PROSPECTUS Filed pursuant to Rule 424(b)(3)
Registration number 333-65278
[LOGO RADIO ONE, INC.]
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We are offering to exchange:
up to $300,000,000 of our new 8 7/8% Senior Subordinated Notes
due 2011, series B
for
a like amount of our outstanding 8 7/8% Senior Subordinated Notes due 2011.
Material Terms of Exchange Offer
. There is no existing public market for the outstanding notes or the
exchange notes. We do not intend to list the exchange notes on any
securities exchange or seek approval for quotation through any automated
trading system.
. Expires 5:00 p.m., New York City time, November 9, 2001, unless extended.
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For a discussion of certain factors that you should consider before
participating in this exchange offer, see "Risk Factors" beginning on page 7
of this prospectus.
Neither the SEC nor any state securities commission has approved the notes
to be distributed in the exchange offer, nor have any of these organizations
determined that this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
October 10, 2001
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TABLE OF CONTENTS
Page
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Prospectus Summary......................................................... 1
Cautionary Note Regarding Forward-Looking Statements....................... 6
Risk Factors............................................................... 7
Exchange Offer; Registration Rights........................................ 15
Use of Proceeds............................................................ 22
Capitalization............................................................. 23
Selected Historical Consolidated Financial Data............................ 24
Description of Indebtedness................................................ 25
Description of Notes....................................................... 27
Certain U.S. Federal Income Tax Considerations............................. 68
Plan of Distribution....................................................... 72
Legal Matters.............................................................. 72
Independent Public Accountants............................................. 73
Incorporation by Reference................................................. 73
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We have not authorized anyone to give any information or represent anything
to you other than the information contained in this prospectus or to which we
have referred you. You must not rely on any unauthorized information or
representations.
The market data incorporated by reference into this prospectus, including
information relating to our relative position in the industry, is based on
internal surveys, market research, publicly available information and industry
publications. Although we believe that such independent sources are reliable,
we have not independently verified the information contained in them, and we
cannot guarantee the accuracy or completeness of this information.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference into this prospectus. This summary does not contain all of the
information that you should consider before you make an investment decision.
You should carefully read this entire prospectus, including the "Risk Factors"
section, and the documents we have referred you to, including the documents
incorporated herein by reference, before making your investment decision.
RADIO ONE, INC.
Radio One was founded in 1980 and is one of the largest radio broadcasting
companies in the United States. We are also the largest radio broadcasting
company in the United States primarily targeting African-Americans.
Our strategy is to expand within our existing markets and into new markets
that have a significant African-American presence. We believe radio
broadcasting primarily targeting African-Americans has significant growth
potential. We also believe that we have a competitive advantage in the African-
American market and the radio industry in general, due to our primary focus on
urban formats, our skill in programming and marketing these formats, and our
turnaround expertise.
Radio One is led by our Chairperson and co-founder, Catherine L. Hughes, and
her son, Alfred C. Liggins, III, our Chief Executive Officer and President, who
together have over 40 years of operating experience in radio broadcasting. Ms.
Hughes, Mr. Liggins and our strong management team have successfully executed a
strategy of acquiring and turning around underperforming radio stations.
Our principal executive offices are located at 5900 Princess Garden Parkway,
7th Floor, Lanham, Maryland 20706 and our telephone number is (301) 306-1111.
For a description of our business, please see our Amended Annual Report on
Form 10-K/A for the year ended December 31, 2000, which is incorporated by
reference into this prospectus. The description of our business contained in
our Amended Annual Report on Form 10-K/A for the year ended December 31, 2000,
has been and will be updated and superseded by later filings we make with the
SEC that are incorporated by reference into this prospectus.
Summary of the Exchange Offer
The Initial Offering of
Outstanding Notes.......
We sold the outstanding notes on May 18, 2001 to Banc
of America Securities LLC, Credit Suisse First Boston
Corporation, Deutsche Bank Alex. Brown Inc., Blaylock
& Partners, L.P., First Union Securities, Inc.,
Morgan Stanley & Co. Incorporated and TD Securities
(USA) Inc. We collectively refer to those parties in
this prospectus as the "initial purchasers." The
initial purchasers subsequently resold the
outstanding notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of
1933, as amended.
Registration Rights In connection with the initial sale of the
Agreement............... outstanding notes, we entered into a registration
rights agreement for the exchange offer. In the
registration rights agreement, we agreed, among other
things, to use our reasonable best efforts to file a
registration statement with the SEC and to complete
this exchange offer within 150 days of issuing the
outstanding notes. The exchange offer is intended to
satisfy your rights under the registration rights
agreement. After the exchange offer is complete, you
will no longer be entitled to any exchange or
registration rights with respect to your outstanding
notes.
The Exchange Offer...... We are offering to exchange the exchange notes, which
have been registered under the Securities Act for
your outstanding notes, which were issued on May 18,
2001 in the initial offering. In order to be
exchanged, an outstanding note must be properly
tendered and accepted. All outstanding notes that are
validly tendered and not validly withdrawn will be
exchanged. We will issue exchange notes promptly
after the expiration of the exchange offer.
Resales................. We believe that the exchange notes issued in the
exchange offer may be offered for resale, resold and
otherwise transferred by you without compliance with
the registration and prospectus delivery provisions
of the Securities Act provided that:
. the exchange notes are being acquired in the
ordinary course of your business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the exchange notes issued to
you in the exchange offer; and
. you are not an affiliate of ours.
If any of these conditions are not satisfied and you
transfer any exchange notes issued to you in the
exchange offer without delivering a prospectus
meeting the requirements of the Securities Act or
without an exemption from registration of your
exchange notes from these requirements, you may incur
liability under the Securities Act. We will not
assume, nor will we indemnify you against, any such
liability.
Each broker-dealer that is issued exchange notes in
the exchange offer for its own account in exchange
for outstanding notes that were acquired
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by that broker-dealer as a result of market-making or
other trading activities, must acknowledge that it
will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of
the exchange notes. A broker-dealer may use this
prospectus for an offer to resell, resale or other
retransfer of the exchange notes issued to it in the
exchange offer.
Record Date............. We mailed this prospectus and the related exchange
offer documents to registered holders of outstanding
notes on October 10, 2001.
Expiration Date......... The exchange offer will expire at 5:00 p.m., New York
City time, November 9, 2001, unless we decide to
extend the expiration date.
Conditions to the
Exchange Offer..........
The exchange offer is not subject to any condition
other than that the exchange offer not violate
applicable law or any applicable interpretation of
the staff of the SEC.
Procedures for
Tendering Outstanding
Notes................... We issued the outstanding notes as global securities.
When the outstanding notes were issued, we deposited
the global notes representing the outstanding notes
with The Bank of New York (formerly United States
Trust Company of New York), as custodian for The
Depository Trust Company, known as DTC, as book-entry
depositary. DTC issued a certificateless depositary
interest in each global note we deposited with it,
which represents a 100% interest in the outstanding
notes. Beneficial interests in the outstanding notes,
which are held by direct or indirect participants in
DTC through the certificateless depositary interest,
are shown on records maintained in book-entry form by
DTC.
You may tender your outstanding notes through book-
entry transfer in accordance with DTC's Automated
Tender Offer Program, known as ATOP. To tender your
outstanding notes by a means other than book-entry
transfer, a letter of transmittal must be completed
and signed according to the instructions contained in
the letter. The letter of transmittal and any other
documents required by the letter of transmittal must
be delivered to the exchange agent by mail,
facsimile, hand delivery or overnight carrier. In
addition, you must deliver the outstanding notes to
the exchange agent or comply with the procedures for
guaranteed delivery. See "Exchange Offer;
Registration Rights--Procedures for Tendering
Outstanding Notes" for more information.
Do not send letters of transmittal and certificates
representing outstanding notes to us. Send these
documents only to the exchange agent. See "Exchange
Offer; Registration Rights--Exchange Agent" for more
information.
Special Procedures for
Beneficial Owners.......
If you are the beneficial owner of book-entry
interests and your name does not appear on a security
position listing of DTC as the holder of the book-
entry interests or if you are a beneficial owner of
outstanding notes
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that are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to tender the book-entry interest or
outstanding notes in the exchange offer, you should
contact the person in whose name your book-entry
interests or outstanding notes are registered
promptly and instruct that person to tender on your
behalf.
Withdrawal Rights....... You may withdraw the tender of your outstanding notes
at any time prior to 5:00 p.m., New York City time on
November 9, 2001.
Federal Income Tax
Considerations..........
The exchange of outstanding notes will not be a
taxable event for United States federal income tax
purposes.
Use of Proceeds......... We will not receive any proceeds from the issuance of
exchange notes pursuant to the exchange offer. We
will pay all of our expenses incident to the exchange
offer.
Exchange Agent.......... The Bank of New York (formerly United States Trust
Company of New York) is serving as the exchange agent
in connection with the exchange offer.
Summary of Terms of the Exchange Notes
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes, except that the exchange notes will be registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damage provisions contained in the outstanding notes. The exchange
notes represent the same debt as the outstanding notes. Both the outstanding
notes and the exchange notes are governed by the same indenture. We use the
term "Notes" in this prospectus to collectively refer to the outstanding notes
and the exchange notes.
Issuer.................. Radio One, Inc.
Securities Offered...... $300.0 million in principal amount of 8 7/8% Senior
Subordinated Notes due 2011, series B.
Maturity................ July 1, 2011.
Interest................ Annual rate: 8 7/8%. Payment frequency: every six
months on January 1 and July 1. First payment:
January 1, 2002.
Ranking................. The exchange notes and the guarantees are senior
subordinated obligations. Accordingly, they will
rank:
. behind all of our and our guarantors' existing
and future senior debt;
. equally with all of our and our guarantors'
existing and future unsecured senior
subordinated obligations that do not expressly
provide that they are subordinated to the
Notes; and
. ahead of any of our and our guarantors' future
debt that expressly provides that it is
subordinated to the Notes.
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Assuming we had completed the transactions described
under "Capitalization", as of June 30, 2001, the
Notes would have been subordinated to approximately
$531.5 million of senior debt. No debt of ours having
an equal ranking with the Notes and the guarantees or
which is subordinate to the Notes and the guarantees
was outstanding as of June 30, 2001.
Guarantees.............. The exchange notes will be unconditionally guaranteed
on a senior subordinated basis by each of our
existing and future domestic restricted subsidiaries.
If we cannot make payments on the Notes when they are
due, our guarantors must make them instead.
Optional Redemption..... On or after July 1, 2006, we may redeem some or all
of the Notes at any time at the redemption prices
listed under "Description of Notes--Optional
Redemption."
Prior to July 1, 2004, we may redeem up to 35% of the
Notes with the proceeds of qualified equity offerings
at the redemption price listed under "Description of
Notes--Optional Redemption."
Mandatory Offer to If we sell certain assets or experience specific
Repurchase.............. kinds of changes in control, we must offer to
repurchase the Notes at the prices listed under
"Description of Notes--Repurchase at the Option of
Holders."
Certain Covenants....... The Indenture governing the Notes will, among other
things, restrict our ability and the ability of our
subsidiaries to:
. incur or guarantee additional indebtedness;
. pay dividends or distributions on, or redeem
or repurchase, capital stock;
. make investments;
. issue or sell capital stock of subsidiaries;
. engage in transactions with affiliates;
. incur liens;
. transfer or sell assets; and
. consolidate, merge or transfer all or
substantially all of our assets.
The Indenture under which the outstanding notes were
issued will govern the exchange notes.
For more details, see "Description of Notes."
You should refer to "Risk Factors" for an explanation of certain risks of
investing in the Notes.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in this prospectus by
reference contain forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are not historical facts, but rather are based
on our current expectations, estimates and projections about Radio One's
industry, our beliefs and assumptions. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
are intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. These risks
and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We undertake no obligation to publicly update or revise any
forward-looking statements because of new information, future events or
otherwise. In light of these risks and uncertainties, the forward-looking
events and circumstances discussed in this prospectus might not transpire.
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RISK FACTORS
Before you participate in the exchange offer, you should carefully consider
the following factors in addition to the other information contained in this
prospectus.
Risks Associated with the Exchange Offer
Because there is no public market for the Notes, you may not be able to resell
your Notes.
The exchange notes will be registered under the Securities Act, but will
constitute a new issue of securities with no established trading market, and
there can be no assurance as to:
. the liquidity of any trading market that may develop;
. the ability of holders to sell their exchange notes; or
. the price at which the holders would be able to sell their exchange
notes.
If a trading market were to develop, the exchange notes might trade at
higher or lower prices than their principal amount or purchase price, depending
on many factors, including prevailing interest rates, the market for similar
debentures and our financial performance.
We understand that the initial purchasers presently intend to make a market
in the Notes. However, they are not obligated to do so, and any market-making
activity with respect to the notes may be discontinued at any time without
notice. In addition, any market-making activity will be subject to the limits
imposed by the Securities Act and the Securities Exchange Act of 1934, and may
be limited during the exchange offer or the pendency of an applicable shelf
registration statement. There can be no assurance that an active trading market
will exist for the notes or that any trading market that does develop will be
liquid.
In addition, any outstanding note holder who tenders in the exchange offer
for the purpose of participating in a distribution of the exchange notes may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. For a description of
these requirements, see "Exchange Offer; Registration Rights."
Your outstanding notes will not be accepted for exchange if you fail to follow
the exchange offer procedures.
We will not accept your outstanding notes for exchange if you do not follow
the exchange offer procedures. We will issue exchange notes as part of this
exchange offer only after a timely receipt of your outstanding notes, a
properly completed and duly executed letter of transmittal and all other
required documents. Therefore, if you want to tender your outstanding notes,
please allow sufficient time to ensure timely delivery. If we do not receive
your outstanding notes, letter of transmittal and other required documents by
the expiration date of the exchange offer, we will not accept your outstanding
notes for exchange. We are under no duty to give notification of defects or
irregularities with respect to the tenders of outstanding notes for exchange.
If there are defects or irregularities with respect to your tender of
outstanding notes, we will not accept your outstanding notes for exchange.
If you do not exchange our outstanding notes, your outstanding notes will
continue to be subject to the existing transfer restrictions, and you may not
be able to sell your outstanding notes.
We did not register the outstanding notes, nor do we intend to do so
following the exchange offer. Outstanding notes that are not tendered will
therefore continue to be subject to the existing transfer restrictions and may
be transferred only in limited circumstances under the securities laws. If you
do not exchange your outstanding notes, you will lose your right to have your
outstanding notes registered under the federal securities laws. As a result, if
you hold outstanding notes after the exchange offer, you may not be able to
sell your outstanding notes.
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Risks Related to the Notes
Substantial Leverage--Our substantial indebtedness could adversely affect our
financial position and prevent us from fulfilling our obligations under the
Notes.
We have a significant amount of indebtedness. The data set forth below
reflects our indebtedness as of June 30, 2001 on a pro forma basis (dollars in
millions):
Total indebtedness................................................. $ 831.5
Stockholders' equity............................................... 1,093.1
--------
Total capitalization............................................... $1,924.6
========
Debt to total capitalization ratio................................. 43.2%
Pursuant to the covenants of our bank credit facility we would be permitted
to incur an additional $22.1 million of indebtedness.
Our substantial indebtedness could have important consequences to you. For
example, it could:
. limit our ability to borrow additional amounts for working capital,
capital expenditures, acquisitions, debt service requirements, execution
of our growth strategy or other purposes;
. require us to dedicate a substantial portion of our cash flow to pay
principal and interest on our debt, which will reduce the funds
available for working capital, capital expenditures, acquisitions and
other general corporate purposes;
. limit our flexibility in planning for and reacting to changes in our
business and our industry that could make us more vulnerable to adverse
changes in general economic, industry and competitive conditions and
adverse changes in government regulation; and
. place us at a disadvantage compared to our competitors that have less
debt.
Any of the above listed factors could materially adversely affect us. See
"Description of Notes--Repurchase at Option of Holders--Change of Control" and
"Description of Indebtedness."
Ability to Service Debt--To service our indebtedness, we will require a
significant amount of cash. Our ability to generate cash depends on many
factors beyond our control.
Our ability to pay the principal of and interest on the Notes, to service
our other debt and to finance indebtedness when necessary depends on our
financial and operating performance, each of which is subject to prevailing
economic conditions and to financial, business, legislative and regulatory
factors and other factors beyond our control.
We cannot assure you that we will generate sufficient cash flow from
operations or that we will be able to obtain sufficient funding to satisfy all
of our obligations, including the Notes. If we are unable to pay our debts, we
will be required to pursue one or more alternative strategies, such as selling
assets, refinancing or restructuring our indebtedness or selling additional
debt or equity securities. In addition, the ability to borrow funds under our
bank credit facility in the future will depend on our meeting the financial
covenants in the agreements governing this facility, including a minimum
interest coverage test and a maximum leverage ratio test. We cannot assure you
that our business will generate cash flow from operations or that future
borrowings will be available to us under our bank credit facility, in an amount
sufficient to enable us to pay our debt or to fund other liquidity needs. As a
result, we may need to refinance all or a portion of our debt on or before
maturity. However, we cannot assure you that any alternative strategies will be
feasible at the time or prove adequate. Also, some alternative strategies will
require the consent of our lenders before we engage in those strategies. See
"Description of Notes" and "Description of Indebtedness."
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Subordination--Your right to receive payment on the Notes and the guarantees is
junior to all of our and the guarantors' senior debt.
The Notes are general unsecured obligations, junior in right of payment to
all of our existing and future senior debt and that of each guarantor,
including obligations under our bank credit facility. The Notes are not secured
by any of our or the guarantors' assets, and as such will be effectively
subordinated to any secured debt that we or the guarantors have now, including
all of the borrowings under our credit facilities, or may incur in the future
to the extent of the value of the assets securing that debt.
In the event that Radio One or a guarantor is declared bankrupt, becomes
insolvent or is liquidated or reorganized, any debt that ranks ahead of the
Notes and the guarantees will be entitled to be paid in full from our assets or
the assets of the guarantors, as applicable, before any payment may be made
with respect to the Notes or the affected guarantees. In any of the foregoing
events, we cannot assure you that we would have sufficient assets to pay
amounts due on the Notes. As a result, holders of the Notes may receive less,
proportionally, than the holders of debt senior to the Notes and the
guarantees. The subordination provisions of the Indenture governing the Notes
also provide that we can make no payment to you during the continuance of
payment defaults on our senior debt, and payments to you may be suspended for a
period of up to 180 days if a nonpayment default exists under our senior debt.
See "Description of the Notes--Subordination."
As of June 30, 2001, on a pro forma basis, the Notes and the guarantees were
ranked junior to $531.5 million of senior debt. In addition, the Indenture
governing the Notes and the credit agreement governing our bank credit facility
permit, subject to specified limitations, the incurrence of additional debt,
some or all of which may be senior debt. See "Description of Notes--Certain
Covenants" and "Description of Indebtedness."
Restrictive Covenants--The Indenture for the Notes and the credit agreement
governing our bank credit facility contain various covenants that limit our
management's discretion in the operations of our business.
The Indenture governing the Notes and the credit agreement governing our
bank credit facility contain various provisions that limit our management's
discretion by restricting our ability to:
. incur additional debt and issue preferred stock;
. pay dividends and make other distributions;
. make investments and other restricted payments;
. create liens;
. sell assets; and
. enter into certain transactions with affiliates.
These restrictions on our management's ability to operate our business in
accordance with its discretion could have a material adverse effect on our
business.
In addition, our bank credit facility requires that we maintain specific
financial ratios. Events beyond our control could affect our ability to meet
those financial ratios, and we cannot assure you that we will meet them.
If we default under any financing agreements, our lenders could:
. elect to declare all amounts borrowed to be immediately due and payable,
together with accrued and unpaid interest; and/or
. terminate their commitments, if any, to make further extensions of
credit.
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If we are unable to pay our obligations to our senior secured lenders, they
could proceed against any or all of the collateral securing our indebtedness to
them. The collateral under our bank credit facility consists of substantially
all of our existing assets. In addition, a breach of certain of these
restrictions or covenants, or an acceleration by our senior secured lenders of
our obligations to them, would cause a default under the Notes. We may not
have, or be able to obtain, sufficient funds to make accelerated payments,
including payments on the Notes, or to repay the Notes in full after we pay our
senior secured lenders to the extent of their collateral. See "Description of
Indebtedness" and "Description of Notes."
Fraudulent Conveyance Matters--Federal and state statutes allow courts, under
specific circumstances, to void guarantees, subordinate claims in respect of
the Notes and require our Noteholders to return payments received from
guarantors.
Under federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee could be voided, or claims in respect of the Notes
or a guarantee could be subordinated to all of our other debts or all other
debts of a guarantor if, among other things, we or the guarantor was insolvent
or rendered insolvent by reason of such incurrence, or we or the guarantor were
engaged in a business or transaction for which our or the guarantors' remaining
assets constituted unreasonably small capital, or we or the guarantor intended
to incur or believed that we or it would incur, debts beyond our or its ability
to pay those debts as they mature. In addition, any payment by us or that
guarantor in accordance with its guarantee could be voided and required to be
returned to us or the guarantor, or to a fund for the benefit of our creditors
or the creditors of the guarantors.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if the sum of its debts, including contingent liabilities,
were greater than the fair saleable value of all of its assets, or if the
present fair saleable value of its assets were less than the amount that would
be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature, or it could not pay
its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that we and each guarantor, after giving effect
to its guarantee of the Notes, will not be insolvent, will not have
unreasonably small capital for the business in which we and they are engaged
and will not have incurred debts beyond our or their ability to pay the debts
as they mature. We cannot assure you, however, as to what standard a court
would apply in making these determinations or that a court would agree with our
conclusions.
Price Volatility--The trading price of the Notes may be volatile.
The trading price of the Notes could be subject to significant fluctuation
in response to, among other factors, variations in operating results,
developments in industries in which we do business, general economic
conditions, changes in securities analysts' recommendations regarding our
securities and changes in the market for noninvestment grade securities
generally. This volatility may adversely affect the market price of the Notes.
Financing Change of Control Offer--We may not have the ability to raise the
funds necessary to finance the change of control offer required by the
Indenture for the Notes.
If a change of control occurs, you will have the right to require us to
repurchase any or all of your Notes at a price equal to 101% of the principal
amount thereof, together with any interest we owe you. Upon a change of
control, we also may be required immediately to repay the outstanding
principal, any accrued interest on and any other amounts owed by us under the
senior credit facility and any other indebtedness or preferred stock then
outstanding. We cannot assure you that we would be able to repay amounts
outstanding under the senior credit facility or obtain necessary consents under
the facility to purchase the Notes. Any requirement to offer to purchase any
outstanding notes may result in our having to refinance our outstanding
indebtedness, which we may not be able to do. In addition, even if we were able
to refinance this indebtedness, the financing may be on terms unfavorable to
us. If we fail to repurchase the Notes tendered for purchase upon the
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occurrence of a change of control, the failure will be an event of default
under the Indenture governing the Notes. In addition, the change of control
covenant does not cover all corporate reorganizations, mergers or similar
transactions and may not provide you with protection in a highly leveraged
transaction.
Risks Related to Radio One
Competition for Advertising Revenue--We compete for advertising revenue against
radio stations and other media, many of which have greater resources than we
do, and if we are unable to maintain or grow our advertising revenue share, our
business and operating results may be adversely affected.
In the competitive broadcasting industry, the success of each of our radio
stations is primarily dependent upon its share of the overall advertising
revenue within its market. Although we believe that each of our stations can
compete effectively in its broadcasting area, we cannot be sure that any of our
stations can maintain or increase its current audience ratings or market share,
or that advertisers will not decrease the amount they spend on advertising.
Our advertising revenue may suffer if any of our stations cannot maintain
its audience or market share. Shifts in population, demographics, audience
tastes and other factors beyond our control could cause us to lose market
share. Our stations also compete for audiences and advertising revenues
directly with other radio stations, and some of the owners of those competing
stations have greater resources than we do. If a competing station converts to
a format similar to that of one of our stations, or if one of our competitors
strengthens its operations, our stations could suffer a reduction in ratings
and advertising revenue. Other radio companies which are larger and have more
resources may also enter markets in which we operate. In addition, our stations
also compete with other media such as broadcast and cable television,
newspapers, magazines, direct mail, music videos, the Internet and outdoor
advertising, some of which may be controlled by horizontally-integrated
companies. We also anticipate that our stations will soon compete with
satellite-based radio services, including Sirius Satellite Radio and XM
Satellite Radio.
Decline in Level of Advertising Spending--An economic downturn that impacts
business sectors which advertise heavily on radio could result in a reduction
in advertising spending in those sectors, and could have a negative impact on
our advertising revenue and business.
We believe that advertising is a discretionary business expense, meaning
that spending on advertising may decline during economic recession or downturn.
Consequently, a recession or downturn in the United States economy or the
economy of an individual geographic market in which we own or operate stations
could adversely affect our advertising revenue and, therefore, our results of
operations. Even in the absence of a general recession or downturn in the
economy, an individual business sector that tends to spend more on advertising
than other sectors might be forced to reduce its advertising expenditures if
that sector experiences a downturn. If that sector's spending represents a
significant portion of our advertising revenues, any reduction in its
expenditures may affect our revenue.
In recent months the radio industry has been experiencing negative year over
year advertising revenue growth, primarily as a result of the downturn in the
overall economy. A number of business sectors that traditionally have been
heavy radio advertisers, including the automotive, retail sales and television
broadcast industries, as well as Internet businesses which in recent years
become significant radio advertisers, have been adversely affected by the
general economic slowdown. While we have continued to experience positive year
over year advertising revenue growth, if the factors that have contributed to
the radio industry's overall negative advertising revenue growth persist or
worsen, our advertising growth rate could be affected.
11
Integration of Acquisitions--We may have difficulty integrating the operations,
systems and management of the stations that we have recently acquired or agreed
to acquire. Our failure to successfully integrate acquired stations could have
a material adverse effect on our business and operating results.
From January 1, 2000 through September 30, 2001, we acquired or agreed to
acquire and/or operate 45 radio stations, including 16 stations that we own
and/or operate as the result of the August 10, 2001 consummation of our
acquisition of Blue Chip Broadcasting, Inc., and we expect to make acquisitions
of other stations and station groups in the future.
We cannot assure you that we will be able to integrate successfully the
operations, systems or management acquired in the Blue Chip acquisition, or any
other operation, systems or management that might be acquired in the future.
The recent consummation of the Blue Chip acquisition will require us to manage
a significantly larger and geographically more diverse radio station portfolio
than historically has been the case. Our failure to integrate and manage newly
acquired stations successfully could have a material adverse effect on our
business and operating results. In addition, in the event that the operations
of a new station do not meet our expectations, we may restructure or write-off
the value of some portion of the assets of the new station.
Risks of Acquisition Strategy--If we are unable to successfully execute our
acquisition strategy, our business may not grow as expected.
We intend to grow by acquiring radio stations primarily in top 50 African-
American markets. However, we may not successfully identify and consummate
future acquisitions, and stations that we do acquire may not increase our
broadcast cash flow or yield other anticipated benefits.
Our failure to execute our acquisition strategy successfully could have a
material adverse effect on our business and operating results, and on the value
of our common stock.
Dependence on Key Personnel--The loss of key personnel, including on air-
talent, could disrupt the management and operation of our business.
Our business depends upon the continued efforts, abilities and expertise of
our executive officers, including our chief executive officer, chief financial
officer, chief operating officer and general counsel, and other key employees,
including on-air personalities. We believe that the unique combination of
skills and experience possessed by our executive officers would be difficult to
replace, and that the loss of any one of them could have a material adverse
effect on us, including the impairment of our ability to execute our business
strategy. Additionally, our radio stations employ or independently contract
with several on-air personalities and hosts of syndicated radio programs with
significant loyal audiences in their respective broadcast areas. These on-air
personalities are sometimes significantly responsible for the ranking of a
station, and thus, the ability of the station to sell advertising. We cannot be
assured that these individuals will remain with our radio stations or will
retain audiences.
Controlling Stockholders--Two common stockholders have a majority voting
interest in Radio One and have the power to control matters on which Radio
One's common stockholders may vote, and their interests may conflict with
yours.
Catherine L. Hughes and her son, Alfred C. Liggins, III, collectively hold
approximately 55.9% of the outstanding voting power of Radio One's common
stock. As a result, Ms. Hughes and Mr. Liggins will control most decisions
involving Radio One, including transactions involving a change of control of
Radio One, such as a sale or merger. In addition, certain covenants in Radio
One's debt instruments require that Ms. Hughes and Mr. Liggins maintain
specified ownership and voting interests in Radio One, and prohibit other
parties' voting interests from exceeding specified amounts. Ms. Hughes and Mr.
Liggins have agreed to vote their shares together in elections of members of
the board of directors.
12
Technology Changes, New Services and Evolving Standards--We must respond to the
rapid changes in technology, services and standards which characterize our
industry in order to remain competitive.
The radio broadcasting industry is subject to rapid technological change,
evolving industry standards and the emergence of new media technologies. We
cannot assure you that we will have the resources to acquire new technologies
or to introduce new services that could compete with these new technologies.
Several new media technologies are being developed, including the following:
. Audio programming by cable television systems, direct broadcast
satellite systems, Internet content providers and other digital audio
broadcast formats;
. Satellite digital audio radio service, which could result in the
introduction of several new satellite radio services with sound quality
equivalent to that of compact discs; and
. In-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services.
We have entered into a programming agreement with a satellite digital audio
radio service, and have also invested in a developer of digital audio broadcast
technology and two Internet content providers. However, we cannot assure you
that these arrangements will be successful or enable us to adapt effectively to
these new media technologies.
Government Regulation--Our business depends on maintaining our licenses with
the FCC. We could be prevented from operating a radio station if we fail to
maintain its license.
Radio broadcasters depend upon maintaining radio broadcasting licenses
issued by the FCC. These licenses are ordinarily issued for a maximum term of
eight years and may be renewed. Our radio broadcasting licenses expire at
various times from October 1, 2003 to August 1, 2006. Although we may apply to
renew our FCC licenses, interested third parties may challenge our renewal
applications. In addition, if Radio One or any of our stockholders, officers,
or directors violates the FCC's rules and regulations or the Communications Act
of 1934, as amended, or is convicted of a felony, the FCC may commence a
proceeding to impose sanctions upon us. Examples of possible sanctions include
the imposition of fines; the revocation of our broadcast licenses; or the
renewal of one or more of our broadcasting licenses for a term of fewer than
eight years. If the FCC were to issue an order denying a license renewal
application or revoking a license, we would be required to cease operating the
radio station covered by the license only after we had exhausted administrative
and judicial review without success.
The radio broadcasting industry is subject to extensive and changing federal
regulation, as described in greater detail in our reports filed with the SEC.
Among other things, the Communications Act and FCC rules and policies limit the
number of broadcasting properties that any person or entity may own (directly
or by attribution) in any market and require FCC approval for transfers of
control and assignments of licenses. The filing of petitions or complaints
against Radio One or any FCC licensee from which we are acquiring a station
could result in the FCC delaying the grant of, or refusing to grant or imposing
conditions on its consent to the assignment or transfer of control of licenses.
The Communications Act and FCC rules and policies also impose limitations on
non-U.S. ownership and voting of the capital stock of Radio One.
Antitrust Matters--We may have difficulty obtaining regulatory approval for
acquisitions in our existing markets and, potentially, new markets, which could
affect the implementation of our acquisition strategy.
An important part of our growth strategy is the acquisition of additional
radio stations. The agencies responsible for enforcing the federal antitrust
laws, the Federal Trade Commission or the Department of Justice, may
investigate certain acquisitions. After the passage of the Telecommunications
Act of 1996, the Department of Justice became more aggressive in reviewing
proposed acquisitions of radio stations. The Justice Department is particularly
aggressive when the proposed buyer already owns one or more radio stations in
the market of the
13
station it is seeking to buy. The Justice Department has challenged a number of
radio broadcasting transactions. Some of those challenges ultimately resulted
in consent decrees requiring, among other things, divestitures of certain
stations. In general, the Justice Department has more closely scrutinized radio
broadcasting acquisitions that result in local market shares in excess of 40%
of radio advertising revenue.
We cannot predict the outcome of any specific Department of Justice or FTC
investigation. Any decision by the Department of Justice or FTC to challenge a
proposed acquisition could affect our ability to consummate an acquisition or
to consummate it on the proposed terms. For an acquisition meeting certain size
thresholds, the Hart-Scott-Rodino Act requires the parties to file Notification
and Report Forms concerning antitrust issues with the Department of Justice and
the FTC and to observe specified waiting period requirements before
consummating the acquisition. If the investigating agency raises substantive
issues in connection with a proposed transaction, then the parties frequently
engage in lengthy discussions or negotiations with the investigating agency
concerning possible means of addressing those issues, including restructuring
the proposed acquisition or divesting assets. In addition, the investigating
agency could file suit in federal court to enjoin the acquisition or to require
the divestiture of assets, among other remedies. Acquisitions that are not
required to be reported under the Hart-Scott-Rodino Act may be investigated by
the Department of Justice or the FTC under the antitrust laws before or after
consummation. In addition, private parties may under certain circumstances
bring legal action to challenge an acquisition under the antitrust laws. As
part of its increased scrutiny of radio station acquisitions, the Department of
Justice has stated publicly that it believes that local marketing agreements,
joint sales agreements, time brokerage agreements and other similar agreements
customarily entered into in connection with radio station transfers could
violate the Hart-Scott-Rodino Act if such agreements take effect prior to the
expiration of the waiting period under the Hart-Scott-Rodino Act. Furthermore,
the Department of Justice has noted that joint sales agreements may raise
antitrust concerns under Section 1 of the Sherman Act and has challenged joint
sales agreements in certain locations. As indicated above, the Department of
Justice also has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the Department of Justice has also investigated
transactions that do not meet or exceed these benchmarks and has cleared
transactions that do exceed these benchmarks.
Similarly, the FCC staff has adopted procedures to review proposed radio
broadcasting transactions even if the proposed acquisition otherwise complies
with the FCC's ownership limitations. In particular, the FCC may invite public
comment on proposed radio transactions that the FCC believes, based on its
initial analysis, may present ownership concentration concerns in a particular
local radio market. In March 2001, however, the FCC Commissioners expressed
their intent to eliminate delays in the staff's review of transactions that
might involve concentration of market share but are otherwise consistent with
the radio ownership limits set forth in the Communications Act.
14
EXCHANGE OFFER; REGISTRATION RIGHTS
The issuer, the guarantors and the initial purchasers entered into a
registration rights agreement in connection with the original issuance of the
Notes. The registration rights agreement provides that we will take the
following actions, at our expense, for the benefit of the holders of the Notes:
. within 60 days after the date on which the outstanding notes were
issued, we will file the exchange offer registration statement, of which
this prospectus is a part, relating to the exchange offer. The exchange
notes will have terms substantially identical in all material respects
to the outstanding notes except that the exchange notes will not contain
transfer restrictions;
. we will cause the exchange offer registration statement to be declared
effective under the Securities Act within 150 days after the date on
which the outstanding notes were issued; and
. we will keep the exchange offer open for at least 30 business days, or
longer if required by applicable law, after the date notice of the
exchange offer is mailed to the holders.
For each of the outstanding notes surrendered in the exchange offer, the
holder who surrendered the note will receive an exchange note having a
principal amount equal to that of the surrendered note. Interest on each
exchange note will accrue from the later of (1) the last interest payment date
on which interest was paid on the outstanding note surrendered and (2) if no
interest has been paid on the outstanding note, from the date on which the
outstanding notes were issued. If the note is surrendered for exchange on a
date in a period that includes the record date for an interest payment date to
occur on or after the date of the exchange, interest will accrue from that
interest payment date.
Under existing interpretations of the SEC contained in several no-action
letters to third parties, the exchange notes will be freely transferable by
holders of the notes, other than our affiliates, after the exchange offer
without further registration under the Securities Act. However, each holder
that wishes to exchange its outstanding notes will be required to make the
following representations:
. any exchange notes to be received by the holder will be acquired in the
ordinary course of its business;
. at the time of the commencement of the exchange offer, the holder has no
arrangement or understanding with any person to participate in the
distribution, within the meaning of the Securities Act, of the exchange
notes in violation of the Securities Act;
. the holder is not our affiliate as defined in Rule 405 promulgated under
the Securities Act;
. if the holder is not a broker-dealer, it is not engaged in, and does not
intend to engage in the distribution of exchange notes; and
. if the holder is a broker-dealer that will receive exchange notes for
its own account in exchange for outstanding notes that were acquired as
a result of market-making or other trading activities, the holder will
deliver a prospectus in connection with any resale of the exchange
notes. We refer to these broker-dealers as participating broker-dealers.
We will agree to make available, during the period required by the
Securities Act, a prospectus meeting the requirements of the Securities Act for
use by participating broker-dealers and any other persons with similar
prospectus delivery requirements for use in connection with any resale of
exchange notes.
We will be required to file a shelf registration statement covering resales
of the outstanding notes if:
(1) we are not required to file the exchange offer registration statement
or consummate the exchange offer because the exchange offer is not
permitted by applicable law or SEC policy; or
(2) in some circumstances, the holders of unregistered exchange notes so
request.
15
If obligated to file the shelf registration statement, we will use our best
efforts to file the shelf registration statement with the SEC on or prior to 60
days after such filing obligation arises and to cause the shelf registration
statement to be declared effective by the SEC on or prior to 150 days after
such obligation arises.
In addition, we have agreed to use our best efforts to keep effective the
shelf registration statement for a period of two years (or the time when all of
the applicable notes have been sold under the shelf registration statement).
If we fail to comply with any of the above provisions or if the exchange
offer registration statement or the shelf registration statement fails to
become effective, then, as liquidated damages, commencing on the day after the
required filing date, we will pay additional interest in an amount equal to
$0.05 per week per $1,000 principal amount of Notes held by a holder.
The amount of liquidated damages will increase by an additional $0.05 per
week per $1,000 principal amount of Notes with respect to each subsequent 90-
day period until such failure has been cured, up to a maximum amount of
liquidated damages for all failures of $0.50 per week per $1,000 principal
amount of Notes.
Following the consummation of the exchange offer, holders of the outstanding
notes who were eligible to participate in the exchange offer but who did not
tender its outstanding notes will not have any further registration rights and
the outstanding notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the outstanding notes
could be adversely affected.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all outstanding notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the expiration date of the exchange offer. We will issue $1,000 principal
amount of exchange notes in exchange for each $1,000 principal amount of
outstanding notes accepted in the exchange offer. Any holder may tender some or
all of its outstanding notes pursuant to the exchange offer. However,
outstanding notes may be tendered only in integral multiples of $1,000.
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes except that:
(1) the exchange notes bear a Series B designation and a different CUSIP
Number from the outstanding notes;
(2) the exchange notes have been registered under the Securities Act and
hence will not bear legends restricting the transfer thereof; and
(3) the holders of the exchange notes will not be entitled to certain
rights under the registration rights agreement, including the
provisions providing for an increase in the interest rate on the
outstanding notes in certain circumstances relating to the timing of
the exchange offer, all of which rights will terminate when the
exchange offer is terminated.
The exchange notes will evidence the same debt as the outstanding notes and
will be entitled to the benefits of the Indenture.
As of the date of this prospectus, $300,000,000 aggregate principal amount
of the outstanding notes were outstanding. We have fixed the close of business
on October 5, 2001 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially.
Holders of outstanding notes do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware, or the Indenture relating to the
notes in connection with the exchange offer. We intend to
16
conduct the exchange offer in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the SEC thereunder.
We will be deemed to have accepted validly tendered outstanding notes when,
as and if we have given oral or written notice thereof to the exchange agent.
The exchange agent will act as agent for the tendering holders for the purpose
of receiving the exchange notes from us.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of specified other events set forth in this
prospectus or otherwise, the certificates for any unaccepted outstanding notes
will be returned, without expense, to the tendering holder thereof as promptly
as practicable after the expiration date of the exchange offer.
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the exchange offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" will mean 5:00 p.m., New York City time, on
November 9, 2001, unless we, in our sole discretion, extend the exchange offer,
in which case the term "expiration date" will mean the latest date and time to
which the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will mail to the registered holders
an announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion, (1) to delay accepting any
outstanding notes, to extend the exchange offer or to terminate the exchange
offer if any of the conditions set forth below under "--Conditions" have not
been satisfied, by giving oral or written notice of any delay, extension or
termination to the exchange agent or (2) to amend the terms of the exchange
offer in any manner. Any delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
Interest on the Exchange Notes
The exchange notes will bear interest from their date of issuance. Holders
of outstanding notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
exchange notes. Such interest will be paid with the first interest payment on
the exchange notes on October 1, 2001. Interest on the outstanding notes
accepted for exchange will cease to accrue upon issuance of the exchange notes.
Interest on the exchange notes is payable semi-annually on each January 1
and July 1, commencing on July 1, 2001.
Procedures for Tendering
Only a holder of outstanding notes may tender outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must complete, sign
and date the letter of transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the letter of transmittal or transmit an
agent's message in connection with a book-entry transfer, and mail or otherwise
deliver the letter of transmittal or the facsimile, together with the
outstanding notes and any other required documents, to the exchange agent prior
to 5:00 p.m., New York City time, on the expiration date. To be tendered
effectively, the outstanding notes, letter of
17
transmittal or an agent's message and other required documents must be
completed and received by the exchange agent at the address set forth below
under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date. Delivery of the outstanding notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of the
book-entry transfer must be received by the exchange agent prior to the
expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that the book-entry transfer
facility has received an express acknowledgment from the participant in the
book-entry transfer facility tendering the outstanding notes that the
participant has received and agrees: (1) to participate in ATOP; (2) to be
bound by the terms of the letter of transmittal; and (3) that we may enforce
the agreement against the participant.
By executing the letter of transmittal, each holder will make to us the
representations set forth above under the heading "Exchange Offer; Registration
Statement."
The tender by a holder and our acceptance thereof will constitute agreement
between the holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal or
agent's message.
The method of delivery of outstanding notes and the letter of transmittal or
agent's message and all other required documents to the exchange agent is at
the election and sole risk of the holder. As an alternative to delivery by
mail, holders may wish to consider overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the exchange
agent before the expiration date. No letter of transmittal or outstanding notes
should be sent to us. Holders may request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the above transactions
for them.
Any beneficial owner whose outstanding notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the letter of transmittal.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member of the Medallion System unless the
outstanding notes tendered pursuant to the letter of transmittal are tendered
(1) by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the letter of
transmittal or (2) for the account of a member firm of the Medallion System. In
the event that signatures on a letter of transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, the guarantee must be by a
member firm of the Medallion System.
If the letter of transmittal is signed by a person other than the registered
holder of any outstanding notes, the outstanding notes must be endorsed or
accompanied by a properly completed bond power, signed by the registered holder
as the registered holder's name appears on the outstanding notes with the
signature thereon guaranteed by a member firm of the Medallion System.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations or others acting in a fiduciary or representative
capacity, the person signing should so indicate when signing, and evidence
satisfactory to us of its authority to so act must be submitted with the letter
of transmittal.
We understand that the exchange agent will make a request promptly after the
date of this prospectus to establish accounts with respect to the outstanding
notes at DTC for the purpose of facilitating the exchange
18
offer, and subject to the establishment thereof, any financial institution that
is a participant in DTC's system may make book-entry delivery of outstanding
notes by causing DTC to transfer the outstanding notes into the exchange
agent's account with respect to the outstanding notes in accordance with DTC's
procedures for the transfer. Although delivery of the outstanding notes may be
effected through book-entry transfer into the exchange agent's account at DTC,
unless an agent's message is received by the exchange agent in compliance with
ATOP, an appropriate letter of transmittal properly completed and duly executed
with any required signature guarantee and all other required documents must in
each case be transmitted to and received or confirmed by the exchange agent at
its address set forth below on or prior to the expiration date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under the procedures. Delivery of documents to DTC does
not constitute delivery to the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered outstanding notes and withdrawal of tendered
outstanding notes will be determined by us in our sole discretion, which
determination will be final and binding. We reserve the absolute right to
reject any and all outstanding notes not properly tendered or any outstanding
notes our acceptance of which would, in the opinion of our counsel, be
unlawful. We also reserve the right in our sole discretion to waive any
defects, irregularities or conditions of tender as to particular outstanding
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding notes must be cured within the time we
determine. Although we intend to notify holders of defects or irregularities
with respect to tenders of outstanding notes, neither we, the exchange agent
nor any other person will incur any liability for failure to give the
notification. Tenders of outstanding notes will not be deemed to have been made
until the defects or irregularities have been cured or waived. Any outstanding
notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holders, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
Guaranteed Delivery Procedures
Holders who wish to tender their outstanding notes and (1) whose outstanding
notes are not immediately available, (2) who cannot deliver their outstanding
notes, the letter of transmittal or any other required documents to the
exchange agent or (3) who cannot complete the procedures for book-entry
transfer, prior to the expiration date, may effect a tender if:
(A) the tender is made through a member firm of the Medallion System;
(B) prior to the expiration date, the exchange agent receives from a member
firm of the Medallion System a properly completed and duly executed
Notice of Guaranteed Delivery by facsimile transmission, mail or hand
delivery setting forth the name and address of the holder, the
certificate number(s) of the outstanding notes and the principal amount
of outstanding notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of transmittal or
facsimile thereof together with the certificate(s) representing the
outstanding notes or a confirmation of book-entry transfer of the
outstanding notes into the exchange agent's account at DTC, and any
other documents required by the letter of transmittal will be deposited
by the member firm of the Medallion System with the exchange agent; and
(C) the properly completed and executed letter of transmittal of facsimile
thereof, as well as the certificate(s) representing all tendered
outstanding notes in proper form for transfer or a confirmation of
book-entry transfer of the outstanding notes into the exchange agent's
account at DTC, and all other documents required by the letter of
transmittal are received by the exchange agent within five New York
Stock Exchange trading days after the expiration date.
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Upon request to the exchange agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the expiration date.
To withdraw a tender of outstanding notes in the exchange offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received
by the exchange agent at its address set forth in this prospectus prior to 5:00
p.m., New York City time, on the expiration date of the exchange offer. Any
notice of withdrawal must:
(1) specify the name of the person having deposited the outstanding notes
to be withdrawn;
(2) identify the outstanding notes to be withdrawn, including the
certificate number(s) and principal amount of the outstanding notes,
or, in the case of outstanding notes transferred by book-entry
transfer, the name and number of the account at DTC to be credited;
(3) be signed by the holder in the same manner as the original signature
on the letter of transmittal by which the outstanding notes were
tendered, including any required signature guarantees, or be
accompanied by documents of transfer sufficient to have the trustee
with respect to the outstanding notes register the transfer of the
outstanding notes into the name of the person withdrawing the tender;
and
(4) specify the name in which any outstanding notes are to be registered,
if different from that of the person depositing the outstanding notes
to be withdrawn.
All questions as to the validity, form and eligibility, including time of
receipt, of the notices will be determined by us, and our determination will be
final and binding on all parties. Any outstanding notes so withdrawn will be
deemed not to have been validly tendered for purposes of the exchange offer and
no exchange notes will be issued with respect thereto unless the outstanding
notes so withdrawn are validly retendered. Any outstanding notes which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof without cost to the holder as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn outstanding notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange notes for, any outstanding notes,
and may terminate or amend the exchange offer as provided in this prospectus
before the acceptance of the outstanding notes, if:
(1) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the exchange
offer which, in our sole judgment, might materially impair our ability
to proceed with the exchange offer or any material adverse development
has occurred in any existing action or proceeding with respect to us
or any of our subsidiaries; or
(2) any law, statute, rule, regulation or interpretation by the Staff of
the SEC is proposed, adopted or enacted, which, in our sole judgment,
might materially impair our ability to proceed with the exchange offer
or materially impair the contemplated benefits of the exchange offer
to us; or
(3) any governmental approval has not been obtained, which approval we
will, in our sole discretion, deem necessary for the consummation of
the exchange offer as contemplated by this prospectus.
If we determine in our sole discretion that any of the conditions are not
satisfied, we may (1) refuse to accept any outstanding notes and return all
tendered outstanding notes to the tendering holders, (2) extend the
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exchange offer and retain all outstanding notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of holders to
withdraw the outstanding notes (see "--Withdrawal of Tenders") or (3) waive the
unsatisfied conditions with respect to the exchange offer and accept all
properly tendered outstanding notes which have not been withdrawn.
Exchange Agent
The Bank of New York (formerly United States Trust Company of New York) has
been appointed as exchange agent for the exchange offer. Questions and requests
for assistance, requests for additional copies of this prospectus or of the
letter of transmittal and requests for Notice of Guaranteed Delivery should be
directed to the exchange agent addressed as follows:
By Registered or Certified Mail: Overnight Courier and by Hand
Delivery after
4:30 p.m., New York City time, on
the expiration date:
The Bank of New York The Bank of New York
c/o United States Trust Company of c/o United States Trust Company of
New York New York
P. O. Box 112, Bowling Green Station 30 Broad Street, 14th Floor
New York, NY 10274-0084 New York, NY 10004-2304
By Hand Prior to 4:30 p.m., New York By Accredited Investors Holding
City time: Physical Securities the By
Registered or Certified Mail address
is:
The Bank of New York The Bank of New York
c/o United States Trust Company of c/o United States Trust Company of
New York New York
30 Broad Street, B-Level P.O. Box 84
New York, NY 10004-2304 Bowling Green Station
New York, NY 10074-0084
For Information Telephone (call toll-free): (800) 548-6565
Delivery to an address other than set forth above will not constitute a valid
delivery.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
telegraph, telecopy, telephone or in person by our and our affiliates' officers
and regular employees.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses incurred in connection with these services.
We will pay the cash expenses to be incurred in connection with the exchange
offer. Such expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the
outstanding notes, which is face value, as reflected in our accounting records
on the date of exchange. Accordingly, we will not recognize any gain or loss
for accounting purposes as a result of the exchange offer. The expenses of the
exchange offer will be deferred and charged to expense over the term of the
exchange notes.
21
Consequences of Failure to Exchange
The outstanding notes that are not exchanged for exchange notes pursuant to
the exchange offer will remain restricted securities. Accordingly, the
outstanding notes may be resold only:
(1) to us upon redemption thereof or otherwise;
(2) so long as the outstanding notes are eligible for resale pursuant to
Rule 144A, to a person inside the United States whom the seller
reasonably believes is a qualified institutional buyer within the
meaning of Rule 144A under the Securities Act in a transaction meeting
the requirements of Rule 144A, in accordance with Rule 144 under the
Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act, which other exemption is based upon
an opinion of counsel reasonably acceptable to us;
(3) outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act; or
(4) pursuant to an effective registration statement under the Securities
Act, in each case in accordance with any applicable securities laws of
any state of the United States.
Resale of the Exchange Notes
With respect to resales of exchange notes, based on interpretations by the
Staff of the SEC set forth in no-action letters issued to third parties, we
believe that a holder or other person who receives exchange notes, whether or
not the person is the holder, other than a person that is our affiliate within
the meaning of Rule 405 under the Securities Act, in exchange for outstanding
notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the exchange notes, will be allowed to
resell the exchange notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the exchange notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires exchange notes in the exchange offer for the
purpose of distributing or participating in a distribution of the exchange
notes, the holder cannot rely on the position of the Staff of the SEC expressed
in the no-action letters or any similar interpretive letters, and must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction, unless an exemption from
registration is otherwise available. Further, each broker-dealer that receives
exchange notes for its own account in exchange for outstanding notes, where the
outstanding notes were acquired by the broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of the exchange notes.
USE OF PROCEEDS
This exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement. We will not receive any cash proceeds from
the issuance of the exchange notes. In consideration for issuing the exchange
notes contemplated in this prospectus, we will receive outstanding notes in
like principal amount, the form and terms of which are the same as the form and
terms of the exchange notes, except as otherwise described in this prospectus.
22
CAPITALIZATION
The table below sets forth our cash, cash equivalents and capitalization as
of June 30, 2001, on an actual basis and on a pro forma basis giving effect to
the transactions identified below:
. the pending acquisitions of:
-- WJMO-FM (formerly WPLZ-FM), WCDX-FM, WPZE-FM and WGCV-AM in
Richmond;
-- Blue Chip Broadcasting, Inc.; and
-- WPEZ-FM in Atlanta (pro forma balance sheet only); and
. the offering of the outstanding notes to the initial purchasers.
The information in this table should be read in conjunction with "Use of
Proceeds," "Unaudited Pro Forma Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements included elsewhere in, or
incorporated by reference into, this prospectus.
As of June 30, 2001
-----------------------
Pro Forma
Actual (unaudited)
---------- -----------
(in thousands)
Cash and cash equivalents.............................. $ 9,519 $ 2,001
========== ==========
Long-term debt (including current portion):
Bank credit facility................................... 350,000 531,394
8 7/8% Senior Subordinated Notes....................... 300,000 300,000
Other long-term debt................................... 57 119
---------- ----------
Total debt........................................... 650,057 831,513
---------- ----------
Stockholders' equity:
Preferred stock........................................ -- --
Common stock........................................... 89 89
Stock subscriptions receivable......................... (30,110) (30,110)
Accumulated comprehensive income adjustments........... (6,570) (6,570)
Additional paid-in capital............................. 1,127,515 1,209,215
Accumulated deficit.................................... (79,551) (79,551)
---------- ----------
Total stockholders' equity........................... 1,011,373 1,093,073
---------- ----------
Total capitalization................................. $1,661,430 $1,924,586
========== ==========
23
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table contains selected historical consolidated financial data
with respect to Radio One. The selected historical consolidated financial data
have been derived from the Consolidated Financial Statements of Radio One for
each of the fiscal years for the five year period ended December 31, 2000,
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected historical consolidated financial data for the six months ended
June 30, 2000 and 2001 have been derived from the unaudited consolidated
financial statements incorporated by reference into this prospectus. The
selected historical consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements of Radio One included
in documents incorporated by reference into this prospectus.
The following table includes information regarding broadcast cash flow and
EBITDA. Broadcast cash flow consists of operating income before depreciation,
amortization, local marketing agreement fees and corporate expenses. EBITDA
consists of operating income before depreciation, amortization, local marketing
agreement fees and non-cash compensation charges. Although broadcast cash flow
and EBITDA are not measures of performance or liquidity calculated in
accordance with GAAP, we believe that these measures are useful to an investor
in evaluating Radio One because these measures are widely used in the broadcast
industry as a measure of a radio broadcasting company's performance.
Nevertheless, broadcast cash flow and EBITDA should not be considered in
isolation from or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in accordance
with GAAP, or as a measure of profitability or liquidity. Moreover, because
broadcast cash flow and EBITDA are not measures calculated in accordance with
GAAP, these performance measures are not necessarily comparable to similarly
titled measures employed by other companies.
Six Months Ended
Fiscal Years Ended/(1)/ December 31, June 30,/(1)/
------------------------------------------------- ----------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- -------- --------- -------- ---------
(in thousands) (unaudited)
Statement of Operations:
Net broadcast revenue... $ 23,702 $ 32,367 $ 46,109 $ 81,703 $ 155,666 $ 54,795 $ 110,210
Station operating
expenses............... 13,927 18,848 24,501 44,259 77,280 28,728 54,213
Corporate expenses...... 1,793 2,155 2,800 4,380 6,303 2,400 3,998
Depreciation and
amortization........... 4,262 5,828 8,445 17,073 63,207 12,671 62,375
-------- -------- -------- -------- --------- -------- ---------
Operating income
(loss)................. 3,720 5,536 10,363 15,991 8,876 10,996 (10,376)
Interest expense/(2)/... 7,252 8,910 11,455 15,279 32,407 7,247 30,418
Gain on sale of assets,
net.................... -- -- -- -- -- -- 4,272
Other income (expense),
net.................... (77) 415 358 2,149 20,084 9,707 --
Income tax (benefit)
expense/(3)/ -- -- (1,575) 2,728 804 5,818 (11,942)
-------- -------- -------- -------- --------- -------- ---------
(Loss) income before
extraordinary item... (3,609) (2,959) 841 133 (4,251) 7,638 (24,580)
Extraordinary loss -- 1,985 -- -- -- -- 5,207
-------- -------- -------- -------- --------- -------- ---------
Net (loss) income..... $ (3,609) $ (4,944) $ 841 $ 133 $ (4,251) $ 7,638 $ (29,787)
======== ======== ======== ======== ========= ======== =========
Other Data:
Broadcast cash flow..... $ 9,775 $ 13,519 $ 21,608 $ 37,444 $ 78,386 $ 26,067 $ 55,997
Broadcast cash flow
margin/(4)/............ 41% 42% 47% 46% 50% 48% 51%
EBITDA.................. $ 7,982 $ 11,364 $ 18,808 $ 33,289 $ 72,271 $ 23,667 $ 52,474
EBITDA margin/(4)/...... 34% 35% 41% 41% 46% 43% 48%
Cash interest
expense/(5)/........... $ 4,815 $ 4,413 $ 7,192 $ 10,762 $ 28,581 $ 4,756 $ 24,788
Capital expenditures.... 252 2,035 2,236 3,252 3,665 1,397 2,840
Ratio of earnings to
fixed charges/(6)/ -- -- -- 1.2x -- -- --
Balance Sheet Data (at period end):
Cash and cash equivalents.......................... $ 9,519
Intangible assets, net............................. 1,594,732
Total assets....................................... 1,708,722
Total debt (including current portion and deferred
interest)......................................... 650,057
Total stockholders' equity......................... 1,011,373
-------
/(1)/ Year-to-year comparisons are significantly affected by Radio One's
acquisition of various radio stations during the periods covered.
/(2)/ Interest)expense includes non-cash interest, such as the accretion of
principal, the amortization of discounts on debt and the amortization of
deferred financing costs.
/(3)/ FromJanuary 1, 1996 to May 19, 1997, Radio One elected to be treated as an
S corporation for U.S. federal and state income tax purposes and,
therefore, generally was not subject to income tax at the corporate level
during that period.
/(4)/ Broadcast cash flow margin is defined as broadcast cash flow divided by
net broadcast revenue. EBITDA margin is defined as EBITDA divided by net
broadcast revenue.
/(5)/ Cash interest expense is calculated as interest expense less non-cash
interest, including the accretion of principal, the amortization of
discounts on debt and the amortization of deferred financing costs, for
the indicated period.
/(6)/ Earnings were insufficient to cover fixed charges for the fiscal years
ended December 31, 1996, 1997, 1998 and 2000 by approximately $3.6
million, $3.0 million, $700,000 and $4.3 million respectively.
24
DESCRIPTION OF INDEBTEDNESS
Bank Credit Facility
Our credit agreement provides for a bank credit facility under which we may
borrow up to $600.0 million from a group of banking institutions. The credit
facility consists of term loans in an amount of up to $350.0 million and
revolving credit loans in an amount of up to $250.0 million that may be
borrowed on a revolving basis. As of June 30, 2001, we had approximately $350.0
million outstanding under the bank credit facility. Subsequent draw downs of
revolving loans under the bank credit facility will be subject to compliance
with provisions of the credit agreement, including but not limited to the
financial covenants. Borrowings under the bank credit facility may be entirely
of Eurodollar Loans, Alternate Base Rate ("ABR") Loans or a combination
thereof.
The term loans have scheduled quarterly amortization payments payable on the
last day of each fiscal quarter beginning March 31, 2003, with 15% of the term
loans payable in each of 2003 and 2004, 20% payable in 2005, and 25% payable in
each of 2006 and 2007, with the final payment due on June 30, 2007. In
addition, we are required to prepay the term loans with 100% of the net cash
proceeds of certain asset sales and insurance awards (subject to a $10 million
exclusion and the right to reinvest such proceeds within specified time
periods), 50% of the net cash proceeds of certain equity issuances (but only if
the ratio of total debt to EBITDA as of the end of the immediately preceding
fiscal quarter exceeds 6.0 to 1.0, and then only to the extent necessary to
reduce the ratio of total debt to EBITDA to 6.0 to 1.0), and, if the ratio of
total debt to EBITDA exceeds 6.0 to 1.0 as of the end of any fiscal year after
December 31, 2002, 50% of excess cash flow for such fiscal year.
Our ability to borrow revolving loans under the bank credit facility will
terminate on June 30, 2007, at which time any outstanding principal together
with all accrued and unpaid interest thereon would become due and payable.
All amounts under the bank credit facility are guaranteed by each of Radio
One's direct and indirect restricted subsidiaries. The bank credit facility is
secured by a perfected first priority secured interest in: (1) substantially
all of the tangible and intangible assets of Radio One and our direct and
indirect restricted subsidiaries including, without limitation, any and all FCC
licenses to the maximum extent permitted by law, but excluding real estate
assets, and (2) all of the common stock of our direct and indirect restricted
subsidiaries, including all warrants or options and other similar securities to
purchase such securities. Radio One will also grant a security interest in all
money (including interest), instruments and securities at any time held or
acquired in connection with a cash collateral account established pursuant to
the credit agreement, together with all proceeds thereof.
The interest rates on the borrowings under the bank credit facility are
based on the ratio of total debt to EBITDA with a maximum margin above ABR of
1.250% with respect to ABR Loans, and a maximum margin above Eurodollar rate of
2.250% with respect to Eurodollar Loans. Eurodollar Loans is based on a 360-day
period for actual days elapsed, and interest on ABR Loans is based on a 365-day
period for actual days elapsed. In addition, Radio One will pay a commitment
fee based on the average daily amount of the available revolving credit loans
commitment computed at a rate per year tied to a leverage ratio in effect for
the fiscal quarter preceding the date of payment of such fee. The commitment
fee is fully earned and non-refundable and is payable quarterly in arrears on
the last business day of each March, June, September and December and on the
maturity date of the revolving credit loans.
The credit agreement contains customary and appropriate affirmative and
negative covenants including, but not limited to, financial covenants and other
covenants including limitations on other indebtedness, liens, investments,
guarantees, restricted payments (dividends, redemptions and payments on
subordinated debt), prepayment or repurchase of other indebtedness, mergers and
acquisitions, sales of assets, transactions with
25
affiliates and other provisions customary and appropriate for financing of this
type, including mutually agreed upon exceptions and baskets. The financial
covenants include:
. a maximum ratio of total debt to EBITDA of 7.0x;
. a maximum ratio of senior debt to EBITDA of 5.0x;
. a minimum interest coverage ratio; and
. a minimum fixed charge coverage ratio.
The credit agreement contains the following customary events of default:
. failure to make payments when due;
. defaults under any other agreements or instruments of indebtedness;
. noncompliance with covenants;
. breaches of representations and warranties;
. voluntary or involuntary bankruptcy or liquidation proceedings;
. entrance of judgments;
. impairment of security interests in collateral; and
. changes of control.
12% Notes Due 2004
On May 15, 1997, we entered into an approximate $85.0 million aggregate
principal amount offering of our 12% Senior Subordinated Notes. The 12% Notes
due 2004 were issued pursuant to an indenture, dated as of May 15, 1997 among
Radio One, Radio One Licenses, Inc. and United States Trust Company of New
York.
The 12% Notes due 2004 were redeemable at any time and from time to time at
the option of Radio One, in whole or in part, on or after May 15, 2001 at the
redemption prices set forth in the 12% Notes due 2004, plus accrued and unpaid
interest to the date of redemption. We redeemed the 12% Notes due 2004 in whole
with proceeds from the offering of the outstanding notes to the initial
purchasers.
26
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description under
the subheading "--Certain Definitions." In this description, the word "Radio
One" refers only to Radio One, Inc. and not to any of its subsidiaries.
Radio One issued the Notes under an Indenture among itself, the Guarantors
and The Bank of New York (formerly United States Trust Company of New York), as
trustee, in a private transaction that was not subject to the registration
requirements of the Securities Act. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939.
Any Notes that remain outstanding after completion of the exchange offer,
together with the exchange notes, will be treated as a single class of
securities under the Indenture.
The following description is a summary of the material provisions of the
Indenture and the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the Indenture and the
registration rights agreement because they, and not this description, define
your rights as holders of the Notes. Copies of the Indenture and the
registration rights agreement are available as set forth below under "--
Additional Information." Unless the context otherwise requires, references in
this description to the Notes include the notes originally issued to the
initial purchasers in a transaction not subject to the registration
requirements of the Securities Act and the exchange notes to be registered
under the Securities Act by the registration statement of which this prospectus
is a part. Certain defined terms used in this description but not defined below
under "--Certain Definitions" have the meanings assigned to them in the
Indenture.
The registered Holder of a Note will be treated as the owner of it for all
purposes. Only registered Holders will have rights under the Indenture.
Brief Description of the Notes and the Guarantees
The Notes
The Notes:
. are general unsecured obligations of Radio One;
. are subordinated in right of payment to all existing and future Senior
Debt of Radio One;
. are pari passu in right of payment with any future senior subordinated
Indebtedness of Radio One; and
. are unconditionally guaranteed by the Guarantors.
The Guarantees
The Notes are guaranteed by all of Radio One's Domestic Subsidiaries.
Each guarantee of the Notes:
. is a general unsecured obligation of the Guarantor;
. is subordinated in right of payment to all existing and future Senior
Debt of that Guarantor; and
. is pari passu in right of payment with any future senior subordinated
Indebtedness of that Guarantor.
As of June 30, 2001, on a pro forma basis Radio One and the Guarantors would
have had total Senior Debt of approximately $531.5 million. As indicated above
and as discussed in detail below under the caption "--Subordination," payments
on the Notes and under these guarantees will be subordinated to the payment of
Senior Debt. The Indenture permits us and the Guarantors to incur additional
Senior Debt.
27
As of the date of the Indenture, all of our subsidiaries except Satellite
One, L.L.C. were "Restricted Subsidiaries." However, under the circumstances
described below under the subheading "--Certain Covenants--Designation of
Restricted and Unrestricted Subsidiaries," we will be permitted to designate
certain of our subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants in the
Indenture. Our Unrestricted Subsidiaries will not guarantee the Notes.
Principal, Maturity and Interest
The Indenture permits Radio One to issue Notes with a maximum aggregate
principal amount of $500.0 million, of which $300.0 million were issued to the
initial purchasers. Radio One may issue additional Notes from time to time. Any
offering of additional Notes is subject to the covenant described below under
the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock." The Notes and any additional Notes subsequently issued under
the Indenture will be treated as a single class for all purposes under the
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. Radio One will issue Notes in denominations of $1,000 and
integral multiples of $1,000. The Notes will mature on July 1, 2011.
Interest on the Notes will accrue at the rate of 8 7/8% per annum and will
be payable semi-annually in arrears on January 1 and July 1, commencing on
January 1, 2002. Radio One will make each interest payment to the Holders of
record on the immediately preceding December 15 and June 15.
Interest on the Notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to Radio One, Radio One
will pay all principal, interest and premium and Liquidated Damages, if any, on
that Holder's Notes in accordance with those instructions. All other payments
on Notes will be made at the office or agency of the paying agent and registrar
within the City and State of New York unless Radio One elects to make interest
payments by check mailed to the Holders at their address set forth in the
register of Holders.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. Radio One may
change the paying agent or registrar without prior notice to the Holders of the
Notes, and Radio One or any of its Subsidiaries may act as paying agent or
registrar.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The registrar and the trustee may require a Holder to furnish appropriate
endorsements and transfer documents in connection with a transfer of Notes.
Holders will be required to pay all taxes due on transfer. Radio One is not
required to transfer or exchange any Note selected for redemption. Also, Radio
One is not required to transfer or exchange any Note for a period of 15 days
before a selection of Notes is to be redeemed.
Subsidiary Guarantees
The Notes will be guaranteed by each of Radio One's current and future
Domestic Subsidiaries. These Subsidiary Guarantees will be joint and several
obligations of the Guarantors. Each Subsidiary Guarantee will
28
be subordinated to the prior payment in full of all Senior Debt of that
Guarantor. The obligations of each Guarantor under its Subsidiary Guarantee
will be limited as necessary to prevent that Subsidiary Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk Factors--
Fraudulent Conveyance Matters."
A Guarantor may not sell or otherwise dispose of all or substantially all of
its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than Radio One or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation
or merger assumes all the obligations of that Guarantor under the
Indenture, its Subsidiary Guarantee and the registration rights
agreement pursuant to a supplemental Indenture satisfactory to the
trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the Indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary of Radio One, if the sale
or other disposition complies with the "Asset Sale" provisions of the
Indenture;
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to
such transaction) a Subsidiary of Radio One, if the sale complies with the
"Asset Sale" provisions of the Indenture;
(3) if Radio One designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary in accordance with the applicable
provisions of the Indenture;
(4) in connection with any transaction whereby a Guarantor is no longer
a Restricted Subsidiary immediately after giving effect to such transaction
if the transaction complies with the "Asset Sale Provisions" of the
Indenture; or
(5) upon the discharge or release of all guarantees of such Guarantor,
and all pledges of property or assets of such Guarantor securing all other
Indebtedness of Radio One and its Restricted Subsidiaries.
See "--Repurchase at the Option of Holders--Asset Sales."
Subordination
The payment of principal, interest and premium and Liquidated Damages, if
any, on the Notes will be subordinated to the prior payment in full of all
Senior Debt of Radio One, including Senior Debt incurred after the date of the
Indenture.
The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt whether or not a claim for such interest would be
allowed in such proceeding) before the Holders of Notes will be entitled to
receive any payment with respect to the Notes or on account of any purchase or
redemption or other acquisition on any Note (except that Holders of Notes may
receive and retain Permitted Junior Securities and payments made from the trust
described under "--Legal Defeasance and Covenant Defeasance" so long as, on the
date or dates the respective amounts were paid into trust, such
29
payments were made without violating the subordination provisions described
herein), in the event of any distribution to creditors of Radio One:
(1) in a liquidation or dissolution of Radio One;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Radio One or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Radio One's assets and liabilities.
Neither Radio One nor any Guarantor may make any payment in respect of the
Notes or on account of any purchase or redemption or other acquisition of any
Note (except in Permitted Junior Securities or from the trust described under
"--Legal Defeasance and Covenant Defeasance" so long as, on the date or dates
the respective amounts were paid into trust, such payments were made without
violating the subordination provisions described herein) if:
(1) a default in the payment of the principal of, or premium, if any, or
interest on, or any fees or other amounts relating to Designated Senior
Debt occurs and is continuing beyond any applicable grace period; or
(2) any other default occurs and is continuing on any series of
Designated Senior Debt that permits holders of that series of Designated
Senior Debt to accelerate its maturity and the trustee receives a notice of
such default (a "Payment Blockage Notice") from Radio One or the holders of
any Designated Senior Debt.
Payments on the Notes (including any missed payments) may and will be
resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in the case of a nonpayment default, upon the earlier of the date on
which such nonpayment default is cured or waived, 179 days after the date
on which the applicable Payment Blockage Notice is received, or the date on
which the trustee receives notice from or on behalf of the holders of
Designated Senior Debt to terminate the applicable Payment Blockage Notice,
unless the maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the delivery of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default has
been cured or waived for a period of not less than 90 days.
If the trustee or any Holder of the Notes receives a payment in respect of
the Notes (except in Permitted Junior Securities or from the trust described
under "--Legal Defeasance and Covenant Defeasance" so long as, on the date or
dates the respective amounts were paid into trust, such payments were made
without violating the subordination provisions described herein) when the
payment is prohibited by these subordination provisions, the trustee or
Holder, as the case may be, will hold the payment in trust for the benefit of
the holders of Senior Debt. Upon the proper written request of the holders of
Senior Debt, the trustee or the Holder, as the case may be, will deliver the
amounts in trust to the holders of Senior Debt or their proper representative.
Radio One must promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default.
30
As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or reorganization of Radio One, Holders of Notes may
recover less ratably than creditors of Radio One who are holders of Senior
Debt. See "Risk Factors--Subordination."
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Agreement; and
(2) any other Senior Debt permitted under the Indenture the principal
amount of which is $25.0 million or more (or otherwise available under a
committed facility) and that has been designated by Radio One or a
Guarantor as "Designated Senior Debt."
"Permitted Junior Securities" means:
(1) Equity Interests in Radio One or, subject to the provisions of the
Credit Agreement, any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any
debt securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the Notes and the Subsidiary
Guarantees are subordinated to Senior Debt under the Indenture.
"Senior Debt" means:
(1) all Indebtedness of Radio One or any Guarantor outstanding under the
Credit Facility and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of Radio One or any Guarantor permitted to be
incurred under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes or any
Subsidiary Guarantee; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing
by Radio One;
(2) any intercompany Indebtedness of Radio One or any of its Restricted
Subsidiaries to Radio One or any of its Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of the
Indenture.
Optional Redemption
At any time prior to July 1, 2004, Radio One may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes issued
under the Indenture at a redemption price of 108.875% of the principal amount,
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that:
(1) at least 65% of the aggregate principal amount of Notes issued under
the Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by Radio One and its Subsidiaries); and
(2) the redemption occurs within 180 days of the date of the closing of
such Equity Offering.
Except pursuant to the preceding paragraph, the Notes will not be redeemable
at Radio One's option prior to July 1, 2006.
31
On or after July 1, 2006, Radio One may redeem all or a part of the Notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, on the Notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period
beginning on July 1 of the years indicated below:
Year Percentage
---- ----------
2006.............................................................. 104.438%
2007.............................................................. 102.958%
2008.............................................................. 101.479%
2009 and thereafter............................................... 100.000%
Mandatory Redemption
Radio One is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Notes will have the right to
require Radio One to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that Holder's Notes pursuant to a Change of Control
Offer on the terms set forth in the Indenture. In the Change of Control Offer,
Radio One will offer a Change of Control Payment in cash equal to 101% of the
aggregate principal amount of Notes repurchased plus accrued and unpaid
interest and Liquidated Damages, if any, on the Notes repurchased, to the date
of purchase. Within 10 days following any Change of Control, Radio One will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the Change
of Control Payment Date specified in the notice, which date will be no earlier
than 30 days and no later than 60 days from the date such notice is mailed,
pursuant to the procedures required by the Indenture and described in such
notice. Radio One will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change
of Control provisions of the Indenture, Radio One will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control provisions of the
Indenture by virtue of such conflict.
On the Change of Control Payment Date, Radio One will, to the extent lawful:
(1) accept for payment all Notes or portions of Notes properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all Notes or portions of Notes properly
tendered; and
(3) deliver or cause to be delivered to the trustee the Notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of Notes or portions of Notes being purchased by Radio
One.
The paying agent will promptly mail to each Holder of Notes properly
tendered the Change of Control Payment for such Notes, and the trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
32
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, Radio
One will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this covenant. Radio One will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require Radio One to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the Indenture are applicable. Except as described above
with respect to a Change of Control, the Indenture does not contain provisions
that permit the Holders of the Notes to require that Radio One repurchase or
redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
Radio One will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by Radio
One and purchases all Notes properly tendered and not withdrawn under the
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the direct
or indirect sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the properties or assets of Radio One and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require Radio One to repurchase its Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of Radio One and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
Asset Sales
(A) Radio One will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Radio One (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of the Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) the fair market value is determined by Radio One's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an officers' certificate delivered to the trustee; and
(3) at least 75% of the consideration received in the Asset Sale by
Radio One or such Restricted Subsidiary is in the form of cash or Cash
Equivalents except to the extent Radio One is undertaking a Permitted Asset
Swap. For purposes of this provision and the next paragraph, each of the
following will be deemed to be cash:
(a) any liabilities, as shown on Radio One's or such Restricted
Subsidiary's most recent balance sheet, of Radio One or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are
by their terms subordinated to the Notes or any Subsidiary Guarantee)
that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases Radio One or such Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received by Radio One
or any such Restricted Subsidiary from such transferee that are
converted by Radio One or such Restricted Subsidiary within 90 days
into cash or Cash Equivalents, to the extent of the cash or Cash
Equivalents received in that conversion.
The 75% limitation referred to in clause (3) above will not apply to any
Asset Sale in which the cash or Cash Equivalents portion of the consideration
received therefrom, determined in accordance with the preceding
33
provision, is equal to or greater than what the after-tax proceeds would have
been had such Asset Sale complied with the aforementioned 75% limitation.
Notwithstanding the foregoing, Radio One, a Guarantor or any Restricted
Subsidiary will be permitted to consummate an Asset Sale without complying with
the foregoing if:
(x) Radio One, such Guarantor or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or other property sold, issued or otherwise
disposed of;
(y) the fair market value is determined by Radio One's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an officers' certificate delivered to the trustee; and
(z) at least 75% of the consideration for such Asset Sale constitutes a
controlling interest in a Permitted Business, assets used or useful in a
Permitted Business and/or cash;
provided that any cash (other than any amount deemed cash under clause
(3)(a) of the preceding paragraph) received by Radio One, such Guarantor or
such Restricted Subsidiary in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Proceeds subject to the
provisions of the next paragraph.
(B) Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, provided that (i) such Net Proceeds either singularly or when aggregated
with all other Net Proceeds from all Asset Sales consummated since the date of
the Indenture exceed $10,000,000; and (ii) the Leverage Ratio as of the end of
the fiscal quarter immediately prior to the date on which such application of
such Net Proceeds would otherwise be required is greater than 6.00 to 1.00, and
then only to the extent necessary to reduce the Leverage Ratio to 6.00 to 1.00,
Radio One, such Guarantor or such Restricted Subsidiary may apply those Net
Proceeds at its option:
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with respect
thereto;
(2) to acquire all or substantially all of the assets of, or a majority
of the Voting Stock of, another Permitted Business;
(3) to make capital expenditures; or
(4) to acquire other assets that are used or useful in a Permitted
Business.
Pending the final application of any Net Proceeds, Radio One may temporarily
reduce revolving credit borrowings or otherwise invest the Net Proceeds in any
manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, Radio One will make
an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in the Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of
the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to
100% of principal amount plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, and will be payable in cash. If any
Excess Proceeds remain after consummation of an Asset Sale Offer, Radio One may
use those Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes and other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the trustee will select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds will be reset at zero.
(C) Radio One will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection
34
with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
Asset Sale provisions of the Indenture, Radio One will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Asset Sale provisions of the Indenture by
virtue of such conflict.
The agreements governing Radio One's outstanding Senior Debt currently
prohibit Radio One from purchasing any Notes, and also provides that certain
change of control or asset sale events with respect to Radio One would
constitute a default under these agreements. Any future credit agreements or
other agreements relating to Senior Debt to which Radio One becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
or Asset Sale occurs at a time when Radio One is prohibited from purchasing
Notes, Radio One could seek the consent of its senior lenders to the purchase
of Notes or could attempt to refinance the borrowings that contain such
prohibition. If Radio One does not obtain such a consent or repay such
borrowings, Radio One will remain prohibited from purchasing Notes. In such
case, Radio One's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
such Senior Debt. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, the trustee
will select Notes for redemption as follows:
(1) if the Notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the Notes are listed; or
(2) if the Notes are not listed on any national securities exchange, on
a pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No Notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior
to a redemption date if the notice is issued in connection with a defeasance of
the Notes or a satisfaction and discharge of the Indenture. Notices of
redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note will state the portion of the principal amount of that
Note that is to be redeemed. A new note in principal amount equal to the
unredeemed portion of the original Note will be issued in the name of the
Holder of Notes upon cancellation of the original Note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
Certain Covenants
Restricted Payments
Radio One will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Radio One's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving Radio One or any
of its Restricted Subsidiaries) or to the direct or indirect holders of
Radio One's or any of its Restricted Subsidiaries' Equity Interests in
their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of Radio One and other
than dividends or distributions payable to Radio One or a Restricted
Subsidiary of Radio One);
35
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving Radio One) any Equity Interests of Radio One or any
direct or indirect parent of Radio One (other than any such Equity
Interests owned by Radio One or a Restricted Subsidiary);
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof (except for payments
into a trust within one year of the stated maturity of any such
Subordinated Indebtedness which payments effect a defeasance or discharge
of such Indebtedness); or
(4) make any Restricted Investment (all such payments and other actions
set forth in these clauses (1) through (4) above being collectively
referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or
would occur as a consequence of such Restricted Payment;
(2) Radio One would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Leverage
Ratio test set forth in the first paragraph of the covenant described below
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Radio One and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (1), (2), (3), (4), (5), (7), (9), (11) and (12) of the next
succeeding paragraph) is less than the sum, without duplication of:
(a) (i) 100% of the aggregate Consolidated Cash Flow of Radio One
(or, in the event such Consolidated Cash Flow shall be a deficit, minus
100% of such deficit) accrued for the period beginning April 1, 2001
and ending on the last day of Radio One's most recent calendar month
for which financial information is available to Radio One ending prior
to the date of such proposed Restricted Payment, taken as one
accounting period, less (ii) 1.4 times Consolidated Interest Expense
for the same period, plus
(b) 100% of the aggregate net proceeds (including the fair market
value of property other than cash or Cash Equivalents) received by
Radio One since the date of the Indenture from the issue or sale of
Equity Interests of Radio One (other than Disqualified Stock), or of
Disqualified Stock or debt securities of Radio One that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Restricted
Subsidiary and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus
(c) to the extent that any Unrestricted Subsidiary is redesignated
as a Restricted Subsidiary after the date of the Indenture, the fair
market value of such Subsidiary as of the date of such redesignation,
plus
(d) the aggregate amount returned in cash with respect to
Investments (other than Permitted Investments) made after the issue
date whether through interest payments, principal payments, dividends
or other distributions, plus
(e) the net cash proceeds received by Radio One or any of its
Restricted Subsidiaries from the disposition, retirement or redemption
of all or any portion of such Investments referred to in clause (4)
above (other than to a Restricted Subsidiary), plus
(f) $15.0 million.
36
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the dividend
payment would have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of Radio One or any Guarantor
or of any Equity Interests of Radio One in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of Radio One) of, Equity Interests of Radio One
(other than Disqualified Stock); provided that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition will be excluded from clause
(3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Radio One or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of Radio One
to the holders of its common Equity Interests on a pro rata basis;
(5) so long as no Default has occurred and is continuing or would be
caused thereby, the payment of dividends on Existing Preferred Stock in
accordance with the terms thereof;
(6) loans to members of management of Radio One or any Restricted
Subsidiary, the proceeds of which are used for a concurrent purchase of
Equity Interests of Radio One or a capital contribution to Radio One
(provided that the proceeds from such purchase of Equity Interests or
capital contribution shall be excluded from the calculation of amounts
under clause (3) above), provided that such loans shall be included in the
calculation of the amount of Restricted Payments from and after such time;
(7) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Radio One or any Restricted Subsidiary of
Radio One or the payment of a dividend to any Restricted Subsidiary of
Radio One to effect the repurchase, redemption, acquisition or retirement
of Radio One or its Restricted Subsidiary's Equity Interests, that are held
by any member or former member of Radio One's (or any of the Restricted
Subsidiaries') management, or by any of their respective directors,
employees or consultants; provided that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests may not
exceed the sum of (a) $1,000,000 in any calendar year (with unused amounts
in any calendar year being available to be so utilized in succeeding
calendar years) and (b) the net cash proceeds to Radio One and its
Restricted Subsidiaries from any issuance or reissuance of Equity Interests
of Radio One or its Restricted Subsidiaries (other than Disqualified Stock)
to members of management (which are excluded from the calculation set forth
in clause (3)(b) of the proceeding paragraph) and the net cash proceeds to
Radio One and its Restricted Subsidiaries of any "key man" life insurance
proceeds; provided that the cancellation of Indebtedness owing to Radio One
and its Restricted Subsidiaries from members of management shall not be
deemed Restricted Payments;
(8) payment of the dividends on Disqualified Stock the incurrence of
which was permitted by the Indenture;
(9) repurchases of Equity Interests deemed to occur upon the exercise of
stock options;
(10) the retirement of any shares of Disqualified Stock of Radio One by
conversion into, or by exchange for, shares of Disqualified Stock of Radio
One, or out of the net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of Radio One) of other shares of
Disqualified Stock of Radio One, provided that the Disqualified Stock of
Radio One that replaces the retired shares of Disqualified Stock of Radio
One shall not require the direct or indirect payment of the liquidation
preference earlier in time than the final stated maturity of the retired
shares of Disqualified Stock of Radio One;
37
(11) repurchases of Equity Interests of Radio One in open market
purchases, provided that the aggregate amount expended for such repurchases
shall not exceed $40.0 million; and
(12) redemption of the Existing Preferred Stock in accordance with the
terms thereof, provided that either (i) after giving pro forma effect to
such redemption, the Leverage Ratio is 4.00 to 1.00 or lower, or (ii) such
redemption is funded with the net cash proceeds of one or more Equity
Offerings (so long as such redemption occurs within 180 days of the date of
the closing of such Equity Offering).
The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Radio One or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant will be determined by the Board of Directors whose resolution with
respect thereto will be delivered to the trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million.
Incurrence of Indebtedness and Issuance of Preferred Stock
Radio One and the Guarantors will not, and will not permit any of their
Subsidiaries to, directly, or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and the Company will not issue any Disqualified Stock and will
not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that Radio One or any Guarantor may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock or preferred
stock if Radio One's Leverage Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock or such preferred
stock, as the case may be, after giving pro forma effect to such incurrence or
issuance as of such date and to the use of the proceeds therefrom as if the
same had occurred at the beginning of the most recently ended four full fiscal
quarter period of Radio One for which internal financial statements are
available, would have been no greater than 7.0 to 1.
The first paragraph of this covenant will not prohibit the incurrence of any
of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by Radio One and any Guarantor of additional
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (1) (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of Radio One and its Subsidiaries thereunder)
not to exceed $600.0 million less the aggregate amount applied by Radio One
and the Restricted Subsidiaries to permanently reduce the availability of
Indebtedness under the Credit Facility pursuant to the covenant described
under the caption "--Repurchase as the Option of Holders--Asset Sales";
(2) the incurrence by Radio One and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by Radio One and the Guarantors of Indebtedness
represented by the Notes and the related Subsidiary Guarantees to be issued
on the date of the Indenture;
(4) the incurrence by Radio One or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment whether through the direct
purchase of assets or at least a majority of the Voting Stock of any person
owning such assets, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (4), not to exceed $10.0
million at any time outstanding;
(5) the incurrence by Radio One or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace
38
Indebtedness (other than intercompany Indebtedness) that was permitted by
the Indenture to be incurred under the first paragraph of this covenant or
clauses (2), (3), (4), (5), (10) or (12) of this paragraph;
(6) the incurrence by Radio One or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Radio One and any of its Wholly
Owned Subsidiaries; provided, however, that (i) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than Radio One or a Subsidiary of Radio One and (ii)
any sale or other transfer of any such Indebtedness to a Person that is not
either Radio One or a Restricted Subsidiary of Radio One will be deemed, in
each case, to constitute an incurrence of such Indebtedness by Radio One or
such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (6);
(7) the incurrence by Radio One or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
(x) interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of the Indenture to be outstanding or (y)
currency exchange rate risk in ordinary course of business;
(8) the guarantee by Radio One of Indebtedness of any Restricted
Subsidiary of Radio One that was permitted to be incurred by another
provision of this covenant;
(9) the guarantee by any Restricted Subsidiary of Indebtedness of Radio
One or any Guarantor that was permitted to be incurred by another provision
of this covenant;
(10) Indebtedness incurred by Radio One or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation letters of credit in respect to workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(11) Obligations in respect of performance and surety bonds and
completion guarantees provided by Radio One or any of its Restricted
Subsidiaries in the ordinary course of business;
(12) Acquisition Debt of Radio One or any Restricted Subsidiary if (w)
such Acquisition Debt is incurred within 270 days after the date on which
the related definitive acquisition agreement or LMA, as the case may be,
was entered into by Radio One or such Restricted Subsidiary, (x) the
aggregate principal amount of such Acquisition Debt is no greater than the
aggregate principal amount of Acquisition Debt set forth in a notice from
Radio One to the Trustee (an "Incurrence Notice") within ten days after the
date on which the related definitive acquisition agreement or LMA, as the
case may be, was entered into by Radio One or such Restricted Subsidiary,
which notice shall be executed on Radio One's behalf by the chief financial
officer of Radio One in such capacity and shall describe in reasonable
detail the acquisition or LMA, as the case may be, which such Acquisition
Debt will be incurred to finance, (y) after giving pro forma effect to the
acquisition or LMA, as the case may be, described in such Incurrence
Notice, Radio One or such Restricted Subsidiary could have incurred such
Acquisition Debt under the Indenture as of the date upon which Radio One
delivers such Incurrence Notice to the Trustee and (z) such Acquisition
Debt is utilized solely to finance the acquisition or LMA, as the case may
be, described in such Incurrence Notice (including to repay or refinance
indebtedness or other obligations incurred in connection with such
acquisition or LMA, as the case may be, and to pay related fees and
expenses);
(13) guarantees by Radio One or any Restricted Subsidiary of
Indebtedness of officers of Radio One or any Restricted Subsidiary in an
aggregate principal amount not to exceed $5.0 million at any time
outstanding;
(14) the incurrence by Radio One's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event will be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of Radio One that was not permitted by this clause (14); and
39
(15) the incurrence by Radio One or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (15), not to exceed $20.0
million.
For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through (15) above, or is entitled to
be incurred pursuant to the first paragraph of this covenant, Radio One will be
permitted to classify such item of Indebtedness on the date of its incurrence,
or later reclassify all or a portion of such item of Indebtedness, in any
manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount and the accretion of accreted value
will not be deemed to be an incurrence of Indebtedness for purposes of this
covenant. Indebtedness under Credit Facilities outstanding on the date on which
Notes are first issued and authenticated under the Indenture will be deemed to
have been incurred on such date in reliance on the exception provided by clause
(1) of the definition of Permitted Debt.
No Senior Subordinated Debt
Radio One will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of Radio One and senior in any respect in right of
payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior
in right of payment to the Senior Debt of such Guarantor and senior in any
respect in right of payment to such Guarantor's Subsidiary Guarantee.
Liens
Radio One will not, and will not permit any of its Subsidiaries to, directly
or indirectly, create, incur, assume or suffer to exist any Lien of any kind
securing Indebtedness, or trade payables on any asset now owned or hereafter
acquired, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Radio One will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to Radio One or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to Radio One or any of its Restricted Subsidiaries;
(2) make loans or advances to Radio One or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to Radio One or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness and Credit Facilities as
in effect on the date of the Indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of those agreements, provided that the amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those
contained in those agreements on the date of the Indenture;
40
(2) the Indenture, the Notes and the Subsidiary Guarantees;
(3) applicable law, rule, regulation or order;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Radio One or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness or
Capital Stock was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations (including Capital Lease Obligations) for
property acquired in the ordinary course of business that impose
restrictions only on that property of the nature described in clause (3) of
the preceding paragraph;
(7) contracts for the sale of assets, including without limitation any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or
other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred under
the provisions of the covenant described above under the caption "--Liens"
that limit the right of the debtor to dispose of the assets subject to such
Liens;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements entered into in the
ordinary course of business; and
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation or Sale of Assets
Radio One may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not Radio One is the surviving corporation); or
(2) sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of Radio One and its Restricted Subsidiaries
taken as a whole, in one or more related transactions, to another Person;
unless:
(1) either: (a) Radio One is the surviving corporation; or (b) the
Person formed by or surviving any such consolidation or merger (if other
than Radio One) or to which such sale, assignment, transfer, conveyance or
other disposition has been made is a corporation organized or existing
under the laws of the United States, any state of the United States or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than Radio One) or the Person to which such sale, assignment,
transfer, conveyance or other disposition has been made assumes all the
obligations of Radio One under the Notes, the Indenture and the
registration rights agreement pursuant to agreements reasonably
satisfactory to the trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) Radio One or the Person formed by or surviving any such
consolidation or merger (if other than Radio One), or to which such sale,
assignment, transfer, conveyance or other disposition has been made (a)
will, on the date of such transaction after giving pro forma effect thereto
and any related financing
41
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Leverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock," or (b) would have a lower
Leverage Ratio immediately after the transaction, after giving pro forma
effect to the transaction as if the transaction had occurred at the
beginning of the applicable four quarter period, than Radio One's Leverage
Ratio immediately prior to the transaction.
The preceding clause (4) will not prohibit: (a) a merger between Radio One
and one of Radio One's Wholly Owned Restricted Subsidiaries; or (b) a merger
between Radio One and one of Radio One's Affiliates incorporated solely for the
purpose of reincorporating in another state of the United States.
In addition, Radio One may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Radio One and any of its Wholly
Owned Restricted Subsidiaries.
Transactions with Affiliates
Radio One will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each, an "Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are no less favorable to
Radio One or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by Radio One or such Restricted
Subsidiary with an unrelated Person; and
(2) Radio One delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an
officers' certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by Radio One or any of its
Subsidiaries in the ordinary course of business and consistent with the
past practice of Radio One or such Subsidiary;
(2) transactions between or among Radio One and/or its Restricted
Subsidiaries;
(3) loans, advances, payment of reasonable fees, indemnification of
directors, or similar arrangements to officers, directors employees and
consultants who are not otherwise Affiliates of Radio One;
(4) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of Radio One;
(5) transactions under any contract or agreement in effect on the date
of the Indenture as the same may be amended, modified or replaced from time
to time so long as any amendment, modification, or replacement is no less
favorable to Radio One and its Restricted Subsidiaries than the contract or
agreement as in effect on the date of the Indenture;
42
(6) services provided to any Unrestricted Subsidiary of Radio One in the
ordinary course of business, which the Board of Directors has determined,
pursuant to a resolution thereof, that such services are provided on terms
at least as favorable to Radio One and its Restricted Subsidiaries as those
that would have been obtained in a comparable transaction with an unrelated
Person; and
(7) Permitted Investments and Restricted Payments that are permitted by
the provisions of the Indenture described above under the caption "--
Restricted Payments."
Additional Subsidiary Guarantees
If Radio One or any of its Subsidiaries acquires or creates another Domestic
Subsidiary after the date of the Indenture, excluding all Subsidiaries that
have been properly designated as Unrestricted Subsidiaries in accordance with
the Indenture for so long as they continue to constitute Unrestricted
Subsidiaries, then that newly acquired or created Domestic Subsidiary will
become a Guarantor and execute a supplemental Indenture and deliver an opinion
of counsel satisfactory to the trustee within 10 Business Days of the date on
which it was acquired or created.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments owned by Radio One
and the Restricted Subsidiaries in the Subsidiary properly designated will be
deemed to be an Investment made as of the time of the designation and will
reduce the amount available for Restricted Payments under the first paragraph
of the covenant described above under the caption "--Restricted Payments" or
Permitted Investments, as determined by Radio One. That designation will only
be permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if the redesignation would not cause a Default.
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Subsidiaries
Radio One will not, and will not permit any of its Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests in
any Wholly Owned Restricted Subsidiary of Radio One to any Person (other than
Radio One or a Wholly Owned Restricted Subsidiary of Radio One), unless:
(1) as a result of such transfer, conveyance, sale, lease or other
disposition or issuance such Restricted Subsidiary no longer constitutes a
Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset
Sales."
In addition, Radio One will not permit any Wholly Owned Restricted
Subsidiary of Radio One to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to Radio One or a Wholly Owned Restricted
Subsidiary of Radio One.
Payments for Consent
Radio One will not, and will not permit any of its Subsidiaries to, directly
or indirectly, pay or cause to be paid any consideration to or for the benefit
of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
43
Reports
Whether or not required by the SEC so long as any Notes are outstanding,
Radio One will furnish to the Holders of Notes, within the time periods
specified in the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
Radio One were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by Radio One's certified independent accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if Radio One were required to file such reports.
If Radio One or any Guarantor has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by the preceding paragraph will include, either on the face of the
financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, a
reasonably detailed summary of financial condition and results of operations of
the Unrestricted Subsidiaries containing line items substantially consistent
with those contained in the summary section of this prospectus.
In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the SEC, Radio
One will file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the SEC for public availability within the time
periods specified in the SEC's rules and regulations (unless the SEC will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, Radio One has
agreed that, for so long as any Notes remain outstanding, it they will furnish
to the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes whether or not prohibited by
the subordination provisions of the Indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the Notes, whether or not prohibited by the subordination provisions of
the Indenture;
(3) failure by Radio One or any of its Restricted Subsidiaries to comply
with the provisions described under the captions "--Repurchase at the
Option of Holders--Change of Control;"
(4) failure by Radio One or any of its Restricted Subsidiaries for 30
days after notice from the trustee or holders of at least 25% in principal
amount of the Notes to comply with the provisions described under the
captions "--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments," "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" or "--Certain Covenants--
Merger, Consolidation or Sale of Assets;"
(5) failure by Radio One or any of its Restricted Subsidiaries for 60
days after notice from the trustee or holders of 25% in principal amount of
the Notes to comply with any of the other agreements in the Indenture;
(6) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Radio One or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Radio One or any of
its Restricted
44
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, if that default:
(a) is caused by a failure to pay principal of such Indebtedness at
the final stated maturity thereof (a "Payment Default"), or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(7) failure by Radio One or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $5.0 million not covered by
insurance, which judgments are not paid, discharged or stayed for a period
of 60 days;
(8) except as permitted by the Indenture, any Guarantee of a Significant
Subsidiary shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Significant Subsidiary that is a Guarantor, or any Person acting on behalf
of any such Guarantor, shall deny or disaffirm its obligations under its
Guarantee; and
(9) certain events of bankruptcy or insolvency described in the
Indenture with respect to Radio One or any of its Restricted Subsidiaries.
In the event of a declaration of acceleration of the Notes because an Event
of Default has occurred and is continuing as a result of the acceleration of
any Indebtedness described in clause (6) of the preceding paragraph, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of any Indebtedness described in clause (6) of the preceding paragraph
have rescinded the declaration of acceleration in respect of the Indebtedness
within 30 days of the date of the declaration and if:
(1) the annulment of the acceleration of Notes would not conflict with
any judgment or decree of a court of competent jurisdiction; and
(2) all existing Events of Default, except nonpayment of principal or
interest on the Notes that became due solely because of the acceleration of
the Notes, have been cured or waived.
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to Radio One, any Restricted Subsidiary that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the Holders of
at least 25% in principal amount of the then outstanding notes may declare all
the Notes to be due and payable immediately.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default if it
determines that withholding notice is in their interest, except a Default or
Event of Default relating to the payment of principal or interest or Liquidated
Damages.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, the Notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of Radio One with the
intention of avoiding payment of the premium that Radio One would
45
have had to pay if Radio One then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium will
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to, by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of Radio One with the intention of avoiding the prohibition on redemption of
the Notes prior to July 1, 2006, then the premium specified in the Indenture
will also become immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
Radio One is required to deliver to the trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, Radio One is required to deliver to the trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Radio One,
any Subsidiary of Radio One, or any Guarantor, as such, will have any liability
for any obligations of Radio One or the Guarantors under the Notes, the
Indenture, the Subsidiary Guarantees, or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
Radio One may, at its option and at any time elect to have all of its
obligations discharged with respect to the outstanding notes and all
obligations of the Guarantors discharged with respect to their Subsidiary
Guarantees ("Legal Defeasance") except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and Liquidated Damages,
if any, on such Notes when such payments are due from the trust referred to
below;
(2) Radio One's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and Radio One's and the Guarantors' obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the Indenture.
In addition, Radio One may, at its option and at any time, elect to have the
obligations of Radio One and the Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants will not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "--Events
of Default and Remedies" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Radio One must irrevocably deposit with the trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination of cash in U.S. dollars and non-
callable Government Securities, in amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, or interest and premium and Liquidated Damages, if
any, on the outstanding notes on the stated maturity or on the applicable
46
redemption date, as the case may be, and Radio One must specify whether the
Notes are being defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, Radio One has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that (a) Radio One has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the date
of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion
of counsel will confirm that, the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Radio One has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the Holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing on the
date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which Radio One or
any of its Restricted Subsidiaries is a party or by which Radio One or any
of its Restricted Subsidiaries is bound;
(6) Radio One must deliver to the trustee an officers' certificate
stating that the deposit was not made by Radio One with the intent of
preferring the Holders of Notes over the other creditors of Radio One with
the intent of defeating, hindering, delaying or defrauding creditors of
Radio One or others; and
(7) Radio One must deliver to the trustee an officers' certificate and
an opinion of counsel, which opinion may be subject to customary
assumptions and exclusions, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
The Credit Agreement restricts Radio One's ability to effect a Legal
Defeasance or a Covenant Defeasance.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
47
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of, or interest or premium or Liquidated Damages, if
any, on the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders"); or
(8) make any change in the preceding amendment and waiver provisions.
In addition, (x) any amendment to, or waiver of, the provisions of the
Indenture relating to subordination that adversely affects the rights of the
Holders of the Notes or (y) the release any Guarantor from any of its
obligations under its Subsidiary Guarantee or the Indenture, except in
accordance with the terms of the Indenture will require the consent of the
Holders of at least 75% in aggregate principal amount of Notes then
outstanding.
Notwithstanding the preceding, without the consent of any Holder of Notes,
Radio One, the Guarantors and the trustee may amend or supplement the Indenture
or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of Radio One's obligations to Holders
of Notes in the case of a merger or consolidation or sale of all or
substantially all of Radio One's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder;
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act;
(6) to provide for the issuance of additional Notes in accordance with
the limitations set forth in the Indenture as of its date; or
(7) to allow any Guarantor to execute a supplemental Indenture and/or a
Guarantee with respect to the Notes.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when:
(1) either:
(a) all Notes that have been authenticated, except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for whose
payment money has been deposited in trust and thereafter repaid to
Radio One, have been delivered to the trustee for cancellation; or
(b) all Notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the mailing of a
notice of redemption or otherwise or will become due and payable within
one year and Radio One or any Guarantor has irrevocably deposited or
caused to be
48
deposited with the trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient without
consideration of any reinvestment of interest, to pay and discharge the
entire indebtedness on the Notes not delivered to the trustee for
cancellation for principal, premium and Liquidated Damages, if any, and
accrued interest to the date of maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing on the
date of the deposit or will occur as a result of the deposit and the
deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which Radio One or any Guarantor is
a party or by which Radio One or any Guarantor is bound;
(3) Radio One or any Guarantor has paid or caused to be paid all sums
payable by it under the Indenture; and
(4) Radio One has delivered irrevocable instructions to the trustee
under the Indenture to apply the deposited money toward the payment of the
Notes at maturity or the redemption date, as the case may be.
In addition, Radio One must deliver an officers' certificate and an opinion of
counsel, which may be subject to customary assumptions and exclusions, to the
trustee stating that all conditions precedent to satisfaction and discharge
have been satisfied.
Concerning the Trustee
If the trustee becomes a creditor of Radio One or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
Additional Information
Anyone who receives this prospectus may obtain a copy of the Indenture and
registration rights agreement without charge by writing to Radio One, Inc.,
5900 Princess Garden Parkway, 7th Floor, Lanham, Maryland 20706, Attention:
Investor Relations, or by sending an email message to invest@radio-one.com.
Book-Entry, Delivery and Form
The Notes were offered and sold to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A Notes"). Notes also have been offered and
sold in offshore transactions in reliance on Regulation S ("Regulation S
Notes"). Except as set forth below, Notes will be issued in registered, global
form in minimum denominations of $1,000 and integral multiples of $1,000 in
excess of $1,000.
Rule 144A Notes initially were represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Rule 144A
Global Notes"). Regulation S Notes initially were represented by one or more
temporary Notes in registered, global form without interest coupons
(collectively, the
49
"Regulation S Temporary Global Notes"). The Rule 144A Global Notes and the
Regulation S Temporary Global Notes were deposited upon issuance with the
trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Through and including the 40th day after the later of the commencement of the
offering to the initial purchasers and the closing of the offering to the
initial purchasers (such period through and including such 40th day, the
"Restricted Period"), beneficial interests in the Regulation S Temporary Global
Notes were permitted to be held only through the Euroclear System ("Euroclear")
and Clearstream Banking, S.A. ("Clearstream") (as indirect participants in
DTC), unless transferred to a person that took delivery through a Rule 144A
Global Note in accordance with the certification requirements described below.
Within a reasonable time period after the expiration of the Restricted Period,
the Regulation S Temporary Global Notes will be exchanged for one or more
permanent Notes in registered, global form without interest coupons
(collectively, the "Regulation S Permanent Global Notes" and, together with the
Regulation S Temporary Global Notes, the "Regulation S Global Notes" (the
Regulation S Global Notes and Rule 144A Global Notes, collectively being the
"Global Notes")) upon delivery to DTC of certification of compliance with the
transfer restrictions applicable to the Notes and pursuant to Regulation S as
provided in the Indenture. Beneficial interests in the Rule 144A Global Notes
may not be exchanged for beneficial interests in the Regulation S Global Notes
at any time except in the limited circumstances described below. See "--
Exchanges between Regulation S Notes and Rule 144A Notes."
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in certificated form except in the limited circumstances described below.
See "--Exchange of Book-Entry Notes for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Notes will not be entitled to receive physical delivery of Notes in
certificated form.
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Notes) will be subject to certain restrictions on transfer and will bear a
restrictive legend. Regulation S Notes will also bear the legend. In addition,
transfers of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of Euroclear and Clearstream), which may
change from time to time.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear
and Clearstream are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. Radio One takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC has advised Radio One that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised Radio One that, pursuant to procedures established by
it:
50
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership of these interests will be effected only
through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other
owners of beneficial interest in the Global Notes).
Investors in the Rule 144A Global Notes who are Participants in DTC's system
may hold their interests therein directly through DTC. Investors in the Rule
144A Global Notes who are not Participants may hold their interests therein
indirectly through organizations (including Euroclear and Clearstream) which
are Participants in such system. Investors in the Regulation S Global Notes
must initially hold their interests therein through Euroclear or Clearstream,
if they are participants in such systems, or indirectly through organizations
that are participants in such systems. After the expiration of the Restricted
Period (but not earlier), investors may also hold interests in the Regulation S
Global Notes through Participants in the DTC system other than Euroclear and
Clearstream. Euroclear and Clearstream will hold interests in the Regulation S
Global Notes on behalf of their participants through customers' securities
accounts in their respective names on the books of their respective
depositories, which are Morgan Guaranty Trust Company of New York, Brussels
office, as operator of Euroclear, and Citibank, N.A., as operator of
Clearstream. All interests in a Global Note, including those held through
Euroclear or Clearstream, may be subject to the procedures and requirements of
DTC. Those interests held through Euroclear or Clearstream may also be subject
to the procedures and requirements of such systems. The laws of some states
require that certain Persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such Persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a Person having beneficial interests
in a Global Note to pledge such interests to Persons that do not participate in
the DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, Radio One and the
trustee will treat the Persons in whose names the Notes, including the Global
Notes, are registered as the owners of the Notes for the purpose of receiving
payments and for all other purposes. Consequently, neither Radio One, the
trustee nor any agent of Radio One or the trustee has or will have any
responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised Radio One that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not
receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
51
Participants and will not be the responsibility of DTC, the trustee or Radio
One. Neither Radio One nor the trustee will be liable for any delay by DTC or
any of its Participants in identifying the beneficial owners of the Notes, and
Radio One and the trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Subject to applicable transfer restrictions, transfers between Participants
in DTC will be effected in accordance with DTC's procedures, and will be
settled in same-day funds, and transfers between participants in Euroclear and
Clearstream will be effected in accordance with their respective rules and
operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between the Participants in DTC, on
the one hand, and Euroclear or Clearstream participants, on the other hand,
will be effected through DTC in accordance with DTC's rules on behalf of
Euroclear or Clearstream, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions
to Euroclear or Clearstream, as the case may be, by the counterparty in such
system in accordance with the rules and procedures and within the established
deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case
may be, will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
Global Note in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositories for Euroclear or Clearstream.
DTC has advised Radio One that it will take any action permitted to be taken
by a Holder of Notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC reserves the right to exchange the
Global Notes for legended Notes in certificated form, and to distribute such
Notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Rule 144A Global Notes
and the Regulation S Global Notes among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to continue to perform
such procedures, and may discontinue such procedures at any time. Neither Radio
One nor the trustee nor any of their respective agents will have any
responsibility for the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies Radio One that it is unwilling or unable to
continue as depositary for the Global Notes and Radio One fails to appoint
a successor depositary or (b) has ceased to be a clearing agency registered
under the Exchange Act;
(2) Radio One, at its option, notifies the trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default or Event of Default
with respect to the Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests in
Global Notes will be registered in
52
the names, and issued in any approved denominations, requested by or on behalf
of the depositary (in accordance with its customary procedures) and will bear
the applicable restrictive legend, unless that legend is not required by
applicable law.
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the trustee a written
certificate (in the form provided in the Indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such Notes.
Exchanges Between Regulation S Notes and Rule 144A Notes
Prior to the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Note may be exchanged for beneficial interests in the
Rule 144A Global Note only if:
(1) such exchange occurs in connection with a transfer of the Notes
pursuant to Rule 144A; and
(2) the transferor first delivers to the trustee a written certificate
(in the form provided in the Indenture) to the effect that the Notes are
being transferred to a Person:
(a) who the transferor reasonably believes to be a qualified
institutional buyer within the meaning of Rule 144A;
(b) purchasing for its own account or the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A; and
(c) in accordance with all applicable securities laws of the states
of the United States and other jurisdictions.
Beneficial interest in a Rule 144A Global Note may be transferred to a
Person who takes delivery in the form of an interest in the Regulation S Global
Note, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the trustee a written certificate (in the form
provided in the Indenture) to the effect that such transfer is being made in
accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available) and
that, if such transfer occurs prior to the expiration of the Restricted Period,
the interest transferred will be held immediately thereafter through Euroclear
or Clearstream.
Transfers involving exchanges of beneficial interests between the Regulation
S Global Notes and the Rule 144A Global Notes will be effected in DTC by means
of an instruction originated by the trustee through the DTC Deposit/Withdraw at
Custodian system. Accordingly, in connection with any such transfer,
appropriate adjustments will be made to reflect a decrease in the principal
amount of the Regulation S Global Note and a corresponding increase in the
principal amount of the Rule 144A Global Note or vice versa, as applicable. Any
beneficial interest in one of the Global Notes that is transferred to a Person
who takes delivery in the form of an interest in the other Global Note will,
upon transfer, cease to be an interest in such Global Note and will become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions and other procedures applicable to beneficial
interest in such other Global Note for so long as it remains such an interest.
The policies and practices of DTC may prohibit transfers of beneficial
interests in the Regulation S Global Note prior to the expiration of the
Restricted Period.
Payments; Certifications by Holders of the Regulation S Temporary Global Notes
A holder of a beneficial interest in the Regulation S Temporary Global Notes
must provide Euroclear or Clearstream, as the case may be, with a certificate
in the form required by the Indenture certifying that the beneficial owner of
the interest in the Regulation S Temporary Global Notes is either not a United
States Person (as defined below) or has purchased such interest in a
transaction that is exempt from the registration requirements under the
Securities Act (the "Regulation S Certificate"), and Euroclear or Clearstream,
as the
53
case may be, must provide to the trustee (or the paying agent if other than the
trustee) a certificate in the form required by the Indenture, prior to any
exchange of such beneficial interest for a beneficial interest in the
Regulation S Permanent Global Notes.
"U.S. Person" means
(1) any individual resident in the United States;
(2) any partnership or corporation organized or incorporated under the
laws of the United States;
(3) any estate of which an executor or administrator is a United States
Person (other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets);
(4) any trust of which any trustee is a United States Person (other than
a trust of which at least one trustee is a non-U.S. Person who has sole or
shared investment discretion with respect to its assets and no beneficiary
of the trust (and no settler if the trust is revocable) is a United States
Person);
(5) any agency or branch of a foreign entity located in the United
States;
(6) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a
United States Person;
(7) any discretionary or similar account (other than an estate or trust)
held by a dealer of other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account held
for the benefit or account of a non-U.S. Person);
(8) any partnership or corporation organized or incorporated under the
laws of a foreign jurisdiction and formed by a United States Person
principally for the purpose of investing in securities not registered under
the Securities Act (unless it is organized or incorporated, and owned, by
accredited investors within the meaning of Rule 501(a) under the Securities
Act who are not natural persons, estates or trusts); provided, however,
that the term "U.S. Person" will not include:
(a) a branch or agency of a United States Person that is located and
operating outside the United States for valid business purposes as a
locally regulated branch or agency engaged in the banking or insurance
business;
(b) any employee benefit plan established and administered in
accordance with the law, customary practices and documentation of a
foreign country; and
(c) the international organizations set forth in Section 902(o)(7)
of Regulation S under the Securities Act and any other similar
international organizations, and their agencies, affiliates and pension
plans.
Same Day Settlement and Payment
Radio One will make payments in respect of the Notes represented by the
Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. Radio One will make all payments
of principal, interest and premium and Liquidated Damages, if any, with respect
to Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the Holders of the Certificated Notes or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Notes represented by the Global Notes are expected to trade in
DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such Notes will, therefore, be required by DTC to be
settled in immediately available funds. Radio One expects that secondary
trading in any Certificated Notes will also be settled in immediately available
funds.
54
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised
Radio One that cash received in Euroclear or Clearstream as a result of sales
of interests in a Global Note by or through a Euroclear or Clearstream
participant to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for Euroclear or
Clearstream following DTC's settlement date.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Acquisition Debt" means Indebtedness the proceeds of which are utilized
solely to (x) acquire all or substantially all of the assets or a majority of
the Voting Stock of an existing radio broadcasting business or station or (y)
finance an LMA (including to repay or refinance indebtedness or other
obligations incurred in connection with such acquisition or LMA, as the case
may be, and to pay related fees and expenses).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" have correlative
meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than in the ordinary course of business; provided that the
sale, conveyance or other disposition of all or substantially all of the
assets of Radio One and its Subsidiaries taken as a whole will be governed
by the provisions of the Indenture described above under the caption "--
Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset
Sale covenant; and
(2) the issuance of Equity Interests in any of Radio One's Restricted
Subsidiaries or the sale of Equity Interests in any of its Restricted
Subsidiaries.
Notwithstanding the preceding, the following items will not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of $1.0 million or less;
(2) a transfer of assets between or among Radio One and its
Subsidiaries;
(3) an issuance of Equity Interests by a Subsidiary to Radio One or to
another Subsidiary;
55
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale and leaseback of any assets within 90 days of the
acquisition thereof;
(6) foreclosures on assets;
(7) the disposition of equipment no longer used or useful in the
business of such entity;
(8) the sale or other disposition of cash or Cash Equivalents;
(9) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "--Certain Covenants--
Restricted Payments;" and
(10) the licensing of intellectual property.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" have a
corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality of the United
States government having maturities of not more than one year from the date
of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year and overnight bank deposits, in each
case, with any lender party to the Credit Facility or any domestic
commercial bank
56
having capital and surplus in excess of $500.0 million and a Thomson Bank
Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Rating Services
and in each case maturing within one year after the date of acquisition;
and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of Radio One and its Restricted Subsidiaries, taken as
a whole to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
Radio One;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties,
becomes the Beneficial Owner, directly or indirectly, of more than 50% of
the Voting Stock of Radio One, measured by voting power rather than number
of shares; or
(4) the first day on which a majority of the members of the Board of
Directors of Radio One are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any specified Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss,
together with any related provision for taxes, realized by such Person or
any of its Restricted Subsidiaries in connection with (a) an Asset Sale
(including any sale and leaseback transaction), or (b) the disposition of
any securities by such Person or any of the Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of the Restricted
Subsidiaries, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to obligations with respect to any sale and leaseback
transaction, all fees, including but not limited to agency fees, letter of
credit fees, commitment fees, commissions, discounts and other fees and
charges incurred in respect of Indebtedness and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(4) depreciation, amortization (including non-cash employee and officer
equity compensation expenses, amortization of goodwill and other
intangibles, amortization of programming costs and barter expenses, but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other
57
non-cash expenses (excluding any such non-cash expense to the extent that
it represents amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-
cash expenses were deducted in computing such Consolidated Net Income; plus
(5) any extraordinary or non-recurring expenses of such Person and the
Restricted Subsidiaries for such period to the extent that such charges
were deducted in computing such Consolidated Net Income; plus
(6) any non-capitalized transaction costs incurred in connection with
actual or proposed financings, acquisitions or transactions; minus
(7) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business; minus
(8) cash payments related to non-cash charges that increased
Consolidated Cash Flow in any prior period; minus
(9) barter revenues,
in each case, on a consolidated basis and determined in accordance with
GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash
expenses of, a Subsidiary of Radio One will be added to Consolidated Net Income
to compute Consolidated Cash Flow of Radio One only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to Radio One by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication of:
(1) the consolidated interest expense of such Person and the Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations);
(2) the consolidated interest expense of such Person and the Restricted
Subsidiaries that was capitalized during such period;
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or any of the Restricted Subsidiaries or secured
by a Lien on assets of such Person or any of the Restricted Subsidiaries
(whether or not such guarantee or Lien is called upon); and
(4) the product of:
(a) all cash dividend payments (and non-cash dividend payments in
the case of a Person that is a Restricted Subsidiary) on any series of
preferred stock of such Person or any of the Restricted Subsidiaries,
times
(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
58
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income of any Unrestricted Subsidiary will be excluded,
whether or not distributed to the specified Person or a Restricted
Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded; and
(4) the cumulative effect of a change in accounting principles will be
excluded.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of Radio One who:
(1) was a member of or nominated to such Board of Directors on the date
of the Indenture; or
(2) was nominated for election by either (a) one or more of the
Principals or (b) the Board of Directors of Radio One, a majority of whom
were members of or nominated to the Board of Directors on the date of the
Indenture or whose election or nomination for election was previously
approved by one or more of the Principals beneficially owning at least 25%
of the Voting Stock of Radio One (determined by reference to voting power
and not number of shares held) or such directors.
"Credit Agreement" means that certain Second Amended and Restated Credit
Agreement, dated as of July 17, 2000, by and among Radio One, the guarantors
party thereto, Bank of America, N.A., as administrative agent and the lenders
party thereto, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as amended,
modified, renewed, refunded, replaced or refinanced from time to time
(including any increase in principal amount).
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time (including any increase in principal amount).
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the holder of the Capital Stock, in whole or in part, on or prior to the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders of the Capital Stock have the right to require Radio One to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
will not constitute Disqualified Stock if the terms of such Capital Stock
provide that Radio One may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--Restricted
Payments."
59
"Domestic Subsidiary" means any Restricted Subsidiary of Radio One that was
formed under the laws of the United States or any state of the United States
or the District of Columbia or that guarantees or otherwise provides direct
credit support for any Indebtedness of Radio One.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of Capital Stock (other than
Disqualified Stock) of Radio One or one of its Subsidiaries, the net proceeds
of which are contributed to Radio One, in each case to any Person that is not
an Affiliate of Radio One, which offering results in at least $25.0 million of
net aggregate proceeds to Radio One.
"Existing Indebtedness" means Indebtedness of Radio One and its Restricted
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the Indenture.
"Existing Preferred Stock" means the 6 1/2% Convertible Preferred
Remarketable Term Income Deferrable Equity Securities of Radio One pursuant to
the Certificate of Designations filed with the State of Delaware on July 13,
2000, as in effect on the date of the Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) Radio One's Restricted Subsidiaries on the date of the Indenture;
and
(2) any other subsidiary of Radio One that executes a Subsidiary
Guarantee in accordance with the provisions of the Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange rates or interest rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, Notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
60
(5) representing the balance deferred and unpaid of the purchase price
of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person; provided that
Indebtedness shall not include the pledge of the Capital Stock of an
Unrestricted Subsidiary securing Non-Recourse Debt of that Unrestricted
Subsidiary; and, provided further, in no event shall the Existing Preferred
Stock (including all accrued dividends thereon) be deemed Indebtedness.
The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount of the Indebtedness, together with any interest
on the Indebtedness that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Radio One
or any Subsidiary of Radio One sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of Radio One such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of Radio One, Radio One will be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "--Certain Covenants--Restricted Payments."
"Leverage Ratio" means the ratio of (i) the aggregate outstanding amount of
Indebtedness of each of Radio One and the Restricted Subsidiaries as of the
last day of the most recently ended fiscal quarter for which financial
statements are internally available as of the date of calculation on a combined
consolidated basis in accordance with GAAP (subject to the terms described in
the next paragraph) plus the aggregate liquidation preference of all
outstanding Disqualified Stock of Radio One and preferred stock of the
Restricted Subsidiaries (except preferred stock issued to Radio One or a
Restricted Subsidiary) as of the last day of such fiscal quarter to (ii) the
aggregate Consolidated Cash Flow of Radio One for the last four full fiscal
quarters for which financial statements are internally available ending on or
prior to the date of determination (the "Reference Period").
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of Radio One and the Restricted Subsidiaries and the aggregate
liquidation preference of all outstanding preferred stock of the Restricted
Subsidiaries for which such calculation is made shall be determined on a pro
forma basis as if the Indebtedness and preferred stock giving rise to the need
to perform such calculation had been incurred and issued and the proceeds
therefrom had been applied, and all other transactions in respect of which such
Indebtedness is being incurred or preferred stock is being issued had occurred,
on the first day of such Reference Period. In addition to the foregoing, for
purposes of this definition, the Leverage Ratio shall be calculated on a pro
forma basis after giving effect to (i) the incurrence of the Indebtedness of
such Person and the Restricted Subsidiaries and the issuance of the preferred
stock of such Subsidiaries (and the application of the proceeds therefrom)
giving rise to the need to make such calculation and any incurrence (and the
61
application of the proceeds therefrom) or repayment of other Indebtedness or
preferred stock, at any time subsequent to the beginning of the Reference
Period and on or prior to the date of determination (including any such
incurrence or issuance which is the subject of an Incurrence Notice delivered
to the Trustee during such period pursuant to clause (12) of the definition of
Permitted Debt), as if such incurrence or issuance (and the application of the
proceeds thereof), or the repayment, as the case may be, occurred on the first
day of the Reference Period (except that, in making such computation, the
amount of Indebtedness under any revolving credit facility shall be computed
based upon the average balance of such Indebtedness at the end of each month
during such period) and (ii) any acquisition at any time on or subsequent to
the first day of the Reference Period and on or prior to the date of
determination (including any such incurrence or issuance which is the subject
of an Incurrence Notice delivered to the Trustee during such period pursuant to
clause (12) of the definition of Permitted Debt), as if such acquisition
(including the incurrence, assumption or liability for any such Indebtedness
and the issuance of such preferred stock and also including any Consolidated
Cash Flow associated with such acquisition) occurred on the first day of the
Reference Period giving pro forma effect to any non-recurring expenses, non-
recurring costs and cost reductions within the first year after such
acquisition Radio One reasonably anticipates in good faith if Radio One
delivers to the Trustee an officer's certificate executed by the chief
financial or accounting officer of Radio One certifying to and describing and
quantifying with reasonable specificity such non-recurring expenses, non-
recurring costs and cost reductions. Furthermore, in calculating Consolidated
Interest Expense for purposes of the calculation of Consolidated Cash Flow, (a)
interest on Indebtedness determined on a fluctuating basis as of the date of
determination (including Indebtedness actually incurred on the date of the
transaction giving rise to the need to calculate the Leverage Ratio) and which
will continue to be so determined thereafter shall be deemed to have accrued at
a fixed rate per annum equal to the rate of interest on such Indebtedness as in
effect on the date of determination and (b) notwithstanding (a) above, interest
determined on a fluctuating basis, to the extent such interest is covered by
Hedging Obligations, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"LMA" means a local marketing arrangement, joint sales agreement, time
brokerage agreement, shared services agreement, management agreement or similar
arrangement pursuant to which a Person, subject to customary preemption rights
and other limitations (i) obtains the right to sell a portion of the
advertising inventory of a radio station of which a third party is the
licensee, (ii) obtains the right to exhibit programming and sell advertising
time during a portion of the air time of a radio station or (iii) manages a
portion of the operations of a radio station.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Radio One or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of (i) the direct costs
relating to
62
such Asset Sale, including, without limitation, legal, accounting and
investment banking fees, and sales commissions, and any relocation expenses
incurred as a result of the Asset Sale, (ii) taxes paid or payable as a result
of the Asset Sale, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, (iii) amounts required
to be applied to the repayment of Indebtedness, other than Senior Debt secured
by a Lien on the asset or assets that were the subject of such Asset Sale and
(iv) any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Radio One, the Guarantors, nor any of the
Restricted Subsidiaries (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender; and
(2) no default with respect to which (including any rights that the
holders of the Indebtedness may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both
any holder of any other Indebtedness (other than the Notes) of Radio One,
the Guarantors, or any of the Restricted Subsidiaries to declare a default
on such other Indebtedness or cause the payment of the Indebtedness to be
accelerated or payable prior to its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness and in all cases whether direct or
indirect, absolute or contingent, now outstanding or hereafter created, assumed
or incurred and including, without limitation, interest accruing subsequent to
the filing of a petition in bankruptcy or the commencement of any insolvency,
reorganization or similar proceedings at the rate provided in the relevant
documentation, whether or not an allowed claim, and any obligation to redeem or
defease any of the foregoing.
"Permitted Asset Swap" means, with respect to any Person, the substantially
concurrent exchange of assets of such Person (including Equity Interests of a
Restricted Subsidiary) for assets of another Person, which assets are useful to
the business of such aforementioned Person.
"Permitted Business" means any business engaged in by Radio One or its
Restricted Subsidiaries as of the Closing Date or any business reasonably
related, ancillary or complementary thereto.
"Permitted Investments" means:
(1) any Investment in Radio One or in a Restricted Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by Radio One or any Restricted Subsidiary in a
Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of Radio One; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, Radio One or a Restricted Subsidiary;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales;"
(5) any acquisition of assets (including Investments in Unrestricted
Subsidiaries) solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of Radio One;
(6) notes and accounts receivable incurred in the ordinary course of
business and any Investments received in compromise of obligations of such
persons incurred in the ordinary course of trade creditors or customers
that were incurred in the ordinary course of business, including pursuant
to any plan of
63
reorganization or similar arrangement upon the bankruptcy or insolvency of
any trade creditor or customer;
(7) Hedging Obligations;
(8) guarantees of loans to management incurred pursuant to clause (13)
of the definition of Permitted Debt;
(9) loans and advances to employees of Radio One or any Restricted
Subsidiary in the ordinary course of business not in excess of $10,000,000
in aggregate principal amount at any time outstanding; or
(10) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (10) that are at the time
outstanding not to exceed $30.0 million.
"Permitted Liens" means:
(1) Liens of Radio One and any Guarantor securing Indebtedness and other
Obligations under Credit Facilities that were securing Senior Debt that was
permitted by the terms of the Indenture to be incurred;
(2) Liens in favor of Radio One or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Radio One or any Restricted
Subsidiary of Radio One; provided that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with
Radio One or the Subsidiary;
(4) Liens on property existing at the time of acquisition of the
property by Radio One or any Restricted Subsidiary of Radio One, provided
that such Liens were in existence prior to the contemplation of such
acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with such Indebtedness;
(7) Liens existing on the date of the Indenture;
(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as is required in
conformity with GAAP has been made therefor;
(9) Liens incurred in the ordinary course of business of Radio One or
any Restricted Subsidiary with respect to obligations that do not exceed
$5.0 million at any one time outstanding;
(10) Liens on assets of Unrestricted Subsidiaries that secure Non-
Recourse Debt of Unrestricted Subsidiaries;
(11) Liens to secure Indebtedness that is pari passu in right of payment
with the Notes, provided that the Notes are equally and ratably secured
thereby;
(12) Liens securing Permitted Refinancing Indebtedness where the liens
securing indebtedness being refinanced were permitted under the Indenture;
(13) easements, rights-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred or imposed, as applicable,
in the ordinary course of business and consistent with industry practices;
64
(14) any interest or title of a lessor under any Capital Lease
Obligation;
(15) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
letters of credit and products and proceeds thereof;
(16) Liens encumbering deposits made to secure statutory, regulatory,
contractual or warranty obligations, including rights of offset and set-
off;
(17) Liens securing Hedging Obligations which Hedging Obligations relate
to Indebtedness that is otherwise permitted under the Indenture;
(18) leases or subleases granted to others;
(19) Liens under licensing agreements;
(20) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(21) judgment Liens not giving rise to an Event of Default;
(22) Liens encumbering property of Radio One or a Restricted Subsidiary
consisting of carriers, warehousemen, mechanics, materialmen, repairmen,
and landlords, and other Liens arising by operation of law and incurred in
the ordinary course of business for sums which are not overdue or which are
being contested in good faith by appropriate proceedings and (if so
contested) for which appropriate reserves with respect thereto have been
established and maintained on the books of Radio One or a Restricted
Subsidiary in accordance with GAAP; and
(23) Liens encumbering property of Radio One or a Restricted Subsidiary
incurred in the ordinary course of business in connection with workers'
compensation, unemployment insurance, or other forms of governmental
insurance or benefits, or to secure performance of bids, tenders, statutory
obligations, leases, and contracts (other than for Indebtedness) entered
into in the ordinary course of business of Radio One or a Restricted
Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of Radio One or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Radio One or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest on the
Indebtedness and the amount of all expenses and premiums incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Radio One or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principals" means Catherine L. Hughes and Alfred C. Liggins, III.
65
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of any one or
more Principals and/or such other Persons referred to in the immediately
preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" all current and future Domestic Subsidiaries of
Radio One, other than Unrestricted Subsidiaries.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the
only general partners of which are that Person or one or more Subsidiaries
of that Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary of Radio One that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a resolution of the Board of Directors, but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Radio One or any Restricted Subsidiary unless the terms
of any such agreement, contract, arrangement or understanding are no less
favorable to Radio One or such Restricted Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of Radio One;
(3) is a Person with respect to which neither Radio One nor any of the
Restricted Subsidiaries has any direct or indirect obligation to maintain
or preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Radio One or any of the Restricted
Subsidiaries.
Any designation of a Subsidiary of Radio One as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments." If,
66
at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it will thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary will be deemed to be incurred by a Restricted Subsidiary as of
such date and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock," Radio One will be
in default of such covenant. The Board of Directors of Radio One may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation will be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation will only be permitted if (1) such
Indebtedness is permitted under the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of
such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
will at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material United States federal income tax
consequences of the acquisition, ownership and disposition of the Notes, but
does not purport to be a complete analysis of all the potential tax
considerations. This summary is limited to the tax consequences of those
persons who are original beneficial owners of the Notes, who purchase Notes at
their original issue price and who hold such Notes as capital assets within the
meaning of Section 1221 of the Code ("Holders"). This summary does not purport
to deal with all aspects of United States federal income taxation that might be
relevant to particular Holders in light of their particular investment
circumstances or status, nor does it address specific tax consequences that may
be relevant to particular persons (including, for example, financial
institutions, broker-dealers, insurance companies, tax-exempt organizations and
persons that have a functional currency other than the U.S. Dollar or persons
in special situations, such as those who have elected to mark securities to
market, or those who hold Notes as part of a straddle, hedge, conversion
transaction, or other integrated investment). In addition, this summary does
not address U.S. federal alternative minimum tax consequences or consequences
under the tax laws of any state, local or foreign jurisdiction. This summary is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Department regulations promulgated or proposed thereunder and
administrative and judicial interpretations thereof, all as of the date hereof
and all of which are subject to change, possibly on a retroactive basis. We
have not sought any ruling from the Internal Revenue Service (the "IRS") with
respect to the statements made and the conclusions reached in this summary, and
we cannot assure you that the IRS will agree with such statements and
conclusions.
This summary is for general information only. Prospective purchasers of the
Notes are urged to consult their tax advisors concerning the United States
federal income and other tax consequences to them of acquiring, owning, and
disposing of the Notes, as well as the application of state, local and foreign
income and other tax laws.
U.S. Federal Income Taxation of U.S. Holders
The following summary is limited to the U.S. federal income tax consequences
relevant to a Holder that is (i) a citizen or individual resident of the United
States; (ii) a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any state thereof or in the
District of Columbia; (iii) an estate, the income of which is subject to U.S.
federal income tax regardless of the source or (iv) a trust, if a court within
the United States is able to exercise primary supervision over the trust's
administration and one or more United States persons have the authority to
control all its substantial decisions or if a valid election to be treated as a
U.S. person is in effect with respect to such trust (a "U.S. Holder").
A "Non-U.S. Holder" is a Holder that is neither a U.S. Holder nor a
partnership for U.S. federal income tax purposes.
A partnership for United States federal income tax purposes is not subject
to the income tax on income derived from holding the Notes. A partner of the
partnership may be subject to tax on such income under rules similar to the
rules for U.S. Holders or non-U.S. Holders depending on whether (i) the partner
is a United States or a non-U. S. person, and (ii) the partnership is or is not
engaged in a United States trade or business to which income or gain from the
Notes is effectively connected. If you are a partner of a partnership acquiring
the Notes, you should consult your tax advisor about the U.S. tax consequences
of holding and disposing of the Notes.
Payments of Interest
Interest paid on a Note generally will be taxable to a U.S. Holder as
ordinary interest income at the time it accrues or is received, in accordance
with the U.S. Holder's method of accounting for federal income tax purposes.
68
We are required to furnish to the IRS, and will furnish annually to record
holders of Notes, information with respect to interest accruing during the
calendar year.
Disposition of Notes
Upon the sale, exchange, redemption or other disposition of a Note, a U.S.
Holder generally will recognize taxable gain or loss equal to the difference
between (i) the sum of cash plus the fair market value of all other property
received on such disposition (except to the extent such cash or property is
attributable to accrued but unpaid interest, which is treated as interest as
described above) and (ii) such Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note generally will equal the cost of the Note
to such Holder, less any principal payments received by such Holder.
Gain or loss recognized on the disposition of a Note generally will be
capital gain or loss, and will be long-term capital gain or loss if, at the
time of such disposition, the U.S. Holder's holding period for the Note is more
than 12 months. The maximum federal long-term capital gain rate is 20% for
noncorporate U.S. Holders and 35% for corporate U.S. Holders. The deductibility
of capital losses by U.S. Holders is subject to limitations.
Exchange Offer
The exchange of Notes for registered notes in the exchange offer will not
constitute a taxable event for U.S. Holders. Consequently, a U.S. Holder will
not recognize gain upon receipt of a registered note in exchange for Notes in
the exchange offer, the U.S. Holder's basis in the registered note received in
the exchange offer will be the same as its basis in the corresponding Note
immediately before the exchange and the U.S. Holder's holding period in the
registered note will include its holding period in the original note.
We are obligated to pay additional interest on the Notes under certain
circumstances described under "Exchange Offer; Registration Rights." Although
the matter is not free from doubt, such additional interest should be taxable
as ordinary income at the time it accrues or is received in accordance with the
U.S. Holder's regular method of accounting for federal income tax purposes. It
is possible, however, that the IRS may take a different position, in which case
the timing and amount of income inclusion may be different from that described
above. U.S. Holders should consult their own tax advisors about payments of
additional interest.
U.S. Federal Income Taxation of Non-U.S. Holders
Payments of Interest
Subject to the discussion of backup withholding below, payments of principal
and interest on the Notes by us or any of our agents to a Non-U.S. Holder will
not be subject to U.S. federal withholding tax, provided that:
(1) the Non-U.S. Holder does not, directly or indirectly, actually or
constructively own 10 percent or more of the total combined voting power of
all classes of our stock entitled to vote;
(2) the Non-U.S. Holder is not a controlled foreign corporation for U.S.
federal income tax purposes that is related to us through stock ownership;
(3) the Non-U.S. Holder is not a bank described in Section 881(c)(3)(A)
of the Code; and
(4) either (A) the beneficial owner of the Notes certifies to us or our
agent on IRS Form W-8BEN (or a suitable substitute form or successor form),
under penalties of perjury, that it is not a "U.S. person" (as defined in
the Code) and provides its name and address, or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Notes on behalf of the beneficial owner
certifies to us or our agent, under penalties of perjury, that such a
statement has been received from the beneficial owner by it or by a
69
financial institution between it and the beneficial owner and furnishes us
with a copy thereof (the "Portfolio Interest Exemption").
If a Non-U.S. Holder cannot satisfy the requirements of the Portfolio
Interest Exemption, payments of interest made to such Non-U.S. Holder will be
subject to a 30% withholding tax unless the beneficial owner of the Note
provides us or our agent, as the case may be, with a properly executed:
(1) IRS Form W-8BEN (or successor form) claiming an exemption from
withholding under the benefit of a tax treaty (a "Treaty Exemption") or
(2) IRS Form W-8ECI (or successor form) stating that interest paid on
the Note is not subject to withholding tax because it is U.S. trade or
business income to the beneficial owner.
The certification requirement described above also may require a non-U.S.
Holder that provides an IRS form, or that claims the benefit of an income tax
treaty, to provide its United States taxpayer identification number. The
applicable regulations generally also require, in the case of a note held by a
foreign partnership, that:
(1) the certification described above be provided by the partners and
(2) the partnership provide certain information, including a United
States taxpayer identification number.
Further, a look-through rule will apply in the case of tiered partnerships.
We suggest that you consult your tax advisor about the specific methods for
satisfying these requirements. A claim for exemption will not be valid if the
person receiving the applicable form has actual knowledge that the statements
on the form are false.
If interest on the Note is effectively connected with a U.S. trade or
business of the beneficial owner, the Non-U.S. Holder, although exempt from the
withholding tax described above, will be subject to United States federal
income tax on such interest on a net income basis in the same manner as if it
were a U.S. Holder. In addition, if such Holder is a foreign corporation, it
may be subject to a branch profits tax equal to 30% of its effectively
connected earnings and profits for the taxable year, subject to adjustments.
For this purpose, interest on a Note will be included in such foreign
corporation's earnings and profits.
Disposition of Notes
No withholding of United States federal income tax will be required with
respect to any gain or income realized by a Non-U.S. Holder upon the sale,
exchange or disposition of a Note.
A Non-U.S. Holder will not be subject to U.S. federal income tax on gain
realized on the sale, exchange, or other disposition of a Note unless (a) the
Non-U.S. Holder is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met, (b) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to certain
U.S. expatriates, or (c) such gain or income is effectively connected with a
U.S. trade or business.
Exchange of Notes
The exchange of Notes for registered notes in the exchange offer will not
constitute a taxable event for a Non-U.S. Holder.
70
Information Reporting and Backup Withholding
U.S. holders
For each calendar year in which the Notes are outstanding, we are required
to provide the IRS with certain information, including the beneficial owner's
name, address and taxpayer identification number, the aggregate amount of
interest paid to that beneficial owner during the calendar year and the amount
of tax withheld, if any. This obligation, however, does not apply with respect
to certain payments to U.S. Holders, including corporations and tax-exempt
organizations, provided that they establish entitlement to an exemption.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, we,
our agents or paying agents or a broker may be required to "backup" withhold a
tax equal to 31% of each payment of interest and principal (and premium or
liquidated damages, if any) on the Notes. This backup withholding is not an
additional tax and may be credited against the U.S. Holder's U.S. federal
income tax liability, provided that the required information is furnished to
the IRS.
Non-U.S. Holders
Under current Treasury Regulations, United States information reporting
requirements and backup withholding tax will not apply to payments on a Note to
a Non-U.S. Holder if the statement described in "U.S. Federal Income Taxation
of Non-United States Holders--Payments of Interest" is duly provided by such
Holder or the Holder otherwise establishes an exemption, provided that the
payor does not have actual knowledge that the Holder is a United States person
or that the conditions of any claimed exemption are not satisfied.
Generally, information reporting requirements and backup withholding tax
will not apply to any payment of the proceeds of the sale of a Note effected
outside the United States by a foreign office of a "broker" (as defined in
applicable Treasury regulations), unless the broker is (i) a United States
person, (ii) a foreign person that derives 50% or more of its gross income for
certain periods from activities that are effectively connected with the conduct
of a trade or business in the United States, (iii) a controlled foreign
corporation for United States federal income tax purposes or (iv) a foreign
partnership more than 50% of the capital or profits of which is owned by one or
more U.S. persons or which engages in a U.S. trade or business. Payment of the
proceeds of any such sale effected outside the United States by a foreign
office of any broker that is described in (i), (ii), (iii), or (iv) of the
preceding sentence may be subject to backup withholding tax, and will be
subject to information reporting requirements unless such broker has
documentary evidence in its records that the beneficial owner is a non-U.S.
Holder and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or
through the United States office of a broker is subject to information
reporting and backup withholding requirements, unless the beneficial owner of
the note provides the statement described in "U.S. Federal Income Taxation of
Non-U.S. Holders--Payments of Interest" or otherwise establishes an exemption.
71
PLAN OF DISTRIBUTION
Each participating broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a participating broker-dealer in connection with resales of exchange notes
received in exchange for outstanding notes where such outstanding notes were
acquired as a result of market-making activities or other trading activities.
We have agreed that for a period ending on the earlier of (i) 180 days from the
date of this prospectus and (ii) the date on which a participating broker-
dealer is no longer required to deliver a prospectus in connection with market-
making or other trading activities, we will make this prospectus, as amended or
supplemented, available to any participating broker-dealer for use in
connection with any such resale.
We will not receive any proceeds from any sales of the exchange notes by
participating broker-dealers. Exchange notes received by participating broker-
dealers for their own account pursuant to the exchange offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the exchange notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such participating broker-dealer and/or the
purchasers of any such exchange notes. Any participating broker-dealer that
resells the exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a participating broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
Prior to the exchange offer, there has not been any public market for the
outstanding notes. The outstanding notes have not been registered under the
Securities Act and will be subject to restrictions on transferability to the
extent that they are not exchanged for exchange notes by holders who are
entitled to participate in this exchange offer. The holders of outstanding
notes, other than any holder that is our affiliate within the meaning of Rule
405 under the Securities Act, who are not eligible to participate in the
exchange offer are entitled to certain registration rights, and we are required
to file a shelf registration statement with respect to the outstanding notes.
The exchange notes will constitute a new issue of securities with no
established trading market. We do not intend to list the exchange notes on any
national securities exchange or to seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation System. In
addition, such market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the exchange
offer and the pendency of the shelf registration statements. Accordingly, no
assurance can be given that an active public or other market will develop for
the exchange notes or as to the liquidity of the trading market for the
exchange notes. If a trading market does not develop or is not maintained,
holders of the exchange notes may experience difficulty in reselling the
exchange notes or may be unable to sell them at all. If a market for the
exchange notes develops, any such market may be discontinued at any time.
LEGAL MATTERS
The validity of the exchange notes and the guarantees and other legal
matters, including the tax-free nature of the exchange, will be passed upon on
our behalf by Kirkland & Ellis, a partnership that includes professional
corporations, Washington, DC.
72
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of Radio One, Inc. and subsidiaries as
of December 31, 1999 and 2000, and for each of the years in the three-year
period ended December 31, 2000, incorporated by reference in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
The financial statements of selected operations of Clear Channel
Communications as of December 31, 1998 and 1999, and for each of the years in
the three-year period ended December 31, 1999 incorporated by reference in this
prospectus have been audited by Arthur Andersen, LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
The financial statements of selected operations of AMFM, Inc. as of December
31, 1998 and 1999, and for each of the years in the three-year period ended
December 31, 1999, incorporated by reference in this prospectus have been
audited by Arthur Andersen, LLP, independent public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said report.
The financial statements of Blue Chip Broadcasting, Inc. and subsidiaries as
of December 31, 2000 and 1999 and for each of the two years in the period ended
December 31, 2000 incorporated by reference in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Blue Chip Broadcasting Company and subsidiary as
of December 31, 1998, and for the year then ended incorporated by reference in
this prospectus have been audited by Clark, Schaefer, Hackett & Co.,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
INCORPORATION BY REFERENCE
The SEC permits us to "incorporate by reference" the information in
documents we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file with the SEC after the initial filing date of the
registration statement of which this prospectus is a part, and prior to the
effectiveness of that registration statement, will automatically update and
supersede this information. We have filed the following documents with the SEC
and incorporate in this prospectus by reference:
. our Amended Annual Report on Form 10-K for the year ended December 31,
2000 filed on August 7, 2001;
. our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001
and June 30, 2001;
. our Definitive Proxy Statement on Form DEF 14A filed on April 26, 2001;
and
. our Current Reports on Form 8-K filed on April 9, 2001, April 18, 2001,
May 4, 2001, May 16, 2001, August 3, 2001, August 6, 2001, August 13,
2001 and August 24, 2001.
We also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act. Statements
contained in documents incorporated or deemed to be incorporated by reference
after the initial filing date of the registration statement of which this
prospectus is a part will modify statements in any other subsequently filed
documents to the extent the new information differs from the old information.
Any statements modified or superseded will no longer constitute a part of this
prospectus in their original form.
If you request a copy of any or all of the documents incorporated by
reference, then we will send to you the copies you requested at no charge.
However, we will not send exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents. You should direct
requests for such copies to Investor Relations, Radio One, Inc., 5900 Princess
Garden Parkway, 7th Floor, Lanham, MD 20706, or to our e-mail address:
invest@radio-one.com. Our telephone number is (301) 306-1111.
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We have filed with the SEC a registration statement on Form S-4 under the
Securities Act, covering the securities described in this prospectus. This
prospectus does not contain all of the information included in the registration
statement, some of which is contained in exhibits to the registration
statement. The registration statement, including the exhibits, can be read at
the SEC web site or at the SEC offices referred to above. Any statement made in
this prospectus concerning the contents of any contract, agreement or other
document is only a summary of the actual contract, agreement or other document.
If we have filed any contract, agreement or other document as an exhibit to the
registration statement, you should read the exhibit for a more complete
understanding of the document or matter involved.
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$300,000,000
[Radio One LOGO Appears Here]
Offer to Exchange $300,000,000
8 7/8% Senior Subordinated Notes due 2011, Series B
for any and all outstanding
8 7/8% Senior Subordinated Notes due 2011
PROSPECTUS
October 10, 2001
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