrument and in some cases acceleration of debt under
other instruments that contain cross-default or cross-acceleration provisions
and (iv) the Company's level of indebtedness could make it more vulnerable to
economic downturns, limit its ability to withstand competitive pressures and
limit its flexibility in reacting to changes in its industry and general
economic conditions. Certain of the Company's competitors operate on a less
leveraged basis, and have significantly greater operating and financial
flexibility, than the Company.
Dividend payments on the Preferred Stock have been and will be made
out of the remaining proceeds of the Preferred Stock offering and/or the
Credit Agreement. In order to fund future dividend payments from operating
income, the Company will have to improve the operating results of its current
radio stations and those to be acquired in the pending acquisitions. The
Company's ability to make these improvements will be subject, to a certain
extent, to general economic, financial, competitive, legislative, regulatory
and other factors, many of which are beyond the Company's control.
The Company's borrowings under the Credit Agreement are, and other
future borrowings may be, at variable rates of interest, which will result in
higher interest expense in the event of increases in interest rates. There can
be no assurance that the Company's business will generate sufficient cash flow
from operations or that future working capital borrowings will be available in
an amount which enables the Company to service its debt and to make dividend
payments and to make necessary capital or other expenditures. The Company may
be required to refinance a portion of the principal amount of its debt or the
aggregate liquidation preference of the outstanding preferred stock prior to
their maturities. There can be no assurance that the Company will be able to
raise additional capital through the sale of securities, the disposition of
radio stations or otherwise for any such refinancing.
EXTENSIVE REGULATION OF RADIO BROADCASTING
Adoption of the Recent Legislation in February 1996 eliminated the
national limits and liberalized the local limits on radio station ownership by
a single company. However, the Antitrust Agencies are increasingly
scrutinizing acquisitions of radio stations and the entering into of joint
sales agreements ("JSAs") and local market agreements ("LMAs"). There can be
no assurance that policy and rule-making activities of the Antitrust Agencies
will not impact the Company's operations (including existing stations or
markets), expansion strategy or its ability to realize the benefits which
management had anticipated obtaining following the adoption of the Recent
Legislation.
The radio broadcasting industry is subject to extensive regulation by the
FCC. In particular, the Company's business is dependent upon its continuing to
hold and, in connection with acquisitions of radio stations, upon obtaining
FCC consents to assignments or transfers of control of broadcasting station
operating licenses issued by the FCC. Radio
5
<PAGE>
broadcasting licenses may be granted for maximum terms of eight years. There
can be no assurance that the Company's licenses will be renewed, or that the
FCC will approve future acquisitions or dispositions. Failure to obtain the
renewal of any of the Company's broadcast licenses or to obtain FCC approval
for an assignment of a license in connection with a station acquisition could
have a material adverse effect on the Company's business and operations.
In addition, the number and locations of radio stations that the
Company may acquire is limited by FCC rules and will vary depending upon,
among other things, whether the interests in other radio stations or certain
other media properties of certain individuals affiliated with the Company
(including but not limited to any stockholders of the Company who hold or will
hold five percent or more of the total voting power in the Company) are
attributable to those individuals. Moreover, under certain circumstances, the
FCC's cross-interest policy may prohibit one party from acquiring an
attributable interest in one media outlet and a substantial non-attributable
economic interest in another media outlet in the same market, thereby
prohibiting a particular acquisition by the Company. The number and location
of stations the Company may acquire may, in particular, be affected by whether
the stations owned by the Company are attributable to Robert F.X. Sillerman
and Howard J. Tytel. The Company believes that such stations are not currently
attributable to Messrs. Sillerman and Tytel. The FCC is currently examining
through outstanding rule making and adjudicatory proceedings whether to change
the criteria for considering an interest to be attributable. In particular,
the FCC recently released a notice of proposed rulemaking that, among other
things, seeks comment on whether the FCC should modify its attribution rules
by (i) restricting the availability of the single majority stockholder
exemption, (ii) increasing the amount of stock an investment company can own
without attribution, (iii) attributing, under certain circumstances, certain
interests such as non-voting stock or debt, and (iv) attributing, under
certain circumstances, JSAs. Some commenters in the rule making proceedings
have urged that the test for attribution should not be voting power but rather
influence over the licensee. Fisher Wayland Cooper Leader & Zaragoza LLP, FCC
counsel to the Company, has advised the Company that to the extent that the
FCC adopts this standard, the contractual arrangements between SCMC and the
Company may cause Messrs. Sillerman's and Tytel's interests in the Company to
be attributable to them which may require a change in the relationship between
such individuals and the Company. Any limitations upon the ability of Messrs.
Sillerman or Tytel to provide services to the Company could have a material
adverse effect on the Company. Also, the activities of persons who are deemed
by the FCC to control the Company could adversely affect the Company's ability
to obtain license renewals and to acquire radio stations. In addition, any
actions, such as transfers or conversions of stock in the Company, that would
cause an individual or entity to acquire 50% or more of the total voting power
in the Company or to acquire actual working control over the Company would
require prior FCC consent, and there can be no assurance that such consent
would be obtained.
There can be no assurance that there will not be changes in the
current regulatory scheme, the imposition of additional regulations or the
creation of new regulatory agencies, which would restrict or curtail the
ability of the Company to acquire, operate and dispose of its stations or, in
general, to compete profitably with other operators of radio and other media
properties. Further, there can be no assurance that there will not be other
regulatory changes, including aspects of deregulation, that will result in a
decline in the value of broadcasting licenses held by the Company or adversely
affect the Company's competitive position.
COMPETITION
The radio broadcasting industry is highly competitive and the
Company's stations are located in highly competitive markets. Each of the
Company's stations competes for audience share and advertising revenue
directly with other FM and AM radio stations, as well as with other media,
within its respective market. The financial results of each of the Company's
stations are dependent to a significant degree upon its audience ratings and
its share of the overall advertising revenue within the station's geographic
market. The Company's audience ratings and market share are subject to change,
and any adverse change in audience ratings or market share in any particular
market could have an adverse material effect on the Company's net revenues.
Although the Company competes with other radio stations with comparable
programming formats in most of its markets, if another station in the market
were to convert its programming format to a format similar to one of the
Company's radio stations, if a new radio station were to adopt a competitive
format, or if an existing competitor were to strengthen its operations, the
Company's stations could suffer a reduction in ratings or advertising revenue
and could require the Company to incur increased promotional and other
6
<PAGE>
expenses. In addition, certain of the Company's stations compete, and in the
future other stations may compete, with groups of stations in a market
operated by a single operator. As a result of the Recent Legislation, the
radio broadcasting industry has become increasingly consolidated, resulting in
the existence of radio broadcasting companies which are significantly larger,
with greater financial resources, than the Company. Furthermore, the Recent
Legislation will permit other radio broadcasting companies to enter the
markets in which the Company operates or may operate in the future. Although
the Company believes that each of its stations is able to compete effectively
in its market, there can be no assurance that any of the Company's stations
will be able to maintain or increase its current audience ratings and
advertising revenue market share. The Company's stations also compete with
other advertising media such as newspapers, television, magazines, billboard
advertising, transit advertising and direct mail advertising. Radio
broadcasting is also subject to competition from new media technologies that
are being developed or introduced, such as the delivery of audio programming
by cable television systems or the introduction of digital audio broadcasting.
The Company cannot predict the effect, if any, that any of these new
technologies may have on the radio broadcasting industry.
DEPENDENCE ON ECONOMIC FACTORS
Because the Company derives substantially all of its revenue from the
sale of advertising time, its revenues may be adversely affected by economic
conditions which affect advertisers. In particular, because a significant
percentage of the Company's revenue has generally been derived from local
advertisers, operating results in individual geographic markets will be
adversely affected by local or regional economic downturns. These economic
downturns might have an adverse impact on the Company's financial condition
and results of operations. In addition, revenues of radio stations may be
affected by many other factors, including: (i) the popularity of programming;
(ii) regulatory restrictions on types of programming or advertising; (iii)
competition within national, regional or local markets from programming on
other stations or from other media; (iv) loss of market share to other
technologies; and (v) challenges to license renewals.
LIMITATIONS ON EXPANSION STRATEGY; NEED FOR ADDITIONAL FUNDS
The Company's financial performance will be substantially dependent
upon its ability (i) to grow continuing its acquisition strategy and (ii) to
integrate the operations of the radio stations the Company acquires in order
to increase revenues and reduce operating expenses. There can be no assurance
that the Company will be able to enter into and consummate any acquisitions or
integrate the operations of those acquired stations, if any. In certain of the
markets in which the Company is focusing its operations, the competition for
radio station acquisitions is substantial and the Recent Legislation may
result in an increase in competition for such acquisitions. Accordingly, there
can be no assurance that the Company will be able to identify additional
acquisition opportunities or, if identified, be able to successfully
consummate such acquisitions. Each acquisition will be subject to the prior
approval of the FCC and AT&T. Furthermore, as a result of the Recent
Legislation, future acquisitions may be subject to antitrust review by the
Antitrust Agencies, even if approved by the FCC. In addition, the Company may
require additional debt or equity financing to finance properties it may seek
to acquire in the future. The availability of additional acquisition financing
cannot be assured, and depending on the terms of such acquisitions and
financings, could be restricted by the terms of the Credit Agreement and
Preferred Stock. There can be no assurance that any future acquisitions will
be successfully integrated into the Company's operations or that such
acquisitions will not have a material adverse effect on the Company's
financial condition and results of operations. See "--Extensive Regulation of
Radio Broadcasting."
KEY PERSONNEL
The Company's success is dependent to a significant extent upon the
performance of certain key individuals, including in particular, Norman Feuer.
In 1995, the Company entered into a five-year employment agreement with Mr.
Feuer to serve as the Company's President and Chief Executive Officer;
however, there can be no assurance that Mr. Feuer will continue to provide
services to the Company for the term of his employment agreement. In the event
that Mr. Feuer is no longer employed by the Company, an event of default will
occur under the Credit Agreement unless a successor with comparable experience
is appointed within 90 days. The Company has obtained key man life insurance
on Mr. Feuer in the amount of $2.0 million. In addition, Robert F.X. Sillerman
and Howard J. Tytel, by virtue of their
7
<PAGE>
positions with SCMC, which provides financial consulting and advisory services
to the Company, are expected to contribute materially to the development and
implementation of the Company's business strategies. Mr. Sillerman, however,
is employed by SFX Broadcasting, Inc. ("SFX") and pursuant to his employment
agreement with SFX is required to devote substantially all of his business
time to matters related to SFX. Therefore, Mr. Sillerman is restricted in the
amount of time he may devote to matters affecting the Company. Mr. Tytel is
also an officer and director of SFX, which will limit the amount of time Mr.
Tytel will devote to the Company. The loss of the services to the Company of
Messrs. Feuer, Sillerman or Tytel could have a material adverse effect on the
Company.
SECURITY HOLDINGS OF MANAGEMENT; PRINCIPAL STOCKHOLDERS
Mr. Feuer holds approximately 23.85% of the Company's combined voting
power by virtue of his ownership of 100% of the outstanding shares of Class B
Common Stock assuming the conversion of the remaining 50,000 shares of Class C
Common Stock into an equal number of shares of Class A Common Stock. Mr.
Feuer's shares of Class B Common Stock are subject to surrender to the Company
in varying percentages in the event he terminates his employment with the
Company. Mr. Feuer has granted Radio Investors, Inc., a New York corporation
which is controlled by Mr. Sillerman ("Radio Investors"), a right of first
refusal to purchase all of Mr. Feuer's shares of Class B Common Stock. Radio
Investors and Radio Analysis Associates ("Radio Analysis"), both of which are
affiliates of Mr. Sillerman, hold 1,199,476 and 244,890 shares, respectively,
of non-voting Class D Common Stock. Upon the occurrence of certain events, and
subject to FCC approval, Radio Investors and Radio Analysis will have the
right to convert their shares of Class D Common Stock into shares of Class B
Common Stock. In the event of such conversion, Radio Investors, Radio Analysis
and Mr. Feuer will hold approximately 48.5%, 9.9% and 9.9%, respectively, of
the Company's combined voting power. Accordingly, Mr. Feuer, or upon
conversion of the Class D Common Stock into Class B Common Stock upon approval
of the FCC, Radio Investors, will have the ability to significantly influence
and possibly control the outcome of substantially all matters submitted to a
vote of the stockholders. In addition, an aggregate of 565,000 shares of
Series B Convertible Preferred Stock have been issued by the Board of
Directors of the Company to Radio Investors, Radio Analysis, Mr. Feuer, John
D. Miller and Dennis R. Ciapura. The Series B Convertible Preferred Stock is
non-voting and vests over a five year period beginning one year from the date
of issuance. One-half of the shares of Series B Preferred Convertible
Preferred Stock are convertible into an equal number of shares of Class A
Common Stock if and when the market price of the Class A Common Stock is
greater than or equal to $14.00 per share for 20 consecutive trading days. The
remaining shares of Series B Convertible Preferred Stock are convertible into
an equal number of shares of Class A Common Stock if and when the market price
of the Class A Common Stock is greater than or equal to $15.00 per share for
20 consecutive trading days. Upon the conversion of such Series B Convertible
Preferred Stock into Class A Common Stock, which may require FCC consent, Mr.
Feuer will hold 25.3% of the Company's combined voting power. See "Description
of Capital Stock."
The holdings of Company securities of Mr. Feuer and Radio Investors
and the requirement of obtaining FCC consent prior to any change of control of
the Company may have the effect of discouraging certain types of change of
control transactions, including transactions in which the holders of the
shares of Class A Common Stock or the Depository Shares might otherwise
receive a premium for their shares over the then current market price.
POTENTIAL CONFLICTS OF INTEREST
Each of Messrs. Sillerman and Tytel provides services to the Company
through his position as an officer and director of SCMC, a corporation
controlled by Mr. Sillerman. SCMC is obligated to offer the Company any radio
broadcasting opportunities that come to its attention in medium and small
markets located west of the Mississippi River. Messrs. Sillerman and Tytel
have investments in other entities that own and operate radio stations. Mr.
Sillerman is the Executive Chairman of the Board of Directors and controlling
stockholder, and Mr. Tytel is a Director, Executive Vice President and
Secretary, of SFX. These investments (and any similar investments made in the
future) and management responsibilities may give rise to certain conflicts of
interest as well as potential attribution under FCC rules. Specifically, these
investments and management responsibilities may affect the ability of Messrs.
Sillerman and Tytel to provide services to the Company, which could have a
material adverse effect on the Company.
8
<PAGE>
SFX owns certain radio stations in the Wichita, Kansas market, a
market in which the Company has significant radio station ownership interests.
SFX has indicated that it does not intend to pursue acquisitions in the medium
and small markets on which the Company primarily focuses, except for its
stations in Wichita, Kansas. SFX and SCMC entered into an agreement, pursuant
to which SCMC assigned to SFX its rights to receive fees for consulting and
marketing services payable by the Company, except for fees relating to certain
transactions pending at the date of such agreement.
RESTRICTIONS ON FOREIGN OWNERSHIP
The Amended and Restated Certificate of Incorporation of the Company
restricts the ownership, voting and transfer of the Company's capital stock in
accordance with the Communications Act of 1934, as amended (the
"Communications Act"), and the rules of the FCC, to prohibit ownership of more
than 25% of the Company's outstanding capital stock, or more than 25% of the
voting rights it represents, by or for the account of non U.S. citizens or
their representatives or a foreign government or a representative thereof or a
corporation organized under the laws of a foreign country ("Aliens") or
corporations otherwise subject to domination or control by Aliens. In
addition, the Amended and Restated Certificate of Incorporation provides that
shares of capital stock of the Company determined by the Board of Directors to
be owned beneficially by an Alien or an entity directly or indirectly owned by
Aliens in whole or in part shall always be subject to redemption by the
Company by action of the Board of Directors to the extent necessary, in the
judgment of the Board of Directors, to comply with the Alien ownership
restrictions of the Communications Act and the FCC rules and regulations.
The Company has established certain procedures and controls designed
to implement such prohibitions. Specifically, at the time shares of Common
Stock or other capital stock of the Company are presented for transfer, the
Company's transfer agent will inquire as to whether the transfer would result
in Aliens directly or indirectly owning or having the right to vote more than
20% of the Company's outstanding capital stock. If so, the proposed transfer
will not be permitted. This restriction on transfers to Aliens may adversely
affect the market for the Company's securities.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock by existing stockholders pursuant to
Rule 144 promulgated under the Securities Act or otherwise could have an
adverse effect on the market price of the shares of Class A Common Stock and
could impair the Company's ability to raise additional capital through the
sale of equity securities. In addition, the currently outstanding 244,890
shares of Class B Common Stock, 1,444,366 shares of Class D Common Stock and
565,000 shares of Series B Convertible Preferred Stock are "restricted
securities" as that term is defined in Rule 144 promulgated under the
Securities Act. Such shares of Class B Common Stock, Class D Common Stock and
Series B Convertible Preferred Stock may, under certain circumstances, be
converted into shares of Class A Common Stock and sold without registration
pursuant to Rule 144 commencing in July 1997. The holders of all of the issued
and outstanding shares of Class B Common Stock and Class D Common Stock have
agreed not to sell, assign or transfer any of their shares of Common Stock
until March 7, 1997 without the IPO Underwriters' prior written consent.
Furthermore, the Company has issued 120,000 of the 400,000 and none of the
200,000 stock options under its 1995 Stock Option Plan and 1996 Stock Option
Plan, respectively. The Company has agreed to file a registration statement
covering the resale of the shares of Class A Common Stock issuable to the IPO
Underwriters upon the exercise of the IPO Warrants. No prediction can be made
as to the effect, if any, that future sales, or the availability of shares for
future sale, will have on the market price of the Class A Common Stock
prevailing from time to time. Sales of substantial amounts of Class A Common
Stock in the public market, or the perception that such sales could occur,
could adversely affect prevailing market prices for the Class A Common Stock
and could impair the Company's ability to raise capital through an offering of
its equity securities.
9
<PAGE>
THE COMPANY
The Company owns and operates radio stations primarily in medium and
small-sized markets in the Midwest and Western United States. The Company
currently owns and operates, sells advertising on behalf of or provides
programming to 24 FM and 12 AM radio stations in seven markets: Wichita,
Kansas; Lincoln, Nebraska; Omaha, Nebraska; Little Rock, Arkansas; Colorado
Springs, Colorado; Tri-Cities, Washington; and Spokane, Washington. The
principal executive offices of the Company are located at Symphony Towers, 750
B Street, Suite 1920, San Diego, California 92101 and its telephone number is
(619) 239-4242.
USE OF PROCEEDS
The Company will not receive any proceeds from the Class A Common
Stock offered hereby. All of the proceeds of this offering will be received by
the Selling Stockholders. The Company has agreed to bear certain costs
relating to the registration of the Class A Common Stock under the federal and
state securities laws (currently estimated to be $50,000), and of any offering
and sale hereunder, not including certain expenses such as commissions and
discounts of underwriters, dealers and agents.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is incorporated under the laws of the State of Delaware.
Pursuant to the Company's Amended and Restated Certificate of Incorporation,
the Company's authorized capital stock consists of 30,000,000 shares of Class
A Common Stock, 1,689,256 shares of Class B Common Stock, 367,344 shares of
Class C Common Stock, 1,444,366 shares of Class D Common Stock and 4,000,000
shares of preferred stock. The Company has outstanding 3,124,808 shares of
Class A Common Stock, including the 317,344 shares of the 367,344 shares of
Class A Common Stock offered hereby, 244,890 shares of Class B Common Stock,
50,000 shares of Class C Common Stock convertible into Class A Common Stock
offered hereby, 1,444,366 shares of Class D Common Stock, 583,400 shares of 9%
Mandatory Convertible Preferred Stock (represented by 5,834,000 Depositary
Shares) and 565,000 shares of Series B Convertible Preferred Stock. In
addition, the Company has (i) 9,489,256 shares of Class A Common Stock
reserved for issuance upon the conversion of the shares of Class B Common
Stock, Class D Common Stock and the Preferred Stock, (ii) 400,000 shares of
Class A Common Stock reserved for issuance upon the exercise of options
pursuant to the 1995 Stock Option Plan, (iii) 200,000 shares of Class A Common
Stock reserved for issuance upon the exercise of options pursuant to the 1996
Stock Option Plan, (iv) 600,000 shares of Class A Common Stock reserved for
issuance upon the conversion of the Series B Convertible Preferred Stock, (v)
240,000 shares reserved for issuance upon exercise of IPO Warrants, (vi)
1,444,366 shares of Class B Common Stock reserved for issuance upon the
conversion of the shares of Class D Common Stock and (vii) 23,725 shares of
Class A Common Stock reserved for issuance to Southern Skies Corporation upon
the consummation of the purchase of radio stations KMVK-FM and KSSN-FM, each
operating in the Little Rock, Arkansas market from an affiliate of Southern
Skies Corporation (the "Second Southern Skies Acquisition").
The following description of the capital stock of the Company is a
summary and is qualified in its entirety by the Company's Amended and Restated
Certificate of Incorporation and Bylaws, copies of which are filed as exhibits
to the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
Voting Rights. Holders of shares of Class A Common Stock, Class B
Common Stock and Depositary Shares vote as a single class on all matters
submitted to a vote of the stockholders, with each share of Class A Common
Stock entitled to one vote, each share of Class B Common Stock generally
entitled to ten votes and each Depositary Share entitled to 4/5ths of one
vote, except as described below or as otherwise provided by law.
10
<PAGE>
The holders of Class A Common Stock, voting together as a class with
the holders of the Depositary Shares, are entitled to elect or remove two of
the Company's directors. In the event of the death, removal or resignation of
such a Director prior to the expiration of his or her term, such vacancy may
be filled by a majority of the directors then in office, although less than a
quorum. The holders of Class A Common Stock, Depositary Shares and Class B
Common Stock, voting as a single class are entitled to elect or remove the
remaining directors. The holders of Common Stock and Depositary Shares are not
entitled to cumulative votes in the election of directors.
If one or more of Messrs. Feuer, Sillerman or Tytel or Radio
Investors (each a "Principal Stockholder") or any of their affiliates engage
in or agree to participate in a "going private" transaction, any share of
Class B Common Stock held by such person or entity engaging in or agreeing to
participate in such transaction shall be entitled to only one vote per share.
For purposes of this provision, Mr. Feuer is not deemed to be an "affiliate"
of Messrs. Sillerman or Tytel or Radio Investors. Such provision is designed
to decrease the voting power of any Principal Stockholder of the Company
engaging in or participating in a going private transaction.
Except as required by law, the holders of the Class C Common Stock
and the Class D Common Stock have no voting rights.
Under Delaware law, the affirmative vote of the holders of a majority
of the outstanding shares of any class of Common Stock is required to approve,
among other things, a change in the designations, preferences or limitations
of the shares of such class of Common Stock.
Conversion. Each share of Class B Common Stock, Class C Common Stock
and Class D Common Stock automatically converts into one share of Class A
Common Stock upon its sale or other transfer of such holder's entire interest
in such shares to any party other than a Principal Stockholder or any of their
affiliates, subject (as are all conversions of the Company's capital stock) to
compliance with FCC rules and regulations. 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 (i) a
Principal Stockholder or (ii) to an affiliate of the Principal Stockholder
holding such shares, 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 compliance with FCC rules and regulations). Each share of Class D
Common Stock may be converted at any time, subject to compliance with FCC
rules and regulations, at the option of its holder, into one share of Class A
Common Stock. In addition, each share of Class D Common Stock may be
converted, subject to compliance with FCC rules and regulations, at the option
of its holder, into one share of Class B Common Stock in the event that (i)
the Company generates less than $2,000,000 of Broadcast Cash Flow in any
fiscal year ending after December 31, 1996 or (ii) the Company is in default
for borrowed money from an institutional lender and such default has not been
cured or waived by such lender. As used herein, Broadcast Cash Flow is defined
as net revenues less station operating expenses, excluding depreciation,
amortization, interest, taxes and corporate expenses. The shares of Class C
Common Stock which has been converted into the Class A Common Stock offered
hereby are, and the shares of Class B Common Stock, Class C Common Stock and
Class D Common Stock that may be converted into shares of Class A Common Stock
or Class B Common Stock will be, retired and cannot be reissued.
Dividends. Holders of shares of Common Stock are entitled to receive
such dividends as may be declared by the Board of Directors out of funds
legally available for such purpose. In general, in the case of any stock
dividend, holders of Class A Common Stock are entitled to receive the same
percentage dividend (payable in shares of Class A Common Stock) as the holders
of Class B Common Stock (payable in shares of Class B Common Stock), the
holders of Class C Common Stock (payable in shares of Class C Common Stock)
and the holders of Class D Common Stock (payable in shares of Class D Common
Stock). The payment of dividends is limited by the terms of the Preferred
Stock and the Credit Agreement.
Liquidation Rights. Upon liquidation, dissolution or winding-up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets available for distribution after payment in full of creditors and
holders of preferred stock, including the Preferred Stock, as required by the
terms of such preferred stock.
11
<PAGE>
Other Provisions. The holders of Common Stock are not entitled to
preemptive or subscription rights. The shares of Common Stock presently
outstanding are validly issued, fully-paid and nonassessable. In any merger,
consolidation or business combination, the consideration to be received per
share by holders of Class A Common Stock, 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
distributed, such shares may differ as to voting rights to the extent that
voting rights differ among the classes of Common Stock. No class of Common
Stock may be subdivided, consolidated, reclassified or otherwise changed
unless concurrently the other classes of Common Stock are subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation
authorizes the Board of Directors to issue 4,000,000 shares of preferred stock
from time to time in one or more series. The Board of Directors is authorized
to determine, prior to issuing such series of preferred stock and without any
vote or action by the stockholders, the rights, and preferences, privileges
and restrictions of the shares of such series, including dividend rights,
voting terms, terms of redemption, the provisions of any purchase, retirement
or sinking fund to be provided for the shares of any series, conversion and
exchange rights, the preferences upon any distribution of the assets of the
Company, including in the event of voluntary or involuntary liquidation,
dissolution or winding-up of the Company and the preferences and relative
rights among each series of preferred stock.
9% Mandatory Convertible Preferred Stock and Depositary Shares each
representing a 1/10th interest in a share of 9% Mandatory Convertible
Preferred Stock. The holders of the Preferred Stock (and thereby the
Depositary Shares) are entitled to receive, when, as and if dividends are
declared by the Board of Directors, out of funds legally available therefor,
cumulative preferential dividends accruing at the rate per Depositary Share of
$.945 per annum, payable in arrears at the end of each calendar quarter.
Dividends are payable in cash, except that upon conversion or redemption of
the Depositary Shares the accrued dividends may be paid, at the Company's
option, in shares of Class A Common Stock. Conversions or redemptions of the
Depositary Shares or the Preferred Stock are subject to compliance with FCC
rules and regulations. Accumulated unpaid dividends bear interest at a rate of
10.5% per annum. On June 30, 2000 (the "Mandatory Conversion Date"), the
Preferred Stock then outstanding (and thereby the Depositary Shares) will
convert automatically into shares of Class A Common Stock. Upon mandatory
conversion of the Depositary Shares, accrued but unpaid dividends with respect
thereto shall be payable in cash or, at the Company's option, in shares of
Class A Common Stock valued at the then Current Market Price (as defined in
the Certificate of Designations).
On the Mandatory Conversion Date, each of the Depositary Shares will
convert into that number of shares of Class A Common Stock that when
multiplied by the Current Market Price of the Class A Common Stock on the
Mandatory Conversion Date produces a value equal to the initial public
offering price per Depositary Share (the "Mandatory Conversion Rate"), except
that the Mandatory Conversion Rate shall not be greater than 1.15 or less than
.833, subject to adjustment in certain circumstances. The Preferred Stock (and
thereby the Depositary Shares) will be convertible at the option of the
holders, at any time prior to redemption or the Mandatory Conversion Date,
into Class A Common Stock, at a conversion rate of 8.33 shares of Class A
Common Stock per share of Preferred Stock (.833 shares per Depositary Share
(the "Conversion Rate")), which is equivalent to a conversion price of $12.60
per share of Class A Common Stock, subject to adjustment in certain
circumstances. Upon conversion of the Depositary Shares, accrued but unpaid
dividends with respect thereto shall be payable in cash or, at the Company's
option, in shares of Class A Common Stock valued at the then Current Market
Price.
In the event a Change of Control (as defined in the Certificate of
Designations) or a Fundamental Change (as defined in the Certificate of
Designations) occurs when the Current Market Price of the Class A Common Stock
is less than the Conversion Price (as defined in the Certificate of
Designations) then in effect, the Conversion Rate will be increased for a
period of 45 days such that the effective Conversion Price will equal the
Current Market Price of the Class A Common Stock immediately prior to such
occurrence, but in no event will the Conversion Rate be adjusted above 1.5,
subject to adjustment in certain circumstances. The Company may pay cash in
lieu of the Class A Common Stock to be issued resulting from such conversion.
12
<PAGE>
The Preferred Stock (and thereby the Depositary Shares) is not
redeemable by the Company prior to June 30, 1999. At any time or from time to
time on or after June 30, 1999 until the close of business on the last
business day preceding the Mandatory Conversion Date, the Company may redeem,
in whole or in part, the outstanding Preferred Stock (and thereby the
Depositary Shares). Upon any such redemption, the Company shall deliver, with
respect to each share of the Preferred Stock redeemed, that number of shares
of Class A Common Stock equal to the Call Price (as defined in the Certificate
of Designations) in effect on the date of redemption divided by the Current
Market Price of the Class A Common Stock, subject to adjustment in certain
circumstances, together with all accrued and unpaid dividends. Any such
accrued but unpaid dividends shall be payable in cash or, at the Company's
option, in shares of Class A Common Stock valued at the then Current Market
Price.
The holders of the Preferred Stock (and thereby the Depositary
Shares) vote together with the holders of Class A Common Stock, with each
share of the Preferred Stock entitled to eight votes (the equivalent of 4/5 of
a vote per Depositary Share). Whenever dividends on the Preferred Stock shall
be in arrears and unpaid in the aggregate amount of dividends payable thereon
for six quarterly dividend periods, the holders of the Preferred Stock (voting
separately as a class) will be entitled to vote for the election of two
additional directors of the Company, subject to certain limitations.
The Certificate of Designations of the Preferred Stock contains
covenants for the benefit of the holders of the Preferred Stock that, among
other things, restrict the ability of the Company and the subsidiaries to (i)
create encumbrances on the ability of the Company to pay dividends or make
other distributions on the Preferred Stock, (ii) pay two-thirds of the annual
advisory fees to SCMC at any time that the Company's dividend payments on the
Preferred Stock are in arrears, (iii) incur debt or issue capital stock, (iv)
repurchase capital stock or pay dividends on capital stock (other than the
Preferred Stock), (v) engage in transactions with related parties and (vi)
issue capital stock to related parties.
Holders of Depositary Shares may exchange the Depositary Shares for
that number of whole shares of the Preferred Stock represented by such
Depositary Shares. The Preferred Stock is not qualified for inclusion on the
Nasdaq SmallCap Market or any other organized trading market.
Series B Convertible Preferred Stock. The Board of Directors
designated 600,000 shares of preferred stock as Series B Convertible Preferred
Stock, par value $.01 per share. In the event of the liquidation of the
Company, the holders of the Series B Convertible Preferred Stock would share
ratably in the assets of the Company, to the extent of the par value of each
share of the Series B Convertible Preferred Stock, before the holders of the
Common Stock. The Preferred Stock ranks senior to the Series A Convertible
Preferred Stock and the Series B Convertible Preferred Stock in right of
payment with respect to dividends and upon liquidation, dissolution or
winding-up of the Company. The Series B Convertible Preferred Stock contains
no voting or dividend rights and there is no sinking fund for the benefit of
the holders of the Series B Convertible Preferred Stock.
On February 8, 1996, the Company issued an aggregate of 565,000
shares of Series B Convertible Preferred Stock pursuant to a compensation plan
to Radio Investors, Radio Analysis and Messrs. Feuer, Miller and Ciapura.
Subject to required FCC consents, if the market price of Class A Common Stock
is greater than or equal to $14.00 per share for 20 consecutive trading days
prior to December 31, 1998, one-half of the Series B Convertible Preferred
Stock held by each holder thereof will be convertible into an equal number of
shares of Class A Common Stock. If the market price is not greater than or
equal to $14.00 per share for such 20 consecutive trading days, such shares
will become redeemable by the Company for $.01 per share. If the market price
of the Class A Common Stock is greater than or equal to $15.00 per share for
20 consecutive trading days prior to December 31, 1999, any remaining shares
of Series B Convertible Preferred Stock not yet subject to redemption will be
convertible into an equal number of shares of Class A Common Stock. If the
market price is not greater than or equal to $15.00 per share for such 20
consecutive trading days, such shares will become redeemable by the Company
for $.01 per share. The Series B Convertible Preferred Stock vests over a five
year period beginning one year from the date of issuance.
13
<PAGE>
The ability of the Board of Directors of the Company to issue
preferred stock, while providing flexibility in connection with acquisitions
and other corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, a majority of the outstanding voting stock of the Company. The
Company has no current plans to issue any additional preferred stock.
TRANSFER AGENT
The Transfer Agent and Registrar for the Class A Common Stock is
Chemical Mellon Shareholder Services L.L.C.
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND STATUTE
Directors' Liability. Under the General Corporation Law of the State
of Delaware (the "Delaware Law"), directors of a Delaware corporation can
generally be held liable for certain acts and omissions in connection with the
performance of their duties to the corporation and its stockholders. As
permitted by Delaware Law, however, the Amended and Restated Certificate of
Incorporation contains provisions eliminating or limiting the personal
liability of directors for monetary damages for breaches of duties to the
Company and its stockholders. Such provisions do not, however, eliminate
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases and (iv) for any transaction from which the director derives an
improper personal benefit. In addition, the Amended and Restated Certificate
of Incorporation provides that if the Delaware Law is amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of the directors shall be eliminated or limited to the fullest
extent permitted by the Delaware Law, as so amended. The effect of this
provision is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care
as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(iv) above. This provision, which may not be amended or modified to increase
the liability of a director, or repealed except upon the affirmative vote of
75% or more of the outstanding shares of Common Stock, does not limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care.
Directors' Indemnification. The Amended and Restated Certificate of
Incorporation provides that the Company shall indemnify its directors,
officers and employees to the fullest extent permitted by Delaware Law and
advance expenses to such directors, officers and employees to defend any
action for which rights of indemnification are provided. The Company believes
that this provision will assist the Company in attracting and retaining
qualified individuals to serve as directors, officers and employees.
Section 203 of Delaware Law. The Company is subject to the "business
combination" statute of the Delaware Law. In general, Section 203 of the
Delaware Law prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
"interested stockholder," unless (i) prior to such date the board of directors
of the corporation approved either the "business combination" or the
transaction which resulted in the stockholder becoming an "interested
stockholder," (ii) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested stockholder"
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (a) by persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(iii) at or subsequent to such time the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3 % of the outstanding
voting stock which is not owned by the "interested stockholder." A "business
combination" includes mergers, stock or asset sales and other transactions
resulting in a financial benefit to the "interested
14
<PAGE>
stockholder." An "interested stockholder" is a person (other than the
corporation and any direct or indirect majority-owned subsidiary of that
corporation) who, together with affiliates and associates, owns (or within
three years, did own) 15% or more of the corporation's voting stock.
FOREIGN OWNERSHIP
The Amended and Restated Certificate of Incorporation restricts the
ownership, voting and transfer of the Company's capital stock, in accordance
with the Communications Act and the rules of the FCC, which prohibit the
ownership of more than 25% of the Company's outstanding capital stock, or more
than 25% of the voting power of its outstanding capital stock which is
entitled to vote (such percentage, however, is 20% in the case of those
subsidiaries that are direct holders of FCC licenses), by or for the account
of Aliens or corporations otherwise subject to domination or control by
Aliens. In addition, the Amended and Restated Certificate of Incorporation
provides that shares of capital stock of the Company determined by the Board
of Directors to be owned beneficially by an Alien or entity directly or
indirectly owned by Aliens in whole or in part shall always be subject to
redemption by the Company by action of the Board of Directors to the extent
necessary, in the judgment of the Board of Directors, to comply with the alien
ownership restrictions of the Communications Act and the FCC rules and
regulations. The Amended and Restated Certificate of Incorporation authorizes
the Board of Directors of the Company to adopt such provisions as it deems
necessary to enforce these prohibitions. The Company has established certain
procedures and controls designed to implement the aforesaid prohibitions.
Specifically, at the time shares of Common Stock, Depositary Shares or any
other equity securities of the Company are presented for transfer, the
Company's transfer agent will inquire as to whether the transfer would result
in Aliens directly or indirectly owning or having the right to vote more than
20% of the Company's outstanding capital stock. If so, the proposed transfer
will not be permitted.
IPO UNDERWRITERS' WARRANTS
The Company sold to the IPO Underwriters, for nominal consideration,
the IPO Warrants to purchase up to an aggregate of 240,000 shares of Class A
Common Stock. The IPO Warrants are exercisable during the three-year period
commencing on September 7, 1997 at an exercise price equal to $7.425, subject
to adjustment in certain events, and are not transferable except to officers
of the IPO Underwriters or to members of the selling group. The IPO Warrants
also contain a cashless exercise provision. The Company has agreed to register
the Class A Common Stock issuable upon exercise of the IPO Warrants, under the
Securities Act on one occasion during the four-year period commencing
September 7, 1997 upon request of the holders of a majority of the IPO
Warrants, such registration to be at the Company's expense. The Company has
also granted certain "piggyback" registration rights to the holders of the IPO
Warrants.
If the IPO Warrants are exercised, the value of the Class A Common
Stock held by public investors will be diluted if the value of such stock
immediately prior to the exercise of such IPO Warrants exceeds the exercise
price thereof, with the extent of such dilution depending upon such excess.
The IPO Warrants afford the holders thereof the opportunity, at nominal cost,
to profit from a rise in the market price of the Class A Common Stock, which
may adversely affect the terms upon which the Company could issue additional
Class A Common Stock during the term thereof.
15
<PAGE>
PLAN OF DISTRIBUTION
Each of the Selling Stockholders may offer and sell from time to time
shares of Class A Common Stock directly or through broker-dealers or
underwriters who may act solely as agents, or who may acquire shares as
principals. The distribution of the shares may be effected in one or more
transactions that may take place through the Nasdaq Small Cap Market or any
national securities exchange on which the Class A Common Stock is approved for
listing in the future, including block trades or ordinary broker's
transactions, or through privately negotiated transactions, or through an
underwritten public offering, or in accordance with Rule 144 under the
Securities Act, through a combination of any such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling
Stockholders in connection with such sales. Although the Company ultimately
expects that all shares may be sold, the actual number of shares that will be
sold cannot be determined.
Each Selling Stockholder and any other person participating in the
sale of shares of Class A Common Stock will be subject to applicable
provisions of the Exchange Act and the rules and regulation thereunder,
including, without limitation, Rules 10b-2, 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales by each Selling Stockholder and
any other such person. Furthermore, under 10b-6 under the Exchange Act, any
person engaged in a distribution of the Class A Common Stock may not
simultaneously engage in market making activities with respect to such
securities for a period of two business days prior to the commencement of such
distribution. All of the foregoing may affect the marketability of the
securities offered hereby.
The aggregate proceeds to the Selling Stockholders from the sale of
the Class A Common Stock will be the purchase price of the Class A Common
Stock sold less the aggregate agents' commissions and underwriters' discounts,
if any, and other expenses of issuance and distribution not borne by the
Company. The Selling Stockholders and any dealers or agents that participate
in the distributions of the Class A Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the Class A Common Stock by them and any commissions received by any
such dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.
The Selling Stockholders may effect transactions by selling the Class
A Common Stock directly or through broker-dealers acting either as principal
or as agent, and such broker-dealers may receive compensation in the form of
usual and customary or specifically negotiated underwriting discounts,
concessions or commissions from the Selling Stockholders.
To comply with the securities laws of certain jurisdictions, the
securities offered hereby will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities offered hereby may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied
with.
To the extent required, the specific shares of the Class A Common
Stock to be sold, the names of the Selling Stockholders, purchase price,
public offering price, the names of any such agent, dealer or underwriter and
any applicable commission or discount with respect to a particular offering
will be set forth in an accompanying Prospectus Supplement.
Pursuant to the Subscription Agreements (as defined below), the
Company will pay all of the expenses, estimated to be $50,000 in connection
with this offering, other than underwriting discounts and commissions, legal
fees and expenses of the Selling Stockholders which shall be borne by them.
In addition, the Subscription Agreements and the Purchase Agreement
(as defined below) provide that the Company has agreed to indemnify each of
the Selling Stockholders against certain liabilities, including liabilities
under the Securities Act, and the Subscription Agreements further provide that
the Company will reimburse the Selling Stockholder for payments made by such
Selling Stockholder in respect thereof.
16
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders
and the number of shares of Class A Common Stock or Class C Common Stock of
the Company beneficially owned on December 31, 1996 (or January 9, 1997 in the
case of Southern Skies Corporation), by such Selling Stockholders. All shares
are beneficially owned and the sole voting power and investment power is held
by the person or entity named.
Except for Southern Skies Corporation, all of the Selling
Stockholders obtained shares of Class C Common Stock pursuant to Subscription
Agreements effective as of May 1, 1995 (collectively, the "Subscription
Agreements") which provide that the Company shall prepare and file with the
Commission a registration statement covering the resale of the Class A Common
Stock issued upon conversion of the Class C Common Stock and shall use its
best efforts to cause such registration statement to become effective as soon
as practically possible. Southern Skies Corporation obtained shares of Class A
Common Stock on January 9, 1997 as a portion of the purchase price paid to it
upon the consummation of the Purchase Agreement entered into by the Company
and Southern Skies Corporation on February 8, 1996, as amended (the "Purchase
Agreement"). The Purchase Agreement provides that the Company shall prepare
and file with the Commission a registration statement covering the resale of
the Class A Common Stock issued to Southern Skies Corporation no later than
January 29, 1997 and shall use its best efforts to have such registration
statement declared effective as soon as reasonably practicable after such
filing and shall use commercially reasonable efforts to keep such registration
statement continuously effective for the period of two years thereafter.
<TABLE>
<CAPTION>
Number of Shares of Percentage of
Class A Common Class A
Stock Beneficially Common Stock
Owned on December to be
Name 31, 1996 Beneficially Owned
- ---- ------------------- ------------------
<S> <C> <C>
Henilia Financial Limited.......................................... 267,344 8.42%
First Rock Trustees Limited as Trustee for the Mair Trust.......... 50,000 1.57%
Ellis French....................................................... 18,750* +
Jeffrey Zimmerman.................................................. 18,750* +
Henry A. Leonard & Co. Inc.
Employees Pension Trust....................................... 6,250* +
Richard Tauber..................................................... 6,250* +
Southern Skies Corporation ........................................ 22,464** +
</TABLE>
- ---------------------
* Represents shares of Class C Common Stock which will
automatically convert into Class A Common Stock upon transfer.
** Represents shares of Class A Common Stock obtained on January
9, 1997.
+ Less than one percent of the Class A Common Stock outstandings
upon completion of this offering.
The Selling Stockholders may sell up to all of the shares of Class A
Common Stock shown above pursuant to this Prospectus in one or more
transactions from time to time as described under the section "Plan of
Distribution". Since the Selling Stockholders may sell all, some or none of
their shares, no estimate can be made of the aggregate number of shares of
Class A Common Stock that are to be offered hereby or that will be owned by
each Selling Stockholder upon completion of the offering to which this
Prospectus relates. If, however, each of the Selling Stockholders were to sell
all of the shares of Class A Common Stock set forth above, each Selling
Stockholder would beneficially own less than one percent of the Class A Common
Stock.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Baker & McKenzie, New York, New York, counsel to the Company.
Howard J. Tytel, who is Executive Vice President, General Counsel and a
Director of and holds an equity interest in SCMC, and is an executive officer
of, and holds an equity interest in, Radio Investors which holds certain
securities of the Company, including the Class D Common Stock that upon
certain circumstances are convertible into a controlling interest in the
Company, is of counsel to Baker & McKenzie.
17
<PAGE>
EXPERTS
The consolidated financial statements of Triathlon Broadcasting
Company as of March 31, 1996 and for the year then ended; the financial
statements of Marathon Broadcasting Corporation as of June 30, 1995 and for
the six months ended June 30, 1995; the financial statements of 93.3, Inc. as
of December 31, 1995 and for the two years in the period ended December 31,
1995; the financial statements of Rock Steady, Inc. as of September 30, 1995
and for the two years in the period ended September 30, 1995; the financial
statements of Valley Broadcasting, Inc. as of December 31, 1995 and for the
two years in the period ended December 31, 1995; the financial statements of
KOLL-FM (a division of Southern Starr of Arkansas, Inc.) as of December 31,
1995 and for the period from March 27, 1995 to December 31, 1995; the
statements of operations of KOLL-FM (a division of Southern Starr Broadcasting
Group, Inc.) for the year ended December 31, 1994 and the period from January
1, 1995 to March 26, 1995; and the combined financial statements of KAQQ-AM,
KISC-FM and KNFR-FM (divisions of Silverado Broadcasting Company, Inc.) as of
December 31, 1995 and for the two years in the period ended December 31, 1995,
incorporated by reference herein, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports with respect thereto, and
are incorporated by reference herein in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
The financial statements of KFH/KXLK (a division of Pourtales Radio
Partnership) as of December 31, 1994 and for the periods from July 1, 1994
through December 31, 1994 and January 1, 1995 through September 12, 1995; the
combined financial statements of KZKX-FM, Inc., KTGL Corporation, and KZKX and
KTGL (divisions of Pourtales Radio Partnership) as of December 31, 1995 and
1994 and for the years then ended; and the combined financial statements of
Springs Radio, Inc., KVUU/KSSS, Inc., KOTY-FM, Inc., KEYF Corporation, Fourth
Street Broadcasting, Inc., and KTCR/KEGX, KEYF, KUDY/KKZX and KEYN (divisions
of Pourtales Radio Partnership) as of December 31, 1995 and 1994 and for the
years then ended incorporated by reference herein have been audited by
Deloitte & Touche LLP, independent auditors, as set forth in their reports
with respect thereto, and are incorporated by reference herein in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The combined financial statements of Southern Skies Corporation and
Arkansas Skies Corporation as of December 31, 1995 and for each of the years
ended December 31, 1994, and 1995 incorporated by reference herein have been
audited by KPMG Peat Marwick LLP, independent auditors, as set forth in their
report with respect thereto, and are incorporated by reference herein in
reliance upon such report given upon the authority of said firm as experts in
accounting and auditing.
The financial statements of KFAB-AM, KGOR-FM and Business Music
Service (divisions of Henry Broadcasting Company) for the years ended December
31, 1994 and 1995 incorporated by reference herein have been audited by
Miller, Kaplan, Arase & Co., independent auditors, as set forth in their
report with respect thereto, and are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
18
<PAGE>
TRIATHLON BROADCASTING COMPANY
[LOGO]
389,808 SHARES
OF
CLASS A COMMON STOCK
--------------------
PROSPECTUS
--------------------
FEBRUARY 13, 1997
